Cohen v. National Grid USA, Index No 18536/08 (DeStefano, J.)

Breach of Contract; Severance Plan; Summary Judgement; Declaratory Judgment

 By: Michael D. Manzo | Staff Writer

After National Grid USA acquired Keyspan Corporation and its subsidiaries (collectively, “Defendants”), it entered into a purchase agreement with Light Tower Fiber LLC (“Light Tower”) to sell KeySpan Communications Corporation (“KCC”), a KeySpan subsidiary.  In the agreement, Defendants agreed not to employ, hire, or solicit fifteen current employees (collectively, “Plaintiffs”) for one year. Defendants admitted that employees would “eligible for an involuntary severance benefit.” Subsequently, Plaintiffs requested severance benefits pursuant to KCC’s 2007 Severance Plan (“the Plan”), which provided that employees were eligible for severance pay and benefits if employment was “terminated without cause” within 18 months after the date of a “change of control.” The Plan contemplated a merger as a change of control. KeySpan, however, denied Plaintiffs’ request for severance benefits on the grounds that Plaintiffs were not terminated without cause but, rather, hired by Light Tower one year after the sale. Defendants made such denial while admitting that other former employees received severance benefits pursuant to the Plan.

Later, Plaintiffs commenced suit seeking a declaratory judgment on the basis that the sale of KCC to Light Town terminated their employment without cause, consequently entitling them to relief for Defendants’ breach of the Plan. Defendants moved for summary judgment to deny Plaintiff’s request for declaratory judgment on the grounds that they do not have a “history or practice” of providing severance benefits to persons continuing employment and that Plaintiffs cannot prove they “knew or relied to their detriment” upon any practice by Defendants to pay severance benefits. In response, Plaintiffs cross-moved for summary judgment arguing that they knew of Defendants’ practice of paying severance under the Plan and that they relied on the practice of paying severance in accepting and continuing their employment.

The Court granted Plaintiff’s cross-motion for summary judgment on a finding that Defendants breached the Plan.  To establish prima facie entitlement for summary judgment, a party must provide that there is no genuine issue of material fact. Here, Plaintiffs provided affidavits and depositions demonstrating that they had actual knowledge of several KeySpan employees regularly receiving severance pay under the Plan and relied upon the Plan when deciding whether to leave or continue their employment at KeySpan. Moreover, various interoffice emails, letters, and verbal messages referred to the sale of KCC to Light Tower as a “divestiture” and the employees as being “terminated.”  Therefore, Plaintiffs established a prima facie entitlement to summary judgment.

The Court, however, dismissed Plaintiff’s request for declaratory judgment because the Plaintiffs had an adequate alternative remedy in the breach of the Plan claim. Here, Plaintiffs sought a judgment declaring that they were terminated and, thus, entitled to severance benefits.  The Court agreed and dismissed Plaintiff’s request for declaratory judgment.

Cohen v. National Grid USA, Index No 18536/08 (DeStefano, J.).


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