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October 26, 2001


The opinion of the court was delivered by: William C. Conner, Senior District Judge


Plaintiff Jon Gustafson brings this action against defendants Bell Atlantic Corporation and its corporate successors (collectively "the Company"*fn1), NYNEX Pension Plan, NYNEX Health Benefits Plan, NYNEX Separation Allowance Plan and NYNEX Unnamed Plans 1 through 5 under the Employment Retirement Income Security Act, 29 U.S.C. § 1001 et. seq. ("ERISA"), the Fair Labor Standards Act of 1938 as amended, 29 U.S.C. § 201 et. seq. ("FLSA"), New York Labor Law and New York common law. Plaintiff alleges. inter alia, that the Company intentionally mis-classified him as an independent contractor instead of an employee in order to deny him overtime pay, benefits and participation in several of its retirement and healthcare plans, and that the Company's Benefits Claims Committee (the "Committee") unlawfully denied his request for retroactive application of plan benefits

Defendants now move for summary judgment pursuant to FED. R. Civ P. 56. Alternatively, defendants seek indemnification from plaintiffs former company, J.A.G. Services, Inc. ("JAG"), should the Court determine that plaintiff is entitled to any remuneration from the Company. Plaintiff cross-moves for partial summary judgment, seeking a declaration that he was a common law employee and therefore entitled to benefits under ERISA, the FLSA and New York law. For the reasons that follow, defendants' motion is granted in part and denied in part, and plaintiffs motion is granted in part and denied in part.


At least since 1977, the Company has used chauffeur services to provide transportation for its senior executives, enlisting both Company staff drivers ("employee chauffeurs") and independent contract drivers ("contract chauffeurs"), but calling both "executive chauffeurs." From March 1987 until May 1988, plaintiff was a chauffeur at County Limousine ("County Limo"), who provided the Company with chauffeur service. At that time, the Company had two employee chauffeurs. When the Company used an independent contract driving vendor such as County Limo, the vendor sent different drivers for Company executives, retained all authority over those drivers and provided and maintained the cars those drivers used.

While at County Limo, plaintiff sometimes drove Joseph Walsh, then Vice President ("VP") of Personnel for the Company. In early 1988, Walsh and Paul Scarpelli, Manager of the Company's Executive Transportation Department ("ETD"), discussed with plaintiff the possibility of his becoming an employee chauffeur for the Company. However, the Company did not offer plaintiff such a position.

Sometime in 1987, the Company changed its policy and directed that all non-employee chauffeurs become independent contract chauffeurs. The Company required these drivers to form their own corporations, which were required to carry workers' compensation, unemployment compensation and non-owners liability insurance. The Company then contracted with these corporations for their driving services, using standard contracts the Company's legal department had drafted. In May 1988, before incorporating his own corporation JAG, and without a written contract, plaintiff began driving for the Company as a contract chauffeur. Plaintiff incorporated JAG shortly thereafter, and at all times was its sole owner, officer and employee.

In May 1988, the company had retained its two employee chauffeurs and had hired five contract chauffeurs. Unlike contract chauffeurs, employee chauffeurs were salaried and received 1 1/2 times pay for overtime, received a clothing allowance and dry cleaning services and were eligible for all benefits and plans the Company offered. In all other respects, the Company treated employee and contract chauffeurs identically: the Company provided, insured and maintained all cars used; required the same dress code of all drivers; listed all drivers in the Company directory; gave all drivers gasoline credit cards, EZ passes and beepers; reimbursed all drivers for all out-of-pocket expenses including parking, tolls and cleaning and washing the cars; and assigned drivers either as "pool" or "designated" chauffeurs.

A pool chauffeur was not assigned directly to one person. Thus, if no assignment was given, the drivers remained in the chauffeur room waiting to drive executives or to perform other tasks that Scarpelli assigned. A designated chauffeur drove only for one executive, and his schedule was determined by that of the executive. A designated chauffeur was expected to be available on weekends, and plaintiff asserts that when not driving, a designated chauffeur was not at liberty to pick up other fares, which the Company disputes. Plaintiff began as a pool driver but later was assigned as a designated driver to Richard Jalkut, Executive VP of the Company and then to Frank Salerno, the Company's President and Chief Financial Officer.

In 1989, 1991, 1993, 1994, 1995 and 1996, the Company and JAG entered into successive contracts wherein JAG agreed to comply with all Occupational Safety and Health Act ("OSHA") rules and regulations, all applicable federal and state laws and all Equal Employment Office ("EEO") provisions. JAG also agreed to pay all employee taxes, carry all applicable insurance and indemnify the Company "against losses, claims, demands, payments, suits, actions, recoveries and judgment of all nature and description, out of or in any manner caused by the performance of any services or the providing of any materials under this agreement by [JAG]." (Krasnow Aff., Exs. I-L.)

The Company at all times classified plaintiff as an independent contractor, paying him a flat hourly rate with no overtime and providing a meal allotment for days he worked. Plaintiff submitted form invoices to the Company reflecting the hours he worked and the expenses he incurred, the Company paid JAG, and JAG paid plaintiff his wages. Plaintiff incorporated JAG as an "S" Corporation and issued himself (via JAG) Internal Revenue Service ("IRS") W-2 form for all local, state and federal taxes.

On July 24, 1997, sitting en banc, the Ninth Circuit Court of Appeals decided Vizcaino v. Microsoft Corp., 120 F.3d 1006 (9th Cir. 1997). In that case, the IRS informed Microsoft that certain workers classified as independent contractors were actually common law employees. Id. at 1008. Microsoft agreed, issued the workers W-2 forms and paid the IRS for taxes it had mistakenly withheld. Id. Plaintiff avers that, "as a result of the publicity over [that] case, plaintiff learned that he was actually a common law employee and that he should have been paid overtime and granted benefits by the Company." (Pl. Rule 56.1 Stmt. ¶ 156.) Plaintiff thereafter retained his present attorney and on June 11, 1998 wrote the Company seeking back overtime pay and benefits. On June 18, 1998, the Company denied plaintiffs requests and on January 27, 1999, the Committee denied his appeal. Plaintiff filed the instant Complaint on November 13, 1998.


I. Summary Judgment Standard

Under FED. R. CIV. P. 56, summary judgment may be granted where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 247-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The burden rests on the movant to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine factual issue exists if there is sufficient evidence favoring the nonmovant for a reasonable jury to return a verdict in his favor. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. In deciding whether summary judgment is appropriate, the court resolves all ambiguities and draws all permissible factual inferences against the movant. See id. at 255, 106 S.Ct. 2505. To defeat summary judgment, the nonmovant must go beyond the pleadings and "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The court's role at this stage of the litigation is not to decide issues of material fact, but to discern whether any exist. See Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1224 (2d Cir. 1994).

II. ERISA Claims

A. Standard of Review

As a threshold matter, it is necessary to determine the appropriate standard for reviewing the Committee's denial of plaintiffs claim to benefits. A decision to deny benefits "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". Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). If a plan grants such authority, "denials are subject to the more deferential arbitrary and capricious standard, and may be overturned only if the decision is without reason, unsupported by substantial evidence, or erroneous as a matter of law." Kinstler, 181 F.3d at 249 (internal quotations omitted) (quoting Pagan v. NYNEX Pension Plan, 52 F.3d 438 (2d Cir. 1995)). To determine the appropriate standard of review in the instant action, we must determine whether the Plans grant discretionary authority to the Committee.

"The plan administrator bears the burden of proving that the arbitrary and capricious standard of review applies . . ." Kinstler, 181 F.3d at 249. Defendants argue that each Plan vests full and final discretionary authority in its Plan Administrator. (Defs. Mem. Supp. Summ. J. at 15.) As an example, they cite ¶ 14.12 of the NYNEX Management Pension Plan, which vests in the Plan Administrator:

the sole and absolute discretion (a) to construe the terms of the plan, and (b) to determine eligibility for benefits and the amount of benefits provided under the Plan, and any such determination by ...

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