Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

FATA v. RAYTHEON COMPANY

January 30, 2004.

MICHAEL LA FATA, et al. Plaintiffs,
v.
RAYTHEON COMPANY, et al. Defendants



The opinion of the court was delivered by: ANITA BRODY, District Judge

MEMORANDUM AND ORDER

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 Page 2 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. Page 3

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 are 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 Page 4 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 Page 5 employees classified as layoff,*fn10 release,*fn11 or reorganization.*fn12 (Id.) Section IX of the Termination Policy states:
Any accrued vacation*fn13 and severance pay, if applicable, will be included on the first paycheck following an employee's termination date.
Id.

  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 Page 6 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 offer.
Parties' Joint Summ. J. Ex. 1. Page 7
  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 Agreement.
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 Page 8 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. Page 9 RESOLVED that the Corporation assume all of the obligations of Raytheon Constructors Inc.

 Id.

  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 § 2.)

  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, Page 10 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 Page 11 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 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.