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OWEN v. WADE LUPE CONSTRUCTION COMPANY

July 14, 2004.

AMELIA OWEN, Individually and as Trustee and Beneficiary of the Wade Lupe Construction Company, Inc. Employee Benefit Plan, Plaintiff,
v.
WADE LUPE CONSTRUCTION COMPANY, INC.; and ROBERT LUPE, as Trustee and/or Administrator of the Wade Lupe Construction Company, Inc. Employee Benefit Plan, Defendants.



The opinion of the court was delivered by: DAVID HURD, District Judge

MEMORANDUM-DECISION and ORDER

I. INTRODUCTION

  Plaintiff Amelia Owen ("Owen" or "plaintiff"), individually and as a trustee and beneficiary of the Wade Lupe Construction Company, Inc. Employee Benefit Plan ("Plan"), brought suit against Wade Lupe Construction Company, Inc. ("WLC") and Robert Lupe ("R. Lupe") (collectively, "defendants"), as Trustee and/or Administrator of the Plan,*fn1 alleging that an interpretation he made of Plan documents resulted in an improper allocation of benefits to her and certain Plan participants, in violation of the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. ("ERISA").*fn2

  Defendants asserted two counterclaims, alleging that Owen: (1) in 1998 or 1999, intentionally overstated her earnings to the Plan in order to secure higher benefits; and (2) under a separate agreement, breached her obligation to take the necessary steps, and incur the costs, for termination of the Plan.

  Plaintiff filed a motion for summary judgment on liability with respect to her claims, and for summary judgment dismissing the counterclaims. Defendants filed a motion for summary judgment dismissing the complaint, and opposed her summary judgment motion on their counterclaims. Oral argument was heard on January 23, 2004, in Albany, New York. Decision was reserved.

  II. FACTUAL BACKGROUND

  Owen and R. Lupe are sister and brother. Their parents operated a number of family-owned construction and real estate businesses, including WLC. In 1967, WLC, along with various other entities, formed the Employee Benefit Plan, under which a participating employer was defined as WLC, any successor to its ownership, or any other businesses which assume in writing the obligations of the plan. In 1973, Owen's and R. Lupe's father died, followed three years later by the death of their mother. The siblings inherited the businesses in equal undivided shares, resulting in 50% ownership each of WLC, Hexam Gardens Construction Company, Inc. ("HG"), and Wade Lupe Town Houses, Inc. ("WLTH").

  Initially, Owen and R. Lupe operated the businesses together, with both serving as officers and directors in all three companies. In 1980, a document entitled "Adoption Agreement" was signed by both, amending the terms of the Plan. In the document, it is stated that "[t]he Employer is doing business under the name of [WLC], [HGC], and [WLTH], 100 Cardell Road, Schenectady, New York 12304." (Docket No. 12, Ex. B.) Section 2.18 of the Plan was "amended to read as follows: The Employer named in the Adoption Agreement which shall also include all members of a controlled group of corporations as further defined in Section 1563(a)4 and e(3)(c)." Id.

  In 1984, the Plan was again amended, and this time defined "employer" as WLC "and any Participating Employer which shall adopt this Plan; any successor which shall maintain this Plan; and any predecessor which has maintained this Plan." (Docket No. 12, Ex. C, § 1.18.) The Plan provided that a company "may adopt" the Plan "by a properly executed document evidencing such intent and will." Id. § 12.1.

  In August of 1989, Owen and R. Lupe decided to end their equal ownership in all three companies and divide the companies, as a whole, as equally as possible. R. Lupe attained sole ownership over WLC and HG, and Owen received the same over WLTH. Each resigned from any officer or director position he or she held with the company or companies the other received. This resulted in certain employees of WLC, including Owen, being "terminated" and then placed on the payroll of WLTH. At this time, the two wanted to terminate the Plan altogether, but could not because it was severely underfunded.

  The division of assets was memorialized in April of 1991, when the two signed what they refer to as the Omega Agreement. In that document, they agreed that "[t]he pension plan shall not be terminated, and its obligations shall be divided between the appropriate member(s) of [R. Lupe's] Group and [Owen's] Group." (Docket No. 12, Ex. D, § 3.5.)

  On June 30, 1994, R. Lupe, acting as Plan Administrator, provided plan participants with notice of intent to terminate the Plan, and froze benefits as of that day. Everyone agreed termination was in the best interests of all involved, but IRS issues prevented it from then occurring.

  In 1995, the Plan was again amended, but the definition of "employer" stated in the 1984 amendment remained unchanged. The amendment to the Plan, however, was made retroactive to July 1, 1989, because, according to defendants, that is the day on which the employees "terminated" on August 11, 1989, were considered to have ceased working for WLC. The Plan Administrator was given "the power and discretion to construe the terms of the Plan and to determine all questions arising in connection with the administration, interpretation, and application of the Plan," as well as the authority to "reconcile any inconsistency" in the Plan. (Docket No. 12, Ex. E, § 2.6.)

  After the IRS issues were resolved, R. Lupe again issued the notice of intent to terminate the Plan. That same day, WLC passed a corporate resolution, purporting to terminate the Plan. WLC then retained an actuary, who prepared calculations for the distribution of benefits to participants. The initial calculations proceeded on the assumptions that only WLC was a participating employer at the time the Plan was terminated, and that Owen and her WLTH employees had their participation terminated as of July 1, 1989. In other words, after July 1, 1989, R. Lupe and his employees at WLC continued to accrue benefits, but Owen and her employees did not.

  R. Lupe sent the distribution calculations to Owen. Predictably, and perhaps understandably, she vehemently objected to the distributions, and requested alternative calculations on the assumption that all of the companies were participating employers at the time benefit rates were frozen in 1994. The actuary presented the siblings with three alternatives, the first of which was preferred by R. Lupe and involved crediting Owen's employees with service up to August 11, 1989, the date the two decided to divide up the ...


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