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KORN v. LEVINE BROS. IRON WORKS CORP.

October 26, 1983

SAMUEL KORN, Plaintiff, against LEVINE BROS. IRON WORKS CORP., and VITO A. MANZOLI, MICHAEL LEVINE, LOUIS SIEGEL and ARCHIE LEVINE, individually and as Trustees of the LEVINE BROS. IRON WORKS CORP. EMPLOYEES PENSION PLAN AND TRUST, Defendants.


The opinion of the court was delivered by: DUFFY

KEVIN THOMAS DUFFY, D.J.:

Plaintiff Samuel Korn, brought this suit against the defendants Levine Bros. Iron Works Corporation ("Levine Bros."), Vito A. Manzoli, Michael Levine, Louis Siegel and Archie Levine, individually, and as Trustees of the Levine Bros. Iron Works Corp. Employees Pension Plan Trust (the "Plan") to recover additional pension retirement benefits. I held a bench trial in this matter on December 9th and 10th, 1982. Post-trial memoranda were fully submitted by the parties by December 29, 1982. The following shall constitute my findings of fact and law.

 Samuel Korn began working for Levine Bros. in 1956. Since then Levine Bros. has engaged in structural stell erection. Korn was hired by the owner and president of the company, Archie Levine. Levine owned 100 percent of the stock until 1976 when Vito Manzoli and Michael Levine obtained approximately 5 percent of the stock. Over his first few years Korn was the supervisor in charge of the company's outside fieldwork. He arranged jobs and worker schedules, supervised initial work on projects, and monitored the progress of ongoing jobs. In addition, his duties at times included sales and the estimation of contract prices.

 Effective October 1, 1962, Levine Bros. established a defined pension benefit plan in which plaintiff was a participant. Subsequently, Levine Bros. adopted a completely restated plan to accord with the statutory requirements set forth in the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et. seq. ("ERISA"). The restated plan was effective September 1, 1976. Plaintiff initially retired from Levine Bros. on December 1, 1978. He subsequently was persuaded by Archie Levine to stay on with the company in order to train Archie's nephew. Although he agreed to put off his retirement, Korn also agreed not to participate in the pension plan during his "second" stint at Levine Bros. Accordingly, for the purposes of calculating plaintiff's retirement benefits, his entitlement must be evaluated as of his initial retirement on December 1, 1978. *fn1"

 The 1976 Plan provided in section 3.01 that upon a participant's retirement, he was entitled (subject to a multiplier) to Monthly Retirement Income "equal to 36-1/2 percent of his average Monthly Compensation as computed per Section 3.03 herein." Section 3.03 stated that "[a] Participant's Monthly Retirement Income shall be based on the average of the highest five consecutive years. . . ." Therefore, the determination of Korn's retirement benefits necessitates calculating thirty-six and a half percent of his average monthly income over a specified five-year period. Obviously, this requires a calculation of plaintiff's average monthly income. It is this calculation, however, that is at the heart of the parties' disagreements.

 The basic issue concerns what income is to be included in determining Korn's average monthly compensation. Korn testified that when he was hired, Archie Levine told Korn that no other employee would earn as much as Korn. To ensure this, Korn's wages were tied to the level of the unionized iron workers' pay: when they got a raise, Korn got a raise. Korn received monies from Levine Bros. in two ways; he received weekly payments and he received quarterly payments. Both plaintiff and defendant agree that the weekly amounts are included in Korn's benefit calculations. Levin Bros., however, in determining plaintiff's retirement benefits, excluded the quarterly payments. *fn2" It is this exclusion that forms the basis of plaintiff's suit.

 I. Exhaustion of Administrative Remedies

 A preliminary issue is whether plaintiff was required and failed to make a demand upon the "Administrative Committee" designated to handle disputed claims. Defendants assert that this failure to exhaust administrative remedies requires dismissal of plaintiff's action. I disagree.

 I note at the outset that nowhere does the Plan state that the demand on the Administrative Committee must be in writing. Section 9.12, though ambigous, provides the opposite implication: "All disputed claims for benefits under the Plan shall be submitted to, and decided in writing by, one member of the Administrative Committee designated in writing by the Committee's Chairman." Furthermore, the Summary Plan Description makes the submission of even a written demand appear to be a matter of choice. Paragraph XII states that "if you become aware of a problem with your benefits you may file a written claim with the Administrative Committee." (Emphasis Added). In any case, even assuming a demand were required, see Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980), plaintiff made such a demand both written and oral upon the Administrative Committee.

 Korn stated that at least as early as December 1980, he spoke to people who were on either the Administrative Committee or the Board of Trustees about an underpayment of his retirement benefits.According to Korn's virtually uncontradicted and certainly credible testimony, at this juncture and several times over the subsequent months, Korn was told that their accountants were or would check his benefit calculations. Even Louis Siegel, whose testimony often was less than consistent, admitted that Korn expressed his belief that the benefits were miscalculated at various informal meetings with the trustees during 1981. Finally, frustrated by the evasive answers and constant delay, plaintiff sought the assistance of an attorney. His attorneys, however, met with no better success. Nonetheless, the letters sent by his attorney were sufficient written indications of Korn's desire for the trustees to recompute his benefits, especially given the contemporaneous oral requests for the same relief. In addition, Levine Bros. is a small, closely-held company. To accept defendant's argument that plaintiff's request for a benefits' recomputation was not technically made would be to ignore the practical and economic realities of this small corporation's bureaucratic structure. In short, the pension plan trustees were aware of plaintiff's dispute.

 In addition, the details of plaintiff's attempt to obtain relief from the company demonstrates another important point. Demand would have been futile. Even had plaintiff not made an appropriate demand upon the Administrative Committee, it would have been excusable because plaintiff would have received no redress. See Vander Malle v. Ambach, 673 F.2d 49, 52 (2d Cir. 1982); Baxter v. Claytor, 209 U.S. App. D.C. 188, 652 F.2d 181, 185 (D.C.Cir. 1981). Therefore, the futility of such a demand is another reason for rejecting defendants' argument. Accordingly, I turn to the merits.

 II. Compensation Included in Plaintiff's Benefit Calculation

 Section 1.11 of the Plan defines "Monthly Compensation" as "one-twelfth of the total annual wage or salary paid to an Employee, while a Participante in this Plan, including bonuses, overtime, and commissions." Defendants argue first that the quarterly payments were excludable "profit-sharing." I conclude, however, that the payments to Korn were at least bonuses, and thus should be included in computing plaintiff's Monthly Compensation. Defendant's characterization of the payments as excludable "profit-sharing" was arbitrary and capricious. See Valle v. Joint Plumbing Industry Board, 623 F.2d 196, 203 (2d Cir. 1980). The reasons for this conclusion are many.

 First, the circumstances surrounding the origin of the label "profit-sharing" are quite suspicious. Michael Levine, present Levine Bros. president, admitted that he first heard the term "profit-sharing" in September 1981, the same month Korn retired permanently. Vito Manzoli, the company secretary and a trustee also admitted he had not heard the term profit-sharing used previously. On September 17, 1981, plaintiff, his attorney, and the trustees met, discussed their respective understanding of plaintiff's benefit entitlement, and were unable to reach any agreement or compromise. This also was shortly after plaintiff's attorneys had demanded copies ...


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