(R. at 9, 35-38, 62). At this time Bresee's also attempted to deny plaintiff Black his vested benefits under the Plan. Bresee's did not consult with DiCresce regarding either their 1993 termination of the plan or their attempt to deny plaintiff his vested benefits. (R. at 54-56).
10. In July of 1994 Bresee's ceased its business operations (R. at 37-38).
II. CONCLUSIONS OF LAW
A. Bresee's Liability on Plaintiff's Claims:
1. In its decision from the bench on June 23, 1995, the Court reached the following conclusions of law:
(a). That Bresee's plan fell within ERISA's definition of an employee pension benefit plan. See 29 U.S.C. § 1002(2)(A) ("any plan . . . maintained by an employer . . . that . . . (I) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond. . . ."); Pane v. RCA Corp., 868 F.2d 631, 635 (3d Cir. 1989);
(b). That within the categories of employee pension benefit plans, Bresee's Plan was of the type commonly referred to as a "top hat" plan, because it was unfunded and existed primarily to provide benefits to a select group of management or highly compensated employees.
See 29 U.S.C. § 1101(a). The Court further concluded that, as a top hat plan, the Plan was exempted from the substantive provisions of parts 2, 3, and 4 of Title I of ERISA (regarding participation, vesting, funding and fiduciary responsibility). 29 U.S.C. §§ 1051(2), 1081(a)(3) and 1101(a)1; see Fasco Industries, Inc. v. Mack, 843 F. Supp. 1252, 1255 (N.D. Ill. 1994). Although ERISA's substantive provisions do not apply, however, courts have nevertheless held that such plans remain subject to the enforcement provisions of ERISA. See Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 930-31 (3d Cir. 1985); Fasco Industries, 843 F. Supp. at 1255;
(c). That the federal common law developed under ERISA generally governs the enforcement of top hat plans, See Kemmerer v. ICI Americas, Inc., 842 F. Supp. 138, 142 (E.D. Pa. 1994); Carr v. First Nationwide Bank, 816 F. Supp. 1476, 1485 (N.D. Cal. 1993); see also Barrowclough, 752 F.2d at 935-37, and that the unilateral contract principles that have been applied by federal courts to "qualified" or "funded" pension plans (which are controlled by the substantive provisions of ERISA) may also govern unfunded, non qualified, top hat plans, but only if the terms of these "unilateral contracts" are clear from the formal written plan documents. See Kemmerer, 842 F. Supp. at 142; Carr, 816 F. Supp. at 1485.
Thus, the Court concluded that this Plan's clear and plain terms (see § I, P 1) constituted an offer for a unilateral contract and a participant's performance under the plan's terms created a binding contract. Carr, 816 F. Supp. at 1492; see Restatement (Second) of Contracts §§ 30, 71 (1981);
(d). That it was undisputed in both in the record and at oral argument that plaintiff, by his full performance under all the plan's terms, had fully accepted the unilateral offer embodied in the terms of the Plan.
Accordingly, plaintiff's rights under the unilateral contract had vested, at least contractually, and he was entitled to the benefits promised therein;
(e). That the discontinuance provision in the plan (§ I, P 2) could only operate prospectively, not retrospectively, since only that reading would give lawful meaning to all the provisions in the Plan. This conclusion followed from the following principles: that the plan should be construed as a whole, and the specific language of each provision should be interpreted in the context of the whole, Kemmerer, 842 F. Supp. at 143; Alexander, 967 F.2d 90, 93; that the provisions of an ERISA plan should be construed as to render none nugatory and avoid illusory promises, Kemmerer, 842 F. Supp. at 143; Carr, 816 F. Supp. at 1493; and, that an interpretation which gives a reasonable, lawful and effective meaning to all the terms is preferred to one which leaves any part unreasonable or of no effect. Musto v. American General Corp., 861 F.2d 897, 906 (6th Cir. 1988). In short, after applying the foregoing principles to the Plan's plain language, the Court concluded that "(a short general provision stating that the [employer] 'may' amend cannot operate to nullify numerous other specific provisions regarding how, when and at what rates of interest the [employer] 'shall' repay plaintiffs' deferred income." Carr, 816 F. Supp. at 1493-94. It followed then, that Bresee's attempt to exercise the discontinuance provision could have no effect on those participants who had already fully performed the terms of the agreement, but rather, could effect only those who had failed to fully perform under the agreement.
B. Plaintiff's Damages:
1. Applying the conclusions of law contained in § II, PP 1(a)-(e) to the findings of fact contained in § I, PP 1-3, leads to the conclusion that defendant Bresee's is liable to plaintiff under the terms of the Plan as follows:
(a). Past due payments of $ 800. per month from September 1, 1993 through March 1, 1996 inclusive, equaling: $ 24,800.00
together with interest thereon
from the respective dates of payment, equaling: $ 1,617.98
in the amount of: $ 604.28
for a total award of $ 27,022.26
(b). Payment of $ 800. per month from March 1, 1996 through the earlier of August 1, 2008, OR, the date of Mr. Black's death; and,
(c). If Mr. Black dies prior to August 1, 2003, payment of $ 800. per month from the 1st day of the month following his death through August 1, 2003, to his wife, Rosemarie Black, if living, and, if deceased, to his children, in equal shares, in accordance with plaintiff's election under the plan. (See § I, P 1 supra).
Nothing in plaintiff's medical history, as elicited on cross-examination by defendant at trial alters these conclusions. Likewise, nothing in the pre-1985 amendment Certificates of Participation (Ex. D-11, 12) which defendant produced at trial establishes that plaintiff was not a participant in the Plan, or, that plaintiff was not subject to the 1985 amendment which raised class G benefits to $ 800. Per month.
C. Plaintiff's Attorney's Fees:
On July 25, 1995 plaintiff filed a motion for attorney's fees. In that motion plaintiff fully analyzed and argued the five factors that the Court should consider regarding whether to grant attorney's fees under 29 U.S.C. § 1132(g). See Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 872 (2d Cir. 1987)
; Ford v. New York Central Teamsters Pension Fund, 506 F. Supp. 180 (W.D.N.Y. 1980) aff'd 642 F.2d 664 (2d Cir. 1981). Neither defendant Bresee's nor third-party defendant DiCresce made any response to plaintiff's motion for fees. At trial, only defendant Bresee's addressed plaintiff's renewed fees motion and at that time Bresee's raised no objection to granting the attorney's fees Motion, but objected only to the hourly rate at which plaintiff's attorney had calculated his fees. Finally, in their post-trial briefs defendant Bresee's renewed their objections to the rate of calculation employed, but again raised no argument and pointed to nothing in the record in opposition to granting attorney's fees.
(Deft. Bresee's Post Trial Brief at 20).
The decision of whether to award fees under § 1132(g)(1) lies within the discretion of the district court. See Fase v. Seafarers Welfare and Pension Plan, 589 F.2d 112, 116 (2d Cir. 1978). Notwithstanding both third-parties' complete failure to timely address plaintiff's motion, the Court has fully considered the Chambless factors, albeit with only plaintiff's comprehensive briefing for guidance, and concluded that attorney's fees are appropriate here.
As the § II, part A analysis supra establishes, the Court has found that Bresee's actions toward Black were unlawful, and that their reading of the clause they have purported to rely upon in taking those actions was plainly unreasonable. While the Court is reluctant to characterize Bresee's conduct as plain bad faith, clearly Bresee's conduct reflects a large measure of culpability. The Court is also cognizant that Bresee's actions were undertaken during a time of extreme financial hardship for the corporation: the Court finds it reasonable to believe that an award of attorney's fees here may well serve to deter other financially strained businesses from taking such unreasonable actions when tempted to do so during uncertain economic times. This is particularly true where, as here, a corporation takes unilateral action against an individual plan participant who must then draw on his own resources, if any, to seek review of the action. If the end result is nothing more than an award of that which plaintiff was plainly entitled to some three years ago, there is no downside whatsoever to attempting to preserve corporate assets at the expense of entitled individual employees. As to the next factor, given the Court's conclusions that Bresee's unreasonably sought to deprive plaintiff of his clearly vested and rightful benefits, the relative merits of the parties' positions weighs heavily in plaintiff's favor. Finally, plaintiff has conferred no common benefit on other plan members.
While three of the foregoing four factors weigh heavily in plaintiff's favor, the Court must also consider Bresee's ability to pay. It is clear from the record that Bresee's has discontinued business and therefore its ability to pay is extremely diminished. There is no evidence that Bresee's is completely unable to pay, however, and given the important deterrence values identified above, as well as Bresee's inequitable conduct toward plaintiff, the Court finds that this factor alone should not absolve Bresee's of their obligations in this regard. Balancing the factors the Court finds that an award to plaintiff of one-half his attorney's fees will best satisfy the equities on both sides.
Plaintiff's uncontroverted affidavit indicates that plaintiff's attorneys have expended 116.5 hours on this matter and that their hourly rate is $ 150.00 per hour, for a total of $ 17,475.
The most useful starting point for determining the amount of reasonable attorney's fees is "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 434, 76 L. Ed. 2d 40, 103 S. Ct. 1933 (1983). In general, the rate used in a determination of the amount of attorneys' fees to be awarded "should be calculated according to the prevailing rates in the community 'for similar services by lawyers of reasonably comparable skill, experience and reputation.'" Cefali v. Buffalo Brass Co., 748 F. Supp. 1011, 1018 (W.D.N.Y. 1990) (quoting Chambless v. Masters, Mates & Pilots Pension Plan, 885 F.2d 1053, 1058-59 (2d Cir. 1989), cert. denied, 496 U.S. 905, 110 L. Ed. 2d 268, 110 S. Ct. 2587 (1990)) (emphasis in original).
This Court has previously considered the prevailing rates in the Northern District of New York, as instructed to by Polk v. New York State Dep't of Correctional Servs., 722 F.2d 23, 25 (2d Cir. 1983), and concluded that $ 150. is a reasonable and customary hourly rate for partners practicing in this area. See Greenwich Citizens Comm. v. County of Warren, 1994 U.S. Dist. LEXIS 16144, 1994 WL 631212 (N.D.N.Y. 1994). The Court is mindful also that ERISA presents a practice area of some complexity.
Applying the above rates to the instant case, the Court arrives at the same figure calculated and requested by plaintiff: $ 17,475.00. Reducing this lodestar by half under the balanced factors discussed supra, results in an award to plaintiff of attorney's fees in the amount of $ 8,737.50
D. The Third-Party Action:
In support of its third-party action, Bresee's asserts contribution and indemnification and equitable and promissory estoppel as bases
for its claim to recovery over against DiCresce for the full extent of its liability to plaintiff Black.
Liability as a Fiduciary:
1. While the Second Circuit has indicated that "the traditional trust law right to contribution must also be recognized as a part of ERISA," Chemung Canal Trust Co. V. Sovran Bank/Maryland, 939 F.2d 12, 16 (2d Cir. 1991), it is also clear that generally, "traditional trust law provides for a right of contribution among defaulting fiduciaries." See also, Mertens v. Hewitt Associates, 113 S. Ct. 2063, 2071 (1993) ("Professional service providers such as actuaries become liable for damages when they cross the line from advisor to fiduciary."). It follows, then, that Bresee's might have some basis for recovery, at least on its contribution/indemnification claims, and perhaps on other bases, if DiCresce can properly be characterized as a Plan fiduciary under ERISA principles.
2. A party is a "fiduciary" of a retirement plan:
to the extent (I) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation . . . with respect to . . . such plan, or has any authority or any responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.
29 U.S.C. § 1002(21)(A).
"Whether or not an individual or entity is an ERISA fiduciary must be determined by focusing on the function performed, rather than on the title held." Blatt v. Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987). However, a party "need not have absolute discretion with respect to a benefit plan in order to be considered a fiduciary." Id. On the contrary, fiduciary status exists "with respect to any activity enumerated in the statute over which the [party] exercises discretion or control." Id.; See also, Amato v. Western Union Int'l, Inc., 773 F.2d 1402, 1416-17 (2d Cir. 1985) (ERISA permits employers to wear "two hats" -- employer in some cases and fiduciary in others).
While the term "fiduciary" should be broadly construed, the Court finds that even the broadest construction of the instant record will not support Bresee's contention that DiCresce was a fiduciary of the Plan. Rather, the Court finds Consolidated Beef Industries v. New York Life Insurance, 949 F.2d 960 (8th Cir. 1991), almost indistinguishable, both factually and analytically, from the present case.
First of all, Bresee's Oneonta Department Store, Inc. is expressly designated as "Plan Administrator and Sponsor" in the plan documents, (Ex. D1-2), and nothing in any plan document either refers to DiCresce or purports to invest in DiCresce any discretionary power or control over the plan. While the Court finds as a fact that DiCresce initially approached Bresee's with the Plan proposal, it is equally clear that DiCresce approached Bresee's as a life insurance salesman who was marketing the plan for Bresee's ultimate consideration as to whether or not the plan should be adopted: "the mere marketing of the . . . plan does not implicate fiduciary conduct." Id. At 965; compare Thomas, Head & Greisen Employees Trust v. Buster, 24 F.3d 1114, 1118 (9th Cir. 1994) (distinguishing Consolidated Beef because of the "important distinction between an agent or broker selling uniform commercial products of a reputable insurance company and the sale of deed of trust notes secured by real property with highly individualized characteristics"), cert. denied 130 L. Ed. 2d 881, 115 S. Ct. 935 (1995). The Court notes also that Bresee's called upon other professionals to assess aspects of the plan before adopting it. (§ I, P 6).
Furthermore, the Court finds that DiCresce was not providing "investment advice" as much as he was marketing his company's products, i.e. the life insurance policies which were theoretically to provide the basis for Bresee's Plan. Indeed these policies represent the only plan "investments" and the only "advice" the Court can find in the record is DiCresce's continuing offer to sell his products as a means of funding the Plan. It is likewise undisputed that Bresee's -- the named plan administrator and sponsor -- paid no advisory fee to DiCresce and that the only compensation DiCresce received was his commissions from the sale of the policies.
Much of the conduct that Bresee's points to in seeking to establish DiCresce's status as a fiduciary reflects only DiCresce's ongoing activities in selling and maintaining the Plan participant's life insurance policies.
Nor does DiCresce's involvement in the various Plan amendments advance Bresee's position.
It is undisputed in the record that it was Bresee's who sought each and every amendment, and then only after Bresee's had independently concluded that DiCresce's products were not performing as Bresee's had anticipated. Indeed, nothing reflects Bresee's independent decision-making and DiCresce's lack of discretionary power as much as Bresee's unilateral decision to ultimately cancel their insurance policies with DiCresce and to move all their business (to the extent that it was possible for them to do so at that time) to another agent. (See § I, P 8 supra).
The remainder of the conduct Bresee's points to reflects only routine ministerial actions by DiCresce which do not support a finding that DiCresce acted in a fiduciary capacity.
In short, there is no evidence of DiCresce taking any discretionary action in reference to the plan, or indeed ever having the power to take any such actions.
Liability as a Third Party:
3. Bresee's further claims, however, that even in the absence of any contractual basis for indemnity and contribution, and even assuming that DiCresce was not a fiduciary of the plan, DiCresce can still be liable as a third-party under either equitable or promissory estoppel, or application of some form of non-fiduciary contribution or implied indemnity theories. Given ERISA's broad preemption, however, application of these theories to a third party, based on the instant facts is, at best, troublesome. See, i.e. Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993) ("We have recognized that under 'extraordinary circumstances' principles of estoppel can apply in ERISA cases."); Bigda v. Fischbach Corp., 898 F. Supp. 1004, 1016 (S.D.N.Y. 1995) (holding that "ERISA preempts state law causes of action regarding top hat plans"); Ransom v. Administrative Committee, 820 F. Supp. 1429, 1431 (N.D.Ga. 1993) ("Because ERISA preempts all state law common law claims relating to employee benefit plans, the Court must look to federal law of equitable estoppel to determine if plaintiff's claim is futile); compare, Williams v. Bridgestone/Firestone, Inc., 954 F.2d 1070, 1073-74 (5th Cir. 1992) (disallowing application of estoppel principles); see generally, Diduck 974 F.2d at 288 ("ERISA's preemption clause is 'conspicuous for its breadth' . . . representing Congress' aim to establish as area of 'exclusive federal concern' the regulation of employee benefit plans.") (citations omitted).
Even assuming that such claims are viable under the federal common law of ERISA
as applied to these facts, however, for Bresee's to prevail they would need to have established at trial, at minimum: (i) a misrepresentation or unfulfilled promise by DiCresce; (ii) their own reasonable reliance on that misrepresentation or unfulfilled promise; and (iii) damages flowing from that reasonable reliance. See Haeberle v. Board of Trustees, 624 F.2d 1132, 1139 (2d Cir. 1980) ("The principle of estoppel permits recovery when 'a representation of fact made to a party who relies thereon with the right to so rely may not be denied by the party making the representation if such denial would result in injury or damage to the relying party.' . . . The party who seeks to invoke estoppel [must] prove every element of the doctrine.") (quoting 1 Williston on Contracts, § 139 at 600 (3d Ed. 1957)); Chemung Canal Trust, 939 F.2d 12 ("The 'right of action' for contribution is no more than a procedural device for equitably distributing responsibility for plaintiff's losses proportionally among those responsible for the losses, and without regard to which particular persons plaintiff chose to sue in the first instance.") (emphasis added). The Court finds that as a matter of law, Bresee's has failed to establish the existence of the three necessary estoppel conditions, or, that in any other legal sense, DiCresce is "responsible for the losses" plaintiff has suffered.
(i). Misrepresentation or Promise:
First, third-party plaintiff must show either an affirmative misrepresentation of fact (to invoke equitable estoppel), Lee 991 F.2d at 1010, or a clear and unambiguous promise (to invoke promissory estoppel). Aquilio v. Police Benev. Ass'n of N.Y. State Troopers, 857 F. Supp. 190, 199 (N.D.N.Y. 1994). In this matter, then, Bresee's must show that DiCresce either misrepresented or promised to them that they could cancel plaintiff Black's (or any fully performing participant's) otherwise vested benefits. The Plan clause that Bresee's relies on to make this showing does not establish such a misrepresentation or promise. (see § I, P 2 supra).
That clause, entitled "Future of Program," (emphasis added), speaks only in terms of the "the right to modify or discontinue the plan"16 (Ex. D-1) (emphasis added). In fact, Bresee's did successfully exercise the option outlined in this clause and discontinue the plan as to numerous non-vested employees. There is no evidence in the record that termination of, or non-payment to, vested participants was either discussed or even contemplated by the parties, let alone understood to be embedded in the contested clause.
Furthermore, the Court finds nothing in the clause's plain language or fair implication which could reasonably be interpreted as a representation or reassurance by DiCresce that Bresee's could deny vested benefits to a participating employee who had fully performed under the Plan's terms. Bresee's professed reading partakes more of post hoc wishful thinking than it does of a reasonable and realistic interpretation of their duties and obligations under the unambiguous plan language they had adopted. See Aquilio, 857 F. Supp. at 210 (estoppel claim fails "due to lack of affirmative misrepresentation."); compare, Kane v. Aetna Life Ins., 893 F.2d 1283 (11th Cir.), cert. denied, 498 U.S. 890, 112 L. Ed. 2d 192, 111 S. Ct. 232 (1990) (ERISA-estoppel claim permitted to proceed where plan held ambiguous).
(ii). Reasonable Reliance:
Second, even assuming that the clause could be reasonably understood as a statement by DiCresce to Bresee's that it could deny benefits to a vested participant, Bresee's alleged reliance on that statement alone is simply unreasonable given the facts and circumstances here.
It is undisputed that Bresee's sought to terminate Black's vested benefits some fourteen years after adopting the plan -- and fourteen years after DiCresce's statements were first made. The record further reflects that, at various times, Bresee's consulted both accountants and attorneys in assessing their options under the plan. See § I, P 6). Finally, the record shows that Bresee's three times caused the original plan to be amended, and ultimately severed (at least to the extent that it could) third-party defendant DiCresce's underwriting relationship to the plan.
Plaintiff Black was apparently not vested at the time Bresee's ended its relationship with DiCresce and nothing in the record indicates that Bresee's could not have exercised the clause and terminated the plan (and so any potential obligations to Black) at that time, or indeed at any time prior to Black's vesting. Furthermore, it is clear that at some point during these fourteen years, and certainly upon realizing that the plan was not performing as expected in other respects, there fell upon Bresee's an independent duty to fully explore its lawful options and not to continue to rely solely on a single clause (if indeed this is what Bresee's did). Had Bresee's timely met this duty to themselves and their participating employees, they would have discovered that they presently enjoyed the option of further modifying or terminating the plan, but that they delayed taking such action at their peril. Bresee's failed, however, to undertake any such reasonable inquiry. To the extent that Bresee's professed reliance led to the lapsing of their option to terminate without liability to Black, then, that alleged reliance was simply unreasonable.
(iii). Reliance Damages:
Third, the Court notes that damages from reliance "requires proof of 'irremedial change in position.'" Haeberle, 624 F.2d at 1140 (quoting Philo Smith & Co. Inc. V. US LIFE Corp, 554 F.2d 34, 36 (2d Cir. 1977). As stated above, Bresee's could have exercised the termination clause as to all participants at any time prior to the vesting of that participant's benefits. It is clear that Bresee's sought to terminate the plan at the eleventh hour (and only after Black had performed and sought to enjoy the benefits that had vested in him). (See § I, P 3). There is no evidence that Bresee's ever considered terminating prior to Black's vesting, but stayed their hand in reliance on DiCresce's representations. Rather, the Court finds it far more likely that Bresee's simply failed to appreciate the liabilities represented by the Plan, and then belatedly undertook drastic (and ultimately unlawful) action only because Black's application brought home to them the financial consequences of the plan -- not because they believed that the clause allowed them to delay such action until that point.
In short, the Court finds no credible evidence in the record that Bresee's altered any course of action it undertook, or failed to undertake, in reliance on the termination clause or any other statements by DiCresce.
By way of summary then, plaintiff Black has prevailed on his claims against defendants Bresee's Oneonta Department Store, Inc. Security Plan and Bresee's Oneonta Department Store, Inc., for damages, prejudgment interest and costs in the amount of $ 27,022.26 and attorney's fees in the amount of $ 8,737.50, and future payments as detailed in § II, P B(1)(b) & (c) supra.
Third-party plaintiffs Bresee's Oneonta Department Store, Inc. Security Plan and Bresee's Oneonta Department Store, Inc. have failed to establish that third-party defendant Gary P. DiCresce d/b/a Gary P. DiCresce & Associates, is a fiduciary of the Plan, or is otherwise liable to Bresee's for the damages they owe Black. Therefore, third-party plaintiffs' claims are denied and dismissed.
IT IS SO ORDERED
Binghamton, New York
March 16, 1996
Thomas J. McAvoy,
Chief U.S. District Judge