Carr v. First Nationwide Bank
| Decision Date | 02 March 1993 |
| Docket Number | No. C-92-2927 MHP.,C-92-2927 MHP. |
| Citation | 816 F. Supp. 1476 |
| Court | U.S. District Court — Northern District of California |
| Parties | John L. CARR, Anthony M. Frank, and S. Davidson Herron, Jr., Plaintiffs, v. FIRST NATIONWIDE BANK, a Federal Savings Bank, First Nationwide Financial Corporation, a Delaware Corporation, and the First Nationwide Financial Corporation Deferred Compensation Plan, Defendants. |
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This action for declaratory and injunctive relief, or alternatively, for contract damages, was brought by plaintiffs, former executive employees of defendants First Nationwide Bank and First Nationwide Financial Corporation (collectively, "the Bank" or "the Savings and Loan"). They seek to enforce contractual rights under the terms of the First Nationwide Financial Corporation Deferred Compensation Plan ("the Plan" or "the Top Hat Plan") pursuant to Section 502(a) the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1132(a). The matter is now before the court on the parties' cross-motions for summary judgment. For the reasons explained below, plaintiffs' motion for summary judgment is GRANTED and defendants' motion for summary judgment is DENIED.
Beginning in 1979, the Savings and Loan adopted a deferred executive compensation arrangement, the Plan at issue in this action. Joint Statement of Material Facts Not In Dispute ("Jt. Stmt."),1 ¶¶ 12-13. The Plan was first adopted in 1979, was amended and "restated" in 1983, amended in 1986, amended in 1990 and amended again in 1992. Id. ¶¶ 13, 27, 35, 38 & 44.
Approximately twenty-five individuals, including plaintiffs, over the course of the past thirteen years have deferred their compensation pursuant to the Plan. Id. ¶ 10. Plaintiff John L. Carr ("Carr") was employed by the Savings and Loan from 1973 until 1989 and was its Vice Chairman and General Counsel when he terminated his employment at the Savings and Loan. Id. ¶ 2. Plaintiff Anthony M. Frank ("Frank") was employed by the Savings and Loan from 1971 to 1988 and was its Chairman and Chief Executive Officer when he terminated his employment with the Savings and Loan. Id. ¶ 3. Plaintiff S. Davidson Herron, Jr. ("Herron") was employed by the Savings and Loan from 1976 to 1983 and was its Chief Financial Officer when he terminated his employment with the Savings and Loan. Id. ¶ 4.
The Plan was originally adopted by the Bank in October 1979 ("the 1979 Plan") by amending the then existing 1977 Performance Share Plan ("the 1977 Plan") to become a deferred compensation plan. Id. ¶¶ 13-15. The 1979 Plan, or 1977 Plan as Amended, provided participants the new option of deferring the payment of performance share awards to which participants might become entitled under the Plan by submitting written deferral notices to the Bank. Id. ¶ 21; Plaintiff's Appendix of Exhibits in Support of Motion for Summary Judgment ("App."), Ex. 2 ¶ 11(H). The 1979 Plan also provided the following formula for the rate of interest to be paid on deferred amounts:
... there shall be credited to a participant's deferred compensation account quarterly for the benefit of the participant interest for the average balance in the account during the quarter at a rate equal to the highest rate of interest paid by the Company or its savings and loan subsidiary on savings certificates or borrowings during the calendar quarter in which interest on the participant's account is earned.
Id. In addition, Plan participants could select when they wanted payments of their deferred awards to begin, as well as the schedule such payments would follow:
In the deferral notice the participant may elect not to receive any payments from his account until the date of the participant's retirement or termination of employment, or such other date as is specified in the deferral notice (the "Commencement Date"), at which time payments to the participant would be made under one of the following three methods selected by the participant in the deferral notice ...
Id. The 1979 Plan then set forth three distinct alternative payout options from among which a participant could select in the deferral notice and under each of which payments "shall" be made to the participant on and/or after his selected "Commencement Date". Id.
Finally, the 1979 Plan contained the following "Termination and Modification" provision:
The Board of Directors may at any time terminate the Plan (without canceling or altering any outstanding awards thereunder), if in its judgment, the tax accounting or other effects of the Plan or potential payouts under prospective awards would not be in the best interests of the Company. Without canceling, reducing or altering any outstanding awards thereunder, the Board of Directors, at any time, or from time to time, may modify or amend the Plan in whole or in part ... followed by language requiring stockholder approval for amendments increasing numbers of Performance Share Units authorized or shares of Common Stock paid out under the Plan.
The Plan was amended and "restated" by the Bank in 1983 ("the 1983 Plan"). Jt. Stmt. ¶¶ 27-29. The stated "Purpose" of the 1983 Plan was "to provide for an unfunded deferred compensation arrangement for a select group of management or highly compensated employees" of the Bank. Id. ¶ 32; App. Ex. 3 ¶ 1.
With respect to deferrals, interest and payouts, the 1983 Plan remained consistent with the 1979 Plan. The interest rate formula remained:
a rate equal to the highest rate of interest paid by the Company or its savings and loan subsidiary on savings certificates or borrowings during the calendar quarter in which interest on the Participant's Account is earned.
Jt. Stmt. ¶ 30; App. Ex. 3 ¶ 7. The 1983 Plan continued to provide a choice of three alternative payout methods by which a participant could elect to receive payments "upon retirement or termination of employment, or such other date as is specified" by selecting the preferred method in the deferral notice. Id.
The 1983 Plan also provided, regarding "Payout on Termination of Employment," that:
Should a Participant die, become disabled, retire under the Company Retirement Plan or be terminated by the Company without cause, the Participant's Deferred Amounts shall not be forfeited and he shall receive such Amounts in accordance with the provisions of the Plan.
Jt. Stmt. ¶ 31; App. Ex. 3 ¶ 9.
Finally, the 1983 Plan amended the former provision regarding "Amendment or Modification" and provided that:
The Plan may be modified or amended in whole or in part at any time or from time to time by the Board of Directors.
On December 19, 1986, the Plan was again amended. Jt. Stmt. ¶¶ 35-36. The 1986 amendment to the Plan ("the 1986 Plan") changed only Section 7 of the 1983 Plan and all other sections remained the same, including the 1983 Plan's provisions regarding Purpose, Administration, Payout on Termination of Employment, and Amendment or Modification. Jt. Stmt. ¶ 37. The amendment to Section 7 partially changed the interest rate formula that would be applied to Deferred Compensation Accounts.
The 1986 amendment to Section 7 retained the 1979 and 1983 Plans' interest rate formula for "Prior Amounts", defined as amounts credited before December 19, 1986 or credited after that date pursuant to deferral notices received before January 19, 1986. However, as to amounts otherwise credited on or after December 1, 1986, or "Subsequent Amounts", the amended Section 7 adopted a wholly new interest rate formula.2
The Plan was again amended effective July 1, 1990 ("the 1990 Plan"). Jt. Stmt. ¶ 38. The 1990 amendment included some significant changes from prior plans in its provisions regarding "Amendment, Modification or Discontinuance" as follows:
The Plan may be modified or amended in whole or in part, or be discontinued at any time or from time to time by the Board of Directors of First Nationwide Financial Corporation, but no such action shall retroactively impair or otherwise adversely affect the rights of any person to payments under the Plan which has sic. accrued prior to the date of such action, as determined by the Committee.
Id. ¶ 41; App.Ex. 6 ¶ 12. Regarding its "Effective Date" the 1990 Plan added:
The Plan restates and amends effective as of July 1, 1990, the provisions of the Deferred Compensation Plan adopted by the Board of Directors of First Nationwide Financial Corporation on October 24, 1979, as amended by such Board on February 15, 1983, and December 19, 1986, and as restated by such Board on December 18, 1987 ("Prior Plan"). Any election made prior to July 1, 1990, under the Prior Plan shall be governed by the provisions of the Restated and Amended Plan, except to the extent that the provision of the Restated and Amended Plan shall impair or otherwise adversely affect a Participant's rights under the Prior Plan in which case (and only to the extent) the provisions of the Prior Plan shall apply.
Jt. Stmt. ¶ 42; App. Ex. 6 ¶ 17.
However, the 1990 Plan did not change the interest rate or payout provisions of the prior plans. Jt. Stmt. ¶ 43. The interest rate provision of the 1990 Plan remained identical to that of the 1986 Plan. Jt. Stmt. ¶ 43; App. Ex. 6 ¶ 7(B). The 1990 Plan's provisions regarding repayment or payouts to Plan participants were also substantially identical to those of the 1986 Plan. Jt. Stmt. ¶ 43; App. Ex. 6 ¶ 7(D).
The most recent amendment to the Plan was adopted by the Savings and Loan effective August 1, 1992 ("the 1992 Plan"). Jt. Stmt. ¶ 44; App. Ex. 8. The 1992 Plan represents an extensive revision and modification of the provisions contained in the 1990 and prior Plans. The 1992 Plan retains the language of the 1990, 1986 and 1983 Plans...
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