United States District Court, W.D. New York
DANIEL E. GILL, THOMAS C. McDERMOTT, and JAY T. HOLMES, Plaintiffs,
BAUSCH & LOMB SUPPLEMENTAL RETIREMENT INCOME PLAN I, BAUSCH & LOMB INCORPORATED, and COMPENSATION COMMITTEE OF THE BAUSCH & LOMB BOARD OF DIRECTORS, Defendants
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For Daniel E. Gill, Thomas C. McDermott, Jay T. Holmes, Plaintiffs: Harold A. Kurland, Heidi S. Martinez, LEAD ATTORNEYS, Ward Greenberg Heller & Reidy LLP, Rochester, NY.
For Bausch & Lomb Supplemental Retirement Income Plan I, Bausch & Lomb Incorporated, Compensation Committee of the Bausch & Lomb Board of Directors, Defendants: Howard Shapiro, Nicole A. Eichberger, LEAD ATTORNEYS, PRO HAC VICE, Proskauer Rose LLP, New Orleans, LA; David Rothenberg, Geiger and Rothenberg, LLP, Rochester, NY.
DECISION AND ORDER
HONORABLE MICHAEL A. TELESCA, United States District Judge.
Daniel E. Gill (" Gill" ), Thomas C. McDermott (" McDermott" ), and Jay T. Holmes (" Holmes" ) (hereinafter, collectively, " Plaintiffs" ) are retired Bausch & Lomb Incorporated (" B& L" ) executives and are the sole participants in the Bausch & Lomb Supplemental Retirement Income Plan I (" the Plan" or " SERP I" ). Represented by counsel, Plaintiffs instituted this action pursuant to the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (" ERISA" ), challenging Defendants' termination of their monthly benefits pursuant to the Change of Control Provision of SERP I and calculation and distribution of their supplemental retirement benefits as lump sums. Plaintiffs and Defendants have filed competing motions for summary judgment, which presently are pending before this Court.
A. The Plan Document
SERP I is an executive deferred compensation plan enacted to provide supplemental retirement benefits to its vested Participants: Gill, McDermott, and Holmes. Plaintiffs are the only individuals named in the Plan, and their rights vested before the effective date of the current
version of SERP I, restated on December 18, 1990. The Plan defines the terms " Participant" and " Retired Participant" as follows: " Participant means an employee of the Company who has been selected to participate in the Plan pursuant to Section 4." Plan, § 2(f). " Retired Participant means a former Participant who is receiving benefits under this Plan." Id., § 2(h). All three individual plaintiffs were retired and receiving benefits under SERP I prior to the dates on which the relevant decisions were made.
The Plan states that it " shall be administered by the Vice President of Human Resources of [B& L], or by such other employees as the Committee may from time to time designate." Plan, § 3. " Committee" is defined as the " Committee on Management of the Board of Directors." Id., § 2(a). The Plan provides that, subject to provisions not at issue here, " the Committee shall have authority and discretion to . . . interpret the Plan, and make all determinations deemed necessary or desirable for the administration of the Plan." Id., § 3.
The Plan's Change of Control (" COC" ) provision states in relevant part as follows:
Upon a Change of Control (as defined below), each Participant shall be fully vested in the benefit set forth in section 5 hereof . . . . [S]uch benefit (assuming commencement at age 55 or such greater age as is then attained by the Participant) shall be converted to a cash lump sum and paid within 15 days following the Change of Control utilizing for this purpose the same actuarial assumptions as are utilized in the Bausch & Lomb Retirement Benefits Plan. . . . The Plan and its associated trusts shall continue in effect and survive any Change of Control and any successor to the Company shall assume the obligations of the Company under the Plan.
Ex. A, BL-AR 002065.
B. The Merger and the Decision to Terminate Benefits
In May 2007, B& L announced its agreement to sell its outstanding shares of common stock to Warburg Pincus, LLC (" Warburg" ), a global private equity firm. In preparation for the anticipated shareholder approval, B& L Human Resources personnel, including Vice President of Compensation and Benefits Laurie Zaucha (" Zaucha" ) and Senior Benefits Analyst Christopher Reigle (" Reigle" ), analyzed B& L's various benefit plans to determine whether they contained COC provisions that would be triggered by a shareholder vote approving the merger. SERP I was identified as one of the plans containing such a COC provision. Reigle discussed the COC provisions in SERP I and other benefit plans issued by B& L with Todd E. Weber (" Weber" ) of Mercer Human Resource Consulting (" Mercer" ), specifically, the issue of whether inactive Participants would receive lump sumps following a COC. See Ex. K, BL-LIT 000865-868 (Letter from Weber to Reigle; cc: to Zaucha). Weber noted that
the purpose of a change in control provision is to ensure continued employment and objectivity of senior executives prior to a potential change in control, notwithstanding any risks or uncertainties created by the possible change in control. This is done by paying benefits in a lump sum upon a change in control--benefits that would otherwise be payable only if the executives terminated employment. . . .
Ex. K, BL-LIT 000865. In Weber's opinion, " [s]ince the change in control provision specifically references 'Participants', and not 'Retired Participants', it appears the three retires [sic] would not receive lump
sum distributions upon a change in control." Id., BL-LIT 000866. Weber observed that even " if it is determined that the change in control provisions do not permit, or require lump sum payments to both active and inactive participants, [B& L] may still be able to terminate the plans based on the plan termination provisions." Id., BL-LIT 000867. Weber concluded by " strongly recommend[ing]" that B& L discuss the COC provisions with its legal counsel before proceeding with any lump sum distributions. Id.
Zaucha and Reigle sought and received additional input on the COC provision from Nadir Minocher (" Minocher" ) at Westport Strategies (" Westport" ). See Ex. K, BL-LIT 001650-51 (Email from Minocher to Susan Miller; cc: to Reigle and Zaucha). Minocher opined that SERP I is " not an asset of B& L[; ] it is beneficially owned by the executives as beneficiaries. A change of control at B& L should not have any effect on [SERP I]. . . . The design of the trust assures participants are fully protected in the event of any change at B& L." Id., 001650. Reigle followed up with Minocher on August 17, 2007, informing him that no decision had been made yet on the COC provision in SERP I. Reigle noted, " We want to make sure we are covering all ends before that decision is made. I think in the end everyone would like these SERP plans to go away, it's just doing it the correct way and covering all options." Ex. L, BL-LIT 000801 (Email from Reigle to Minocher).
On September 19, 2007, Zaucha wrote individually to Plaintiffs " to notify [them] that the change of control provisions under . . . [SERP I] will be triggered if the Company's shareholders approve the [Warburg] merger" and that " [i]n the event of a change of control, [their] SERP I benefits will be converted to a cash lump sum and paid to [them] within 15 days of the shareholder vote." Ex. M, BL-LIT 000143 (Letter from Zaucha to Gill). Gill's financial planner Patrick D. Martin (" Martin" ) sent an email to Zaucha that same day, stating that he would " discuss the proposal with [Gill]" at their upcoming meeting. Ex. R, BL-LIT 001679 (Emails from Martin to Zaucha). Zaucha responded " to clarify that this isn't a proposal", because " [t]he plan requires a lump-sum payout upon a change in control." Id. Martin stated that he did " not see things that clearly under the Plan document regarding[,] among other things[,] the computation of the lump sum payout." Id. Zaucha replied that she would be " happy to meet with [Martin] regarding the differences in how [they] are interpreting the plan." Id.
Shareholders voted to approve the Warburg merger on September 21, 2007, and on September 24, 2007, Efrain Rivera, B& L Senior Vice President and Chief Financial Officer, directed Wells Fargo Bank, N.A., the SERP I trustee, to discontinue all monthly benefits payments under SERP I. Ex. N, BL-LIT 000894. On September 27, 2007, Zaucha wrote to Martin indicating that B& L still was " consulting with several actuaries and an additional law firm" regarding the amount of the lump-sum distribution to be paid to Gill and the other affected individuals. Ex. R, BL-LIT 001726. The lump-sum benefit amounts subsequently were submitted for payment to Plaintiffs on October 5, 2007. Ex. P, BL-LIT 000914.
Plaintiffs retained counsel, who wrote to Robert B. Stiles, Esq., B& L Senior Vice President and General Counsel on October 5, 2007, noting their concerns that " the lump sum payments are insufficient, by substantial amounts, to achieve the plan requirement" and requested a " process . . . for working through the numbers and attempting to stipulate to appropriate payments." Ex. S.
Plaintiffs further contended that the Plan explicitly provided for the trusts to survive any change in control of B& L. B& L responded that it was reviewing their claims and would contact them " to set up a process for providing information." 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. 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. At the time of this communication, no " Committee on Management" or ERISA-compliant claim review procedure in fact existed.
On November 21, 2007, the Board appointed three individuals to serve as the " Compensation Committee" and vested it with responsibility for all determinations concerning SERP I. 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. On January 2, 2008, B& L's current Chairman and Chief Executive Officer advised Holmes that B& L and unnamed " advisors" had reviewed the 2007 decision and had referred the matter to the newly constituted Compensation Committee. On January 8, 2008, B& L sent a Company Position Statement in Response to SERP I Claims to the members of the Compensation Committee. Ex. T, BL-AR 000009. On January 15, 2008, Plaintiffs' counsel expanded the bases for Plaintiffs' claims to include, inter alia, an assertion that " the Plan's change in control provisions do not apply to [Plaintiffs], because [Plaintiffs] had retired prior to the 2007 acquisition of the Company and, under the terms of the Plan, were therefore not subject to the lump sum cash-out provisions of the Plan that operate in connection with a change in control[.]" Ex. U, B& L/R& G 000079.
Sometime in February 2008, Jonathan Zorn, Esq. of Ropes & Gray LLC, the Compensation Committee's attorneys, sent Plaintiffs' attorneys the procedures established under the Plan, pursuant to Section 503 of ERISA, for consideration of Plaintiffs' claims under SERP I. See Ex. U, B& L/R& G 000047.
B& L, through its counsel, Proskauer Rose, actively advocated against Plaintiffs during the claims review process and were permitted to file submissions with the Compensation Committee. On April 14, 2008, plaintiffs were informed that their claims for benefits had been denied. The letter was signed by Zorn, 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. The Compensation Committee subsequently denied Plaintiffs' appeal on December 11, 2008.
C. The Instant Action
Plaintiffs filed the present lawsuit on January 29, 2009, asserting two claims under ERISA: (1) their benefits were terminated and wrongfully reduced under 29 U.S.C. § 1132(a)(1)(B); and (2) Defendants owe them additional information and documents under 29 U.S.C. § 1132(c)(1)(B). The second claim was dismissed by the Court (Siragusa, D.J.). See Dkt #24 at 10. The first claim, which remains pending, asserts that (1) the lump sum payments were less than the present value of the benefits to which Plaintiffs were entitled, and (2) the right-of-reversion created a conflict of interest which actually influenced Defendants' determination of Plaintiffs claims.
Extensive discovery proceedings ensued. See, e.g., Gill v. Bausch & Lomb Supplemental Retirement Income Plan I, 2011 WL 2413411 (W.D.N.Y. June 10, 2011). Plaintiffs and Defendants both filed competing motions for summary judgment on April 16, 2012. Oral argument was heard by the Court (Siragusa, D.J.) on July 19, 2012, and the matter subsequently was referred to mediation, which was unsuccessful. The matter was transferred to District Judge Frank P. Geraci, Jr. on January 9, 2013, and then re-transferred to District Judge Charles J. Siragusa on March 21, 2013. The matter was transferred to the undersigned on February 18, 2014.
For the reasons set forth below, Plaintiffs' motion for summary judgment (Dkt #56) is granted, and Defendants' motion for summary judgment (Dkt #55) is denied.
III. General Legal Principles
A. Summary Judgment Standard
A party is entitled to summary judgment " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The movant bears the burden of demonstrating the absence of any genuine issue of material fact. Celotex v. Catrett Corp., 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has carried that burden, the non-movant " must do more than simply show that there is some metaphysical doubt as to the material facts", and instead " must come forward with specific facts showing that there is a genuine issue for trial." Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (internal quotations and citation omitted). Summary judgment is not defeated based on conclusory allegations or mere speculation. Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). When evaluating a motion for summary judgment, the court must assess ...