The opinion of the court was delivered by: ANITA BRODY, District Judge
Plaintiff Michael La Fata ("La Fata") is a former employee of
Raytheon Engineers and Constructors, Inc. ("RE&C"). Prior to July 7,
2000, RE&C was a wholly-owned subsidiary of defendant Raytheon
Engineers and Constructors International, Inc. ("RECI"). RECI is a
wholly-owned subsidiary of defendant Raytheon, Inc. ("Raytheon"). La
Fata originally filed a 17-count class action complaint against a number
of defendants*fn1 for violations of the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., federal
securities laws, and state common law.*fn2 At this time, only two*fn3
counts remain: Count I, a claim for benefits
pursuant to § 502(a)(1)(B) of ERISA,
29 U.S.C. § 1132(a)(1)(B),*fn4 and Count II, a claim for benefits pursuant
to § 510 of ERISA, 29 U.S.C. § 1140.*fn5 Raytheon and RECI are the
only remaining defendants.*fn6 Before me are the cross-motions for summary
judgment filed by the parties on the two remaining counts. This court has
jurisdiction based on the existence of a federal question. For the
following reasons, I grant defendants' motion for summary judgment on
both Count I and Count II.
I. Facts Stated Most Favorably to Plaintiff
In March of 1993, La Fata began working for RE&C as an engineer.
(First Am. Compl. ¶ 28.) RE&C and its owner, RECI,*fn7
Delaware corporations. (App. Supp. D's Mot. Summ. J. Ex. B.) La Fata was
provided a number of benefits as an RE&C employee. Those benefits
included: the option to participate in an RE&C-sponsored defined
pension benefit plan, the option to participate in a Raytheon-sponsored
savings and investment plan with an employee stock ownership component,
the option to participate in the Raytheon Scholars Program, which
provided cash awards to the children of Raytheon employees to be used for
costs associated with undergraduate programs, access to medical, dental,
and disability coverage, and a non-discretionary severance plan for
involuntary termination of RE&C employment known as the RE&C
Severance Pay Policy ("Severance Pay Policy"). (App. Supp. D's Mot. Summ.
J. Ex. R.) Some of the constituent benefit programs enjoyed by La Fata
are expressly incorporated into what is known as the Welfare Benefit
Plan. The Welfare Benefit Plan operates as an umbrella plan for the other
RE&C employee plans, supplying "certain uniform terms for the
employee benefit plans." (App. Supp. D's Mot. Summ. J. Ex. C at §
2.1.) Each term of the Welfare Benefits Plan is considered to apply to
all incorporated plans unless it "conflicts with, contradicts, or renders
ambiguous" a term, provision, implication or statement in the
incorporated plan. (Id. at § 1.5.) The rules of each
incorporated plan regarding eligibility, enrollment, coverage, and
termination of coverage of eligible employees are set forth in each
incorporated plan's "Constituent Benefit Program Document." (Id.
at § 3.2.) The Welfare
Benefits Plan contains a termination provision. It provides:
In the event of any dissolution, merger,
consolidation, or reorganization of the Employer
in which the Employer is not the survivor, the
[Welfare Benefits Plan] shall terminate with
respect to the Employer and its Employees unless
the Plan is continued by the successor to the
Employer and such successor agrees to be bound by
the terms and conditions of the Plan.
Id. at § 7.4.
The Severance Pay Policy is one of the constituent benefit programs
explicitly incorporated into the Welfare Benefits Plan. (Id. at
App. A.)*fn8 The Severance Pay Policy is not a stand-alone policy. The
Severance Pay Policy is section X of a larger employment policy, the
RE&C Termination of Employment Policy ("Termination Policy").*fn9
The Termination Policy sets out "fair and uniform standards for the
termination of employees." (Decl. Supp. Pl's Opp'n Defs.' Mot. Summ. J.
Ex. A.) In Section IV of the Termination Policy, several types of
voluntary and involuntary terminations of employment are described. Of
the four types of involuntary terminations defined, Section X, the
Severance Pay Policy, specifies that severance pay will be authorized for
those terminations of full-time
employees classified as layoff,*fn10
(Id.) Section IX of the Termination Policy
Any accrued vacation*fn13 and severance pay, if
applicable, will be included on the first paycheck
following an employee's termination date.
In about September 1999, executives and directors of Raytheon, RECI,
RE&C, and Morrison Knudsen Corporation ("MK") commenced discussions
in the hope of selling its RE&C stock to MK. (Decl. Pl.'s Mot. Summ.
J. Ex. 5, 8, 9.) At that time, RE&C had eight operating divisions.
(Id. Ex. 27.) Also at that time, MK performed some due diligence
on RE&C. (Id. Ex. 8.) MK is an Ohio corporation.
(Id. Ex. 21.) The initial proposal between Raytheon and MK was
structured as an asset sale. (Id. Ex. 5.) Likewise, the Term
Sheet outlining the proposed acquisition of RE&C by MK structured the
transaction as an asset purchase. (Id. Ex. 31.) An early draft
of the agreement of sale was entitled a "Stock and Asset Purchase
Agreement." (Decl. Supp. Pl's Opp'n Defs.' Mot. Summ. J. Ex. G.) Members
of Raytheon's Human Resources Leadership Team discussed structuring the
sale as a stock sale as opposed to an asset sale
because they believed that a stock sale would not trigger the
obligations of the RE&C Severance Pay Policy. (Decl. Pl.'s Mot. Summ.
J. Ex. 7.) In November or December of 1999, Raytheon proposed structuring
the sale as a sale of stock. (Id. Ex. 5.)
On February 11, 2000, Shay Assad, Executive Vice-President of Raytheon
and Chairman and Chief Executive Officer of RE&C, sent a letter to
all RE&C employees pledging that an employee benefit program
involving RE&C's performance sharing plan would continue in 2000, and
expressed hope "to put extra money in everyone's pocket this time next
year." Assad's letter made no mention of a potential sale. (App. Supp.
D's Mot. Summ. J. Ex. Q.) Also in February 2000, La Fata's employment
title became that of construction or project manager for RE&C's PECO
Contractor and Project Manager Group. (Id. Ex. F.)
Sometime in mid-April of 2000, Raytheon, RECI, and MK signed an
agreement for the sale of the stock of RE&C to MK. (Decl. PL's Mot.
Summ. J. Ex. 5.) Section 9.1(a) of the Stock Purchase Agreement (the
"Agreement") provides that:
At the Closing, the Buyer will or will cause an
RECI Company to offer employment to those
individuals listed on Schedule 9.1, each an
employee of one or another of the Sellers
primarily engaged in providing services with
respect to the Purchased Business. The offer for
each such individual shall be for the same base
pay as such individual receives as of the Closing
Date and with benefits satisfying the Buyer's
obligations under Section 9.2. The employment with
the Buyer (or an RECI Company) of all such
employees accepting such offers will be deemed to
have commenced immediately after 11:59 p.m.,
Boston local time, on the Closing Date.
Parties' Joint Summ. J. Ex. 1.
Section 9.1(c) provides:
The Sellers shall remain responsible for any
severance benefits, termination indemnity
payments, or similar payments, if owed to any
individual made an offer of employment as provided
in paragraph (a) above who does not accept such
Parties' Joint Summ. J. Ex. 1.
Section 9.3(d) provides:
The Sellers shall be responsible for amounts
payable and any other obligations under the
Retention Agreements not specifically addressed in
this Section 9.3, when and if such obligations
become due, and for severance, change of control
or similar amounts payable to any Assumed
Employees and arising solely from the consummation
of the transactions contemplated by this
Parties' Joint Summ. J. Ex. 1.
Section 16.4 provides:
The validity and construction of the agreement
shall be governed by the internal laws (and not
choice-of-law rules which would require the
application of the laws of another jurisdiction)
of the state of New York.
Parties' Joint Summ. J. Ex. 1.
Section 16.9 provides:
Except as otherwise expressly provided herein,
nothing herein expressed or implied is intended or
shall be construed to confer upon or to give any
person, firm or corporation, except the Sellers
and the Buyer and as provided in Article 13 with
respect to the Buyer Indemnified Parties and the
Seller Indemnified Parties, any rights or remedies
under or by reason of this Agreement.
Parties' Joint Summ. J. Ex. 1.
The Stock Purchase Agreement did not require MK to provide or maintain
benefits for RE&C employees at an aggregate level comparable to those
provided by RE&C. (Decl. Pl.'s Mot. Summ. J. Ex. 9.)
By at least May 2000, RE&C employees were informed of the changes
that would result from the closing of the sale through meetings,
"MK-RE&C Integration Q&A Sheet" releases ("Q&A Sheet"), and
other information posted on a transitional website. (Id. Ex.
14.) An undated document entitled MK & RE&C Weekly
Connection stated that the "transition team is developing answers to
any questions you might have regarding timelines, benefits, and the
reorganization." (Id. Ex. 28.) The May 8, 2000 Q&A
Sheet referred to the "integration of MK and RE&C" and the "new
organization." (Id. Ex. 14.) The May 8, 2000 Q&A Sheet also
instructed RE&C employees that they will continue on the "existing
RE&C payroll and benefits programs through the end of 2000."
(Id.) The May 26, 2000 Q&A sheet revealed that MK and
RE&C would be integrated into one organization with five divisions.
(Id. Ex. 26.)
The stock sale closed on July 7, 2000. (Decl. Pl.'s Mot. Summ. J. Ex.
6.) The Ohio Secretary of State certified that on that same day records
were filed showing that RE&C, a Delaware company qualified to do
business in Ohio, merged into MK, an Ohio corporation. (Id. Ex.
21.) The Ohio Secretary of State further certified that MK was the
survivor of the merger, and that the survivor's corporate title was
changed to Washington Group International Inc. ("Washington Group"), an
Ohio corporation. (Id.) The Ohio Certificate of Merger indicated
the same. (Id. Ex. 22.) The Delaware Secretary of State
certified that on July 10, 2000, a Certificate of Ownership and Merger
was filed merging RE&C into Washington Group. (Opp'n Defs.' Pl.'s
Mot. Summ. J. Ex. 1.) The Delaware Certificate of Ownership and Merger
included the resolutions passed by Washington Group's Board of Directors
on July 7, 2000 to merge RE&C into Washington Group. Two of the
relevant resolutions provide:
RESOLVED that Raytheon Constructors Inc. be
merged into the Corporation*fn14 and that all of
the estate, property, rights, privileges, powers,
and franchises of Raytheon Constructors Inc. be
vested in and held and enjoyed by the Corporation
as fully and entirely and without change or
diminution as the same were before held and
enjoyed by Raytheon Constructors Inc. in its name.
RESOLVED that the Corporation assume all of the
obligations of Raytheon Constructors Inc.
There is some evidence suggesting that former RE&C employees no
longer worked for RE&C after the day of the closing. First,
information provided to RE&C employees on the day the stock sale
closed included the July 7, 2000 Q&A sheet which referenced "[f]ormer
RE&C employees." (Decl. Supp. Pl.'s Opp'n Defs.' Mot. Summ. J. Ex.
N.) Secondly, a stock option report prepared by Raytheon for La Fata
covering the time period between June 1, 1995 to July 7, 2000 described
the transactions that took place on July 7, 2000 as "Cancel: Terminated."
(Decl. Pl.'s Mot. Summ. J. Ex. 23.) Finally, under the terms of the
MK/WGI 401(k) plan, years of service for RE&C employees were
calculated using July 8, 2000 as the first day of employment with
Washington Group and July 7, 2000 as the last day of employment with
RE&C. (Id. Ex. 24.) La Fata continued to be a construction
or project manager for the PECO Contractor and Project Manager Group
after the close of the stock sale. (App. Supp. D's Mot. Summ. J. Ex. H
Some of the benefits RE&C employees had enjoyed prior to the stock
sale were altered on July 7, 2000, the day the stock sale closed. (App.
Supp. D's Mot. Summ. J. Ex. R.) The defined benefit pension plan RE&C
had provided for its employees prior to the close of the stock sale was
eliminated. (Decl. Pl.'s Mot. Summ. J. Ex. 6.) RE&C employees were no
longer eligible to participate in the Raytheon Scholars program. (Decl.
Supp. Pl.'s Opp'n Defs.' Mot. Summ. J. Ex. N.) While Raytheon had
provided its employees, including RE&C employees, a stock ownership
component in its 401(k) savings and investment plan prior to the stock
sale, (Decl. Pl.'s Mot. Summ. J. Ex. 18) the 401(k) plan offered to
RE&C employees on July 7,
referred to by the defendants as the "MK/WGI 401(k) plan," did not
offer employer stock as an investment option.*fn15 (App. Supp. D's Mot.
Summ. J. Ex. R.) With one exception,*fn16 an RE&C employee's
invested stock options expired at the closing date. (Decl. Supp. Pl.'s
Opp'n Defs.' Mot. Summ. J. Ex. N.) The MK/WGI 401(k) plan also differed
from the Raytheon savings and investment plan in two other ways. First,
while the prior plan had allowed the contribution of both pre-tax and
post-tax dollars, the MK/WGI 401(k) plan did not allow for after-tax
contributions. (App. Supp. D's Mot. Summ. J. Ex. R.) Second, as compared
to the prior plan in which employer-contributions vested immediately
(Id. Ex. R), employer-matching contributions in the MK/WGI
401(k) plan vested over a five year period. (Decl. Supp. Pl.'s Opp'n
Defs.' Mot. Summ. J. Ex. N.)
There is conflicting evidence as to whether the Severance Pay Plan was
altered on the day the stock sale closed. Defendants claim the Severance
Pay Policy was unchanged on July 7, 2000. (App. Supp. D's Mot. Summ. J.
Ex. R.) However, a document, presumably an internal memo, entitled
"Talking Points Regarding Immediate Removal of RE&C Severance Policy"
states that "If a Washington Group International, Inc. employee is laid
off due to the acquisition, he/she will receive a modified
legacy RE&C severance package. (The modified package does not include
salary continuation.)" (italics added) (Decl. Supp. Pl.'s Opp'n Defs.'
Mot. Summ. J. Ex. E.) The document further states "[Making RE&C
employees immediately subject to the
MK severance policy after the acquisition] will lead to employee
anger and poor employee relations, and the impact will ripple throughout
the organization." The document concludes:
It is recommended that we continue the RE&C
severance policy ...