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ALGIE v. RCA GLOBAL COMMUN.

November 22, 1994

THOMAS ALGIE, et al., Plaintiffs, against RCA GLOBAL COMMUNICATION, INC. and MCI COMMUNICATIONS CORPORATION, Defendants.

MICHAEL H. DOLINGER, UNITED STATES MAGISTRATE JUDGE


The opinion of the court was delivered by: MICHAEL H. DOLINGER

MICHAEL H. DOLINGER

 UNITED STATES MAGISTRATE JUDGE:

 The twenty-three plaintiffs in this case were all long-term employees of defendant RCA Global Communications, Inc. ("RCAG"). They have sued to recover severance benefits allegedly denied them under a plan sponsored by RCAG.

 Plaintiffs were each advised that their employment was being terminated one to three days after the stock sale of RCAG to MCI Communications Corporation ("MCIC") on May 16, 1988. They were later paid severance benefits under the MCIC plan rather than under the more generous RCAG plan. In explaining this decision, defendants have claimed that the RCAG plan was terminated as of the closing, and alternatively have asserted that plaintiffs ceased to be RCAG plan participants at that time because they became employees of MCIC's subsidiary MCI International, Inc. ("MCII").

 As a result of several pre-trial decisions, plaintiffs were left with one triable claim, under section 502(a)(1)(B) of the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(1)(B), for the denial of benefits. (See Algie v. RCA Global Communications, Inc., 1994 WL 132358 (S.D.N.Y. April 12, 1994)). However, the court also granted plaintiffs partial summary judgment on that claim, holding that they had established beyond triable dispute that the RCAG severance plan had not been terminated by the time that they were fired in late May 1988. (Id. at *22-24). Accordingly, the court defined two issues for trial:

 
1. Did the plaintiffs remain RCAG employees until their post-closing termination?
 
2. If not, was their departure from RCAG a "layoff" within the meaning of the RCAG severance benefit plan?

 (Id. at *32). Thus, at trial the first issue to be determined was whether plaintiffs continued as RCAG employees for the few days between the stock purchase of RCAG by MCIC and their termination or else became employees of defendant MCII in that intervening time.

 The court conducted a jury trial on these two questions from July 18 to 26, 1994. At the conclusion of the trial the jury returned a verdict for plaintiffs on the first question, finding that they were still RCAG employees at the time of termination. In view of this finding, the jurors were not required to reach the second question.

 In the wake of the trial, defendants have moved for judgment as a matter of law or alternatively for a new trial. Plaintiffs in turn have moved for an award of attorney's fees and expenses and for pre-judgment interest. For the reasons that follow, defendants' motions are denied and plaintiffs' motions are granted.

 I. Defendants' Motions

 As noted, defendants seek judgment as a matter of law. This application is based principally on their contention that the trial evidence demonstrates that the RCAG plan was replaced by the MCIC severance plan just prior to the termination of the plaintiffs. Alternatively, defendants seek a new trial based on their contention that the court erred in three respects in its jury charge. I address these issues in the order presented.

 A. The Rule 50(a) Motion

 Defendants' motion for judgment rests on two grounds. First, they assert that the RCAG plan was no longer in effect when the plaintiffs were terminated shortly after the closing in which MCIC purchased the stock of RCAG. In support of this contention defendants point principally to evidence that they introduced at trial indicating that in late June 1988 the MCIC Board of Directors had issued a consent that, in substance, authorized the extension of MCIC's severance plan to all employees of RCAG, effective retroactively to the date of the closing. (Tr. 974-77 & Defs.' Exh. 131). Defendants argue that this evidence demonstrates that MCIC intended to replace the RCAG plan with the MCIC plan even for RCAG employees, and therefore, even if plaintiffs remained RCAG employees until their severance -- as found by the jury -- they were not entitled to be paid under the RCAG plan. This argument fails for both procedural and substantive reasons. *fn1"

 Second, defendants argue that the decision of the RCAG plan administrators to deny severance benefits to plaintiffs must be judged under an "arbitrary and capricious" standard. So viewed, defendants assert, that decision must be upheld. This argument cannot be sustained in view of both the wording of the severance plan and the grounds stated by the administrators for denial of benefits.

 1. The Asserted Termination of the RCAG Plan

 Federal Rule of Civil Procedure 50(a)(1) provides as follows:

 
If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.

 The standards for applying this rule are the same as under the predecessor rule, which governed motions for a directed verdict and for a judgment notwithstanding the verdict. See, e.g., Piesco v. Koch, 12 F.3d 332, 340 (2d Cir. 1993). As the Second Circuit has recently summarized, "when faced with such a motion, the trial court must consider the evidence in the light most favorable to the nonmoving party and must 'give that party the benefit of all reasonable inferences that the jury might have drawn in his favor from the evidence.'" Toltec Fabrics, Inc. v. August Inc., 29 F.3d 778, 782 (2d Cir. 1994) (quoting Smith v. Lightning Bolt Prods., Inc., 861 F.2d 363, 367 (2d Cir. 1988)). In doing so, "the court is not allowed to weigh conflicting evidence, or assess the credibility of the witnesses, or substitute its judgment for that of the jury." Id. Judged by these standards, the motion must be denied "unless. . . 'the evidence is such that, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, there can be but one conclusion as to the verdict that reasonable [persons] could have reached.'" Cruz v. Local Union No. 3 of the IBEW, 34 F.3d 1148, 1994 WL 460842, at * 6 (2d Cir. Aug. 25, 1994) (quoting Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970)).

 As is evident from the text of the rule and its elaboration by the courts, the Rule 50(a) remedy is addressed to issues that were the subject of the trial. Defendants' motion, however, insofar as it rests on trial evidence concerning the alleged termination of the RCAG plan, is mislabelled since the question of whether the RCAG plan had been terminated prior to plaintiffs' departure was not an issue at the trial. As noted, that question was determined as a matter of summary judgment three months before the trial. Indeed, there can be no question as to this matter since the summary judgment decision explicitly held that the defendants had failed to demonstrate a triable dispute on this issue and then proceeded to limit the trial to two other factual issues, as to which the parties' summary judgment motion papers demonstrated triable questions.

 Viewed in context, it is evident that defendants' application is, in substance, a motion for reconsideration of the court's prior summary judgment ruling based upon evidence received for different purposes at trial. There are obvious procedural problems with this effort, and in any event there is no substantive justification for the relief that is sought.

 The initial hurdle is that defendants' motion, properly characterized, is both untimely and otherwise in violation of the local rule that governs such motions. The relevant provision is Rule 3(j) of the Civil Rules of this court, which provides that a motion for reconsideration "shall be served within ten (10) days after the docketing of the court's determination of the original motion." Although this time limit may not be jurisdictional Hershfang v. Citicorp, 1991 WL 197699, at *1 (S.D.N.Y. Oct. 1, 1991), it is enforced absent adequate justification for ignoring it. See, e.g., Blanco v. United States, 775 F.2d 53, 55-56 (2d Cir. 1985); see also Donahue v. Pendleton Woolen Mills, 719 F. Supp. 149, 150 (S.D.N.Y. 1988) (although motion was untimely, "in the interest of justice" court did not dismiss motion). In this case defendants offer no justification for their failure to meet the time limit or even to come remotely close to it. Indeed, defendants' motion papers are silent on this problem, and at oral argument their counsel conceded that, until shortly before the trial, defendants had simply overlooked the evidence on which they now rely. Since both the facts underlying the Board of Directors' decision and the documentation of it were uniquely in the control of defendants, this omission has not been explained and can hardly be justified. Indeed, if we assumed arguendo that the evidence otherwise might justify the relief sought, then the delay in producing it would be inexcusable since it resulted in an unnecessary seven-day trial.

 Defendants' motion also fails to satisfy a second part of Rule 3(j). A motion for reargument is ordinarily limited to errors assertedly made by the court in its original decision, and it is not the vehicle for the losing party to submit additional evidence. See Ades v. Deloitte & Touche, 843 F. Supp. 888, 891-92 (S.D.N.Y. 1994); Collins Development Corp. v. Marsh & McLennan, Inc., 1991 WL 135605, at *4 (S.D.N.Y. July 18, 1991). Cf. Transaero, Inc. v. La Fuerza Aerea Boliviana, F.3d , 1994 WL 584702, at * 3 (2d Cir. Oct. 19, 1994) (applying Fed. R. App. P. 40(a)). Thus the rule specifies that the motion is to be based on a memorandum of law "setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked." This limitation is further underscored by the provision that "no affidavits shall be filed by any party unless directed by the court." As is evident, defendants' motion does not rest on the notion that the court "overlooked" facts or controlling law, since their argument relies on newly submitted evidence over which they have always had control. This failing equally demonstrates that defendants cannot justify a new trial on this question, much less their demand for judgment at this stage. See Chang v. City of Albany, 150 F.R.D. 456, 459 (N.D.N.Y. 1993) (holding that a motion for a new trial will only be granted if the movant shows that the evidence was discovered since the trial); Bradford Trust v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 622 F. Supp. 208, 213-14 (S.D.N.Y. 1985), aff'd, 805 F.2d 49 (2d Cir. 1986).

 Even if we were to disregard these procedural difficulties, we would be constrained to reject defendants' application on another procedural ground. Fed. R. Civ. P. 56(d) contemplates that a court faced with a summary judgment motion may conclude that full case-dispositive relief cannot be granted. In that circumstance it directs that

 
the court. . .shall if practicable ascertain what material facts exist without substantial controversy and what material facts are actually and in good faith controverted. It shall therefore make an order specifying the facts that appear without substantial controversy . . .and directing such further proceedings in the action as are just. Upon the trial of the action the facts so specified shall be deemed established, and the trial shall be conducted accordingly.

 The evident purpose of this rule is to "speed[] up litigation by eliminating before trial matters wherein there is no genuine issue of fact." Fed. R. Civ. P. 56(d), Advisory Committee Notes (1946).

 This is precisely the procedure followed by this court when it granted partial summary judgment before trial. If, however, a party could, in effect, ignore such a ruling and, after trial, sift the trial record for evidence that might have supported its position on issues decided before trial -- as defendants seek to do here -- the salutary purpose of the rule, to narrow the trial and define in advance the issues to be addressed there, would be defeated.

 It is certainly true, as defendants argue, that a court may reexamine its Rule 56(d) rulings if sufficient cause is shown. See, e.g., 6 Pt. 2 J. Moore et ano., Moore's Federal Practice P 56.20[3.-3] at 56-701 & n. 10 (2d Ed. 1993) (citing cases); id. P 56.20[3.-4] at 56-704 to 05 (citing Coffman v. Federal Laboratories, 171 F.2d 94, 98 (3d Cir. 1948), cert. denied, 336 U.S. 913, 93 L. Ed. 1076, 69 S. Ct. 603 (1949)). See generally Fed. R. Civ. P. 54(b). Such a revision by the court must, however, be shown to be justified, see, e.g., Audi Vision Inc. v. RCA Mfg. Co., 136 F.2d 621, 625 (2d Cir. 1943) (change permitted at trial "to prevent manifest injustice"); Moore's Federal Practice, supra, at 56-707 (court should not alter ruling absent "good cause"), and it must be done on notice to the other parties, so that they understand that additional issues will be open for adjudication at trial and may prepare accordingly. As the Second Circuit has noted:

 
Once a district judge issues a partial summary judgment order removing certain claims from a case, the parties have a right to rely on the ruling by forebearing from introducing any evidence or cross-examining witnesses in regard to those claims. If, as allowed by Rule 54(b), the judge subsequently changes the initial ruling and broadens the scope of the trial, the judge must inform the parties and give them an opportunity to present evidence relating to the newly revived issue.

 Leddy v. Standard Drywall, Inc., 875 F.2d 383, 386 (2d Cir. 1989).

 Defendants' effort to obtain judgment at this stage fails all of these tests. It does not seek to add an issue for trial, but rather seeks dispositive relief, and yet it does so in reliance on evidence that defendants offered at a trial that was expressly not conducted on the issue for which defendants now seek to invoke the evidence. Such an approach would deny plaintiffs notice and an opportunity to shape their trial presentation to meet an issue that they justifiably assumed was already settled. Moreover, defendants have made no showing of need or unfairness to justify their belated effort to snatch victory from the jaws of defeat. As noted, the evidence on which they rely was exclusively in their hands and knowledge at all times until the eve of trial, and they have not even attempted to explain their failure to produce it in a timely fashion. Moreover, even after their asserted belated discovery of the information shortly before trial, they did not then move for reconsideration of the court's summary judgment ruling or to expand the list of issues for trial. Indeed, they did not unveil their theory until the filing of their post-trial motion papers. In short, simply as a matter of procedural regularity and fairness, their motion must be rejected.

 Finally, and most importantly, even if we were to ignore the foregoing considerations, the result would be the same since defendants' substantive argument is entirely meritless. As noted, the evidentiary record before the court on summary judgment contained no evidence that the RCAG plan had been terminated prior to the departure of plaintiffs in May 1988. The trial record is entirely consistent with the court's prior finding to this effect.

 With regard to intent, defendants' proffered evidence, in the form of the document itself and the explanatory testimony of corporate counsel at trial, does not demonstrate that the consent was intended to terminate the RCAG severance plan. Indeed, according to defendants' own witness the purpose was simply "to allow any non-collective bargained employees of RCAG who might remain employed by RCAG to participate in the MCI Communications Corporation severance pay plan after the acquisition and to count their prior service with RCAG for the plan for purposes of calculating their benefit." (Tr. 975-76). In short, the consent was apparently intended to ensure continued coverage of any individuals who still remained as RCAG employees. (See also Tr. 977, 979 (noting MCIC concern that payment of MCIC benefits to non-participants would violate ERISA)). Plaintiffs, of course, did not remain, having long since been fired. In addition, whatever the intent of the Board, the consent did not purport either to terminate the RCAG plan or to apply the MCIC plan to RCAG. All that it did was to authorize the subsidiary to apply that plan, and the record is devoid of evidence as to whether RCAG ever adopted that plan.

 In any event, even if we assumed that this evidence conclusively demonstrated that in late-June 1988 the MCIC Board of Directors acted to terminate the RCAG plan retroactively, such an effort would obviously be ineffective to divest the former employees of RCAG of their right to severance benefits under the RCAG plan. It is common ground that an employer is ordinarily free to alter or eliminate an employee welfare benefits plan at any time, absent a provision in the plan guaranteeing against such an eventuality. See, e.g., Deibler v. United Food & Commercial Workers' Local Union 23, 973 F.2d 206, 210 (3d Cir. 1992); Reichelt v. Emhart Co., 921 F.2d 425, 430 (2d Cir. 1990), cert. denied, 501 U.S. 1231, 111 S. Ct. 2854, 115 L. Ed. 2d 1022 (1991); Ryan v. Chromalloy American Corp., 877 F.2d 598, 603 (7th Cir. 1989). Nonetheless, once a triggering event occurs that entitles the 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. Indeed, to conclude otherwise would entirely undermine the obligations imposed by ERISA upon a sponsor of a non-vesting benefit plan, since the employer could then ignore the requirements of the plan and, when sued, simply amend or terminate the plan retroactive to a date preceding the aggrieved participant's eligibility for benefits.

 Not surprisingly, the courts have consistently held that an employer may not deny a benefit already earned, whether under a vested or a non-vested plan. See, e.g., Wulf v. Quantum Chemical Corp., 26 F.3d 1368, 1378 (6th Cir. 1994), petition for cert. filed, No. 94-750 (Oct. 25, 1994); Pratt v. Petroleum Prod. Mgt., Inc. Employee Sav. Plan & Trust, 920 F.2d 651, 661 (10th Cir. 1990); Adams v. General Tire & Rubber Co., 794 F.2d 164, 166-67 (4th Cir. 1986); Harm v. Bay Area Pipe Trades Pension Plan Trust Fund, 701 F.2d 1301, 1305-06 (9th Cir. 1983); Kemmerer v. ICI Americas, Inc., 842 F. Supp. 138, 142-46 (E.D. Pa. 1994); Edward W. Sparrow Hosp. Ass'n, Inc. v. Industrial Welding, Inc., 1990 U.S. Dist. LEXIS 9194, at *20 (W.D. Mich. 1990). See also New York State Teamsters Conf. Pension & Retirement Fund v. Hoh, 561 F. Supp. 679, 684 n. 8 (N.D.N.Y. 1982) (citing cases). As one court has noted: "allowing [the employer] to unilaterally terminate Plan benefits retroactively renders the Plan illusory. Carried to an extreme, [the employer] could terminate benefits for claims already incurred and paid out. Although. . .[the employer] properly reserved the right to amend its Plan, including the right to terminate benefits, this right does not encompass claims that have already been incurred." Edward W. Sparrow Hosp. Ass'n, Inc. v. Industrial Welding, Inc., 1990 U.S. Dist. LEXIS at * 20. *fn2"

 In this case plaintiffs' entitlement to a lump-sum payment under the RCAG plan accrued at their termination in May 1988. Necessarily, then, the June 28, 1988 consent approved by the MCIC Board could not divest them of that entitlement, and hence defendants' argument for judgment based on that consent is legally insupportable. *fn3"

 2. The Standard of Review of the Administrator's Denial of Benefits

 Defendants also seek judgment as a matter of law on the theory that the decision to deny benefits under the RCAG plan should be subjected to a deferential standard of review. This issue was previously raised by defendants in connection with the court's rulings on their requests to charge, and at that time the court rejected defendants' argument. (Tr. 1165-70). Having reviewed defendants' motion papers, I conclude that the argument has not improved with repetition.

 The Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), that "a denial of benefits challenged under § 1132 (a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. Thus we must look to the terms of the plan to determine whether and in what circumstances the plan administrator is given such discretionary authority. See, e.g., Masella v. Blue Cross & Blue Shield of Connecticut, 936 F.2d 98, 103 (2d Cir. 1991). In doing so, we bear in mind the admonition that "discretion is not an all-or-nothing proposition. A plan can give an administrator discretion with respect to some decisions, but not others. . . . A plan administrator has exactly the amount and type of discretion granted by the plan, no more and no ...


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