The opinion of the court was delivered by: WILLIAM M. SKRETNY
Defendants move for summary judgment, and plaintiff cross moves for summary judgment, pursuant to Fed. R. Civ. P. 56(b).
In a single count Amended Complaint ("Am. Complaint"), plaintiff seeks payment of pension plan benefits allegedly owed to her, plus attorney's fees and costs.
This Court has jurisdiction based on ERISA, 29 U.S.C. § 1132(e).
Both parties contend that no material issue of fact exists and that each is entitled to judgment as a matter of law. Plaintiff Laura Renda ("Renda") alleges that she is an employee of defendant store Adam, Meldrum & Anderson ("AM&A") as defined by ERISA and by traditional agency principles, and that as such she is entitled to payment of benefits accrued under the Pension Plan covering AM&A employees.
In support of their motion for summary judgment, defendants submit an Affidavit of Robert B. Adam, with exhibits, sworn to on June 28, 1989 ("Adam aff."), an Affidavit of James M. Rollo, with exhibits, sworn to on January 22, 1990 ("Rollo aff."), a Memorandum of Law dated January 25, 1990 ("def. memo"), a Statement of Material Facts dated January 5, 1990 ("def. fact statement"), and a Reply Memorandum of Law dated March 28, 1990 ("def. reply memo").
In support of her cross motion for summary judgment, plaintiff submits Renda's deposition, sworn to June 20, 1989 ("Renda dep."), the Affidavit of Laura Renda, sworn to on March 13, 1990 ("Renda aff."), the Supporting Affidavit of Paul T. Bumbalo, Esq., with exhibits, sworn to on March 13, 1990 ("Bumbalo aff."), a Memorandum of Law, not dated ("pl. memo"), and a Statement of Material Facts, dated March 13, 1990 ("pl. fact statement"). On May 1, 1991, the Hon. Richard A. Arcara, United States District Court Judge for the Western District of New York, transferred the case to this Court. Both parties presented oral argument on August 8, 1991.
In ruling, this Court has considered all the aforementioned submissions by the parties, as well as their oral arguments.
For the reasons articulated below, this Court hereby DENIES defendants' motion for summary judgment, and GRANTS plaintiff's cross motion for summary judgment.
On January 30, 1951, AM&A entered into a "Lease and Agreement" ("lease") with Max Tegler, ("Tegler"), now deceased, to let space to Tegler in the Main Street AM&A store, to be used as a jewelry sales department and repair area. (Adam aff., ex. A). The lease contained various provisions relating to the oversight of the jewelry department and employees working in that department, and provided for a rental fee based on the gross sales of the department. (Adam aff., 1951 lease, P 4).
Receipts from the jewelry department were turned over to the store and credited to the department. (Adam aff., 1951 Lease, P 5; Bumbalo aff., P 3). The lease was amended three times between 1956 and 1986, however most of the relevant provisions of the lease remained the same.
The total lease period ran from January 30, 1951 to January 1, 1986. (Rollo aff., P 4).
In 1955, Renda contacted the AM&A Personnel Department and applied for a position in the jewelry department. (Renda aff., P 2). She was first required to meet with Max Tegler at the AM&A University Plaza Store. (Renda dep., p. 12; Renda aff., P 2). Following this interview, she met with Eugene Schaefer, AM&A's Personnel Manager. She was then instructed to fill out an employment application from the AM&A Personnel Department and to attend an orientation program covering the rules and procedures for employees of AM&A. She was hired to work in the jewelry department on April 26, 1955. (Renda aff., P 2). The jewelry department employees were compensated through the AM&A payroll system from the time that Renda was hired until May 18, 1983, when checks began to be issued from Tegler's account. (Renda aff., PP 6, 7; Exs. D, E). Renda's 1960 Withholding Statement lists AM&A as the employer paying her wage. (Renda aff., Ex. C). Tegler was responsible for preparing the work schedules and computing payroll hours of jewelry department employees, and plaintiff testified that "he was in charge" and "was the boss and we all catered like everybody else would do." (Renda dep., p. 34, lines 11 - 20).
During her time at the jewelry department, Renda was subject to the AM&A dress code in effect at the store, including wearing AM&A name tags. (Renda aff., P 6). During Renda's tenure as an employee, she received various tokens of acknowledgement from AM&A, such as receipt of an AM&A watch on her 25th anniversary, and inclusion of her name in the list of long time employees of AM&A in the Buffalo News, the local newspaper. (Renda aff., P 9). Renda testified that all employee dismissals in the jewelry department were commonly handled "from upstairs," that is, by the AM&A supervisors rather than by Tegler. (Renda dep., p. 77, line 18; Renda aff., P 11).
AM&A gave its leased departments the option of adopting either or both of the AM&A Life and Health Insurance Plans. The option was specifically offered to Tegler as lessee of the jewelry department, who accepted it on behalf of the lease department and the employees working there. (Adam aff., P 8).
On January 1, 1976, AM&A established the AM&A Pension Plan, and distributed a summary plan description to its employees. (Adam aff., P 9). The plan provided that an "associated employer had the option of adopting the plan on behalf of employees working in that associated employer's department." (Rollo aff., Ex. A).
At the time the plan was adopted, Robert Adam, Chairman of the Board and Chief Executive Officer of AM&A, offered Tegler the option of participating in the plan on behalf of his employees, pursuant to § 2.04 of the plan document. (Adam aff., PP 10, 11; Rollo aff., Ex. A). In a conversation with Tegler, Adam alleges that Tegler refused to participate in the plan. (Adam aff., P 12). It is undisputed that Renda never received a summary plan description while employed in the jewelry department, nor was she notified that she was a participant. (def. fact statement, P 6; pl. fact statement, P 6). It is also undisputed that no one else in the jewelry department ever received a summary plan description or any benefits under the plan. (def. memo, pp. 1, 2).
Renda retired from her position on or about January 25, 1986, and thereafter filed this suit on May 8, 1989. (Renda aff., PP 4, 7; Rollo aff., Ex. C). Since then, the AM&A Retirement Committee has reviewed Renda's claim, and has determined that she is not entitled to any benefits under the plan. (Rollo aff., Ex. C).
Statements made during oral argument as well as the absence of any supporting or opposing papers from either plaintiff or defendant concerning the issue of age discrimination indicate that plaintiff's age discrimination claim set out in the Amended Complaint (Am. Complaint, P VI) has been withdrawn. Therefore, this Court deems that claim withdrawn.
Plaintiff argues that her tenure with the lease department of AM&A was sufficient to qualify her for participation in and eligibility under the plan, and that she has not received either pension benefits or insurance conversion rights from the plan. (Am. Complaint, PP 6 - 8). She asserts that ERISA §§ 3(5) and 3(14)(E)(ii), 29 U.S.C. §§ 1002(5), and 1002(14)(E)(ii), respectively, which define certain employment relationship terms, include within their scope the relationship between plaintiff and defendant AM&A. (pl. memo, p. 6). Additionally, plaintiff seeks to demonstrate that AM&A possessed the powers of selection and engagement of plaintiff, control over wages, dismissal, and the power to control plaintiff's conduct sufficient to warrant a finding that AM&A was her actual employer under the common law definition of the term. (pl. memo, pp. 4-6). As a result, she asserts that, during the time in which she worked for the jewelry department located in AM&A, she was an employee of AM&A and as such should have been allowed to participate in the plan, and that denial of participation was the result of a breach of a fiduciary duty owed to her on the part of the defendants. (Am. Complaint, PP VI, XI; pl. memo, pp. 4, 8).
Plaintiff also refers to sections of the Internal Revenue Code ("IRC"), 26 U.S.C. § 414(n)(1) (incorrectly cited by plaintiff as "§ § 414(V)(2)"), which describes benefit contributions for leased employees, and § 414(n)(2) (incorrectly cited by plaintiff as "§ 414(N)(2)"), which defines "leased employee" for purposes of the section, to conclude that employees of the jewelry department are employees of AM&A. These provisions are alleged to provide further support for the proposition that the services performed by her for the jewelry department entitle her to be considered an employee of AM&A. (pl. memo, pp. 9-10).
Plaintiff supplements her position by referring to IRC 26 U.S.C. § 410(b) and accompanying Reg. § 1.410(b)-4(c)(3), which describe minimum coverage and nondiscrimination requirements for qualified pension plans. The substance of the argument is that since AM&A and the plan have not articulated a business reason for their exclusion of leased employees from the plan, it may be inferred that the motive is to reduce costs to AM&A of providing pension benefits. This motive is not a valid business reason under Reg. § 1.410(b)(4)(c)(3)(iii)(A), according to plaintiff, causing defendant's plan to fail the non-discriminatory classification test set forth in that section. (pl. memo, pp 8,9).
Finally, plaintiff asserts that Tegler's alleged communication with Adam in which he rejected inclusion of jewelry department employees into the plan constitutes uncorroborated hearsay and as such is non-admissible. (pl. memo, pp. 7,8).
Defendants contend that Renda was not an employee of AM&A but rather of Tegler, the operator and lessee of the jewelry department, and as such is not entitled to any benefits under the plan. (def. memo, pp. 4, 5). They assert that Tegler had ultimate control over Renda's employment, and that AM&A's right to terminate her as an employee merely amounted to "the right of any customer to insist that he not be provided services by any objectionable employee." (def. memo, p. 2). Defendants argue that the lease arrangement of calculating rent based on gross sales in no way disturbs this concept as it is typical of lease practice. (Id.).
In the alternative, defendants point out that even if Renda were determined to be a common law employee of AM&A, or a joint employee of both AM&A and Tegler, § 2.01 of the plan states that an associated employer, like Tegler, must choose to include employees of his department in the plan in order for those individuals to participate and become eligible for plan benefits; otherwise they are specifically excluded. (Rollo aff., Ex.A; Plan § 2.04; def. memo, pp. 3 - 5). Thus, defendants conclude that since Tegler rejected the plan for his employees, they were excluded from the plan. (def. memo, p. 5).
Defendants urge this Court to conclude that the anti-discrimination provisions contained in § 410(b) and accompanying Treasury Regulations are useful only in determining whether a minimum percentage of employees is covered under a qualified plan. They state that these regulations do not require that leased employees be included in the plan, but only that they be counted for the purposes of establishing correct percentage figures. Their assertion, in essence, is that the regulations merely prohibit an employer from using a lease organization to hide employees in a separate entity and thereby avoid counting them for purposes of non-discrimination classification requirements.
In any event, they insist that those provisions do not require that a leased employee be covered under a plan, regardless of whether that individual is ultimately determined to be an employee of the lessor. The minimum coverage requirements, they insist, are inapplicable. (Id.).
Defendants also argue that the decision of the AM&A Retirement Committee rejecting Renda's claim for benefits should be upheld since it was not arbitrary and capricious or ...