Court Opinion

ID: 3020255
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:22:30.164815+00
Date Added: 2024-06-11T13:04:58.656131
License: Public Domain

United States Court of Appeals
                               FOR THE EIGHTH CIRCUIT
                                   ___________

                                  No. 97-2291
                                   ___________
George J. Clough, Jr.,                   *
                                         *
                 Plaintiff-              *
Appellant,                               *
                                         *
     v.                                  *
                                         *   Appeal from the United States
Voyager Group, Inc., a                   *   District Court for the
Corporation; Transport Life              *   Eastern District of Missouri.
Insurance Company, a Corporation;        *
Primerica Life Insurance Company,        *
formerly known as Massachusetts          *
Indemnity and Life Insurance             *
Company; Travelers Group, Inc.,          *
                                         *
                 Defendants-             *
Appellees.                               *

                                   ___________

                         Submitted: January 12, 1998
                            Filed: March 23, 1998
                                 ___________

Before LOKEN and MURPHY, Circuit Judges, and ALSOP, District Judge1.
                               ___________

MURPHY, Circuit Judge.

      1
      The Honorable Donald D. Alsop, United States District Judge for the District
of Minnesota, sitting by designation.
      George Clough was an executive in an insurance business which
underwent several changes over the years due to corporate reorganization and
relocation, and he ultimately had responsibility for downsizing and phasing
out the St. Louis operation of the business. He sued appellee companies
under the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq.
(ERISA), after they denied his claim for severance benefits. After a trial
to the court,2 judgment was entered in favor of the companies. He appeals
from the judgment, and we affirm.

      Clough began working for Penn Life Insurance Company (Penn) in 1972
as an executive vice president in its St. Louis division.       Penn was a
subsidiary of American Can Company (American). Over time the corporate
structure changed as Penn merged with Massachusetts Indemnity and Life
Insurance Company and then with several other American subsidiaries in an
umbrella holding company called PennCorp Group Management. Clough became
the chief operating officer of PennCorp and handled the company’s credit
insurance business, its training programs, oversight of the finance and
credit departments, marketing and administration for a car rental insurance
division, and all daily operations of some three hundred employees in St.
Louis.

      In 1987 American began transferring most of the functions of the St.
Louis office to another subsidiary, Voyager Group, Inc. (Voyager), in
Jacksonville, Florida.3 In order to encourage the managers and officers in
the St. Louis office to remain during the transition, PennCorp established
in 1987 a severance award program and “stay bonus” plan that would become
payable when a recipient’s position was eliminated.

      2
        The Honorable E. Richard Webber, United States District Judge for the Eastern
District of Missouri.
      3
      In May of 1988, American was purchased by Commercial Credit and its name
was changed to Primerica Corporation. In 1991, Voyager’s business was transferred
to Transport Life Insurance Company, another Primerica subsidiary. Primerica
eventually purchased Travelers Group, Inc. and adopted the name Travelers.

                                         -2-
The parties stipulated that Clough was eligible for the PennCorp severance
plan at the time it was initiated. At the beginning of 1988, however,
Clough entered into a new two year employment contract with Voyager that
included an entitlement to all the benefits the company provided but did not
mention any predecessor company. In June 1990 he entered into a second
employment contract with Voyager for a five year term. Neither contract
mentioned the 1987 severance plan, and neither Clough nor Voyager’s agent,
Gary Pridgen, brought up the plan during their negotiations.

      Under Clough’s second employment contract his responsibilities and
salary gradually decreased as his numerous duties began to be shifted to Jim
Moore in Ft. Worth, Texas and to other Voyager employees elsewhere. Near
the end of the five year contract term, all of Clough’s duties had been
shifted to other employees and he came to the office only two days a week
and had no actual responsibilities. This contract terminated on May 31,
1995 and was not renewed.     On August 8, 1995, Clough sent a letter to
Transport Life Insurance Company, which had meanwhile taken up Voyager’s
business, requesting severance benefits under the 1987 plan.       Transport
replied with a denial letter stating that his employment contracts had been
intended to supersede the earlier severance plan.

      Clough then brought this suit against all the companies in his
employment line. The parties presented a stipulation to the district court
which also heard additional evidence before it determined that Clough was
not entitled to severance benefits under the 1987 plan. The court found
that Clough never became eligible for those benefits because his job was
never eliminated and his employment contracts with Voyager were intended to
supersede his eligibility for the plan.       Clough was the only PennCorp
carryover employee who received such contracts, and they did not refer to
the severance plan.      Moreover, during his seven years of continued
employment Clough never asserted that he was entitled to payments under the
plan, nor did he request certification from the company that he was. Both
contracts also had integration clauses

                                    -3-
stating that they expressed the full agreement of the parties as to their
rights and obligations.

      The district court’s factual findings in this ERISA case are reviewed
for clear error and its legal conclusions are reviewed de novo. Donatelli
v. Home Insurance Co., 992 F.2d 763, 765 (8th Cir. 1993). Although Clough
was covered by the severance plan at the time of its creation as agreed in
the parties’ stipulation, under the plan entitlement to payment did not
arise until the employee’s position was eliminated. The district court
specifically found that Clough’s position was never eliminated, but that his
duties were shifted to Jim Moore and other employees.        His employment
contract provided for a gradual decrease during the transition period in
both annual salary (from $162,000 the first two years to $129,600 the third
year and $97,200 for the last two years) and responsibility (his required
work days decreased to four days a week, then three, and finally two). At
the time Voyager took control of PennCorp, Clough had circulated a memo to
employees eligible for the 1987 severance plan which stated that if their
positions were eliminated, severance benefits would accrue “at the time such
a change becomes effective.” This suggests not only that eligible employees
had no enforceable right to benefits under the 1987 package prior to
elimination of their positions, but also that Clough was well aware of that
fact.

      Clough remained employed with Voyager and its successor Transport for
seven years to help familiarize the new officials with the existing
operation, its local contacts, and the employees who would remain involved
in the work. A severance benefit plan does not vest while an employee
continues to work for the creator of a benefit plan or for its successor in
comparable employment. Parker v. Bankamerica Corp., 50 F.3d 757, 766-67
(9th Cir. 1995); Harper v. R.H. Macy, & Co., Inc., 920 F.2d 544, 545-46 (8th
Cir. 1990). Clough testified at trial that he was retained because he was,
“the most knowledgeable in it [sic] I knew most of the customers...they
needed someone who would hold the hands, if you like, of the brokers and
agents so that the business was moved smoothly.” Clough also testified that
in the final phases of his second contract

                                    -4-
with Voyager, his primary task was introducing Moore to the customers in the
St. Louis area so Moore could assume Clough’s former duties.         By the
beginning of 1994, Clough’s only service to the company was consulting with
its lawyers about lawsuits involving files with which he was familiar. As
of 1995 he had no employees reporting to him and no duties to discharge.
Severance benefits under the 1987 plan never vested in Clough because his
position was never eliminated. Schunholz v. Long Island Jewish Medical
Center, 87 F.3d 72, 77 (2nd Cir. 1996); Anderson v. John Morrell & Co., 830
F.2d 872, 877 (8th Cir. 1987).

      Clough argues that his continued eligibility for benefits under the
1987 plan is demonstrated by paragraph six of his 1990 contract which stated
that he was entitled to participate in all benefit programs of “the company”
(defined elsewhere in the contract as Voyager).          Gary Pridgen, who
negotiated the contracts with Clough, testified that the purpose of the
contracts was to phase Clough out of the business gradually and that the
severance plan was never considered by Voyager and never raised by Clough.
Paragraph six only refers to benefit programs of Voyager and does not show
that Clough is entitled to benefits under the 1987 plan. The paragraph also
specifically provides that it is subject to paragraph four which spells out
the gradual reduction of Clough’s duties and compensation.

      Clough’s contracts with Voyager do not show any clear intent that he
be eligible for payments under the 1987 severance plan drawn up by PennCorp.
They provided for his continuing employment with ensured compensation while
he facilitated the corporate transition. This type of agreement was not
reached with any other employee originally eligible under the plan. Seven
other individuals still employed in the business inquired in 1991 about
their continued eligibility for the 1987 severance plan, and their
eligibility was confirmed in a memo from Moore. Clough was not included in
the names of the eligible employees, but he was copied on the memo and never
objected to not being included and never suggested to Moore that he should
have been.

                                    -5-
      Based on this record, the district court did not err in concluding
that Clough was not entitled to severance benefits under the 1987 PennCorp
plan. The judgment is therefore affirmed.

     A true copy.

           Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                   -6-