Opinion
Civil Action No. 3:98-CV-3015-C.
October 18, 2000.
MEMORANDUM ORDER
Before the court is the motion of defendant Excel Telecommunications Corporation ("Excel") for summary judgment. For the reasons discussed below, Excel's motion is granted.
I. BACKGROUND
In November 1994, Kenneth C. Long ("Long") began working for Excel as the Director of Credit and Collections, and his compensation package included a retirement plan, stock options, and access to an employee stock ownership plan. Plaintiff's Second Amended Complaint ("Complaint") at 2. On December 20, 1996, Long was notified by Excel officers that several allegations had been made against him and that an investigation of those allegations had begun. Id. The officers advised Long to resign and presented him with papers that, if signed, would have waived his right to pursue legal action against Excel or to claim several of the employee benefits mentioned above. Id. Long refused to sign the papers and as a result, he contends, was terminated. Id. at 2-3. The termination came just four months before twenty percent of his stock options were to vest and shortly before Excel's sale of its assets and liabilities to Teleglobe Corporation — an event that would have vested the rest of his options. Id. at 3. Long now maintains that he — along with several other Excel employees — were terminated so that they would be unable to exercise their stock options and therefore unable to dilute the value of the outstanding shares already held by the officers. Id. at 4.
The only claim remaining in this litigation is that Excel terminated Long for the purpose of depriving him of benefits under Excel's Stock Option Plan ("SOP"), Employee Stock Ownership Plan ("ESOP"), and other employee benefit plans, in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1140, Section 510. Excel has moved for summary judgment, arguing that the Stock Option Plan is not an ERISA plan and that even if it is, Long has adduced no evidence of Excel's specific intent to violate ERISA.
II. ANALYSIS A. Evidentiary Burdens
Summary judgment is proper when the pleadings and evidence on file show that no genuine issue exists as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). The movant for summary judgment makes such a showing by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues to support the nonmovant's case. Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Once the movant makes this showing, the nonmovant cannot survive a motion for summary judgment by resting on the allegations in his pleadings. Isquith for and on behalf of Isquith v. Middle South Utilities, Inc., 847 F.2d 186, 199 (5th Cir.), cert. denied, 488 U.S. 926 (1988); see also Celotex, 477 U.S. at 324. Rather, the nonmovant must direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. Celotex, 477 U.S. at 324. To carry this burden, the nonmovant must present evidence sufficient to support a resolution of the factual issues in his favor. Anderson, 477 U.S. at 257. Summary judgment is proper if, after adequate time for discovery, the affidavits, depositions, answers, and admissions on file fail to show the existence of an element essential to the nonmovant's case and as to which he will bear the burden of proof at trial. Celotex, 477 U.S. at 322-23.
Long alleges that Excel discharged him in order to prevent his rights in the SOP and ESOP from vesting. ERISA provides that "[i]t shall be unlawful for any person to discharge . . . a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. . . ." 29 U.S.C. § 1140. Under Section 510 of ERISA, Long must first establish a prima facie case that Excel discharged him with a specific discriminatory intent to prevent attainment of benefits to which he would have become entitled under the plan. 29 U.S.C.A. § 1140; Stafford v. True Temper Sports, 123 F.3d 291, 295 (5th Cir. 1997). "The plaintiff in such an ERISA employment discrimination test need not prove that the discriminatory reason was the only reason for discharge, but he must show that the loss of benefits was more than an incidental loss from his discharge, and this inference of discrimination can be proven by circumstantial evidence." Stafford, 123 F.3d at 295. If Long can establish his prima facie case of discrimination, then Excel must articulate a non-discriminatory reason for its actions. Id. If Excel succeeds in doing so, then the burden shifts back to Long to demonstrate that Excel's explanation is nothing more than pretext and that the real purpose he was fired was to deny him benefits governed by ERISA. Id.
B. Are Excel's SOP and ESOP ERISA Plans?
Because an ERISA "plan" is necessary before ERISA's provisions apply, this court must first determine whether Excel's SOP and ESOP are in fact ERISA plans. See Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1986). Excel has conceded that its ESOP is an ERISA plan, which is governed by the enforcement provisions of ERISA. Defendant's Reply to Plaintiffs Response to Defendant's Motion for Summary Judgment and Brief in Support ("Defendant's Reply") at 3. Whether the SOP is an ERISA plan is a more difficult question and one that the Fifth Circuit has not specifically addressed. In an analogous case, however, the Fifth Circuit has held that an employee bonus plan giving employees a royalty interest in oil and gas production proceeds was not an ERISA employee benefit plan. Murphy v. Inexco Oil Company, 611 F.2d 570, 572-73 (5th Cir. 1980). Murphy discussed the history of ERISA and noted that Congress, in enacting ERISA, did not intend to "control every aspect of the employer-employee relationship or every promise made to employees." Id. at 574. Rather, "[i]t sought only to deal with those types of plans that had created the problems it sought to remedy." Id. In short, Congress by enacting ERISA, intended to protect employees with many years of service who were losing anticipated retirement benefits because of inadequate vesting provisions, lack of funding, or other problems. Id. Under Murphy, plans that might incidentally result in payment of benefits after retirement, death or disability would only fall under ERISA if they were established or maintained for the express purpose of doing so. Id. at 574-75.
Long contends that executive stock option plans are by definition "top-hat" plans covered by ERISA because they are offered only to high-level employees. Plaintiffs Response to Defendant's Motion for Summary Judgment and Brief ("Plaintiffs Response") at 14. This court is inclined to agree with Excel that Long's argument puts the cart before the horse. See Defendant's Reply at 4. A "top-hat" plan under ERISA is one which "is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly trained employees." In re New Valley Corporation, 89 F.3d 143, 148 (3rd Cir. 1996) (emphasis added), cert. denied, 519 U.S. 1110 (1997). A plan that is restricted to top-level executives does not become an ERISA plan merely by virtue of such restriction. Rather, "`top hat' plans are a subset of the two recognized types of ERISA plans — welfare or pension plans — rather than a third class of `plans.'" Kaelin 4v. Tenneco, Inc., 28 F. Supp.2d 478, 484 (N.D. Ill. 1998).
Long's "persuasive line of Circuit court authority," see Plaintiffs Response at 14, stands only for the unremarkable proposition that when the stated purpose of a plan is to defer compensation to high-level employees, it is a top-hat plan falling under ERISA. See In re New Valley Corporation, 89 F.3d at 146, 148; Kemmerer v. ICI Americas Inc., 70 F.3d 281, 286 (3rd Cir. 1995), cert. denied, 517 U.S. 1209 (1996); Pane v. RCA Corporation, 868 F.2d 631, 637 (3rd Cir. 1989); Barrowclough v. Kidder, Peabody Co., Inc., 752 F.2d 923, 926-27, 930-31 (3rd Cir. 1985); Rockney v. Blohorn, 877 F.2d 637, 639 (8th Cir. 1989); Gallione v. Flaherty, 70 F.3d 724, 725, 727-28 (2d Cir. 1995); Duggan v. Hobbs, 99 F.3d 307, 310-11 (9th Cir. 1996). See also Bigda v. Fischbach Corporation, 898 F. Supp. 1004, 1015 (S.D. N.Y. 1995), aff'd, 101 F.3d 108 (2d Cir. 1996). None of these cases supports Long's contention that a benefit plan becomes an ERISA plan solely by virtue of the fact that participation is restricted to executives. The stated purpose of Excel's SOP is as follows:
Another of Long's purported authorities, Miller v. Eichleay Engineers, Inc., expressly did not reach the question of whether the plan at issue was a top hat plan under ERISA. Miller v. Eichleay Engineers, Inc., 886 F.2d 30, 34 (3rd Cir. 1989).
The purpose of the Plan is to provide a means by which selected Employees of and Consultants to the Company [Excel] and its Affiliates may be given an opportunity to purchase stock of the Company. The Company, by means of the Plan, seeks to retain the services of persons who are now Employees of or Consultants to the Company and its Affiliates, to secure and retain the services of new Employees and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
Excel Communications, Inc. 1995 Stock Option Plan ¶ 1(a), attached as Exhibit B-1 to Defendant's Brief. Nowhere does Excel's Stock Option Plan indicate that its purpose is to defer compensation. In fact, the plan itself indicates that it is intended to operate as an incentive and bonus program. Long's evidence does not dispute that this was the purpose of Excel's SOP. See Affidavit of Kenneth Long ("Long Affidavit") ¶ 3, attached as Exhibit to Plaintiffs Response.
The district courts that have considered the question of whether an SOP is an employee benefit plan under ERISA have uniformly held that it is not. See, e.g., Goodrich v. CML Fiberoptics, Inc., 990 F. Supp. 48, 49-50 (D. Mass. 1998); Johnson v. TCOM Systems, Inc., 1989 WL 517870 (D.D.C. 1989) at *223; Kaelin, 28 F. Supp.2d at 485-86. As Murphy makes clear, a plan must be designed specifically to provide employees with medical, unemployment, disability, death, vacation or other specified benefits or to provide income following retirement in order to come within the purview of ERISA. Murphy, 611 F.2d at 574. Kaelin is particularly instructive on this point. The plaintiff in Kaelin, like Long here, maintained that Tenneco's stock option plan was a top-hat plan falling under ERISA because it existed primarily to provide benefits to a particular group of highly compensated employees. Kaelin, 28 F. Supp.2d at 485-86. Holding that top-hat plans do not constitute a third class of ERISA plans, the court inquired instead whether Tenneco's stock option plan could be considered either an ERISA employee welfare benefit plan or an employee pension benefit plan. Id. at 486. The court quickly rejected the notion that a stock option plan could be an employee welfare benefit plan because stock options are not an enumerated benefit under 29 U.S.C. § 1002 (1). Id. Holding that a stock option plan also was not an employee pension benefit plan, the court noted, "[a]n employer does not create an employee pension benefit plan merely by making payments to employees under a bonus system unless such payments are systematically deferred to the termination of covered employment or beyond, or as to provide retirement income for employees." Id. (internal quotations omitted).
In the instant case, even though there existed a set vesting schedule for the SOP, the plan did not provide for systematic deferral of payments to the termination of employment or beyond, and was not created for the express purpose of providing retirement income. Excel Communications, Inc. 1995 Stock Option Plan, attached as Exhibit B-1 to Defendant's Brief. Accordingly, this court is persuaded that Excel's SOP is not a employee benefit plan, as that term is defined in ERISA. See 29 U.S.C. § 1002 (1), (2), (3). Therefore, ERISA's prohibition against discharge to prevent the attainment of benefits under an employee benefit plan, 29 U.S.C. § 1140, is inapplicable to Long's claim that he was discharged by Excel to deny him such benefits.
Because Excel has conceded that its ESOP is an ERISA plan, the only remaining issue is whether Excel terminated Long for the purpose of depriving him of ESOP benefits in violation of ERISA, Section 510, a question to which the court now turns.
Although Long's complaint also alleges that his termination was for the purpose of preventing him from obtaining benefits under Excel's executive compensation plan and employee benefit plan, Complaint ¶ 4.02, he has adduced no evidence in support of these other claims, and in fact, appears to have abandoned them.
C. Prima Facie Case
Under Section 510, Long must first establish a prima facie case that Excel discharged him to deprive him of benefits under the ESOP. 29 U.S.C.A. § 1140; Stafford, 123 F.3d at 295. To make out a prima facie case, Long must show that Excel had the specific intent to violate ERISA when it terminated him. Unida v. Levi Strauss Company, 986 F.2d 970 (5th Cir. 1993). Long's complaint alleges that he was discharged to prevent his benefits from vesting under Excel's ESOP plan. Complaint ¶ 4.02. However, Long cannot survive Excel's motion for summary judgment merely by resting on the allegations in his pleadings. See Celotex, 477 U.S. at 324; Isquith, 847 F.2d at 199. "[W]hile [Long is] entitled to have reasonable inferences drawn in [his) favor, the inferences to be drawn must be rational and reasonable, not idle, speculative or conjectural." Unida, 986 F.2d at 980 (internal quotations omitted). The summary judgment record contains no evidence of any specific intent on the part of Excel to prevent Long from obtaining ESOP benefits. Long's only evidence on this point is his own affidavit. In his affidavit, Long makes the conclusory statement that "[i]n my opinion . . . one of the actual reason(s) for my termination, if not the sole reason, was the company's desire to prevent me from vesting and excercising [sic] my rights under the 1995 SOP, and to a lesser degree, to prevent further vesting rights in the ESOP." Long Affidavit ¶ 17, attached as Exhibit to Plaintiffs Response. In fact, aside from this lone statement and possibly one other in the unexecuted General Release and Covenant Not to Sue ("the Release"), Long's summary judgment record is entirely devoid of any other mention of the ESOP. There can be no question that this single, conclusory statement is insufficient to withstand Excel's motion for summary judgment. E.g., Douglass v. United Services Automobile Association, 79 F.3d 1415, 1430 (5th Cir. 1996) ( en banc) ("It is more than well-settled that an employee's subjective belief that he suffered an adverse employment action as a result of discrimination, without more, is not enough to survive a summary judgment motion"). Without sufficient evidence to support a finding that Excel had the specific intent to deprive Long of ESOP benefits under ERISA, the court need not address the question of whether Excel's stated reason for terminating Long was pretextual.III. CONCLUSION
The Excel SOP is not a benefit plan falling within the purview of ERISA. With respect to the ESOP, Excel has pointed out that there is no probative evidence to establish that when Long was discharged, Excel acted with specific intent to deprive him of ESOP benefits. Because Long has failed to adduce evidence demonstrating that a material issue of fact exists regarding this element of his claim, and because he will have the burden of proving this element at trial, this lack of evidence is fatal, and all other issues are thereby rendered immaterial. See Celotex, 477 U.S. at 322-23. Accordingly, Excel's motion for summary judgment is GRANTED.
SO ORDERED.