Simpson v. Ernst & Young

• Decision Date: 23 September 1994
• Docket Number: No. C-1-91-196.,C-1-91-196.
• Citation: 879 F. Supp. 802
• Court: U.S. District Court — Southern District of West Virginia
• Parties: P. LaRue SIMPSON, Plaintiff, v. ERNST & YOUNG, Defendant.

879 F. Supp. 802

P. LaRue SIMPSON, Plaintiff, v. ERNST & YOUNG, Defendant.

No. C-1-91-196.

United States District Court, S.D. Ohio, Western Division.

September 23, 1994.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Janet Gilligan Abaray, Theodore M. Berry, Waite, Schneider, Bayless & Chesley, Cincinnati, OH, for plaintiff LaRue Simpson.

Michael Samuel Glassman, Dinsmore & Shohl, Cincinnati, OH, Elizabeth B. Healy, Ernst & Young, New York City, for defendants Ernst & Young, A partnership Accounting Firm, Gerry Hill, Managing partner.

ORDER

STEINBERG, United States Magistrate Judge.

This case is before the Court on Plaintiff P. LaRue Simpson's Employment Retirement Income Security Act (ERISA) claim, following arguments thereon and post-hearing pleadings. (Docs. 242, 245, 246, 253). We also consider evidence presented during the jury trial on Simpson's Age Discrimination in Employment Act (ADEA) claim against Ernst & Young, which resulted in a verdict in Simpson's favor. The parties unanimously consented to entry of final judgment by the United States Magistrate Judge.

Simpson contends that Ernst & Young discharged him in retaliation for his requests regarding retirement plan benefits. He also contends that Ernst & Young discharged him with intent to interfere with the attainment of his retirement rights, in order to avoid its obligation to pay retirement benefits to him. Simpson seeks lost retirement benefits; compensatory damages, including back pay, front pay, and emotional distress damages; punitive damages; and attorney's fees and expenses. He also seeks statutory relief of $100 a day for Ernst & Young's failure to provide him with requested pension information.

FINDINGS OF FACT

1. Defendant Ernst & Young is a large accounting firm created in October 1989 by the merger of the Ernst & Whinney and Arthur Young accounting firms. Plaintiff Simpson, a Certified Public Accountant (CPA), was born on September 27, 1943. Prior to his relationship with Ernst & Young, Simpson worked for Arthur Young's Cincinnati, Ohio office from December 1986 to the merger on October 1, 1989. He was Cincinnati Managing Partner from 1987 to 1989. From October 1972 to December 1986, Simpson worked for KMG/Main Hurdman (KMG/MH), an accounting firm Arthur Young acquired in 1986. He was Managing Partner of KMG/MH's Denver and Cincinnati offices from 1981 to 1986.

2. In June 1989, Arthur Young distributed to its partners a Merger Agreement and an Information Document For Partners. The Information Document represented that the worldwide combination of Arthur Young and Ernst & Whinney would result in the largest and strongest international professional services firm in the world. The two firms were described as compatible because, among other things, they "care for individuals by promoting and recognizing them based on performance" and have "mutual respect among partners." Both were estimated to have good increases in their 1990 and 1991 cash earnings, despite merger costs. The Information Document represented that Arthur Young partners would receive equal or better benefits under the Ernst & Young retirement plan. They represented to their partners and the public that the merger was not expected to result in a reduction in partners.

3. On October 1, 1989, the merger was effected. The merged firm organized itself into two entities: Ernst & Young and Ernst & Young U.S. The Ernst & Young Partnership Agreement (Partnership Agreement) required the signatories, who are termed "Partners," to be CPAs and to sign a second agreement, the Ernst & Young U.S. Partnership Agreement (U.S. Agreement). The signatories to the U.S. Agreement were not termed "Partners," but were denominated "Parties" and consisted of individuals who were both CPAs and non-CPAs. The CPAs were referred to as "Capital Account Parties," and the non-CPAs were termed "Investment Account Parties."

4. Both Ernst & Whinney and Arthur Young maintained Cincinnati offices before the merger. Gerald Hill was Ernst & Whinney's Cincinnati Managing Partner. Simpson was Arthur Young's Cincinnati Managing Partner. Following the merger, Ernst & Young named Hill Cincinnati Managing Partner. Simpson was named Cincinnati Director of Entrepreneurial Services, a lesser position.

5. A Management Committee, consisting of ten to fourteen Parties and a Chairman, was responsible for the management of Ernst & Young U.S. and Ernst & Young. Its responsibilities included addition or discharge of Parties, decisions on mergers and acquisitions, allocation of earnings among the Parties, and appointment or removal of the Chairman. The Management Committee also had many responsibilities and duties regarding the retirement plan described in the U.S. Agreement, Section 12 (Ernst & Young Plan).

6. The original members of the Management Committee included Jesse Miles, who was also Chairman, John Schornack, and James Boland.

7. Simpson was covered by four Ernst & Young retirement plans: 1) the Ernst & Young Plan, 2) the Defined Benefit Plan, 3) the Retirement Savings Plan, and 4) the UBT Account.

8. The Defined Benefit Plan and the Retirement Savings Plan each had a five year vesting requirement.

9. The Ernst & Young Plan, embodied in Section 12 of the U.S. Agreement, has age and years of service vesting requirements. Vesting does not occur until the participant reaches age 53. If the participant retires at an age less than 58, he needs either 15 years as a partner or 20 years with the firm to vest. If the participant retires at age 58 or thereafter, there is no years of service requirement. There is a 4% reduction of benefits for each year of service with the firm under 25 years. The amount paid to a retiree under the Ernst & Young Plan is offset by the retiree's benefits under the Defined Benefit and Retirement Savings Plans.

10. The UBT¹ Account is available only to previous partners² of Arthur Young, including Simpson. Before the merger, Arthur Young partners had a right to this money as a part of their retirement package, which was to be paid to them over an eight year period following withdrawal or retirement from the firm. Before the merger, UBT Accounts accrued interest over time. As a term of the merger, the UBT Accounts were carried over to Ernst & Young and the UBT Account values were frozen as of September 30, 1989.

11. Each former Arthur Young partner, including Simpson, was allowed to elect retirement under the plan Arthur Young had in place before the merger (Arthur Young Plan), with a frozen UBT Account value, or under the Ernst & Young Plan, with forfeiture of the UBT Account.

12. If Simpson had remained employed at Ernst & Young and retired at age 60 in 2003, he would have had 17 years of service with Arthur Young and Ernst & Young. Due to the 4% reduction of service factor for each year with the firm under 25 years, he would have then vested 68% in the Ernst & Young Plan.

13. On September 27, 1989, Simpson, on behalf of himself and Ernst & Young partners Jerry Hindman and Donald Fritz, wrote to Management Committee Member Schornack, with copies to Management Committee Member Boland and Cincinnati Managing Partner Gerald Hill, requesting years of service credit for their prior service with KMG/MH. Simpson's concerns were: 1) under the Ernst & Young Plan, he would not be fully vested at retirement due to the years of service requirement and service reduction factor; and 2) he was losing his UBT Account's accruing benefits.

14. Schornack responded to Simpson on October 30, 1989, with copies to Boland and Hill, that Simpson, Hindman, and Fritz would not be given credit for their prior service with KMG/MH. Schornack also stated that he did not understand the basis of Simpson's concern that he could not become 100% vested under the Ernst & Young Plan.

15. On November 8, 1989, Simpson again wrote Schornack, with copies to Boland and Hill, "to clarify what we believe to be inequities existing in our pensions due to the merger with Ernst & Whinney." Simpson requested a calculation of his retirement benefits as a future Ernst & Young retiree, including UBT Account values, and a calculation of what his retirement benefits would have been under the Arthur Young Plan, including UBT Account values. He asked for the vesting requirements of both plans. Simpson's concern was made clear in the closing paragraph: "For me to spend 27 years as a partner and not receive 100% retirement benefits just is not fair."

16. On November 28, 1989, Simpson wrote Boland, with copies to Schornack and Hill, enclosing calculations showing that at certain earning levels he would receive less under the Ernst & Young Plan than he would have received under the Arthur Young Plan.

17. On December 12, 1989, Schornack presented Simpson's prior correspondence to Management Committee Chairman Miles for his consideration.

18. On December 20, 1989, Simpson communicated directly to Miles on this issue.

19. On December 28, 1989, Miles responded to Schornack, with a copy to Simpson, stating that he did not understand some of Simpson's comments and that Simpson did not understand the retirement plan details. Miles calculated the Ernst & Young Plan vesting percentages of Hindman and Fritz upon retirement at age 60 to be 88% and 100% respectively. Miles did not calculate Simpson's vesting percentage at age 60. He noted that Simpson would vest in the Defined Benefit and Retirement Savings Plans if he remained with the firm until December 1991. Miles' letter concludes:

After writing this epistle it is fairly clear we are dealing with complex matters that are difficult to understand without investing substantial time. If you wish I will subject myself to interrogation by LaRue and do my best to explain how all the plans work, including UBT. (I really do not wish to write further on this subject, however.)

20. On January 11, 1990,...