Reddinger v. Sena Severance Pay Plan

In the

United States Court of Appeals
For the Seventh Circuit

Nos. 10-2361 & 10-2362

M ELISSA J. R EDDINGER and S COTT L EF EBVRE,

Plaintiffs-Appellants,
v.

SENA S EVERANCE P AY P LAN and
N EWP AGE W ISCONSIN S YSTEM, INC.,

Defendants-Appellees.

Appeals from the United States District Court
for the Eastern District of Wisconsin.
Nos. 09 CV 119 & 09 CV 141—William C. Griesbach, Chief Judge.

A RGUED JANUARY 10, 2011—D ECIDED F EBRUARY 19, 2013 Œ

Œ
NewPage filed for Chapter 11 bankruptcy in 2011. Pursuant
to the bankruptcy automatic stay provision in 11 U.S.C. § 362,
these proceedings were stayed, and a decision could not
issue. SENA and NewPage informed us on February 4, 2013
that the bankruptcy has concluded, and so we issue our deci-
sion.
2 Nos. 10-2361 & 10-2362

Before F LAUM and W ILLIAMS, Circuit Judges, and
H ERNDON, District Judge. ŒŒ
W ILLIAMS, Circuit Judge. Scott LeFebvre and Melissa
Reddinger maintain they should have received severance
benefits after they left the paper mill where they
both worked. However, the company’s plan only pro-
vided for severance to persons whose employment was
involuntarily terminated. Although the company initially
offered LeFebvre and Reddinger a May termination
date when the mill had been set to close in the spring,
by the time they returned the requisite release forms,
the company had informed them that the mill would
be staying open longer and that their new termination
dates would be later in the year. Knowing all this,
LeFebvre and Reddinger still chose to leave the mill in
May. Their choice to do so despite the company’s offer
that they stay longer meant their employment was not
involuntarily terminated, and the plan administrator’s
decision to deny them severance was not arbitrary and
capricious. Therefore, we affirm the grant of summary
judgment in favor of the defendants.

I. BACKGROUND
Stora Enso North America Corporation (SENA) owned
a paper mill in Niagara, Wisconsin, a city on the banks
of the Menominee River in the northeastern part of the

ŒŒ
Of the United States District Court for the Southern
District of Illinois, sitting by designation.
Nos. 10-2361 & 10-2362 3

state. NewPage Wisconsin System, Inc. bought SENA in
December 2007. A month later, NewPage informed
Niagara mill employees that it was closing the mill with
a likely shut-down date in late April. Many employees
began looking for new employment, including Scott
LeFebvre and Melissa Reddinger.
On March 10 and 12, 2008, respectively, LeFebvre and
Reddinger received letters from NewPage stating that
their employment was being terminated effective May 2,
2008. The letters also stated that “in exchange for your
agreement to release [NewPage] from any and all legal
claims you may have concerning your employment or
termination of that employment, [NewPage] will provide
you with a severance package . . . . Please note that the
benefits outlined in this package are contingent upon
signing the Separation and Release Agreement.” The
enclosed Separation and Release Agreements provided
for a “severance payment according to the Severance
Pay Plan.” The letters also included the severance pay-
ment amounts that the employees would receive —$64,831
for LeFebvre if he executed the agreement within forty-
five days, and $7227 for Reddinger, a newer employee,
if she executed hers within twenty-one days.
Another NewPage salaried employee submitted his
executed release agreement on March 20 and ultimately
received severance. That same day, LeFebvre says
that NewPage’s Human Resources Administrator in-
formed him the company was no longer accepting
release agreements.
On March 24, about two weeks after it sent the letters,
the company held meetings informing Niagara em-
4 Nos. 10-2361 & 10-2362

ployees that it had decided to keep the plant open
longer, until October, to fill customer orders. This
news came as a surprise to LeFebvre and Reddinger.
Both had been in talks with other companies that even-
tually led to job offers, but both still wanted to receive
severance from NewPage. Reddinger spoke with the
Niagara mill manager on March 24 and asked to be al-
lowed to submit her signed release agreement that
day. The manager responded that the company was
no longer accepting agreements that had not yet been
signed. Nonetheless, the next day, March 25, LeFebvre
and Reddinger signed and submitted the release and
separation agreements they had received two weeks
earlier. When they later asked whether the company
would pay them severance benefits, they were told it
would not.
At the end of March, the company gave salaried em-
ployees including LeFebvre and Reddinger written
notice of the extended mill closure date, another
severance offer, and an additional retention bonus offer
for those who stayed until the mill was to close in Octo-
ber. The new letters sent on March 27 stated in part: “You
can expect a new Separation & Release Agreement to
be sent prior to the mill closure date. The severance will be
paid to you at the new closure date under the same
terms and conditions and with new release dates. . . . As
an incentive to retain you through the new closure, we
will provide all salaried . . . employees with a retention
bonus that will pay you 15% of your annual base salary
if you stay with the mill until October 1, 2008, or until
the mill closure date, whichever comes sooner . . . .”
Nos. 10-2361 & 10-2362 5

LeFebvre and Reddinger both stopped working at the
mill on May 2 and started new jobs. The mill continued
to operate. After leaving the mill and not receiving any
severance, LeFebvre and Reddinger requested it from
the SENA Severance Pay Plan. The plan administrator
concluded that the two had voluntarily terminated
their employment and for that reason denied their re-
quests. After their appeals were denied, LeFebvre
and Reddinger each filed suit in federal court invoking
the Employee Retirement Income Security Act of 1974
(ERISA) and various state-law theories. The district court
granted the plan’s motions for summary judgment, and
we consolidated LeFebvre’s and Reddinger’s cases
on appeal.

II. ANALYSIS
LeFebvre and Reddinger maintain they are entitled to
severance payments under the terms of the Separation
and Release Agreement that they submitted on March 25.
Our review of the district court’s grant of summary
judgment considers the evidence in the light most favor-
able to LeFebvre and Reddinger, since they were the non-
moving parties. Miller v. Ill. Dep’t of Transp., 643 F.3d 190,
192 (7th Cir. 2011). Summary judgment is appropriate if
the record establishes that there are no genuine issues
of material fact and that the moving party is entitled to
a judgment as a matter of law. Fed. R. Civ. P. 56(a).

A. Standard of Review
We begin with our standard of review. The plaintiffs
contend that we should review de novo the denial of
6 Nos. 10-2361 & 10-2362

their request for severance. When, like here, a wel-
fare benefit plan within the meaning of ERISA gives
the administrator discretion to interpret the plan provi-
sions or determine eligibility, our review of a challenged
denial of benefits asks whether the plan administrator’s
decision was arbitrary and capricious. Wetzler v. Ill.
CPA Soc. & Found. Ret. Income Plan, 586 F.3d 1053, 1057
(7th Cir. 2009).
The plaintiffs argue this standard should not apply
because NewPage had a “conflict of interest,” and
they argue that NewPage was trying to avoid paying
severance in order to conserve its corporate assets. The
record supports the opposite. NewPage wanted to con-
tinue employing LeFebvre and Reddinger until the
mill closed in October. It offered to pay them severance
upon termination after the mill closed, and that
severance amount would have been even higher than
had they stopped working in May since the severance
formula was based upon length of employment.
NewPage also offered LeFebvre and Reddinger an addi-
tional retention bonus if they stayed at the mill through
October. The company would have been out more
money had they stayed.
The plaintiffs also argue for a de novo standard of
review because they say the “true decision” to deny
benefits was made not by the plan administrator, but by
the company in March. But there is no evidence that the
decision to keep the mill open longer was in any way
motivated by a desire to avoid paying severance to em-
ployees like LeFebvre and Reddinger. The company
Nos. 10-2361 & 10-2362 7

promised, and ultimately paid, severance to salaried
employees who remained with the company until the
mill closed. The evidence in the record supports a con-
clusion only that the company’s reason for keeping the
mill open longer was to fill existing orders and to keep
it open to make it more attractive to potential buyers.
NewPage obviously needed employees to operate the
mill, and so it delayed many employee termination
dates. The company’s business decision to keep the
mill open longer does not mean we review the severance
denial de novo. Our review of the plan administrator’s
denial asks only whether that decision was arbitrary
and capricious.

B. Denial of Severance Benefits
The plaintiffs contend that they have been wrongfully
denied benefits owed to them under an ERISA plan in
violation of 29 U.S.C. § 1132(a)(1)(B). The SENA Severance
Pay Plan is a welfare benefit plan under ERISA. NewPage
continued to administer the plan after it acquired SENA
in December 2007. We look to the SENA Severance Pay
Plan and to how it detailed severance eligibility to ascer-
tain whether the plan administrator’s determination
that the plaintiffs were ineligible for severance was arbi-
trary and capricious. See James v. Gen. Motors Corp., 230
F.3d 315, 318 (7th Cir. 2000).
The Plan’s stated purpose is “to provide severance pay
to eligible employees of the Company whose employ-
ment is involuntarily terminated due to a reduction
in force, reorganization, business necessity or economic
8 Nos. 10-2361 & 10-2362

conditions.” The Plan’s provisions state that full-time
employees whose employment is “involuntarily termi-
nated” due to business necessity or other reasons are
participants in the plan and eligible for severance pay.
The Plan specifically provides that “[e]mployees who
voluntarily terminate their employment with an
Employer by resignation or otherwise . . . prior to being
discharged by an Employer” are not participants in
the plan and are not eligible for severance under the
Plan. The Plan further states that no severance “will be
paid or offered” to an eligible employee until the em-
ployee has executed a release of claims form releasing
the employee’s then-existing rights and legal claims
against the employer.
So, to receive severance under the terms of the SENA
Severance Pay Plan, LeFebvre and Reddinger needed to
execute a release agreement and be involuntarily termi-
nated. The plan administrator’s conclusion that neither
employee had been “involuntarily” discharged was not
arbitrary and capricious. Although the company initially
told LeFebvre and Reddinger their jobs would end in
May, it informed them two weeks later that their em-
ployment would continue until October. Knowing that,
LeFebvre and Reddinger made the choice to stop
working at the mill in May. They did so voluntarily,
and they did so after being informed that even if
they returned the initial severance documents they
would not receive severance pay if they left in May.
That NewPage did not adjust all its employees’ end dates
after the initial letter does not make the plan administra-
Nos. 10-2361 & 10-2362 9

tor’s decision arbitrary and capricious. Bob DeMay, to
whom the plaintiffs point, received severance from
the company. But DeMay signed and returned his sever-
ance agreement before the March 24 announcement
that the mill would stay open longer, and the company
did not change his termination date.
The plaintiffs also argue that the letters they received
in early March created a group of employees who
were now beneficiaries of the SENA Severance Pay
Plan and that the company had no power to revoke
severance pay because the pay was for the sole interest
of plan beneficiaries. Simply offering the potential for
severance did not make all employees “beneficiaries”
who were entitled to severance under ERISA, however,
as the Plan only authorized severance for persons
who were involuntarily terminated. The plaintiffs
stopped working in May of their own accord, and their
termination was not involuntary. As a result, the
plan administrator’s decision to deny LeFebvre and Red-
dinger severance pay was not an arbitrary and capri-
cious denial of benefits under 29 U.S.C. § 1132(a)(1)(B).

C. Breach of Fiduciary Duty
LeFebvre and Reddinger also argue that the company
breached the duty ERISA fiduciaries have to discharge
“duties with respect to a plan solely in the interest of
the participants and beneficiaries and for the exclusive
purpose of providing benefits to participants and
their beneficiaries.” 29 U.S.C. § 1104(a)(1)(A)(i). They
argue that the true nature of the determination that
10 Nos. 10-2361 & 10-2362

they had voluntarily terminated their employment was
to advance the employer’s interest. In support of this
argument, they point to the mill’s initial announcement
to employees that it would close in late April, its notice
to many employees of a May 2 termination date, and its
acknowledgment that the plaintiffs were not granted
severance because the company wanted them to con-
tinue effectively operating the mill. From these facts,
the plaintiffs conclude that the company promoted its
interests ahead of the plaintiffs’ interests and breached
the fiduciary duty imposed by ERISA.
“In every case charging a breach of ERISA fiduciary
duty, . . ., the threshold question is not whether the
actions of some person employed to provide services
under the plan adversely affected a plan beneficiary’s
interest, but whether the person was acting as a
fiduciary (that is, was performing a fiduciary function)
when taking the action subject to complaint.” Pegram v.
Herdrich, 530 U.S. 211, 226 (2000). A person “is a fiduciary
with respect to a plan to the extent (i) he exercises any
discretionary authority . . . respecting management of
such plan . . ., (ii) he renders investment advice . . ., or
(iii) he has any discretionary authority or discretionary
responsibility in the administration of such plan.” 29
U.S.C. § 1002(21)(A). Although NewPage was acting as a
fiduciary when it administered the Plan, its decisions
about when to close the mill were clearly made as
business decisions, not as ones made in an ERISA
fiduciary role. See Varity Corp. v. Howe, 516 U.S. 489, 527-
28 (1996). There is no evidence that its business decision
to keep the mill open later was in any way motivated by
Nos. 10-2361 & 10-2362 11

a desire to avoid its obligations under the SENA
Severance Pay Plan. The company also never misled its
employees about the terms of the Plan. See James, 230
F.3d at 318. There was no breach of fiduciary duty cog-
nizable under ERISA in this case.

D. Claims Under State Law
The plaintiffs also maintain their state-law claims for
breach of contract and estoppel should proceed. We
disagree. First, “ERISA includes expansive pre-emption
provisions, which are intended to ensure that employee
benefit plan regulation would be exclusively a federal
concern.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208
(2004) (citation omitted). Even if ERISA did not preempt
the state-law claims, they would not succeed. LeFebvre
and Reddinger first argue that NewPage breached a
contract with them. They maintain that they executed
and returned the release agreement within the time
specified in the letters they received in early March, and
that neither the plan nor the agreement contained any
other relevant conditions. But it is black-letter law that
an offer can be revoked any time before acceptance. See,
e.g., Kocinski v. Home Ins. Co., 452 N.W.2d 360, 367 (Wis.
1990) (finding that offer including release of claims was
revoked and therefore no contract was formed). NewPage
informed its Niagara mill employees on March 24 that
it would not accept any more Separation Agreements
because the mill would stay open longer. And when
Reddinger inquired whether she could still submit her
signed agreement, she was told “no.” The company
12 Nos. 10-2361 & 10-2362

revoked its offer before LeFebvre and Reddinger
accepted it, and no contract was formed.
LeFebvre and Reddinger next contend their claim for
promissory estoppel under Wisconsin state law has
merit. Although ERISA includes expansive preemp-
tion provisions, we have noted that in some instances
whether ERISA preempts state-law promissory estoppel
claims can be a close question. Sembos v. Philips Com-
ponents, 376 F.3d 696, 703 (7th Cir. 2004). Here, summary
judgment on the promissory estoppel claim was proper
even if ERISA did not preempt it.
Under Wisconsin law, a plaintiff succeeds on a promis-
sory estoppel claim if: (1) a promise is made where
the promisor should reasonably expect to induce action
or forbearance of a definite and substantial character on
the part of the promisee; (2) the promise induced such
action or forbearance; and (3) injustice can only be
avoided by enforcement of the promise. Hoffman v. Red
Owl Stores, Inc., 133 N.W.2d 267, 275 (Wis. 1965); McLellan
v. Charly, 758 N.W.2d 94, 107-08 (Wis. Ct. App. 2008).
LeFebvre and Reddinger contend that they were
promised in writing in letters dated March 10 and 12,
respectively, that they would be discharged on May 2.
They maintain they acted in reliance on this promise
to their detriment, as they stopped working at the mill
on May 2 yet did not receive the severance discussed in
the letters.
Thinking they were losing their jobs soon, LeFebvre
and Reddinger understandably began looking for new
jobs after they received the letters. The Plan, however,
Nos. 10-2361 & 10-2362 13

makes explicitly clear that the letters giving a May 2
termination date were not enough to make LeFebvre
and Reddinger entitled to severance. The Plan clearly
states it does not offer severance until an employee
signs the release: “No severance benefits will be paid or
offered to an eligible employee until the employees has
executed a Company-approved ‘release of claims’ form
releasing all of the employee’s then existing rights and
legal claims against the Employers.” (emphases added).
And the one-page March 10 and 12 letters made that
explicitly clear too, stating in a stand-alone one-sentence
paragraph: “Please note that the benefits outlined in
this package are contingent upon signing the Separa-
tion and Release Agreement.”
The timing of the events demonstrates that the claim
of estoppel based on the March 10 and 12 letters cannot
succeed. By the time LeFebvre and Reddinger executed
and returned their releases, the offer of severance
with a May 2 termination date had been revoked. And
although they suggest they accepted new jobs in
reliance on the March 10 and 12 letters, it was not until
after the March 24 announcement that the company
would be staying open longer and that termination
dates were no longer May 2 that they accepted new
employment. Both also received a letter on March 27,
well before they stopped working at the mill on May 2,
that made clear in writing that new employment
release dates were coming and that severance would
be paid at the new mill closure date. Moreover, Reddinger
testified in her deposition that she left when she did
because she was pregnant and wanted to be in a new job
by October, while LeFebvre testified that he also knew
14 Nos. 10-2361 & 10-2362

that the mill wanted him to keep working after May 2
but that he chose to leave because he had had enough.
It is true that after the announcement that employ-
ment at the mill would continue past May 2, some mill
employees certainly faced a difficult choice between
leaving the mill to pursue the employment offers they
had obtained in a small town or staying until the mill
closed to collect severance. LeFebvre and Reddinger
chose to accept new employment instead of continuing
to work at the mill, an understandable decision. As rele-
vant here, though, when they decided to stop working
on May 2, they could not have reasonably believed that
they would receive severance. See McLellan, 758 N.W.2d
at 109 (rejecting promissory estoppel argument where
plaintiff could not reasonably believe he had valid offer
in light of written agreement to the contrary); Dunn v.
Milwaukee Cnty., 693 N.W.2d 82, 89 (Wis. Ct. App. 2005)
(declining to grant equitable relief of promissory
estoppel for plaintiffs’ actions in 2003 where promise
had been withdrawn in 2002). In these circumstances
the promissory estoppel claim cannot succeed. To the
extent the plaintiffs are still pursuing an ERISA estoppel
claim, it similarly fails for lack of reasonable reliance.
See Kannapien v. Quaker Oats Co., 507 F.3d 629, 636 (7th
Cir. 2007).

III. CONCLUSION
The judgment of the district court is A FFIRMED.

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