by Jennifer Golson
September 3, 2010
U.S. Third Circuit – LABOR LAW – Pensions
When the former Mellon Financial Corp. sold its subsidiary in 2005, it refused to give Robert Howley a severance package because the new owner promised to give him a comparable job.
But the day after Mellon sold Buck Consultants to Affiliated Computer Systems Inc. (ACS), the new owner fired Howley and 99 others. When Howley returned to Mellon for severance, the company refused. The Maplewood resident sued, and on Tuesday, the Philadelphia-based 3rd U.S. Circuit Court of Appeals ruled in his favor.
Howley’s attorneys sued under the Employee Retirement Income Security Act (ERISA) of 1974, a federal law that sets minimum standards for voluntarily established pension and health plans in private industry.
Those who administered Mellon’s Displacement Program said they did not owe Howley because the buyer had similar employment for him, at least according to the sales contract.
“Under the administrator’s approach, so long as a contract of sale includes a promise, no matter how illusory, to continue an employee’s employment, that employee is ineligible for Displacement Program benefits,” wrote Chief Judge Theodore McKee of the 3rd U.S. Circuit Court of Appeals. “The buyer is thus free to terminate that employee one week, one day, or one hour (or even one minute) after the completion of the sale. Crediting such empty promise is entirely unreasonable in light of the purpose of the Displacement Program.”
Howley’s lawyers say the decision has broader implications as more companies are sold. “A court is not going to allow an administrator to stick their head in the sand, ignore surrounding circumstances, and rubber stamp a hollow administrative decision,” said Kevin Barber, who handled the case with Matthew Vance and Peter Heck.
$3 MILLION IN DAMAGES
Barber said Howley will receive benefits he should have received since 2005, including early retirement, which includes a pension and lifelong health benefits. That’s over $3 million in damages, including attorney’s fees.
Mellon merged with Bank of New York in 2007 and became BNY Mellon. Spokesman Ron Gruendl declined comment.
Howley, 54, said the health benefits are key. He has a 19-year-old daughter with severe autism and she would be entitled to health benefits for as long as Howley is alive. He said he will fight if Mellon appeals again.
“My career is pretty much damaged at this point,” said Howley, who worked for Buck for more than 25 years. “When you’re over 50 and you’ve litigated, it hurts your career.”
There was another twist to this case. While taking depositions, it came to light that managers from Buck Consultants had helped plan for Howley’s termination before the sale. They gave ACS the names of 100 employees they believed could be fired immediately after the sale without harming the business, court papers say.
The decision reflects a trend in cases filed under ERISA, said Philip Harvey, professor of law and economics at Rutgers School of Law in Camden. “It is consistent with a trend in the federal courts not to deny employees a remedy for wrongs that they’ve suffered because of some peculiarities of the Employee Retirement Income Securities Act,” he said.
In this case, it’s clear the employer acted in bad faith and the court says as much, Harvey said. “They conspired with the buyer to plan the sale of the business in a way that would result in the sellers not having any liability for the termination benefits that these employees would have received under their ERISA plan.