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Daniel E. Gill, et al v. Bausch & Lomb Supplemental Retirement Income Plan I

June 10, 2011


The opinion of the court was delivered by: Marian W. Payson United States Magistrate Judge



By Order of Hon. Charles J. Siragusa, United States District Judge, dated September 30, 2009, all pretrial matters in the above-captioned case have been referred to this Court pursuant to 28 U.S.C. §§ 636(b)(1)(A)-(B). (Docket # 27).

Plaintiffs Daniel Gill, Thomas McDermott and Jay Holmes have filed this action against defendants Bausch & Lomb Supplemental Retirement Income Plan I, Bausch & Lomb, Inc., and the Compensation Committee of the Bausch & Lomb Board of Directors, under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq . ("ERISA"). (Docket # 1). Plaintiffs, retired senior officers of Bausch & Lomb, Inc. ("B&L"), allege that defendants unlawfully reduced their vested benefits in B&L's Supplemental Retirement Income Plan I ("SERP I" or the "Plan") at the time B&L was acquired by another company. Specifically, plaintiffs challenge B&L's issuance at that time of lump sum payments to each of them, which they contend were less than the present value of the benefits to which they were entitled.

On September 29, 2009, United States District Judge Charles Siragusa issued a decision granting in part and denying in part defendants' motion to dismiss the Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Docket # 24). Following the dismissal of Count Two, plaintiffs' sole remaining claim is one for wrongful reduction of benefits under 29 U.S.C. § 1132(a)(1)(B). ( Id .). Judge Siragusa denied as premature defendants' motion to dismiss that claim, Count One, noting that further discovery was necessary. ( Id . at 7). The parties now dispute the permissible scope of that discovery. (Docket ## 33, 36).


I. The SERP I Plan

In the 1980s, B&L created the SERP I pension plan in order to recruit and retain senior executives. (Docket # 1 at ¶¶ 27-29). The Plan required B&L to establish and maintain a separate, irrevocable trust for each participant and to fund each trust with periodic contributions. ( Id . at ¶¶ 30-31). Under the Plan, each participant was to receive annual after-tax benefits of up to 36% of the participant's "Final Average Compensation" (as defined by the Plan) paid in equal monthly installments over the course of the participant's life. ( Id . at ¶ 35). The Plan further provided that following a participant's death, his or her surviving spouse was to receive 50% of such benefits for life. ( Id . at ¶ 36). Each trust agreement contained a provision authorizing the trustee to pay B&L any excess assets remaining in the trusts after final payment to the participants and their surviving spouses under the Plan. ( Id . at ¶ 33; Docket # 37-5 at 69).

Plaintiffs are former B&L senior executives and were the only three participants in SERP I. Plaintiff Gill retired in 1996; plaintiff McDermott retired in 1993; and, plaintiff Holmes retired in 1997. (Docket # 1 at ¶¶ 38-40). Following retirement, each plaintiff began receiving monthly benefits under SERP I.

In May 2007, B&L announced its agreement to sell its outstanding shares of common stock to Warburg Pincus, a global private equity firm. ( Id . at ¶ 42). On September 19, 2007, B&L advised plaintiffs that shareholder approval of the Warburg acquisition would trigger the "change in control" provision in the Plan, pursuant to which their monthly payments would be converted into one-time lump sum payments and their rights in the Plan would be terminated. ( Id . at ¶¶ 43, 45). On September 21, 2007, B&L's shareholders voted to approve the acquisition, and, on October 3, 2007, B&L directed the trustee to cease the monthly payments and to issue lump sum cash payments to each of the plaintiffs. ( Id . at ¶¶ 46, 47). Despite plaintiffs' objections that the projected payments understated the present value of the benefits to which they were entitled, the proposed lump sum payments were deposited into each plaintiff's account on October 5, 2007. ( Id . at ¶¶ 50, 52).

That same day, plaintiffs' attorney wrote to B&L objecting to the discontinuance of the monthly payments and contesting the amount of the lump sum payments. ( Id . at ¶ 50). Plaintiffs further contended that the Plan explicitly provided for the trusts to survive any change in control of B&L. ( Id . at ¶ 51). B&L responded that it was reviewing their claims and would contact them "to set up a process for providing information." ( Id . at ¶ 53).

On November 1, 2007, B&L advised plaintiffs that in order to challenge the benefit payments, they were required to file a claim with the Board's Committee on Management. ( Id . at ¶¶ 55, 58). B&L further advised that it intended to establish a new Board of Directors, which would appoint a new committee to assume the responsibilities of the Committee on Management. ( Id . at ¶ 60). Plaintiffs contend, however, that at the time of this communication, no Committee on Management or "written claim review procedure" in fact existed. ( Id . at ¶¶ 56-57, 59).

On November 21, 2007, the Board appointed the Compensation Committee and vested it with responsibility for all determinations concerning SERP I. (Docket # 37-9 at 2-5). On November 28, 2007, plaintiffs wrote to the Board's "Committee on Management or Successor Committee" to contest the adequacy of the lump sum payments and to request that the Committee remedy the deficiency (the "November 28, 2007 Claim"). (Docket # 37-3 at 64-66; Docket # 1 at ¶ 63). On January 2, 2008, B&L's current Chairman and CEO advised plaintiff Holmes that B&L and its "advisors" had reviewed the benefits determination and had referred the matter to the Compensation Committee. (Docket # 1 at ¶ 64).

Following submissions to the Compensation Committee by counsel for plaintiffs and counsel for B&L, on April 14, 2008, plaintiffs were informed that their claims for benefits had been denied. ( Id . at ΒΆ 74). The letter was signed by counsel for the Compensation Committee, who stated that he was acting on behalf of the Plan Administrator, although the letter did not expressly identify the Administrator. ( Id .). The Compensation ...

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