In re Gulf Oil Corporation’s Stock Ownership Plans, 17 N.Y.2d 337 (1966)
When a corporation sells one of its divisions, the provisions of an employee benefit plan applicable to that division may be severable, entitling the employees of the sold division to their share of the benefits, particularly when the plan language indicates an intent to treat the divisions as separate entities.
Summary
This case concerns the severability of an employee benefit plan when Gulf Oil Corporation sold its Ticonium Division. The plan covered employees in both the Transportation and Ticonium Divisions. The Court of Appeals reversed the lower court’s decision, holding that the plan was not severable despite language suggesting separate treatment of the divisions for contribution purposes. The dissenting opinion argued for severability, emphasizing the plan’s intent to benefit employees within each division and the inequity of allowing the remaining division’s employees to absorb the benefits of those who left with the sold division. This case underscores the importance of clear plan language regarding severability upon corporate restructuring.
Facts
Gulf Oil Corporation established a retirement and profit-sharing plan for its salaried employees, covering both its Transportation and Ticonium Divisions. The Ticonium Division was subsequently sold to another corporation. Salaried employees of the Ticonium Division then became employees of the purchasing corporation. The retirement and profit-sharing plan did not have explicit language regarding what would happen in the event of the sale of one of the divisions. The plan language included a clause stating that in determining the amount of contribution, “the two Divisions shall be considered as though they were separate companies.”
Procedural History
The lower court (Appellate Division) initially held the instrument to be severable as between the Transportation Division and Ticonium Division of the company. The New York Court of Appeals reversed this decision, finding the plan was not severable.
Issue(s)
Whether the salaried employees’ retirement and profit-sharing plan of Gulf Oil Corporation is severable as between the Transportation Division and Ticonium Division upon the sale of the Ticonium Division.
Holding
No, because the plan language did not explicitly provide for severability upon the sale of a division, despite language treating divisions as separate for contribution purposes.
Court’s Reasoning
The majority opinion (which is not included here) likely reasoned that, despite the language treating the divisions as separate entities for the purpose of calculating contributions, the plan as a whole was intended to be a single, unified plan. The dissenting opinion, written by Judge Van Voorhis, argued that the plan should be considered severable. The dissent emphasized the intent of the plan, which was to induce employees to remain with the company. Given that the employees of the Ticonium Division could no longer remain with Gulf Oil after the sale of the division, it was unfair to allow the Transportation Division employees to absorb the benefits intended for the Ticonium Division employees. The dissent highlighted the plan’s language, stating that