United States District Court, E.D. Pennsylvania
March 31, 2004.
JOE A. HOOVEN, MICHAEL AVERSANO, AINARS BLUSS, T.B. BOTTOLFSON, D.R. CLARIZIO, STAN CONLEY, E. CHRISTINE COPLEY, EDMUND E. DAVIS, SR., PAUL E. DOXEY, JACK F. DUNLEAVEY, CHRISTOPHER G. GIBSON, ROGER A. HENDLER, J.K. HOOVEN, ROMULUS VANCE HOUCK, III, TODD HOWARD, D. HRINAK, J.D. HUMPHREYS, E. JACKSON H. J. KLEIN, A.R. KLINE, R. J. KOPCHA, FRANKLIN W. LEE, R.E. LITTLE, JOANNE LIMA, J. LUTZ, E.T. McMURPHY, S.A. MEDOLIA, STEVE MERCURIO, CLARK D. MILLER, MICHAEL L. MILLMAN, G.A. MILNE, DANIEL G. MOORE, B.L. MORGAN, P.S. POROHNAVI, PATRICIA V. ROSE, JEAN VALENZA-RUBINO, SHELLY C. SHARER, JAMES R. SLUSHER, M.W. STUMP, D.M. SULLIVAN, LINDA N. SUTPHIN, DARREL R. RAYLOR, THOMAS P. THOMPSON, JOHN TROY, DONALD A. TWELE, CARROLL S. WAGNER, LAURA WAKS, JOE D. WOODWARD, JOHN H. WOOLFOLK, L. YOUNG, SUZANNE MICHAUD, and WILLIAM HELFRICH
EXXON MOBIL CORPORATION et al
The opinion of the court was delivered by: CYNTHIA RUFE, District Judge
MEMORANDUM OPINION AND ORDER
Before the Court are the claims of fifty-two (52) former employees
of Mobil Corporation (collectively "Plaintiffs") against Exxon Mobil
Corporation ("Exxon Mobil") and Mobil Corporation Employee Severance Plan
In December 1998, Plaintiffs were each employees of Mobil Corporation
(hereinafter "Mobil") in the Mid-Atlantic Marketing Assets division when
Mobil formally announced its planned merger with Exxon Corporation
(hereinafter "Exxon") to create Exxon Mobil. At that time, Mobil
announced the adoption of a new Enhanced Change-In-Control
Retention/Severance Plan ("the CIC Plan"), which provided employees with
attractive severance packages in the event they did not ultimately
receive jobs with the combined company following the merger. Plaintiffs
allege that from the time the proposed merger was announced and to the
end of 1999, Mobil, both orally and in writing, assured Plaintiffs that
employees who did not obtain employment with Exxon Mobil would receive
fair and attractive severance packages.
In August 1999, Plaintiffs were given a Summary Plan Description
("SPD") setting forth the eligibility requirements for enhanced severance
benefits in the event of a change in control. Due to a drafting error,
however, the SPD omitted an eligibility exception with respect
to divestitures that applied to Tier 4 employees, such as
Plaintiffs. On November 30, 1999, the Federal Trade Commission approved
the merger between Exxon and Mobil. On December 2, 1999, Plaintiffs were
first informed that their employment with Mobil was being terminated, and
they were not being offered positions with Exxon Mobil. Plaintiffs were
also then informed that they were ineligible to receive severance
benefits because the enhanced severance package did not apply to
employees within their salary group (Tier 4). Although the SPD did not
contain this ineligibility provision, the provision was contained in the
CIC Plan. The divestiture ineligibility provision was, however, later
included in an Errata that was mailed to Plaintiffs in February 2000.
Between March and May 2000, Plaintiffs, as a unit, were transferred to
Tosco. Corporation (hereinafter "Tosco"), the company which purchased
Mobil's Mid-Atlantic Marketing Assets division.
Plaintiffs advance claims under the Employee Retirement Income Security
Act of 1974 ("ERISA"), 29 U.S.C. § 1132, pleading claims for breach
of fiduciary duty, equitable estoppel, federal common law breach of
contract, and procedural and reporting violations.*fn1 On June 5, 2002,
the Court denied cross-motions for summary judgment on the ground that
genuine issues of material fact existed, including: (1) whether
Defendants actively misled Plaintiffs about severance benefits; (2)
whether Plaintiffs detrimentally relied upon the representations of
Defendants; (3) the terms of any contract between the parties; and (4)
whether extraordinary circumstances warranted the imposition of statutory
penalties. Hooven v. Exxon Mobil Corp., No. 00-CV-5071, 2002 WL
1277325, 2002 U.S. Dist. LEXIS 10274 (E.D. Pa. June 5, 2002).
After an 8-day trial during which more than 20 witnesses testified
and voluminous records were introduced, the Court allowed additional
briefing and took the matter under advisement. The Court now sets forth
its Findings of Fact, Discussion, and Conclusions of Law:*fn2
FINDINGS OF FACT
1. On June 16, 1998, Mobil CEO Lucio Noto and Exxon CEO Lee Raymond
initiated discussions regarding the possibility of a merger. (Trial Ex.
2. Mobil hired a law firm to draft the CIC Plan.
3. Mobil Attorney Douglas Davies was responsible for ERISA compliance
and participated in the drafting of the CIC Plan.
4. In 1998, Davies conferred with Noto and other members of senior
management, addressing the prospect that, in the event of a merger, both
tangible assets as well as employees may need to be divested. (Tr. Day 7
5. On or about September 25, 1998, the Mobil Board revoked Mobil's
prior change in control plan and adopted the CIC Plan. (Trial Ex. P-10).
The CIC Plan's provisions for eligibility and the calculation of benefits
depended, in part, upon the salary grade of a particular employee. The
Plan recognized four salary grades: Tiers 1, 2, 3 and 4. The CIC Plan
differed from Mobil's prior plan with regard to divestitures involving
Tier 1, 2 or 3 level employees because, unlike the prior plan, divested
Tier 1, 2 or 3 level employees were eligible to
receive severance benefits under the new CIC Plan.*fn3 Under the
terms of the CIC Plan, however, Tier 4 employees continued to be
ineligible for severance benefits in the event of a divestiture.
6. Plaintiffs were all Tier 4 employees, which encompassed only
employees in salary groups 19 and below.
7. Section 1.19 of the CIC Plan defines a "severance" as follows:
the termination of an Eligible Employee's
employment with the Employer (or, if applicable, a
successor to the Employer) on or within two years
following the date of a Change in Control, (i) by
the Employer other than for Cause, or (ii) by the
Eligible Employee for Good Reason. An Eligible
Employee will not be considered to have incurred a
Severance (i) if his or her employment is
discontinued by reason of the Eligible Employee's
death or a physical or mental condition causing
such Eligible Employee's inability to
substantially perform his or her duties with the
Employer, including, without limitation, such
condition entitling him or her to benefits under
any sick pay or disability income policy or
program of the Employer or (ii) in case of a
Tier 4 Employee, by reason of the divestiture of a
facility, sale of a business or business unit, or
the outsourcing of a business activity with which
the Eligible Employee is affiliated if the
Eligible Employee is offered comparable employment
by the entity which acquires such facility,
business or business unit or which succeeds to
such outsourced business activity.
(Trial Ex. P-10) (emphasis added.)
8. The CIC Plan was not published on Mobil's Intranet site or
distributed to Mobil employees when it was adopted. The text of the CIC
Plan, however, was available to employees upon request. (Tr. Day 3 at
9. The CIC Plan had three important objectives: (1) to provide
transition income to Mobil employees who lose their jobs after the Exxon
Mobil merger or any other "change in control" of Mobil Corporation or any
successor company; (2) to encourage employees to stay with the company
through the time that their employment was terminated by the company
(Trial Ex. P-12); and to retain employees during the merger. (Tr. Day 8
10. On December 1, 1998, the Boards of both Mobil and Exxon officially
approved the merger, and Mobil publicly announced to its employees its
intent to merge with Exxon. (Tr. Day 3 at 75). That day No to sent a mass
e-mail to "All Mobil Employees" announcing the merger, attaching a press
release and stating:
But like other mergers, with this announcement,
comes the painful reality that some people in each
company will lose their jobs. Where similar
responsibilities exist today in both companies,
only one person with that responsibility may be
required in the new company. Where assets,
geographic locations or business endeavors
overlap, consolidation of positions will occur. In
those instances, both Mobil and Exxon have agreed
to a cooperative process to select the right
people for the remaining positions.
To those of you who do not ultimately remain with
the combined company, we will extend a fair and
attractive separation compensation and benefit
program. Because we are very early in this process
many of your questions can not yet be answered.
Most details are yet to be worked [out] by a
transition team to be established to manage the
integration of the two companies. Further
information can be found in communications that
will be forwarded to you as key decisions are
(Trial Ex. P-14 at D14465).
11. In the December 1, 1998 e-mail, Noto also informed Mobil employees
that the Exxon Mobil merger was expected to yield $2.8 billion in short
term cost savings and significant
long-term, improved profitability. (Trial Ex. P-14 at D14468).
12. Also on December 1, 1998, pursuant to Note's directive, L.W.
Allstadt, a member of Mobil's Executive Committee and the executive in
charge of coordinating merger communications, distributed materials to
certain Mobil management, including Gene Renna, Robert Amrhein, and Brian
Baker, to use while briefing Mobil employees about the merger. The
briefing materials included Note's e-mail dated December 1, 1998, the
Mobil press release, Employee Q & As, and a Powerpoint presentation.
(Trial Exs. P-15 and P-16).
13. Employee Question 23 asked whether there would be job reduction.
The answer to Employee Question 23 stated in part: "Yes. . . . Employees
who regrettably will not be asked to join the new company will
be offered a fair and attractive separation compensation and benefit
program." (Trial Ex. P-15 at D14185).
14. Employee Question 25 asked how Mobil expected to keep it employees.
The answer to Employee Question 25 stated in part: "Special retention
compensation arrangements are also being put into place for those who are
[not] offered jobs in the merged company." (Trial Ex. P-15 at D14185).
15. Manager Question 68 asked: "What will be the severance packages for
Mobil employees? Are they the same for employees and senior management?"
The answer to Manager Question 68 stated in part: "There will be a
special severance package for employees who are ultimately not retained
by the merged company. For most U.S. employees, it will represent twice
the normal severance payment for employees and managers applicable under
current Mobil separation and benefit plans. . . ." (Trial Ex. P-16 at
16. Manager Question 73 asked: "How do you expect to keep your
employees?" The answer to Manager Question 73 stated in part: "Special
retention compensation arrangements are also being put into place." The
answer to Manager Question 131A stated in part: "Employees who
regrettably will not be asked to join the new company will be offered a
fair and attractive separation compensation and benefit program." (Trial
Ex. P-16 at D14237).
17. In conjunction with the merger announcement, Mobil management began
holding informational meetings with Mobil employees to announce and
discuss the proposed merger with Exxon. During those meetings, Mobil
management explained that there would be a selection process to determine
which employees would obtain employment with the merged company if the
transaction were to be consummated. Mobil management also explained that
some employees would lose their jobs because there would be instances
where these jobs would overlap with jobs of others at Exxon. Mobil
management did not address the issue of divestiture during these
informational meetings. (Tr. Day 2 at 29-30; Tr. Day 3 at 76-83). The
purpose of these meetings was to communicate information about the merger
and the potential effects it would have on employees because the merger
would possibly result in the loss of approximately 9,000 to 12,000 jobs.
(Tr. Day 3 at 79-80). At the meetings, Mobil employees, including
Plaintiffs, were told they would either be offered employment with the
new company or they would receive the enhanced severance benefit package.
At the meetings, Mobil management encouraged Mobil employees, including
Plaintiffs, to work hard, to stay focused, and to maintain a competitive
edge while the merger was pending. In addition, many Plaintiffs watched a
video made by Mobil CEO Noto discussing the merger and describing the
impact the merger would have on employees, shareholders, and the oil
industry. (Trial Ex. D-6). Based on the
representations made by Mobil management while the merger was
pending, Plaintiffs generally understood they would either be selected
for a job with the newly merged entity or would be eligible for the
enhanced severance package. (Tr. Day 2 at 13-14, 108; Tr. Day 4 at 13,
54). Mobil executives made clear, however, that they were not describing
all of the details regarding the Plan and that additional information
would be provided subsequently. (Tr. Day 1 at 91-92; Tr. Day 4 at 11-12).
18. Although divestitures were a possibility, including divestiture of
employees, and despite Mobil's promise to keep employees informed, Mobil
management never orally communicated the existence of the divestiture
provision of the CIC Plan or the possibility of divestitures with Mobil
employees at any of these company meetings or in any direct
correspondence. (Trial Exs. P-14 and D-6; Tr. Day 3 at 34, 81).
19. Following the December 1998 meetings, Mobil sent an e-mail to all
of its employees worldwide about its creation of a website addressing
merger-related issues. That e-mail stated:
Employee Questions on the Proposed Exxon Mobil
Mobil has established an "Employee Question and
Answer" Web site for you to ask questions
regarding the proposed Exxon Mobil merger. The
site is located on the Intranet. Questions will
remain anonymous. Mobil will post new questions
and answers weekly (except during the holidays).
As you may be aware, 48 hours after Mobil's public
announcement of its proposed merger with Exxon
(12/1/98), for regulatory reasons, we entered a
"quiet period," which severely limits what we can
say about the merger both internally and
Our commitment to you is to communicate as much as
we can as soon as possible. Our goal is that every
employee is treated equitably and fairly.
You can find the new Employee Question and Answer
Web site at: www.internal.mobil.com.
(Trial Ex. D-10).
20. Mobil representatives did not state that the website would serve as
a replacement for the traditional manner in which the company
communicated information from Mobil, which was by regular mail. (Tr. Day
2 at 146-47; Tr. Day 4 at 15).
21. In January 1999, Mobil published on the Intranet a summary of the
terms of the CIC Plan on its website. The Intranet summary provided as
CHANGE IN CONTROL (CIC) U.S.
RETENTION/SEVERANCE DETAILS U.S. SALARY
GROUPS 19 AND BELOW
Many of you have been asking for information about
the Mobil Corporation Employee Severance Plan (CIC
retention/severance package). This communication
will give you a brief description of the package
for U.S. employees at Salary Groups 19 and below
You will be eligible to receive the CIC
retention/severance package described
you are a regular, non-represented
employee in salary groups 19 and below
on the U.S. payroll who works at least
20 hours per week; and
your employment is terminated by the
Company within two years after the CIC;
you are offered a job by the Company
within two years after the CIC, but
decline because it involves either
? a cut in total annual pay (including
target variable pay), or
? a job move of at least 50 miles,
And you are not offered another position or
the opportunity to remain in your existing
you stay until you are released by the
you sign a separation agreement.
This package will be in effect for terminations
during the two-tear [sic] period following the
date of the CIC. CIC does not occur until
after all regulatory and shareholder approvals are
received and the stock of Mobil is exchanged for
the stock of Exxon.
you will not be eligible to receive the
CIC retention/severance package described
your employment terminates prior to the
CIC for any reason; or
you are represented, temporary, leased
or Station Operators, Inc. (SOI)
employee, or you are classified as a
contractor or consultant not eligible
to participate in Mobil's benefit
plans, or you are providing services
under a written or oral contract; or
you are terminated for cause, or
separated because of disability or
you decline a position as a result of a
divestiture or outsourcing after the
CIC that does not involve:
? a cut in total annual pay (including
target variable pay), or
? a job move of at least 50 miles
If you are eligible and sign a separation
agreement, you will receive the following CIC
EIGHT-WEEK NOTICE PERIOD
During the eight-week notice period, you
will remain on the payroll with your
current benefits. You may be required to
work during part or all of this period.
Four weeks of pay for every year of
service, to a maximum of 104 weeks. This
is two times. . . .
(Trial Ex. P-76) (footnotes omitted).
22. The divestiture language included in the Intranet summary posting
differs from the divestiture language included in the CIC Plan. The
divestiture language included in the Intranet summary posting also
differs from the divestiture language included in the Errata (discussed
infra) provided to Plaintiffs in February 2000 and the divestiture
language included in the prior plan. Moreover, the Intranet summary was
not particularly clear or well written and fails to track the structure
of the CIC Plan, making it difficult to understand. (Tr. Day 7 at 147).
23. The Intranet posting containing the summary of the CIC Plan was not
the SPD and therefore not subject to ERISA's statutory requirements. It
was not intended by Mobil to replace the company's obligations under
ERISA as it had been Mobil's practice to mail summary plan descriptions
to employees. (Tr. Day 7 at 149). Moreover, Mobil did not post a summary
on the Intranet for employees in Tiers 1, 2 and 3. Instead, Mobil mailed,
via first class mail, Tier 1, 2 and 3 employees hard copies of a document
summarizing their benefits under the CIC Plan. (Tr. Day 7 at 151-52).
24. Some Plaintiffs did not access Mobil's Intranet website because
they generally do not review information on the web or were otherwise
uncomfortable using computers. (Tr. Day 2 at 21-22, 36, 47-48; Tr. Day 5
at 92). Other Plaintiffs did not access Mobil's Q & A website because
they were confident they had the information they needed from meetings
with Mobil management and from the CIC Plan Summary. (Tr. Day 4 at
60-61). Still other Plaintiffs accessed the Q & A website, but found
it contained many questions that did not pertain to them, involved too
much scrolling, and was otherwise too time-consuming. (Tr. Day 1 at
158-59; Tr. Day 2 at 47, 147-48; Tr. Day 4 at 15-16, 111; Tr. Day 5 at
22). A few Plaintiffs were truck drivers who did not have access to
Mobil's Intranet site at any time. (Tr. Day 4 at 111).
25. Mobil's Benefits Policy and Communications Department ("Benefits
Group"), headed by Patricia Pagano, included a team of professionals
dedicated to preparing useful and understandable communications to Mobil
employees about Mobil's various benefits plans. (Tr. Day 6 at 101; Tr.
Day 7 at 102-05). In January 1999, following the posting of the Intranet
summary, Mobil retained Barbara Rineheimer, a consultant with Towers
Perrin Forster & Crosby, to prepare an initial draft of the SPD for
the CIC Plan. (Tr. Day 6 at 115).
26. Mobil's Benefits Group was responsible for drafting an SPD that was
clear and understandable. (Tr. Day 6 at 128-29; Tr. Day 7 at 23-24, 118,
148-49). The drafters of the SPD knew they had to set forth the material
provisions of the plan regarding "eligibility and ineligibility" in an
understandable way. (Tr. Day 7 at 167). Between January and July 1999,
the Benefits Group revised the proposed SPD on several occasions.
27. The divestiture provision was a material provision. (Tr. Day 7 at
28. Pagano, the primary drafter of the SPD, understood that the CIC
Plan differed from previous Mobil severance plans in eligibility
requirements. (Tr. Day 6 at 132).
29. The first draft of the SPD prepared by Rineheimer provided, in
Severance benefits are not paid if: . . . [you]
are offered but decline another position that does
a cut in total annual pay, including variable
pay, or a job move of at least 50 miles.
(Trial Ex. D-17).
30. Pagano modified the Rineheimer draft by adding the terms
"divestiture" and "outsourcing" to the draft of the SPD (dated January
30, 1999), which provided that an employee was not eligible for benefits
[you] are offered but decline another position as
a result of a divestiture or outsourcing after the
CIC that does not involve:
a cut in total annual pay, including variable
pay, or a job move of at least 50 miles.
(Trial Ex. D-17; Tr. Day 6 at 116).
31. On February 12, 1999, another draft of the SPD was circulated by
Pagano. It provided that an employee was ineligible for benefits if:
you decline a position as a result of a
divestiture or outsourcing after the CIC that does
a cut in total annual pay (including target
variable pay), or a job move of at least 50
(Trial Ex. P-50; Tr. Day 6 at 117-19).
32. On February 19, 1999, the draft SPD, unchanged in relevant part,
continued to provide that an employee was ineligible for benefits if:
you decline a position as a result of a
divestiture or outsourcing after the CIC that does
a cut in total annual pay (including target
variable pay), or a job move of at least 50
(Trial Ex. P-51; Tr. Day 6 at 119-21).
33. On March 16, 1999, the draft SPD, still unchanged in relevant part,
provided that an employee was ineligible for benefits if:
you decline a position offered as a result of a
divestiture or outsourcing after the CIC that does
a cut in total annual pay (including target
variable pay), or a job move of at least 50
(Trial Ex. P-52).
34. In March 1999, as the SPD was being finalized, the Benefits Group
reviewed and redrafted the SPD and determined that the inclusion of the
phrase "as a result of a divestiture
or outsourcing" provided too narrow a description of ineligibility
under the CIC Plan, and deleted the phrase. (Tr. Day 6 at 122; Tr. Day 7
at 18-19). The Benefits Group believed that deleting those words would
make the terms of ineligibility clearer to employees in Grade 19 and
below. (Tr. Day 6 at 18, Tr. Day 7 at 122, 136-37). Also in March 1999,
the Benefits Group circulated another SPD for grades 20 and higher. (Tr.
Day 7 at 148). The SPD for Grades 20 and higher contained the same
language as the SPD for Grades 19 and below regarding ineligibility as
the result of obtaining comparable employment, even though the
ineligibility as the result of divestiture applied to employees at Grades
19 and below only. (Tr. Day 6 at 21, 46-7; Day 7 at 84-86, 148; Trial Ex.
P-34). The modifications were made despite the Benefits Group's intention
that Grades 20 and higher should interpret this ineligibility provision
as not applicable to a divestiture situation. (Tr. Day 6 at 45-47; Tr.
Day 7 at 138-50).
35. Although the Benefits Group determined that it was inappropriate to
refer to a divestiture situation in the SPD, it never revised the
Intranet summary, which contained the same provision that was deemed by
the group to be too narrow. (Tr. Day 6 at 139).
36. By drafting the provision in the manner eventually circulated to
Plaintiffs, the SPD failed to advise Plaintiffs that they would be
ineligible for severance in the event of a divestiture. (Tr. Day 7 at
37. In May 1999, James Carter, then Vice President of Marketing for
Exxon, made a presentation to the Federal Trade Commission ("FTC") staff
to convince them that the proposed merger would not violate antitrust
laws. (Tr. Day 8 at 12, 14).
38. As of June l, 1999, the SPD's description of ineligibility had not
changed since March 1999. It provided that an employee was ineligible for
you decline a position offered after the CIC that
does not involve:
a cut in total annual pay (including target
variable pay), or a job move of at least 50
(Trial Ex. P-12).
39. As of June 3, 1999, Mobil management anticipated that the merger of
Exxon and Mobil would receive regulatory approval by about the end of the
third quarter. (Trial Ex. P-38 at D10289).
40. In July 1999, the SPD was finalized, and Mobil mailed it to
Plaintiffs in August 1999. (Tr. Day 7 at 106).
41. The eligibility and ineligibility provisions of the final version
of the SPD provided, in relevant part, as follows:
You are eligible to participate in the CIC
retention/severance package if:
? you are a regular, non-represented
employee in salary group 19 or lower on the
U.S. payroll who works at least 20 hours
per week; and
? your employment is terminated by the
Company within two years after the change
in control; or
? you are offered a job* by the Company
within two years after the change in
control, but you decline it because it
a cut in total annual pay (your
annualized based pay on the date of change in
control plus your target variable pay),
a job move of at least 50 miles; and
? you sign a Separation Agreement.
You are not eligible to participate in
the CIC retention/severance package if any of the
following is true:
? your employment is terminated by the Company
prior to CIC for any reason;
? you are a represented employee, unless your
union bargains for eligibility;
? you are a Station Operators, Inc. (SOI)
? you are not eligible to participate in
Mobil's benefit plans;
? you are terminated for cause;
? your employment ends as a result of death
or disability prior to your separation date
under the Plan;
? you decline a position offered after the
CIC that does not involve:
a cut in total annual pay (including
target variable pay), or
a job move of at least 50 miles;
? you provide services to Mobil under a
written or oral contract or agreement pursuant to
which you are treated as:
an independent contractor,
an employee of an entity other than
a leased employee from a temporary or
Any person retained under any special contract or
arrangement shall be ineligible to participate in
this Plan, without regard to whether the
arrangement would constitute employment under
legal principles, unless such contract or
arrangement specifically provides for
participation in all of Mobil's benefit plans.
(Trial Ex. P-12 at D13174).
42. The SPD also contained the following language regarding
Mobil reserves the right to modify, suspend, or
terminate benefits at any time for any reason. If
such steps are taken, you will be notified. You
will also be informed of the effect that any
material changes in the plans will have on your
rights to benefits.
However, the Severance Plan may not be terminated
or modified while a change of control is pending,
? Six months following a potential change in
? Two years following a change in control.
(Trial Ex. P-12 at D13182).
43. The CIC Plan also provided that benefits could not be modified
within two years of a change in control:
The Plan may be amended or terminated by the Board
at any time; provided, however, that the
Plan may not be terminated or amended during the
pendency of, or within six (6) months following a
Potential Change in Control or within two years
following a Change in Control.
(Trial Ex. P-10 at D10209).
44. Each of the Plaintiffs received and reviewed the SPD. Based upon
the eligibility/ineligibility language in the SPD, Plaintiffs understood
that they were entitled to an enhanced severance package if they did not
receive an offer of employment with Exxon Mobil. (Tr. Day 1 at 139; Tr.
Day 2 at 56-57, 143-44; Tr. Day 3 at 50; Tr. Day 4 at 16, 54, 92; Tr. Day
5 at 29-30, 86-87; Tr. Day 7 at 169-71).
45. Around June or July 1999, Carter began to lead the Remedies Team,
was established to analyze other mergers in the oil industry,
determine what remedies the FTC might require in order to agree not to
oppose the merger, and then ascertain what would be the "very best deal"
possible to avoid a challenge by the FTC to the merger. (Tr. Day 8 at 16,
31). At the time he was appointed to the Remedies Team, Carter knew the
FTC was likely to require certain divestitures. (Tr. Day 8 at 45).
46. None of the employees who drafted the SPD knew anything about the
remedies discussions with the FTC staff. (Tr. Day 6 at 128).
47. Once the Remedies Team completed its discussions with the FTC, it
was to present its findings to the senior executives of Exxon and Mobil
so they could determine whether to (1) agree to the FTC's terms, (2)
merge without the FTC's involvement and contest any FTC challenge in
court, or (3) decide to terminate the Merger Agreement. The Remedies Team
had no authority to agree to any divestitures. (Tr. Day 8 at 19-20).
48. Prior to August 1999, the FTC staff had not proposed any
significant divestitures. (Tr. Day 8 at 12-13, 18).
49. In August 1999, the FTC staff advised Exxon and Mobil for the first
time that it would recommend to the FTC Commissioners that the FTC not
oppose the merger if Exxon divested all Exxon gas stations on the East
Coast from Virginia to Maine. (Tr. Day 8 at 18-19). The magnitude of the
divestitures suggested by the FTC staff surprised the Remedies Team as it
went far beyond what the FTC had required in the BP-Amoco. merger and the
Shell-Texaco. joint venture. (Tr. Day 8 at 20-21).
50. The FTC staff did not state that its recommendation to the
would include the divestiture of the entire marketing organization
(including employees) that supported the Exxon service stations. Nor did
the FTC staff communicate that their recommendation would include a
requirement that the marketing assets be sold as an ongoing business to a
buyer that had a certain level of experience and financial resources.
(Tr. Day 8 at 21-22).
51. In early September 1999, the FTC staff advised for the first time
that it would be willing to recommend to the FTC Commissioners a remedy
requiring Mobil to divest Mobil gas stations in the mid-Atlantic states,
and Exxon to divest all of its gas stations in the Northeastern states.
The FTC staff also advised the Remedies Team for the first time that it
would recommend to the FTC Commissioners that Exxon and Mobil divest
their respective marketing operations in their entirety for the relevant
areas. The FTC staff further advised the Remedies Team at that time that
Exxon and Mobil must make employees in the divested businesses available
to the buyer. As of this time, neither Exxon nor Mobil senior executives
had agreed to this proposal; nor had the FTC Commissioners agreed that
these terms would be acceptable. (Tr. Day 8 at 21-25, 30-31).
52. The FTC Staff and the Remedies Team also utilized a new concept
called a "hold separate business" as a proposed solution to the FTC
Commissioners' concern that all required divestitures occur before the
Commissioners vote on the merger. (Tr. Day 8 at 36-37). The "hold
separate business" was the result of Mobil and Exxon compromising with
the FTC to avoid having to divest the assets before the FTC voted on the
merger. (Tr. Day 8 at 57). The alternative to running the "hold separate
business" was "to hold the whole merger up until every asset had been
sold." (Tr. Day 3 at 87). If the companies failed to comply with the
terms of the
agreement, they were subject to civil penalties. (Trial Exs. P-31
and P-61; Tr. Day 8 at 57). 53. The "hold separate business" was
effectively "a totally separate company." (Tr. Day 3 at 87-88).
54. In late November 1999, the FTC staff indicated for the first time
that it would support Tosco. as a potential purchaser for the assets that
were required to be divested. (Tr. Day 8 at 33-34).
55. In late November 1999, Mobil CEO Noto and Exxon CEO Raymond met
with the FTC Commissioners. (Tr. Day 8 at 35).
56. Exxon and Mobil expressed for the first time their agreement to the
divestitures proposed by the FTC staff, and it became apparent that the
FTC Commissioners would not oppose the merger. The FTC Commissioners also
made clear that they would vote on the merger before the agreed-upon
divestitures were completed in accordance with the "hold separate
business" concept discussed between the Remedies Team and the FTC staff.
(Tr. Day 8 at 35).
57. On November 30, 1999, the FTC conditionally approved the merger,
subject to public comment and further FTC review. (Tr. Day 8 at 36,
42-43). The FTC voted not to oppose the acquisition of Mobil by Exxon and
required, for competitive reasons, significant divestitures of certain
Mobil business unit assets. (Trial Ex. P-31).
58. Exxon Mobil was created on December 1, 1999. (Tr. Day 1 at 99).
Under the terms of the merger, Exxon covenanted that the surviving
company would honor all Mobil benefit plans. The Administrator of
Benefits for Exxon became the Administrator for the CIC Plan.
(Trial Ex. P-6 at 10530; Defs.' First Am. Answer and Affirmative
Defenses [Doc. No. 27] 4; Stipulation of Facts 52).
59. Also, on December 1, 1999, Mobil executed an agreement of sale of
the Mid-Atlantic Marketing assets to Tosco. (Tr. Day 8 at 39-40; Trial
Ex. D-79). Under the terms of the agreement of sale, Tosco. had the right
to interview employees and decide which employees, if any, it wished to
hire. The sale agreement did not require Tosco. to hire any of Mobil's
employees. (D-79 § 18.1).
60. On the evening of December 1, 1999, Baker, who had been named to
run the "hold separate business," negotiated with Thomas O'Malley,
Chairman of Tosco, to offer jobs to all employees of the Mid-Atlantic
Marketing Assets division. After several hours of negotiations regarding
a number of issues, O'Malley agreed to offer jobs to all employees with
comparable or improved salaries and benefits. (Tr. Day 3 at. 91-94).
61. Prior to learning whether Tosco. would offer comparable employment
to all employees, Mobil management was unable to take a position with
respect to Plaintiffs' eligibility for enhanced severance benefits. Until
Baker completed his negotiations with Tosco, Mobil was prepared to advise
Plaintiffs that it was unknown whether they would receive severance
benefits even if they were offered employment with Tosco. (Tr. Day 8 at
62. On or about December 1, 1999, shortly before the announcement of
the divestiture to Tosco, Jim Melvin, the Manager of Mobil's Penn-Jersey
district, questioned Robert Amrhein, Vice President of Human Resources
for Mobil, whether divested employees would be eligible for severance
benefits. Amrhein told Melvin he believed that it depended on whether
employees were offered comparable employment. After Melvin pointed
out that the SPD did not address the situation, Amrhein contacted Mobil
Attorney Davies. (Tr. Day 3 at 49-50; Tr. Day 7 at 109-110).
63. Although Davies believed that there was an express reference to a
divestiture event in the SPD, after reviewing the document he realized
that it did not include specific language about divestitures. Davies
confirmed to Amrhein his belief that because the employees were being
offered comparable employment with a divested business unit, they were
ineligible under the express terms of the CIC Plan. Davies also sent
Amrhein copies of the Q & As that had been posted on the website so
that Amrhein could demonstrate to employees that the divestiture
provision was not a new amendment to the CIC Plan. (Tr. Day 7 at
64. On December 2, 1999, the day after the agreement with Tosco. was
executed and two days after the FTC Commissioners voted not to oppose the
merger, Mobil announced that its Mid-Atlantic Marketing Assets division
(in which all Plaintiffs were employed) would be totally divested to
Tosco. (Tr. Day 1 at 53, 55). Plaintiffs' Mobil employment was
constructively terminated on December 2, 1999.
65. At the employee meetings on December 2, 1999, Baker explained his
personal efforts to ensure that all employees obtained comparable
employment with Tosco. (Tr. Day 1 at 55-57). Amrhein and Baker were
pleased to be able to deliver what, in their opinion, was good news. (Tr.
Day 3 at 92-93).
66. At the same meeting on December 2, 1999, Amrhein and Baker advised
Tier 4 employees that they would not be receiving severance benefits
because they were being offered comparable employment with Tosco. (Tr.
Day 3 at 59-66; 104-06).
67. At a subsequent meeting on December 15, 1999, Plaintiffs expressed
displeasure that they were not going to receive severance benefits and
claimed that Mobil had changed the terms of the CIC Plan. At some point,
Amrhein distributed copies of the relevant Q & As from the Intranet
website as well as the actual CIC Plan text reflecting the divestiture
provision. These documents showed that the terms of the CIC Plan remained
unchanged from the outset. (Tr. Day 1 at 62-64; Tr. Day 3 at 65; Tr. Ex.
68. In February 2000, Mobil distributed an Errata to the SPD, which
clearly and accurately referred to the divestiture provision. It provided
The following text was omitted from the Mobil
Corporation Employee Severance plan Summary for
U.S. employees in salary groups 19 and below,
distributed to all employees in those salary
groups in August, 1999. Please keep this with your
Summary for future reference.
This bullet belongs on page 5 and should be
included as an additional reason one is not
eligible to participate in the CIC
? you are no longer employed by the Company or
an Affiliate due to a divestiture of any facility
or sale or outsourcing of any business and are
offered comparable employment by the purchaser or
successor of such facility or business,
regardless of whether you accept or reject the
(Trial Ex. P-13).
69. Each of the Plaintiffs were offered employment with Tosco*fn4 on
comparable terms to their employment with Mobil. With the exception of
Shelly Sharer, all testifying Plaintiffs accepted Tosco's employment
offer. (Tr. Day 2 at 69; Tr. Day 5 at. 97). Sharer opted not to accept a
position with Tosco. to spend more time with her family. (Joint
Stipulations, 62; Tr. Day 4 at 65). After the divestiture to Tosco,
Plaintiffs received the same salaries and benefits, and generally
reported to the same supervisors to whom they reported immediately before
the divestiture. (Tr. Day 1 at 84, 168-69; Tr. Day 2 at 26, 70; Tr. Day 4
at 36-37; Tr. Day 5 at 7-12. 51-52, 95).
70. No Plaintiff who accepted a position with Tosco. missed any work
between the date he or she left Mobil and the date he or she began
working for Tosco. (Tr. Day at 84-85; Tr. Day 2, at 28, 75; Tr. Day 5 at
54). Moreover, there was no break in any Plaintiffs' health care coverage
from the date he or she left Mobil until he or she started at Tosco. (Tr.
Day 1 at 85; Tr. Day 2 at 28, 75; Tr. Day 4 at. 38, 54; Tr. Day 5 at 96).
71. The change in control occurred on November 30, 1999. (Tr. Day 3,
72. Plaintiffs' Mobil employment was terminated between March and May
73. Most of the Plaintiffs were divested effective March 1, 2000, while
others were not divested until May 2000. (Stipulation of Facts 65).
74. Prior to December 1999, Mobil employees (except for a few
not know (1) if they were going to be offered employment after the
merger, (2) what positions, if any, they would be offered, (3) where the
positions would be located, (4) the salary for the position, (5) the
supervisor for the position, (6) whether they would be working with the
same co-workers, or (7) what it would be like to work for their new
employer. (Tr. Day 3 at 174-76; Tr. Day 7 at 181-82, 190).
75. Plaintiffs stayed with Mobil through December 1999 for the
opportunity to work for Exxon Mobil-not to collect enhanced severance
benefits. (Tr. Day 1 at 141, 177; Tr. Day 4 at 98; Tr. Day 5 at 70; Tr.
Day 5 at 114). No Plaintiff proved that he or she did anything in
reliance upon the understanding that he or she would receive enhanced
severance benefits in the event of a divestiture. No Plaintiff turned
down any specific job offer in reliance on the belief that he or she
would receive severance benefits in the event of a divestiture. (Tr. Day
1 at 133, 136; Tr. Day 2 at 17; Tr. Day 2 at 57-58; Tr. Day 4 at 12-13;
Tr. Day 5 at 70).
76. Plaintiffs did not actively seek alternative employment upon
learning of the divestiture to Tosco. and their purported ineligibility
for severance benefits. (Tr. Day 1 at 107; Tr. Day 1 at 118-19, 172; Tr.
Day 2 at 36, 96, 192; Tr. Day 4 at 48-49, 123-24, Tr. Day 5 at 67, 103).
77. John Troy and Joanne Lima were the only two Plaintiffs who
submitted internal appeals to the CIC Plan Administrator. (Tr. Day 1 at.
120). However, their claims for benefits were predicated upon arguments
that they did not receive comparable employment with Tosco. None of the
other Plaintiffs exhausted their administrative remedies on their claims
for severance benefits because management clearly and unequivocally
represented to Plaintiffs in
December 1999 that they were ineligible for benefits due to the
disclaiming language in the SPD and the controlling language in the CIC
78. On January 26, 2001, the FTC issued its Final Order approving the
merger. (Tr. Day 8 at 43; Trial Ex. P-27 at D10638).
ERISA was "enacted `to protect contractually defined benefits.'"
Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 113
(1989). Full disclosure of employee benefits "permits employees to
bargain further or seek other employment if they are dissatisfied with
their benefits." Hamilton v. Air Jamaica, Ltd., 945 F.2d 74, 78
(3d Cir. 1991). ERISA preempts any and all state laws insofar as they
relate to any employee benefit plan. 29 U.S.C. § 1144(a). "[B]y
preempting any law that even relates to ERISA plans Congress anticipated
the development of a `federal common law of rights and obligations under
ERISA-regulated plans.'" McGurl v. Trucking Employees of North
Jersey Welfare Fund. Inc., 124 F.3d 471, 481 (3d Cir. 1997).
ERISA has "an elaborate scheme in place for enabling beneficiaries to
learn their rights and obligations at any time, a scheme that is built
around reliance on the face of written plan documents."
Curtiss-Wright Corp, v. Schoonejongen, 514 U.S. 73, 83 (1995).
"Among the required documents, one of the most important is the [summary
plan description] provided to plan beneficiaries. The importance of
[summary plan descriptions] stems from their role in the ERISA scheme as
the primary informational document issued to plan beneficiaries
to inform them of their rights and obligations under a plan." Local
56. United Food and Comm. Workers Union v. Campbell Soup Co.,
898 F. Supp. 1118, 1130 (D.N.J. 1995). The contents of a summary plan
description and the language used to communicate the contents are carefully
prescribed by statute and regulation. 29 U.S.C. § 1021-24;
29 C.F.R. § 2520.102-3(1). "Summary plan descriptions must warn employees of
adversity." Alexander v. Primerica Holdings, Inc., 967 F.2d 90,
94 (3d Cir. 1992). The summary plan description must contain a
description of the "circumstances which may result in disqualification,
ineligibility, or denial or loss of benefits." 29 U.S.C. § 1022(b).
Finally, a summary plan description must "not have the effect of
misleading, misinforming or failing to inform participants . . . with
respect to pertinent provisions of the plan."
29 C.F.R. § 2520.102-2(b). An ERISA plan administrator (a fiduciary) is
responsible for providing a timely and accurate summary plan description to
employees covered by the employee benefit plan. 29 U.S.C. § 1021, 1022,
1024. "[A] fiduciary may satisfy its statutory disclosure obligations
regarding the terms of a plan by distributing a summary plan description
that complies with ERISA." In re Unisys Corp. Retiree Med. Benefit
"ERISA" Litig., 57 F.3d 1255, 1264 (3d Cir. 1995).
The importance of ERISA summary plan descriptions was recently
highlighted by the Third Circuit's decision in Burstein v.
Retirement Account Plan for Employees of Allegheny Health Educ, and
Research Fund, 334 F.3d 365 (3d Cir. 2003). In that case, the
plaintiffs were former employees of Allegheny Health Education and
Research Foundation (hereinafter "AHERF"), some of whom became employees
of Tenet Healthcare when Tenet purchased part of AHERF's assets. The
plaintiffs alleged that the language in both the plan brochure and a
summary plan description conveyed the impression that each participant
had a funded account in which retirement benefits were being accrued. The
summary plan description stated that "if the Plan is terminated, you will
become vested in your account, regardless of how many years of service
you have earned." Id. at 383. However, the Plan provided that
upon termination, non-vested participants' benefits would become
nonforfeitable only to the extent they were funded on the date of
termination. Id. at 385 n.3O. Plaintiffs pursued claims for the
denial of plan benefits pursuant to § 502(a)(1)(B),
29 U.S.C. § 1132(a)(1)(B), equitable estoppel, and breach of fiduciary duty
under § 502(a)(3)(B), 29 U.S.C. § 1132(a)(3)(B).
Reversing an order granting the defendants' motion to dismiss all
claims on the ground that benefits cannot become due under a summary
plan, the Third Circuit ruled that the plaintiffs may be entitled to
benefits under § 502(a)(1)(B). The Burstein court ruled
that where there is a conflict between a plan document and a summary plan
description, the summary plan description governs. The Burstein
court emphasized that 29 U.S.C. § 1022(a) reflects Congress's desire
that the summary plan description be transparent, accurate and
comprehensive. Id. at 378.
Following Sixth Circuit precedent, the Burstein court further
held that a plan participant who sought benefits based upon a conflict
between a summary plan description and plan did not have to prove
reliance upon the summary plan description in order to show that benefits
were improperly denied under § 502(a)(1)(B). Id. at 381
(citing Edwards v. State Farm Mut. Auto. Ins., 851 F.2d 134
(6th Cir. 1988)). "Claims for ERISA plan benefits under ERISA §
502(a)(1)(B) are contractual in nature. . . . In interpreting plan
terms for purposes of [denial of benefits] claims, we apply a federal
common law of contract, informed both by general principles of contract
law and by ERISA's purposes as manifested in its specific provisions."
Id. "[J]ust as a court's enforcement of a contract generally
does not require proof that the parties to the contract actually read,
and therefore relied upon, the particular terms of the contract, we are
persuaded that enforcement of [a summary plan description's] terms under
a claim for plan benefits does not require a showing of reliance."
Id. Thus, a plan participant who bases a claim for plan
benefits on a conflict between a summary plan description and plan
document need not establish reliance upon the summary plan description.
Id. While the Burstein court held that reliance was
an unnecessary element in a § 502(a)(1)(B) claim-which is contractual
in nature-the Third Circuit emphasized that detrimental reliance must be
established to support claims for
breach of fiduciary and equitable estoppel. Id. at 383,
The Court will address below each of Plaintiffs' four claims in the
case at bar.
1. Breach of Fiduciary Duty Claims
Plaintiffs advance a breach of fiduciary duty claim in Count I of their
Second Amended Complaint. This claim is premised upon Defendants' failure
to inform them of the divestiture provision in the SPD and Defendants'
misleading communications about the CIC Plan beginning in December 1998.
The duty to inform is a constant thread in the relationship between a
beneficiary and a trustee. It entails not only a negative duty not to
misinform, but also an affirmative duty to inform when the trustee knows
silence might be harmful. Bixler v. Central Pa. Teamsters Health
& Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993). "When a plan
administrator affirmatively misrepresents the terms of a plan or fails to
provide information when it knows that its failure to do so might cause
harm, the plan administrator has breached its fiduciary duty to
individual plan participants and beneficiaries." In Re Unysis
Corp., 57 F.3d at 1264. What is stated "as well as what was left
unstated" may be relevant in determining whether a breach of fiduciary
duty has occurred. In Re Unysis Savings Plan Litig.
74 F.3d 429, 443 (3d Cir. 1996).
To establish a claim for breach of fiduciary duty, a plaintiff must
prove: (1) the defendant's status as an ERISA fiduciary; (2) a
misrepresentation on the part of the defendant; (3) the materiality of
that misrepresentation; and (4) detrimental reliance by the plaintiff on
that misrepresentation. Daniels v. Thomas Betts Corp., 263 F.3d 66. 73
(3d Cir. 2001). Detrimental
reliance is a necessary element of breach of fiduciary claims based
upon misrepresentation. Burstein, 334 F.3d at 387.
Plaintiffs contend that the omission in the SPD regarding the
divestiture ineligibility was a material non-disclosure, and the
ineligibility provision clearly should have been included in the SPD
pursuant to 29 U.S.C. § 1022(b). Plaintiffs also contend that
communications made through Noto, Amrhein, Baker and other members of
Mobil management were made to purposely mislead Plaintiffs into believing
that they would be entitled to benefits should they not obtain a position
with Exxon Mobil.
Assuming arguendo that these Mobil representatives were acting
in a fiduciary capacity,*fn5 Plaintiffs have established that Defendants
failed to adequately inform participants of the terms of the CIC Plan by
not informing Plaintiffs of the divestiture provision. Ineligibility due
to divestiture was a significant provision that should have been
communicated to Plaintiffs at the informational meetings and clearly
should have been included in the SPD. A term of eligibility is material
to those employees covered by the plan. Had Plaintiffs known about the
divestiture provision, they would have been able to make informed
decisions about their ongoing employment with Mobil.
However, Plaintiffs failed to show that they detrimentally relied upon
the representations of Mobil management or the SPD. While the Tier 4
employees may have believed that they would be entitled to enhanced
severance benefits based upon the eligibility requirements set forth in
the SPD and by the assurances of Mobil management, they did not maintain
their employment with Mobil or fail to seek alternative employment
because of this omission. Rather, the Tier 4 employees stayed with Mobil
because they understandably were excited about the prospect of working
for what would be the world's largest oil company. See Pane v. RCA
Corp., 868 F.2d 631, 638 (3d Cir. 1989) (noting that continued
employment is insufficient to support a claim of detrimental reliance).
Because Plaintiffs failed to prove detrimental reliance, the Court enters
judgment in favor of Defendants on the breach of fiduciary duty claims
pleaded in Count I of the Amended Complaint.
2. Equitable Estoppel Claims
ERISA authorizes claims for equitable estoppel. Curcio v. John
Hancock Mut. Life Ins. Co., 33 F.3d 226, 235 (3d Cir. 1994). In
order to prevail on an equitable estoppel claim, a plaintiff must
establish (1) a material misrepresentation; (2) reasonable and
detrimental reliance; and (3) extraordinary circumstances. Id.
at 235-36. "Extraordinary circumstances" generally involve "acts of bad
faith on the part of the employer, attempts to actively conceal a
significant change in the plan, or commissions of fraud."
Burstein, 334 F.3d at 383 (citing Jordan v. Federal
Express Corp., 116 F.3d 1005, 1011 (3d Cir. 1997)).
Although the failure to reference the divestiture provision in the SPD
rendered it materially inaccurate and inconsistent with the actual plan,
detrimental reliance and extraordinary circumstances are lacking in this
case. During the trial, none of the Plaintiffs presented any
evidence that they turned down more lucrative offers of employment
elsewhere because of their belief that they would be entitled to the
severance benefits. Additionally, Plaintiffs failed to prove that any
misinformation, orally or in the SPD, was the result of a campaign to
conceal the actual terms of the CIC Plan from Tier 4 employees. In fact,
Plaintiffs failed to establish that Defendants possessed knowledge of
Plaintiffs' confusion on the issue. While the fiduciaries failed to
include the eligibility and ineligibility terms in the SPD, the Court
finds that this failure is one of inartful drafting, not fraud or active
concealment. It was not an underhanded effort to retain employees who
might otherwise seek employment with competitors. This conclusion is
supported not only by the fact that earlier drafts of the SPD included
the divestiture provision, but through Mobil's promptly posting a summary
that referenced the divestiture provision on its Intranet site, shortly
after the merger was announced.
Due to Plaintiffs' failure to prove detrimental reliance and
extraordinary circumstances, judgment is entered in favor of Defendants
and against Plaintiffs on the equitable estoppel claims.
3. Federal Common Law Breach of Contract Claims
In Count III, Plaintiffs advance a claim for breach of contract for
vested severance benefits. Although Defendants argue that Plaintiffs
cannot maintain a breach of contract claim under ERISA as a matter of
law, this Court found otherwise in a previous ruling. See Hooven v.
Exxon Mobil Corp. No. 00-CV-5071, 2001 WL 793275, at *1, 2001 U.S.
Dist. LEXIS 9819, at *4-5 (E.D. Pa. July 12, 2001) ("A claim for breach
of contract can be maintained under
ERISA.").*fn6 This ruling constitutes the law of the case. Because
no "extraordinary circumstances" exist that might warrant reconsideration
of this issue, the Court's prior ruling controls. Pub. Interest
Research Group of N. J., Inc. v. Magnesium Elektron, Inc.,
123 F.3d 111, 116-17 (3d Cir. 1997) (courts must "refrain from re-deciding
issues that were resolved earlier in the litigation" absent "new evidence,"
"supervening new law" or a "clearly erroneous" decision). The CIC Plan is
an "employee welfare benefit plan" under ERISA.
See 29 U.S.C. § 1002(1): cf. Amatuzio v. Gandalf Sys.
Corp., 994 F. Supp. 253, 264-65 (D.N.J. 1998) ("Almost all severance
policies are ERISA-covered welfare benefit plans as they are included by
reference in ERISA's definition of `employee welfare benefit plan.'").
While ERISA does not require automatic vesting of employee
welfare benefit plans, "[i]t is well settled that nothing in ERISA
prevents an employer from providing vested employee welfare benefits by
contract." Id. at 265 (citations omitted); see Kemmerer v.
ICI Americas Inc., 70 F.3d 281, 287 (3d Cir. 1995); Bruch v.
Firestone Tire and Rubber Co., 828 F.2d 134, 145-47 (3d Cir. 1987)
(explaining that severance benefits offered as an inducement to continue
working create a unilateral contract), aff'd in part and rev'd in
part on other grounds. 489 U.S. 101 (1989).
Plaintiffs allege that their contractual right to severance benefits
vested on November 30, 1999, when the FTC conditionally approved the
merger. Plaintiffs contend that through the SPD Defendants offered them
an enhanced severance/retention plan providing that if their employment
with Mobil was terminated and they did not obtain a comparable position
the combined company following the merger, then they would be
entitled to severance benefits. Plaintiffs assert they accepted this
offer by continuing to work for Mobil through the change in control, thus
creating a unilateral contract. They further note that both the SPD and
the CIC Plan provided that the plan could not be terminated or amended
within two years after a change in control.
Defendants counter that there is no conflict between the CIC Plan and
the SPD, so the CIC Plan controls. This argument is premised on
Defendants' contention that the CIC Plan merely "fills in" an omission in
the SPD. In the alternative, Defendants assert that even if the documents
conflict and the SPD controls, Plaintiffs would not be entitled to
severance benefits until they were terminated (i.e., divested) from
Mobil, and that Mobil was entitled to correct the SPD and thereby modify
Plaintiffs' rights prior to divestiture. Defendants also contend that
both the SPD and the CIC Plan specifically required that administrative
remedies be exhausted before any employee may advance a claim for
benefits under the CIC Plan.
Where an employer offers a severance benefit plan to its employees as
an inducement for them to remain with the company despite an uncertain
future, and the employees accept the offer by continuing to work for the
employer, a unilateral contract is formed because the employees accept
the offer by performance instead of by return promise.
Amatuzio, 994 F. Supp. at 265-66 ("Severance plans adopted to
encourage employees to stay with their employer, and severance plans
awarding severance based on length of service, are unilateral contracts,
regardless of whether they are the product of negotiations between
employer and employees."); Taylor v. Cont'l Group Change in Control
Severance Pay Plan, 933 F.2d 1227, 1232 (3d Cir.
1991) (explaining that the plan at issue was adopted "to encourage
employees to stay with [the employer] despite an impending
takeover . . . [S]uch severance plans are in essence unilateral
contracts"). "Under unilateral contract principles, once the employee
performs, the offer becomes irrevocable, the contract is completed, and
the employer is required to comply with its side of the bargain."
Kemmerer, 70 F.3d at 287; Amatuzio, 994 F. Supp. at
To determine whether a unilateral contract was formed, the Court must
identify "objective manifestations of contractual intent," beginning with
the plan documents. Amatuzio, 994 F. Supp. at 269; see In
re Unisys Corp. Retiree Med. Benefit ERISA Litig., 58 F.3d 896, 902
(3d Cir. 1995) ("ERISA's framework ensures that employee benefit plans be
governed by written documents and summary plan descriptions, which are
the statutorily established means of informing participants and
beneficiaries of the terms of their plan and its benefits.");
Taylor, 933 F.2d at 1232; Fallo v. Piccadilly Cafeterias,
Inc., 141 F.3d 580, 583 (5th Cir. 1998) ("SPD most nearly represents
the intention of the parties"). After Burstein, 334 F.3d at
378, if the SPD and the CIC Plan conflict, the SPD controls. In those
circumstances, the SPD is the best objective manifestation of contractual
Here, the SPD provided that Tier 4 employees would be entitled to
benefits if their employment was terminated by the Company within two
years after the change in control. The CIC Plan contained a similar
provision, but it also contained an ineligibility provision that applied
to Tier 4 employees who are no longer employed by Mobil as the result of
a divestiture and are offered comparable employment with the purchaser or
Given these discrepancies, the Court must first address whether the CIC
the August 1999 SPD conflict. Defendants maintain that they do not
and that the failure to include the divestiture provision was a mere
omission. The general rule is that when an SPD simply omits rather than
contradicts plan details, the plan will govern. Sprague v. Gen.
Motors Corp., 133 F.3d 388, 401 (6th Cir. 1998). However, where an
actual conflict exists between the SPD and the Plan, the SPD controls.
Burstein, 334 F.3d at 378; see also id at n. 18
(citing other circuits holding same).
In this case, the discrepancy cannot be characterized as a mere
omission. The SPD contained language that Tier 4 employees would be
entitled to benefits if terminated provided they "did not decline a
position after the CIC" that involves a cut in total annual pay or a job
move of more than 50 miles. A reasonable person would construe this
language to apply to employees who were terminated by Mobil and who were
not offered comparable employment with the merged company,
Importantly, this same language ("decline a position after the CIC")
regarding comparable employment was used in the SPD for employees in
grades 20 and higher who under the CIC Plan were eligible for
benefits, even if they were offered comparable employment with an
acquiring company.*fn7 By not including the divestiture ineligibility
provision, the SPD offered Tier 4 employees a similar entitlement to
severance benefits as Tier 1, 2 and 3 employees.
While the SPD controls over the Plan, the same is not true for
employer-prepared summaries that have no footing in ERISA. Under ERISA,
the form of communication must be reasonably calculated to ensure actual
receipt of the material by plan participants and beneficiaries.
29 C.F.R. § 2520.104b-l(b). Based upon the trial record, the Intranet was
not a sufficient manner of communicating with Mobil employees about their
ERISA benefits because not all employees were comfortable using or had
access to the Intranet.
One reviewing the SPD for employees in salary grades 19 and below would
reasonably expect that Mobil intended to offer severance benefits,
notwithstanding a divestiture. Because of the contradictory provisions in
the SPD and the CIC Plan, the CIC Plan is "superseded and modified by
conflicting language in the SPD." Burstein, 334 F.3d at 381.
Where a plan and an SPD conflict, the provision more favorable to the
employee controls. Bergt v. Ret. Plan for Pilots Employed by
MarkAir. Inc., 293 F.3d 1139, 1145 (9th Cir. 2002); Chiles v.
Ceridian Corp., 95 F.3d 1505, 1518 (10th Cir. 1996). As the Tenth
Circuit has explained, because the duty of clarity falls on the plan
[a]ny burden of uncertainty created by careless or
inaccurate drafting must be placed on those who do
the drafting, and who are most able to bear that
burden, and not on the individual employee, who is
powerless to affect the drafting of the
summary . . . and ill-equipped to bear the
financial hardship that might result from a
misleading or confusing document. Accuracy is not
a lot to ask.
Id. (quoting Hansen, 940 F.2d at 981).
In light of Defendants' obligation to draft an SPD that is clear and
that unequivocally differentiates between the eligible and ineligible
employee, the Court concludes that the ineligibility phrase "decline a
position after the CIC" relates to a position with Exxon Mobil.
This language purports to define ineligibility, and therefore
must be converse to language in the eligibility provision. The
SPD provides that Tier 4 employees are eligible for benefits if they are
"offered a job by the Company after the change in control but decline it
because it  involves a cut in total annual pay. . . ." (Trial Ex.
P-12). While the language in the ineligibility provision does not
expressly state that to be ineligible one must be offered and decline a
position with the merged company (Exxon Mobil), to read it as rendering
employees ineligible if the future offer of employment comes from a
purchasing entity or a competitor would be wholly inconsistent with the
purpose and goal of severance benefits-to benefit the current
employer (here, Mobil) by encouraging employee loyalty (to Mobil) even in
the face of an uncertain employment future. Because it is, at best,
ambiguous, the Court accepts Plaintiffs' reasonable reading of the SPD
provision as controlling and as manifesting the parties' contractual
intent. Cf. Amatuzio, 994 F. Supp. at 270 (showing defendant
intended to be bound by a unilateral contract requires "specific, if not
written" expression) (citing Anderson v. John Morrell &
Co., 830 F.2d 872, 877 (8th Cir. 1987)). Accordingly a unilateral
Support for this conclusion is not limited to the SPD alone. When the
ambiguous language is considered in conjunction with the repeated
suggestions of Mobil management, Plaintiffs' belief that Defendants
intended to offer them severance if they did not obtain a position with
Exxon Mobil is even more reasonable. Significantly, the SPD for salary
grades 20 and higher (Tier 1, 2 and 3 employees) contained the "decline a
position offered after the CIC" language, even though the SPD for grades
20 and higher was intended to convey to those employees that they would
be eligible for enhanced severance benefits in the event of divestiture.
Baker and Davies both testified at trial that it was not unreasonable for
Tier 4 employees, after reading the
SPD alone, to believe that they would be eligible for severance
benefits if they were offered comparable employment with the purchaser of
the divested assets. (Tr. Day 3 at 127; Tr. Day 7 at 169-71).
Accordingly, Plaintiffs are not bound by the CIC Plan divestiture
provision, which Defendants failed to include in the SPD. To accept
Defendants' argument to the contrary would essentially allow employers to
generate an incomplete list of "circumstances which may result in
disqualification, ineligibility or denial of benefits." That is not
permitted by ERISA. See 29 U.S.C. § 1022(a)(1). A summary
plan description "is intended to be a document easily interpreted by a
layman; an employee should not be required to adopt the skills of a
lawyer and parse specific undefined words throughout the entire document
to determine whether they are consistently used in the same context."
Chiles, 95 F.3d at 1517-18. There is simply no indication in
the text of the SPD that Tier 4 employees who are terminated from Mobil
but subject to divestiture would be ineligible for enhanced severance
benefits. The burden of clarity is on Defendants, and the consequence of
inaccurate drafting falls squarely on the employer.
Defendants argue that the Tier 4 employees are ineligible for benefits
by operation of disclaimers in the SPD, which state that the CIC Plan
governs over the SPD. These disclaimers provide: "If the Plan description
in this handbook does not agree with the Plan text, the Plan text will
govern," and "This information is a summary of the Plan and does not
replace the official Plan documents, which govern in all cases." (Trial
Ex. P-12 at D13179, D13181).
If an employee were expected to read the entire plan to obtain an
understanding of benefits provided, then there would be no need to
provide a summary plan description. See
Burstein, 334 F.3d at 379 (refusing to give effect to
language in the SPD that the "[P]lan [D]ocument always governs" in the
event of a conflict); Hansen, 940 F.2d at 982 ("[D]rafters of a
summary plan description may not disclaim its binding nature.");
McKnight v. S. Life & Health Ins. Co., 758 F.2d 1566, 1570
(11th Cir. 1985) ("It is no effect to publish and distribute a plan
summary booklet designed to simplify and explain a voluminous and complex
document and then proclaim that any inconsistencies will be governed by
the Plan."). Accordingly, the Court will not apply the disclaimer
language against Plaintiffs under these circumstances.
Plaintiffs contend that their contractual rights as communicated to
them in the SPD (and otherwise) vested with the November 30, 1999 change
in control. This position is supported by the terms of the SPD, which
states that the "CIC retention/severance package will pay benefits only
if there is a change in control of Mobil Corporation or any successor
company." Accordingly, the change in control is the triggering event upon
which Plaintiffs' contractual rights vested. Cf. Wheeler v. Dynamic
Eng'g. Inc., 62 F.3d 634, 637-38 (4th Cir. 1995) ("[B]enefits under
a welfare plan may vest under the terms of the plan itself"). The SPD
defines "change in control" in the merger context as follows: "In the
case of the Exxon Mobil merger, the change in control occurs after all
regulatory and shareholder approvals are received and the stock of Mobil
is exchanged for 1.32015 shares of Exxon Mobil stock for each Mobil
share." As set forth in the Court's Findings of Fact 57-60, these
conditions were satisfied when the FTC voted not to oppose the merger on
November 30, 1999; Exxon Mobil was created on December 1, 1999, and Mobil
executed an agreement of sale of the Mid-Atlantic Marketing Assets to
Tosco. on December 1, 1999. Put plainly, this is when Plaintiffs'
employment future materially altered, and their rights vested at that
With Mobil's December 2, 1999 announcement, Plaintiffs learned the
import of these events; they knew with certainty that they would be
divested to Tosco, they would not be working for Exxon Mobil, and they
would not be receiving severance benefits-in other words, that Mobil
would not perform its obligations under the unilateral contract. In these
circumstances, by virtue of Plaintiffs' performance on the unilateral
contract, the Court must enforce Defendants' corresponding
obligation.*fn8 Accordingly, because Plaintiffs entered into a
unilateral contract with Defendants, they are entitled to receive the
severance pay they earned under that contract. Amatuzio,
994 F. Supp. at 267.
The Court also rejects Defendants' argument that they had the right to
amend the SPD after the change in control but prior to the divestiture.
Here, both the SPD and the CIC Plan imposed burdens on Mobil beyond
ERISA's requirements. Both documents provided that the CIC Plan could not
be amended or terminated within two years of the change in control.
Because by its very terms Defendants could not modify the CIC Plan after
a change in control, the February 2000 Errata was incapable of modifying
Plaintiffs' rights to severance benefits. See
Algie v. RCA Global Communications, Inc., 891 F. Supp. 875,
884 (S.D.N.Y. 1994) ("[O]nce a triggering event occurs that entitles
an employee to a specified benefit, the employer is contractually and
statutorily obligated to provide that benefit and may not retrospectively
amend the plan to divest the plan participant of a payment that he was
already entitled to receive."). While the provision not permitting
modification constituted an extra-ERISA commitment, Defendants are
nevertheless bound by this undertaking and could not have modified the
CIC Plan until two years after the change in control, or until November
2001. Plaintiffs received and reviewed the SPD and reasonably believed
severance benefits would be forthcoming in the event they were not
offered comparable employment with Exxon Mobil. See Hamilton v. Air
Jamaica, Ltd., 750 1259, 1269-70 (E.D. Pa. 1990) (holding that
employer was bound to pay according to terms of contract and could not
unilaterally amend contract after performance), aff'd in part and
rev'd in part on other grounds, 945 F.2d 74 (3d Cir. 1991). The
change in control occurred on November 30, 1999. From that point, in
accordance with the express terms of the SPD, Defendants were unable to
terminate, amend or modify the terms of the unilateral contract for a
period of two years.
Finally, the Court rejects Defendants' argument that Plaintiffs failed
to exhaust their administrative remedies before advancing a claim for
benefits. Throughout the proceedings, Plaintiffs have disavowed §
502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and have repeatedly asserted
that they are not advancing a claim for denial of benefits. Plaintiffs
have also maintained that they are exempt from the exhaustion requirement
since seeking administrative remedies would have been futile.
Assuming that exhaustion is required under a unilateral contract
theory, see Constantino v. TRW. Inc., 13 F.3d 969, 975 (6th
Cir. 1994) (suggesting exhaustion is unnecessary in instances where the
issue relates to the legality of a plan, as opposed to its
interpretation), exhaustion would have been futile in this case.
Plaintiffs proved that Defendants had a "blanket policy denying
coverage." Since December 1999, Amrhein (the CIC Plan Administrator) and
other Mobil executives clearly and equivocally told Plaintiffs that they
were ineligible for severance benefits due to the divestiture provision
in the CIC Plan. (Tr. Day 3 at 55-66, 103-06). Defendants thereafter
distributed an Errata to the SPD in February 2000 for the purpose of
publishing Mobil's position that divested employees would be ineligible
for severance benefits. Finally, two of the Plaintiffs filed claims for
benefits, and both were denied severance pay based upon the divestiture
provisions. (Trial Exs. P-20, P-21, P-22, P-23, and P-24).
Accordingly, Plaintiffs have satisfied the Court that exhaustion would
have been futile. See Berger v. Edgewater Steel Co.,
911 F.2d 911, 916 (3d Cir. 1990) (citing Arnato v. Berhard,
618 F.2d 559, 568 (9th Cir. 1980)).
4. ERISA Reporting and Disclosure Violations
Finally, Plaintiffs assert that they are entitled to equitable remedies
due to the violation of reporting requirements under ERISA §
502(c)(1), which provides:
Any administrator . . . who fails or refuses to
comply with a request for any information which
such administrator is required by this subchapter
to furnish to a participant or beneficiary (unless
such failure or refusal results from matters
reasonably beyond the control of the
administrator) by mailing the material requested
to the last known address for the requesting
participant or beneficiary within 30 days after
such request may in the court's discretion be
personally liable for a penalty of up to $100
a day from the date of such failure or refusal,
and the court may in its discretion order such
other relief as it deems proper.
29 U.S.C. § 1132(c).
It is undisputed that Plaintiffs never requested plan documentation
from the Plan Administrator. In order to be entitled to a substantive
remedy under § 502(c), Plaintiffs must establish extraordinary
circumstances. Ackerman v. Warnaco, Inc., 55 F.3d 117, 124 (3d
Cir. 1995). As noted above, extraordinary circumstances generally involve
acts of bad faith on the part of the employer, attempts to actively
conceal, or fraud. Id. at 125; Kurz v. Philadelphia Elec. Co.,
96 F.3d 1544, 1553 (3d Cir. 1996). The Third Circuit has consistently
rejected claims for substantive remedies "based on simple ERISA reporting
errors or disclosure violations, such as a variation between a plan
summary and the plan itself, or an omission in the disclosure documents."
While the Court finds that the SPD and the CIC Plan conflict and that
the SPD was not sufficiently accurate under 29 U.S.C. § 1022(a), a
penalty under 29 U.S.C. § 1132(c) is inappropriate.
CONCLUSIONS OF LAW
1. Plaintiffs failed to establish breach of fiduciary duty claims under
ERISA because they failed to prove detrimental reliance upon the terms of
2. Plaintiffs failed to establish equitable estoppel claims because
they failed to prove detrimental reliance upon the terms of the SPD and
to prove extraordinary circumstances.
3. Plaintiffs have proved the existence of a unilateral contract that
obligated Defendants to provide Plaintiffs with enhanced severance
benefits in the event that they were terminated following a change in
control, which occurred on November 30, 1999.
4. Under the terms of the SPD and the CIC Plan, Defendants could not
amend or modify Plaintiffs' entitlement to severance benefits for a
period of two years after the change in control.
5. Plaintiffs have proved that pursuing administrative remedies would
have been an exercise in futility.
6. The failure to draft a clear and accurate SPD does not serve as a
sufficient basis for a penalties under 29 U.S.C. § 1132(c), and
Plaintiffs have not proved the existence of extraordinary circumstances
that may entitle them to substantive relief.
AND NOW, this 31st day of March, 2004, in accordance with the foregoing
Memorandum Opinion, it is hereby ORDERED as follows:
(1) Judgment is entered in favor of Defendants Exxon Mobil
Corporation and Mobil Corporation Employee Severance Plan and
against Plaintiffs Joe A. Hooven, Michael Aversano, Ainars Bluss,
T.B. Bottolfson, D.R. Clarizio, Stan Conley, E. Christine Copley, Edmund
E. Davis, Sr., Paul E. Doxey, Jack F. Dunleavey, Christopher G. Gibson,
Roger A. Hendler, J.K. Hooven, Romulus Vance Houck, III, Todd Howard, D.
Hrinak, J.D. Humphreys, E. Jackson, H.J. Klein, A.R. Kline, R.J. Kopcha,
Franklin W. Lee, R.E. Little, Joanne Lima, J. Lutz, E.T. McMurphy, S.A.
Medolia, Steve Mercuric, Clark D. Miller, Michael L. Millman, G.A. Milne,
Daniel G. Moore, B.L. Morgan, P.S. Porohnavi, Patricia V. Rose, Jean
Valenza-Rubino, Shelly C. Sharer, James R. Slusher, M.W. Stump, D.M.
Sullivan, Linda N. Sutphin, Darrel R. Raylor, Thomas P. Thompson, John
Troy, Donald A. Twele, Carroll S. Wagner, Laura Waks, Joe D. Woodward,
John H. Woolfolk, L. Young, Suzanne Michaud, and William J. Helfrich on
Counts I, II, and IV of the Second Amended Complaint.
(2) Judgment is entered in favor of Plaintiffs Joe A. Hooven,
Michael Aversano, Ainars Bluss, T.B. Bottolfson, D.R. Clarizio, Stan
Conley, E. Christine Copley, Edmund E. Davis, Sr., Paul E. Doxey, Jack F.
Dunleavey, Christopher G. Gibson, Roger A. Hendler, J.K. Hooven, Romulus
Vance Houck, III, Todd Howard, D. Hrinak, J.D. Humphreys, E. Jackson,
H.J. Klein, A.R. Kline, R.J. Kopcha, Franklin W. Lee, R.E. Little, Joanne
Lima, J. Lutz, E.T. McMurphy, S.A. Medolia, Steve Mercuric, Clark D.
Miller, Michael L. Millman, G.A. Milne, Daniel G. Moore, B.L. Morgan,
P.S. Porohnavi, Patricia V. Rose, Jean Valenza-Rubino, Shelly C. Sharer,
James R. Slusher, M.W. Stump, D.M. Sullivan, Linda N. Sutphin, Darrel R.
Raylor, Thomas P. Thompson, John Troy, Donald A. Twele, Carroll S.
Wagner, Laura Waks, Joe D. Woodward, John H. Woolfolk, L. Young, Suzanne
Michaud, and William J. Helfrich and against Defendants Exxon Mobil
Corporation and Mobil Corporation Employee Severance Plan on Count III of
the Second Amended Complaint. Plaintiffs are entitled to enhanced
severance benefits upon execution of the Waiver and Release of Claims
Agreement attached to the CIC Plan. Defendants are ORDERED to provide
severance benefits in accordance with the terms of the SPD and consistent
with the foregoing Memorandum Opinion. (3) The Clerk is directed to CLOSE
this case for statistical purposes.