Donnelly v. Bank of New York Co., Inc.

• Decision Date: 28 August 1992
• Docket Number: No. 92 Civ. 0045 (RWS).,92 Civ. 0045 (RWS).
• Citation: 801 F. Supp. 1247
• Parties: June DONNELLY, Plaintiff, v. The BANK OF NEW YORK COMPANY, INC., and Irving Bank Corporation Benefits Protection Trust, Defendants.
• Court: U.S. District Court — Southern District of New York

801 F. Supp. 1247

June DONNELLY, Plaintiff, v. The BANK OF NEW YORK COMPANY, INC., and Irving Bank Corporation Benefits Protection Trust, Defendants.

No. 92 Civ. 0045 (RWS).

United States District Court, S.D. New York.

August 28, 1992.

Phillips Cappiello Kalban, Hofmann & Katz, P.C., New York City (Sidney H. Kalban, of counsel), for plaintiff.

Michael D. Povman, New York City, for defendant, The Bank of New York.

Kelley Drye & Warren, New York City (Vincent J. Conlan, Esq. of Counsel) for defendant Irving Bank Corp.

OPINION

SWEET, District Judge.

Defendants The Bank of New York Company, Inc. ("BNYC") and Irving Bank Corporation Benefits Protection Trust (the "Trust") through its trustee Manufacturers Hanover Trust Company ("MHT" or the "Trustee") (BNYC and the Trust are referred to collectively as the "Defendants") have moved under Rule 56, Fed.R.Civ.P. for summary judgment dismissing the complaint of plaintiff June Donnelly ("Donnelly"), a former employee of Irving Trust Company ("Irving"). In this action, Donnelly seeks severance payments pursuant to an employee welfare benefit plan established by Irving to protect its employees in the event of a takeover. For the reasons stated below and upon the following uncontested facts and conclusions of law, the motions are granted, and summary judgment will be entered dismissing the complaint.

Prior Proceedings

Donnelly filed her summons and complaint on January 31, 1992. Issue has been joined, and no discovery has been taken.

Donnelly has set forth four claims in her complaint. The first claim for relief alleges that the Defendants breached their fiduciary duties under § 404 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1104, by failing or refusing to inform Donnelly of her rights to severance benefits. The second claim alleges that the Defendants breached their fiduciary duties under § 404(a)(1)(D) of ERISA, 29 U.S.C. § 1104(a)(1)(D), by failing to comply with the documents and instruments governing the Plan, as defined infra. The third claim alleges a violation of the claims procedure set forth in § 503 of ERISA, 29 U.S.C. § 1133, based on the Defendants' denial of severance benefits and failure to specify in writing the reasons for the denial or to accord Donnelly a full and fair review. The fourth claim alleges that the Defendants violated § 510 of ERISA, 29 U.S.C. § 1140, by interfering with Donnelly's protected rights under ERISA. Donnelly seeks a declaration that she is entitled to severance benefits under the Policy, a determination of the amount of severance benefits to which she is entitled, an order enjoining the Defendants to pay her severance benefits and attorneys' fees and costs.

The present motion was filed on April 22, 1992. Oral argument was heard on May 20, 1992, at which time the motion was considered fully submitted.

Facts

Donnelly was initially hired by Irving on April 20, 1966. By 1988, Donnelly had risen to the position of senior clerk and unit leader in Irving's Corporate Agency Division where her duties were to ensure the accuracy of entries and Irving's balance on more than 800 corporate accounts. She was in Irving's employ at the time of the merger between Irving Bank Corporation ("IBC") (Irving's parent) and BNYC in November 1988, and thereafter remained as an employee of BNY, a BNYC subsidiary, until she resigned in December of 1990 or January of 1991.

On July 2, 1987, the IBC Board of Directors adopted the IBC Separation Policy (the "Policy" or the "Plan"), an employee welfare benefit plan under ERISA. The Plan provides for severance payments under certain circumstances, only one of which is in issue in this action. Under the relevant provision of the Plan, a participant is entitled to severance benefits if, within two years of a "Change in Control"¹ his or her job duties are materially diminished without consent, and he or she resigns within sixty days of the diminishment. Specifically, § 4.2(a)(iii) states that:

if within two years of a Change in Control a participant's duties and responsibilities are materially diminished without his consent, he may terminate his employment within sixty (60) days of the occurrence of such reduction and be entitled to Severance Benefits set forth in Section 4.3.

See id. § 4.2(a)(iii). Under § 4.3 of the Plan, an employee that satisfies these conditions is entitled to severance of one month's pay ("one-twelfth of the Participant's Base Salary") for each year of service up to a maximum of twenty four years. As of April 1990, Donnelly was entitled to that maximum — twenty four months base salary — if severed as set forth in the Plan. The Plan further provides that in the event IBC or its successor denies an application for benefits, it must provide the applicant with a written explanation of the reasons for the denial.

Shortly after it adopted the Plan, IBC entered into a Trust Agreement with MHT on January 22, 1989 under which it established a Trust to provide a litigation fund to qualified claimants to pursue claims under the Policy turned down by the Plan Administrator. MHT was selected to serve as trustee. By its own terms, the Trust "shall be administered, in accordance with the laws of the United States and of the State of New York" and "nothing in this Agreement shall be construed to subject the Trust created hereunder to ERISA." Conlan Aff. Ex. B Art. TWENTIETH (a). The preamble to the Trust also notes that "the Trustee is not a party to the Plans" covered by the Trust Agreement.

Under the terms of the Trust, following a "Change in Control," a participant of the Plan may notify the Trustee that IBC or its successor has refused in writing to pay a claim asserted under the Plan. After receiving such a notification, the Trustee must determine whether the claim for benefits has any basis in law and fact as defined by the Plan and as restated in the Trust. The Trustee considers the claims through an informal committee (the "Trustee Committee"), which meets with the claimant, considers all information furnished by the claimant and the Plan Administrator, and evaluates whether the claimant's case is plausible. The Trust is not permitted to provide any benefits if the Trustee determines that the employee's claim has no basis in law or fact. See id. Art. NINTH (d)(2).

On October 7, 1988, BNYC and IBC entered into a merger agreement, and a "Change in Control" under the terms of the Plan occurred on November 29, 1988 when IBC was merged into BNYC. This change in control triggered the provisions of both the Plan and the Trust. As of the time BNYC took over Irving, BNYC became the Plan Administrator.

Donnelly remained as an employee of the merged institution's subsidiary, BNY. At first, her duties remained the same, and she continued to work in the same location. In the fall of 1989, her work station was moved a number of times although she continued to be charged with her normal tasks. Each time she was moved she was informed that the changes were temporary and that she would be returned shortly to a steady location with her previous duties.

In December 1989 Donnelly was moved to 90 Washington Street where, for about a month and a half, she continued work in the mornings on the accounts to which she had previously been assigned by Irving. In the afternoons, she assisted in reconciling BNY accounts. Beginning in late January or early February 1990, Donnelly was no longer permitted to work on her long-standing accounts, and BNY began training her in its method for correcting reject reports, a task which had been only a small part of her previous duties. When she spoke to her supervisor and his manager during that period about the apparent changes in her duties, she was advised that BNY had not had a reconciliation department until recently and that the situation would improve upon a contemplated move back to 101 Barclay Street, her prior location, where necessary technical equipment would be available.

Shortly after April 20, 1990, the twenty-fourth anniversary of Donnelly's employment, Donnelly inquired about her annual review and raise and was told that she would not receive any raise because she was the highest paid individual at her level. Perceiving that her work status had been permanently reduced, she began inquiring about her rights to severance pay. On April 23, 1990 she told the BNY employee relations representative that she wanted her severance pay and would leave. In May 1990 she was informed that it was BNY's position that her duties had not been "materially diminished" and that in any case her request was not timely. She was also advised that she could resign and reapply for severance benefits but that upon resignation she would lose her medical benefits.

Donnelly then wrote to BNY's Chairman of the Board, who referred her letter to the manager of the employee relations department. This individual repeated the previous advice that Donnelly was entitled to no severance benefits.

By late May 1990, Donnelly became disabled and could not continue working. On June 5, 1990, she wrote to the Chairman of BNY, recounting her job experience since November of 1989, including the loss of her duties and equipment, and the reassurances given to her. She stated: "I fully realize that my job has diminished drastically. I am now doing a small part of reconcilimen sic when I once performed the entire job." On or about June 21, 1990, she wrote BNY concerning her right to severance pay under the Policy.

Donnelly commenced sick leave on June 25, 1990. Both her husband, who suffers from asbestosis, and she needed medical care and, therefore, continuance of her medical benefits. She was told by Geraldine Gallashaw, BNY's Affirmative Action Vice President, that if she resigned in order to file a formal application for severance pay she would lose her coverage under BNY's medical plan.

By letter dated July 21, 1990, BNY Senior Vice President Frank...