Cohen v. Stanley
| Decision Date | 20 June 1983 |
| Docket Number | No. 82 Civ. 210 (DNE).,82 Civ. 210 (DNE). |
| Citation | 566 F. Supp. 246 |
| Parties | Robert D. COHEN, Plaintiff, v. Edmund A. STANLEY, Jr., Victor Simonte, Jr., Franz Von Ziegesar and Carl R. Pite, Individually and in their capacity as Trustees of the Bowne Profit-Sharing Trust, Bowne Profit-Sharing Trust and Bowne Health Benefit Plan and Trust, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Hertzog, Calamari & Gleason, New York City, for plaintiff; Loretta Preska, New York City, of counsel.
Simpson Thacher & Bartlett, New York City, for defendants; John W. Ohlweiler, New York City, of counsel.
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
INTRODUCTION
This is an action under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq. (1976 & Supp. IV 1980) ("ERISA") to compel the trustees of a profit-sharing plan to accelerate payment of the benefits held in the plaintiff's, a former employee's, account such that he would receive a lump sum prior to the date set forth in the plan. The trustees refused the employee's request on the ground that the plaintiff terminated his employment to work for a competitor. This action raises questions as to whether a change of employment by a plan participant is a permissible subject of trustee discretion in deciding whether to accelerate pension payments, and whether in the circumstances of this case the trustees exercised their discretion arbitrarily and capriciously.
Plaintiff Robert Cohen ("Cohen") commenced his employment with Bowne of New York, Inc. ("Bowne"), a subsidiary of Bowne & Co., Inc., on January 28, 1974. Bowne engages in financial, corporate, commercial and legal printing and in providing computer text, time-sharing services. Bowne's principal place of business is New York City, and it has subsidiaries in various locations throughout the United States.
During his employment at Bowne, Cohen held the position of pricing analyst in Bowne's pricing and estimating department. In that capacity, he evaluated the cost of work performed by Bowne employees and sent invoices to customers for the work. Trial Transcript ("Tr.") 233. As a pricing analyst Cohen did not have responsibility for generating business and had only infrequent contact with customers. Pre-Trial Order, dated November 30, 1982, Stipulated Fact ("Stipulated Fact") (n).
On March 17, 1981, Cohen resigned his position at Bowne to accept employment at Pandick Press, Inc. ("Pandick"). Pandick is also a financial, corporate and commercial printer with its principal place of business in New York City and has a number of subsidiaries elsewhere in the United States. Initially, Cohen worked in the pricing department at Pandick, and in the summer of 1982, he was promoted to assistant pricing manager. This position is considered a management position and involves responsibility as to billing decisions, corporate pricing policy and management of the pricing department. Tr. 239.
During his employment at Bowne, Cohen was a "participant" within the meaning of § 3 of ERISA, 29 U.S.C. § 1002(7), in an employee profit-sharing plan called the Bowne Profit-Sharing Plan and Trust (the "Plan"). The Plan was established in 1961 and amended and restated on October 31, 1972. The Plan is administered pursuant to an agreement known as the Bowne & Co., Incorporated Profit-Sharing Plan and Trust Agreement and is a deferred profit-sharing plan, which receives contributions from the business profits of the participating Bowne subsidiaries for the purpose of providing deferred profit-sharing benefits to their employees. Defendants Edmund A. Stanley, Jr., Victor Simonte, Jr., Franz Von Ziegesar and Carl R. Pite (the "Trustees") were trustees of the Plan at all times relevant herein.
In effect, under Article 7.4, all funds previously paid or credited to a participant's account, whether vested or not, were forfeited if an employee went to work for a competitor of Bowne. From 1972 to 1977, three employees left Bowne and became employed by competitors. The Trustees invoked the forfeiture provision and withheld all payments to these three employees.1
The Plan was amended and entirely restated effective June 17, 1977, and again on November 29, 1979, to comply with ERISA. In order to bring the Plan into compliance with ERISA, the forfeiture provision was eliminated. This change was the subject of considerable discussion among Bowne's employees including Cohen. Tr. 244-45. Cohen testified that the employees' understanding of the effect of the deletion of the forfeiture provision was they could leave Bowne's employ to work for a competitor and that this would not affect their ability to receive immediate distribution of their account balances. Id.
Under the 1977 Plan, which is presently in effect,2 Articles 8.1(A) and (B) provide as follows:
In addition, Articles 12.5(A) and (B) provide as follows:
A summary booklet entitled "Highlights of the Bowne Profit Sharing Plan for Employees of Participating Companies of Bowne & Co., Inc." (the "Summary") was distributed to all Plan participants, including Cohen. In addition to describing the mandatory payment provisions at Normal and Early Retirement Dates, the Summary states, inter alia: "The method and time of making payment shall be determined by the Trustees in their sole discretion, except for specific provisions in the event of death or disability."
On June 17, 1981 Cohen made a written request for an immediate distribution of his nonforfeitable balance. At that time, he was thirty-six years old, had completed seven years of service and thus, under Article 8.1, was entitled to receive his vested benefits at age sixty-five. Cohen requested the trustees immediately to distribute his benefits stating:
the Trustees pursuant to Article 8.1(B) of the Plan, have established and consistently applied procedures to make full distribution to participants of the value of their accounts as soon as practical after termination ... I have immediate and pressing financial needs and I again request that the value of my account ... be paid to me at once as was done to the numerous other individuals that have resigned from employment at Bowne.
Cohen concedes that he had read the above-mentioned Summary provision and that he had not inquired about distribution of his benefits prior to his leaving Bowne's employ. Tr. 260-61, 267-68.
On June 22, 1981, Carl Pite ("Pite") notified Cohen by letter that the Trustees had denied his request (the "June 22 Letter"). The June 22 Letter stated: "After reviewing the circumstances of your termination of employment, and in view of your immediate subsequent employment with a competitor, the Trustees have concluded that it would not be appropriate at this time to exercise their discretion to commence payment of your account balance immediately, as you have requested." Cohen was also advised by the June 22 Letter that he would be entitled to receive his retirement benefits on his Normal Retirement Date, and that he could request review of the Trustees' decision. The June 22 Letter also stated that the Trustees would consider further Cohen's request for accelerated payment if he submitted a statement of his income, expenses and the nature of his financial need.
The June 22 Letter also indicated that pursuant to Article 8.1(D), Cohen's nonforfeitable account balance would be segregated from the Plan funds and would be deposited in an interest-bearing bank account. On July 2, 1981 this bank account was opened. At the time of his resignation from Bowne, Cohen had accumulated $27,518.45 in his account. Under the terms of Article 7.1(B) of the Plan, Cohen's seven years of credited service meant that fifty percent, $13,759.23, of his account balance was vested and could not be forfeited.
On July 17, 1981 Cohen requested the Trustees to reconsider their decision to deny acceleration of benefits to him. Cohen enclosed a list of former Bowne employees who had accepted employment with competitors of Bowne and received accelerated distribution despite their employment with a competitor.
On July 23,...
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