Browe v. CTC Corp.
| Decision Date | 29 September 2021 |
| Docket Number | August Term, 2020,Docket No. 19-677-cv, 19-813-cv |
| Parties | Donna BROWE, Tyler Burgess, Bonnie Jamieson, Philip Jordan, Estate of Beverly Burgess, Plaintiffs-Appellants-Cross-Appellees, Lucille Launderville, Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. CTC CORPORATION, Bruce Laumeister, Defendants-Counter-Claimants-Appellees-Cross-Appellants. |
| Court | U.S. Court of Appeals — Second Circuit |
John D. Stasny, Woolmington, Campbell, Bent & Stasny, P.C., Manchester Center, VT, for Plaintiffs-Appellants-Cross-Appellees and Plaintiff-Counter-Defendant-Appellant-Cross-Appellee.
A. Jay Kenlan, A. Jay Kenlan, Esq., PLLC, Rutland, VT, for Defendants-Counter-Claimants-Appellees-Cross-Appellants.
Before: Livingston, Chief Judge, Lynch and Bianco, Circuit Judges.
Former employees and officers of the now-defunct CTC Corporation brought this action asserting various claims under the Employee Retirement Income Securities Act ("ERISA") against the corporation and its former CEO, Bruce Laumeister, arising out of alleged mismanagement of the firm's deferred compensation plan (the "Plan"). Plaintiffs asserted claims for wrongful denial of benefits, breaches of fiduciary duties, and violation of ERISA's reporting requirements. Plaintiffs also sought a judgment declaring that they were entitled to benefits under the Plan and injunctive relief in the form of the appointment of an administrator for the Plan. Defendants countersued Plaintiff Launderville for contribution and indemnity. After a bench trial, the United States District Court for the District of Vermont (Christina C. Reiss, J. ) entered judgment for Plaintiffs on their fiduciary duty and reporting claims and judgment for Defendants on the remaining claims. The district court also entered judgment against Plaintiff Launderville on Defendants’ contribution claim.
In a subsequent remedial opinion, the district court calculated the damages on the fiduciary breach claims at $350,603 and appointed a special master to administer the distribution of the award on a per capita basis to those Plan participants who met certain qualifications. The district court further apportioned liability for the award between Laumeister and Launderville at 60% and 40%, respectively, without holding them jointly and severally liable, and ordered each to pay $1,000 in damages for the reporting claims.
The parties cross appealed. Plaintiffs assert that the district court's limitation of damages to the Plan's projected balance as of 2004 violates ERISA by failing to restore all Plan losses, and that the per-capita distribution scheme that the district court adopted violates their vested rights to benefits. Plaintiffs also argue that the district court erred in holding Launderville liable, and that CTC itself is jointly and severally liable for the losses. Finally, Plaintiffs contend that the district court erroneously dismissed their wrongful denial of benefits claims and that their benefits are vested and enforceable. Defendants argue that the claims are time-barred and, in any case, meritless because the Plan was exempt from the relevant provisions of ERISA as a "top hat" plan. Defendants also assert that the district court erred in admitting a 1997 statement of account balances because it was hearsay not falling within any exception to the general rule excluding hearsay evidence.
For the most part, we agree with Plaintiffs. Accordingly, for the reasons stated below, we hold as follows: (1) the district court correctly rejected Defendants’ invocation of ERISA's three-year statute of limitations for fiduciary claims because Defendants failed to prove that all Plaintiffs had knowledge of the breaches three years prior to the commencement of this suit; (2) Defendants waived any reliance on ERISA's six-year statute of repose by failing to assert it; (3) the Plan was not a top hat plan because it was not offered to a qualitatively select group of employees; (4) the district court's decision to limit the restoration award to the Plan's projected balance as of 2004 was error, and damages must be recalculated to represent the Plan's balance had its funds been prudently invested through the date of judgment; (5) it was error for the district court not to assess the scope of CTC's liability, if any, for the claims asserted against it; (6) Laumeister is liable for the entire amount of the restoration award, as liability under ERISA is joint and several; (7) while the district court's conclusion that Launderville is liable in contribution is supported by sufficient evidence, that liability is to Laumeister, not to the Plan directly; (8) there is no basis to impose liability on Launderville for her failure to comply with ERISA's reporting requirements, as no party with standing sued her for that failure; (9) the district court's entry of judgment for Defendants on Plaintiffs’ wrongful denial of benefits claims was error, though we express no view on the ultimate viability of those claims, which are appropriately assessed by the district court in the first instance; (10) the district court's order that the restoration award be distributed on a per capita basis to Plan participants risks violating those participants’ vested rights and is, in any case, inconsistent with ERISA; and (11) Defendants’ evidentiary challenge is meritless.
We therefore AFFIRM IN PART and VACATE IN PART the judgment of the district court and REMAND this case for further proceedings consistent with this opinion. We DENY all pending motions as moot.
Except as otherwise noted, the following statement of facts paraphrases the district court's extensive findings. Because neither party argues that those findings are clearly erroneous, we accept them as true for the purpose of this opinion.
Defendant-Counter-Plaintiff-Cross-Appellant Bruce Laumeister formed Defendant-Counter-Plaintiff-Cross-Appellant the CTC Corporation ("CTC") in or around 1979. Laumeister was CTC's sole shareholder, Chief Executive Officer, and the chairman of its board of directors throughout CTC's existence. He served as president of CTC from 1979-2000 and then from 2008 until its dissolution in 2014. From around 1979 until 2014, CTC operated a retail photo-finishing facility and retail store in Bennington, Vermont. CTC also operated between 23 and 26 one-hour photo labs in Vermont, Connecticut, Massachusetts, New Hampshire, and New York (the "One-Hour Labs"). The One-Hour labs also operated as retail stores selling photographic equipment and supplies.
The One-Hour Labs were incorporated in the states in which they conducted business, filed their own tax returns, and paid their employees through three corporations, each of which held a separate bank account controlled by CTC: VSL Corp. (New Hampshire); LWB Corp. (Massachusetts); and BRL Corp. (Vermont and New York). The ownership structure of those corporations was not clearly established in the record; while Laumeister testified that they were wholly owned subsidiaries of CTC, he admitted on cross-examination that LWB was not a wholly owned subsidiary but was instead owned by Laumeister and a man named Christopher Belknap.
Between 1980 and 2000, CTC grew significantly. At its peak operation, CTC's Bennington facility operated three and sometimes four shifts per day, depending on the seasonal volume of the film to be developed and printed. During peak times, CTC and One-Hour Labs employed additional workers, typically on a part-time basis. Although Defendants assert that CTC employed 196 people at its peak, that figure includes employees of the One-Hour Labs. The district court found that CTC itself had no more than 60 full-time employees as of 1997.
Many of the Plaintiffs began their careers at CTC at or around its inception. Donna Browe was employed by CTC from its inception until on or about November 12, 2012. Browe began at CTC as a "minimum-wage" clerk in the accounting department and eventually rose to manager of the department in 2000. Browe voluntarily left her job at CTC in 2012 for a position at Morris Repair Company. Lucille Launderville also began her employment with CTC at its inception. Launderville initially worked in customer service but was eventually promoted to a number of senior positions, including President and Chief Operating Officer. Launderville also came to hold a position on the company's board. She resigned from CTC in 2008 for a position at Plasan Industries. Beverly Burgess, who died in November 2004, was employed by CTC from the time of its formation in 1980 until approximately 2004. She is the mother of Plaintiffs Tyler Burgess and Bonnie Jamieson. Philip Jordan worked at CTC from its inception until January 4, 2008, excluding the period between October 1986 and October 1988. Jordan began as a salesman and eventually became sales manager.
Sometime in late 1989 or early 1990, due to the company's rapid growth and success, CTC decided to offer certain employees a deferred compensation plan (the "Plan"). Wayne Massari, who served as CTC's Treasurer and Chief Financial Officer and sat on CTC's board until he suffered a stroke and became permanently disabled in 1999, drafted the first plan agreement, dated December 10, 1990 (the "1990 Plan Agreement").1
Laumeister intended the Plan to accomplish three objectives: (1) to reward CTC's senior managers for the performance and growth of the company; (2) to incentivize CTC's senior managers to remain as employees of CTC until their retirement at age 65 or their death or disability while in CTC's employ; and (3) to encourage CTC's senior managers to make annual contributions of a minimum of three percent of their salary to their own Individual Retirement Accounts. Moreover, Laumeister intended the Plan to be a "top hat" plan that was offered to a select group of highly compensated managerial employees within the meaning of ERISA.2 However,...
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