AmericanXyrofin, a manufacturer of food additives, was sold, merged, and reorganized early in 1996, with predictable consequences for some of its executives. Cultor U.S. Inc. acquiredXyrofin in January 1996 and renamed thenew subsidiary Cultor Food Science (cfs).Soon Cultor Limited (the parent of CultorU.S.) bought another food additives groupfrom Pfizer, Inc., and merged thisbusiness into cfs. As part of theacquisition, Cultor promised Pfizer thatit would give Pfizer employees who joinedcfs but later lost their jobs benefitstracking those of the severance-paymentplan that Pfizer maintained under theEmployee Retirement Income Security Act(erisa). When in March 1996 cfs ended theemployment of Violeta Velasco, who camefrom Xyrofin (which lacked a severance-benefit plan), it offered her a severancepackage: six weeks’ pay, plus oneadditional week’s pay for each year shehad been employed by Xyrofin, bothdoubled if she signed a release of anylegal claims against cfs. Toward the endof March cfs decided that the services ofKenneth Sandstrom, Velasco’s supervisor,also were no longer necessary. Sandstrom,unlike Velasco, was not offered aseverance package. He filed this suitunder sec.502(a) (1)(B) of erisa, 29U.S.C. sec.1132(a)(1)(B), contending thatthe offer to Velasco demonstrated that cfshad an “informal plan for severancebenefits” that applied to him too. Thedistrict court disagreed and grantedsummary judgment for cfs. 1999 U.S. Dist.Lexis 6525 (N.D. Ill. Apr. 26, 1999). Briefs filed in this court dwell on twoquestions: whether Sandstrom has producedevidence from which a reasonable trier offact could conclude that cfs “intended” toestablish an “informal” (which is to say,unwritten) severance-benefit plan and, ifso, whether the terms of that plan aresufficiently definite to support aremedy. They debate, for example, whetherBarton Finegan, the vice president ofhuman resources who approved the offer toVelasco, had authority to establish aplan on behalf of cfs. They also explorewhether the Velasco offer sets out theterms of the plan or whether, instead,these terms may be found elsewhere–perhaps in a check sent to Velasco (whichgave her one week’s pay in addition towhat the offer promised) or perhaps inthe (written) plan for employees cfsinherited from Pfizer. This plan had a13-week base plus triple the week’s-pay-per-prior-year if the employee signed arelease. Nor can the parties agree onwhether the “informal plan” affordedbenefits in lieu of notice (so that anemployee who remained on the payrollafter notice of termination would haveseverance benefits reduced by the numberof weeks of employment yet to go) or wason top of whatever wages the employeeearned. If cfs created a plan by making anoffer to Velasco, did it amend or abolishthe plan by not making a similar offer toSandstrom? These are enigmas, whichexemplify a deeper problem that theparties have not mentioned: does erisacontemplate unwritten plans? None ofthese uncertainties would exist if theplan were on paper. Several of our cases say that it ispossible to have an unwritten pension orwelfare-benefit plan under erisa, if theplan is “a ‘reality,’ which requires . .. that the court be able to determine’whether from the surroundingcircumstances a reasonable person couldascertain the intended benefits,beneficiaries, source of financing, andprocedures for receiving benefits.’”James v. National Business Systems, Inc.,924 F.2d 718, 720 (7th Cir. 1991),quoting from Donovan v. Dillingham, 688F.2d 1367, 1373 (11th Cir. 1982) (enbanc). See also Diak v. Dwyer, Costello &Knox, P.C., 33 F.3d 809, 811-12 (7th Cir.1994); Ed Miniat, Inc. v. Globe LifeInsurance Group, Inc., 805 F.2d 732, 738-39 (7th Cir. 1986). It is not clear thatthe approach taken in Dillingham iscompatible with more recent decisions ofthe Supreme Court, which emphasizedifferent considerations when askingwhether an informal policy or arrangementis a “plan.” See Massachusetts v. Morash,490 U.S. 107 (1989); Fort Halifax PackingCo. v. Coyne, 482 U.S. 1 (1987). BothMorash and Ft. Halifax evince reluctanceto find that regular and predictableawards of severance or vacation paymentsestablish a “plan,” given the frequencywith which these benefits are the subjectof bilateral negotiations betweenemployers and departing employees. But weneed not pursue this subject, because cfshad an express plan, which did not coverSandstrom. Written plans may be altered only inwriting. Statements by planadministrators, side agreements andunderstandings, or even special offersmade to many of a firm’s employees, donot change the contents of the planapplicable to other employees. See, e.g.,Central States Pension Fund v. GerberTruck Service, Inc., 870 F.2d 1148 (7thCir. 1989) (en banc); Frahm v. EquitableLife Assurance Society, 137 F.3d 955, 960(7th Cir. 1998); Central States PensionFund v. Joe McClelland, Inc., 23 F.3d1256 (7th Cir. 1994). Likewise,statements or conduct by bureaucratsimplementing a plan do not estop theemployer to enforce the plan’s writtenterms, and although we have not barredthe door we have made it clear that onlyextreme circumstances (not yet seen)justify estoppel. See, e.g., Shields v.Teamsters Pension Plan, 188 F.3d 895 (7thCir. 1999); Plumb v. Fluid Pump Service,Inc., 124 F.3d 849, 856 (7th Cir. 1997);Schoonmaker v. Employee Savings Plan ofAmoco Corp., 987 F.2d 410 (7th Cir.1993). These decisions are fatal to Sandstrom’sposition, for his claim must be that cfsamended its formal plan (the oneapplicable only to former Pfizeremployees) by making the offer toVelasco. Yet that is not the means erisacontemplates for plan amendments. SeeCurtiss-Wright Corp. v. Schoonejongen,514 U.S. 73 (1995). Sandstrom evidentlybelieves that erisa forbids bilateraldeals between an employer and individualemployees, so that the offer to Velascomust be a manifestation of a generallyapplicable “plan.” Our opinion in Frahmrejects that position, holding thatbilateral arrangements are compatiblewith erisa and do not modify the planapplicable to other employees who did notreceive the offers or estop the employerto enforce the plan’s written terms. 137F.3d at 957-58. See also McNab v. GeneralMotors Corp., 162 F.3d 959 (7th Cir.1998). Accord, Sprague v. General MotorsCorp., 133 F.3d 388, 403 (6th Cir. 1998)(en banc). Sandstrom was not entitled toseverance benefits under the terms of thePfizer acquisition, so the judgment ofthe district court is affirmed.
Sandstrom v. Cultor Food Science, Inc. United States Court of Appeals For the Seventh Circuit No. 99-2331 Kenneth Sandstrom, Plaintiff-Appellant, v. Cultor Food Science, Incorporated, Defendant-Appellee. Appeal From: United States District Courtfor the Northern District of Illinois, EasternDivision. Argued: April 25, 2000 Decided: May 25, 2000 Before: Posner, Chief Judge, and Easterbrookand Evans, Circuit Judges.
