letter. The only way the plaintiffs' rights could have vested was by the occurrence of one of the enumerated conditions precedent in the SPP (i.e. "involuntary separation from the service of Meritor Financial Group where that separation results from lack of work, job elimination, reorganization, or reduction-in-force.") during the period in which the SPP was in effect.
Pursuant to its terms, the SPP could have been terminated at any time. An employer may generally terminate welfare benefit plans at will, so long as the procedure followed is consistent with the plan and ERISA. Deibler v. Local Union 23, 973 F.2d 206, 210 (3d Cir. 1992). Because both the FDIC and Meritor had the right to terminate the SPP at will, the plaintiffs had no vested right to severance pay.
The plaintiffs have the burden of showing that they were involuntarily separated before the appointment of the receiver. See Dababneh, 971 F.2d at 434. Since plaintiffs were not terminated prior to the appointment of the FDIC as receiver, their rights to severance pay did not vest until after Meritor was declared insolvent by the Commonwealth's Secretary of Banking.
Since the plaintiffs' rights to severance did not arise prior to the FDIC takeover, the court must now address whether their right to severance arose after the FDIC takeover.
1. FDIC's right to repudiate
Plaintiffs cannot recover severance pay in this case because the FDIC repudiated the SPP upon its appointment as receiver. As receiver, the FDIC had the power to repudiate any contract that it determines to be "burdensome" in order to "promote the orderly administration of the institution's affairs." 12 U.S.C. § 1821(e)(1); Howell v. FDIC, 986 F.2d 569 (1st Cir. 1993). The FDIC may exercise its right to repudiate within a reasonable time period following its appointment as receiver. 12 U.S.C. § 1821(e)(2); see also 1185 Ave. of America Assoc. v. RTC, 22 F.3d 494, 498 (2d Cir. 1994) (repudiation after 90 days not unreasonable under the circumstances). If the FDIC chooses to repudiate a contract, it may repudiate a contract retroactively to its date of appointment as receiver. 12 U.S.C. § 1821(e)(3)(A)(ii). Because the SPP was unfunded, see Second Amended Compl., Ex. C., the FDIC could reasonably determine that, in wrapping up the affairs of Meritor, paying severance pay to plaintiffs would be "burdensome." Morton v. Arlington Heights Federal Sav. & Loan, 836 F. Supp. 477, 485 (N.D. Ill. 1993) (" Any unnecessary payment is burdensome to an insolvent institution" (emphasis in the original)). Pursuant to its authority under section 1821(e), the FDIC immediately repudiated the SPP on the day of its appointment as receiver. On the day Meritor was closed, the FDIC closing manager, Jack Goodner, informed Meritor employees that they would not receive severance pay. Def. Ex. 4, Goodner Dep. p. 26-27. While this repudiation may have been informal, it was clear, unambiguous and reasonable under the circumstances. See Lawson v. FDIC, 3 F.3d 11, 15 (1st Cir. 1993).
The court's scope of review of the FDIC decision to repudiate is very limited. Cf. Howell, 986 F.2d at 572. ("litigant would normally have an uphill battle in overturning an FDIC finding of 'burden'"); Atlantic Mechanical, Inc. v. RTC, 772 F. Supp. 288 (E.D. Va. 1991) (abuse of discretion standard applied), aff'd, 953 F.2d 637 (4th Cir. 1992); Morton v. Arlington Heights Federal Sav. & Loan, 836 F. Supp. 477, 484-85 (N.D. Ill. 1993) (questioning whether a district court has jurisdiction to review a receiver's repudiation of a contract). The receiver has wide discretion to decide what is burdensome. 12 U.S.C. § 1821(e)(1)(B); 1185 Ave. of America Assoc. v. RTC, 22 F.3d 494, 498 (2d Cir. 1994). The receiver does not have to give reasons for that decision. 1185 Ave. of America Assoc., 22 F.3d at 498; Morton, 836 F. Supp. at 485. Because the receiver did not desire to continue the employment of any of the plaintiffs, it was reasonable for the FDIC to repudiate the SPP and the individual letters. See Morton, 836 F. Supp. at 485-86.
2. Actual direct damages
The plaintiffs ability to recover for damages caused by the FDIC's repudiation of the SPP are limited to actual direct compensatory damages. 12 U.S.C. § 1821(e)(3). Severance payments are not such damages. Howell v. FDIC, 986 F.2d 569 (1st Cir. 1993). Therefore, plaintiffs' claims for damages do not survive.
In Howell v. FDIC, 986 F.2d 569 (1st Cir. 1993), four officers of a failed bank brought suit against the FDIC for severance pay. The bank by letter agreement
promised the officers severance pay in the event of termination. 986 F.2d at 570. The letters made clear that these agreements did not alter the "at will" employment relationship between the parties. Id. The officers alleged that the FDIC knew of and approved of their agreements with the bank. Id. at 571. After the bank failed, the FDIC was appointed receiver. Id. Within two months, the officers were terminated. The officers filed claims for severance pay with the FDIC. The FDIC disallowed these claims as violative of public policy. Id. The district court ruled that the FDIC lawfully repudiated the contracts between the plaintiffs and the bank and that under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") 103 Stat. 183 (codified in various sections of 12 and 18 U.S.C.), there were no compensable damages for the resulting breach. Id.
Because the Howell court found that the FDIC validly repudiated the plaintiff officers' contracts, its decision focused on whether the officers could recover damages for the repudiation of those contracts. See 12 U.S.C. 1821(e)(3). A receiver's liability for repudiation of any contract is limited to actual direct compensatory damages suffered by an aggrieved person as a result of the repudiation. 12 U.S.C. § 1821(e)(3)(A)(i). The Howell court held that the officers' claims did not comprise allowable claims under FIRREA, because severance payments are not "actual direct compensatory damages" under 12 U.S.C. § 1821(e)(3)(A)(i). Id. at 572-73. The court concluded that severance payments
are at best an estimate of likely harm made at a time when only prediction is possible. When discharge actually occurs, the employee may have no way to prove the loss from alternative employments foregone, not to mention possible disputes about the discharged employee's ability to mitigate damages by finding new employment. A severance agreement properly protects against these uncertainties by liquidating the liability. Such payments comprise or are analogous to "liquidated damages," at least when the amount is not so large as to constitute an unenforceable penalty.