Blair v. Young Phillips Corp.

• Decision Date: 30 October 2002
• Docket Number: No. CIV.A.1:00-CV-01130.,CIV.A.1:00-CV-01130.
• Citation: 235 F.Supp.2d 465
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Richard M. BLAIR, Plaintiff, v. YOUNG PHILLIPS CORPORATION; Graphic Systems, Inc.; the Young Phillips Employment Agreement; and the Young Phillips Executive Salary Continuation Agreement, Defendants.

235 F.Supp.2d 465

Richard M. BLAIR, Plaintiff, v. YOUNG PHILLIPS CORPORATION; Graphic Systems, Inc.; the Young Phillips Employment Agreement; and the Young Phillips Executive Salary Continuation Agreement, Defendants.

No. CIV.A.1:00-CV-01130.

United States District Court, M.D. North Carolina.

October 30, 2002.

J. Griffin Morgan, Robert M. Elliot, Elliot Pishko Morgan, P.A., Winston-Salen, NC, for Plaintiff.

Daniel R. Taylor, Jr., Louis Whittier Doherty, Kilpatrick Stockton, L.L.P., Winston-Salem, NC, for Defendants.

MEMORANDUM OPINION

BULLOCK, District Judge.

This matter, originally filed in state court and removed by Defendants pursuant to 28 U.S.C. § 1331, is before the court on Defendants' motion for summary judgment. This case involves Plaintiff Richard M. Blair ("Plaintiff") whose employment with Young Phillips Corporation ("Young Phillips") and Graphic Systems, Inc. ("GSI") (collectively "Defendants") was terminated for disputed reasons. The amended complaint alleges that Defendants breached their fiduciary duties owed to Plaintiff in violation of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1104(a)(1), and, therefore, Plaintiff is entitled to relief under ERISA, Section 502(a)(3), 29 U.S.C. § 1132. Plaintiff also claims that his termination was for the purpose of wrongfully interfering with his rights to benefits in violation of Section 510 of ERISA, 29 U.S.C. § 1140. Lastly, Plaintiff raised numerous state law claims but has acknowledged that his state law claims are preempted by ERISA in light of this court's earlier ruling that ERISA applies to the benefits Plaintiff seeks under the employment agreement. Furthermore, Plaintiff has stipulated to the dismissal of his claims for bonus compensation. Accordingly, only Plaintiff's claims for breach of fiduciary duties and wrongful termination are before the court on Defendant's current motion.

FACTS

Plaintiff was a longtime executive of Young Phillips, a North Carolina corporation. Initially hired as an executive vice president and chief operating officer ("COO") in 1988, Plaintiff eventually took over as president and COO in 1991. In 1998, Plaintiff was named vice chairman of the board of directors of Young Phillips. Although he reported to Ben Phillips, Plaintiff was the principal officer of Young Phillips and managed the company on a day-to-day basis.

During Plaintiff's employment with Young Phillips, he was protected by employment agreements which were periodically renewed and remained relatively consistent. On May 7, 1998, Plaintiff and Young Phillips entered into a final employment agreement ("Agreement"). Effective January 1, 1998, it provided for a term of employment of two years and for severance compensation in the event of termination "without cause." With regard to the two-year term of employment, the Agreement provided that Plaintiff would serve as COO for "a continuing term of two years which is automatically extended on a daily basis so that the term remains a full two years at all times." (Pl.'s Br. in Support of Mot. to Remand, Ex. 1 at 1.) This term of employment, however, would "not be extended automatically beyond July 31, 2004." (Id.) As to the severance provision, Young Phillips maintained the right to terminate Plaintiff "for cause" at any time. If Plaintiff was terminated "for cause" he would have no right to receive any compensation or benefits following his termination. The term "for cause" was defined by the Agreement to include:

chronic alcoholism, drug addiction, criminal dishonesty, misappropriation of any money or other assets or properties of [Young Phillips], bankruptcy of [Plaintiff], willful violation of specific and lawful directions of the Board of Directors of [Young Phillips] or their designees (which directions must not be inconsistent with the provisions of this Agreement), failure or refusal to perform the services required of [Plaintiff] under this Agreement and any other acts or omissions that constitute grounds for cause under the laws of the State of North Carolina.

(Pl.'s Br. in Support of Mot. to Remand, Ex. 1 at 3.) The Agreement also contained a provision entitled "Voluntary Termination." Under this provision the Agreement could "be terminated by either party ... upon 30 days written notice to the other party." (Id.) However, if Young Phillips terminated the Agreement for any reason other than Plaintiff's death, disability, or "for cause" Plaintiff would receive sixty per cent (60%) of his salary as well as other fringe benefits listed in the Agreement for twenty-four (24) months or until July 31, 2004, whichever came first.¹ On the same date, Plaintiff and Young Phillips executed the Executive Salary Continuation Agreement which provided substantial benefits to Plaintiff after his retirement if his employment was not terminated before the date of his retirement by his voluntary resignation or because of involuntary termination for cause.

In the spring of 1999, Young Phillips and GSI commenced serious discussions concerning the potential acquisition of Young Phillips by GSI. Plaintiff and a local attorney, Eugene (Gene) Johnson, led the discussions for Young Phillips; and Jon Wright, President of GSI, and Jim Clark, financial officer of GSI, handled negotiations for GSI.

On July 31, 1999, GSI acquired all or most of the stock of Young Phillips. After this acquisition, Young Phillips operated as a subsidiary of GSI. Most of the employees of Young Phillips, including the principals, remained with the company. As a term of GSI's acquisition, Plaintiff resigned as an officer and board member. However, Plaintiff was immediately restored to his position when he and GSI entered into an Addendum Agreement of Employment ("Addendum"). Over the objection of Jim Clark, GSI agreed to be bound by the Agreement between Plaintiff and Young Phillips. Plaintiff remained actively employed pursuant to the terms of the Agreement, but thereafter reported to Jon Wright and Jim Clark, not Ben Phillips.

Shortly after the acquisition, Plaintiff received a memorandum from Jim Clark dated August 17, 1999. In the memorandum, Clark informed Plaintiff that, based on conversations between Clark and Jon Wright, he must obtain prior approval before taking a number of actions on behalf of Young Phillips. Plaintiff responded by memorandum dated August 19, 1999, stating that he "concur[red] with the bulk of the subject matter" but suggested "reasonable parameters" to allow for better operation. (Defs.' Mot. Summ. J., Ex. 6.) Plaintiff and Wright spoke by telephone and reviewed Plaintiff's suggestions. Plaintiff claims that Wright told him during this conversation that the only purpose of the memorandum was to keep Wright advised of "material issues."

The events that transpired between the GSI acquisition of Young Phillips and Plaintiff's termination are highly disputed. Plaintiff claims that he performed all of his responsibilities within the limitations set by GSI. Plaintiff claims that he was in "constant communication" with Jim Clark and Jon Wright to get approval for decisions to be made or actions to be taken. (Pl.'s Ex. Opp'n Defs.' Mot. Partial Summ. J., Ex. 1 at 4 ¶ 15, 5 ¶ 17.) Plaintiff states that he had frequent telephone conversations with Wright and Clark and that both would visit the Young Phillips facility in Clemmons on a regular basis. Also, Plaintiff claims that GSI was totally involved in the operation of Young Phillips. Plaintiff avers that he was never aware of any disapproval by GSI; that he never received a single writing from GSI indicating any discontent over his performance; and that, although he spoke to both Clark and Wright "weekly," neither ever expressed any discontent over his performance. Then, on August 23, 2000, without prior notice, Jon Wright sent a letter to Plaintiff terminating him "for cause."

Defendants claim that by the summer of 2000 Jon Wright and Jim Clark were aware of numerous instances in which Plaintiff had failed to follow specific instructions. They indicate that Plaintiff did many things without first obtaining approval as required under the guidelines set out in the August 1999 memorandum. Also, there were other instances where Plaintiff failed to do what he had been asked to do. Finally, Defendants claim that in August 2000 Jim Clark and Plaintiff had a very heated telephone conversation in which Plaintiff indicated to Clark that he was gathering information to provide to an attorney for Ben Phillips and that he planned to do so even after instruction from Clark not to do so. Defendant contends that the accumulation of these reasons and the telephone conversation with Jim Clark prompted Clark and Jon Wright to terminate Plaintiff's employment "for cause."

Plaintiff originally filed this action in North Carolina state court. Defendants filed notice of removal of this action to this court, claiming that this case should be preempted by ERISA. This court denied Plaintiff's motion to remand to state court, holding that Plaintiff's claims are governed by ERISA. Plaintiff then filed an amended complaint alleging claims under ERISA arising from the employment agreement. After discovery, Plaintiff filed a second amended complaint alleging additional claims under ERISA arising from the parties' Executive Salary Continuation Agreement. Defendants then moved for summary judgment.

Plaintiff alleges that Defendants breached their fiduciary duties owed to Plaintiff in violation of ERISA, 29 U.S.C. § 1104(a)(1) and therefore Plaintiff is entitled to relief under ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3). Plaintiff also claims that his termination was for the purpose of wrongfully interfering with his right to benefits in violation of Section 510 of ERISA, 29 U.S.C. § 1140. Plaintiff also raised numerous state law claims, but has acknowledged that his state law claims are preempted by ERISA in light of this court's earlier ruling that ERISA...