Aldridge v. Lily-Tulip, Inc.
| Decision Date | 12 June 1990 |
| Docket Number | Civ. A. No. CV187-084. |
| Citation | 741 F. Supp. 906 |
| Parties | Allan C. ALDRIDGE, Dennis W. Peterson and Henry A. Sieron, Plaintiffs, v. LILY-TULIP, INC. SALARY RETIREMENT PLAN BENEFITS COMMITTEE and Fort Howard Cup Corporation, Defendants. |
| Court | U.S. District Court — Southern District of Georgia |
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David E. Hudson, William F. Hammond, Augusta, Ga., for plaintiffs.
Ted H. Clarkson, Augusta, Ga., Sanford M. Litvack, Jack A. Gordon, Valerie A. Cohen, New York City, for defendants.
The captioned case is a multiple-count class action brought by current and former employees of defendants Lily-Tulip, Inc. ("Lily") and Fort Howard Cup Corporation ("Fort Howard").1 The plaintiffs seek damages pursuant to the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. (1984); various provisions of Georgia law; and the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq. (1985). Plaintiffs also seek injunctive relief pursuant to the provisions of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (1985).
On January 10, 1990, three classes of plaintiffs were certified. The first class consists of persons seeking damages under federal RICO and state law for Lily's alleged improper deprivation of vacation benefits for the year 1982. The second class consists of persons seeking relief pursuant to ERISA, and the third class consists of persons asserting claims under the ADEA. Prior to my certifying the aforementioned classes, the defendants filed a motion to dismiss. A hearing on defendants' motion was conducted May 1, 1990. The motion to dismiss is now before the Court, and I will rule on the issues presented in the order they appear in the motion.2
In September, 1981, Lily was formed pursuant to the sale by Owens-Illinois Corp. of its paper cup division. Many Owens-Illinois employees transferred to the newly-formed Lily-Tulip corporation as a result of the sale. Around the time of the sale Lily distributed a memo to the transferred employees which informed them that Lily would continue to provide benefits as previously provided by Owens-Illinois. The vacation policy which the September, 1981, memo allegedly pledged to continue provided that salaried employees would accrue vacation time in one calendar year, then take the accrued vacation time in the following year.
In June, 1982, Lily first attempted to change the existing vacation policy by reducing the amount of the vacation benefits by 20%. Later, on about November 4, 1982, Lily sent out a memo, the so-called "Tucker memo,"3 which purports to restore the 20% reduction pursuant to another change in Lily's vacation policy. This November 4, 1982, change is at the heart of plaintiffs' federal RICO and state law claims.
The "Tucker memo" states that under the new vacation policy employees must take their vacation in the year it is earned, rather than in the following year. The memo states that the new policy will be "implemented January 1, 1983." The memo also states that there will be "no provision to carry over vacation periods earned in one year into the following year," and that "employees who have existing, untaken vacation entitlements under former policy have until the end of the year (1982) to avail themselves of untaken vacation earned under the old policy." Needless to say, there was a great deal of employee discussion and interest regarding the "Tucker memo."
Plaintiffs allege that sometime prior to September 30, 1982, Lily had already decided to change the vacation policy, and that on September 30th Lily wiped from its books a liability of over $1.3 million dollars which had been earmarked as payment for vacation benefits, thereby converting the money to its own use. Plaintiffs claim that they were neither allowed to take their vacations nor paid their vacation benefits for the year 1982. Plaintiffs allege that officers of Lily used the mails and telephone from June, 1982, through February, 1987, to implement and conceal their actions from Lily's employees. Plaintiffs claim that this conduct constitutes a violation of federal and Georgia RICO laws, breach of trust, tortious conversion and fraud, and breach of contract.
I will now move to the facts surrounding plaintiffs' ERISA claims. As stated earlier, when Lily was formed in 1981 it distributed a memo to those employees who transferred from Owens-Illinois. The memo said that Lily intended to continue providing to those employees the same benefits they previously enjoyed. Plaintiffs allege that the employees' retirement benefits were among those which Lily pledged to continue and that the Lily-Tulip, Inc. Salary Retirement Plan ("the Plan") was set up to administer these retirement benefits.
In June, 1986, a wholly-owned subsidiary of Fort Howard Paper Company acquired Lily and then merged with another wholly owned subsidiary of Fort Howard Paper Company to form Fort Howard Cup Corporation ("Fort Howard"). Plaintiffs allege that in October, 1986, the Fort Howard Board of Directors voted to amend and then terminate the Plan effective December 31, 1986, but that no notice of the amendments was given. It appears to be undisputed that the Plan was underfunded at the time of its termination.4
When the Plan was terminated its participants were sent forms giving them two options as to their retirement benefits. The participants were allowed either to purchase an annuity in the amount of their normal retirement benefit, or to transfer their benefits into a profit sharing plan. Plaintiffs allege that the election forms contained misrepresentations and that the amounts of the participants' benefits were miscalculated in various ways. Plaintiffs further allege that as a result of defendants' misrepresentations many salaried employees involuntarily retired in order to protect their benefits. Lastly, plaintiffs allege that the defendants' actions aforementioned constituted a breach of a fiduciary duty.
I will now analyze plaintiffs' vacation benefits claims. As stated earlier, plaintiffs allege that Lily's actions in changing its vacation policy in 1982 violated both federal and state RICO laws (Counts One and Two, respectively), and constituted breach of trust (Count Three), tortious conversion and fraud (Count Five), and breach of contract (Count Four). Defendants move to dismiss both RICO claims on the grounds that plaintiffs have failed to allege the requisite pattern of racketeering activity and that their allegations of fraud are not pled with particularity as required under Fed.R.Civ.P. 9. Defendants also contend that the federal RICO claim, as well as the breach of trust claim and the tortious conversion and fraud claim, are barred by the statute of limitations.5 Lastly, defendants claim that as a matter of law there was no breach of contract with regards to the November, 1982, changes in Lily's vacation policy. I will begin with the motion to dismiss the RICO claims.
Defendants first argue that plaintiffs' federal RICO claim is barred by the statute of limitations. In Agency Holding Corp. v. Malley-Duff and Associates, Inc., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987), the Supreme Court set a four-year statute of limitations on RICO claims.6 Thus, a plaintiff is not barred from bringing a suit pursuant to RICO where he filed suit within four years of the time he knew or should have known of his injury. Bowling v. Founders Title Co., 773 F.2d 1175 (11th Cir.1985).
The complaint in the captioned case was apparently filed in state court in April, 1987, and removed to this court on May 13, 1987. The complaint alleges that plaintiffs were injured as a result of a change in Lily's vacation benefits policy. Defendants claim the Tucker memo, dated November 4, 1982, clearly described the change. Thus, defendants argue that plaintiffs knew or should have known that they were being deprived of their vacation benefits no later than November 4, 1982.
At first glance defendants' argument holds some appeal. However, when one carefully reads the Tucker memo the initial appeal fades. Any vacation policy which allows employees vacation with pay necessarily has two components; the actual vacation from work and the monetary benefit of being paid while away from work. The Tucker memo states that under the new policy "vacation ... is earned" during the current year. The memo then states "vacation periods earned in one year" would not be carried over into the following year (emphasis added). While defendants argue that the memo clearly states that any vacation benefits not used by December 31, 1982, would be lost, another reasonable interpretation of the memo is that only vacation time not used by December 31, 1982, would be lost.
The heart of plaintiffs' complaint is that they were wrongfully deprived of the monetary value of their vacation benefits, not the physical time off from work. Moreover, the complaint alleges that the plaintiffs were not permitted to take any vacation that had accrued as of September 30, 1982. Complaint at p. 5, paragraph 6(c). The Tucker memo is silent as to whether plaintiffs would still be paid if they could not physically take time off from work as vacation. Hence, the Tucker memo is ambiguous as to whether it applied to both the employees' vacation time away from work and the monetary benefit to which the employees were entitled while on vacation.
Plaintiffs argue that no employee realized that Lily was not going to pay vacation benefits for 1982 until June, 1983, when, for the first time, a retiring employee requested benefits but Lily refused to pay. Under these circumstances, I cannot conclude as a matter of law that plaintiffs knew or should have known of their injury prior to June, 1983. As the complaint was apparently filed in April, 1987, but in any...
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Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee
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