Cook Techs., Inc. v. Panzarella, CIVIL ACTION NO. 15-CV-1028
| Decision Date | 17 December 2018 |
| Docket Number | CIVIL ACTION NO. 15-CV-1028,CIVIL ACTION NO. 15-CV-3568 |
| Parties | COOK TECHNOLOGIES, INC. EMPLOYEE STOCK OWNERSHIP PLAN, COOK TECHNOLOGIES, INC., as the Plan's Administrator, COOK TECHNOLOGIES, INC., EMPLOYEE STOCK OWNERSHIP PLAN TRUST, MICHAEL FINNEGAN as a plan participant Plaintiffs v. THOMAS A. PANZARELLA Defendant THOMAS A. PANZARELLA, SR. Plaintiff v. COOK TECHNOLOGIES, INC., et. al. Defendants |
| Court | U.S. District Court — Eastern District of Pennsylvania |
DECISION
These competing civil ERISA actions were tried non-jury before the undersigned over a total of eight days from April 9 - 13, 2018 and April 30 - May 2, 2018. The parties have since filed their proposed findings of fact and conclusions of law and supplemental post-trial briefing and the matter is now ripe for adjudication by the Court. Accordingly, we hereby make the following:
FINDINGS OF FACT
1. Thomas A. Panzarella, Sr. is an adult individual presently residing at 413 99th Street, Stone Harbor, NJ 08247.
2. Cook Technologies, Inc. was incorporated in 1946 in Pennsylvania and remains a Pennsylvania corporation with a principal place of business located at 1 North Second Street, Green Lane, Pennsylvania 18054. (P-26, p. 6).
3. Cook Technologies, Inc. ("Cook" or "Cook Technologies") is the plan administrator and plan sponsor of the Cook Technologies, Inc. Employee Stock Ownership Plan ("Cook ESOP"). Cook Technologies, Inc. is also now the Trustee of the Cook ESOP. (N.T. 4/10/18, pp. 177-178).
4. The Cook ESOP was created in 1974 and is an employee pension benefit plan within the meaning of the Employee Retirement Income Security Act, 29 U.S.C. §1002(d) ("ERISA"). (P-26, p. 6; N.T. 5/1/18, pp. 181-182).
5. Michael Finnegan, Gordon Kulp and Robert Ziegler are adult individuals presently residing in the Commonwealth of Pennsylvania and are directors of Cook Technologies, Inc. Immediately prior to Cook Technologies becoming Plan Trustee, Messrs. Finnegan, Kulp and Ziegler were the Trustees and fiduciaries of the Cook ESOP and the Cook ESOP Trust. (N.T. 4/10/18, p. 178). Prior to that and in February - May, 2012, Mr. Ziegler, Mr. Panzarella and Mr. Finnegan were Trustees and fiduciaries of the Cook ESOP and the Cook ESOP Trust. (Exhibit P-2).
6. Cook Technologies, Inc. ("Cook") provides engineering, consulting and design services for sample prototypes and manufactures parts, subassemblies and complete metal-based products according to its customers' specifications. Among its most frequently-produced products are computer and copier trays, steel cabinets, chair frames, automotive stampings and items used in the health care industry. (N.T. 4/10/18, pp. 174-177; P-26, p.6).
7. Michael Finnegan, Gordon Kulp and Robert Ziegler are all long-term employees of Cook Technologies. Mr. Kulp has worked for Cook Technologies for some 34 years, starting as a punch press operator, working his way up to welder and into the prototype and tool rooms and eventually becoming the maintenance director and overseeing a division of Cook - Lehigh Valley Mobility.1 Mr. Finnegan began working for Cook Technologies in February 1978, after having completed a four-year night school and apprenticeship program in Tool and Die and working for General Electric for twelve years. He was first employed as a tool and die maker at Cook, and gradually moved into other positions doing quoting/pricing, managing/supervising the tool room and becoming the company estimator. (N.T. 4/10/18, pp. 3-11; N.T. 4/12/18, pp. 3-13). Mr. Ziegler has been employed at Cook for nearly 37 years, beginning as a machine operator and later working as a materials handler, overseeing the receiving department, and in quality control. (N.T. 4/30/18, pp. 43-46).
8. Thomas Panzarella, Sr. began working at Cook in September, 1975. (N.T. 4/12/18, p. 140; N.T. 5/1/18, p. 172). Prior to that time, Mr. Panzarella had worked at General Electric for some ten years, having entered GE's Tool and Die Apprenticeship program in 1965 shortly after his high school graduation. While working for GE, Mr. Panzarella also attended night school at Spring Garden College, Temple University and St. Joseph University and eventually earned a Bachelor of Science degree in Business Administration from St. Joseph's University in 1972 and a Bachelor of Science degree in Mechanical Engineering from Spring Garden College in 1973. (N.T. 4/12/18, pp. 127-132, 140; N.T. 5/1/18, p. 173). His position at General Electric at the time that he left its employment was that of an Engineer. (N.T. 4/12/18, p. 136; N.T. 5/1/18, p. 173).
9. Mr. Panzarella started working at Cook as the Plant Manager under the direction of Donald and Charles Cook, the company's President and Vice President, respectively. At that time, the company had no proprietary products of its own, but rather did primarily metal fabrication, stamping and welding work to order and based upon whatever specifications a particular customer gave it. In 1975, Cook was a small company doing approximately $1 million annually in business and employing only about 15 people. (N.T. 4/12/18, pp. 144-145; N.T. 5/1/18, p. 174, 178-181).
10. Thomas Panzarella's hiring in 1975 was part of a succession plan on the part of the company's then-owners, Donald and Charles Cook, who were specifically seeking someone who could move the company forward by introducing more modern technology and increasing sales and who would keep the company going as an employee-owned business that was empathetic to those within the organization who had lesser education. (N.T. 4/12/18, pp. 146-150; N.T. 5/1/18, pp. 175-176). At the time Mr. Panzarella began working at Cook, the majority of the company was owned by its Employee Stock Ownership Plan ("ESOP"). (N.T. 5/1/18, p. 181). As part of the succession plan, Mr. Panzarella was asked to put some money into the business and he therefore individually purchased shares of Cook stock outside of the ESOP, eventually acquiring an approximately 9% interest in the Company. (N.T. 5/1/18, pp. 175-176).
11. Mr. Panzarella became the Vice President of Cook in 1979 and was made President in 1981, when Charles Cook left the business. Francis Undorfer became Cook's Vice President at or around that time, likewise personally acquiring some shares of Cook's stock "outside" of the ESOP. (N.T. 4/30/18, pp. 43-45; N.T. 5/1/18, pp. 175-176). Mr. Panzarella remained Cook's President until he retired in June, 2012. (N.T. 4/12/18, pp. 158-159, 173). Mr. Undorfer retired a few years before Mr. Panzarella, in or around 2006. (N.T. 4/30/18, p. 48; P-83). As of Mr. Undorfer's retirement, he and Mr. Panzarella were the only shareholders who held stock outside of the Cook ESOP. (N.T. 5/1/18, p. 176).
12. Between the late 1980's and late 1990's, Cook Technologies had as many as 150 employees and Mr. Panzarella's annual salary was upwards of $200,000, plus a company-paid car and expense account. Like any manufacturing business, Cook did not have straight-line growth, but rather experienced ups and downs in its business and revenues depending upon what jobs would come in or were available to be bid on. (N.T. 4/12/18, pp. 19-21, 153-158).
13. In the early 2000s, Cook Technologies was producing certain products for a company called Electric Mobility, which was targeted to serving the mobility impaired/physically challenged consumer. (N.T. 4/13/18, p. 73; N.T. 4/30/18, pp. 67-68; N.T. 5/1/18, pp. 238-239). As part of this, Thomas Panzarella helped develop a winch-mounted lift and some related devices which Cook produced and rigorously tested. Electric Mobility, however, was engaging in direct sales to primarily elderly consumers. Inasmuch as Cook had done the design work and testing and had much of the infrastructure for production in place, it began to produce and sell some of these products to dealers on its own under the fictitious name of "Freedom Lift." (N.T. 4/13/18, pp. 72-73; 4/30/18, pp. 68-69; N.T. 5/1/18, pp. 238-244).
14. At the National Mobility Equipment Dealers Association Conference in 2003 or 2004, Thomas Panzarella came up with an idea for what later came to be known as the Automated Transfer and Retrieval System or "ATRS." (N.T. 4/13/18, pp. 74-75; N.T. 5/1/18, pp. 139-140, 242).2 Enlisting the help of Mr. Panzarella's son, Thomas Panzarella, Jr., to assist with writing software codes and overseeing the development of the technology and using an economic development grant, a prototype of this idea was manufactured at Cook Technologies and subsequently demonstrated to professors from Lehigh University, Carnegie Mellon University and the University of Pittsburgh. (N.T. 4/13/18, p. 74, 77; N.T. 5/1/18, pp. 129-130, 141-142, 243-245).
15. To further develop the ATRS concept and to qualify for grant monies, Freedom Sciences, LLC was formed in or around July 2005 as a separate entity. Cook Technologies had an exclusive manufacturing agreement with Freedom Sciences to produce anything that Freedom Sciences developed. (N.T. 4/13/18, pp. 74-75; 5/1/18, pp. 129-130, 132-135; 5/2/18, pp. 4-5)). Thomas Panzarella became the Chief Executive Officer ("CEO") of Freedom Sciences; concurrently he was and remained the CEO and President of Cook Technologies. (N.T. 4/13/18, pp. 89-91, 129-130, 133).
16. Although Cook Technologies in effect "incubated" Freedom Sciences insofar as it was Cook's location in Green Lane, Pennsylvania where many of the development team3 meetings and some development work was performed and where the prototype was manufactured, most of the funding for the early stages of ATRS' development was provided through state and federal small business research and development grants. (N.T. 5/1/18, pp. 132-136, 141-144, 149, 245-246). In addition, throughout the initial development stages, a number of Cook employees collaborated with the development team of Freedom Sciences including Todd Bick, Bob Smith, Mike Kachalla, Gordon Kulp, Bob Ziegler, Scott Schiery, Mike Martin and Dan...
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