[00:00:10] Speaker 02:
Mr. Hilton for the appellees.

[00:00:15] Speaker 01:
Mr. Wilder, and I'll just announce to the Council for both cases that Judge Henderson will consider the cases based on the oral arguments of today's, based on the recording of today's oral arguments.

[00:00:23] Speaker 03:
Thank you, Your Honor.

[00:00:24] Speaker 03:
May it please the Court, William Wilder, for the appellant, Ronald Peck.

[00:00:28] Speaker 03:
Mr. Peck appeals from the adverse judgment of the District Court.

[00:00:31] Speaker 03:
Against him under count one of the amended complaint, his state law claim seeking nine months severance pay under CELEX's severance pay policy and under count two, his ERISA claim seeking his accrued benefit under CELEX's deferred compensation top hat plan.

[00:00:50] Speaker 03:
Mr. Peck is entitled to judgment under Count 2 for reasons that also resolve the ultimate question under Count 1 of the amendment complaint of whether or not he was terminated for cause in accordance with the definition of under Selex's Deferred Compensation Plan.

[00:01:10] Speaker 03:
It cannot be caused to terminate an employee's existing contract that he declines to modify that contract by accepting a new position.

[00:01:20] Speaker 03:
While Mr. Peck was an Atwell employee and that meant that his employer was free to propose modifications to his employment and even condition continued employment upon that agreement,

[00:01:31] Speaker 03:
As Selex concedes, Mr. Peck was entitled to decline that new position, and then the employer could decide whether to terminate him, to obtain an employee who would agree to the new conditions, or to continue his employment under the existing terms.

[00:01:47] Speaker 03:
But Mr. Peck

[00:01:48] Speaker 03:
exercising that right to decline the offer of new employment cannot be cause for discharge under the definition of cause in the CELEX plan, regardless of the standard of review applied under ERISA to that plan interpretation dispute, that is habitual neglect or refusal to perform the material duties of his employment.

[00:02:12] Speaker 03:
And CELEX's unreasonable interpretation of the plan

[00:02:17] Speaker 03:
which is also arbitrary and capricious because it's contrary to plain meaning, ultimately reduces to he's obligated to do whatever his employer directs him to do, including taking a new position.

[00:02:29] Speaker 03:
And that is simply an effort to read into the plain in exclusion for the offer of comparable employment that nowhere appears in it.

[00:02:37] Speaker 01:
Can I ask you a factual question?

[00:02:38] Speaker 01:
Yes, sir.

[00:02:39] Speaker 01:
The position that he was asked to be moved to,

[00:02:45] Speaker 01:
is that under the top hat plan, was that a position that would also get the benefit of the deferred composition under the top hat plan?

[00:02:52] Speaker 01:
Or would that position have put him in a different place in the org chart so that he wouldn't be one of the top strata of management that would get the?

[00:03:00] Speaker 03:
As I understood, Selleck's position, moving to this new position would not disqualify him from the key plan because he was designated as a key employee.

[00:03:10] Speaker 03:
They hadn't asserted that at any point, Your Honor.

[00:03:14] Speaker 03:
But rather the plain reading of the plan is that Mr. Peck's entitled to his accrued benefit because Selleck's chose to terminate his employment in order to obtain, rather because he declined to modify the plan.

[00:03:33] Speaker 03:
And that disposition of the interpretation of cause also resolves

[00:03:37] Speaker 03:
the ultimate issue under Count 1, and Mr. Peck's entitled to judgment in the amount of nine months of severance pay.

[00:03:43] Speaker 03:
The district court erred by ruling that his position was not eliminated.

[00:03:48] Speaker 03:
Rather, under the Mendes-Holt doctrine, Selig should be precluded from now contending, only after the initiation of litigation, a contractual ground that it never asserted when actually performing under the agreement.

[00:04:03] Speaker 03:
In September 2012, its position to Mr. Peck was there was no other job for him in the district and the duties, not the position, but the duties of his business development vice president position had been distributed to other employees.

[00:04:19] Speaker 03:
It did not deny his severance benefit on the ground that his position was not eliminated and therefore he wasn't eligible because that position elimination was an eligibility issue, not an exclusion.

[00:04:31] Speaker 03:
Rather, it relied on the exclusion provision of cause termination to deny him the benefit.

[00:04:38] Speaker 03:
Now, the district court ignored that mend his hold issue that is followed in the district after first being established by the Supreme Court in McCarthy, but this court should apply that to preclude Selleck from now arguing this issue of position elimination.

[00:04:56] Speaker 03:
But even considering the issue, the district court erred in its conclusion that the position was not eliminated, since all of the objective facts, whether it's the elimination of Celex's DC staffing to just one employee working from home,

[00:05:11] Speaker 03:
just a few months after Mr. Peck's termination, the closure of its office, the elimination of its mailing address, and that more than a year later it wasn't seeking to fill its position.

[00:05:23] Speaker 03:
All of those objective facts established the position was in fact eliminated.

[00:05:28] Speaker 01:
So on the deferred compensation issue rather than the elimination of the position deals more directly at least with the severance pay issue.

[00:05:34] Speaker 01:
So on the deferred compensation issue,

[00:05:36] Speaker 01:
The key question seems to be, the key interpretive question of the contract seems to be whether the material duties and obligations of his or her employment, whether that language necessarily means employment in a position, which is essentially your position, which is that has to mean, that has to be what it means, or just employment in some fashion with the company, which I take it to be the company's position.

[00:05:59] Speaker 01:
And what are the best indicators

[00:06:03] Speaker 01:
from your perspective that what it has to mean is employment in a position?

[00:06:07] Speaker 03:
The best indicators of that, Your Honor, is the specific language that's used, the material duties, not just generally, not generically duties, but the material duties of your employment and, again, the purpose of ERISA, which is to put the ordinary person on notice of the conditions of the benefit.

[00:06:26] Speaker 03:
And so material duties

[00:06:28] Speaker 03:
can only reasonably be interpreted in terms of what are my duties now that is in the position that I am in now as opposed to duties that I can't know about that are of a position I've never held.

[00:06:41] Speaker 03:
So it simply wouldn't be possible to put the ordinary person on notice of duties that he or she doesn't now perform

[00:06:50] Speaker 03:
and couldn't fail to perform since they aren't the duties of the position that the employee is now performing.

[00:06:58] Speaker 03:
And so the very specific definition of cause under the plan is what requires that it be the material duties of the position the employee is in at the time

[00:07:09] Speaker 03:
that the termination decision is made.

[00:07:12] Speaker 01:
That submission is not without intuitive force, but you could have a situation in which an entity hires individuals into a position, and the position by nature is one that just doesn't entail a particular set of duties at a particular location.

[00:07:28] Speaker 01:
It could be that, just to use a far-of-field example, so you have a trainee program.

[00:07:32] Speaker 01:
and the training program, the position is a training position.

[00:07:34] Speaker 01:
You come into the training position, you accept the position.

[00:07:38] Speaker 01:
We don't know where you're going to be stationed.

[00:07:40] Speaker 01:
It could be anywhere in the country.

[00:07:42] Speaker 01:
And we don't know exactly what your duties are because it's going to depend on the local needs.

[00:07:47] Speaker 01:
But what you're agreeing to come into is a open position that is just one whose duties and whose location and all of those details will be filled out later.

[00:07:55] Speaker 01:
But you're coming on board with the understanding that it could be any of those.

[00:07:59] Speaker 03:
Yes, your honor there could be a scenario where that's true because at the time of the employment the employees put on notice of that and therefore in performing that position the employee knows that there could be broader duties associated with it presumably that are related to the the current duties but broader duties that's just a question of how the employment is defined by the parties and the scope that the parties define it and

[00:08:23] Speaker 03:
and material duties could vary for one employee than another, even at the same company.

[00:08:29] Speaker 03:
And so that's true.

[00:08:30] Speaker 03:
For Mr. Peck, however, he had a specific position with specific duties, and therefore that language has a different notice, different connotation application to his specific position.

[00:08:45] Speaker 03:
So, Your Honor,

[00:08:49] Speaker 03:
Even considering if 52A's clearly erroneous standard was considered under the severance plan, it's simply those objective facts and even the ultimate fact cited by the district court in its two sentence conclusion supports that the position was eliminated.

[00:09:04] Speaker 03:
We would say as a matter of law, you can't rely on alleged replacement at a post-merger company, a new company, and apply it to replacement at a pre-merger company.

[00:09:14] Speaker 03:
But the reality is there were three companies merged

[00:09:17] Speaker 03:
And there were at least two employees at the predecessor companies in this business development position.

[00:09:23] Speaker 03:
And following the merger, there was only one.

[00:09:25] Speaker 03:
And so just as a matter of mathematical certainty, Mr. Peck's position was eliminated.

[00:09:31] Speaker 00:
On the severance question, you're assuming that the district court's finding is clearly erroneous and judgment should be entered?

[00:09:38] Speaker 03:
Well, Your Honor, we would assert Rule 52 doesn't apply because there's no disputed facts, no credibility determinations, and the question of whether the position is eliminated should properly be considered a conclusion of law, not a finding of fact akin as under the U.S.

[00:09:57] Speaker 03:
v. General Motors.

[00:09:58] Speaker 03:
I think what we would submit that even if Rule 52 is applied, it was clearly erroneous because it's contrary to the objective undisputed facts in the record.

[00:10:09] Speaker 03:
And therefore, yes, Mr. Peck should be entitled to judgment under Count 2, even under a Rule 52A standard.

[00:10:19] Speaker 03:
If there's nothing further, thank you, Your Honor.

[00:10:21] Speaker 03:
Thank you.

[00:10:30] Speaker 02:
Timothy Hilton for the appellees may please the court.

[00:10:33] Speaker 02:
Thank you your honors.

[00:10:35] Speaker 02:
First to speak briefly about what I would call a contract.

[00:10:39] Speaker 00:
Yes on your right on your right there should be a button to lift it up.

[00:10:51] Speaker 02:
Thank you, Your Honor.

[00:10:51] Speaker 02:
Is that acceptable?

[00:10:52] Speaker 02:
Yeah.

[00:10:52] Speaker 02:
Thank you.

[00:10:53] Speaker 02:
First, to respond briefly to talk about the severance claim or the contract claim, to respond first to the idea of this mend your hold doctrine, it's in the manner of an estoppel claim.

[00:11:07] Speaker 02:
And Mr. Peck's argument relies on the notion that pre-litigation, not simply that CELEX,

[00:11:17] Speaker 02:
didn't explain every reason for its actions, but that Selex took a position and then changed its position.

[00:11:23] Speaker 02:
The record evidence is clear that on September 30, 2012, Selex informed Mr. Peck that due to the circumstances of the termination of his employment,

[00:11:33] Speaker 02:
He was not eligible under the deferred compensation plan or or its severance policy.

[00:11:38] Speaker 02:
It's not accurate that selects ever disclaimed or ever affirmatively stated that his position had not been eliminated or I'm sorry that it had been eliminated and regardless the

[00:11:51] Speaker 02:
Clearly erroneous standard applies to the district court's finding of fact that Mr. Peck's employment did not end due to position elimination.

[00:12:00] Speaker 02:
The facts about whether or not Mr. Peck's position was eliminated that Mr. Peck emphasizes might be interesting, but ultimately the question under the contract is that you're eligible for severance under the policy

[00:12:14] Speaker 02:
if your employment ends due to position elimination.

[00:12:18] Speaker 02:
Even if Mr. Peck's position was eliminated at some point in the future, which we maintain that it wasn't, and the evidence is sufficient to support that finding, the parties are really not in dispute that Mr. Peck's employment ended as a result of his refusal to

[00:12:33] Speaker 02:
perform the duties that were assigned to him in the Overland Park, Kansas office.

[00:12:37] Speaker 02:
Now, we assert that that was caused for termination of employment.

[00:12:41] Speaker 02:
Obviously, Mr. Peck disputes that it was, but there's really no one who's ever asserted that Mr. Peck's employment ended due to position elimination and no competent record evidence other than

[00:12:51] Speaker 02:
speculation about what might have happened 18 months after his termination to say that his position was eliminated.

[00:12:59] Speaker 01:
Do you know just as a rough practical matter how much is at stake with the severance issue and how much is at stake with the deferred comp issue?

[00:13:06] Speaker 02:
Yes, under the deferred comp I think it's approximately $57,000 and under the severance policy it would be nine months of severance and I believe it's in the range of $180,000.

[00:13:18] Speaker 02:
And to speak now about the ERISA claim, under the Peddaway case, when a plan is given an interpretive discretion, this court reviews, courts review their

[00:13:32] Speaker 02:
their denial of a claim under an arbitrary and capricious standard.

[00:13:37] Speaker 01:
So that ultimately means, and the parties essentially agree... So let's just give you the benefit of the doubt on the standard first, just as a matter of assumption for now.

[00:13:45] Speaker 01:
Sure.

[00:13:45] Speaker 01:
I'm not saying that that's necessarily right, but let's just assume that to be true.

[00:13:49] Speaker 01:
Even if we give you the benefit of that,

[00:13:51] Speaker 01:
does your position mean that you could have told Mr. Peck, you know, here's the obligations of your employment.

[00:13:57] Speaker 01:
We need you to take a 90 percent pay cut and we need you to move into essentially a ministerial clerical position.

[00:14:06] Speaker 01:
And I don't mean to denigrate that position, but the pay would indicate that it's not valued as much by the company this far away.

[00:14:13] Speaker 01:
And if you don't do that, obviously you're not

[00:14:16] Speaker 01:
adhering to your material duties and obligations of your employment, because this is what we need to do as your employer, and you'll be terminated for cost.

[00:14:23] Speaker 02:
No, not necessarily, Your Honor.

[00:14:24] Speaker 02:
I mean, I think... Why not?

[00:14:26] Speaker 02:
There probably is a limiting principle here.

[00:14:29] Speaker 02:
Ultimately, the question is whether the committee's determination of cause termination is reasonable.

[00:14:36] Speaker 02:
And under these facts, Mr. Peck was directed to take a position where he would lose... Yes, he would lose a cost of living increase that he

[00:14:45] Speaker 02:
got when he was transferred to DC.

[00:14:47] Speaker 02:
As you note in your question to Appellant's Council, to answer that question, he would have remained eligible.

[00:14:55] Speaker 02:
He was moving from one vice president role to another vice president role.

[00:15:00] Speaker 01:
But it's a different position.

[00:15:01] Speaker 01:
The company doesn't deny that.

[00:15:03] Speaker 01:
And I think the way you describe it is that it's a different position.

[00:15:05] Speaker 02:
Oh, absolutely, Your Honor.

[00:15:07] Speaker 00:
The material duties are different.

[00:15:09] Speaker 02:
The material duties of that position would have been different.

[00:15:12] Speaker 02:
Yes, it was a change to

[00:15:15] Speaker 02:
a quality and technical role similar to those Mr. Peck had performed at various other points in his career.

[00:15:21] Speaker 00:
What's the limiting principle that you have in mind to address Judge Winn-Fawcett's question?

[00:15:28] Speaker 01:
Well, I can't necessarily say in the abstract what the limiting principle is, Your Honor, but I don't think it's presented by these facts where... That makes it a little bit hard because one limiting principle that seems to work and the way against which all employment law

[00:15:43] Speaker 01:
seems to operate is that a position is a thing that you are hired into and a different position is a different thing in which you could in theory have been hired into but you weren't.

[00:15:54] Speaker 01:
And when you move from one position to another, particularly when you're moving halfway across the country, that's just a different set of material duties.

[00:16:01] Speaker 02:
That could be, Your Honor, but under the course of the party's conduct over Mr. Peck's approximately 15 years of employment, he had accepted, he had taken, and I should say he'd been assigned, numerous different positions at the discretion of the company.

[00:16:16] Speaker 02:
He'd always performed them.

[00:16:18] Speaker 02:
And the moving back and forth across the country issue is, I think, of less importance here in that we were reassigning him to the headquarters in Kansas where he had lived for most of his career, where he still owned a home.

[00:16:31] Speaker 02:
and to a quality and technical role that he had performed similar roles to throughout his career.

[00:16:38] Speaker 01:
Yeah, some people might think moving to Kansas is a demotion, having grown up there I wouldn't say that, but it does seem to me to be a, it's just a different situation and it seems questionable whether

[00:16:54] Speaker 01:
The contract that refers to material duties and obligations of his or her employment doesn't necessarily mean material duties and obligations with respect to the position to which you're hired.

[00:17:02] Speaker 01:
And if you want to be moved to, if you are asked to be moved to a different position, I think most employees would naturally think, well, now you're asking me to do something that I wasn't hired to do.

[00:17:12] Speaker 01:
And of course, you're right that in some situations in the past, it may well have been to my advantage to take the move that you've offered me.

[00:17:18] Speaker 01:
But now you're offering me something that I just don't want to do.

[00:17:20] Speaker 01:
I want to stay in the position that I have.

[00:17:23] Speaker 01:
And then you're forced to move under pain of being terminated.

[00:17:30] Speaker 01:
and to call that cause might strike that employee as a surprise.

[00:17:36] Speaker 02:
I don't dispute that it might strike some as difficult.

[00:17:42] Speaker 02:
Of course, in this situation, the parties went into this with their eyes wide open.

[00:17:47] Speaker 02:
Mr. Peck.

[00:17:48] Speaker 01:
Well, let me ask you this.

[00:17:49] Speaker 01:
Let me ask you a former question I asked earlier to your brother in council.

[00:17:53] Speaker 01:
What you gave him the opportunity to do was to move into a position that wasn't part of the top hat plan.

[00:17:59] Speaker 01:
I know you're saying that didn't happen, but I'm just saying suppose that that was the offer.

[00:18:06] Speaker 01:
Actually, the pay is going to stay the same.

[00:18:07] Speaker 01:
Your ongoing pay is going to stay the same.

[00:18:09] Speaker 01:
Now, it's true that you're not in the top tier anymore, so you're not going to get the benefit of the Top Hat plan, but this is something the company needs you to do.

[00:18:15] Speaker 01:
Under the argument that was spelled out in the letter and under the argument that's in your briefs, it seems to me the company would say that that's fine.

[00:18:20] Speaker 01:
We could have done that.

[00:18:21] Speaker 01:
And if he refused to accept that, then that would have been a termination for cost.

[00:18:27] Speaker 02:
I think that that would approach changing the material nature of the employment as it significantly changes the compensation.

[00:18:38] Speaker 02:
Our position here is that he received a significant cost of living increase when he went to DC.

[00:18:42] Speaker 02:
That would have dropped away.

[00:18:43] Speaker 02:
Our position is that it's effectively he would have had the same compensation in Kansas and in DC.

[00:18:48] Speaker 02:
He would have remained in a vice president role, albeit with different substantive duties.

[00:18:54] Speaker 02:
And as I was saying a moment ago,

[00:18:57] Speaker 02:
The parties went into this with an understanding.

[00:19:00] Speaker 02:
Mr. Peck refused and insisted on continuing to perform the position in D.C., which was no longer available to him, was not eliminated, but was no longer available to him, and was given notice that we regard this as cause for termination of employment.

[00:19:13] Speaker 02:
He was given the proper notice period under the

[00:19:17] Speaker 02:
contract to, sorry, under the plan to continue to cure his refusal to perform.

[00:19:24] Speaker 02:
And when he refused to do that, his employment was terminated.

[00:19:26] Speaker 01:
I mean, of course, all that presumes that you're right.

[00:19:28] Speaker 00:
I mean, because he had no duty to cure anything.

[00:19:30] Speaker 00:
You're just stating the facts.

[00:19:32] Speaker 00:
That's all.

[00:19:33] Speaker 00:
The question is what the facts mean.

[00:19:35] Speaker 00:
Come back to the elimination of the job.

[00:19:37] Speaker 00:
Who filled his job when he left?

[00:19:39] Speaker 02:
When he left, initially, the position was performed by Mr. Warner, the CEO of the company.

[00:19:44] Speaker 02:
Duties were also assigned to two consultants who had to pay more for their services.

[00:19:51] Speaker 02:
Ultimately, the job was filled in early 2014.

[00:19:53] Speaker 02:
The job remained budgeted.

[00:19:56] Speaker 02:
and was not eliminated, it simply is a high-level position that was not immediately filled.

[00:20:02] Speaker 02:
And there were circumstances due to the sequestration around military budgets and things like that at the time that made it more difficult to fill.

[00:20:11] Speaker 02:
And again, our position is that on September 30, 2012, his employment does not end due to position elimination, regardless of if the court finds that his position is eliminated at some point in the future.

[00:20:23] Speaker 00:
Well, I'm talking about as he's leaving.

[00:20:27] Speaker 00:
Well, the position remained an open position and filled.

[00:20:31] Speaker 00:
It appears that it did not.

[00:20:34] Speaker 00:
It did not remain open and it was not filled as a position any longer.

[00:20:39] Speaker 00:
The duties were distributed, but the position was not filled.

[00:20:42] Speaker 00:
The fact that you had it on book doesn't mean anything.

[00:20:45] Speaker 02:
The position was not filled immediately, Judge.

[00:20:48] Speaker 02:
It was always budgeted and the duties were performed by other employees and consultants, including those that we had to pay more compensation to as a result of the increase of their duties.

[00:20:57] Speaker 02:
It is true that we did not immediately put somebody into that position.

[00:21:03] Speaker 01:
So you're saying the position was open but not filled?

[00:21:05] Speaker 01:
Is that what you're saying?

[00:21:07] Speaker 01:
It remained open?

[00:21:08] Speaker 02:
Yes, the position remained in existence, unfilled until it was filled in, I believe, January of 2014.

[00:21:13] Speaker 00:
Remaining in existence but not filled.

[00:21:15] Speaker 00:
Yes.

[00:21:15] Speaker 00:
In the merged companies is what you're talking about.

[00:21:19] Speaker 00:
That's when it was filled.

[00:21:20] Speaker 00:
Yes, that's correct.

[00:21:25] Speaker 01:
Thank you, Your Honors.

[00:21:26] Speaker 01:
Thank you.

[00:21:29] Speaker 01:
Mr. Wilder, have you time?

[00:21:31] Speaker 01:
We'll give you two minutes for rebuttal only, please.

[00:21:35] Speaker 03:
Thank you, Your Honor.

[00:21:36] Speaker 03:
Briefly, Your Honor, the assertion that Mr. Peck was not terminated because his position was eliminated but for cause confuses that the for-cause provision is an exclusion under the severance plan, not an eligibility provision.

[00:21:53] Speaker 03:
And as I've already presented, we believe the record establishes the position was eliminated.

[00:21:58] Speaker 03:
The asserted ground is to exclude him from receiving a benefit he's otherwise eligible for.

[00:22:04] Speaker 03:
And that is this for-cause assertion.

[00:22:08] Speaker 03:
And so that's why we contend the district court erred in ruling against him under the severance plan because his position was eliminated and the alleged exclusion was not satisfied by the company.

[00:22:22] Speaker 00:
And what do you think your best evidence is on the elimination?

[00:22:25] Speaker 03:
Well, Your Honor, it's that the operation was in fact closed.

[00:22:30] Speaker 03:
All of the employees went from a high of 10 to 12 to 2 to 3 at the time of Mr. Peck's termination to only one a few months later.

[00:22:39] Speaker 03:
The office space itself was closed.

[00:22:42] Speaker 03:
Its D.C.

[00:22:42] Speaker 03:
presence was eliminated, and the duties were distributed to other existing employees.

[00:22:47] Speaker 03:
which under, for example, the Sixth Circuit case we cite to the court, that is evidence of position elimination.

[00:22:54] Speaker 03:
Of course, fewer heads doing the same duties.

[00:22:57] Speaker 03:
That's what a RIF is, and that the post-merger replacement, even if considered, in fact, shows that Mr. Peck wasn't, his position was not the survivor since Selex concedes he never held the position in the merged company.

[00:23:15] Speaker 03:
And just briefly on the question of requiring him to accept this other position, nothing in the plan, the ERISA plan, deals with any of these issues.

[00:23:25] Speaker 03:
There's no standard under the ERISA plan of reasonableness or making the position of this sort or the other, because there's no comparable employment provision.

[00:23:33] Speaker 03:
And therefore, there is no standard under the plan for the position that Selex asserts.

[00:23:39] Speaker 03:
Thank you, Your Honors.

[00:23:40] Speaker 01:
Thank you, Councils.

[00:23:41] Speaker 01:
The case is submitted.