Fitch v. Chase Manhattan Bank, N.A.
| Decision Date | 16 June 1999 |
| Docket Number | No. 95-CV-6212 CJS.,95-CV-6212 CJS. |
| Citation | 64 F.Supp.2d 212 |
| Parties | James E. FITCH, Carolyn Antinelli, Robert K. Lee, Lloyd I. Maclean, William E. Gibson, John Wilson, Eugene T. Oliver, Donald L. Cramer, Richard P. Mangan, Josephine D. Scaccia, Robert J. Walczak, William W. Malanowski, Milton B. Mason, Allen A. Platt, for Themselves and as Class Representatives, Plaintiffs, v. CHASE MANHATTAN BANK, N.A., the Retirement and Family Benefits Plan of Chase Manhattan Bank, N.A. and Richard Shinn, Robert Field and James Riordan, as Named Fiduciaries of the Retirement and Family Benefits Plan of the Chase Manhattan Bank, N.A., Defendants. |
| Court | U.S. District Court — Western District of New York |
Lonny H. Dolin, Dolin & Modica, Rochester, NY, for plaintiffs.
Eugene D. Ulterino, Nixon, Peabody LLP, Rochester, NY, for defendants.
DECISION AND ORDER
This is an action in which former employees of the defendant Chase Manhattan Bank seek additional retirement benefits pursuant to ERISA, 29 U.S.C. § 1001, et seq. Now before the Court are the parties' cross-motions for summary judgment [# 33][# 42]. For the reasons that follow, the plaintiffs' motion is denied, and the defendants' motion is granted.
The relevant facts are not disputed. Until July of 1984, all plaintiffs were employed by Lincoln First Bank ("Lincoln") and were participants in Lincoln's retirement plan (the "Lincoln Plan"). In July of 1984, Lincoln was merged into the Chase Manhattan Bank ("Chase"), and was renamed Chase Lincoln First Bank ("Chase Lincoln"). Chase had its own retirement plan (the "1976 Chase Plan"), which provided better benefits than the former Lincoln plan. Rather than allowing the Chase Lincoln employees to join the more beneficial Chase plan, Chase created the Chase Lincoln Plan. Under the Chase Lincoln Plan, at retirement, former Lincoln employees would receive the greater of a) the accrued benefit under the Lincoln Plan as of the merger date [July 31, 1984], plus the Chase Lincoln Formula from that date onward; or b) the Lincoln Plan benefit for the participant's entire career, both with Lincoln First before July 31, 1984, and with Chase Lincoln after July 31, 1984.1 (See, Chase Lincoln plan, Article IV, Section 4.01(c),(d) and Appendix A). On January 1, 1988, the Chase plan and the Chase Lincoln plan were merged, therefore the plaintiffs became participants in the Chase Plan. The Chase Plan is an employee pension benefit plan as defined by ERISA, 29 U.S.C. § 1002(2), and is governed by the provisions of ERISA, 29 U.S.C. § 1001, et seq. Under the merged Chase Plan, the plaintiffs continued to have their benefits calculated as they had been under the Chase Lincoln plan. (See, 1989 Chase Plan, Appendix VIII). Both the Chase Lincoln plan and the Chase Plan calculate benefits using a "final pay formula" based upon final average compensation and years of service, however the two plans calculate benefits differently. Among other differences, the Chase Lincoln formula has a "30-year stepdown," under which former Lincoln employees accrue benefits at a lower rate during their thirty-first through fortieth years of benefit service. For those years of service, a lesser percentage of final average compensation is used to determine the benefit. (Ulterino 2, Appendix A). The Chase Plan was amended again, effective January 1, 1989, however the plaintiffs were "grandfathered" and continued to have the option of having their benefits calculated as before.
Sometime prior to September of 1994, John Farrell, Director of Human Resources for Chase and Administrator of the Chase Plan, began planning an early retirement incentive program designed to reduce the corporation's expenses. Farrell projected that a Voluntary Retirement Program ("VRP") could save Chase approximately $55 million in annual operating costs. As the incentive for employees to take early retirement, the VRP would add five years to an employee's age and years of benefit service.
On October 13, 1994, Farrell presented his VRP proposal to the Chase Board of Directors. Farrell's memo set forth the general details of the proposed VRP, and stated that "[t]he program will be available for acceptance only during the `window' period beginning on October 28, 1994 and ending on December 12, 1994." (Ulterino Affidavit [# 38] Exhibit 9, p. 6437). The memo further stated, in relevant part: (Ulterino Affidavit [# 38], Exhibit 9, p. 6807).
On October 17, 1994, the Chase Board of Directors passed a resolution authorizing the VRP. (Chase Plan, Appendix VIII). That Resolution stated, in relevant part:
RESOLVED, that the recommendation of Compensation Committee with respect to the amendment of [the Retirement Plan] ... in order to establish and offer the proposed Voluntary Retirement Program described in the memorandum which has been presented to this meeting be, and it hereby is, approved, and that the Executive Vice President and Human Resources Executive of this Bank [Farrell] and such other officers as he shall designate be, and each of them hereby is, authorized and directed to adopt such specific amendments to the Retirement Plan ... to the extent necessary to conform to the amendments to the Retirement Plan authorized by this resolution, as in their judgment shall be necessary or appropriate to carry out such recommendation.
* * * * * *
RESOLVED, that the officers of this Bank be, and each of them hereby is, authorized, in the name and on behalf of this Bank, to perform all such further acts, and to execute and deliver all such further agreements or other writings, as they may deem advisable in order to carry out the intent of the foregoing resolutions.
(Ulterino Affidavit [# 38], Exhibit 11).
On or about October 18, 1994, Chase sent two letters to each of the plaintiffs, informing them of the upcoming VRP. The letters informed them, inter alia, that they would receive specific details of the VRP by the end of October, and that they would have to make an election on whether or not to participate by December 12, 1994, and that if they elected to participate, they would have to actually retire by December 31, 1994. As mentioned earlier, the incentive to retire was the addition of five years of service credit and five years of age for purposes of calculating retirement benefits.
In August or September of 1994, Chase had retained an actuarial firm, Buck Consulting Group ("Buck"), to perform benefit calculations for Chase Plan employees who were eligible to take early retirement under the VRP. (Ulterino 7, p. 152). Once the VRP was approved, Buck was responsible for calculating the individual VRP enhancements. The plaintiffs admit that Buck is "one of the largest and most reputable actuarial firms in the country." (Plaintiffs' Memorandum of Law [# 43], p. 21). One of Buck's employees, Mary Beth McBride, was responsible for preparing individual benefit estimates for the eligible former Chase Lincoln employees based using information provided by Chase. The Chase Lincoln formula was the final pay formula applicable to the plaintiffs, and as mentioned earlier, that formula includes a "step-down" for service between years 30 and 40. However, McBride failed to take this "step-down" into consideration when she created the computer program for computing benefit estimates. This error resulted in erroneously-high benefit estimates for 61 employees, including the plaintiffs.
Chase gave Buck a list of sixteen former Chase Lincoln employees, for which Buck was supposed to prepare sample benefit estimate calculations. The list of sixteen employees included two of the plaintiffs, Antinelli and Maclean. (Ulterino Affidavit [# 38], Exhibit 19, p. 500475). Once McBride prepared these test calculations, she was supposed to send them to Peggy McEachen, an employee of the Chase Human Resources department, who was responsible for verifying the accuracy of the calculations using a Lotus Spreadsheet which she had prepared for that purpose. (Ulterino Aff, Ex. 13, p. 152). Since McEachen's program was properly programmed to account for the "30-year stepdown," it could have detected the error if McEachen had tested one of McBride's erroneous estimates. However, McBride sent only "five or so" calculations to McEachen, who performed tests on those calculations. (Ulterino Affidavit [# 38], Exhibit 13, McEachen Dep. p. 159). McBride states that she sent "several" test cases to McEachen, but she can only positively identify two cases, one for an employee named Hasman and one for an employee named Adams (Ulterino Aff, Ex. 14, p. 36). On one of the test cases, McEachen's calculations did not match McBride's. (Ulterino Aff. Ex. 13, p. 161). However, after speaking with McBride, and after consulting others at Chase, McEachen concluded that the discrepancy was related to an error involving Social Security benefits. (Ulterino Aff, Ex 13, pp. 161-166). It is unclear whether or not McEachen re-tested the calculation that she had initially found to be incorrect. McEachen then had McBride run additional sample estimates, and McEachen states that she tested these and found no disrepancies. (Ulterino Aff, Ex. 13, p. 166). McEachen believes that she missed the error because Buck did not provide her with any samples involving the 30-year stepdown. (Ulterino Aff, Ex. 13, p. 254). However, the plaintiffs contend that the Adams sample did implicate the "30-year stepdown."2 It appears clear from the record, however, that McBride's error would have been discovered if McBride and McEachen had tested the sixteen names on the list of test cases which Chase sent to Buck. However, that did not happen, and McEachen approved McBride's erroneous calculations. As a result, on October 24, 1994, Buck delivered its erroneous...
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