Cooke v. Lynn Sand & Stone Co.
| Decision Date | 18 July 1986 |
| Docket Number | Civ. A. No. 85-2474-W. |
| Citation | 673 F. Supp. 14 |
| Parties | James H. COOKE, Plaintiff, v. LYNN SAND & STONE CO., Trimount Bituminous Products Co., Louis E. Guyott II, and Stuart Lamb, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Victor Bass, Henry G. Stewart, Robert G. Holdway, Palmer & Dodge, Boston, Mass., for plaintiff.
Peter J. Schneider, Burns & Levinson, Boston, Mass., for Lynn Sand & Stone Co., Trimount Bituminous Products Co., Louis E. Guyott II, Stuart Lamb.
Edward Mackiewicz, James N. Delcan, Robert L. Furst, Ralph L. Landy, Pension Benefit Guaranty Corp., Washington, D.C., for Pension Benefit Guaranty Corp.
Plaintiff, James H. Cooke, has brought this action against defendants, Lynn Sand & Stone Company ("Lynn Sand"), its corporate parent, Trimount Bituminous Products Company ("Trimount"), and two of its corporate officers, Louis E. Guyott II and Stuart Lamb. Cooke is a former officer and stockholder of Lynn Sand and administrator and trustee of the Lynn Sand Pension Plan ("the Plan"). He claims that the current trustees of the Plan committed various violations of the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (as amended), in the process of terminating the Plan. Cooke also raises state law claims for breach of contract, breach of implied covenant of good faith and fair dealing, interference with advantageous relations and contract misrepresentation, and unfair and deceptive business practices under Mass.Gen.Laws c. 93A.
Cooke also brought an enforcement action against the Pension Benefit Guaranty Corporation ("PBGC"), which regulates the termination of pension benefit funds. PBGC filed a motion to dismiss that action, which was granted on December 5, 1985.
The remaining defendants have moved for summary judgment on all of Cooke's claims. Cooke has filed a cross-motion for partial summary judgment on the question of the proper interest rate to be used in calculating his lump-sum termination benefits. He argues that summary judgment may not be entered against him on his other claims. The parties have submitted numerous memoranda and exhibits in support of their motions. Jurisdiction rests on 29 U.S.C. § 1132(e). For the reasons set forth below, the court grants partial summary judgment for defendants and denies Cooke's motion for summary judgment.
The undisputed facts of this case are as follows:
From 1974 to May 27, 1983, plaintiff James H. Cooke was the President, Treasurer, a member of the Board of Directors, and a minority stockholder of Lynn Sand, a closely-held corporation. He also served as the Administrator and Trustee of the Plan.1
On May 18, 1983, Trimount purchased all of Lynn Sand's outstanding common stock, thus becoming Lynn Sand's corporate parent. The new Lynn Sand management, which included defendants Stuart Lamb, as President, and Louis E. Guyott II, as Treasurer, terminated Cooke's employment on July 8, 1983. On September 7, 1983, Lynn Sand's newly-constituted Board of Directors voted to remove Cooke from his position as Trustee and Administrator of the Plan. Lamb and Guyott became the new Trustees and Plan Administrators on that date.
On December 10, 1983, the new Trustees notified Cooke that Lynn Sand was terminating the Plan pursuant to Article XIV, § 1 of the 1980 Plan.2 The effective date for termination was December 31, 1983. In November, 1983, Lynn Sand also notified the PBGC of its intention to terminate the Plan, as required by 29 U.S.C. § 1341(a).
In May of 1984, Cooke received a letter from Guyott, dated May 1, 1984, offering him an election between receiving (1) a fully paid-up annuity of $1,856.93 per month to start at age 65 and stop at death or after 120 payments, which ever came first, or (2) a lump-sum actuarial equivalent of this annuity amounting to $58,987.98. The letter informed Cooke that if he did not make an election, the Trustees would automatically provide him with the annuity option.3
On May 22, 1984, Cooke's counsel wrote to Guyotte and Lamb seeking additional information on how they calculated Cooke's lump-sum benefit. On May 24, 1984, Guyotte sent a letter to Cooke giving him until June 4, 1984 to make an election between the annuity and lump-sum options. On May 25, Cooke's counsel responded with a letter informing Guyott and Lamb that Cooke desired the lump-sum benefit option but contested Lynn Sand's calculation of the amount due to him. He sought to accept the $58,987.98 offered by Lynn Sand without prejudice to his right to the additional benefits to which he claimed he was entitled. On June 4, the Plan's counsel provided Cooke with the actuary's calculation of Cooke's lump-sum benefit and requested that Cooke make an election by June 8, 1984.
On July 12, 1984, Cooke's counsel wrote to the Plan's counsel contesting the Trustees' calculation, informing Lynn Sand that Cooke had filed an objection to the termination proceedings with the PBGC, and stating that the Trustees had no authority to distribute termination benefits until the PBGC had issued a Notice of Sufficiency.4 In the meantime, on June 24, 1984, Cooke's counsel had written to the PBGC requesting that it withhold Lynn Sand's Notice of Sufficiency.
On July 23, 1984, counsel for the Plan wrote to Cooke's counsel telling him that the Trustees were treating Cooke's complaint as a claim for benefits, as required by 29 C.F.R. § 2560.503-1(d), and gave a detailed explanation for why his claim for higher benefits was denied. On August 2, 1984, Cooke made a claim for review of this decision. This appeal was denied on November 30, 1984, in another detailed letter from the Plan's counsel. With this letter the Trustees also sent Cooke a check for $4,921.84, representing the principal and accumulated interest on voluntary contributions that Cooke had made pursuant to Article VIII of the Plan.
On September 24, 1984, the PBGC issued a Notice of Sufficiency. Cooke filed a Request for Reconsideration of this decision on October 22, 1984. The PBGC summarily denied this request on May 8, 1985.
On June 14, 1985, Cooke filed a complaint in this court.5 He raises claims under ERISA, as well as Massachusetts law. Defendants have moved for summary judgment on all of Cooke's claims. Cooke has filed a cross-motion for partial summary judgment on the issue whether the Trustees acted arbitrarily, capriciously, in bad faith, or in breach of their fiduciary duties by using an excessive interest rate in calculating his lump-sum benefit payment. He argues that summary judgment is inappropriate on his other claims. Defendants have agreed that Cooke need not make an election between the annuity and lump-sum benefits options until ten days after final judgment is entered in this action.
In deciding the pending motion the court has applied the following principles regarding motions for summary judgment and the standard of review of a trustee's interpretation and implementation of the terms of a pension plan.
The court's discretion to grant summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure. Under Rule 56(c), the court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In addition, "the court must look at the record in the light most favorable to the party opposing the motion and must indulge all inferences favorable to that party." Stepanischen v. Merchants Despatch Transportation Corp., 722 F.2d 922, 928 (1st Cir.1983) (citing Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976)).
For the purposes of the instant case, it is important to note that a court must ordinarily be "particularly cautious" about granting summary judgment in cases involving the intent or motive of one of the parties. Stepanischen, 722 F.2d at 928. The presence of a state of mind issue does not, however, "automatically preclude summary judgment." Id. at 929. The party opposing the motion must give some indication that "he can produce the requisite quantum of evidence" to entitle him to a trial. Hahn, 523 F.2d at 468; Velazquez v. Chardon, 736 F.2d 831, 833 (1st Cir.1984); Stepanischen, 722 F.2d at 929.
However, in cases where intent or motive is at issue there is seldom direct evidence of a party's motivation. Thus, before granting summary judgment, "the court should ask itself whether the non-movant could prevail if a jury or judge believed his version of the facts and disbelieved the movant's version." Id.
It is well-settled in the area of ERISA-governed pension plans that a court may not overturn the trustee's interpretation of the plan unless it is arbitrary, capricious, without rational basis, or made in bad faith. Jestings v. New England Tel. and Tel. Co., 757 F.2d 8, 9 (1st Cir.1985); Govoni v. Bricklayers, Masons & Plasterers Int'l Union, Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir.1984); Miles v. New York State Teamsters Conference Pension and Retirement Fund, Etc., 698 F.2d 593, 599 (2d Cir.), cert. denied, 464 U.S. 829, 104 S.Ct. 105, 78 L.Ed. 2d 108 (1983) (); Rueda v. Seafarers Int'l Union of North America, 576 F.2d 939, 942 (1st Cir.1978). Where the trustees and a disappointed applicant each offer a reasonable interpretation of a term in a pension plan, the trustees' interpretation will ordinarily prevail. Miles, 698 F.2d at 601. However, the court's decision regarding alleged arbitrary, capricious, irrational, or bad faith decisions must be...
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