Campbell v. Bankboston

• Decision Date: 17 May 2002
• Docket Number: No. 99-CV-12543-MEL.,99-CV-12543-MEL.
• Citation: 206 F.Supp.2d 70
• Parties: James W. CAMPBELL, Plaintiff, v. BANKBOSTON, N.A., Bankboston Separation Pay Plan and its Administrator Helen Drinan, and the Bankboston Cash Balance Retirement Plan and its Administrator, the Retirement Committee, Defendants.
• Court: U.S. District Court — District of Massachusetts

206 F.Supp.2d 70

James W. CAMPBELL, Plaintiff, v. BANKBOSTON, N.A., Bankboston Separation Pay Plan and its Administrator Helen Drinan, and the Bankboston Cash Balance Retirement Plan and its Administrator, the Retirement Committee, Defendants.

No. 99-CV-12543-MEL.

United States District Court, D. Massachusetts.

May 17, 2002.

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Robert O. Berger, III, Boston, MA, for Plaintiff.

Robert B. Gordon, Crystal D. Talley, Ropes & Gray, Samuel B. Goldberg, Barron & Stadfeld, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

LASKER, District Judge.

James W. Campbell sues BankBoston, N.A. ("BankBoston"), BankBoston Separation Pay Plan ("SPP") and its Administrator Helen Drinan, and the BankBoston Cash Balance Retirement Plan ("Retirement Plan") and its Administrator, The Retirement Committee, alleging that the defendants: (1) wrongfully denied him SPP severance benefits under the Employment Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 ("ERISA"); (2) failed to pay the full amount of retirement benefits provided for by the Retirement Plan due to him in violation of ERISA and the Age Discrimination in Employment Act, 29 U.S.C. § 623 ("ADEA"); and, (3) discriminated against him by excluding him from an "early retirement" program. The complaint contains affiliated common law claims for breach of the covenant of good faith and fair dealing and wrongful termination.

The defendants jointly move for summary judgment. The motion is granted.

I.

Campbell was continuously employed by BankBoston (or its predecessors) from June 19, 1961, until September 30, 1998. During the last four years of his employment, Campbell was employed as a Senior Fiduciary Specialist in BankBoston's Global Asset Management Group, which was part of the trust department, where he handled BankBoston's institutional custody and trust business.

Three series of events define this dispute. The first occurred in June 1996, when BayBank and Bank of Boston merged to form BankBoston. At that time, an "early retirement" program was created to minimize involuntary layoffs associated with the merger. Campbell and other highly compensated employees (those earning above $66,000 a year) were excluded from this program. Campbell contends that this exclusion amounted to discrimination.

The second of the series of events that led to this lawsuit is the staged conversion of BankBoston's Retirement Plan to a cash balance plan. In the prior version of the Retirement Plan, participants had individual accounts to which they and BankBoston made periodic contributions, and their benefits were expressed under a traditional annuity-based formula. The cash balance plan also gave each participant an account to which annual credits were made, determined as a specified percentage of the employee's salary, but the contributions were not made by the employee, and the plan itself was insured to reduce market risk for plan participants.

The first step in this conversion occurred on January 1, 1989, when the Retirement Plan was amended to provide that future retirement benefits would accrue under a cash balance formula, but prior accruals would be grandfathered under the old annuity-based system. On January 1, 1997, the entire Retirement Plan was switched to a cash balance system and the accrued benefits were converted by calculating their present value and crediting that amount as an opening balance in the new cash balance system. Campbell bases his amended complaint on the second step in the conversion: he alleges that he received fewer benefits than he deserved.

The third and final series of events that generated the remaining counts in Campbell's complaint began in the middle of 1998, when BankBoston sold its institutional trust and custody business to Investors Bank and Trust ("IBT"). The effective date of the sale was October 1, 1998. When BankBoston announced that it was selling the division that Campbell worked in to IBT in July 1998, Campbell was offered continuing employment with IBT after the October 1, 1998 closing. Campbell declined this offer and sought severance benefits under the BankBoston SPP. On September 30, 1998, defendant Helen Drinan, the Plan Administrator of BankBoston's SPP, amended the plan to exclude anyone who refused offers of comparable employment by an acquiring company. Under the provisions of the SPP, Drinan determined that Campbell was ineligible for severance benefits.

The parties have since submitted 97 pages of briefing on the motion for summary judgment, discussed below.

II.

A. Count I: Violation of ERISA

Count I of the amended complaint alleges the defendants violated ERISA by failing to pay Campbell the severance pay he was entitled to under the SPP. 29 U.S.C. § 1132(a)(1)(B). The defendants argue that the denial of benefits was authorized under the amended version of the SPP and, if for some reason the amendment was improper or ineffective, it was authorized under the prior version of the SPP.

1. Was the Amendment of September 30, 1998 Effective?

The defendants contend that there is no limitation as a matter of law on how an amendment to a severance plan such as the SPP can be made. Accordingly, the defendants maintain that they were well within their rights when on September 30, 1998, Plan Administrator Drinan amended the SPP to exclude employees who "refuse an offer of employment by . . . an employer who acquires any of the assets or operations of a BankBoston company or business." Aff. of Helen G. Drinan, Ex. 13. Since it is undisputed that Campbell refused a job offer from IBT, the defendants assert that under the amended SPP, Campbell was not entitled to benefits.

In response, Campbell contends that the amendment to the SPP on September 30, 1998 "has no bearing on [his] proper entitlement to benefits . . . ." Pl.'s Memo. in Opp. at 21. His chief argument is that the amendment was made by a fiduciary, Drinan, and that therefore the amendment should not affect him. Instead, argues Campbell, the earlier version of the SPP controls, and under those terms, he contends he was due severance benefits.

It is the law that a severance benefit plan such as the SPP provides "welfare" rather than "pension or retirement" benefits. See 29 U.S.C. §§ 1002(1) and 1002(2)(A). "Welfare" benefits, which are not vested, can be altered or terminated by an employer at any time. See, e.g., Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851, 855 (4th Cir.1994); Reichelt v. Emhart Corp., 921 F.2d 425, 429-30 (2nd Cir. 1990); see also Allen v. Adage, Inc., 967 F.2d 695, 698 (1st Cir.1992) ("severance pay plans are employee welfare plans, and thus, are not vested"). Moreover, the Supreme Court has ruled that when amending a "welfare" benefit plan, an employer is not acting as a fiduciary. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 444, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999); Lockheed Corp. v. Spink, 517 U.S. 882, 890-91, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996); see also Joanou v. Coca-Cola Co., 26 F.3d 96, 99 (9th Cir.1994) (employers do not act in a fiduciary capacity when amending or terminating a severance benefit plan).

Accordingly, the amendment was permissible, and under the amendment, Campbell was not entitled to severance benefits. This conclusion is buttressed by and in harmony with O'Leary v. BankBoston, No. 99-CV-10627 (D.Mass.2000), which addressed this very issue, with the same SPP and amendment scheme, albeit with different plaintiffs. As with Campbell, the plaintiffs in O'Leary declined IBT's offer of continuing employment and attempted to get severance benefits instead. Judge Wolf held: (1) "the September 30, 1998, amendment governs for purposes of this case;" and (2) the 1997 version of the SPP "specifically reserved the right to amend, modify, or discontinue the plan for any reason at any time." O'Leary Tr. at 56, 58-59.

Accordingly, summary judgment is granted for the defendants as to count I on this ground. However, the parties have devoted considerable resources to briefing alternative, fall-back positions on this issue, and therefore, they are addressed below.

2. Was Campbell Entitled to Severance Benefits Under the Earlier Version of the SPP?

If the amendment was somehow improper or ineffective, the defendants argue that the amendment merely codified the prior practice under the SPP, and that therefore, even without the amendment, Campbell was not entitled to severance benefits. The earlier version of the SPP provides that an employee is eligible for benefits "if his or her active employment is terminated as a result of work force reduction or job elimination and he or she has made a reasonable and effective effort to secure a comparable position . . . ." Aff. of Drinan, Ex. 2 at 1. According to the defendants, the Plan Administrator reasonably found that Campbell was neither "terminated," nor involved in a "work force reduction or job elimination," nor made a "reasonable" effort to obtain a comparable position.

The defendants assert that Campbell was not "terminated" because BankBoston took special efforts to make sure that all employees who were within the division being sold to IBT were offered jobs there, and therefore, Campbell did not suffer an involuntary job loss. The defendants further assert that neither a "work force reduction" nor a "job elimination" occurred here because all of the employees kept their jobs and salaries; only their employer changed. Finally, the defendants contend that Campbell did not make a "reasonable" effort to secure comparable employment because he turned down a perfectly acceptable job at IBT. The earlier version of the SPP defines a "comparable" job as one which requires "a reasonably similar employment background and skill set, has a base salary within 10 percent of current base salary, has a similar work schedule, and is within 30 miles of the employee's work location." Aff. of Drinan Ex. 4. The defendants contend that...