Opinion
5:00-CV-962
July 12, 2002
THOMAS C. BUCKEL, ESQ., HANCOCK ESTABROOK, LLP, Syracuse, NY, Attorneys for Plaintiffs.
GARY F. KOTASKA, ESQ., PAUL K. STECKER, ESQ., PHILLIPS, LYTLE, HITCHCOCK, BLAINE HUBER, Buffalo, NY, Attorneys for Defendants.
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
On June 19, 2000, plaintiffs Gary F. Brockett ("Brockett") and Terry L. Crawford ("Crawford") (collectively, "plaintiffs") commenced the instant action against defendants Earle C. Reed ("E. Reed"), Tim Reed ("T. Reed"), Utica Boilers, Inc. ("Utica Boilers"), Enviromaster International Corporation ("Enviromaster"), and the Utica Boilers, Inc. Profit Sharing Plan (the "Plan") (collectively "defendants") pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., and state law.
Plaintiffs now move for summary judgment against defendants as to liability only. Defendants oppose, and cross-move for summary judgment. Plaintiffs oppose the cross-motion. Oral argument was heard on October 12, 2001, in Utica, New York. Decision was reserved.
II. FACTS
The following are the undisputed facts in this case, and where noted, the facts as alleged by each side.
Brockett became an employee of Enviromaster in or about 1985 or 1986. Crawford became an employee of Enviromaster in 1989. In 1988, Utica Boilers became the controlling shareholder of Enviromaster. Defendant E. Reed is the Chief Executive Officer of Utica Boilers. T. Reed is the President of Utica Boilers. After the acquisition of Enviromaster by Utica Boilers, Brockett became a participant in the Plan. 1993, Benefits Plan Administrators, Inc. ("BPA") recommended that Utica Boilers adopt an amended and restated version of its profit sharing plan. BPA was a consultant to Utica Boilers. Utica Boilers was the Plan administrator.
Utica Boilers established the Plan in 1960. Employees of Enviromaster participated in the Plan following Enviromaster's acquisition by Utica Boilers.
BPA recommended that the Plan provide for contributions to three distinct classes of employees. It is the designation of these three classes that is at the heart of much of the instant dispute. In September 1993, when the Board of Utica Boilers (the "Board") authorized the adoption of the amended plan, it authorized the creation of three separate classes of employees — designated Class A, Class B, and Class C. The minutes of that Board meeting state that it was agreed by the Board that
the company amend its profit sharing plan to a comparability plan. Employee classes were adopted; Class A employees, Class B employees and Class C employees. Each such class will be credited with an amount of profits to be distributed among the class.
Each year the Board of directors will decide on such amount and will from time to time decide, in its sole discretion, which employees shall be included in which employee class.
(Brand Aff. Exh. E.) Immediately preceding the adoption of these classifications, the Board Appointed Brockett as president of Enviromaster. (Id.)
The Board then agreed that Class A was to consist of E. Reed and R.H. Hilton. Class B was to consist of T. Reed and J.R. Benson. Class C was to be comprised of all other eligible employees. The minutes then state that "MR. E.C. Reed and RH Hilton are authorized to take all necessary steps to have the plan implemented."
Notwithstanding this action by the Board, the Plan as actually adopted and signed by Richard H. Hilton as Vice President on November 14, 1994, did not contain these classifications, nor did it designate specific employees or positions to fill the different classes. Instead, the Plan created the classifications of "Executive Management Employees," "Senior Management Employees," and "All Other Eligible Employees." None of these classifications were defined or limited anywhere in the Plan. The Plan also did not require any action by the Board to designate employees to fill these classifications.
Defendants contend that these classifications were intended to simply implement the "A," "B," and "C" classifications that were identified by the Board. Plaintiffs contend that these classifications are "self-effectuating," and that the Board minutes may not be considered in interpreting the classifications. In any event, the Plan was restated in 1996, and the same classifications were adopted without change.
On or about October 1998, during an audit of the Plan by the accounting firm of Barone, Howard, Hiltion and Powers, an auditor noticed the classifications and questioned Crawford about their applicability to Brockett. Shortly thereafter, Crawford made inquiry of E. Reed concerning the allocation provisions of the Plan. She also asked her counterpart at Utica Boilers, Mei Ling Hsu, about the allocation provisions of the Plan.
Plaintiffs now contend that they were fired in retaliation for this inquiry, but have not proffered any facts, other than the mere fact they were terminated, in support of this assertion.
On November 6, 1998, the employment of both plaintiffs was terminated. Each plaintiff was given the option of resigning their employment in exchange for certain benefits contained in a severance agreement. Both chose to sign resignation letters. The severance agreement provided for continued salary payments and insurance benefits through December 31, 1998, continued participation in the Enviromaster profit sharing plan through December 31, 1998, and continued accrual of pension benefits through December 31, 1998. Pursuant to this agreement, Utica Boilers made contributions to plaintiffs' Plan accounts at the 7% rate.
Although there is no "Enviromaster profit sharing plan," it is undisputed that this was a reference to the Utica Boilers, Inc. Profit Sharing Plan. (Lauchert Aff. Exh. D (Letter dated September 28, 1999, from John Lauchert to Gary F. Brockett).)
In March 1998, Utica Boilers changed its name to The Utica Companies, Inc. ("Utica Companies"). In June 1999, Utica Companies was merged into Dunkirk Radiator Corporation, and the surviving company was renamed ECR International, Inc. ("ECR"). ECR subsequently "reversed" the contributions to plaintiffs' Plan accounts, withdrawing the funds previously deposited and refusing to make additional deposits. A series of correspondence ensued between the two sides.
John J. Lauchert ("Lauchert") is the Vice President — Finance of ECR. He is the person appointed by the Plan administrator to respond to benefit claims under the Plan. By letters dated July 13, 1999, and August 11, 1999, Brockett advised Lauchert that he believed that the contributions made to his account under the Plan had not been correctly calculated and that he was entitled to additional contributions. (Lauchert Aff. ¶ 4.) At or about this time, Crawford also raised questions concerning Plan contributions made on her behalf. By separate letters dated September 9, 1999, Lauchert responded to the issues raised by both plaintiffs.
Lauchert's letter to Brockett denied his request to be compensated at the "Executive Management Employee" level, relying on 1993 Board minutes to interpret the meaning of that term. (Lauchert Aff. Exh. A.) The letter noted that
At that meeting, you [Brockett] were named President of [Enviromaster]. The minutes of that meeting reflect your appointment as President. The Board approval of the amended Plan is included in the minutes as the item immediately following your appointment as President. . . . It is clear that the Board did not include you in the categories described as "Class A" or "Executive Management Employee" and "Class B" or "Senior Management Employee." The Board was obviously aware of your status as President of [Enviromaster], nevertheless, decided that you were only entitled to a contribution at the 7% rate applicable to all other eligible employees included in "Class C." Contributions were made for you for each of the years 1993 through 1997 at the 7% rate. Accordingly, no further contributions are due you for the years 1993 through 1997.
As to contributions due for 1998, Lauchert noted that the Plan provided that "[t]he Employer will not allocate Employer related contributions to Employees who terminate during a Plan year, unless required to satisfy the requirements of Code Section 401(a)(26) and 401(b)." Because Brockett had resigned on November 6, 1998, he became a terminated employee during plan year 1998 and was, according to Lauchert, not entitled to any contribution for that plan year. The letter concluded by referring Brockett to page 15 of the Summary Plan Description ("SPD") for the requirements to appeal the denial of his claim under the Plan.
The referenced claims procedures were actually found on page 13 of the SPD.
Lauchert's letter to Crawford addressed her questions concerning her contribution allocation status for the 1998 plan year. (Lauchert Aff. Exh. B.) Just as with Brockett, Lauchert indicated that it was his position that she was not entitled to any allocation for the 1998 plan year because she had terminated her employment during 1998. He also referred Crawford to page 15 of the SPD for the procedures to follow in appealing the denial of her claim.
Brockett responded to Lauchert's letter by facsimile on September 13, 1999, stating:
I received your letter concerning my profit sharing issues. I have included a copy of my Nov. 6, 1998 `Resignation' and circled the paragraph relating to profit sharing which clearly states "continued participation" . . . Please explain.
(Lauchert Aff. Exh. C.) The paragraph circled by Brockett provided for "[c]ontinued participation in the [Enviromaster] profit sharing plan through December 31, 1998, with the right to elect the method of distribution to me of said funds on or before December 31, 1998; [and] [c]ontinued accrual of pension benefits through December 31, 1998."
Lauchert responded to Brockett's facsimile by letter dated September 28, 1999. (Lauchert Aff. Exh. D.) Regarding Brockett's inquiry concerning his "continued participation" in the Plan, Lauchert stated that the resignation agreement "simply recited your rights under the terms of the Plan, which are the same as the rights of any other participant who would have terminated employment in 1998" and that Brockett's "continued participation in the Plan was without any right to receive an allocation of contributions made during or for plan year 1998." Lauchert again referred Brocket to page 15 of the SPD for the procedures to follow in appealing his claim.
Following Lauchert's denials of plaintiffs' claims, plaintiffs' attorneys wrote a letter to Lauchert, dated November 5, 1999, and reiterating plaintiffs' claims for benefits and requesting payment in accordance with those claims. (Lauchert Aff. Exh. E.) Lauchert responded on December 2, 1999, reiterating his basis for the denial of plaintiffs' claims. (Lauchert Aff. Exh. F.) By letter dated January 3, 2000, plaintiffs' attorney Nicholas A. Scarfone set forth the various bases upon which ECR might be liable to plaintiffs for damages, made a demand for the monies due to plaintiffs, and urged "ECR to reconsider its position and to honor the demands for monies due to Mr. Brockett and Ms. Crawford" in order to avoid "needless and protracted litigation." (Lauchert Aff. Exh. G.) This request was denied in a letter from defendants' attorney. (Lauchert Aff. Exh. H.) Plaintiffs made no other efforts to seek review of Lauchert's denial prior to the commencement of this lawsuit.
III. STANDARD OF REVIEW
A. Summary Judgment
A moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The ultimate inquiry is whether a reasonable jury could find for the nonmoving party based on the evidence presented, the legitimate inferences that could be drawn from that evidence in favor of the nonmoving party, and the applicable burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). In determining a motion for summary judgment, all inferences to be drawn from the facts contained in the exhibits and depositions "must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Hawkins v. Steingut, 829 F.2d 317, 319 (2d Cir. 1987). Nevertheless, "the litigant opposing summary judgment `may not rest upon mere conclusory allegations or denials' as a vehicle for obtaining a trial." Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir. 1980) (quoting SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978)).
IV. DISCUSSION
Plaintiffs' complaint raises issues relating to two distinct claims for benefits. These are: (1) plaintiffs' claims for benefits contributions from 1993 to 1997 at the higher Plan rates; and (2) plaintiffs' claims for benefits contributions in 1998 based on the language of their severance agreements. Each side raises various arguments regarding these claims, and the arguments of each will be discussed below as they relate to each type of claim.
In addition, Crawford asserts a claim for additional bonus compensation pursuant to Article 6 of the New York Labor Law. Defendants correctly note that such a claim is not viable where, as here, there was no written bonus plan establishing a guaranteed payment to the plaintiff, and where the bonus, if any, would be based on the financial results of the employer and not on the personal productivity of the employee. See Truelove v. Northeast Capital Advisory, Inc., 95 N.Y.2d 220, 224 (2000). But cf. Fiorenti v. Central Emergency Physicians P.L.L.C., 187 Misc.2d 805, 808 (N.Y.Sup.Ct. 2001). Accordingly, this claim must be dismissed.
A. Exhaustion of Administrative Remedies
In addition to the arguments relating to each type of claim, defendants argue, as a threshold matter, that plaintiffs' claims must be dismissed because they failed to exhaust their administrative remedies under the Plan. Defendants contend that the plaintiffs were afforded numerous opportunities to pursue their administrative remedies under the Plan, but declined to do so. Plaintiffs assert that they did pursue their administrative remedies, and also that exhaustion should be excused as futile because the appeal would be handled by the same person who was responsible for the denial. They also argue that appeal was permissive under the Plan, and not mandatory as the defendants claim. The Plan provides, in relevant part, that :
If the Employer denies your claim, you may, within sixty days after receiving the denial, submit a written request asking the Employer to review your claim for benefits. Any such request should be accompanied by documents or records in support of your appeal.
As described above, the plaintiffs submitted several written requests that Lauchert reconsider his denial of their claims. Plaintiffs' final request, in the January 3, 2000, letter of Nicholas A. Scarfone, specifically requested that "ECR reconsider its position and honor the demands for monies due to Mr. Brockett and Ms. Crawford." In light of the extensive correspondence between the parties in this case, it is held that this request satisfied plaintiffs' duty to exhaust their remedies under the Plan.
B. Claims For Contributions at Higher Rates From 1993-1997
Defendants argue that they are entitled to summary judgment regarding plaintiffs' ERISA claims for benefits from 1993 to 1997 because the Plan administrator acted reasonably in interpreting the phrases "Executive Management Employee" and "Senior Management Employee" in conformity with the classifications adopted by the Board in September 1993. Because a determination of this issue will be determinative of many of the arguments raised by each side, it is an appropriate start to the analysis of plaintiffs' claims.
Fiduciaries are required to administer an ERISA plan in accordance with plan documents. See 29 U.S.C. § 1104(a)(1)(D); O'Neil v. Retirement Plan for Salaried Employees of RKO Gen., 37 F.3d 55, 61 (2d Cir. 1994). "[A]s a general matter, anambiguous language in an ERISA plan must be interpreted and enforced in accordance with its plain meaning." Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 149 (2d Cir. 1999). "Language is ambiguous when it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire . . . agreement." O'Neil, 37 F.3d at 59 (internal quotation marks and citations omitted). "Whether contract language is ambiguous is a question of law that is resolved by reference to the contract alone." Id. at 58-59 (internal quotation marks and citations omitted).
If a plan is determined to be ambiguous, a district court must accord deference to the denial of benefits by a fiduciary where the plan document itself grants the fiduciary discretion in applying and interpreting the plan. See Rombach v. Nestle, 211 F.3d 190, 194 (2d Cir. 2000). A court may only overturn a fiduciary's denial of benefits under such a plan if the fiduciary has acted arbitrarily or capriciously in construing its terms. See Rombach, 211 F.3d at 194; Fay v. Oxford Health Plan, 287 F.3d 96, 103-04 (2d Cir. 2002).
In this case, the parties agree that the Plan administrator must administer the Plan in accordance with Plan documents, and that the Plan documents are unambiguous. However, they disagree strongly over exactly which documents constitute "Plan documents," and over the definition of the terms "Executive Management Employee" and "Senior Management Employee." Plaintiffs contend that the "Plan documents" consist of the Plan as adopted in 1994 and any subsequent amendments, and that the terms "Executive Management" and "Senior Management" have commonly-accepted meanings. Because the 1993 Board minutes did not constitute Plan documents, plaintiffs argue that the Plan administrator was obligated to apply these terms in accordance with their ordinary meanings. Plaintiffs argue that because the Plan administrator did not have discretion to interpret these terms, the determination that they were not entitled to contributions at the higher rates is subject to de novo review.
Defendants contend that the Plan administrator correctly interpreted these terms to correspond to the classifications identified by the Board in its September 1993 minutes adopting the Plan. Defendants assert that the Board minutes constitute a "Plan document" and that the Plan administrator acted in accordance with the unambiguous language of the Plan. Alternatively, the defendants argue that the Plan administrator reasonably interpreted the disputed terms to comply with the classifications established by the Board at its September 1993 meeting.
The Plan is ambiguous as to the terms "Executive Management Employee" and "Senior Management Employee." Although the terms "Executive Management" and "Senior Management" do, in some generality, describe generally-accepted employee classifications, these terms are not so clear as to be incapable of more than one meaning — particularly at the fringes of each classification. As such, plaintiffs are not correct that the Plan is unambiguous. Similarly, the defendants are incorrect in their assertion that the Plan is unambiguous when considered in light of the 1993 Board minutes. In the 1993 Board minutes, the Board adopted classifications with different titles than those adopted in the final version of the Plan. As such, it cannot be said that the Board minutes are necessarily conclusive as to the meaning of "Executive Management" and "Senior Management."
While it is clear that Brockett, as the President of Enviromaster, would constitute an "Executive Management Employee" under any generally-accepted definition of that term and that, in the absence of the 1993 Board minutes, it would have been arbitrary and capricious for the Plan administrator to construe that term so as to exclude him, there are other high-level positions within a company that could not be classified solely on the basis of the plain language of the plan.
Because the Plan is ambiguous, the benefits determination of the Plan administrator is subject to arbitrary and capricious review. See Rombach, 211 F.3d at 194. In this case, the Plan administrator's reliance on the 1993 minutes to determine the scope of the undefined terms "Executive Management Employee" and "Senior Management Employee" was neither arbitrary nor capricious. It was reasonable for the Plan administrator to rely upon the minutes of the Board meeting at which the Plan was adopted in construing the Plan which was result of that meeting. As such, it is held that plaintiffs have failed to raise an issue of fact regarding their denial of benefits for 1993-1997.
Plaintiffs rely heavily upon the Second Circuit decision in Aramony; however, that case is readily distinguished from the case at bar. In Aramony, the Board of Directors of the United Way considered a draft benefits plan which contained a "felony forfeiture" provision. The final version of the plan as actually adopted did not contain such a provision. When the plaintiff was convicted of embezzling funds from the United Way, the defendants sought to deny him his benefits under the plan on the basis of the omitted felony forfeiture provision. The Second Circuit affirmed the district court's finding that the Board had not intended to bind itself to the terms of the draft plan because "the Board intended only to approve the general concept of a [benefits plan] while leaving the relevant details to be worked out" later. Aramony, 191 F.3d at 148.
Unlike Aramony, the Plan administrator was not attempting to read an omitted provision into the Plan. Instead, the Plan administrator was relying on the prior action of the Board to define ambiguous Plan terms. The Board in this case unambiguously acted to adopt the Plan at the 1993 meeting, and expressly adopted the relevant details concerning who would occupy the various classes of employees under the Plan. (Brand Aff. Exh. E.) By expressly adopting the three classifications, and by designating the employees to fill those classifications by name, the Board acted in a manner upon which the Plan administrator could reasonably rely in interpreting the terms of the Plan. As such, it is held that the decision of the Plan administrator was neither arbitrary nor capricious, and it is entitled to deference in this decision.
C. Claims for Benefits Contributions in 1998
Plaintiffs each assert a claim for benefits for plan year 1998, based upon the representations contained in the severance agreements between Enviromaster and each of them. These claims are based alternatively upon alleged violations of ERISA and state law. See Plaintiffs' Memorandum (A) Opposing Defendants' Motion for Summary Judgment; and (B) Further Supporting Plaintiffs' Motion for Partial Summary Judgment on ERISA Claims at 13 (hereinafter, "Pl. Opp. at __").
1. ERISA Preemption
Defendants argue that plaintiffs' state law claims are preempted by ERISA. In order to determine whether or not these claims are preempted, it is necessary to determine whether or not the severance agreement constituted an "employee benefit plan" within the meaning of ERISA. Tischmann v. ITT/Sheraton Corp., 145 F.3d 561, 565 (2d Cir. 1998). While "the term `employee welfare benefit plan' has been held to apply to most, but not all, employer undertakings or obligations to pay severance benefits," a severance plan will fall within the purview of ERISA "only where such an undertaking or obligation requires the creation of an ongoing administrative program." Schonholz v. Long Island Jewish Medical Center, 87 F.3d 72, 75 (2d Cir. 1996).
In determining whether a particular promise to pay severance benefits constituted an "employee benefits plan" within the meaning of ERISA, courts consider the following factors: (1) "whether the employer's undertaking or obligation requires managerial discretion in its administration"; (2) "whether a reasonable employee would perceive an ongoing commitment by the employer to provide employee benefits"; and (3) "whether the employer was required to analyze the circumstances of each employee's termination separately in light of certain criteria." Tischmann, 145 F.3d at 566 (quoting Schonholz, 87 F.3d at 76). While these factors are not necessarily exclusive, see id. (citing Simas v. Quaker Fabric Corp., 6 F.3d 849, 854 (1st Cir. 1993)), they do provide an appropriate framework for the analysis of the severance agreements in this case.
With regard to the first factor, because the severance agreements called for continued participation in the existing Plan, it required as much "managerial discretion" as the Plan itself required. Unlike cases where the severance agreement required the employer to do "little more than write a check," see id. at 565 (quoting Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (1987)), the severance agreements in this case required the employer to fund and manage its Plan for the benefit of the plaintiffs through December 31, 1998.
As to the second factor, plaintiffs could reasonably perceive an ongoing commitment by defendants to provide employee benefits based on the agreement to provide "[c]ontinued participation in the [Enviromaster] profit sharing plan through December 31, 1998."
While the third factor is not directly relevant to the instant case, because each severance agreement was offered solely to plaintiffs on an individual basis, this does not affect the ultimate determination that defendants' severance plan is governed by ERISA. See Tischmann, 145 F.3d at 566 (quoting Schonholz, 87 F.3d at 76). This is particularly true here because the severance plan at issue directly related to the funding of defendants' existing ERISA-governed plan. Accordingly, it is held that the severance agreements at issue are governed by ERISA and plaintiffs' state law claims are, therefore, preempted.
However, the mere finding that plaintiffs' state law estoppel and contract claims are preempted does not end the inquiry in the instant case. The plaintiffs also assert claims under ERISA on the grounds that the severance agreement constituted an amendment of the Plan.
Because the plaintiffs' state law claims have been dismissed and they have failed to allege any basis upon which to hold the Reed defendants liable under ERISA, the complaint must be dismissed as against Earle C. Reed and Tim Reed.
2. Promise To Vest Benefits
Defendants move for summary judgment as to the claim for benefits for plan year 1998 on the ground that the plain language of the Plan precludes such benefits, and because the Plan administrator's denial was not arbitrary and capricious. (Def. Opp. at 9 n. 7.)
Defendants argue that the Plan administrator reasonably interpreted the Plan as providing for no contribution to employees who terminated their employment during a Plan year, and that the Plan administrator reasonably reconciled the apparent "promise" to pay benefits for plan year 1998 with the Plan language prohibiting such a payment. Plaintiffs claim that the severance agreement constituted an agreement to vest benefits that is enforceable under ERISA. Plaintiffs are correct. The agreement to provide "[c]ontinued participation in the [Enviromaster] profit sharing plan through December 31, 1998," did constitute an unambiguous promise to vest plaintiffs' right to such benefits, notwithstanding the Plan administrator's efforts to reconcile the severance agreements with the terms of the Plan.
As the Second Circuit has recently noted:
ERISA does not create any substantive entitlement to employer-provided health benefits or any other kind of welfare benefits. Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans. [I]f a [plan] document unambiguously indicates whether retiree . . . benefits are vested, the unambiguous language should be enforced. Thus, even though [an employer] is generally free to modify its life insurance plan, if [it] promised vested benefits, those benefits will be enforced.
Devlin v. Empire Blue Cross and Blue Shield, 274 F.3d 76, 82 (2d Cir. 2001) (internal citation and quotation marks omitted). Moreover, plaintiffs are required to only identify "specific written language that is reasonably susceptible to interpretation as a promise" in order to create an issue of fact that precludes summary judgment for the defendants. Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 134 (2d Cir. 1999). In this case, it is clear that the language of the severance agreement is more than "reasonably susceptible to interpretation as a promise" to vest the plaintiffs with benefits for plan year 1998.
Defendants object to consideration of the severance agreements on the grounds that they do not constitute "plan documents" within the meaning of ERISA, and argue that the plain language of the Plan, which precludes the payment of benefits to employees who terminate within a plan year, must control. This argument is rejected. As the Second Circuit has observed, "any agreement to vest [plaintiffs'] benefits would only have to be memorialized at the same level of formality that [the employer] chose in promulgating the Severance Plan in the first place." Schonholz, 87 F.3d at 78. Because the promise to vest plaintiffs' benefits for plan year 1998 was contained in the severance agreement itself, it is held that the severance agreement does constitute an enforceable promise to pay benefits under ERISA. However, because the Plan administrator's determination of the plaintiffs' contribution rates was not arbitrary and capricious, they are only entitled to be compensated at the rate for "All Other Eligible Employees" set forth in the Plan.
Defendants rely on Moore v. Metropolitan Life Ins. Co., 856 F.2d 488 (2d Cir. 1988), for the proposition that informal correspondence from an employer is insufficient to amend an employee benefits plan. (Def. Mem. at 16-17.) In Moore, the plaintiffs contended that unilateral communications from the employer to its employees which described its ERISA plan as providing "lifetime" benefits "at no cost" constituted an amendment to the plan. Id. at 489. The reasoning of Moore is simply not controlling where, as here, the issue is the legal effect of a jointly executed agreement between the parties.
3. Promissory Estoppel
Even assuming that the severance agreements did not amend the Plan, which they do, plaintiffs would have a viable promissory estoppel claim under ERISA. The Second Circuit has held that estoppel principles can apply to ERISA cases in "extraordinary circumstances." See Schonholz, 87 F.3d at 78 (citing Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993)). Such circumstances are present here because the plaintiffs resigned based on the promise to vest their benefits, the benefits were actually transferred to their accounts, but were subsequently withdrawn by the new owners of Utica Boilers.
The elements that a plaintiff must establish to prevail on such a claim are: (1) a promise; (2) reliance on the promise; (3) injury caused by the reliance; and (4) an injustice if the promise is not enforced. Id. at 79. Though the defendants largely address plaintiffs' estoppel claims in the discussion of ERISA preemption of state law, they also appear to challenge the existence of the third element. Defendants seem to argue that plaintiffs have failed to allege any injury based on the promises of Earle Reed and Tim Reed to pay benefits pursuant to the severance agreements because both plaintiffs admit that they would have been fired whether or not they chose to sign their resignation letters. This argument is misplaced. The proffered severance agreement clearly offered benefits to both sides, and the plaintiffs' acceptance of the offer to resign clearly was based upon the representation that they would receive the benefits contained in the severance agreement. See Schonholz v. Long Island Jewish Medical Ctr., 87 F.3d 72, 79-80 (2d Cir. 1996). In Schonholz, the Second Circuit held that the plaintiff had established the reliance element of her promissory estoppel claim because,
[i]f [the employer] had not transmitted the December 18 letter [establishing a severance plan], Schonholz might never have submitted her resignation. [The employer] then would have had to choose between firing Schonholz and keeping her on for an undetermined period. Each option presumably entailed disadvantages to [the employer] because [the employer] chose neither. . . . [B]y agreeing to leave amicably, Schonholz conferred a benefit on [the employer], one that may be quantifiable.
Id.
Just as in Schonholz, the plaintiffs forfeited the power to withhold their consent to the termination of their employment in reliance on the fact that "severance benefits were being offered to [them] in exchange." Id. at 80. Accordingly, even assuming they had failed to demonstrate their entitlement to partial summary judgment, plaintiffs have alleged a sufficient injury to survive the defendants' motion.
D. Retaliation Claim
In addition to the claims for benefits which are at the heart of the instant litigation, plaintiffs also assert claims pursuant to Section 510 of ERISA, alleging that the plaintiffs were terminated in response to their inquiries concerning their rights under the Plan. Defendants have moved for summary judgment on the grounds that the plaintiffs have failed to adduce any evidence to contradict the legitimate reasons proffered for the termination of plaintiffs' employment — i.e., that they were dissatisfied with the plaintiffs' job performance. Defendants are correct.
Plaintiffs sole "evidence" regarding their claims of retaliation are (1) generalized statements concerning Enviromaster's profitability during their management, and (2) the fact that their terminations occurred subsequent to their inquiries regarding their contribution rates. This showing is insufficient to raise an issue of fact that their termination was in retaliation and not for a legitimate reason. See Dister v. Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir. 1988). Accordingly, plaintiffs' Section 510 claims must be dismissed.
E. Attorneys' Fees
The final issue raised on the instant motions concerns plaintiffs' claims for attorneys' fees pursuant to 29 U.S.C. § 1132(g). Under the law of this Circuit, there are five factors which must be considered on a motion for attorneys' fees: (1) the degree of the offending party's culpability or bad faith; (2) the ability of the offending party to satisfy an award for attorneys' fees; (3) whether an award of attorneys' fees would deter similar conduct from others; (4) the relative merits of the parties' positions; and (5) whether the action conferred a common benefit on a group of pension plan participants. See Chambless v. Masters, Mates Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987). Though the award of attorneys' fees is discretionary, such an award is favored "in the absence of some particular justification for not doing so." Birmingham v. SoGen-Swiss Int'l Corp. Ret. Plan, 718 F.2d 515, 523 (2d Cir. 1983).
Plaintiffs contend that the first four factors support an award of attorneys' fees in this case. They argue that the defendants were culpable in refusing to pay benefits in accordance with the terms of the Plan and the severance agreements. They also argue that Utica Boilers can afford to pay such an award, and that the award will deter similar conduct by other employers. Finally, they argue that the merits of their case support an award, as their interpretation of the Plan was the only reasonable interpretation. Defendants have submitted no argument in opposition.
It is held that the plaintiffs are entitled to an award of attorneys' fees on their successful claim for benefits based on the severance agreements. Utica Boilers was culpable in unilaterally reversing the contributions made to the plaintiffs' accounts. As a large and profitable corporation, it can afford to pay an award of attorneys' fees. An award of attorneys' fees will deter employers from engaging in the type of conduct at issue in this case. In addition, the relative merits of the parties' positions favors the plaintiffs in that their interpretation of the severance agreement was the only reasonable interpretation. Finally, while the instant action did not confer a benefit on a class of plan participants, an award is nevertheless appropriate because "[n]o one of these factors is necessarily decisive." Sikorski v. Sikorski, 930 F. Supp. 804, 813 (E.D.N.Y. 1996).
V. CONCLUSION
Because the Plan administrator's interpretation of the terms "Executive Management Employee" and "Senior Management Employee" was not arbitrary and capricious, defendants are entitled to summary judgment as to plaintiffs' claims for additional benefits for plan years 1993-1997. However, because the plaintiffs have demonstrated that they were entitled to benefits for plan year 1998, their motion for partial summary judgment as to liability must be granted as to their claims for benefits pursuant to the severance agreement.
Therefore, it is hereby
ORDERED that
1. The defendants' motion for summary judgment is GRANTED as to defendants Earle C. Reed and Tim Reed, and the complaint against them is DISMISSED;
2. The summary judgment motion of defendants Utica Boilers, Inc., Enviromaster International Corporation, and the Utica Boilers, Inc. Profit Sharing Plan is GRANTED in part and DENIED in part as set forth below:
a. The defendants' motion is GRANTED as to plaintiffs' state law claims, retaliation claims, and claims for additional benefits for plan years 1993-1997; and
b. The defendants' motion is DENIED as to plaintiffs' ERISA claims for benefits for plan year 1998;
3. Plaintiffs Gary F. Brockett's and Terry L. Crawford's motion for partial summary judgment is GRANTED as to plaintiffs' claim for benefits for plan year 1998, and DENIED as to all other claims; and
4. Plaintiffs' motion for attorneys' fees is GRANTED for work performed on their successful claim for benefits for plan year 1998.
IT IS SO ORDERED.
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