Benham v. Lenox Savings Bank

• Decision Date: 13 October 1998
• Docket Number: No. CIV.A. 98-30004-MAP.,CIV.A. 98-30004-MAP.
• Citation: 26 F.Supp.2d 231
• Parties: Jacqueline BENHAM, Plaintiff, v. LENOX SAVINGS BANK, Defendant.
• Court: U.S. District Court — District of Massachusetts

26 F.Supp.2d 231

Jacqueline BENHAM, Plaintiff, v. LENOX SAVINGS BANK, Defendant.

No. CIV.A. 98-30004-MAP.

United States District Court, D. Massachusetts.

October 13, 1998.

COPYRIGHT MATERIAL OMITTED

Richard J. O'Brien, Daniel R. Solin, Pittsfield, MA, for Jacqueline T. Benham, Plaintiff.

James E. Wallace, Jr., Thomas J. Scannell, Bowditch & Dewey, Worcester, MA, for Lenox Savings Bank, Defendant.

ORDER

PONSOR, District Judge.

Upon de novo review, this Report and Recommendation is adopted; plaintiff's motion is hereby denied.

REPORT AND RECOMMENDATION REGARDING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (Docket No. 10)

August 25, 1998.

NEIMAN, United States Magistrate Judge.

In her motion for partial summary judgment, Jacqueline T. Benham ("Plaintiff") asserts that Lenox Savings Bank ("Defendant") committed various violations of the Employee Retirement income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). In addition, Plaintiff claims that Defendant fraudulently induced her to enter into a settlement agreement on July 13, 1995, which had the effect of reducing her benefits under a deferred compensation plan. Plaintiff, in her motion for partial summary judgment, seeks a declaratory judgment entitling her to full plan benefits and reasonable attorneys fees incurred in obtaining this relief.

Plaintiff's motion has been referred to the court for a report and recommendation pursuant to Rule 3 of the Rules for United States Magistrates of the United States District Court for the District of Massachusetts. See 28 U.S.C. § 636(b)(1)(B). For the reasons stated below, the court recommends that Plaintiff's motion be denied.

I. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate where the record reveals no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The facts must be viewed in a light most favorable to the non-moving party. Santiago-Ramirez v. Secretary of Dep't of Defense of United States, 62 F.3d 445, 446 (1st Cir.1995). The non-moving party bears the burden of placing at least one material fact into dispute after the moving party shows the absence of any disputed material fact. Mendes v. Medtronic, Inc., 18 F.3d, 13, 15 (1st Cir.1994) (discussing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The factual dispute claimed by the non-moving party must be "material" and the dispute over it "genuine." A "genuine" issue is one that only a finder of fact can properly resolve because it may reasonably be resolved in favor of either party and a "material" issue is one that affects the outcome of the suit. Aponte Matos v. Toledo Davila, 135 F.3d 182, 186 (1st Cir.1998); Collins v. Martella, 17 F.3d 1, 3 n. 3 (1st Cir.1994) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Mere allegations or conjecture unsupported in the record are insufficient to raise a genuine issue of material fact. Santiago v. Canon U.S.A., Inc., 138 F.3d 1, 5 (1st Cir.1998). Absent a genuine dispute of material fact, questions of law are appropriate for resolution on summary judgment. Jimenez v. Peninsular & Oriental Steam Nav. Co., 974 F.2d 221, 223 (1st Cir.1992).

II. FACTS

The court will not repeat the entire history of the deferred compensation plan at issue here, that history having been memorialized in Lemanski v. Lenox Savings Bank, No. Civ.A. 95-30074-MAP, 1996 WL 253315, at *1 (D.Mass. April 12, 1996). Only facts relevant to the instant motion are presented. Given that this is Plaintiff's motion, the facts, although mainly undisputed, are presented in a light most favorable to Defendant.

Defendant is located in Lenox, Massachusetts, and has a management structure composed of both a Board of Trustees ("BOT") and a Board of Investment ("BOI"). Early in 1986, Stanley T. Ryba ("Ryba"), then President of the Bank, adopted a deferred compensation plan, known as the Brick Plan, covering its key executive officers. The Brick Plan was offered through an entity known as the Ban Ser Corp. While Ryba informally discussed the Brick Plan with members of the BOI as early as March of 1986, he did not do so as part of a formal BOI meeting because he did not think that the Plan was likely to cost Defendant any money.

In order to qualify for benefits under the Brick Plan, each participant was to continue as an employee of Defendant for up to five years after execution of his or her participation agreement, during which time a portion of his or her salary would be deferred. Defendant would thereafter pay income to the participant for ten years beginning at age sixty-five or, in the event of a premature death, to a named beneficiary.

"Deferred Income Agreements" concerning Defendant's various officers and Trustees, including Plaintiff as Vice President, were entered into on July 1, 1988. Plaintiff's agreement was signed by her and by Ryba on behalf of Defendant. The agreement stated (i) that Defendant would pay Plaintiff a total of $273,870 in monthly installments of $2,282.25 starting at age sixty-five for a ten year period, (ii) that, in consideration thereof, Plaintiff agreed to continue to serve Defendant as an employee for five years, (iii) that Plaintiff's benefits would vest monthly over a five year period, and (iv) that once Plaintiff served five consecutive years as an officer of Defendant her benefits would fully vest. The agreement also provided for certain death benefits to be paid to Plaintiff's beneficiary. Plaintiff thereafter deferred $3,000 of her income for each of the five years required by the Brick Plan and continued in the employ of Defendant for several years in excess of the time required for her benefits to fully vest.

In 1989, Ryba learned from Defendant's bank auditors that there would be certain costs under the Brick Plan and decided to seek approval of the plan from the BOI. At a February 22, 1989 meeting, the BOI formally voted to offer the Brick Plan to certain officers. On March 13, 1989, the BOT voted to ratify the BOI's actions but did not specifically discuss the Brick Plan.

In February of 1993, Michael A. Christopher ("Christopher") succeeded Ryba as Defendant's president. Christopher has testified that, shortly thereafter, he read Defendant's corporate bylaws and learned of the existence of the Brick Plan. One year later, in February of 1994, Christopher learned that a larger than normal reserve would have to be taken on the bank's 1993 financial statements due principally to amendments allowing for early retirement of some Brick Plan participants. Christopher then reviewed the bank's adoption of the Brick Plan. After consulting bank counsel, Christopher concluded and so advised the BOT that the plan had not been properly adopted.

Thereafter, Christopher advised participants, including Plaintiff, that the Brick Plan had been improperly adopted and proposed alternative benefits. Executive Vice President Wayne Lemanski ("Lemanski") rejected the proposal and, in May of 1994, brought suit against Defendant to enforce his benefits under the plan.

While Lemanski's case was pending, Christopher made a specific written proposal in a letter dated June 22, 1995, to the other Brick Plan participants, including Plaintiff. In introductory paragraphs, Christopher stated the following:

As you know, the Bank has taken the position that the "Brick Plan" "contracts," as to which you are a participant, were not timely or properly authorized by the Board of Trustees of the Bank as required by the Bank's bylaws. One of the participants has instituted a civil action seeking a declaration that the "Brick Plan" is valid and enforceable as to him, and that action is presently pending in the United States District Court for the District of Massachusetts.

If, as the Bank believes, it prevails in the present litigation, there will have been a judicial determination that the Brick Plan is void and unenforceable. If such a determination is made, "Brick Plan" benefits may be unenforceable as to all participants.

(Pl. Statement of Undisputed Facts (Docket 13), Exhibit C.) Then, recognizing that Plaintiff, as well as other plan participants, may have made retirement and investment plans based on the expectation of Brick Plan benefits and "to mitigate the effect of a negative ruling," Christopher offered Plaintiff the option of electing to receive seventy percent of the benefits which would otherwise be payable pursuant to the terms of the plan. (Id.) The same offer was made to all but two of the participants, one of whom was receiving nominal payments under the plan, the other the widow of a participant who was already receiving benefits. Acceptance of the offer was conditioned upon Plaintiff's acknowledgment that the Brick Plan was "void" and "unenforceable" and her agreement to "waive any and all claims or demands ... she may have against Defendant, its President or former officers, Trustees, and agents in connection with the Plan." (Id.) The letter encouraged Plaintiff to have the proposed Settlement Agreement reviewed by her legal counsel or other advisors. The letter concluded as follows:

If you timely accept the Bank's proposal, payments will be made to you even if the Bank successfully defends the present litigation. If you elect not to sign the enclosed Agreement, then it is probable that (i) if [Lemanski] is successful in his claim, you will receive all of the benefits otherwise afforded to you under your existing "Brick Plan" arrangement and (ii) if [Lemanski] is not successful, the Bank will reimburse you for the amounts withheld from your compensation but will not otherwise be obligated to honor the existing "Brick Plan" arrangement.

(Id.)¹

On July 13, 1995, Plaintiff signed the Settlement Agreement which had been offered in the June 22, 1995 letter. Plaintiff thereby agreed to a reduction in her Brick Plan benefits and acknowledged...