PHILADELPHIA – After a federal district court denied class certification to a group of former Pfizer employees seeking severance benefits, the U.S Court of Appeals for the Third Circuit has now concurred with the trial court ruling granting summary judgment.
Judges Thomas L. Ambro, Thomas M. Hardiman and Dolores Sloviter heard the case, with Sloviter writing the ruling.
Former Pfizer employees Robin Feeko, Nelida Marengo and Janet Rodgers brought claims against the pharmaceutical giant and Wyeth Special Transaction Severance Plan on behalf of themselves and others similarly-affected for severance pay, under the Employee Retirement Income Security Act of 1974 (ERISA).
However, the U.S. District Court for the Eastern District of Pennsylvania determined the plaintiffs had not met the requisite number for the class certification they were seeking in the case, and granted a motion for summary judgment from Pfizer that Feeko, Marengo and Rodgers had not experienced a termination as defined by the company’s severance plan.
In 2008, the plaintiffs worked in the Benchmark Federal Credit Union for Wyeth, a pharmaceutical company later acquired by Pfizer in October 2009. On March 10, 2010, the plaintiffs were notified by Pfizer and Benchmark officials that as of April 1, 2010, they would be employed directly by Benchmark, not Pfizer.
Pfizer set up an arrangement where they would end the plaintiffs’ employment on March 31, 2010 and immediately re-hire them with Benchmark the following day. After the plaintiffs were terminated, they filed for severance benefit claims but were told by the company since their employment transferred from Pfizer to Benchmark, they did not meet the criteria for termination under the severance plan. The company’s Administrative Committee later upheld this determination.
The determination led the trial court to deny class certification to the plaintiffs and dismiss the case, leading the former Pfizer employees to appeal to the Third Circuit on the grounds of the company's Administrative Committee not addressing procedure correctly relating to conflicts of interest, and their decision being “arbitrary and capricious.”
Though the trial court did find “inherent conflicts of interest”, with senior Pfizer employees who had a financial stake invested in not offering severance benefits to the plaintiffs being involved in that decision, the Third Circuit ultimately found the conflicts “troubling but not determinative”, since the Committee’s interpretation of the plan was “reasonable.”
The Third Circuit also decided the Committee’s interpretation did not meet the legal standard necessary to be considered “arbitrary and capricious.”
“Not only were appellants immediately employed, they experienced practically no change during the transition [to Benchmark],” Sloviter said.
“Conversely, had the Company granted appellants’ request for severance benefits, they would have received severance benefits on top of the salary and benefits they were receiving from Benchmark. Such a scenario would appear to contradict, not conform to, the goals of the plan,” Sloviter added. “Moreover, it does not appear that ERISA itself conflicts with the Committee’s decision.”
The Third Circuit did not reach the class certification issue in their decision.
Via majority rule, Sloviter and Hardiman chose to affirm the U.S. District Court decision, while Ambro dissented.
“[Since] I believe there was a debilitating conflict whose influence is apparent in a series of procedural and substantive missteps in the Committee’s deliberations, I respectfully dissent,” Ambro said, feeling the conflict noted by the plaintiffs “undermined the neutrality” of the Committee.
The plaintiffs are represented by Karen L. Handorf, Marc I. Machiz and Monya M. Bunch of Cohen Millstein Sellers & Toll in both Washington D.C. and Philadelphia, plus Charles J. Kocher of Saltz Mongeluzzi Barrett & Bendesky, also in Philadelphia.
The defendants are represented by Robert A. Limbacher and Brandon L. Goodman of Goodell DeVries Leech & Dann in Philadelphia, plus Albert L. Hogan III and David R. Pehlke of Skadden Arps Slate Meagher & Flom, in both Chicago, Ill and Washington D.C.
U.S. Court of Appeals for the Third Circuit case 14-4752
U.S. District Court for the Eastern District of Pennsylvania case 2:11-cv-04296
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at firstname.lastname@example.org