United States District Court, N.D. New York
JONATHAN W. DUBEE, Plaintiff,
DONALD SCAMMELL; DON SCAMMELL, INC.; and DON SCAMMELL, INC. EMPLOYEE STOCK ACCUMULATION AND RETENTION PLAN, Defendants
For Jonathan W. Dubee, Plaintiff: Roland M. Cavalier, LEAD ATTORNEY, Alison M. Coan, Tuczinski, Cavalier Law Firm, Albany, NY.
For Donald Scammell, Don Scammell, Inc., Don Scammell, Inc. Employee Stock Accumulation and Retention Plan, Defendants: Donald J. Hillmann, LEAD ATTORNEY, John R. Vero, Couch, White Law Firm, Albany, NY.
Lawrence E. Kahn, U.S. District Judge.
MEMORANDUM-DECISION and ORDER
In this employee-benefits case, Plaintiff Jonathan W. Dubee (" Plaintiff" ) claims that Defendants Donald Scammell (" Scammell" ), Don Scammell, Inc. (" the Company" ), and the Don Scammell Inc. Employee Stock Accumulation and Retention Plan (" the Plan" ) (collectively, " Defendants" ) violated the terms of the Plan by not allocating Plaintiff sufficient shares of Company stock and by undervaluing those shares that Plaintiff was awarded. See generally Dkt. No. 7 (" Amended Complaint" ). Plaintiff brings claims under the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001 et seq., federal common law, and state law. Id. Presently before the Court are Defendants' two Motions to dismiss. Dkt. Nos. 6 (" First Dismissal Motion" ); 14 (" Second Dismissal Motion" ). Both seek dismissal of Plaintiff's state-law claims as preempted by ERISA, while the Second Dismissal Motion also seeks to: (1) strike Plaintiff's Amended Complaint for non-compliance with Local Rule 7.1(a)(4); and (2) dismiss Plaintiff's federal-common-law claims as precluded by ERISA. Id. For the reasons that follow, the First Dismissal Motion is denied, the Second Dismissal Motion is denied in part, and leave is granted for additional briefing regarding whether all of Plaintiff's federal claims should be dismissed because the Plan is not an ERISA plan.
Plaintiff was employed by the Company, a beer distributor. Am. Compl. ¶ ¶ 8, 10. In 2005, the Plan was established to " reward and retain key employees and . . . to further align the interest of key employees
with the interests of the Company's shareholders." Id. ¶ 11, id. Ex. A (" Plan Document" ) § 2.1. The Plan was to be administered by a compensation committee (" the Committee" ) appointed by the Company's board of directors (" the Board" ). Plan Doc. § 7.2 Plaintiff and two other Company employees were the Plan's original participants, although other participants could be added at the discretion of the Committee as long as they fell " within a 'select group of management or highly compensated employees' as this term is defined in Title I of ERISA." Id. § 3.1. The Plan provided that, from 2005 to 2012, half-shares of Company common stock would be allocated to each participant's individual account. Id. § 4.1. After the 2013 redemption of Scammell's stock pursuant to a separate stock-redemption agreement, sufficient additional shares were to be allocated to give each participant a total of seven percent of the outstanding shares. Id.
If cash dividends were paid on Company stock, they were to be invested in " any assets the Committee in its sole discretion determines." Id. § 5.1 Allocated shares were to vest only after Scammell's stock had been redeemed and the Board had determined that there had been a " successful transition to new management." Id. § 4.2. However, if the Board had made the successful-transition determination within one year of the redemption of Scammell's stock, participants' stock would vest regardless. Id. Unvested shares were forfeited upon the termination of a participant's employment. Id.
Participants were to receive ten equal annual cash payments for the fair-market value of their vested stock and the value of their invested stock dividends. Id. § § 5.1, 6.1. Those payments were to commence when participants had both reached the age of 65 and terminated employment with the Company. Id. § 6.1. Although the " Company anticipate[d] that it w[ould] continue the Plan for an indefinite period of time," the Company could terminate the Plan at any time. Id. § 7.6. If it did so, participants were to immediately receive a lump-sum payment for the fair-market value of their vested stock and the value of their invested stock dividends. Id. If a participant died before receiving all of her benefits, her beneficiaries were to receive a lump-sum payment of the remaining benefits. Id. § 6.1.
The fair-market values of shares was to be calculated according to the following " [f]ormula [m]ethod" :
Unaudited Net Book Value (assets minus liabilities) determined as of the nearest fiscal year end plus 1.5 times gross profit divided by issued and outstanding shares. Gross profit equal to revenue minus purchase and freight and NYS's beer excise tax.
Id. Sched. B. This calculation was to take place only once, when the payment of benefits commenced. Id. § 6.1.
Plaintiff received a total of three shares of stock. Am. Compl. ¶ 21. In May 2011, the Company sold all of its assets and business. Id. ¶ 25. In its accounting of the sale, the Company treated half of the proceeds
as received by Scammell personally in exchange for his " personal goodwill." Id. ¶ ¶ 26, 30. The Plan was terminated at about the same time as the sale. Id. ¶ 28. In October 2011, Plaintiff was offered partial payment for his shares--valued as if half of the sale proceeds were not a Company asset--if he signed a liability waiver. Id. ¶ 32. He refused to accept payment or sign the waiver. Id. Plaintiff's attorney subsequently sent a demand letter to Defendants' counsel, seeking both an additional stock share and a recalculation of the value of Plaintiff's account as if the entire sale proceeds had been a Company asset. Am. Compl. Ex. B (" Demand Letter" ).
Plaintiff then commenced this action, bringing claims under ERISA and state law for, inter alia, the same relief sought in the Demand Letter. Dkt. No. 1 (" Original Complaint" ). Defendants filed the First Dismissal Motion and an accompanying Memorandum of law on October 5, 2012, asserting that the Plan should be deemed an ERISA plan because Plaintiff had so alleged in the Original Complaint. Dkt. No. 6-1 (" First Memorandum" ). Therefore, because all of the state-law claims allegedly related to the Plan, Defendants sought dismissal of those claims on ERISA-preemption grounds. Id. Twenty-one days later, Plaintiff filed the Amended Complaint, which brought the same three ERISA claims (Claims One, Two, and Three) and seven state-law claims (Claims Four through Ten) as the Original Complaint. However, the Amended Complaint differed in that it: (1) explicitly stated that all of the state-law claims were " alternative" causes of action applicable only if the Court determined that the Plan was not an ERISA plan; and (2) added three federal-common-law claims (Claims Eleven, Twelve, and Thirteen). Am. Compl. ¶ ¶ 67, 100-117. Plaintiff then filed a Response to the First Dismissal Motion. Dkt. No. 8 (" First Response" ). Defendants filed a Reply, in which they argued that the Amended Complaint should be stricken because Plaintiff, by not filing a motion to amend the Complaint, had not complied with Local Rule 7.1(a)(4). Dkt. No. 10 (" First Reply" ). Defendants then filed the Second Dismissal Motion and an accompanying Memorandum of law, reasserting the arguments they had already raised. Dkt. No. 14-1 (" Second Memorandum" ). Defendants also explicitly stated that they were not admitting that the Plan was ...