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LAVERTY v. SAVOY INDUS.

February 4, 1997

WILLIAM J. LAVERTY, Plaintiff, against SAVOY INDUSTRIES, INC., and JOHN SELZER, and JOHN R. GIOIOSO as fiduciaries of the SAVOY INDUSTRIES, INC. Employee Benefit Plan, Defendants.

David N. Edelstein, U.S.D.J.


The opinion of the court was delivered by: EDELSTEIN

EDELSTEIN, District Judge:

 Currently before the Court is defendants' motion for summary judgment dismissing Plaintiff's first cause of action, pursuant to Federal Rule of Civil Procedure 56 ("Rule 56"). For the following reasons, defendants' motion is granted.

 BACKGROUND

 Plaintiff William J. Laverty ("Laverty" or "plaintiff") had been an employee and officer of defendant Savoy Industries, Inc. ("Savoy") since 1975. (Memorandum of Law in Support of Defendants' Motion for Summary Judgment on the First Cause of Action of the Complaint, Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("Dfts. Memo") at 2 (April 27, 1995)); (Affidavit of William J. Laverty, Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("Laverty Aff.") P 3 (May 4, 1995).) In the spring of 1982, Laverty and Savoy negotiated an individual agreement pertaining to Laverty's future with Savoy. (Dfts. Memo at 2); (Plaintiff's Statement Pursuant to Local Rule 3(g), Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("Pltf. 3(g) Stmt.") PP 2-5 (May 4, 1995)); see generally (Laverty Aff.) Laverty and Savoy signed this Agreement on July 28, 1982. (Employment/Consulting Agreement between Savoy Industries, Inc., and William J. Laverty, Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("the Agreement") (July 28, 1982).)

 The Agreement states that Savoy "believes that it is in its best interest to assure the continued services of Mr. Laverty on the terms and conditions hereinafter set forth," id. at 1, then lists these terms and conditions in three "Articles". Article I, titled "EMPLOYMENT," sets forth the then-current compensation arrangement as consideration for Laverty's continued services. Id. Art.1 (1). Specifically, Article I sets forth the term of Laverty's employment under the Agreement, id. Art. I(2), the "compensation for services rendered" under the Agreement, id. Art. I(3)(A), the formula by which this compensation was to increase during subsequent years, id. Art. I(3)(C), and the reimbursement of Laverty's business-related travel and entertainment expenses, such as company car and credit cards. Id. It further states that, during the term of his employment under the Agreement, Laverty was "entitled to receive or participate in all other fringe benefits, such as medical and hospital plans, profit-sharing plans and pension plans, which [Savoy] may generally make available to its executive employees. . . ." Id. Article I also establishes the nature of Laverty's duties as "an executive employee" of Savoy. Id. Art. I(4). Article I further provides for the amount of payments to be made in the event of Laverty's illness, disability, incapacity, id. Art. I(5), or death. Id. Art. I(6). Finally, Article I states that, "beginning January 1, 1983, Laverty shall reduce his services to [Savoy]" and adhere to the following reduced-work schedule: during 1983, four days per week for 80% salary; during 1984, three days per week for 60% salary. Id. Art. I(7)(A)(B). During this period of "reduced services," Laverty was considered "to be an employee of [Savoy] and [was] entitled to receive all benefits of employment. . . ." Id. Art. I(7)(c).

 Article II of the Agreement, entitled "CONSULTING," provides for a change in Laverty's status with Savoy. It states that he "shall retire from his employment on July 28, 1984, and shall thereupon act as a consultant to the Company." Id. Art. II(1). This article then sets forth the amount of the "consulting fee" to be paid to Laverty, id. Art. II(2)(A, and the formula by which such fee was to increase in subsequent years for the balance of Laverty's "actuarial life." Id. Art II(2)(B). This section further provides that, as a consultant, Laverty was entitled to the same or similar medical and life insurance that he had received while an employee, id. Art. II(2)(E), and to reimbursement of all travel and business expenses incurred in the performance of his duties. Id. Art II(2)(G). Article II also establishes the amount of the consulting fees to be paid to Laverty by Savoy in the event if Laverty's physical or mental incapacity, id., as well as in the event of his death. Id. Art. II(2)(C), (H). In addition, Article II sets forth the method by which Savoy was to make all payments due under this section. Id. Art. 11(D). For so long as he was receiving the consulting fee, Laverty was to remain a consultant to Savoy. Id. Art. II(2)(G).

 Article III of the Agreement is headed "MISCELLANEOUS," and includes a covenant not to complete which governed Laverty's actions both as an employee and as a consultant. Id. Art. III(2). The non-compete covenant provides that Laverty

 
will not directly or indirectly own or control an interest in (except as a passive investor owning less than five (5%) percent of the equity securities of a publicly owned company) or be an employee of or be associated with any individual partnership, joint venture, corporation or other business entity directly or indirectly engaged anywhere in the United States in any business competing with the business carried on by [Savoy] or any of its subsidiaries prior to the date of Mr. Laverty's retirement.

 Id. Violation of this provision would result in the immediate termination of Laverty's right to the consulting fee and other benefits provided to him as a consultant. Id. Art. III(1); Art. II(2)(F).

 Article III further states that "the only grounds upon which [Savoy] may terminate this Agreement and its obligations to Mr. Laverty hereunder are if Mr. Laverty willfully breaches [the covenant not to compete] or is guilty of willful and material malfeasance or misfeasance. . . ." Id. Art. III (1). It also provides that the Agreement "supersedes and replaces any and all present written or oral agreements of employment between the parties, hereto, and all such agreements are hereby deemed cancelled, revoked and of no further force or effect." Id. Art. III(4). Finally, Article III states that the "agreement constitutes the whole agreement between the parties hereto and there are no terms other than those stated herein." Id. Art. III(6).

 Savoy's Board of Directors unanimously approved the Agreement at a meeting held on August 26, 1982. (Dfts. Memo at 5.) Through August 1984, Savoy paid Laverty his salary as employee and officer as required by the Agreement. Id. at 6. From August 1984, through November 1988, Laverty received his monthly checks from Savoy, as well as his medical and life insurance benefits. Id.; (Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment on the First Cause of Action of the Complaint, Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("Pltf. Memo") at 3 (May 5, 1995).) According to plaintiff, on or about December 1988, Savoy unilaterally terminated its payments to Laverty. (Pltf. Memo at 3.)

 Laverty filed the instant suit on May 30, 1989, alleging several contractual causes of action, as well as claims against Savoy and three of its present and former directors for supposed violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (Complaint, Laverty v. Savoy Indus., Inc., 89 Civ. 3728 ("Complaint") (May 22, 1980).) Laverty's ERISA claim, the only claim presently before this Court, hinges on the theory that the Agreement is an "employee benefit plan" under ERISA, id. P 8, that Laverty is entitled to retirement benefits under this plan, id. PP 9-12, and that defendants have failed to provide Laverty with his benefits, rendering them liable for breach of fiduciary duty. Id. PP 13-14. Laverty seeks a judgment declaring that he is entitled to pension benefits under the Agreement, as well as various fees and costs associated with defendants' alleged breach and plaintiff's costs of bringing this action. Id. PP 15-20.

 In response to Laverty's ERISA argument, defendants counter that the Agreement is an individually-negotiated personal services contract, and that "whatever ambiguities may exist in the reach of ERISA's mandate, it does not extend to an individually negotiated personal services contract whose stated purpose is to provide a compensation arrangement for the continued services of Mr. Laverty. . . ." (Dfts. Memo at 2.) Accordingly, defendants seek ...


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