DEBORAH A. BATTS, United States District Judge.
Peter G. Janover ("Plaintiff") moves for partial summary judgment to collect severance benefits pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., or, alternatively, under New York State contract law, and for a declaration that a separate future services agreement is unenforceable. Defendants cross-move for partial summary judgment concerning the severance benefits, and also move for partial summary judgment for monies received by Plaintiff under a separate consulting agreement.
On June 24, 1987, Plaintiff and Defendants Bernan Foods, Inc. ("Bernan") and Axmar Investment Company ("Axmar") signed an employment agreement (the "Employment Agreement") (Peter G. Janover Decl. in Support of Plaintiff's Motion for partial Summary Judgment, [hereinafter "Janover"], Ex. A) whereby Plaintiff would serve as Bernan's President and Chief Operating Officer for a term of five years. At this time, Axmar owned Bernan, and signed the Employment Agreement as guarantor of Bernan.
Defendants Robert and Betty Marcus ("the Marcuses") were the primary shareholders in Bernan, Axmar, and the Birchall Investment Company ("Birchall"). Upon signing the Employment Agreement, the Marcuses informed Plaintiff that his primary goal would be to sell Bernan within the next five years. As this goal conflicted with Plaintiff's interest in continued employment with Bernan, the Employment Agreement included severance benefits, or a "golden parachute" provision. Under the golden parachute provision, Plaintiff would be entitled to substantial monetary compensation if his termination was triggered by the sale of Bernan, as long as he did not continue to work for either Bernan or the purchaser of Bernan. Furthermore, the golden parachute created an incentive to sell Bernan quickly, by including a clause which decreased the amount of severance benefits Plaintiff would receive, the longer it took him to sell the company.
Defendant Robert Marcus, acting on behalf of Axmar, and Plaintiff signed a severance agreement, dated December 28, 1995, yet signed December 29, 1995 (the "Severance Agreement") (Janover Decl., Ex. D) . In the Severance Agreement, Axmar agreed to increase the amount of Plaintiff's severance benefits under the Employment Agreement from 18 months of his regular, monthly salary to 27 months. The parties further agreed that Plaintiff would receive up to $ 6,200 for out-placement expenses for the first 12 months following his termination.
On December 29, 1989, Axmar sold Bernan to the Marcuses' son-in-law, Raymond Hughes ("Hughes"). On January 4, 1990, Plaintiff sent a letter of resignation, effective April 4, 1990, to Hughes, with a copy to the Marcuses, also requesting severance benefits as provided for in the Employment Agreement.
Hughes and the Marcuses then requested that Plaintiff continue to work for them until Bernan was sold to a buyer outside of the Marcus family. On March 18, 1990, Plaintiff sent the Marcuses a memorandum stating that he would draft a letter to the Marcuses and Hughes in order to protect his severance benefits should he remain under their employ beyond April 4, 1990. On March 26, 1990, Plaintiff delivered to Robert Marcus a written letter agreement ("Extension Agreement") (Janover Decl., Ex. G). The Extension Agreement, signed by Plaintiff, Hughes on behalf of Bernan, and Robert Marcus on behalf of Axmar, stated that Plaintiff would continue to work for Bernan beyond April 4, 1990, but that
the continuation of [Plaintiff's] employment, beyond April 4, 1990, does not, in any way, revoke [Plaintiff's] resignation . . . under the Employment Agreement . . . or the severance benefits accrued thereunder and the additional benefits granted by AXMAR in our letter agreement dated December 29th, 1989 [i.e., the Severance Agreement].
Janover Decl., Ex. G at 1.
Plaintiff continued to work for Bernan after April 4, 1990. In November 1991, Plaintiff began negotiating with Wilton Foods, Inc. ("Wilton") to sell Bernan. On February 1, 1992, Plaintiff entered into a consulting agreement (the "Consulting Agreement") (Janover Decl., Ex. J) with Wilton, whereby Plaintiff would receive $ 180,000 in exchange for providing consulting services to Wilton after the sale of Bernan's assets to Wilton. On February 6, 1992, Plaintiff, Axmar and Birchall executed a future services agreement
(the "Future Services Agreement") (Janover Decl., Ex. I) in which the $ 180,000 Plaintiff was to receive under the Consultation Agreement, was deemed part of the sale price of Bernan. The money, however, would be treated as compensation to Plaintiff for his future employment with Axmar, Birchall, and their affiliates over the next 18 month period. Plaintiff did receive $ 180,000; however, Plaintiff never worked for Axmar, Birchall or any of their affiliates after the sale to Wilton.
Following the sale of Bernan's assets to Wilton, Plaintiff continued working for Bernan for a few months. On May 23, 1992, Plaintiff submitted a formal, written resignation from Bernan and requested the severance benefits allegedly owed to him under the Employment, Severance, and Extension Agreements. The Defendants refused to pay the severance benefits.
Plaintiff brought suit against Defendants alleging that the severance benefits provided for in the three Agreements constitute a plan under ERISA, 29 U.S.C. §§ 1001 et seq. He argues that Defendants' refusal to pay the severance is a violation of that statute. In the alternative, Plaintiff alleges that New York State contract law also requires that the Defendants pay him pursuant to the Agreements. Plaintiff also argues he is entitled to keep the $ 180,000 under the Consulting Agreement because the Future Services Agreement is unenforceable.
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. Fed. R. Civ. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Corselli v. Coughlin, 842 F.2d 23 (2d Cir. 1988). As a general rule, all ambiguities and all inferences drawn from the underlying facts must be resolved in favor of the party contesting the motion, and all uncertainty as to the existence of a genuine issue for trial must be resolved against the moving party. LaFond v. General Physics Servs. Corp., 50 F.3d 165, 171 (2d Cir. 1995). As is often stated, "viewing the evidence produced in the light most favorable to the nonmovant, if a rational trier could not find for the nonmovant, then there is no genuine issue of material fact and entry of summary judgment is appropriate." Binder v. LILCO, 933 F.2d 187, 191 (2d Cir. 1991); see also Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir. 1991).
A. ERISA Claims
Congress passed ERISA in order to protect employees' benefits from misuse or mismanagement by requiring that "disclosure be made and safeguards be provided with respect to the establishment, operation, and administration of [employee benefit] plans." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 15, 96 L. Ed. 2d 1, 107 S. Ct. 2211 (1987) (quoting 29 U.S.C. § 1001(a)). Determining whether a claim is covered by ERISA requires an examination of whether a "plan" exists as defined by the statute.
ERISA covers both "employee welfare benefit plans" and "employee pension benefit plans." An employee welfare benefit plan is defined as a plan that pays, inter alia, benefits described in 29 U.S.C. § 186(c). Section 186(c) includes severance or similar benefits. See Adams v. Avondale Indus., 905 F.2d 943, 947 (6th Cir. 1990); Massachusetts v. Morash, 490 U.S. 107, 113, 104 L. Ed. 2d 98, 109 S. Ct. 1668 (1989). Thus, Plaintiff's claim passes the threshold test as it addresses a type of benefit plan covered by ERISA.
A plan protected by ERISA, however, must utilize an administrative scheme because ERISA is necessarily concerned with the regulation and administration of plan funds. Fort Halifax, 482 U.S. at 15 ("The statute . . . presumes that some type of administrative activity is taking place."). Thus, in determining whether a severance arrangement constitutes a "plan," the existence of an administrative scheme is crucial.
Severance benefits which require only one lump-sum payment in the future do not create a "plan" under ERISA because a one-time payment does not entail a true administrative scheme. See Fort Halifax, 482 U.S. at 14; Ackner v. Lenox, Inc., 782 F. Supp. 267, 269 (S.D.N.Y. 1992). Furthermore, ERISA does not define benefits distributed over time as "plans" if they merely require simple arithmetical calculations, are devoid of any discretionary processes, or are standard monthly payments over a pre-determined period of time. See James v. Fleet/Norstar Fin. Group, Inc., 992 F.2d 463, 467 (2d Cir. 1993) (payment of benefits for sixty days if employees remained on the job until internal consolidation was complete, found not to be a plan as it was for too short a time period and there was no on-going administrative program); Fludgate v. Management Technologies, Inc., 885 F. Supp. 645, 648 (S.D.N.Y. 1995) (payment of benefits for up to two years did not qualify as an ERISA plan since there was nothing discretionary about the timing, form, or amount of the payments); Delaye v. Agripac, Inc., 39 F.3d 235 (9th Cir. 1994) (sending one employee a monthly check and paying insurance premiums for two years as contracted is not an administrative scheme under ERISA).
Under the Employment Agreement, Plaintiff was to receive a fixed amount of severance benefits in regular, monthly installments over a set period of time. All of the calculations concerning the amount and timing of these payments were established in the Employment Agreement. Consequently, there was no need for an administrative scheme because there were no uncertain terms necessitating discretionary determinations. As the severance provision provided in the Employment Agreement does not entail an administrative scheme, it cannot be considered an ERISA "plan."
In addition, "a contract between an employer and individual employee providing for post-retirement or post-termination in-kind compensation is not a 'plan, fund, or program' within the definitional framework of ERISA." Jervis v. Elerding, 504 F. Supp. 606, 608 (C.D. Cal. 1980). Although courts have held that an ERISA "plan" may exist even in cases where it benefits only a single employee, see Biggers v. Wittek Indus., 4 F.3d 291, 297 (4th Cir. 1993) (there is no known requirement that a plan must cover more than one employee to be covered by ERISA), parties who enter into an employment contract which contains an incidental provision to induce continued employment does not constitute a separate and specific retirement "plan" under ERISA. Williams v. Wright, 927 F.2d 1540 (11th Cir. 1991). Consequently, where, as here, the severance benefits were merely incidental to an employment contract, ERISA does not apply. Jervis, 504 F. Supp. at 609.
Thus, as the proposed severance benefits do not require the implementation of an administrative scheme, and were merely incidental to an employment contract, Plaintiff's severance benefits do not constitute a "plan" within the ERISA framework.
B. New York State Contract Claims Regarding Severance Payments
Plaintiff argues, in the alternative, that under New York State law the Plaintiff is entitled to receive severance benefits pursuant to the agreements signed by the parties. For reasons more fully explained below, the Plaintiff is entitled to receive those severance benefits.
When deciding a summary judgment motion involving a contract action, summary judgment can only be granted if the terms of the contract are unambiguous. Sayers v. Rochester Tele. Corp. Supp. Management Pension Plan, 7 F.3d 1091, 1094 (2d Cir. 1993); Leberman v. John Blair & Co., 880 F.2d 1555, 1559 (2d Cir. 1989); Wards Co. v. Stamford Ridgeway Assocs., 761 F.2d 117, 119 (2d Cir. 1985). Whether a contract is unambiguous is a question of law. Sayers, 7 F.3d at 1094; W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639 (N.Y. 1990).
The legal principles surrounding a claim for contract enforcement are well settled. "The primary objective in contract interpretation is to give effect to the intent of the contracting parties 'as revealed by the language they chose to use.'" Sayers, 7 F.3d at 1094 (quoting Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992)). Ordinarily, if parties to a contract memorialize their agreement in a clear and complete document, their writing should be enforced according to the agreed upon terms. W.W.W. Assocs., 565 N.Y.S.2d at 443. Evidence outside the four corners of the document as to the terms intended, but unstated, or misstated, are inadmissible to add to or vary the contract. See id. Hence, the parties, absent fraud or other wrongful conduct, would be bound by the agreement's contents. Da Silva v. Musso, 53 N.Y.2d 543, 444 N.Y.S.2d 50, 54, 428 N.E.2d 382 (N.Y. 1981) (defendants objected to the enforcement of a particular agreement, however, their motion was denied because they had signed the agreement, and the protested clause was two clauses above their signature); Dunkin' Donuts of Am., Inc. v. Liberatore, 138 A.D.2d 559, 526 N.Y.S.2d 141, 143 (N.Y. App. Div. 2d Dep't 1988) (Plaintiff had signed several documents, among them, a guarantee Plaintiff did not realize she signed. Because she signed it and had failed to read it, she was precluded from asserting fraudulent inducement.).
However, there is no question that a contract may be modified if the contract provides for its modification. In the present case, the Employment Agreement contained a modification clause which stated that "no variation hereof shall be deemed valid unless in writing and signed by the parties hereto, and no discharge of the provisions hereof shall be deemed valid unless by full performance by the parties hereto or by a writing signed by the parties hereto." (Janover Decl., Ex. A, P 15 (d)). Hence, the Employment Agreement could be modified. Here, the Extension Agreement validly and successfully modified the Employment Agreement
because both the Employment Agreement and the Extension Agreement were signed by the same parties -- Plaintiff, Axmar and Bernan.
The result of modifying the Employment Agreement by the Extension Agreement is that the clause in the Employment Agreement which required the Plaintiff to cease all work with Bernan in order to receive his severance pay was voided. The Extension Agreement states:
"you and I have subsequently discussed the continuation of my services beyond the effective date of my resignation. . . . Please recognize that the continuation of my employment . . . does not, in any way, revoke my resignation . . . under the employment agreement dated June 24, 1987 or the severance benefits accrued thereunder and the additional benefits granted by AXMAR in our letter agreement dated December 29th, 1989 [(the Severance Agreement)]."