Davis By and Through Farmers Bank and Capital Trust Co. of Frankfort, Kentucky v. Kentucky Finance Cos. Retirement Plan

• Decision Date: 04 December 1989
• Docket Number: No. 88-6067,88-6067
• Citation: 887 F.2d 689
• Parties: Misty Dawn DAVIS, an infant under eighteen years of age, by and through the Guardian, FARMERS BANK & CAPITAL TRUST CO. OF FRANKFORT, KENTUCKY, Plaintiff-Appellant, v. KENTUCKY FINANCE COS. RETIREMENT PLAN; Kentucky Finance Cos. Retirement Plan, Retirement Committee; Kentucky Finance Co., Inc.; and Central Bank & Trust Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 689

887 F.2d 689

Misty Dawn DAVIS, an infant under eighteen years of age, by

and through the Guardian, FARMERS BANK & CAPITAL

TRUST CO. OF FRANKFORT, KENTUCKY, Plaintiff-Appellant, v. KENTUCKY FINANCE COS. RETIREMENT PLAN; Kentucky Finance

Cos. Retirement Plan, Retirement Committee;

Kentucky Finance Co., Inc.; and Central

Bank & Trust Co., Defendants-Appellees.

No. 88-6067.

United States Court of Appeals, Sixth Circuit.

Argued May 22, 1989.

Decided Oct. 12, 1989.

Rehearing Denied Dec. 4, 1989.

William R. Meredith (argued), Harrodsburg, Ky., for plaintiff-appellant.

Henry E. Kinser (argued), Kincaid, Wilson, Schaeffer, Hembree, Van Inwegen & Kinser, Lexington, Ky., for defendants-appellees.

Before BOGGS, Circuit Judge; ENGEL, Senior Circuit Judge ^* and GIBSON, District Judge. ^**

BOGGS, Circuit Judge.

Misty Dawn Davis (Davis) appeals from the district court's summary judgment denying her death benefits as her father's beneficiary. Her father, Kenneth Davis, a former employee of Kentucky Finance Company, Inc. (KFC), was murdered by his wife. The dispute concerns whether the decedent still was employed by KFC at the time of his death. The district court denied Davis's claim for death benefits, finding that the Retirement Committee (the Committee) which administers the KFC retirement plan was correct in deciding that Kenneth Davis was no longer an employee at the time of his death for purposes of the plan. The court also held that determination of this issue was not collaterally estopped on the basis of a decision by the Kentucky Supreme Court finding that the decedent still was a KFC employee at the time of his death for purposes of his life insurance policy. Woodson v. Manhattan Life Insurance Co., 743 S.W.2d 835 (Ky.1987). Finally, the court denied Davis's motion to join individual members of the Committee as defendants. We affirm.

I

Kenneth C. Davis (decedent) was an employee of KFC from 1960 to at least 1982. He resigned as an officer and director on February 8, 1982, as a result of a meeting with KFC's executive board; however, Davis claims that he did not resign as an employee of KFC at that time. Davis claims that the decedent was to be carried as an employee under a leave of absence for six additional months, at which time he would leave KFC's employ and take distribution of his retirement benefits. However, he was murdered by his wife before his retirement benefits commenced. Under Art. V, Sec. 5.03 of the Plan, a death benefit is available to the participant's surviving spouse or dependent child, but only if the participant's employment had not been terminated at the time of his death. Section 5.01 provides that no death benefit is available if the terminated participant should die prior to the commencement of benefits and prior to filing a claim for benefits.

Plaintiff Davis, as beneficiary of decedent's death benefits, requested benefits under the Plan from KFC's Retirement Committee. The Committee denied such benefits. KFC contended that the decedent had been terminated and was therefore not an employee at the time of his death. Under that view, his death benefits had been forfeited.

Davis brought suit in district court to recover the death benefits. That court issued three memorandum opinions. On August 4, 1987, the court denied Davis's motion to join individual members of the Committee in order to seek their personal liability for extracontractual compensatory and punitive damages. On June 21, 1988, the court granted summary judgment to the defendants, denying Davis's claim for death benefits. Finally, on August 18, 1988, the court filed its order denying Davis's claim of collateral estoppel.

Misty Dawn Davis is the daughter and dependent of the decedent. The decedent was hired by KFC on March 17, 1960, and became a member of its retirement plan (the plan). As of December 31, 1981, the decedent was Senior Vice President, Legal Counsel, Director and Member of the KFC Retirement Committee. Decedent was in-house counsel for the plan, and so was well-acquainted with its provisions.

The plan was adopted originally in 1959 and was amended several times thereafter to conform with changes in the Employee Retirement Income Security Act (ERISA) enacted by Congress. The plan has specific benefit provisions for a member-employee who is terminated for a reason other than death or retirement. A member credited with five or more years' service shall be entitled to receive monthly retirement income beginning at his normal retirement date. A member who terminates employment with 15 years or more of credited service is entitled at any time after reaching age 55 to elect the immediate commencement of benefits, in compliance with the minimum vesting standards of 29 U.S.C. Sec. 1053. The final sentence of section 5.01 of the plan provides: "Notwithstanding anything expressed or implied to the contrary, in the event a terminated Member dies prior to the beginning of the period for which benefits will be payable, no Death Benefit shall be payable under this Plan."

Death Benefits are provided for in Art. V, Sec. 5.03 of the plan. Consistent with the above-quoted language, such benefit is available to the decedent's surviving wife or dependent child only if the decedent had not been terminated from employment. Under Art. II, Sec. 2.35(a)(ii), an employee receives credit for service for any time attributable to a "leave of absence" granted by the employer, up to two years.

On February 8, 1982, KFC's executive board met to discuss the decedent's future with the company. KFC claims that the decedent resigned his position at that meeting and immediately opened a private law practice in Lexington, Kentucky. The details of the February 8 meeting "are not presently available;" however, Davis claims that the result was that the decedent agreed to resign as an officer and director of KFC, and the executive board agreed to carry the decedent, or caused him to believe that it so agreed, as an employee-member for six additional months. This would have allowed the decedent to attain the age of 59 1/2 before electing, as a 100% vested member, the commencement of his retirement benefits under Sec. 5.01, which also would have allowed the decedent to gain certain income tax advantages. KFC claims that it merely agreed to pay the decedent six months' severance pay. The decedent made no election upon the resolution of his status at the February 1982 meeting.

In an action in Kentucky state court, in which the decedent's estate sought to recover on a life insurance policy, the Fayette Circuit Court jury specifically found that the decedent was on a leave of absence granted by the executive board at the time of his death. The Kentucky Court of Appeals reversed, holding that the "leave of absence" contemplated by the policy is one in which the policy holder, the employer, and the employee intend for the absence to be temporary and that the employee will eventually return to work. However, the Kentucky Supreme Court reversed the court of appeals, finding that there was no such restrictive language in the policy and affirming the jury's verdict that the decedent was an employee of KFC on leave of absence at the time of his death. 743 S.W.2d 835 (Ky.1987).

The district court's first order resolving a number of pretrial motions is dated August 4, 1987. There, the court ruled to compel answers to an interrogatory, and denied the motion to join the individual members of the Retirement Plan Committee under Rule 19, Fed.R.Civ.P. The judge reasoned that the members of the Committee could be held personally liable for a breach of fiduciary duties to the plan but not to beneficiaries of the plan, citing 29 U.S.C. Sec. 1109 and Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). The court further granted summary judgment to the defendants regarding four counts of the complaint that were meritless under Sec. 1109 and Massachusetts Mutual. The court also denied additional requests for discovery, finding that there was not sufficient justification for delaying the proceedings. Finally, the court ruled that Davis could not amend her complaint to add claims not cognizable under ERISA. Davis argues on appeal that the judge should have allowed her to add a claim of equitable estoppel, which he held could not be raised under ERISA.

In its second opinion in this case, the trial judge granted summary judgment to the defendants, finding that the decedent was no longer an employee of KFC at the time of his death, and that because he had not elected to begin receiving benefits before his death, his beneficiary was not entitled to receive benefits. The court reasoned that the decedent could have elected to receive early retirement benefits any time after his resignation, and that his failure to do so demonstrated his intent to wait and receive full benefits at normal retirement age. Section 5.01 of the plan states that if a terminated employee dies prior to the beginning of payment of benefits, then no death benefit is payable. The court found that, in light of the plan's language and the "arbitrary and capricious" standard of review, there was no basis for reversing the Committee's interpretation of the plan as it applied to the decedent. Thus, the trial judge entered a final judgment granting summary judgment to the defendants.

Davis then moved to alter or amend the judgment under Rule 59(e), Fed.R.Civ.P., arguing that the court was collaterally estopped from finding that the decedent was not a KFC employee at the time of his death by the Kentucky Supreme Court's decision in Woodson, 743 S.W.2d 835. The Kentucky Supreme Court had upheld a jury finding that the decedent was on a leave of absence from his job at KFC at the time of his death. However, the district court reasoned that Woodson was not controlling because it was based solely on the particular terms of the decedent's life...