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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 EIGHTH CIRCUIT

___________

No. 06-1164

No. 06-2923

___________

Jerry Jessup, et al., *

*

Plaintiffs - Appellees, *

* Appeals from the United States

v. * District Court for the

* Eastern District of Arkansas.

Alcoa, Inc., et al. *

*

Defendants - Appellants. *

___________

Submitted: December 15, 2006

Filed: April 2, 2007

___________

Before LOKEN, Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.

___________

LOKEN, Chief Judge.

Alcoa, Inc., sold two facilities as going concerns to an unrelated purchaser that

continued to operate the facilities under the name Almatis Group. After the sale,

salaried employees who continued work without interruption as employees of the

purchaser applied to Alcoa for early retirement benefits under the “Rule of 65”

provisions of the Alcoa Retirement Plan I (the Plan). When their claims were denied

by the Alcoa Benefit Appeals Committee, they commenced this action against Alcoa

and the Plan for wrongful denial of benefits under the Employee Retirement Income

Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a). The district court granted

plaintiffs summary judgment on this claim and subsequently awarded them attorneys’

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fees and costs as prevailing parties. Alcoa separately appeals both rulings. We review

the grant of summary judgment de novo, applying the same standard as the district

court. Stearns v. NCR Corp., 297 F.3d 706, 708 (8th Cir. 2002), cert. denied, 537

U.S. 1160 (2003). When an ERISA plan grants the administrator discretion to

construe the plan and to determine benefits eligibility, as in this case, both courts must

apply a deferential abuse-of-discretion standard in reviewing the plan administrator’s

decision. McKeehan v. Cigna Life Ins. Co., 344 F.3d 789, 792 (8th Cir. 2003).

Applying that standard here, we reverse. 

Plaintiffs were not eligible for Rule of 65 benefits under the relevant provisions

of the lengthy Plan document. Article 7.2(b)(vi)(A) provided that employees who

meet certain age and tenure requirements (as plaintiffs did) became eligible for Rule

of 65 benefits if they were “absent due to a Permanent Separation from Employment

resulting from the permanent shutdown of . . . the plant . . . (as determined by Alcoa).”

 Article 2 defined the term “Permanent Separation from Employment” as: 

[T]he termination of the employment of an Eligible Employee . . .

through no fault of his or her own for lack of work for reasons associated

with the business . . . . In no event does a Permanent Separation from

Employment occur if the Eligible Employee is offered suitable

employment by the Company, a Subsidiary, or a successor employer.

In letters denying plaintiffs’ administrative appeals, the Alcoa Benefit Appeals

Committee explained that they were not eligible for Rule of 65 benefits because (i)

they were terminated due to the sale of the business, not “for lack of work,” and (ii)

they received suitable offers of employment from Almatis, a successor employer. If

the Plan language is controlling, this decision was clearly not an abuse of discretion.

However, the Plan’s summary plan description (SPD) employed different

language in summarizing eligibility for the Plan’s Rule of 65 benefits. After setting

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forth age and tenure requirements, the SPD recited that to qualify for rule of 65

benefits an employee must:

• be absent for one year due to layoff . . . or have been placed

on permanent layoff; and

• Alcoa and its subsidiaries fail to offer you suitable longterm employment (as determined by Alcoa).

As a general rule, when the SPD conflicts with the plan it purports to summarize, the

SPD provision governs. See Koons v. Aventis Pharm., Inc., 367 F.3d 768, 775 (8th

Cir. 2004). Therefore, plaintiffs argue, they are eligible for Rule of 65 benefits

because they were permanently laid off when the facilities were sold and they were

not offered suitable long-term employment by Alcoa and its subsidiaries, as the SPD

provided. The district court agreed, concluding that the Plan and the SPD were in

conflict because the Plan provided that an employee was ineligible if he or she

received an offer of suitable employment “from the Company, a Subsidiary, or a

successor employer,” whereas the SPD exclusion was limited to offers from “Alcoa

and its subsidiaries.” Given this conflict, the court concluded, the denials of benefits

must be reversed because they were based upon “an additional qualification” (offers

of employment from Almatis, the successor) not disclosed in the SPD. 

The district court’s Order did not address a distinct issue argued by the parties

in the district court and on appeal. Alcoa argues, as the Benefits Appeal Committee

letters explained, that plaintiffs did not suffer a “permanent layoff” within the meaning

of the SPD provision because, although they ceased working for Alcoa, their facility

was sold as a going concern and they continued working for the purchaser without

interruption or a substantial change in the terms of their employ. Plaintiffs argue they

were nonetheless permanently laid off, citing only a dictionary definition of the word

“layoff.” Alcoa, on the other hand, relies on numerous ERISA and federal labor law

decisions. Though the specific plan language at issue varied, the decisions were

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 See Brandis v. Kaiser Alum. & Chem. Corp., 47 F.3d 947, 949 (8th Cir. 1995)

(“permanent shutdown of the plant”); Headrick v. Rockwell Int’l Corp., 24 F.3d 1272,

1276 (10th Cir. 1994) (“laid off for lack of work”); Schroeder v. Phillips Pet. Co., 17

F.3d 1147, 1148 (8th Cir. 1994) (same); Blank v. Bethlehem Steel Corp., 926 F.2d

1090, 1092-4 (11th Cir. 1991) (“layoff . . . as a result of a permanent shutdown”), cert.

denied, 502 U.S. 938 (1991); Rowe v. Allied Chem. Hourly Employees’ Pension Plan,

915 F.2d 266, 268-69 (6th Cir. 1990) (“layoff”); Lakey v. Remington Arms Co., 874

F.2d 541, 545 (8th Cir. 1989) (“termination . . . caused by lack of work”); Acton v.

Tosco Corp., 815 F.2d 1161, 1162 (8th Cir. 1986) (“layoffs”); Anderson v. Ideal Basic

Indus., 804 F.2d 950, 953 (6th Cir. 1986) (“termination of employment resulting from

a permanent shutdown of a plant”). Plaintiffs urge us to ignore the earlier cases

because they applied an arbitrary and capricious standard of review that gave way to

the abuse of discretion standard after the Supreme Court’s decision in Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101 (1989). However, substantively “this is a

distinction without a difference.” Cox v. Mid-America Dairymen, Inc., 965 F.2d 569,

572 n.3 (8th Cir. 1992). 

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uniform in concluding that, when a facility is sold or its right to conduct contract

operations is assigned to a new owner, employees who continue to work for the new

owner under substantially the same terms and conditions are not entitled to early

retirement or severance benefits.1

 Retired Supreme Court Justice Byron R. White

sitting by designation in the Tenth Circuit explained the common-sense rationale for

these consistent decisions in Headrick, 24 F.3d at 1276:

After all, when an employee retains his job despite a transfer, he has not

suffered for “lack of work.” Moreover, inhering in the term “laid off” is

the understanding the affected employee no longer holds the same job he

did prior to being “laid off” . . . . The difficulty of squaring appellants’

claim to being “laid off for lack of work” with the ordinary meaning of

the phrase is illustrated by the trouble we have in imagining any Rocky

Flats employee describing himself to family, friends, or, say, the local

welfare office . . . as having just been “laid off for lack of work” after

[the successor] had provided him with the very same job and benefits he

enjoyed with Rockwell the day before.

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Viewed from the perspective of these prior decisions, the SPD’s summary of

the eligibility criteria for Rule of 65 benefits did not conflict with the Plan. The SPD

explained that Rule of 65 benefits were limited to employees “placed on permanent

layoff.” Prior cases established the relevant context -- employees are not “placed on

permanent layoff” when, as in this case, a facility is sold and they are offered

comparable, uninterrupted employment by the new owner. In other words, by limiting

eligibility to “permanent layoff” situations, the SPD incorporated the substance of the

Plan’s more explicit reference to offers of suitable employment by a successor. This

interpretation does not render meaningless the SPD’s additional eligibility

requirement that “Alcoa and its subsidiaries” failed to offer suitable long-term

employment. That requirement covers a different situation -- when a facility is sold,

employees are not employed by the purchaser, and Alcoa then terminates the retained

employees without offering suitable alternative employment.

In conclusion, though the Plan and the SPD used different language in defining

eligibility for Rule of 65 benefits, the Alcoa Benefit Appeals Committee did not abuse

its discretion in concluding that plaintiffs were not eligible under either definition.

Therefore, the decisions of the Plan administrator must be affirmed. Turning to the

second appeal, plaintiffs concede that the district court’s award of attorneys’ fees and

costs must be overturned if they are not prevailing parties. 

Accordingly, we reverse that portion of the district court’s judgment that

overturned Alcoa’s denial of Rule of 65 benefits and the district court’s orders dated

July 10 and July 13, 2006, awarding plaintiffs attorneys’ fees and costs. 

______________________________ 

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