The opinion of the court was delivered by: VICTOR Marrero, District Judge.
This case is a class action brought on behalf of approximately 250 former employees of Chock Full O'Nuts Corporation ("CFON"), who were involuntarily terminated, other than for cause, disability, sale of a business or death, within two years after the October 18, 1999 acquisition of CFON by Sara Lee Corporation ("Sara Lee"), and who were denied continuing welfare benefits under certain welfare benefit plans established by CFON (the "Class") and administered by various named defendants. The Class was certified by stipulation between the parties, dated December 12, 2001, and So Ordered by the Court on January 28, 2001 pursuant to Fed. R. Civ. P. 23(b)(3). The Class seeks recovery for benefits it alleges defendants wrongfully withheld from its members, and to enforce and clarify its rights to future benefits under the terms of the CFON Severance Policy in accordance with §§ 502(a)(1)(B) and 502(a)(3) of the Employment Retirement Income Security Act of 1974 ("ERISA") and under a pendent state law theory of relief for breach of contract. Plaintiffs Mayra Rubio ("Rubio"), Daniel Powers ("Powers") and Darrel Honick ("Honick"), on behalf of themselves and the Class (collectively, "Plaintiffs" or the "Class"), move for summary judgment pursuant to Rule 56 of the Fed.R.Civ.P. on their claims against all defendants. Defendants CFON, Chock Full O'Nuts Corporation 1988 Severance Policy, Sara Lee, Sara Lee Corporation Employee Benefits Administrative Committee ("EBAC") and Sara Lee Corporation Employee Benefits Appeal Subcommittee ("Appeal Subcommittee") (collectively, "Defendants") cross-move for summary judgment dismissing the claims against them. For the reasons set forth below, Plaintiffs' motion for summary judgment is GRANTED in part and DENIED in part, and Defendants' motion for summary judgment is DENIED in part and GRANTED in part.
As stipulated, there are no material facts in dispute between the parties. (See Stipulation of Undisputed Facts ("Stipulation"), dated June 26, 2002, signed by both parties and So Ordered by the Court; Defendants' Memorandum of Law in Support of Their Motion for Summary Judgment ("Def. Mem."), dated September 18, 2002, at 1; Plaintiffs' Memorandum of Law in Support of Their Motion for Summary Judgment Against All Defendants ("Pl. Mem."), dated September 18, 2002, at 1.). Accordingly, the task before the Court is the proper application of the law to the facts at hand, not deciphering issues of disputed fact. For the purpose of clarity, the Court sets forth the facts of the case it deems most important.*fn1
CFON created the Chock Full O'Nuts Severance Policy (the "Severance Plan") on May 24, 1998. (See Severance Plan, attached as Exh. C. to the Poretz Aff.) During and following their employment at CFON, the Class members were participants in the Severance Plan, as the term "participant" is defined in ERISA. In addition to the Severance Plan, during their employment at CFON, the Class members were eligible to participate in CFON's Life and Accidental Death & Dismemberment Plan, effective June 1, 1995; the 401(k) Plan, effective May 1, 1996; the Group Benefit Plan, effective June 1, 1998; and the Long-Term Disability Benefit Plan, effective June 1, 1998 and corresponding successor plans sponsored by Sara Lee (collectively, "CFON Welfare Plans"). In fact, many Class members were participants in the CFON Welfare Plans.
The Severance Plan was created by CFON to provide severance benefits for employees whose employment is "involuntarily terminated other than on account of Cause, Disability, Sale of a Business . . . or the Employee's death." (Severance Plan § 1.) The essence of the dispute between the parties concerns the interpretation of a specific provision of the Severance Plan, which determines enhanced severance payments and credit for service under the CFON Welfare Plans:
An Employee shall be credited with a number of weeks
of service equal to the number of weeks of Base Pay he
receives or is entitled to receive as a Severance
Benefit Payment for the purpose of determining
eligibility, vesting and accrual service under all
employee benefit plans of the Company, including, but
not limited to, group health and life insurance,
long-term disability, the Chock Full O'Nuts
Corporation Pension Plan, and the Greenwich Mills
Company retirement plan.
(Severance Plan § 7.4.) Defendants and Plaintiffs present two distinct interpretations of this provision of the Severance Plan, resulting in different understandings of what benefits the Class is entitled to under the CFON Welfare Plans upon a qualifying termination.*fn2
The Severance Plan provides that "the Board of Directors of the Company, or a committee appointed by the Board shall be responsible for implementing, administering and interpreting the Provisions of this Policy." (Severance Plan § 11.) The term "Company" is defined in the Severance Plan as "[CFON] and any successor thereto, including, without limitation, any person . . ., partnership (s) or corporation(s) acquiring directly or indirectly all or substantially all of the business or assets of [CFON]." (Severance Plan § 5.6.) Following the merger between CFON and Sara Lee described below, on February 18, 2000, the Board of Directors of CFON, essentially functioning as a board of directors for a division of Sara Lee, adopted certain resolutions ("CFON Resolutions"), which provided that the Sara Lee EBAC "shall be the plan administrator of the Plans*fn3" and that the EBAC
shall have all of the powers, rights and duties
necessary or advisable in order to fully perform the
applicable responsibilities imposed by ERISA upon plan
administrators (including the authority to delegate or
allocate any of those powers in writing in a prudent
and reasonable manner consistent with ERISA); and in
the case of any Plan or related Trust which provides
that the plan administrator shall be the Company or a
committee of this Board, the responsibility of serving
as plan administrator and all of said necessary or
advisable powers, rights and duties are hereby fully
delegated to the [EBAC].
(Stipulation Exh. O at 1-2.) Thereby, the EBAC became a committee appointed by the CFON Board of Directors, which, according to the Severance Plan, was authorized to undertake the responsibility of "implementing, administering and interpreting" the provisions of the Severance Plan.
According the testimony of John Clousing ("Clousing"), . . . Sara Lee's Director of Employee Benefits and Chairman of the Appeal Subcommittee, the EBAC was appointed by the Sara Lee Board of Directors in the late 1970's to administer Sara Lee ERISA plans. (Deposition of John Clousing ("Clousing Dep."), attached as Exh. N to the Poretz Aff. at 257-258.) However, Defendants indicate that they can not locate the original Board Resolution that created the EBAC. (Def. Mem. at 2 n. 2.) The documentation that is provided concerning the EBAC is more recent. On January 27, 1994, the Board of Directors of Sara Lee adopted certain resolutions ("Sara Lee Resolutions") that detailed the duties and composition of the EBAC, giving the EBAC the same authority and responsibilities as the CFON Board of Directors later conferred upon the EBAC in the CFON Resolutions. (Stipulation Exh. H at 1.)
On August 11, 1993, the EBAC, functioning at that time as the administrator of Sara Lee ERISA plans and having as of yet no relationship to CFON, issued "Committee Resolutions" in which the EBAC delegated certain of its appointed responsibilities to the Appeal Subcommittee. (Stipulation Exh. J.) In particular, the EBAC delegated to the Appeal Subcommittee the authority "to review appeals of decisions denying benefits under any other ERISA plan maintained by Sara Lee Corporation or any of its subsidiaries where the amount of the benefits that are subject of the appeal does not exceed . . . $50,000 and to render final decisions with respect to such appeals. . . ." (Id. at 1.) Thereafter, on February 28, 1997, the EBAC again adopted certain resolutions vesting the Appeal Subcommittee with authority to review appeals of benefit denial claims under Sara Lee's ERISA plans. (Stipulation Exh. K.)
Sara Lee acquired CFON in a hostile takeover that resulted in the merger between CFON and Sara Lee on October 18, 1999 (the "Merger"). On that day, Marvin I. Haas ("Haas"), then CEO of CFON, distributed a memo to all 850 employees covered by the Severance Plan (the "Haas Memo"). (Poretz Aff. Exh. F.) The Haas Memo, dated October 15, 1999, provided official notice to employees of the Merger and explained that the Merger would be characterized as a "Change in Control," entitling terminated employees to enhanced benefits under various CFON benefit plans, including the Severance Plan. The Haas Memo also summarized the enhanced benefits employees would be entitled to in light of the "change in control" situation. Among the other benefits discussed, the Haas Memo sets out in some detail the "Enhanced Severance Benefits" under the Severance Plan, listing conditions entitling the employees to the enhanced severance benefits, indicating certain disqualifying conditions, and explaining the means of calculating the enhanced benefits generally, and by way of two illustrations. (Id. at 1.) The Haas Memo asserts that an employee covered by the Severance Plan who is terminated in a "qualifying termination" within two years following a "change in control" is eligible for twice the severance pay of Severance Plan participants severed prior to a change of control. (Id.) In addition, the Haas Memo indicates that the Severance Plan provides participants with certain benefits as to "eligibility to participate, vesting and accrual" under all employee benefit plans of CFON. (Id., at 2.) The nature and extent of these benefits is the subject of the dispute in this case and depends on the interpretation of § 7.4 of the Severance Plan.
In January 2000, various members of the Sara Lee Benefits and Human Resources Department, including Clousing, Vincent Pellettiere ("Pellettiere"), and Julie Dreixler ("Dreixler"), met with outside counsel from McDermott, Will and Emery ("McDermott") to consider the proper application of § 7.4 of the Severance Plan to employees terminated within two years of the Merger, which would qualify them for enhanced benefits under the Severance Plan (the "January 2000 Meeting"). The participants concluded that the Severance Plan did not contemplate extending coverage of CFON Welfare Plans beyond the date an employee is terminated. Rather, the participants in the January 2000 Meeting determined that, based on the language of the Severance Plan, as well as past practice in applying the Severance Plan, § 7.4's reference to credit of weeks of service for purposes of determining "eligibility, vesting and accrual service" refers to a former employee's eligibility for early retirement or pension disability benefits, which frequently require a minimum period of service in order for an employee to be eligible, and not to extended weeks of coverage under the benefit plans.
The first CFON employee who filed a claim under the Severance Plan, whose employment was terminated by Sara Lee without cause after the Merger, was Michael Goldman ("Goldman"). In conjunction with that termination, and based upon the initial determination made by Sara Lee during the January 2000 meeting concerning benefits provided by the Severance Plan, Sara Lee provided Goldman with a letter, dated January 28, 2000, outlining the severance pay and benefits that Sara Lee was offering Goldman. (Stipulation Exh. Q.) Goldman disputed Sara Lee's determination in an email dated February 11, 2000, seeking coverage under all CFON employee benefit plans for the period he would receive severance payments under the Severance Plan. (Stipulation Exh. R.) Thereafter, on February 15, 2000, Pellettiere wrote to Goldman conveying the denial of his request, based on a review of Goldman's claim conducted by himself and Dreixler, two Sara Lee human resources employees.
Goldman continued to dispute his severance benefits and enlisted the help of an attorney, Jonathon Kenter ("Kenter"), then the trustee of the trust for the Severance Plan, who wrote certain letters on Goldman's behalf. (Stipulation Exhs. T, V.) Thereby, Goldman appealed the initial determination of his severance benefits.
On March 17, 2000, the Appeal Subcommittee met to review Goldman's appeal of the denial of his request for continued coverage under the CFON Welfare Plans. In preparation for this meeting, the Sara Lee Benefits Department gathered information relevant to Goldman's claim. The packet of information provided to the Appeal Subcommittee by the Sara Lee Benefits Department contained the Severance Plan, the Haas Memo, and the correspondence to and from Goldman and Kenter concerning Goldman's severance benefits. At the meeting, the Appeal Subcommittee unanimously concluded that the reference in § 7.4 to crediting the employee with a number of weeks of service "for the purpose of determining eligibility, vesting, and accrual service under all employee benefit plans" refers to "eligibility service for participation", which they contended affects only "eligibility to participate" in the CFON Welfare Plans, but did not provide for "continued participation" in the plans for the severance period.
According to Defendants, this determination was based on the language of the Severance Plan, the reasoning behind Sara Lee's initial interpretation of the Severance Plan, the failure of CFON to have modified the CFON Welfare Plans to provide for participation during the severance period, and past practice of CFON, which they understood to have been to deny continued participation in welfare plans to severed employees. On May 17, 2000, Sara Lee sent Goldman a detailed letter, signed by Clousing, explaining the Appeal Subcommittee's denial of his claim for continued coverage through the severance period under the CFON Welfare Plans, and CFON Incentive (Stock Option) Compensation Plan. (Stipulation Exh. X.)
During the two-year period beginning on October 18, 1999, the date of the Merger, Sara Lee terminated the employment of approximately 250 former CFON employees. For each terminated employee, Sara Lee provided the severance pay called for by the Severance Plan. Sara Lee did not provide the terminated CFON employees with continued group medical, dental, life, long-term disability and "all other employee benefit plans" for the same number of weeks as it paid severance pay. Rubio, Powers and Honick, as well as other members of the Class, filed claims to receive continuing coverage under the welfare benefit plans coterminous with their period of severance pay. These claims were denied in subsequent correspondence signed by Clousing ("Denial Letters").
With respect to members of the Class who were terminated after Goldman, the Appeal Subcommittee agreed that the substance of claims by such individuals would likely be identical to Goldman's claim and that it would be futile to require such individuals to go through the appeals process. Accordingly, in connection with the Class members' claims for benefits under the Severance Plan, Sara Lee entered into a stipulation in June 2001, which provides that, if the Class were to appeal denial of their claims under § 7.4 of the Severance Plan, then Sara Lee would apply the same analysis and reach the same conclusion as it reached on Goldman's claim. (Stipulation Exh. Z.) The parties therefore agree that, to the extent there exists a requirement to exhaust administrative remedies before filing suit under ERISA, the Class need not fulfill this requirement and the Appeal Subcommittee's determination of Goldman's claim is deemed to determine any similar claim that would have been made by a member of the Class. Accordingly, in this action, the Class members' challenge the denial of Goldman's appeal to the Appeal Subcommittee as it relates to each of their claims for extended benefits under the Severance Plan.
A. STANDARD OF REVIEW: RULE 56
In connection with a Rule 56 motion, "[s]ummary judgment is proper if, viewing all the facts of the record in a light most favorable to the non-moving party, no genuine issue of material fact remains for adjudication." Samuels v. Mockry, 77 F.3d 34, 35 (2d Cir. 1996) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50 (1986)). In deciding a motion for summary judgment, a court should not attempt to resolve all factual issues; rather, it should weigh facts that are not in dispute in order to see whether they render additional adjudication necessary. The moving party bears the burden of proving that no genuine issue of material fact exists or that due to the paucity of evidence presented by the non-movant, no rational jury could find in favor of the nonmoving party. Gallo v. Prudential Residential Services, L.P., 22 F.3d 1219, 1223 (2d Cir. 1994). The Court must resolve all ambiguities and draw all reasonable inferences in favor of the non-moving party. Id. at 1223.
B. STANDARD OF REVIEW: ERISA
ERISA explicitly authorizes suits against fiduciaries and plan administrators to remedy statutory violations, including breaches of fiduciary duty and of compliance with benefit plans, but does not set forth a standard for court review of a claim for benefits. See 29 U.S.C. § 1132 (a), 1132(f); Firestone Tire and Rubber Co., 489 U.S. 101, 108-109 (1989); Turay v. Aetna U.S. Healtheare, 160 F. Supp.2d 557, 560 (S.D.N.Y. 2001). Guided by principles of trust law, the Supreme Court held that "a denial of benefits challenged under § 1132(a)(1)(B) 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." Firestone, 489 U.S. at 115. In further elaboration of this holding, the Supreme Court explained that under relevant principles of contract law, "[i]f the plan did not give the employer or administrator discretionary or final authority to construe uncertain terms," the court should review the employee's claim as it would have any other contract claim by looking at the terms of the plan and other manifestations of the parties' intent. Id. at 112-113. If an express ...