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January 25, 1994


The opinion of the court was delivered by: LESLIE G. FOSCHIO



 This matter was referred to the undersigned by the Hon. Richard J. Arcara on December 17, 1991 for report and recommendation on any dispositive motions. The matter is presently before the court on Defendant's motion for summary judgment, filed November 20, 1992, and Plaintiff's cross-motion for summary judgment on Defendant's counterclaims, filed February 4, 1993.


 Plaintiff, Charles E. Hastie, initially filed this action in New York State Supreme Court, Erie County, on August 29, 1988. Defendant, J.C. Penney ("Penney") removed the action to this court on October 3, 1988. Hastie filed an amended complaint on June 16, 1989, and Penney filed an amended answer with counterclaims on June 30, 1989. Hastie has asserted two claims: a claim for unlawful age discrimination under New York State Executive Law § 296(1)(a), and a second claim under Section 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140. Penney has asserted three counterclaims for fraudulent misrepresentation, breach of fiduciary duty, and unjust enrichment.

 Following extensive discovery, Penney filed a motion for summary judgment on Hastie's causes of action, and for partial summary judgment on liability on Penney's counterclaims on November 20, 1992. In response, on February 4, 1993, Hastie filed a motion for summary judgment on Penney's counterclaims. Oral argument on the matter was held on March 25, 1993.

 For the reasons as set forth below, Defendant's motion for summary judgment on the amended complaint should be DENIED. Defendant's motion for partial summary judgment on Defendant's counterclaims should be DENIED. Plaintiff's motion for summary judgment on Defendant's counterclaims should be DENIED as untimely, however, the court sua sponte recommends that Defendant's counterclaims be dismissed.


 Hastie began his employment with Penney, a large retailer of consumer merchandise, as a sales trainee in 1954. (TH. 109). *fn1" In February, 1955, Hastie was promoted to the position of Department Manager, Men's Division, at Penney's Germantown, Pennsylvania store. (TH. 110). Eventually, Hastie was promoted to Floor Manager at that store. In 1960, Hastie took a position as an Assistant Store Manager/General Merchandise Manager at Penney's store in Richmond, Virginia. (TH. 113). Hastie was then promoted, in 1962, to Sales and Merchandise Manager of a "B" Group, responsible for supervising the types of merchandise offered at three stores. (TH. 124). He was subsequently promoted, in 1965, to Merchandise manager of an "A" Group, responsible for supervising the types of merchandise offered for sale at approximately twenty stores. (TH. 126). In 1967, Hastie became Sales and Merchandise Manager of the "A" Group, (TH. 127), and, in 1968, Hastie was promoted to Store Manager at Penney's Germantown, Pennsylvania store. (TH. 128). In 1971, Hastie became the Store Manager at a larger Penney's store located in Lakewood, New York, (TH. 138-139), and, in 1974, Hastie was promoted to Store Manager at Penney's West Seneca, New York store, a store approximately 2 1/2 times larger than the Lakewood store. (TH. 147). In 1982, Hastie became the leader of the District's Women's Fashion Team, responsible for planning and coordinating meetings with other managers to discuss buying strategies. (TH. 236). In 1984, Hastie was offered the position of Store Manager at the Eastern Hills Mall store in Amherst, New York, but he declined the offer. (TH. 219-221).

 Throughout this employment history, Hastie's performance was favorably appraised, and, as a result, he received salary increases and promotions. (TH. 112-113, 116, 125, 127-128). Penney had a rating system for evaluating store managers, with a "1" being the highest rating, and a "5" being the lowest. Additionally, performance appraisals of store managers were also reviewed by the Regional Personnel Manager and the Regional Vice President. (TM. 271). *fn2" Hastie was evaluated as a "2" (above average) and a "3" (average) at different times. (TH. 137, 144, 154-155, 158, 209). Certain later performance appraisals contained notations regarding Hastie's age as of the date of the performance review.

 For the first year of Hastie's employment as the Store Manager at Lakewood, he was supervised by Donald Mustaine, the district manager. (TM. 171). Mustaine appraised Hastie's performance at a level "3" at that time. (TH. 144). After Hastie transferred to the West Seneca store, Karl Scheffer became Hastie's district manager in 1979. (TH. 177). Prior to Scheffer's arrival, Hastie had been given an appraisal of "4" (below average), (TH. 178), however, Hastie claimed that, after Scheffer's inspection of the West Seneca store, he told Hastie that, "I was given some very bad and misleading information about you . . . [but] I'm very, very pleased with the way the store is going, I'm very happy to have you in my district and I look forward to working with you." (TH. 179, 183). In 1980, 1981, 1982, 1983, and 1984, Scheffer gave Hastie a "2" rating. (TH. 210, 214, 222, 224). During Hastie's performance appraisal in 1984, Scheffer criticized Hastie's handling of markdowns in the store, i.e. merchandise sale priced for quicker sale, stating that he wanted lower store mark-downs. (TH. 226).

 Earlier, in 1984, Scheffer offered Hastie the Store Manager position at Eastern Hills Mall, stating that Hastie had worked very hard throughout his career, and that Hastie should manage a store that was easier to manage than the West Seneca store since he "had only a couple of years to go to retirement." (TH. 219). At that time, Hastie was 56 years of age. (TH. 219). Hastie, however, did not plan to retire at 60 years old as Scheffer apparently assumed. (TH. 220).

 In the fall of 1984, Mustaine became employed as Penney's District Manager in the district in which the West Seneca store was located, replacing Scheffer. (TH. 248). In his first appraisal of Hastie for 1984, Mustaine appraised Hastie's performance as a "3," (TH. 230), stating that Hastie needed to bring his inventories in line with company guidelines. (TH. 232-233). Mustaine informed Hastie that he did not want an overstocked store, and that correcting the situation would be a priority. (TH. 299). *fn3"

 In 1985, Hastie claimed that a pattern of harassment against him began. Members of Mustaine's management team began visiting Hastie at his store for routine inspections. (TH. 257). Salary increases due to Hastie were not processed timely. (TH. 277). Mustaine would call Hastie, asking him technical questions, expecting immediate answers. (TH. 278). Mustaine would also telephone Hastie, stating that he would be coming to the store to see him, and then would not appear. (TH. 295). Additionally, sometime in 1985, Bill Columbo, the operations manager for the district, informed Hastie that Mustaine had instructed him to investigate the buying practices in Hastie's store, and to report directly to Mustaine any of his findings. (TH. 261-262).

 According to Hastie, Mustaine continued to harass him in 1986 on an intensified basis. (TH. 297). Hastie claimed that Mustaine's management staff, during visits to the store, would always ask Hastie what his retirement plans were. (TH. 257). In response, Hastie, understanding that, in the Penney company, age 60 had been the normal retirement age, (TH. 260), requested a printout from the benefits department regarding what his potential retirement benefits would be, (TH. 260), however, Hastie did not have plans to retire. (TH. 260). When evaluating Hastie's salary merit increase in October, 1986, after review with Scheffer and Sherwood, it was decided, because of the "chronic overstocks" in Hastie's store, to give Hastie a merit increase based on a "3" rating. (TM. 284). Mustaine actually held up the implementation of Hastie's raise, as, although Hastie had corrected the overstock problem, Mustaine wanted to make sure that "we didn't get back into that problem again." (TM. 296). Mustaine conceded that the date of Hastie's salary increase did not conform to the Penney company guidelines. (TM. 298).

 Hastie had an overstock problem in the store prior to Mustaine's arrival in 1984. (TH. 300, TM. 367). Mustaine spent significant amounts of time discussing this problem during his visits to the store. (TH. 303, TM. 370, 375). However, for a five month period during 1985, the situation improved, and the store was actually understocked. (TH. 304, TM. 347). However, after the December, 1985 snowstorm, the store became heavily overstocked again as a result of the lack of Christmas sales volume. In fact, Mustaine estimated that, because of the storm, the store lost approximately $ 500,000 - $ 600,000 in sales. (TH. 171). Mustaine, however, continued to criticize Hastie for his high inventory. Mustaine instructed Hastie to get the inventories "back in line." (TM. 363). As Penney conducts their annual inventory at the end of January, Hastie assumed that he had only forty days to get rid of high amounts of seasonal inventory which had not been sold due to the storm. (TH. 171). At the time, Hastie was overstocked by a least one million dollars of inventory. (TH. 172, TM. 348). Hastie began to mark-down the merchandise, stopping at a certain point in December 1985 as he thought Mustaine did not want any more markdowns to be taken in December, and then taking further mark-downs in January, February, and March, 1986 when he remained heavily overstocked. (TH. 173-175, 351-352, 367). In contrast to Hastie's recollection, Mustaine stated that he did not recall telling Hastie that he had taken enough mark-downs in December, 1985, and not to take any more in that period. (TM. 365).

 Hastie eventually successfully reduced his inventory, however, to accomplish this goal, he "floated" additional mark-downs on the merchandise, i.e., when he reached the budgeted amounts of mark-downs for a period, he did not tabulate any further mark-downs, but, rather, carried those additional mark-downs into the next period. (TH. 353). By not timely reporting these mark-downs during the period when they actually occurred, the financial records appeared to state that the marked-down merchandise was being sold at the West Seneca store at the regular retail price rather than the actual sale price. (TH. 370). Hastie admitted that he had been periodically instructed not to float mark-downs, however, he stated that this had been a company-wide practice for quite some time. (TH. 373-375, 385). He also did not consider floating mark-downs to be an intentional distortion of company records, as the markdowns were not floated between fiscal years. (TH. 384). Penney, however, apparently considered the floating of mark-downs to be a serious problem, and there was a policy against such practices as stated in a June 6, 1986 memorandum from Sherwood to the Store Managers. See Exhibit A, Defendant's Notice of Motion, dated November 20, 1992, (TM. 723, 773). A follow-up memo was sent to the Store Managers from Mustaine on June 19, 1986. See Exhibit A, Defendant's Notice of Motion.

 In January, 1987, Bill Columbo again visited Hastie at his store, having been assigned by Mustaine to check the store's markdowns. (TH. 451-452, TM. 541). Columbo informed Hastie that he had discovered the mark-down float, and that he would have to report this information to Mustaine. (TH. 453, TM. 543). In April, 1987, Penney auditors came to the West Seneca store, stating that the store had been randomly selected for a three week audit. (TH. 454). David Miller, the head auditor, mentioned to Hastie that there was a problem with the mark-down cutoff. (TH. 455). While the auditors were still in the store, in May, 1987, two representatives from Penney, William True, the regional loss prevention manager for Penney, (TT. 10), *fn4" and Don Kinslow, a regional loss prevention representative, (TT. 10), came to see Hastie at his office, stating that Hastie's mark-down float was exorbitant. (TH. 416). True assisted Hastie in preparing a written statement regarding the mark-down situation, however, Hastie now claims that he only wrote the statement under extreme duress. (TH. 420-421). True and Kinslow also met with William Beausoleil, the store's operations manager, who was subsequently accused of altering the store's inventory figures. (TT. 48, TM. 808-810).

 A week after this visit, Mustaine telephoned Hastie, requesting that he go to the Pittsburgh, Pennsylvania regional headquarters to meet with Sherwood to respond to a charge of defalcation of company records. (TH. 456, TM. 612). Hastie, contacting Karl Scheffer, was told that he was going to be fired because of the floating mark-down problem, and that the decision was irreversible. (TH. 458). Hastie then asked if he could take early retirement instead of being discharged. (TH. 458-459). Hastie did not make the trip to Pittsburgh, instead taking the offered option of early retirement. (TM. 859). Thereafter, as of May 31, 1987, Hastie retired from his position with Penney. (TH. 459). Upon retirement, Hastie claims that he asked Mustaine ...

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