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Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 31, 1995 Decided December 8, 1995

No. 94-7252

BRUCE S. ANDES, ET AL.,

LOUIS S. ARONICA, ET AL.,

APPELLANTS

v.

FORD MOTOR COMPANY,

APPELLEE

Consolidated with

94-7253

Appeals from the United States District Court

for the District of Columbia

(92cv02294 & 93cv00540)

William A. Dobrovir argued the cause for appellants. Cornish F. Hitchcock entered an appearance.

Robert N. Eccles argued the cause and filed the brief for appellee. Michael J. O'Reilly entered an

appearance.

Before: WALD, SILBERMAN, and WILLIAMS, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge: Appellants challenge the district court's summary judgment

determining that Ford Motor Company's decision to sell its Dealer Computer Services (DCS)

subsidiary, and the resulting loss of benefitsto the DCS employees, did not violate § 204(g) or § 510

of ERISA. Since no Ford benefit plan was amended as required by § 204(g) and Ford did not

"discharge, fine, suspend, expel, discipline, or discriminate" against a DCS employee within the

meaning of § 510, we affirm.

I.

The basic facts are undisputed. Appellants represent 60 former employees of DCS, a

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subsidiary of Ford Motor Company. DCS' primary function was providing Ford dealers with

computerservices. In 1990, Ford experienced sharply reduced profits and had losses exceeding $2.25

billion in 1991. In early 1990, Ford management set a 20% reduction in personnel costs by 1995

target for its North American Automotive Operations. In 1990, Ford had a committee evaluate the

possibilityofselling DCS. The committee recommended that DCS be sold, despite DCS' profitability

every year from 1974 to 1990. The rationale given was that DCS was a "non-core" activity which

would require the investment of Ford resources that could be spent more productively on other

operations. At Ford's Board of Director's meeting in June of 1991, Ford's objectives were described

as receiving a reasonable sale price, ensuring fair treatment for its dealers and employees, and

retaining some influence over the future technological development of DCS. In its "Offering

Memorandum" circulated to potentialbuyers, Ford expressed itsintentionthat the acquiring company

adopt "pay and benefits comparable in overall value to existing arrangements." Universal Computer

Services' (UCS) offer was announced as the best bid on November 27, 1991, and the purchase

agreement with UCS was consummated on January 31, 1992. After March 1991, DCS employees

who requested to transfer out of DCS or participate in Ford's VoluntaryTermination Plan, a program

which offered certain incentives for Ford employees to resign, were refused permission. The DCS

employees were given the option of either working for Ford Dealer Computer Services (FDCS),

UCS' new name for DCS, at 100% of their Ford salaries, excluding benefits, or lose their jobs. UCS

had indicated to Ford that it would be "weeding out personnel with less desirable skills" after a

performance evaluation period of12 to 18 months. When UCS started discharging FDCS employees,

Ford rehired some of them. Indeed, 32 of the 60 employees represented by appellants now work at

Ford.

As a result of the sale, the former DCS employees did not receive all of the benefits that they

otherwisewould have ultimatelyreceived as Ford employees. Particularly, Ford's General Retirement

Plan (GRP) provides for early retirement benefits for an "active member" who either has 10 years of

employment at Ford after 1950 and is at least 55 years old or has 30 years of employment at Ford

after 1950. Accordingly, working at FDCS does not count toward the

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1Ford employees are entitled to severance benefits but not in the event that Ford sells a portion

of its operations and the purchaser offers employees at the operation at least 80% of their Ford

salary. UCS offered the DCS employees 100%. 

years-of-employment-eligibility requirement. Some of Ford's personnel people suggested permitting

DCS employees who were close to vesting to "grow into" early retirement benefits despite this

limitation. According to the deposition of Ford Vice President Mr. Hausman, Ford rejected this

proposal because the GRP was a "very generous plan" to begin with, a "cutoff" point had to be

established, and allowing a "grow in" in this sale would establish a precedent for future sales of

portions ofFordCorporation. Ford also rejected a proposal that Ford retain approximately 40 people

and lease them to UCS in order to protect them against being laid off by UCS.1

WhileFord realized significant pensionsavingsanestimated $18.8millionbysellingDCS,

Ford notes that DCS employees were, on average, younger and had fewer years of Ford service,

factorsthat are correlated with benefit costs. Ford provided a "Welcome Aboard" cash bonus to the

transferred DCS employees, which Ford anticipated would cost $1.75 million, and one month's free

coverage under Ford's welfare benefit plans. Unlike previous sales, Ford rejected a proposal to

transfer GRP assetsto a separate retirement plan for the FDCS employees. While UCS indicated that

it would not establish such a benefits plan because of administrative and legal complications, it did

agree to replicate Ford'sseverance benefitsfor one year and to provide a periodic cash bonusfor each

employee equal to a portionallocated by reference to various factorsof the total value of

projected Ford benefits that DCS employees lost. UCS also agreed to allow Ford to have some

continuing influence on FDCS' prices and technological development. Ford urged its dealers to stay

with FDCS, telling them the change would be "transparent" with Ford Motor Credit continuing to

finance FDCS' sales. Appellants characterize the sale merely as an "outsourcing" in which Ford

continued to "control FDCS' performance ofitsfunctions," even though UCS paid $103 million ($53

million of which was financed by a Ford loan) for DCS.

The district court rejected appellants' argumentsthat these facts establish that Ford ran afoul

of the § 204(g) prohibition on decreasing accrued benefits through an amendment of an employee

pension plan and their § 510 claim that the former DCS employees were discharged by Ford with the

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purpose of interfering with the attainment of their pension rights. Appellants contend that the

"district court erred by weighing the evidence and inferences itself and resolving the [§ 510] intent

issue against appellants." Appellants' challenge is not to the facts summarized above (which stem

from pleadings, documents and depositions), but rather to the appropriate inferences to be drawn

from these facts, particularly as to Ford's purpose. Appellants, of course, are correct that these

inferences should be drawn in their favor.

II.

Appellants, even with the benefit of all disputed inferences, seek to stretch the words

"amendment of the plan" as used in § 204(g). That section provides:

(1) The accrued benefit of a participant under a plan may not be decreased by an

amendment of the plan, other than an amendment described in section 1082(c)(8) of

this title.

(2) For purposes of paragraph (1), a plan amendment which has the effect of

(A) eliminating or reducing an early retirement benefit or a retirement-type

subsidy (as defined in regulations) ...

with respect to benefits attributable to service before the amendment shall be treated

as reducing accrued benefits.

29 U.S.C. § 1054(g) (1985) (emphasis added).

It is argued that since the DCS employees, because of the sale and their termination as Ford

employees, could no longer receive credit toward early retirement benefits under the Ford plan, even

though their "post-sale service [is] identical to their pre-sale service," the plan was "constructively

amended." Appellants rely for support on a Third Circuit case, Gillis v. Hoechst-Celanese Corp.,

4 F.3d 1137 (3d Cir. 1993), cert. denied, 114 S. Ct. 1369 (1994). There, the court indicated that a

sale of a corporate subsidiary, which resulted in cutting off the right of employees hired by the

purchaser to accrue early retirement benefits under the seller's (their old employer's) plan, was a

"constructive amendment" of the plan. In Gillis, however, the seller transferred all of the plan's

liabilities and assets to the purchaser and the primary dispute involved the question of whether

sufficient assets were transferred. Although the language in Gillis is broad enough to support

appellants' position, only recently the Third Circuit in Dade v. North American Philips Corp., No.

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2Section 203, 20 U.S.C. § 1053 (1985), sets forth "minimum vesting standards that private

pension plans must meet," which generally include nonforfeitability of benefits upon the

occurrence of certain conditions. Stewart, 730 F.2d at 1558. But § 203(a)(3)(E) allows

multi-employer plans to refuse to pay "benefits accrued as a result of service with the participant's

employer before the employer had an obligation to contribute under the plan ..." 

94-5546, 1995 WL 638809 (Nov. 1, 1995), rejected a claim similar to appellants', limiting Gillis to

a situation where there is a plan spin-off to the acquiring company. Where an employer merely sells

a separate business unit, the Dade court held there is no plan amendment. Id. at 3-4.

In anyevent, appellants' argument isforeclosed in this circuit by Stewart v. National Shopmen

Pension Fund, 730 F.2d 1552 (D.C. Cir.), cert. denied, 469 U.S. 834 (1984). Stewart involved a

multi-employer plan where one employer stopped making contributions to the plan, leaving it

underfunded as to that employer's employees. The trustees of the multi-employer plan, pursuant to

authority granted them by the terms of the plan, decided to reduce the accrued benefits to those

employees. We concluded that this reduction did not violate § 203's minimum vesting requirements

because the trustees' actions were exempted under § 203(a)(3)(E).2In rejecting the argument that

the trustees' actions violated § 204(g), we determined that there was no amendment to the plan. We

explained that the "word "amendment' is used as a word oflimitation. Congress did notstate that any

change would trigger [§ 204(g)]; it stated that any change by amendment would do so.... In its

present form, § 204(g) is specifically limited to actual amendments ..." Id. at 1561, 1563 (emphasis

in original). Appellants' efforts to distinguish Stewart are quite unpersuasive. Appellants point out

that early retirement benefits were not treated as accrued benefits at the time Stewart was decided;

Congress only extended that protection in 1984. We frankly cannot imagine any reason why that

point isrelevant to an understanding of Stewart 'sreasoning. Nor do we think Stewart can be limited

logically to situations where the actionsin question are specifically authorized by other provisions of

ERISA.

AppellantsstressERISA's generalremedial purpose. But the Supreme Court has emphasized

that ERISA is a "comprehensive and reticulated statute" which was the product of a decade of

congressional study. Mertens v. Hewitt Assocs., 113 S. Ct. 2063, 2065 (1993) (quoting Nachman

Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361 (1980)); see also Massachusetts Mut.

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3Examining legislative history to clarify ambiguous statutory language, as we do infra, is

another matter. 

Life Ins. Co. v. Russell, 473 U.S. 134, 147-48 (1985); Alessi v. Raybestos-Manhattan, Inc., 451

U.S. 504, 510 (1981). As a result of the numerous compromises between powerful competing

interest groupsthat ERISA embodies, the length of the legislative process that lead to its enactment,

its detail, and complexity, the Court has placed particular importance on the statutory text. See

Mertens, 113 S. Ct. at 2071. Reliance on free-floating notions of the "purposes" of ERISA is not an

acceptable method of statutory interpretation.3 As the Court pointed out in Rodriguez v. United

States, 480 U.S. 522, 525-26 (1987) (emphasisin original), and restated inPension Benefit Guaranty

Corp. v. LTV Corp., 496 U.S. 633, 646-47 (1990),

[N]o legislation pursues its purposes at all costs. Deciding what competing values

will or will not be sacrificed to the achievement of a particular objective is the very

essence oflegislative choiceand it frustratesratherthaneffectuateslegislative intent

simplistically to assume that whateverfurthersthe statute's primary objective must be

the law.

See also Frank H. Easterbrook, Statutes' Domains, 50 U. CHI. L. REV. 533, 544-48 (1983).

Accordingly, we reiterate the view expressed in Stewart; § 204(g) is limited to actual amendments.

It is clear that a sale of subsidiary does not constitute an actual amendment.

III.

Appellants alternatively argue that the district court erred in granting summary judgment on

the § 510 claim. In particular, appellants stress that drawing the factual inferences in their favor, the

evidence establishes that the sale of DCS was motivated by a § 510 impermissible purpose. That

section provides:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or

discriminate against a participant or beneficiary for exercising any right to which he

is entitled under the provisions of an employee benefit plan, this subchapter, section

1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C. § 301

et seq.], or for the purpose of interfering with the attainment of any right to which

such participant may become entitled under the plan, this subchapter, or the Welfare

and Pensions Plan Disclosure Act.

29 U.S.C. § 1140 (1985) (emphasis added). It is appellants' contention that Ford's sale of DCS and,

more particularly, the attendant termination of DCS' personnel as Ford employees was a "discharge"

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4A number of these employees were subsequently discharged by UCS which appellants claim

Ford knew would happen. Ford denies this and emphasizes its successful efforts to rehire

employees who were let go by UCS. 

5Of course, even if DCS employees had lower benefit costs, it could still be true that Ford

selected DCS for sale, instead of other Ford subsidiaries, because of benefit considerations. It is

not the level of benefits at the subsidiary but the difference between the level of benefits at the

subsidiary and the level of benefits that the buyer will provide that is relevant. Assuming that the

savings are divided equally between seller and buyer, Ford could expect to save 50% of the

difference. Ford itself contends that benefits are significantly lower in the computer industry,

thereby making it unlikely that a buyer will offer comparable benefits. This suggests that DCS

could have been selected even if it had lower level benefits vis-a-vis other Ford employees. 

of those employees at least in partindeed, in large partfor the purpose of preventing those

employees from ultimately qualifying for early retirement benefits. Appellants insist that Ford's

reasons for selling the division included consideration of Ford's expensive labor costs, of which

pension benefits are not an inconsiderable portion. In their reply brief, appellants' emphasis shifts to

Ford's refusal to permit employees that were hired by DCS to continue to accrue early retirement

benefitsfromFord so that theycouldmeet the years-of-employment-eligibilityrequirement and Ford's

refusal to allow these employees to transfer to other Ford locations before the sale.4

Ford, in response, emphasizes its business reasonsfor selling DCS. It believed, according to

contemporaneous Ford documents, that it should not try to compete in the fast moving computer

businessnot its core expertise. Ford employees at DCS were apparently younger with fewer years

of service than the typical Ford employee, making it improbable that this division would be sold in

order to avoid early retirement benefits. Ford also points to the efforts it made to negotiate with

potential buyers a comparable benefit package to Ford's, which resulted in an UCS cash benefit bonus

and a replication of Ford's severance benefits for one year. As noted, Ford itself distributed a

"Welcome Aboard" cash bonus to the FDCS employees and one month'sfree coverage under Ford's

welfare benefit plans.

It does seem rather unlikely that Ford's basic decision to sell the operation would have been

driven by the benefit packages of its employees which, after all, were standard company-wide.5

Indeed, in their reply brief, appellants conceded that "evidence of unlawful motivation is scant" with

respect to Ford's decision to sell DCS. Ford and the district court's opinion point out that five of the

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6Ford assumes that the Burdine framework applies to organizational decisions as well as

actions against individuals; it simply argues that, in this case, the plaintiff did not adduce

sufficient evidence to withstand a summary judgment motion. 

six circuit courts to have addressed the question whether a corporate organizational change, such as

a decision to sell a subsidiary, violated § 510 have easily rejected such claims at the summary

judgment stage. See Daughtrey v. Honeywell, Inc., 3 F.3d 1488 (11th Cir. 1993); Unida v. Levi

Strauss & Co., 986 F.2d 970 (5th Cir. 1993); Varhola v. Doe, 820 F.2d 809 (6th Cir. 1987) (alleged

§ 510 discrimination between groups of employees); West v. Greyhound Corp., 813 F.2d 951 (9th

Cir. 1987); Aronson v. Servus Rubber, Div. of Chromalloy, 730 F.2d 12 (1st Cir.) (alleged § 510

discrimination between groups of employees), cert. denied, 469 U.S. 1017 (1984); but see Gavalik

v. Continental Can Co., 812 F.2d 834 (3d Cir.), cert. denied, 484 U.S. 979 (1987) (holding, after

examining the evidence adduced at a bench trial, that a company's decision to close down a

production line, among other actions, constituted a violation of § 510). Although typically plaintiffs

produce evidence that potential benefit costs contributed in some manner to an organizational

decision, the courts of appeals have thought it inappropriate to afford plaintiffs a full trial in order to

determine how much of a company's motivation can be attributed to a desire to avoid benefit costs.

On the other hand, ifindividual employees are discharged in the absence of an organizational

change, courtstreat such a claim akin to a Title VII case using the classic Burdine framework, Texas

Dep't of Community Affairs v. Burdine, 450 U.S. 248 (1981), to consider whether the plaintiffs have

established a prima facie case and thereafter to determine how the burdens of production are to be

allocated. See, e.g., Rath v. Selection Research, Inc., 978 F.2d 1087 (8th Cir. 1992); Conkwright

v. Westinghouse Elec. Corp., 933 F.2d 231 (4th Cir. 1991). Under that approach, it is less difficult

for a plaintiff to show sufficient evidence to make out a prima facie case of unlawful motivation and

thereby avoid summary judgment.6 The courts' reluctance to grant summary judgment in these cases

stands in sharp contrast to their treatment of cases challenging an organizational decision. This

contrast is particularly puzzling because it is highly unlikelythat an organizational decision would not

be motivated, at least in part, by benefit considerations. This pattern suggests to us that our sister

circuit courts have implicitly recognized that a corporate organizational change that results in the

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7When confronted with the question of the appropriate statute of limitations for § 510, the

courts of appeals have often applied a state's wrongful discharge or employment discrimination

statute. See, e.g., Hinton v. Pac. Enters., 5 F.3d 391 (9th Cir. 1993), cert. denied, 114 S. Ct.

1833 (1994) (analogizing a § 510 claim to a wrongful termination claim); Byrd v. MacPapers,

Inc., 961 F.2d 157 (11th Cir. 1992) (concluding that a § 510 claim was most closely analogous to

claims for discharge in retaliation for filing workers' compensation claims); McClure v. Zoecon,

Inc., 936 F.2d 777 (5th Cir. 1991) (applying the tort statute of limitations to a § 510 claim). 

termination of employees is really not a prototype of the sort of action that § 510 was primarily

designed to cover.

Examining the language of § 510 closely, one notes that the word "discharge" is included

along with the words "fine,suspend, expel, discipline, or discriminate," allwordsthat connote actions

aimed directly at individuals. The principle of statutory construction, noscitur a sociis, suggeststhat

"discharge," as do "fine, suspend, expel, discipline, or discriminate," typically refers to an action

targeted at an individual employee.7 These words are used first in the section to ban a company from

retaliating against an employee for exercising "any right" under the statute, and then the same words

prohibit interference with an employee's attainment of "any right." Although the word "discharge"

can have varying meaningsit is sometimes used to refer to any employment termination including

a permanent layoff caused by impersonal factorsmore often it is used to refer to a personalized

decision. In this case, it seems rather clear to us that Congress was using the word "discharge" in the

latter sensewhich means an employer's decision to sell or close down an operation would not

normally implicate § 510 merelybecause the action caused the termination of employees. If Congress

had wished for § 510 to apply routinely to such decisions, which are virtually always based, at least

in part, on labor costs, it would surely have included the terms "layoff" and "termination."

The legislative history supportsthisinterpretation. As the Sixth Circuit in West v. Butler, 621

F.2d 240, 245 (6th Cir. 1980), explained, the "legislative history reveals that the [§ 510 was] aimed

primarily at preventing unscrupulous employers from discharging or harassing their employees in

order to keep them from obtaining vested pension rights." The Senate Report on the provision that

eventually became § 510 states:

These provisions were added by the Committee in the face of evidence that in some

plans a worker's pension rights or the expectations ofthose rights were interfered with

bythe use of economic sanctions or violentreprisals. Although the instances of these

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occurrences are relatively small in number, the Committee has concluded that

safeguards are required to preclude this type of abuse from being carried out and in

order to completely secure the rights and expectations brought into being by this

landmark reform legislation.

S. REP. NO. 93-127, 93d Cong., 2d Sess., reprinted in 1974 U.S. CODE CONG. & ADMIN. NEWS

4838, 4872 (1974) (emphasis added). Selling a subsidiary is not an "economic sanction" or a "violent

reprisal," nor are such actions "relatively small in number." One of the leading supporters of the

ERISA bill, Senator Williams, when introducing the Conference Report to the Senate, explained that

"[a] further protection for employees is the prohibition against discharge, or other discriminatory

conduct toward participants and beneficiaries which is designed to interfere with attainment of vested

benefits or other rights under the bill ..." 120 CONG. REC. 29,933 (1974) (emphasis added). The

obvious implication is that "discharge" should be construed as referring to discriminatory, viz

targeted, actions. Senator Hartke asked whether there was not "a direct, positive incentive for every

employer to fire a person [assuming that some of that person's benefits will vest when he turns 30,]

when he reaches 29 years and 364 days of age?" Senator Javits responded by noting that he had

"included an express amendment on that score which would provide a remedy" in such a situation,

and that § 510 addressed "precisely the areas to which the Senator refers." 119 CONG. REC. 30,044

(1973). The Supreme Court has implicitly adopted this view of congressional intent. The Court, in

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143 (1990), described a claim that an employer

fired an employee who had worked for the company for over nine years, four months before his

pension would have vested, allegedly in order to avoid making contributions to his pension fund as

"prototypical of the kind [of claim that] Congress intended to cover under § 510."

This is not to say that § 510 could never be implicated in a company's basic organizational

decision. If, for example, a plaintiff produced evidence that a particular company determined that 20

of its employees were soon to become eligible for a rich benefits package and noted that 19 of those

employees were conveniently located in one subdivision with perhaps onlya few other employeesa

company shutdown of that operation might be only an indirect method of discharging those high

benefit employees. In such a situation, the organization's decision merely masks a determination to

interfere with the employees' attainment of benefit plan rights. Accordingly, we think that as applied

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to sale or closure of an entire unit, the plaintiffs can satisfy § 510 only by showing that some

ERISA-related characteristic specialto the unit (such asits having a clearlyabove-average proportion

of employees with pension rights about to vest) was essential to the firm's selecting the unit for

closure or sale.

Gavalik, the one outlier in the court of appeal's opinions construing § 510, involved a

situation which approachesif it does not quite fitour view of the statutory paradigm. There, in

a case appealed after a full trial, the Third Circuit concluded that a decision to close down a

production line causing a "loss of employment," also described as "loss of work," and "layoffs,"

constituted a § 510 violation. The company had developed a "liability avoidance" program which

authorized plant managers to shift business to plants that either had low unfunded pension liabilities

or plants that needed work in order to retain workers with vested benefits. The court stated that

"[f]rom our review of the entire record, we are convinced that the desire to defeat pension eligibility

was a "determinative' factor in each of Continental's challenged actions. A finding to the contrary

would be clearly erroneous." Gavalik, 812 F.2d at 864 (citation omitted). However, the court does

not focus on the meaning of "discharge" in § 510; indeed, with respect to one of the claims, it even

states "that actual deprivation is not a prerequisite to class liability under § 510." Id. at 856.

Ofcourse, evenafter anorganizationaldecision, determinations asto which individuals, if any,

are to be retained by the selling company might implicate § 510. In this case, however, since Ford

was selling a going business to UCS, Ford naturally wished all of the existing employees to go with

the business; otherwise its value to the purchaser would be less. It is undisputed that "UCS

considered the DCS workforce one ofthe primary assets ofthe business and essential to itslong-term

success." (That UCS wished to examine the transferred employees to determine which it wished to

keep permanently is also not surprising.) Appellants make no contention that individual employees

were treated discriminatorily vis-a-vis other employees. As we understand their position, Ford was

obliged to offer them all continued employment at Ford. Given the business realities that is just

another way of challenging the sale itself. As to appellants' alternative suggestion that Ford was

obliged to allow non-Ford employeesto continue to accrue ("grow into") benefits under a Ford plan,

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we think that claim is far removed from any reasonable construction of § 510. Restated, that is

nothing more than a claim that a firm violates § 510 when it fails to take a step that would give a set

of employeessubstitutesfor benefitsthat theywould have had under the company plan in the absence

of the basic corporate sale or closure. That simply cannot be, for it would mean that any downsizing

firm would always have to give employees the expected value of their plan benefits, which would in

effect be an amendment of the plan in favor of the employees.

For the preceding reasons, we hold that Ford's sale of DCS does not implicate § 204(g) or

§ 510.

Affirmed.

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