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Chamberlin v. Brown-Forman Corp.

March 1, 2010


The opinion of the court was delivered by: Joel A. Pisano, U.S.D.J


This is a breach of contract action in which Plaintiffs, eight former executive employees of Lenox Incorporated ("Lenox"),*fn1 a subsidiary of defendant Brown-Forman Corporation ("BFC" or "Defendant"), assert that BFC breached an agreement to guarantee the payment of certain retirement benefits promised by Lenox. The case was removed by BFC to the district court from the Superior Court of New Jersey on the basis of diversity jurisdiction. Presently before the Court is Plaintiffs' motion to remand the matter to state court. Also before the Court is a motion by BFC to dismiss the complaint for failure to state a claim upon which relief can be granted, and a cross-motion for partial summary judgment by Plaintiffs' on the issue of liability. The Court decides the matters without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Plaintiffs' motion is granted and this matter shall be remanded. The Court, having found that it lacks jurisdiction over this matter, does not reach the remaining motions.

I. Background

In 1983, Plaintiffs were executive employees at Lenox and were entitled to certain employment benefits. Compl. ¶ 12. Among these was participation in the Supplemental Executive Retirement Income Plan ("SERIP"), which provided Plaintiffs with certain retirement and health benefits. Id. ¶ 13, 15.

Concerned that it could be the target of a corporate takeover, in June of 1983 Lenox entered into separate agreements (the "Severance Agreements") with each Plaintiff "to provide enhanced severance benefits to assure the continuous dedication of the Executive to Lenox's business and as an incentive for them to remain with Lenox despite the possibility of a takeover or buyout." Id. ¶ 17. These agreements provided that Plaintiffs would receive certain benefits if a change of control of Lenox took place that included a lump sum cash payment, the purchase of an annuity contract to pay benefits, payment for expired stock options, two years of payments for life, medical and dental insurance, and a guaranteed redemption price for stock options. Id. ¶ 18. Because these benefits expired if Plaintiffs remained with Lenox for a certain time after a change of control occurred, these agreements would have provided an incentive to Plaintiffs to resign in the event of a takeover. Id. ¶ 19.

In the fall of 1983 Lenox became a wholly-owned subsidiary of BFC when BFC purchased the company. Id. ¶ 22. Recognizing that the benefits available to Plaintiffs pursuant to the Severance Agreements would provide an incentive for Plaintiffs to resign subsequent to the change in control, "[BFC], by and through Lenox," offered Plaintiffs alternative benefits to discharge Lenox's obligations under the Severance Agreements. Id. ¶ ¶ 23, 24. The parties entered into new agreements, herein after referred to as the "Waiver Agreements," which superseded and terminated (with limited exceptions not relevant to this case) the Severance Agreements. Waiver Agreement ¶ ¶ 5, 6 attached as Ex. B to Blodgett Aff.

The Waiver Agreement provided immediate benefits to each Plaintiff that essentially mirrored what the Plaintiff would have received under the Severance Agreement had they resigned. For example, the Waiver Agreement provided that Lenox would pay each Plaintiff a lump sum cash equal to a multiple of annual compensation. Id. ¶ 1. It further provided that Lenox was to amend the SERIP so that (i) each employee would be fully vested as of June 1983 and (ii) should the employee die before reaching age 55, the vested benefit would be converted from a life annuity to a survivor annuity for the benefit of the deceased employee's spouse. Id. ¶ 2. Most importantly, and central to the instant dispute, each Waiver Agreement contained the following provision: "Brown-Forman Corporation guarantees Lenox's performance under this Agreement." Id. ¶ 10.

Each Plaintiff eventually retired from Lenox and began collecting retirement benefits pursuant to the SERIP. Compl. ¶ 29. However, by letter dated November 12, 2008, Plaintiffs were advised by Lenox*fn2 that their health benefits would be discontinued after January 1, 2009. Id. ¶ 30. Shortly thereafter, on November 23, 2008, Lenox filed for bankruptcy protection. On November 24, 2008, Lenox advised Plaintiffs it would "no longer be in a position to support [SERIP]" and ceased making SERIP payments to Plaintiffs. Id. ¶ 32-33.

Thereafter, Plaintiffs demanded that BFC, pursuant to the guarantee provision in the Waiver agreement, make the payments under the SERIP that Lenox had ceased making. BFC refused. Id. ¶ 35-36. This action followed. As of the date of the filing of the complaint,

Plaintiffs claim the following amounts due and owing:

PlaintiffPension Benefits ClaimedMedical Benefits Claimed Chamberlin$39,466.96$0 Lichtenstein$26,434.33$7,573.02 Grzelecki$16,643.25$3,336.71 Bylin$15,377.96$1,489.54 LaForge$11,651.25$6,666.79 Hansen$8,567.00$4,842.50 Simich$8,122.01$1,405.69 Gallagher$4,179.61$0 Id. ¶ 37.

Plaintiff's complaint in this action contains two counts. The first count seeks a declaration that the guarantee in the Waiver Agreement requires Defendant to make the payments under the SERIP. The second count alleges that Defendant breached the guarantee in the waiver agreement by refusing to make the payments. The relief sought by Plaintiffs includes (1) a declaration as described; (2) judgment in the amount of the unpaid pension and medical benefits; and (3) an order requiring Defendant to resume ongoing payments of pension and medical benefits.

II. Legal Analysis

A. Motion to ...

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