Ford v. Owens-Illinois, Inc.

• Court: U.S. District Court — Northern District of Ohio
• Writing for the Court: JAMES G. CARR
• Citation: Ford v. Owens-Ill., Inc., 961 F.Supp.2d 857 (N.D. Ohio 2012)
• Decision Date: 25 October 2012
• Docket Number: Case No. 3:07CV1828.
• Parties: Stanhope A. FORD, Plaintiff v. OWENS–ILLINOIS, INC., Defendant.

961 F.Supp.2d 857

Stanhope A. FORD, Plaintiff

v.OWENS–ILLINOIS, INC., Defendant.

Case No. 3:07CV1828.

United States District Court,

N.D. Ohio,

Western Division.

Oct. 25, 2012.

John J. McHugh, III, McHugh & McCarthy, Sylvania, OH, for Plaintiff.

Robert A. Koenig, James H. O'Doherty, John J. Siciliano, Shumaker, Loop & Kendrick, Toledo, OH, for Defendant.

ORDER

JAMES G. CARR, Senior District Judge.

This is an employee benefits case. Plaintiff's complaint (Doc. 51) alleges violations of ERISA's anti-cutback and fiduciary duty provisions. Plaintiff also alleges common law fraud and estoppel claims. Pending is defendant's motion for summary judgment (Doc. 83).

Jurisdiction exists under 28 U.S.C. § 1331.

For the reasons that follow, I grant the defendant's motion in part, and deny it in part.

Factual Background

In December 2003, Owens–Illinois (OI) employed plaintiff as the Vice President of its Closure and Special Products Division.

Around this time, OI began contemplating selling the division plaintiff managed to Graham Packaging Company (Graham).

On December 18, 2003, OI and plaintiff entered into an agreement regarding plaintiff's continued employment following the sale to Graham. Plaintiff agreed to remain at the company during the transition period. In exchange, OI offered plaintiff enhanced retirement benefits.

The written agreement provided, inter alia, that Ford would: be entitled to retire pursuant to the “RIF” [Reduction in Force] retirement provisions of the Company's Salaried Retirement Plan with [his] retirement benefit calculated on the base of eighty (80) age service “RIF” points ... [if]] prior to 9/30/2006, while [Ford is] an employee of the Company, there is any materially adverse change in [his] job duties, responsibilities, compensation including compensation level ... or benefits including pension benefits.

(Doc. 51–2).

Plaintiff accepted the offer.

On July 28, 2004, OI entered into a definite sale agreement with Graham. On October 7, 2004, OI completed the sale. Plaintiff participated in these events. He remained active during the ensuing transition phase.

In December 2004, OI announced several amendments to the salary retirement plan (SRP). One amendment provided that § 8.05 of the SRP, which created the RIF benefits, would no longer be available to employees whose service ended on or after January 1, 2005. Another amendment eliminated lump sum payment of benefits for services performed on or after that date.

On receiving notice of the amendments, plaintiff asked OI for written assurance that the SRP amendments (including the amendment to § 8.05) did not affect his December 2003, agreement, which expressly anticipated plaintiff's continued service past December 31, 2004.

On December 28, 2004, OI, responding to plaintiff' inquiry, assured plaintiff, in writing, that the enhanced benefits OI promised in the December 18, 2003 agreement would still be available to plaintiff if he retired after January 1, 2005. OI's response stated, inter alia,:

1. You are correct in your understanding that subparagraph (2) on page 1 of your December 18, 2003 letter agreement (the “Agreement”) has been triggered.

2. Pursuant to the Agreement, you can retire at any time prior to 9/30/2006 and receive the RIF retirement benefits specified in the Agreement.

3. You do not need to take any action at this time to confirm or secure your rights under the agreement.

4. In the event you were to retire before 9/30/2006, your RIF retirement benefit would be payable in the following manner (reflecting the 1/1/05 amendment of the Salaried Retirement Plan):

a. a lump sum (if so elected) amount calculated as of 12/31/04 and payable in part from the Qualified Plan and in part from the Nonqualified Plan; and

b. an annuity amount calculated based on your final covered compensation and your service from 1/1/05 until your retirement date (a part of which annuity may likewise be paid from the Nonqualified plan).

(Doc. 51–2).

In addition to providing this written assurance, OI promised to provide, and provided plaintiff, written projections of his retirement benefits. OI sent plaintiff two separate projections. Each projection contained several pages of calculations and confirmed that plaintiff was entitled to the enhanced benefit payment promised in the December 18, 2003 letter agreement. The conclusion at the bottom of each projection stated plaintiff was entitled to a lump sum payment of approximately one million dollars. Each projection stated a disbursement date after January 1, 2005.

OI does not dispute that the complexity of the benefit calculations precluded plaintiff from independently confirming or denying their accuracy.

On June 1, 2006, plaintiff retired.

Plaintiff alleges (and OI does not appear to dispute) that he decided to continue working beyond January 1, 2005 because of OI's written assurance on December 28, 2004 as to his RIF benefits and the benefit projections. Plaintiff states (and, again, OI does not appear to dispute) that if OI had not provided these assurances, he would have retired on or before December 31, 2004.

The gravamen of this suit is that OI, when it paid RIF benefits to the plaintiff, did so on the basis of the amendment to § 8.05, rather than in accordance with the terms of the December 18, 2003 agreement. This appears to be so, as is the fact that, as a result, plaintiff received substantially less than if OI had paid as promised in the December 18, 2003 agreement.

OI contends that the amendment to § 8.05, not the December 18, 2003 agreement and the December 28, 2004, confirmation of its obligation under the 2003 agreement, controls what plaintiff was to receive when he retired.

The outcome of this dispute matters: plaintiff claims the December 28, 2003 agreement: 1) entitled him to a lump sum distribution of about one million dollars, and, 2) would have enable him to have rolled that payment over into an IRA. Doing so would have allowed plaintiff to defer taxation on his benefits until he started receiving distributions from his IRA.

Instead, OI paid plaintiff a lump sum of $573,799.64. In addition to being almost half of the amount plaintiff expected to receive, taxation was immediate. After taxes plaintiff received $366,564.21.

Standard of Review

A party is entitled to summary judgment on motion under Fed.R.Civ.P. 56 where the opposing party fails to show the existence of an essential element for which that party bears the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The movant must initially show the absence of a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548.

Once the movant meets that initial burden, the “burden shifts to the nonmoving party to set forth specific facts showing there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Fed.R.Civ.P. 56(e)). Rule 56(e) “requires the nonmoving party to go beyond the [unverified] pleadings” and submit admissible evidence supporting its position. Celotex, supra, 477 U.S. at 324, 106 S.Ct. 2548.

In deciding a motion for summary judgment, I accept the opponent's evidence as true and construe all evidence in the opponent's favor. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). The movant can prevail only if the materials offered in support of the motion show there is no genuine issue of material fact. Celotex, supra, 477 U.S. at 323, 106 S.Ct. 2548.

Discussion

The issues in this case are:

• Whether the amendment eliminating plaintiff's RIF benefits violated ERISA's anti-cutback rule;

• Whether OI breached its fiduciary duty by eliminating plaintiff's RIF benefits and/or misrepresenting to plaintiff his right to benefits under the plan;

• Whether OI committed fraud by assuring plaintiff of enhanced benefits; and

• Whether OI is equitably estopped from denying plaintiff the RIF benefits promised in the letter agreement.

1. The Anti–Cutback Rule

Plaintiff claims that the RIF benefits OI promised to pay him in the event of a material change in his position are either early retirement benefits, retirement-type subsidies, or both. As such, plaintiff contends that ERISA's anti-cutback provision, 29 U.S.C. § 1054(g) (quoted below), protects his benefits from the reduction OI unilaterally (and, he contends, unlawfully) imposed on him.

OI argues that § 1054(g) expressly excludes benefits of the kind plaintiff received from its anti-cutback proscription.

In essence, though not expressly, OI argues that plaintiff's RIF benefits are welfare benefit, and thus not protected by the anti-cutback provision.

a. The Anti–Cutback Rule

The relevant statutory provision reads:

(1) The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(d)(2) or 1441 of this title.

(2) For purposes of paragraph (1), a plan amendment which has the effect of-

(A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in regulations), or

(B) eliminating an optional form of benefit,

with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. In the case of a retirement type subsidy, the preceding sentence shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy.

29 U.S.C. § 1054(g).

Prior to 1984, the anti-cutback rule only prohibited the reduction of accrued benefits, and thus “did not protect early retirement benefits or retirement-type subsidies because they were not considered to be accrued benefits.” Bellas v. CBS, Inc., 221 F.3d 517, 522 (3rd Cir.2000). In 1984, Congress amended the anti-cutback statute to protect early retirement benefits. Instead of changing the existing definition of accrued benefit, Cong...