Lojek v. Thomas
| Citation | 716 F.2d 675 |
| Decision Date | 22 September 1983 |
| Docket Number | No. 82-3682,82-3682 |
| Parties | 4 Employee Benefits Ca 2321 Donald W. LOJEK, Plaintiff-Appellant, v. Eugene C. THOMAS, J. Charles Blanton, Moffatt, Thomas, Barrett & Blanton, Chartered, and Moffatt, Thomas, Barrett & Blanton, Chartered, Profit Sharing Plan and The Idaho First National Bank, Trustee, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Donald W. Lojek, Parkinson, Lojek & Penland, Chtd., Boise, Idaho, for plaintiff-appellant.
Phillip M. Barber, Hawley, Troxell, Ennis & Hawley, Boise, Idaho, for defendants-appellees.
Appeal from the United States District Court for the District of Idaho.
Before WRIGHT, CHOY and NELSON, Circuit Judges.
Donald W. Lojek (Lojek) appeals from the district court's partial summary judgment for appellees Moffatt, Thomas, Barrett & Blanton, Chartered (MTBB) in an action challenging the forfeiture of his pension benefits. Lojek also appeals the dismissal of his complaint on the ground that he was not constructively discharged. 1 We affirm.
Lojek, an attorney, joined MTBB, a Boise, Idaho law firm in March 1972. In January 1972, MTBB adopted a profit sharing and retirement plan (the plan). 2 The plan was revised in August 1976 in accordance with the requirements of the Employment Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001 et seq. (1976) to provide that 100% of retirement benefits would vest and be non-forfeitable after ten years of employment. If, however, an attorney voluntarily leaves the firm before completing ten years of employment, engages in competitive employment within two years after leaving the firm, and within a five county area, the attorney forfeits all retirement benefits. 3
The Internal Revenue Service approved the 1976 plan as a tax-qualified employee benefit plan.
Lojek became an MTBB's shareholder in April 1976. 4 In 1978, Lojek became dissatisfied with proposed changes in the share purchase agreement whereby the purchase of shares by junior shareholders would depend on an attorney's performance as determined by a review committee. He disapproved of the proposed agreement that senior partners reduce their stockholdings and that one senior partner, Thomas, be allowed to transfer five shares to his son. Lojek also objected to the method chosen for the valuation of the shares.
The majority of shareholders accepted the proposed changes and rejected Lojek's proposal that junior shareholders be guaranteed the right to purchase a number of shares regardless of merit. Lojek refused to sign the new stock purchase and redemption agreement as well as the stockholders' agreement and left the firm on August 1, 1978 because he was dissatisfied with the content of the agreements.
In the fall of 1978, Lojek began practicing law in Ada County, Idaho. MTBB's plan administrator declared a forfeiture of Lojek's profit-sharing and retirement benefits in accordance with Sec. 5.12 of the plan. No part of those benefits consisted of employee contributions because Lojek had not made any voluntary contributions to his plan account. The amount forfeited was approximately $25,000, all attributable to employer contributions, plan earnings, and unrealized gains on plan assets.
COMPLETED YEARS PERCENTAGE
OF SERVICE OF VESTING
one 0%
two 20%
three 60%
four 80%
five 100%
Lojek sued MTBB in federal district court, arguing that Sec. 5.12 of the plan and the forfeiture of his benefits violated ERISA guarantees against forfeitures. The trial court granted partial summary judgment for MTBB on the following issues:
(1) ERISA preempted state law on vesting and forfeiture of pension plan rights;
(2) The MTBB plan was authorized under ERISA (29 U.S.C. Sec. 1053(a)(2)(A));
(3) Anti-competition clauses permitting forfeiture are valid under ERISA;
(4) Lojek had not completed ten years of employment before leaving the firm, and thus his benefits were subject to forfeiture if he competed with MTBB.
The parties then tried the remaining issue, whether Lojek "voluntarily terminated his employment or was constructively discharged." After a bench trial, the district court concluded that Lojek was neither constructively discharged nor forced to resign, and thus, forfeiture of his account under the plan was legal. Lojek appeals both the summary judgment and the judgment after trial.
Summary judgment is appropriate if, viewing the evidence in the light most favorable to the opposing party, the trial court finds "that there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We review de novo the trial court's grant of summary judgment. Wood v. Santa Barbara Chamber of Commerce Inc., 705 F.2d 1515, 1519 (9th Cir.1983).
I. Is the competition/forfeiture provision of the MTBB plan valid under ERISA?
II. Did the district court clearly err in finding that Lojek voluntarily left his employment?
Lojek contends that ERISA was intended to prevent loss or forfeiture of employee benefits and therefore, even if the MTBB plan is valid under ERISA, ERISA provisions should not govern the result of this case. Instead, Lojek argues that Idaho common law on anti-competition clauses should control. Lojek's argument must fail.
It is true that "[o]ne of the primary purposes of the Act is to insure that plan participants do not lose vested benefits because of 'unduly restrictive' forfeiture provisions," Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 448 (9th Cir.1980). It is also true, however, that Congress explicitly provided that ERISA's provisions preempt state laws. Section 514 provides in pertinent part: "[ERISA] ... shall supercede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. Sec. 1144 (1976). This provision became effective on January 1, 1975, 29 U.S.C. Sec. 1144(b)(1), and clearly controls here. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981); Smith v. CMTA-IAM Pension Trust, 654 F.2d 650, 660 n. 14 (9th Cir.1981). The district court correctly decided that ERISA has preempted Idaho law and that federal law governs the validity of the plan.
Section 1053(a)(2) of ERISA provides that an employee benefit plan meets the requirements of ERISA if it satisfies one of three "alternative" minimum vesting standards. Hummell v. S.E. Rykoff & Co., 634 F.2d at 450. 5 The first standard provides that an employee must have a nonforfeitable right to 100% of his accrued benefits derived from employee contributions after ten years of employment. 29 U.S.C. Sec. 1053(a)(2)(A). 6 There is no requirement for vesting of any lesser percentage of benefits before the required ten years of service.
The MTBB plan provides a vesting schedule more liberal than the minimum ERISA requirements because an employee's benefits become 100% vested after five years of service. Although the vesting schedule of Sec. 5.1 is subject to the non-competition forfeiture provisions of Sec. 5.12, this section provides, in accordance with ERISA Sec. 1053(a)(2)(A), that no benefits are forfeitable after ten years of service, regardless of entrance into competitive employment by an employee. Thus, the MTBB plan meets the requirements of Sec. 1053(a)(2)(A) because it does not affect any nonforfeitable interests. 7 Hummel, 634 F.2d at 450. The district court correctly found that the MTBB plan was authorized pursuant to 29 U.S.C. Sec. 1053(a)(2)(A).
Lojek argues unpersuasively that the MTBB anticompetition clause is invalid under ERISA because ERISA's aim is to protect the interest of employees, and the clause is too broad.
Although one of ERISA's primary purposes is to ensure that employees do not lose vested benefits because of unduly restrictive forfeiture provisions, we held recently that ERISA does not prohibit forfeiture of benefits in excess of ERISA's minimum vesting requirements. Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 450 (9th Cir.1980). 8 Hummell relied on an applicable Treasury Regulation and cases from other circuits, to hold that where, as here, a plan complies with one of the three Sec. 1053(a)(2) plan options, ERISA does not prohibit forfeiture of non-vested benefits in excess of the minimum vesting requirements in Sec. 1053. Id. at 449-51 (citing 26 C.F.R. Sec. 1.411(a)-4; Hepple v. Roberts & Dybdahl, 622 F.2d 962 (8th Cir.1980); Fremont v. McGraw-Edison Co., 606 F.2d 752 (7th Cir.1979), cert. denied, 445 U.S. 951, 100 S.Ct. 1599, 63 L.Ed.2d 786 (1980)).
In Fremont, the profit-sharing plan contained a forfeiture clause providing that an employee with less than ten years of service who stole company property forfeited his accrued benefits. 606 F.2d at 759 n. 11. The employee, who stole company property, had been with the company for six years. Because the plan's vesting schedule complied with the ten year 100% option in Sec. 1053(a)(2)(A), the forfeiture provision did not violate ERISA because it did not "affect any nonforfeitable interests." Id. at 760.
The plan in Hepple provided for forfeiture of employer contributions for employees with less than ten years of service who later competed with the employer. 622 F.2d at 963. The employee left his employment after six years and went to work for a competitor. Because the vesting schedule met with the requirements of Sec. 1053(a)(2)(A), the court held that the benefits were forfeitable.
Similarly to MTBB's plan, the Hummell plan provided for forfeiture if an employee became a business...
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