The opinion of the court was delivered by: DAVID HURD, District Judge
MEMORANDUM-DECISION and ORDER
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.
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 ...