Averill v. Gleaner Life Ins. Soc., Case No. 3:06CV2867.

Decision Date19 June 2009
Docket NumberCase No. 3:06CV2867.
Citation626 F.Supp.2d 756
PartiesCarleton E. AVERILL, II, Plaintiff v. GLEANER LIFE INSURANCE SOCIETY, et al., Defendant.
CourtU.S. District Court — Northern District of Ohio

Robert E. Searfoss, III, Timothy A. Magee, Magee & Searfoss, Bowling Green, OH, for Plaintiff.

Mark A. Bush, Fraser, Trebilcock, Davis & Dunlap, Lansing, MI, Laura J. Avery, Reminger & Reminger, Toledo, OH, for Defendants.

ORDER

JAMES G. CARR, Chief Judge.

This case is about retirement benefits. Plaintiff, Carleton E. Averill, a former insurance agent for defendant Gleaner Life Insurance Society [Gleaner], alleges that Gleaner breached its contract with regard to his retirement benefits. Jurisdiction exists pursuant to 28 U.S.C. § 1332.

After the parties filed cross-motions for summary judgment [Docs. 53, 55] and Averill filed a motion to compel discovery [Doc. 53], I referred this case to Magistrate Judge Benita Y. Pearson. The Magistrate Judge filed a Report and Recommendation [Report] [Doc. 61] recommending that I deny both parties' motions for summary judgment and grant Averill's motion to compel discovery.

Gleaner objects to the Magistrate's Report [Doc. 62]. I overrule Gleaner's objections, in part, denying both parties' motions for summary judgment and denying Averill's motion to compel discovery.

Background

Gleaner is a Michigan-based fraternal benefit society providing financial protection, fraternal benefits, and volunteer opportunities to its certificate holders. From 1985 to 2007, Averill worked as an independent contractor selling insurance for Gleaner.

In 1988, Gleaner established the Gleaner Supplemental Savings Program [GSSP] as a tax-exempt retirement benefits plan pursuant to § 457(e)(12) of the Internal Revenue Code [1988 GSSP]. Section 457(e)(12) excludes employer contributions to nonelective deferred compensation plans from taxation if the plan includes, without individual variation, all individuals with equal relationships to the payor.

The 1988 GSSP did not specify which actuarial assumption to use when valuing the alternative forms of benefit payments. It did not restrict participants' right to receive their entire benefit in a single lump sum payment.1

The 1988 GSSP included Article 4, which states:

The Board of Directors reserves the right to modify or to amend, in whole or in part, or to terminate, this Program at any time. However, no modification, amendment or termination of the Program shall adversely affect the right of any Member to receive the benefits credited under the Program by the Board of Directors with respect to such Member.

[Doc. 54, Ex. 1] [Emphasis supplied].

In 1993, Gleaner amended the GSSP [1993 GSSP]. Among other modifications, the 1993 GSSP restricted participants from receiving benefits in a single lump sum if their benefits exceeded $3,500.2 For such lump sum payouts, the 1993 GSSP applied an interest rate tied to the Pension Benefit Guaranty Corporation [PBGC]. For all other payouts, the 1993 GSSP required the equivalent actuarial value to be computed with an interest rate of 9.0%. Article 4 of the 1993 GSSP remained nearly identical to its 1988 counterpart; it only varied by substituting the word "Program" for "Plan."

Gleaner further amended the GSSP in 1998 [Amendment I] and 1999 [Amendment II] in ways immaterial to the present dispute.

In 2005, Gleaner conducted a review of the GSSP. Based on limited legal precedent interpreting § 457 and discussions with representatives of the Internal Revenue Service [IRS], it determined that the IRS could conclude that the GSSP was outside the scope of § 457; accordingly, its beneficiaries could owe taxes on accrued benefits in addition to penalties and interest.

Based on this finding, Gleaner amended and terminated the GSSP [Amendment 2005-1 or GSSP Termination]. The new GSSP stated that in the event of a GSSP Termination, it lifted its prior restriction on participants receiving benefits in excess of $3,500 in a single lump sum. It also specified that the present equivalent actuarial value should be calculated with an interest rate of 8.5%. The GSSP Termination, in pertinent part, states:

Upon termination of the Plan by action of the Board of Directors, all benefits payable under the Plan shall be paid to Members . . . in the form of a single sum distribution as soon as administratively possible. For purposes of determining the amount of the single sum payment owing to a Member . . . upon termination of the Plan, the Member's Accrued Benefit shall be converted to a single sum payment using the 1994 Group Annuity Mortality table (Male/Female) and an interest rate of eight and one-half percent per year, compounded annually. A Member, . . . who is paid the single sum value of the Member's Accrued benefit determined in accordance with this Article shall have no further claim for Plan benefits against the Plan or against Gleaner Life Insurance Society.

[Doc. 54, Ex. 5] [Emphasis supplied].

After terminating the GSSP, Gleaner distributed a portion of accrued benefits to each beneficiary. Gleaner paid Averill a single lump sum of $68,140.97.3 To arrive at this figure, it valued the present actuarial value of Averill's future interest in $3,931.91 per month for life, ten years guaranteed. For this determination, it assumed an interest rate of 8.5%.

Gleaner, additionally, offered a supplemental payment of approximately $60,000 in exchange for a release of potential claims against Gleaner. Averill rejected this supplemental payment.

Procedural History

On November 29, 2006, Averill brought this suit against Gleaner, asserting nine causes of action. On January 29, 2008, 2008 WL 269533, I dismissed all causes of action with prejudice except for Averill's claim for breach of contract. I also granted the parties leave to conduct further discovery.

In a settlement conference on January 28, 2008, I fashioned a new scheduling order giving the parties the opportunity to discover and present proof on the issue of whether Gleaner used an appropriate interest rate and whether it adversely affected Averill's rights in violation of Article 4.

On May 22, 2008, the parties filed crossmotions for summary judgment and oppositions. Averill requested a ruling with regard to damages only; as an alternative to summary judgment, he moved to compel discovery. Gleaner, in addition to summary judgment, sought costs, fees, and other appropriate relief.

In accordance with 28 U.S.C. § 636(b)(1)(B), I referred this case to Magistrate Pearson. The Magistrate's Report [Doc. 61] recommended that I deny both parties' motions for summary judgment, but grant Averill's motion to compel discovery. Gleaner filed timely objections to the Magistrate's Report [Doc. 62], which Averill Opposed [Doc. 64], and Gleaner Replied [Doc. 65].

CROSS-MOTIONS FOR SUMMARY JUDGMENT
1. Standard of Review

Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. The burden shifts to the nonmoving party who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting FED R.CIV.P. 56(e)).

Once the burden of production shifts, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is insufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the [unverified] pleadings" and present some type of concrete evidentiary material in support of its position. Celotex, supra, 477 U.S. at 324, 106 S.Ct. 2548.

In deciding the motion for summary judgment, the evidence of the non-moving party will be believed as true, all doubts will be resolved against the non-moving party, all evidence will be construed in the light most favorable to the non-moving party, and all inferences will be drawn in the non-moving party's favor. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Summary judgment shall be rendered only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material facts and that the moving party is entitled to judgment as a matter of law. Celotex, supra, 477 U.S. at 323, 106 S.Ct. 2548.

The standard of review for crossmotions for summary judgment does not differ from the standard when one party files such a motion. Taft Broad. Co. v. U.S., 929 F.2d 240, 248 (6th Cir.1991). "[T]hat both parties have moved for summary judgment does not mean that the court must grant summary judgment as a matter of law for one side or the other." Morr v. Kamco Indus., Inc., 548 F.Supp.2d 472, 477 (N.D.Ohio 2008).

In a contract dispute, summary judgment is permissible when the contractual language of the contract is unambiguous, or, if the language is ambiguous, where extrinsic evidence leaves no genuine issue of material fact and permits contract interpretation of the agreement as a matter of law. Int'l Union, United Auto., Aerospace and Agr. Implement Workers of Am. v. BVR Liquidating, Inc., 190 F.3d 768, 772 (6th Cir.1999).

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