of the MCIC severance plan to all RCAG employees, effective retroactively at the closing. This additional information cannot change the original finding that defendants did not eliminate the RCAG plan prior to plaintiffs' termination. The underlying assumptions of defendants' argument are that an employer can retroactively reduce or eliminate its already-terminated employees' severance benefits and that the MCIC consent was intended to accomplish this end. Again, defendants' analysis misses the mark.
With regard to intent, defendants' proffered evidence, in the form of the document itself and the explanatory testimony of corporate counsel at trial, does not demonstrate that the consent was intended to terminate the RCAG severance plan. Indeed, according to defendants' own witness the purpose was simply "to allow any non-collective bargained employees of RCAG who might remain employed by RCAG to participate in the MCI Communications Corporation severance pay plan after the acquisition and to count their prior service with RCAG for the plan for purposes of calculating their benefit." (Tr. 975-76). In short, the consent was apparently intended to ensure continued coverage of any individuals who still remained as RCAG employees. (See also Tr. 977, 979 (noting MCIC concern that payment of MCIC benefits to non-participants would violate ERISA)). Plaintiffs, of course, did not remain, having long since been fired. In addition, whatever the intent of the Board, the consent did not purport either to terminate the RCAG plan or to apply the MCIC plan to RCAG. All that it did was to authorize the subsidiary to apply that plan, and the record is devoid of evidence as to whether RCAG ever adopted that plan.
In any event, even if we assumed that this evidence conclusively demonstrated that in late-June 1988 the MCIC Board of Directors acted to terminate the RCAG plan retroactively, such an effort would obviously be ineffective to divest the former employees of RCAG of their right to severance benefits under the RCAG plan. It is common ground that an employer is ordinarily free to alter or eliminate an employee welfare benefits plan at any time, absent a provision in the plan guaranteeing against such an eventuality. See, e.g., Deibler v. United Food & Commercial Workers' Local Union 23, 973 F.2d 206, 210 (3d Cir. 1992); Reichelt v. Emhart Co., 921 F.2d 425, 430 (2d Cir. 1990), cert. denied, 501 U.S. 1231, 111 S. Ct. 2854, 115 L. Ed. 2d 1022 (1991); Ryan v. Chromalloy American Corp., 877 F.2d 598, 603 (7th Cir. 1989). Nonetheless, once a triggering event occurs that entitles the employee to a specified benefit, the employer is contractually and statutorily obligated to provide that benefit and may not retrospectively amend the plan to divest the plan participant of a payment that he was already entitled to receive. Indeed, to conclude otherwise would entirely undermine the obligations imposed by ERISA upon a sponsor of a non-vesting benefit plan, since the employer could then ignore the requirements of the plan and, when sued, simply amend or terminate the plan retroactive to a date preceding the aggrieved participant's eligibility for benefits.
Not surprisingly, the courts have consistently held that an employer may not deny a benefit already earned, whether under a vested or a non-vested plan. See, e.g., Wulf v. Quantum Chemical Corp., 26 F.3d 1368, 1378 (6th Cir. 1994), petition for cert. filed, No. 94-750 (Oct. 25, 1994); Pratt v. Petroleum Prod. Mgt., Inc. Employee Sav. Plan & Trust, 920 F.2d 651, 661 (10th Cir. 1990); Adams v. General Tire & Rubber Co., 794 F.2d 164, 166-67 (4th Cir. 1986); Harm v. Bay Area Pipe Trades Pension Plan Trust Fund, 701 F.2d 1301, 1305-06 (9th Cir. 1983); Kemmerer v. ICI Americas, Inc., 842 F. Supp. 138, 142-46 (E.D. Pa. 1994); Edward W. Sparrow Hosp. Ass'n, Inc. v. Industrial Welding, Inc., 1990 U.S. Dist. LEXIS 9194, at *20 (W.D. Mich. 1990). See also New York State Teamsters Conf. Pension & Retirement Fund v. Hoh, 561 F. Supp. 679, 684 n. 8 (N.D.N.Y. 1982) (citing cases). As one court has noted: "allowing [the employer] to unilaterally terminate Plan benefits retroactively renders the Plan illusory. Carried to an extreme, [the employer] could terminate benefits for claims already incurred and paid out. Although. . .[the employer] properly reserved the right to amend its Plan, including the right to terminate benefits, this right does not encompass claims that have already been incurred." Edward W. Sparrow Hosp. Ass'n, Inc. v. Industrial Welding, Inc., 1990 U.S. Dist. LEXIS at * 20.
In this case plaintiffs' entitlement to a lump-sum payment under the RCAG plan accrued at their termination in May 1988. Necessarily, then, the June 28, 1988 consent approved by the MCIC Board could not divest them of that entitlement, and hence defendants' argument for judgment based on that consent is legally insupportable.
2. The Standard of Review of the Administrator's Denial of Benefits
Defendants also seek judgment as a matter of law on the theory that the decision to deny benefits under the RCAG plan should be subjected to a deferential standard of review. This issue was previously raised by defendants in connection with the court's rulings on their requests to charge, and at that time the court rejected defendants' argument. (Tr. 1165-70). Having reviewed defendants' motion papers, I conclude that the argument has not improved with repetition.
The Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), that "a denial of benefits challenged under § 1132 (a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. Thus we must look to the terms of the plan to determine whether and in what circumstances the plan administrator is given such discretionary authority. See, e.g., Masella v. Blue Cross & Blue Shield of Connecticut, 936 F.2d 98, 103 (2d Cir. 1991). In doing so, we bear in mind the admonition that "discretion is not an all-or-nothing proposition. A plan can give an administrator discretion with respect to some decisions, but not others. . . . A plan administrator has exactly the amount and type of discretion granted by the plan, no more and no less." Wulf v. Quantum Chemical Corp., 26 F.3d at 1373 (quoting Anderson v. Great West Life Assur. Co., 942 F.2d 392, 395 (6th Cir. 1991) (emphasis in original)). See also Kirwan v. Marriott Corp., 10 F.3d 784, 788-89 (11th Cir. 1994).
In this case the RCAG Summary Plan Description contains no provision purporting to invest the plan administrator with any discretion. (Pl. Exh. 1). The only provision cited by defendants is found in the so-called "Procedure" for the plan, which simply provides, under the heading "Responsibility and Administration", that "the Vice President, Employee Relations, or his designee, will render any interpretation of this Policy that may be required." (Pl. Exh. 2 at p. 4). It could well be argued that this language does not sufficiently articulate a grant of discretion to invoke deferential review in any respect. See, e.g., Rovira v. AT&T, 817 F. Supp. 1062, 1068 (S.D.N.Y. 1993) (ambiguities resolved against plan administrator); Clark v. Bank of New York, 801 F. Supp. 1182, 1189 (S.D.N.Y. 1992) (defendant's burden to show that it has discretionary authority); Arthurs v. Metropolitan Life Ins. Co., 760 F. Supp. 1095, 1098 (S.D.N.Y. 1991). See generally Masella v. Blue Cross & Blue Shield of Connecticut, 936 F.2d at 103 (comparing different formulations of authority assigned to plan administrator). We need not address that question, however, since the plan, even if generously interpreted in defendants' favor, does not grant the plan administrator or his designee the type of discretion that would cover the decision actually rendered on plaintiffs' applications for benefits.
By its own terms, the quoted provision gives the RCAG Vice-President discretion, if at all, only to interpret the plan. It does not purport to give the RCAG Vice-President any separate grant of discretion to determine eligibility for benefits. Compare, e.g., Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1141 (3d Cir. 1993), cert. denied, 128 L. Ed. 2d 46, 114 S. Ct. 1369 & 1540 (1994); Miller v. United Welfare Fund, 851 F. Supp. 71, 74 (E.D.N.Y. 1994); Zisel v. Prudential Insur. Co. of America, 845 F. Supp. 949, 951 (E.D.N.Y. 1994). Thus, that provision, whatever its legal significance, is not triggered here.
RCAG advised plaintiffs through their counsel that benefits were being denied because the plan had been terminated. (Pl's Exh. 43). This conclusion did not rest on the administrator's interpretation of any provisions of the plan; indeed, the plan contained no provisions governing the method of its termination or modification. Rather, the question of whether the plan had been terminated turns on an analysis of caselaw interpreting ERISA and principles of corporate law (see Algie v. RCA Global Communications, Inc., 1994 WL 132358, at *20-24), and that is not an exercise that is committed by the plan to the discretion of the plan administrator.
Since the RCAG plan administrator did not exercise any discretion that he may have had when he denied plaintiffs their severance benefits, it follows that his decision is not entitled to deference. See, e.g., Kinek v. Gulf & Western, Inc., 720 F. Supp. 275, 281-82 (S.D.N.Y. 1987), aff'd sub nom. Kinek v. Paramount Communications, Inc., 22 F.3d 503 (2d Cir. 1994). Hence, insofar as defendants' Rule 50(a) motion is premised on the notion that such deference is owed, the motion is denied.
B. Defendants' Motion for a New Trial
Defendants alternatively seek a new trial, citing three asserted errors in the court's charge. This argument is in part unpreserved and in any event groundless.
Defendants first complain because, they say, the court did not incorporate two of their proposed charges governing the formation of the employment relationship. One of these requests (no. 17), entitled "Employment Status After Acquisition -- Partial Performance", summarized a variety of assertedly relevant considerations in evaluating whether plaintiffs were employed by RCAG or by MCII immediately after the stock sale of RCAG, including particularly "whether one party has partially performed [an employment agreement] and that performance has been accepted by the other party." (See Defs.' Request to Charge at 23). The proposed instruction mentioned other factors as well (id. at 23-24), but gave particular prominence to the notion that "partial performance is an unmistakable signal that" the performing party believes that there is a contract between the parties and that acceptance of performance indicates that both sides recognize such a contractual relationship. (Id. at 23).
The second cited request on this general topic (no. 18) was entitled "Employment Status After Acquisition -- Automatic Employment Upon Stock Sale". (Id. at 25). It would have instructed that, upon a stock sale, "the employees of the company which is sold can automatically become employees of the purchasing company." In explanation, the proposed instruction said, in substance, that no written offer of employment was required and that "employment by the purchasing company may be inferred." Finally, it reiterated that "you may find from the evidence that the Plaintiffs became MCII employees immediately upon acquisition, whether or not Plaintiffs received written employment offers in the form of letters or contracts." (Id.)
Defendants' complaint about the first of these two charges fails on both procedural and substantive grounds. After receipt of both sides' requests to charge, the court prepared a written draft charge and supplied it to counsel the day before the charge conference. (Tr. 989-90, 1088-89, 1096). At the charge conference, the court entertained all objections and requests for modification of the charge. (Tr. 1096-1164). During the course of that colloquy defendants' counsel did not refer to or suggest any problems relevant to request no. 17. At the conclusion of the colloquy, defense counsel sought to invoke "a continuing exception" for any requested charge not specifically incorporated by the court. (Tr. 1164). In response the court advised that if counsel had any requests that she believed had not been satisfied, she should specify them so that the court could determine whether it had inadvertently omitted an instruction or whether defendants' version of a requested charge was preferable. (Tr. 1164). Counsel then cited four specific proposed instructions (Tr. 1164-65), but never mentioned request no. 17 specifically or in substance. (Tr. 1172). Similarly, after the charge was given, although both sides were afforded the opportunity to voice any objections, defendants never mentioned this request. (Tr. 1271).
If a party does not object specifically to a charge that is given or to the failure to give a requested charge, as required by Fed. R. Civ. P. 51, he is generally deemed to have waived the point, and such waiver is forgiven only if the charge as given constituted "plain error". See, e.g., Metromedia Co. v. Fugazy, 983 F.2d 350, 363 (2d Cir. 1992), cert. denied, 124 L. Ed. 2d 662, 113 S. Ct. 2445 (1993) (citing cases). In this case the charge as given did not constitute error, whether plain or otherwise. Indeed, the court instructed the jury in accordance with the substance of defendants' request no. 17, but without the unbalanced language found in the requested charge.
As explained by defendants, request no. 17 was designed to acknowledge defendants' contention that the jury could infer that the payment by MCII of substantial benefits to plaintiffs and plaintiffs' acceptance of those payments demonstrated the existence of an employment relationship with MCII. The court accepted this principle and so instructed the jury. Thus, after telling the jury that an employment relationship did not need to be embodied in a writing and did not depend upon any specific exchange of words between the employee and the putative employer, the court advised that such a relationship "may be inferred from less specific words and may also be inferred from a combination of words and actions of the would-be employer and employee." (Tr. 1250). In explanation, the court went on to state:
In assessing this question, you may take into account . . . all of the statements and actions of the defendants prior to the closing that were made known to the plaintiff, as well as any statements and actions by [the] plaintiff prior to the closing. You may also take into account any subsequent statement and conduct by the parties that sheds light on whether MCI International offered the plaintiff employment and whether plaintiff's reporting for work after the closing and his acceptance of monies and benefits from MCI International amounted to acceptance by him of an offer to work for MCI International instead of RCA Global.
(Tr. 1251). This instruction, a portion of which was suggested by defendants during the charge conference (Tr. 1137-39), explicitly embodies the heart of defendants' request no. 17, and gave defendants an ample basis to argue to the jury, as they did, that plaintiffs' pre-closing signing of MCIC benefit enrollment cards and their receipt of various benefits from MCII after the closing demonstrated an offer and acceptance of employment. (Tr. 1188-90).
A party is not entitled to a charge in the precise words of its request. See, e.g., Riverwoods Chappaqua Corp. v. Marine Midland Bank, 30 F.3d 339, 346 (2d Cir. 1994). See also 1 Edward J. Devitt, Charles B. Blackmar, Michael A. Wolff, and Kevin F. O'Malley, Federal Jury Practice & Instructions § 7.02 at 211 (1992). In this case defendants received the substance of their request, and the court properly exercised its discretion not to use the wording that defendants had formulated, which implied that the payment of benefits by MCII was virtually dispositive of the employment question, and instead chose to give a more balanced charge, which invited the jury in general terms to consider all of the pertinent factors, including the payment and receipt of benefits, without suggesting that any one was necessarily controlling.
As for proposed charge no. 18, in substance it advised the jury that the formation of an employment relationship does not require a writing. (Defs.' Requests to Charge at 25). To that extent, as we have seen, the charge was given very explicitly. (Tr. 1247-50) (repeatedly stating employment agreement need not be in writing and may be implied from words and actions).
The court altered the charge only in one respect, by omitting the statement that an employment relationship may arise "automatically" following the stock purchase of the prior employing corporation. This aspect of the requested charge was both confusing and misleading. It was confusing because it did not indicate in what circumstances a change of employment status would occur "automatically" after a stock purchase. It was misleading in that it implied that a new employment relation would occur automatically upon such a stock purchase, that is, without any actions by either the employee or the purchaser that would suggest some form of implicit employment agreement. This is a reiteration of one of the legal theories pressed by defendants on their summary judgment motion and rejected by the court because it is inconsistent with the presumed independence of a parent and subsidiary. (See Algie v. RCA Global Communication, Inc., 1994 WL 132358 at *25-27).
In sum, request no. 18 was given in substance, and was modified only to avoid the insinuation of a legally erroneous theory. Defendants have no legitimate complaint about this result.
Defendants' last argument for a new trial involves the failure of the court to give their proposed request no. 19. This charge in substance would have instructed the jurors that if, after the closing, MCII controlled the employment practices of RCAG or operated RCAG and MCII "as one corporation", "you may find that RCAG employees, including Plaintiffs, became MCII employees upon the acquisition. . . ." (Defs.' Requests to Charge at 26).
Again, defendants failed to object to the omission of this charge, and therefore the objection is waived absent a showing of plain error. In any event, the refusal to give this instruction was proper and hardly plain error.
In substance defendants sought to disclaim a corporate responsibility of the subsidiary by using an alter-ego or veil-piercing theory. This effort by defendants to use their claimed disregard of corporate independence in order to benefit themselves is unsupported by case law and contrary to the underlying rationale for the alter-ego and veil-piercing doctrines.
The corporate form is a fiction that is recognized to protect the shareholders from being exposed to the risk of personal liability for the obligations of the corporation. This rule is given legal effect as a means of encouraging corporate investment by minimizing the investor's risk. See, e.g., Labadie Coal Co. v. Black, 217 U.S. App. D.C. 239, 672 F.2d 92, 96 (D.C. Cir. 1982); Hackney & Benson, Shareholder Liability for Inadequate Capital, 43 U. Pitt. L. Rev. 837, 872 (1983). By the same token, the benefit of insulation from corporate liability is granted only on condition that the shareholders of the corporation maintain the formalities of corporate form and independence, and if they fail to do so, they risk the loss of their insulation from obligations of the corporation. See, e.g., William Wrigley Jr. Co. v. Waters, 890 F.2d 594, 600-01 (2d Cir. 1989); American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir.), cert. denied, 488 U.S. 852, 102 L. Ed. 2d 109, 109 S. Ct. 136 (1988).
When viewed in this context, we can readily understand why alter-ego and veil-piercing theories have been invoked to benefit those parties seeking to impose liability on the corporation or its shareholders. The one case cited by defendants as legal authority for their requested charge, Johnson v. Flowers Industs., Inc., 814 F.2d 978 (4th Cir. 1987), illustrates this point. In Johnson the plaintiffs sued their employer, its parent corporation and another subsidiary of the parent for age discrimination. The immediate issue was whether, in seeking to demonstrate discrimination in their termination, the plaintiffs could use data reflecting hiring decisions by the other subsidiary. To do so, plaintiffs were required to demonstrate that the parent, which concededly controlled the plaintiffs' employer, also controlled the employment decisions of the other subsidiary. The circuit court affirmed the dismissal of the complaint because the plaintiffs had failed to demonstrate such control. Id. at 979-82.
As in Johnson, other courts employing this form of alter-ego analysis in employment discrimination and related types of cases have consistently applied it as a means to uphold or extend corporate liability. See, e.g., Armbruster v. Quinn, 711 F.2d 1332, 1335-39 (6th Cir. 1983); Weinreich v. Sandhaus, 850 F. Supp. 1169, 1178-79, amended in part, 156 F.R.D. 60 (S.D.N.Y. 1994); United States v. Nagelberg, 772 F. Supp. 120, 124 (E.D.N.Y. 1991). In contrast, defendants' proposed instruction would reverse the thrust and rationale of the alter-ego and corporate-veil-piercing principles. In substance, both RCAG and MCII would benefit if they ignored corporate formalities, and their non-compliance with corporate law requirements would deprive the plaintiffs of the benefits to which they would otherwise be entitled. This perverse use of these doctrines is unprecedented, and, given the reason for those rules, the lack of precedent is scarcely surprising. Indeed, one of the cases cited by defendants makes it plain that this theory is not legally tenable. Thus, in Esmark, Inc. v. N.L.R.B., 887 F.2d 739 (7th Cir. 1989), the circuit court observed that "the accepted rule is that the corporate veil will only be pierced to protect the interests of third parties; the separate corporate entity will not be disregarded to allow the corporation to escape its obligations." Id. at 751.
Defendants' proposed jury charge on corporate control fails for still another reason as well. The plaintiffs were all given their termination notices and told to leave the premises within one to three days after the closing. Whatever evidence may be found in the record relating to possible control of RCAG by any of the other MCI corporate entities -- such as the failure over time to appoint an RCAG Board of Directors or MCIC's dealings with the union representing RCAG's unionized employees -- involves a longer and later time period. Moreover, the fact that MCII personnel may have been involved in the pre-closing decision as to which RCAG employees would be retained as MCII workers does not demonstrate or even suggest that MCII formed an employment relationship with those RCAG personnel who were not selected for retention.
In sum, defendants' request no. 19 was unsupported by the law and inconsistent with the trial evidence. Accordingly, its rejection by the court does not warrant a new trial.
II. Plaintiffs' Application for Fees and Pre-Judgment Interest
In the wake of their success at trial, plaintiffs have moved for an award of fees and costs and also seek pre-judgment interest calculated at an annual rate of nine percent. I address each of these applications separately.
A. Fees and Costs
In authorizing civil suits by plan participants, ERISA grants to the district court the discretion to award fees and costs. Specifically, it states:
In any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party.