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PIPPIN v. RCA GLOBAL COMMUNS.

February 6, 1991

AMOS PIPPIN, et al., Plaintiffs,
v.
RCA GLOBAL COMMUNICATIONS, et al., Defendants


Fern M. Smith, United States District Judge.


The opinion of the court was delivered by: SMITH

FERN M. SMITH, UNITED STATES DISTRICT JUDGE

 "Hired to be fired." That was the plight of five long-time employees on the wrong end of the sale of one company to another. The employees, plaintiffs in this case, received termination letters the day after they were "transferred" to their new company. The federal statutes regulating employee retirement and severance plans forbid such sham arrangements. The Court rules that these employees should recover all the severance benefits to which they are entitled.

 PROCEDURAL BACKGROUND

 Plaintiffs filed a complaint alleging twelve claims for relief on April 10, 1989. After various pre-trial skirmishes, voluntary dismissals, and Court rulings, plaintiffs were left with one claim for wrongful denial of severance benefits.

 The parties then filed cross-motions for summary judgment. After careful consideration of the papers and oral argument, the Court granted plaintiffs' motion for summary judgment and denied defendants' motion for summary judgment at a hearing on October 31, 1990.

 The parties then requested that the Court delay issuing its final Decision; they subsequently indicated that there was no reason for the Court not to issue a written memorandum. This Memorandum of Decision shall serve as the Court's findings of fact and conclusions of law on its grant of plaintiffs' motion for summary judgment.

 FACTS

 The basic facts of this ERISA claim are undisputed. See Employee Retirement Income Security Act, as amended, 29 U.S.C.A. § 1001 et seq., (West 1985 and Supp. 1990). Five individual plaintiffs have sued RCA Global Communications ("RCAG") and MCI International Inc. ("MCI") for violations of ERISA arising out of an alleged denial of full severance benefits in 1988.

 Each plaintiff had worked at RCAG, a subsidiary of RCA Company, for over twenty-two years. General Electric Company ("GE") bought RCAG in 1986, then sold RCAG to defendant MCI on May 16, 1988.

 RCAG's Severance Allowance Plan ("the Plan") covered plaintiffs during the relevant time period. The Plan provided that regular salaried RCAG employees were entitled to severance benefits if their active employment was terminated because of an "involuntary layoff." The Plan defined involuntary layoff as "permanent reduction in force; organizational realignment; discontinuance of an operation; . . . sale of an operation to another company; . . . [or] location closing." Employees who had worked for RCAG for twenty-two years or more were entitled to fifty-two weeks of severance pay under the Plan. Severance allowance benefits were not payable if RCAG sold a business operation to another company under terms that enabled the RCAG employees to step into the acquiring company at "substantially the same or higher" salary.

 MCI began negotiating for the purchase of RCAG some time in 1987. Before the deal between GE and MCI closed in the spring of 1988, the companies executed the October 29, 1987 stock purchase agreement. It provided:

 
Effective on or immediately prior to the Closing Date, employee members of the [RCAG] Group will no longer be eligible to participate in RCA Welfare Benefit Plans because the [RCAG] Group will no longer be subsidiaries of [GE] and [GE] will cause each member of the [RCAG] Group with employees covered by the RCA Welfare Benefit Plans to withdraw and terminate participation in those Plans as to its respective employees.

 This provision of the stock purchase agreement meant that, after the closing, plaintiffs and other RCAG employees would lose their RCAG benefits, including the RCAG severance packages that they would have received under the Plan, and would be covered by the less desirable MCI ...


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