On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 00-cv-05071) District Judge: Honorable Cynthia M. Rufe
The opinion of the court was delivered by: Rendell, Circuit Judge
Before: SLOVITER, McKEE AND RENDELL, Circuit Judges
This case arises out of a dispute over whether employees divested in connection with the merger between Mobil Corporation and Exxon Corporation are entitled to severance benefits. In preparation for the merger, Mobil implemented an Enhanced Change-in-Control Retention / Severance Plan (the "CIC Plan").
Plaintiffs Joe A. Hooven, et al., are former Mobil Corporation employees whose employment with the merged Exxon Mobil Corporation was terminated when the division for which they worked was divested to Tosco Corporation. Plaintiffs contend that they are entitled to benefits under the terms of a summary plan description (the "Initial SPD") that Mobil distributed to employees following the announcement of the merger. They sued Defendants Exxon Mobil Corporation and the Mobil Corporation Employee Severance Plan (together, "Exxon Mobil") under the civil enforcement provision of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132, asserting claims for breach of fiduciary duty, equitable estoppel, procedural and reporting violations and federal common law breach of contract.
After a bench trial, the District Court issued a memorandum opinion and order granting judgment in favor of Exxon Mobil on the fiduciary duty, equitable estoppel and procedural and reporting claims. However, the District Court agreed with Plaintiffs that the Initial SPD established a unilateral contract that obligated Exxon Mobil to provide them with severance benefits when it terminated their employment following the merger. Accordingly, it entered judgment in favor of Plaintiffs on the breach of contract claim and ordered Exxon Mobil to provide Plaintiffs with severance benefits under the terms of the Initial SPD. Exxon Mobil appeals this portion of the District Court's order.
We disagree with the District Court's characterization of the Initial SPD as a unilateral contract the terms of which became fixed as the employees performed. As we will explain, the starting point for Plaintiffs' claim is ERISA, not the common law of contracts. Under this framework, Plaintiffs' rights to benefits under the Initial SPD never became due. Because the plan documents that were in effect when Plaintiffs' claim to benefits would have accrued clearly establish that they are ineligible for severance, we will reverse and remand with instructions for the District Court to enter judgment for Exxon Mobil.*fn1
Exxon and Mobil began merger discussions in June of 1998. In September 1998, in anticipation of a possible merger with Exxon, Mobil's Board of Directors revoked the company's existing severance plan and implemented the CIC Plan. The CIC Plan provided that employees in salary groups 19 and below, together classified as "Tier 4" employees, were not eligible for severance benefits if their business unit or activity was divested after the merger and they were offered comparable employment by the acquiring entity. Plaintiffs were all Tier 4 employees. Hooven v. Exxon Mobil Corp., No. 00-CV-5071, 2004 WL 724496, at *2 (E.D. Pa. Mar. 31, 2004).
After the Boards of Directors of Exxon and Mobil formally approved the merger, Mobil prepared and mailed the Initial SPD to its employees. The Initial SPD did not allude to the specific non-eligibility of divested employees, or even mention divestiture.*fn2 The District Court found that the Initial SPD "failed to advise Plaintiffs that they would be ineligible for severance in the event of a divestiture." Id. at *8. However, the Initial SPD cautioned that it was merely "a summary of the Plan and does not replace the official Plan documents, which govern in all cases." Id. at *21. See also Id. ("If the Plan description in this handbook does not agree with the Plan text, the Plan text will govern."). It also stated that, although Mobil reserved the right to "modify, suspend, or terminate benefits at any time for any reason," the CIC Plan "may not be terminated or modified while a change of control is pending, or within: [s]ix months following a potential change in control, or [t]wo years following a change in control." Id. at *9.
B. The Merger and Divestiture
On November 30, 1999, the Federal Trade Commission approved the Mobil / Exxon merger, subject to divestitures of various Mobil assets and other conditions. Exxon Mobil was created on December 1, 1999. Also on December 1, 1999, Mobil agreed to sell its Mid-Atlantic Marketing division, in which Plaintiffs worked, to Tosco Corporation. Tosco agreed to offer jobs with comparable or improved salaries and benefits to all of Mobil's Mid-Atlantic Marketing employees. Id. at *11.
Mobil announced the divestiture of its Mid-Atlantic Marketing division on December 2, 1999. At an employee meeting that day, Mobil management discussed the divestiture and explained that all affected employees would be offered employment with Tosco. At the same time, management advised Tier 4 employees that they would not be entitled to severance benefits because they had been divested and would receive comparable employment offers. In subsequent meetings, Plaintiffs expressed surprise that they would not be offered severance benefits and complained that Mobil had changed the terms of the CIC Plan. Mobil management responded by distributing copies of relevant questions and answers from Mobil's internal website and the divestiture provision of the actual CIC Plan, which clearly established Plaintiffs' non-eligibility. Id. at *12.
In February of 2000, Mobil distributed a notice of errata in the SPD, which acknowledged that the Initial SPD had omitted the divestiture provision and clarified the conditions for eligibility for benefits under the CIC Plan, as follows:
The following text was omitted from the Mobil Corporation Employee Severance plan Summary for U.S. employees in salary groups 19 and below, distributed to all employees in those salary groups in August, 1999. Please keep this with your Summary for future reference.
This bullet belongs on page 5 and should be included as an additional reason one is not eligible to participate in the CIC retention/severance package:
* you are no longer employed by the Company or an Affiliate due to a divestiture of any facility or sale or outsourcing of any business and are offered comparable employment by the purchaser or successor of such facility or ...