A federal appeals court on Monday upheld the dismissal of a class action lawsuit from former employees of The Chemours Co. who said they were duped into taking a less generous buyout deal as the chemical firm downsized after its spinoff from DuPont.
A three-judge panel of the U.S. Court of Appeals for the Third Circuit ruled that Chemours’ voluntary severance did not violate a 1974 law meant to protect workers’ voluntary pension and health plans, ending a federal challenge launched by three former workers at the Wilmington chemical giant.
The plaintiffs, who had all spent three decades with DuPont before transitioning to Chemours in the July 2015 spinoff, opted to enter a voluntary severance program with Chemours, which included a lump-sum payment tied to their time spent with DuPont, as well as three months of medical insurance coverage and a prorated discretionary bonus payment in the months following the corporate separation.
According to plaintiffs, overall participation in the voluntary separation program, or VSP, was low because it had been rumored that the company was considering implementing an involuntary program with better benefits for terminated employees.
In a complaint filed last April, Mark Girardot and fellow plaintiffs Gerhard Wittreich and Peter Butler said Chemours downplayed those concerns in order to increase sign-ups for the voluntary scheme, telling employees that the mandatory severance package would be mostly in line with the terms of the VSP.
However, when Chemours rolled out its involuntary program, known as the Chemours Career Transition Program employees learned the new package offered an “even greater dollar value” than the VSP and more extensive benefits, including restricted stock units, stock options and a tuition assistance program, Girardot said.
In their suit, the plaintiffs said they would not have chosen to participate in the VSP had Chemours told them about the later plan with greater benefits. They also challenged the VSP itself, arguing under the Employee Retirement Income Security Act that the plan required an ongoing administrative scheme to determine individuals’ eligibility based on subjective criteria.
U.S. District Judge Sue L. Robinson of the District of Delaware dismissed the case last March, finding that the VSP was not subject to the ERISA because it involved an upfront payment that did not require Chemours to set up a new administrative structure.
On Monday, Circuit Judge Michael A. Chagares agreed. In a seven-page opinion, he said Chemours had no intention to provide regular, long-term benefits when it structured its voluntary severance package and merely entered into an agreement to provide lump sum payments to a certain class of workers over a “defined and relatively brief period of time.”
“Determining the amount of these lump sum payments did not require a new administrative body or the exercise of discretion—rather, it involved the mechanical application of a simple formula based on time of employment with the company,” Chagares wrote in the non-precedential opinion, also signed by Judges Anthony Scirica and Marjorie Rendell.
An attorney for the plaintiffs was not immediately available to comment on Tuesday. An attorney for Chemours directed questions to the company’s in-house legal team, which did not immediately provide comment on the ruling.
The same plaintiffs have filed a similar case in Delaware state court, accusing Chemours, among other things, of fraud, unjust enrichment and a breach of the Delaware Wage Payment and Collection Act. Superior Court Judge Mary Miller Johnston in March ruled that Girardot had made a valid claim under the DWPCA. Chemours, however, has not yet moved to dismiss the four other claims outlined in the state action.
The plaintiffs were represented in the federal case by Jonathan Landesman and Robert K. Beste of Cohen Seglias Pallas Greenhall & Furman.
Chemours was represented by Kathleen Furey McDonough and Stephanie E. O’Byrne of Potter Anderson & Corroon.
The case was captioned Girardot v. Chemours.