Kevin Bock v. Computer Associates International, Inc. And Platinum Technology, Inc.

257 F.3d 700, 26 Employee Benefits Cas. (BNA) 2099, 2001 U.S. App. LEXIS 15989, 2001 WL 804109
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 18, 2001
Docket00-2628, 00-3348
StatusPublished
Cited by30 cases

This text of 257 F.3d 700 (Kevin Bock v. Computer Associates International, Inc. And Platinum Technology, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kevin Bock v. Computer Associates International, Inc. And Platinum Technology, Inc., 257 F.3d 700, 26 Employee Benefits Cas. (BNA) 2099, 2001 U.S. App. LEXIS 15989, 2001 WL 804109 (7th Cir. 2001).

Opinion

CUDAHY, Circuit Judge.

Kevin Bock sued Platinum Technology, Inc. (Platinum) and Computer Associates International, Inc. (Computer Associates) for breach of a severance pay agreement. The defendants removed the case to feder *703 al court, asserting that the agreement was part of an employee benefit plan under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA). The district court .found in favor of Bock, and the defendants appeal.

I.

Platinum and Computer Associates are businesses that service computer networks and sell software. Platinum employed Bock as a salesperson from 1995 through 1999. During that time, he repeatedly surpassed his sales quotas and was ultimately promoted to the executive position of senior vice president of sales. His compensation plan •with Platinum consisted of a base salary plus commissions; he did not receive a yearly bonus. Bock’s salary for 1999 was $145,000, and his commission from completed sales for 1998 was $674,333. Bock testified that in 1998, he was credited with $367 million in revenue for the company.

In 1998, Platinum set up a severance pay program for its executives. An important purpose of the plan was to keep key employees working hard for Platinum in the face of rumors of a corporate takeover by another company. Under the agreement implementing the program, an employee covered by the program would receive severance benefits if his or her employment was terminated without good cause within two years of a corporate buyout. Larry Freedman, Platinum’s general counsel, submitted the severance agreement carrying out the plan to employees for their acceptance and signature in fall 1998. The severance agreement, as submitted to Bock, provided that employees would receive “aggregate severance pay” consisting of a “bonus amount” added to twice the sum of their highest base salary plus their highest 12-month amount of “incentive compensation.” “Bonus amount” was defined as the remaining portion of an employee’s expected yearly bonus. “Incentive compensation” was undefined. Bock signed the agreement in September 1998.

Computer Associates acquired Platinum in the spring of 1999. As a result of the change in ownership, Bock’s employment was terminated on June 7, 1999. Platinum later notified Bock that his severance benefits would consist of $290,000 — double his base salary of $145,000. (Because Bock earned no yearly bonus, he received nothing from the “bonus amount” portion of the severance plan.)

Bock sued to enforce the severance agreement as including commission income under the umbrella of “incentive compensation.” He sought summary judgment, contending that the agreement unambiguously entitled him to severance pay equal to two times his base salary and commissions. He also claimed that Platinum was estopped to deny him additional severance pay, based on alleged oral representations about whether commissions were included in the severance pay calculation.

The district court, finding the term “incentive compensation” ambiguous, denied Bock’s motion for summary judgment. Then, after a bench trial, the court found that Platinum’s board of directors, in adopting the severance plan, did not intend to include commission income in the “incentive compensation” portion of the severance agreement. This interpretation of the term “incentive compensation,” the court concluded, was a reasonable one. First, the court concluded that it was “not unreasonable” for the term “incentive compensation” to be a reference to bonus alone. Second, it looked to the summary plan document to support the reasonableness of that interpretation. The summary states that the amount of the severance payment would be calculated “using the *704 sum of base salary and bonus (in addition to making up a lost bonus opportunity).” The summary does not mention commissions (or “incentive compensation”) at all. The district court, in addition, found that the company’s decision to exclude commissions was not effectively communicated to the affected employees. Thus, Bock and at least one other participant in the plan questioned Freedman as to whether their commission income was included; Bock did so before signing the agreement. The district court concluded that Freedman, who had directed that all questions regarding the plan be submitted to him, gave answers in response to these questions that suggested, but did not state explicitly, that commission income was included in the definition of “incentive compensation.” See Tr. at 380-82. It thus found that Platinum had violated its fiduciary duty to Bock under ERISA to clearly disclose that exclusion. Consequently, the court reasoned, the defendants were estopped from denying payment of severance benefits that took Bock’s commission into account when calculating severance pay. Bock was awarded a total amount of $1,909,550.97, consisting of benefits he had been denied, pre-judgment interest and attorneys’ fees and costs.

II.

Platinum’s severance payment plan is governed by ERISA and is properly subject to federal jurisdiction because it is an employee benefit plan, which the Supreme Court has defined as “benefits whose provision by nature requires an ongoing administrative program to meet the employer’s obligations.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). This does not mean, however, that the individual severance agreements are to be construed entirely under trust principles, as Platinum argues. Platinum seeks to accord great weight to its own alleged intent through application of the trust principle that the settlor’s intent governs the interpretation of a trust agreement. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 112, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) (indicating the importance of the intent of the settlor in interpreting terms of trusts); Restatement (Third) of Trusts § 4 (“ ‘[Tjerms of the trust’ means the manifestation of intention of the set-tlor .... ”). But we are dealing here with severance agreements, contractual in form, conferring benefits on the employer as well as the employee and quite distinguishable from vested benefits under a pension plan. See Bidlack v. Wheelabrator Corp., 993 F.2d 603, 616 (7th Cir.1993) (en banc) (plurality opinion) (Easterbrook, J., dissenting) (“Pensions vest by law ... health and other welfare benefits are left to contract.”); Taylor v. Continental Group, 933 F.2d 1227, 1232 (3d Cir.1991) (“But trust law cannot be imported wholesale into the ERISA context. Severance plans are often similar to employment contracts, whose interpretation requires determining the intent of both contracting parties.”).

It has been uniformly held that general principles of contract law — under the federal common law that guides interpretation of ERISA plans — are to be applied to the interpretation of the language of such severance agreements. See Anstett v. Eagle-Picher Indus., Inc.,

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257 F.3d 700, 26 Employee Benefits Cas. (BNA) 2099, 2001 U.S. App. LEXIS 15989, 2001 WL 804109, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kevin-bock-v-computer-associates-international-inc-and-platinum-ca7-2001.