Cress v. Recreation Services, Inc.

• Decision Date: 07 July 2003
• Docket Number: No. 2-01-1350.,2-01-1350.
• Citation: 277 Ill.Dec. 149,795 N.E.2d 817,341 Ill. App.3d 149
• Parties: Donald L. CRESS, Plaintiff-Appellee and Cross-Appellant, v. RECREATION SERVICES, INC., Larry M. Donovan, and Recreation Services, Inc., Deferred Compensation Plan, Defendants-Appellants and Cross-Appellees.
• Court: United States Appellate Court of Illinois

795 N.E.2d 817

341 Ill. App.3d 149

277 Ill.Dec. 149

Donald L. CRESS, Plaintiff-Appellee and Cross-Appellant, v. RECREATION SERVICES, INC., Larry M. Donovan, and Recreation Services, Inc., Deferred Compensation Plan, Defendants-Appellants and Cross-Appellees.

No. 2-01-1350.

Appellate Court of Illinois, Second District.

July 7, 2003.

John P. Ridge, Kankakee, Edwin R. McCullough, Chicago, and Phyllis J. Perko, Law Offices of Harlovic & Perko, West Dundee, for Larry Donovan, Recreation Services, Inc., and Recreation Services, Inc., Deferred Compensation Plan.

Laurence C. Cassano, Ritter & Cassano, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., and Lee T. Polk, Law Offices of Barnes & Thornburg, Chicago, for Donald L. Cress.

Justice O'MALLEY delivered the opinion of the court:

Defendants, Recreation Services, Inc. (RSI), Larry Donovan, and Recreational Services, Inc., Deferred Compensation Plan (Plan), appeal from a judgment entered in favor of plaintiff, Donald Cress, on his claims for breach of contract and tortious interference with contract, which were tried to a jury, and his claim for declaratory relief under the Employment Retirement Income Security Act (ERISA) (29 U.S.C. ž 1001 et seq. (1994)), which was tried to the bench. Defendants appeal on various grounds. Plaintiff cross-appeals. We affirm in part and reverse in part and remand for further proceedings consistent with this opinion.

BACKGROUND

In his complaint, plaintiff alleged that he had been an employee of RSI for 30 years until he was terminated on May 8, 1997, in contravention of a deferred compensation agreement (Agreement), which, he claimed, contained a guarantee of employment until he reached age 65 as well as a provision for retirement benefits. Plaintiff further alleged that Donovan, as president of RSI, knowingly and unjustifiably induced RSI to breach the contract. Plaintiff averred that Donovan thereby acted outside the scope of his limited privilege as a corporate officer to influence the actions of RSI and was liable for tortious interference with contract. Plaintiff claimed he was terminated at age 61 and was owed approximately four years of compensation. Plaintiff alleged that his compensation each year included salary, a bonus, health insurance premiums, and car allowances. Plaintiff also claimed that he was owed back wages and vacation pay. Finally, plaintiff claimed RSI owed him retirement benefits under the Agreement.

Plaintiff brought the following six counts in his complaint: count I (claim against RSI for breach of contract); count II (claim against RSI for violating the Illinois Wage Payment and Collection Act (Wage Payment Act) (820 ILCS 115/1 et seq. (West 2000))); count III (claim against Donovan for violating the Wage Payment Act); count IV (claim against Donovan for tortious interference with plaintiff's contract with RSI); count V (claim against Donovan for tortious interference with plaintiff's prospective economic advantage); and count VI (claim against the Plan for a judgment declaring plaintiff's right to receive retirement benefits under the Agreement). Plaintiff sought punitive damages on counts IV and V. Counts II, III, and V were dismissed before trial.

Before trial, plaintiff moved under section 2-1005(d) of the Code of Civil Procedure (735 ILCS 5/2-1005(d) (West 2000)) for a summary determination of whether the Agreement contained an enforceable promise that RSI would employ plaintiff until age 65 provided he was capable of performing in his position as general manager for RSI. The trial court granted plaintiff's motion, relying on excerpts from the parties' depositions that were quoted in the pleadings.

Defendants subsequently filed a motion to dismiss plaintiff's contract and tort claims as preempted by section 514(a) of ERISA (29 U.S.C. ž 1144(a) (1994)). The trial court denied the motion.

The trial court ordered a bifurcated trial on the remaining counts; counts I and IV would be tried to the jury and count VI to the bench. Before trial, the court granted defendants' motion in limine barring plaintiff from introducing evidence to the jury of the value of the retirement benefits allegedly owed plaintiff under the Agreement as well as evidence of whether defendants had paid plaintiff any of those benefits. Defendants also moved to redact all provisions related to retirement benefits from the copy of the Agreement admitted into evidence. Reasoning that the redactions would render the Agreement incomprehensible, the court denied the motion.

The following facts are undisputed. Donovan established RSI in 1962 and has been its president since that time. Initially, RSI owned and operated a single bowling center located in Kankakee. By the late 1970s, RSI owned and operated three entertainment centers, located in Kankakee, Naperville, and Carol Stream, each of which offered bowling, billiards, arcade games, and food and alcohol. At its peak, RSI had as many as 250 employees. Since 1967, Donovan and his wife have been RSI's only shareholders.

Plaintiff began working part time for RSI at the Kankakee center in 1964 and the next year became a full-time employee. He became the manager of the Kankakee center in 1967 and manager of all three centers in 1976. Plaintiff was promoted to vice-president and general manager in 1978 or 1979 and in that capacity reported directly to Donovan. Plaintiff was responsible for managing the workforce and maintaining the facilities and hard assets of RSI while Donovan handled the financial affairs of the business.

In 1993, RSI terminated its qualified pension plan for its employees, whereupon plaintiff received a lump-sum payment from the plan of $264,000, which he rolled over into an individual retirement account (IRA). In 1994, when Donovan was 65 and plaintiff was 58, RSI and plaintiff entered into the Agreement. The Agreement provided that if the funds in the IRA were not sufficient to provide plaintiff a monthly payment of $7,083.33 after his retirement, RSI would supply the difference. The Agreement stated in relevant part:

"RECITALS

WHEREAS, [plaintiff] has been a key employee of RSI for approximately the last 30 years and is now its Vice-President, and

WHEREAS, RSI wishes to retain the services of [plaintiff] until his retirement at age sixty-five, and

WHEREAS, RSI wants to provide [plaintiff] with Additional Compensation to the extent the Qualified Plan Benefits provided to [plaintiff] as a result employment [sic] by RSI are less than a monthly benefit of Seven Thousand Eighty Three and 33/100 dollars ($7,083.33) at attained age 65.

THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows:

AGREEMENT

1. Definitions. The following words shall have the following meanings when used in this Agreement.

ADDITIONAL COMPENSATION: Deferred compensation or pre-retirement death benefits over and above the amount normally paid or payable as Qualified Plan Benefits to the extent the actuarial equivalent of the Qualified Plan Benefits, computed at attained age 65, is less than a monthly benefit of Seven Thousand Eighty Three and 33/100 dollars ($7,083.33). In the event [plaintiff] retires prior to age 65 said Additional Compensation shall be $7,083.33 multiplied by the quotient of the Actuarially Equivalent value of a monthly life annuity payable at age 65 divided by the Actuarially Equivalent Value of a life annuity payable at early retirement.

ACTUARIAL EQUIVALENT: A form of benefit differing in time, period, or manner of payment from a specific benefit provided under RSI's past, present, or future Qualified Plan or Plans but having the same value when computed using One Hundred and Twenty (120) percent of the applicable interest rate and the UP-84 Mortality Table. (Unisex Pension Mortality table of 1984) used by the Pension Benefit Guaranty Corporation.

APPLICABLE INTEREST RATE: The interest rate which is used, determined as of the first day of the month of the earlier of [plaintiff's] retirement prior to age 65 or the date [plaintiff] reaches attained age 65, by the Pension Benefit Guaranty Corporation for the purpose of determining the present value of a lump-sum distribution on a plan's termination.

QUALIFIED PLAN BENEFITS: (1) All funds contributed to a trust, created or organized by RSI and forming part of RSI's stock bonus, pension, or profit-sharing plan or plans for the exclusive use of its employees or their beneficiaries, that were PAID to [plaintiff] prior to his retirement plus an investment return, computed from date paid through date of retirement, on said paid funds of not less than (6) percent or the actual amount earned, whichever is greater, AND (2) all funds contributed to a trust, created or organized by RSI and forming part of RSI's stock bonus, pension, or profit-sharing plan or plans for the exclusive use of its employees or their beneficiaries, that are PAYABLE to [plaintiff] at retirement under any of RSI's past, present, or future stock bonus, pension, or profit sharing plans, excluding employee contributions and earnings on amounts employees contribute to such plans, if any. Should Qualified Plan Benefits include funds under which [plaintiff] managed or participated in the choice of investment activity for his own account, it is assumed for purposes of computing the amount of Additional Compensation under this Agreement that employer contributions earned an annual investment return of not less than six (6) percent or the actual amount earned, whichever is greater.

2. To the extent that [plaintiff's] Actuarial Equivalent of his Qualified Plan Benefits is less than a monthly benefit of $7,083.33, RSI will pay on a monthly basis, or fund for such payments should RSI so choose, the amount of Additional Compensation needed to provide [plaintiff] with a combined monthly benefit of $7,083.33.

3. Commencing the month after [plaintiff] attains age 65, (March 1, 2001), and whether or not

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