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Rea v. Hershey Co. 2005 Enhanced Mutual Separation Plan

July 15, 2008


The opinion of the court was delivered by: William W. Caldwell United States District Judge


I. Introduction

We are considering cross-motions for summary judgment filed by the Plaintiff, Timothy A. Rea ("Rea"), and the Defendants, The Hershey Company 2005 Enhanced Mutual Separation Plan ("EMSP"), and the Hershey Company ("Hershey"). Rea, a former Hershey employee, filed a three-count complaint alleging wrongful denial of benefits, interference with ERISA rights, and breach of contract. Upon careful review of the motions, the supplemental briefs, and the record, we will grant Defendants' motion for summary judgment, deny Plaintiff's motion for summary judgment, and enter judgment in favor of the Defendants.

II. Background

A. Procedural History

Rea filed a complaint against Hershey and the Plan Administrator of the 2005 EMSP. (doc. 1). After an unopposed motion (doc. 14), Rea filed an amended complaint (doc. 17), naming Hershey and the EMSP.

Count I of the amended complaint alleges wrongful denial of benefits pursuant to section 502(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), based on the denial of Rea's application to participate in the EMSP, an ERISA plan which provided benefits to employees who voluntarily ended their employment with Hershey.*fn1 Count II alleged that Hershey interfered with Rea's ERISA rights in violation of section 510, 29 U.S.C. § 1140.*fn2

Count III was a breach of contract claim based on compensation from other benefits plans that Rea would have received had Hershey approved his participation in the EMSP. We dismissed Counts II and III in response to Defendants' motion to dismiss for failure to state a claim. (doc. 21).

In the remaining Count, Rea alleges that Hershey wrongfully denied his application to participate in the EMSP. (doc. 17, pp. 5-11). After a period of discovery, the parties filed cross-motions for summary judgment. (docs. 30, 31). As discussed infra, we ordered supplemental briefing on an issue involving the exclusionary language in the EMSP (doc. 58), and the parties submitted briefs and exhibits (docs. 59-62). The cross-motions for summary judgment are now ripe for our review.

B. Factual Background

1. Rea's Employment at Hershey

Rea was hired by Hershey on May 6, 1996, and worked in its marketing organization from 1996 to October 2005, after which he voluntarily resigned and accepted a position at another company. Defendants' Statement of Material Facts ("Def. SMF"), ¶ 1; Plaintiff's Statement of Material Facts ("Pl. SMF") ¶ 1. Rea's claim concerns benefits he applied to receive upon his departure from Hershey in the fall of 2005.

From approximately November, 2001, through the fall of 2004, Rea served as Hershey's Director of Instant Consumables. Def. SMF ¶ 3. In this position, Rea oversaw billion dollar portfolios of instant consumables and brand management, both of which were key strategic focus areas at Hershey. Pl. Opp. to Def. SMF ¶ 4. From the fall of 2004 through August, 2005, Rea was the Director of Chocolate Innovation. Def. SMF ¶ 5. In this position, Rea was responsible for national launches of new Hershey products. Id. ¶ 6; Pl. Opp. to Def. SMF ¶ 6.

On or about September 1, 2005, during a company-wide restructuring which included the marketing organization, Rea was reassigned to Director of Food and Beverage Enhancers and Special Trade Channels. Def. SMF ¶ 7. In this position, which Rea considered to be a "significant downgrade in responsibility and marginalization within the company," and not a strategic area, Pl. Opp. to Def. SMF ¶ 8, Rea managed the marketing of the grocery business, the vending trade class, the food service trade class, and the licensing area of the company. Def. SMF ¶ 8; Pl. Opp. to Def. SMF ¶ 8. Thomas Hernquist, Rea's supervisor and the Senior Vice President of U.S. Confectionary, and other Hershey managers believed that Rea's new position required an individual who could take a lot of initiative along with specific capabilities and experience possessed by few, if any, other Hershey employees. Def. SMF ¶ 9; Pl. Opp. to Def. SMF ¶ 9. Hernquist and other Hershey managers believed that Rea was suited for the position due to his decade-long experience in marketing at Hershey as well as the relationships he had developed serving as Director of Instant Consumables. Def. SMF ¶ 10. The position exposed Rea to a new area in Hershey's marketing organization. Id. ¶ 11.

During Rea's nine years with Hershey, he received favorable performance reviews each year. Def. SMF ¶ 2. For the year ending December 31, 2004, Rea's final full-year performance evaluation, Rea's performance was rated as "strong." Pl. Opp. to Def. SMF ¶ 2; Def. SMF ¶ 15. During his employment at Hershey, Rea was promoted to successively higher positions within its marketing organization and Hershey awarded him numerous pay raises. Def. SMF ¶ 2. Rea was also part of a succession plan prepared at least once a year for each Hershey department to ensure an adequate supply of individuals able to step in to key positions in the event of a vacancy. Id. ¶ 14. In the spring 2005 succession plan, Rea was designated as fifth or sixth in the pipeline, showing him to be a "3-5 year candidate under the position of Vice-President, U.S. Confectionary, Refreshment Channel." Def. SMF ¶ 13; Pl. Opp. to Def. SMF ¶ 13.

Despite Rea's strong 2004 performance evaluation and the succession plan, Hernquist rated Rea's performance as "effective" at a mid-year 2005 calibration session. Pl. SMF ¶ 30. At this session, Hernquist told Rea that he did not believe he was living up to his expectations, that his head was not in the game, and that he was not focused. Id. Hernquist told Chris Lansing, Rea's immediate supervisor at the time, that he thought Rea was lazy. Id. Lansing informed Rea of Hernquist's opinion. Id. ¶ 31. Hernquist also told Rea that he was not living up to his potential in early September of 2005. Id. ¶ 32.

2. Hershey's Enhanced Mutual Separation Plan

In 2005, Hershey sought to reduce its overhead and lower costs by "streamlining" its workforce. Def. SMF ¶ 16. To do so, on July 21, 2005, Hershey announced two voluntary separation plans: the Early Retirement Plan ("ERP") for employees ages 50 and over, and the Enhanced Mutual Separation Plan ("EMSP"), for certain salaried employees. Id. ¶ 17. The EMSP, the only plan relevant here, offered enhanced separation benefits to employees who terminated their employment pursuant to the plan requirements. Id. ¶ 18.*fn3

To request participation in the EMSP, the applicant and his manager had to agree on a proposed separation date from Hershey. Id. ¶ 19. By signing the EMSP Acceptance Form, the applicant acknowledged receipt of the 2005 EMSP Plan Document and its summary plan description and he acknowledged that receipt of benefits was conditioned upon signing a separation agreement as well as receiving approval from the Hershey Executive Team ("HET"). Id. ¶ 20; Pl. Opp. to Def. SMF ¶ 20.*fn4

Once the applicant and manager agreed on a proposed separation date and signed the form, the applicant submitted the form to the Hershey WorkLife Center. Def. SMF ¶ 21.

3. EMSP Eligibility Criteria

EMSP benefits were only available to applicants who met certain conditions. Def. SMF ¶ 24. Pursuant to one of the exclusionary provisions in the EMSP plan document, an applicant could be denied participation if the HET determined that the employee's termination of employment would have an "adverse affect" on Hershey's ongoing business operations.*fn5 Id.; Pl. Opp. to Def. SMF ¶ 24. Specifically, the EMSP defined an "Eligible Employee" as "any Employee who meets the conditions set forth in Section C. and who is not excluded from coverage under Section D." Def. SMF ¶ 25. Section D(2) contained the exclusionary provision at issue here. Id. ¶ 26. That section provided:

Notwithstanding anything herein to the contrary, the Company retains the right to deny participation in the Plan to: (I) any otherwise Eligible Employee if the HET determines that the termination of employment of such employee will have an adverse affect on the Company's ongoing business operations, or (ii) any formerly highly compensated employee of the Company as determined by the Plan Administrator. Such a determination will be made in the sole discretion of the HET or Plan Administrator, as applicable.

Id. The HET, in evaluating an EMSP application pursuant to this provision, considered whether elimination of the applicant's position, the loss of the applicant's skills, and the corresponding reduction in headcount in the applicant's business unit would be adverse to Hershey's business operations. Id. ¶ 27. Hernquist and Marcella Arline, two HET members, testified that they considered a number of factors in evaluating the effect of an employee's departure on Hershey's ongoing business operations. Id. ¶ 28. These factors included: the employee's job performance, the scope of the employee's responsibility, other requests to participate in the EMSP from the same business unit, and the overall reduction in headcount in the employee's business unit. Id. ¶ 28. Another factor influencing the HET's decision was that Hershey could not fill the position vacated by an employee who departed under the EMSP; the position could not be "backfilled" by hiring or transferring another employee into the vacated position. Def. SMF ¶¶ 29, 30; Pl. Opp. to Def. SMF ¶ 29. Instead, Hershey had to eliminate the position. Def. SMF ¶ 29.

4. Rea's 2005 EMSP Application

Rea submitted his application to participate in the EMSP on August 29, 2005. Def. SMF ¶ 32; Pl. Opp. to Def. SMF ¶ 32. The Acceptance Form provided that Rea and Hernquist agreed that Rea's separation date from Hershey would be September 30, 2005. Def. SMF ¶ 33; Pl. Opp. to Def. SMF ¶ 33. Hernquist also served as the HET member in charge of Rea's business unit. Def. SMF ¶ 34.*fn6 On August 31, 2005, Hernquist signed the Acceptance Form in his capacity as Rea's supervisor, agreeing to a September 30, 2005, separation date. Id. ¶¶ 35, 36; Pl. Opp. to Def. SMF ¶ 36. Hernquist could not recall whether he discussed a later separation date with Rea in order to give Hershey more time to fill the position. Pl. SMF ¶ 8; Def. Opp. Pl. SMF ¶ 8. On September 1, 2005, the Hershey Company Worklife Center received Rea's Acceptance Form, Separation Agreement, and General Release. Pl. SMF ¶ 10.

After submitting the EMSP Acceptance Forms, Hernquist reviewed Rea's EMSP application pursuant to the factors listed above. Def. SMF ¶ 37. Hernquist concluded that he would recommend denial of the application because Rea's position at Hershey-a director-level position-was "critical." Def. SMF ¶ 39; Pl. Opp. to Def. SMF ¶ 38. According to Hernquist, his group "was already stretched in terms of not enough staffing." Def. SMF ¶ 40a. Additionally, permitting Rea to depart under the EMSP would result in one fewer director at Hershey due to the HET policy of not backfilling positions vacated by individuals participating in the EMSP. Id. ¶ 40b. Only one other director-level employee in Hernquist's business unit had applied for the EMSP. Id. ¶ 41. Hernquist used similar reasoning in recommending denial of her application. Id. ¶ 42.

The HET met on September 21, 2005, to consider EMSP applications, including Rea's. Id. ¶ 43. At the time, the HET consisted of eleven individuals, including Burton Snyder, David West, Marcella Arline, and Thomas Hernquist. Pl. SMF ¶ 12. There are no notes from the HET meeting; however, there is a spreadsheet listing the applicants and the result for each application. Id. ¶ 13; Def. Opp. Pl. SMF ¶ 13. Hernquist was asked at the meeting whether Rea's application met the HET's criteria. Arline Depo., pp. 36-37. The HET talked to Hernquist about Rea's position at Hershey, including whether it was a position which could be eliminated, whether the position was needed if Rea vacated it, and how Rea was performing at Hershey. Id. at 37. The HET relied on the particular member from the applicant's department-Hernquist in Rea's case-in determining whether the applicant's position could be eliminated. Def. Opp. Pl. SMF ¶ 14.

Hernquist told the HET that Rea held a position at Hershey which could not be eliminated. Pl. SMF ¶ 15. Hernquist also informed the HET that Rea's most current performance appraisal rating was strong. Id. Hernquist's recommendation to the HET was to reject Rea's EMSP application. Id. ¶ 16. The HET members trusted the recommendations of other HET members. Def. Opp. to Pl. SMF ¶ 17. With respect to Hershey employees in Hernquist's area of the company, the HET accepted all of Hernquist's recommendations concerning their EMSP applications. ...

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