MEMORANDUM DECISION AND ORDER
BARRINGTON D. PARKER, JR., U.S.D.J.
Plaintiff, International Paper Company ("International Paper"), brought this action seeking enforcement of a noncompete agreement signed by Mark A. Suwyn ("Suwyn"), a former Executive Vice President of International Paper. International Paper also asserted claims against Suwyn and Louisiana-Pacific Corporation ("Louisiana-Pacific") for breach of fiduciary duties and tortious interference with contract. Defendants, in turn, asserted a number of counterclaims seeking payments purportedly due Suwyn under various benefit and bonus plans offered by International Paper.
All claims in this action were previously tried to this Court. In an Opinion dated June 19, 1997, this Court denied plaintiff's application for injunctive relief and dismissed plaintiff's breach of fiduciary duty and tortious interference claims. See International Paper Co. v. Suwyn, 966 F. Supp. 246 (S.D.N.Y. 1997). For the reasons stated below, defendants' counterclaims are likewise dismissed. The Court's Findings of Fact and Conclusions of Law on defendants' counterclaims follow.
This action has been the subject of a number of prior opinions, familiarity with which is assumed. See International Paper Co. v. Suwyn, 951 F. Supp. 445 (S.D.N.Y. 1997); International Paper v. Suwyn, 966 F. Supp. 246. A brief overview of the facts relevant to the counterclaims follows.
International Paper is a multinational paper and forest products company with approximately 81,500 employees. From March 1, 1992 until January 2, 1996, Suwyn was an Executive Vice President of International Paper, responsible for overseeing the company's forest products, specialty products, and distribution businesses. Before Suwyn accepted his position with International Paper, he received a letter dated January 20, 1992 ("Employment Letter") signed by John Georges, International Paper's then Chief Executive Officer and Chairman, referring to International Paper's various retirement, benefit, and incentive compensation plans. Specifically, the letter provided that (1) Suwyn's base salary would be $ 280,000; (2) Suwyn would be "eligible to participate" in International Paper's Management Incentive Plan ("MIP") with a "target award" of $ 172,000; (3) he would be "eligible to participate" in International Paper's Performance Share Awards ("PSA") program; and (4) he would receive an Executive Continuity Award ("ECA"). Shortly after Suwyn commenced his employment at International Paper, he received a binder of materials describing the company's benefit and retirement plans.
The MIP referred to in the Employment Letter is International Paper's annual incentive compensation plan, pursuant to which senior executives are awarded annual bonuses. The MIP pays those bonuses from an award fund which is based on the achievement by International Paper of certain financial and nonfinancial objectives. The funding for bonus awards for a given calendar year occurs in the following January and is based on two factors. First, the award fund is established only if a specified level of net after-tax earnings and predetermined targets for qualitative nonfinancial performance factors, such as quality, safety, and employee development, are achieved by year end. Second, if those financial and nonfinancial targets are achieved, the amount in the award fund is calculated by aggregating target bonus levels that have been pre-established for each eligible MIP participant. The Committee then determines the bonus, if any, to be awarded to each MIP participant,
and bonus award packets are assembled for each participant and forwarded to senior managers for distribution to those participants on a selected date. In each year since 1992, MIP awards were made during the second week of February following the bonus award period.
The MIP explicitly provides that awards will not be paid to plan participants if "employment with the Company is terminated for reasons other than death, disability or retirement prior to actual payment of an award under this Plan." Upon receiving notification that Suwyn's employment with International Paper had terminated as of January 2, 1996, the Committee automatically removed Suwyn as an MIP bonus recipient with respect to 1995.
The LTICP, for which, according to the Employment Letter, Suwyn was eligible, authorizes grants of restricted stock, stock options, and stock appreciation rights to selected senior managers. The LTICP provides for the granting of Performance Share Awards, which are based predominantly on the performance of International Paper relative to other companies over a five-year performance award period ("Award Period"). In or around the December preceding the start of each Award Period, a target number of shares is contingently granted to each eligible employee. According to Rosemary Schmitt, who worked with the Committee in its administration of the company's executive compensation programs, if the conditions to the PSA plan and the performance goals are met as determined by the Committee in the April following the end of the Award Period, the Committee fixes the number of previously granted "contingent" shares as "earned" by each participant. One-half of those shares become unrestricted at that time; the other half become unrestricted at the earliest of death, permanent disability, retirement after the age of 62, or the third anniversary of the date of the determination of the award.
Executive Continuity Awards, which are also authorized under the LTICP, are, according to Schmitt, "designed to motivate and reward a small select group of top International Paper executives and to align their interest with that of shareholders by directly linking their long-term compensation to an increase in [International Paper's] stock price." The ECA program contemplates tandem grants of restricted stock and stock options, each of which is evidenced by an agreement signed by the recipient ("ECA agreement"). For each share of restricted stock granted, the executive is granted an option to purchase five shares. If the executive exercises the option after a certain date -- which for Suwyn was the date at which he turned 62 -- but before the employee attains the age of 65, and while he is an employee of International Paper, he receives the shares underlying the option free and clear. If the participating employee does not exercise the option, the shares underlying the restricted stock grant become unrestricted when the employee reaches age 65. According to Schmitt, the ECA program is a type of "golden handcuff" program which rewards executives only if they remain with International Paper over an extended time period.
During his employment at International Paper, Suwyn received two grants under the ECA program, consisting of a total tandem award of 20,000 shares of International Paper restricted stock and 100,000 International Paper stock options. Each time Suwyn received an ECA, he executed an agreement incorporating by reference the terms and provisions of the LTICP. Paragraph 4(a) of each such agreement states, in relevant part, that "if Executive ceases to be an active employee of the company prior to age 65, for any reason other than death or disability . . ., all of the Restricted Shares under this Agreement shall be canceled and forfeited unless the Committee determines otherwise."
After Suwyn had accepted the position of Executive Vice President and had been working for International Paper in that capacity for over two years, Georges decided to implement a policy requiring select employees to execute a noncompete agreement ("the Noncompete"). The Noncompete, as presented for signature, would have restricted its signatories from leaving International Paper and, for eighteen months, joining any company that competed with International Paper. Suwyn initially refused to sign the Noncompete. After extensive discussions with Georges regarding the agreement's application, Suwyn signed the Noncompete and returned it to Georges with a cover letter which Suwyn claimed modified the terms of the underlying agreement.
On January 2, 1996, Suwyn tendered his resignation and joined Louisiana-Pacific as its Chairman and Chief Executive Officer. On January 10, 1996, International Paper brought this action seeking, inter alia, enforcement of the Noncompete. Defendants subsequently asserted a number of counterclaims seeking a declaratory judgment that (1) under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), International Paper must deliver the 20,000 restricted shares awarded under the ECA no later than the date Suwyn attains the age of 65; (2) Suwyn is entitled to recover 5,444 shares of International Paper common stock, pursuant to the PSA; (3) Suwyn is entitled to an MIP award for 1995 under three alternative theories: breach of oral contract, implied contract, and quantum meruit; and (4) Suwyn is entitled to receive his 1995 MIP bonus under Article 6 of New York Labor Law § 190. International Paper subsequently moved to dismiss all of defendants' counterclaims. This Court, upon consent of all parties, consolidated plaintiff's motion with the trial on the merits.
A. The Executive Continuity Awards Program
Suwyn seeks a declaration that the contingent restricted shares granted to him pursuant to the ECA program are due him when he attains the age of 65. While acknowledging that both the LTICP and the ECA agreements he signed contained provisions pursuant to which the awards would be forfeited if Suwyn "ceased to be an active employee of the Company prior to age 65," Suwyn contends that the ECA program is a "pension plan" governed by ERISA and, as such, those forfeiture provisions are void. See 29 U.S.C. § 1053.
ERISA defines an "employment pension plan" generally as:
any plan, fund or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both to the extent that by its express terms or as a result of surrounding circumstances such plan, fund or program --
(i) provides retirement income to employees, or