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May 9, 2003


The opinion of the court was delivered by: Jed S. Rakoff, United States District Judge


By this lawsuit plaintiffs — physicians formerly employed by defendant St. Barnabas Hospital ("St. Barnabas") at Lincoln Medical and Mental Health Center ("Lincoln") in the South Bronx — seek benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C.A. §§ 1001-1461 (1999) ("ERISA"), contending that when their former employer terminated their and others' employment it constituted a "partial termination" of St. Barnabas' employee pension plan, an event that would entitle them to benefits that were otherwise forfeited by their termination. Following the completion of discovery and the dismissal on consent of the Fourth Count of the Amended Complaint, defendants moved for summary judgment on the remaining three claims.

The relevant facts, either as undisputed or, where disputed, taken most favorably to plaintiffs, are as follows. Lincoln is operated by the New York City Health and Hospitals Corporation ("HHC"), a public benefit corporation that contracts with medical schools, physician groups, and other hospitals to provide services at its facilities. Beginning in 1993, or even earlier, St. Barnabas sought to be considered by HHC as a contractual provider of medical services. See Deposition of Ronald Gade, sworn to Aug. 16, 2002 ("Gade Dep."), at 21-22, 24; Deposition of John Maher, sworn to Aug. 12, 2002, at 72.

In November 1996, St. Barnabas won an HHC bidding auction to provide medical services at Lincoln from July, 1997 through June, 2000 at a cost to HHC of about $30 million a year. Specifically, St. Barnabas was responsible for hiring and managing 250 employees (physicians and others) to serve the medical needs of the hospital's patients. See Declaration of Jay P. Warren, dated Sept. 17, 2002 ("Warren Decl."), HHC Ex. 3 at JM189; Plaintiffs' Local Rule 56.1 Statement ("Pls.' L.R. 56.1 St.") ¶ 11. Although a final written contract was never executed, the parties proceeded on the basis of agreed-to "deal points." See Warren Decl., HHC Ex. 3 at JM200.

About a year later, in November, 1997, St. Barnabas entered into a much larger agreement with HHC to provide various services from January, 1998 through December, 2000 to inmates in the custody of the New York City Department of Correction housed at Rikers Island and two other facilities (together, "Rikers") for a fee of roughly $100 million per year and involving the hiring of some 1,100 employees. Whereas, at Lincoln, St. Barnabas' services consisted essentially of management of hospitalization services similar to those it performed at its own facility, at Rikers, St. Barnabas was responsible for servicing all the medical, mental health, dental, and ancillary needs of the prison inmates except for hospitalization, which was provided elsewhere and by others. See Declaration of Ronald Gade, dated Sept. 14, 2002 ("Gade Decl.") ¶ 21; Warren Decl., HHC Ex. 39 at AM4439-43; Defendants' Local Rule 56.1 Statement ("Defs.' L.R. 56.1 St.") ¶ 27; Pls.' L.R. 56.1 St. ¶¶ 13, 58.

Employees hired by St. Barnabas, whether for work at Lincoln, at Rikers, or elsewhere, were eligible for participation in the pre-existing Employees' Retirement Plan of St. Barnabas Hospital and Affiliates (the "Plan"). Amended Complaint Ex. A. The Plan requires five years of employment before benefits vest. In December, 1999, however, St. Barnabas informed HHC that it would not extend its affiliation at Lincoln beyond the agreed-to three-year period. Two months later, in February, 2000, St. Barnabas informed HHC that it would likewise terminate the Rikers affiliation at the end of its three-year term. When, as a result, certain employees hired for the Lincoln and Rikers programs, respectively, were let go after three years, the pension contributions that had been made on their behalf were forfeited to the Plan. Plan, art. III, § 6(a).

The instant plaintiffs, all of whom worked at Lincoln (and none at Rikers), challenge that result and seek to recover the pension contributions made on their behalf. To this end, they claim (in the first two counts of the Amended Complaint) that their discharge was pursuant to a "partial termination" of the Plan, in which case, under ERISA, their benefits would vest regardless of their discharge. Specifically, in order to qualify for the favorable tax treatment here obtained by the Plan, such a plan must provide that, "upon its termination or partial termination, . . . the rights of all affected employees to benefits accrued to the date of such termination . . . are non-forfeitable." 26 U.S.C.A. §§ 401(a)(7), 411(d)(3) (2002); see also Plan, art. VIII, § 4, art. XI, § 3.

A partial termination occurs upon "the dismissal of a `significant number of employees' in connection with a major corporate event," Weil v. Ret. Plan Admin. Comm., 750 F.2d 10, 12 (2d Cir. 1984) ("Weil I") (italics omitted), quoted in 913 F.2d 1045, 1048 (2d Cir. 1990) ("Weil II"), vacated in part on other qrounds, 933 F.2d 106 (2d Cir. 1991) ("Weil III"). While there is no absolute measure of what number of employees is considered "significant" for these purposes, the rule of thumb, plaintiffs concede, is 20%, and, indeed, plaintiffs have pointed to no case in which a percentage of less than 20% was considered significant for these purposes absent exceptional or "egregious" circumstances. See Halliburton Co. v. Commissioner, 100 T.C. 216, 237-38, 250-51 (1993) (finding that 19.85% was not significant); accord Weil II, 913 F.2d at 1051-52 (finding that 16.4% was not significant in the absence of "additional factors," and citing cases); see also Admin. Comm. of the Sea Ray Employees' Stock Ownership and Profit Sharino Plan v. Robinson, 164 F.3d 981, 988-89 (6th Cir. 1999) (holding 15.9% insufficient); Kreis v. Charles O. Townley, M.D. & Assoc., 833 F.2d 74, 80 (6th Cir. 1987) (holding 15% and 13.6% insufficient); cf. 29 U.S.C.A. § 1343(c)(3) (1999) (providing that a plan administrator is not required to inform an employer about the departure of plan participants unless it involves at least 20% of plan participants).

Prior to commencing this lawsuit, plaintiffs requested that their former employer declare that there had been a partial termination of the Plan. The Retirement Plan Committee refused, finding that the termination of 187 Lincoln employees out of a total of 1,148 Plan participants (16.29%) was too small to warrant finding a partial termination. Declaration of Richard M. Betheil, dated Oct. 1, 2002 ("Betheil Decl."), Smith Ex. 2 at KW255. While plaintiffs here contend that this calculation was erroneous, they do not contend that a proper calculation limited to Lincoln would exceed 20%.*fn1 Nor are their half-hearted attempts to demonstrate exceptional or "egregious" circumstances sufficient to raise a genuine factual dispute. Specifically, the mere fact that defendants understood that termination of the Lincoln affiliation would result in forfeiture to St. Barnabas of plaintiffs' pension contribution is inherent in every termination case and hardly constitutes circumstances sufficiently exceptional or egregious to override the 20% test. See Kreis, 833 F.2d at 80; Wishner v. St. Luke's Hosp. Ctr., 550 F. Supp. 1016, 1020 (S.D.N.Y. 1982).

Plaintiffs' primary argument, however, is that the Lincoln and Rikers terminations should be viewed as related for these purposes and that the combined result — termination of up to 40% of the Plan's participants — clearly constitutes evidence of a "partial termination" sufficient to avoid summary judgment. Plaintiffs have failed, however, to come forward with material, admissible evidence sufficient to enable any reasonable fact-finder to view the Lincoln termination — which is the one that impacted plaintiffs — as meaningfully related to the subsequent Rikers termination in any way that implicates the "partial termination" doctrine.

To begin with, all the evidence of record indicates unequivocally that St. Barnabas' arrangements with Lincoln and Rikers were separate and different in every relevant respect. They were entered into months apart, they related not only to very different facilities (a hospital and a prison) but also to significantly different services, numbers and kinds of employees, and terms of compensation, they covered different contractual periods, and they ended at different times.

Further, the undisputed evidence is that the immediate causes for the terminations were likewise significantly different — with the termination of the Lincoln arrangement primarily resulting from disagreements with Lincoln's Executive Director, Jose Sanchez, regarding Lincoln's mission and the like and from HHC's refusal of St. Barnabas' request that Sanchez be removed, and the termination of the Rikers arrangement primarily resulting from separate disagreements regarding the Rikers program with HHC's Correctional Health Services Executive Director, Ernesto Marrero, and from dissatisfaction with HHC's evaluation of St. Barnabas' performance at Rikers. See, e.g., Deposition of Frank Cirillo, sworn to Aug. 22, 2002, at 82-83; Deposition of Richard Daines, sworn to Jul. 30, 2002, at 75-77, 79-80, 83-84; Gade Dep. at 80-82, 86, 90-91, 124-28, 177-78; Gade Decl. ¶¶ 45-55, 62-67; Declaration of Robert Wild, dated Sept. 12, 2000, ¶¶ 3-6.

As against this undisputed evidence that the Lincoln and Rikers situations were separate and distinct from inception to termination, plaintiffs rely on what they claim was a decision by Dr. Ronald Gade, St. Barnabas' president, made either prior to or contemporaneously with the Lincoln termination, to terminate all business with HHC because he had come to distrust it.

However, the admissible evidence supporting this inference consists, at best, of the following deposition testimony from Dr. Barry ...

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