The opinion of the court was delivered by: ROBERT W. SWEET
This is an action brought by a former partner against his law firm, alleging that his discharge violated provisions of the Employee Retirement Income and Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"), the Consolidated Omnibus Reconciliation Act of 1985, 29 U.S.C. §§ 1161-1169 ("COBRA"), and state common law. Defendants Edwin A. Howe, Jr., Laurence M. Addington, Susan D. Harrington, Steven B. Callahan, Bruce E. Hood, and Anne L. Strassner, individually and as members of the law firm partnership-in-dissolution known as Sann & Howe and as members of the successor law firm partnership operating under the name of Sann & Howe (collectively, the "Defendants") have moved for orders pursuant to Rule 56, Fed. R. Civ. P., granting them summary judgment and dismissing the plaintiff's complaint in its entirety, pursuant to 29 U.S.C. § 1132(g)(1) awarding them costs and attorney's fees in this action, and pursuant to Rule 11, Fed. R. Civ. P., imposing sanctions against the plaintiff and his counsel.
Plaintiff Richard Ehrlich ("Ehrlich") has moved for orders pursuant to Rule 56, Fed. R. Civ. P., granting him partial summary judgment on counts II and III of his complaint and denying the Defendants' motion for summary judgment, sanctions, and other relief, and pursuant to Rules 26 and 30, Fed. R. Civ. P. and Rule 612, Fed. R. Evid., granting him the right to review certain documents previously withheld from discovery and to conduct further discovery.
For the following reasons, the Defendants' motion for summary judgment is granted in part and denied in part, and their motion for costs, fees, and sanctions is denied. Ehrlich's motion for summary judgment is granted in part and denied in part, as is his motion for discovery.
The parties, facts, and prior proceedings in this matter were discussed fully in a prior opinion of this Court, familiarity with which is assumed. See Ehrlich v. Howe, 1992 U.S. Dist. LEXIS 18269 (S.D.N.Y. Nov. 30, 1992) (the "November 30 Opinion"). Ehrlich resides in the County, City, and State of New York and is a member of the Bar of the State of New York. The individually named defendants are also members of the Bar of the State of New York. Defendant Edwin A. Howe, Jr. resides in Garden City, New York. The other individually named plaintiffs reside in the City, County, and State of New York.
Defendant Sann & Howe (together with its predecessor firms, the "Firm"), was established and has existed as a partnership under the laws of the State of New York to engage in the practice of law and the conduct of a law firm and incidental businesses. At all relevant times, it maintained its principal office at 200 Park Avenue, New York, New York.
Under the Agreement, a new partner shared joint and several liability for the debts, claims and other liabilities of the Firm, but held no net asset ownership of it during his or her first three years with the Firm. Rather, a new partner's interest in the equity of the Firm vested upon the partner's third anniversary with the Firm. No partner was required to make a capital contribution to the Firm.
Ehrlich, and all other partners except the senior partner, could be expelled from the partnership pursuant to the Agreement by a vote of all the other partners. Upon termination, a partner was entitled to "an amount equal to such partner's net asset ownership as of the date of [termination], less any amounts owing by him to the firm, plus any amounts owing by the firm to him."
On September 25, 1991, two years and three months after Ehrlich joined the Firm, he was terminated by the partnership by the affirmative vote of all the other partners. Ehrlich was not informed about, and was not present at, the partnership meeting at which the vote to terminate him took place. Ehrlich claims that he was terminated for the purpose of preventing him from obtaining any rights to the equity of the Firm.
Ehrlich asserts that a deferred compensation plan exists at the Firm, and both sides agree that Ehrlich would have been entitled to a share of Firm assets exceeding $ 300,000 upon his third anniversary with the Firm. At the time of his dismissal, at least one other partner had been with the Firm less than three years and was covered by the same terms of the Agreement.
Following the vote to terminate his partnership, Ehrlich received a variety of notices purporting to inform him of his rights under COBRA to continue his coverage under the Firm's health plan. Ehrlich claims that inconsistencies and inaccuracies in these notices constitute violations of COBRA.
The complaint in this matter was filed on February 13, 1992, and an amended complaint was filed on May 1, 1992. On November 30, 1992, the Honorable Pierre N. Leval of this Court denied the Defendants' motion to dismiss the complaint for failure to state a claim upon which relief could be granted. Ehrlich v. Howe, 1992 U.S. Dist. LEXIS 18269 (S.D.N.Y. Nov. 30, 1992). On December 10, 1993, this case was reassigned to this Court. Argument was heard on the present motions on January 25, 1994, and the motions were considered fully submitted as of that date.
Standards Applicable to a Motion for Summary Judgment
A motion for summary judgment may be granted only when there is no genuine issue of material fact remaining for trial and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Silver v. City Univ., 947 F.2d 1021, 1022 (2d Cir. 1991). The moving party bears the burden of proving that no genuine issue of material fact exists. Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir. 1988); Pittston Warehouse Corp. v. American Motorists Ins. Co., 715 F. Supp. 1221, 1224 (S.D.N.Y. 1989), aff'd, 954 F.2d 62 (2d Cir. 1992).
The Second Circuit has repeatedly noted that "as a general rule, all ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party." Brady, 863 F.2d at 210; see also Cartier v. Lussier, 955 F.2d 841, 845 (2d Cir. 1992); Burtnieks v. City of New York, 716 F.2d 982, 983-84 (2d Cir. 1983); Swan Brewery Co. v. United States Trust Co., 832 F. Supp. 714, 717 (S.D.N.Y. 1993).
The remedy of summary judgment is viewed "as an integral part of the Federal rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (citations omitted). Once the moving party has met its burden of coming forward with evidence to show that no material fact exists for trial, the nonmoving party must do more than "simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).
Plaintiff claims that his termination violated ERISA § 510, 29 U.S.C. § 1140, which states:
It shall be unlawful for any person to discharge . . . a participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under [an employee benefit] plan . . . .
Plaintiff contends that the provisions of the partnership agreement providing for the vesting of his net asset interest constituted an ERISA plan and that he was discharged for the purpose of preventing his attainment of his rights under this plan.
Agreements covering only partners are not "employee benefit plans" governed by ERISA. 29 C.F.R. § 2510.3-3 (1991); see also Robertson v. Alexander Grant & Co., 798 F.2d 868 (5th Cir. 1986) (holding that plan covering only partners is not an ERISA plan), cert. denied, 479 U.S. 1089, 94 L. Ed. 2d 152, 107 S. Ct. 1296 (1987). As Ehrlich concedes, in order to maintain his ERISA action, "as a threshold matter, [he] must be deemed an 'employee' under this federal statute." (Pl.'s Mem. at 6.)
In the November 30 Opinion, this Court stated that the viability of Ehrlich's ERISA claims turned on whether he could prove facts showing that, although a nominal partner, his relationship with the Firm was essentially that of an employee. If he could show such facts, the Firm's plan would cover not only partners, but also at least one employee. The Court expressed doubt regarding whether this claim "could survive a motion for summary judgment." Ehrlich v. Howe, 1992 U.S. Dist. LEXIS 18269, at *10 (S.D.N.Y. Nov. 30, 1992).
The question of what distinguishes a "partner" from an "employee" for ERISA purposes appears to be one of first impression. ERISA defines the term "employee" as "any individual employed by an employer." 29 U.S.C. § 1002(6). The Supreme Court has noted that this "nominal definition . . . is completely circular and explains nothing." Nationwide Mut. Ins. Co. v. Darden, 117 L. Ed. 2d 581, 112 S. Ct. 1344, 1348 (1992).
ERISA is "intended to remedy discriminatory conduct designed to interfere with the attainment of either initial benefits or, for vested employees, additional benefits." Healy v. Axelrod Constr. Co. Defined Benefit Pension Plan & Trust, 787 F. Supp. 838, 845 (N.D. Ill. 1992); see also Dister v. Continental Group, Inc., 859 F.2d 1108, 1111 (2d Cir. 1988) (noting ERISA § 510 is designed to prevent unscrupulous employers from discharging or harassing employees attempting to obtain ERISA rights); Gavalik v. Continental Can Co., 812 F.2d 834, 847 (3d Cir.), cert. denied, 484 U.S. 979, 98 L. Ed. 2d 492, 108 S. Ct. 495 (1987) (noting similarity between § 510 ERISA claims and employment discrimination claims under Title VII).
The statutory definition of "employee" under ERISA is virtually identical to that of the Age Discrimination in Employment Act ("ADEA"), see 29 U.S.C. § 630(f), and Title VII, see 42 U.S.C. § 2000e(f). In Hyland v. New Haven Radiology Assocs., P.C., 794 F.2d 793, 796 (2d Cir. 1986), the Second Circuit stated that, since federal anti-discrimination statutes "have a similar purpose -- to stamp out discrimination in various forms -- cases construing the definitional purposes of one are persuasive authority when interpreting the others." Consistent with this approach, in Frankel v. Bally, Inc., 987 F.2d 86 (2d Cir. 1993), the Second Circuit considered the meaning of "employee" under the ADEA and referred to an ERISA case, Roth v. American Hosp. Supply Corp., 965 F.2d 862, 867 (10th Cir. 1992), for guidance.
In Caruso v. Peat, Marwick, Mitchell & Co., 664 F. Supp. 144 (S.D.N.Y. 1987), and Caruso v. Peat, Marwick, Mitchell & Co., 717 F. Supp. 218 (S.D.N.Y. 1989) (collectively, "Caruso"), the defendant moved to dismiss the plaintiff's claim under the ADEA, claiming that his status as a partner
in the defendant accounting firm barred his invocation of the ADEA as an employee.
The defendant in Caruso was a major American accounting and consulting firm, employing several thousand professionals and consultants in more than 100 offices, with approximately 1,350 partners. Peat Marwick was controlled at that time by a 21 member board of directors, the policies of which were implemented by a six-tier management hierarchy. About 300 of the firms' partners held some form of management position.
This Court rejected a per se rule that a partner could not be an employee under the ADEA. The title given to an individual's position is not dispositive; rather, this Court looks to the "individual's actual duties and status." Caruso, 664 F. Supp. at 147.
The test for distinguishing a partner from an employee requires consideration of all elements of the work relationship. Among the most important factors to be considered is the purported partner's "ability to control and operate the business." "The title 'partner' is not normally applied to an individual whose employment duties are ...