Haberern v. KAUPP VASCULAR SURGEONS BEN. PLAN

• Decision Date: 12 May 1993
• Docket Number: Civ. A. No. 88-1853.
• Citation: 822 F. Supp. 247
• Parties: Ruth HABERERN, Plaintiff, v. KAUPP VASCULAR SURGEONS LTD. DEFINED BENEFIT PLAN AND TRUST AGREEMENT; Lehigh Valley Vascular Surgeons Ltd. Retirement Plan; Lehigh Valley Vascular Surgeons Ltd.; and Kenneth M. McDonald, Trustee, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

822 F. Supp. 247

Ruth HABERERN, Plaintiff, v. KAUPP VASCULAR SURGEONS LTD. DEFINED BENEFIT PLAN AND TRUST AGREEMENT; Lehigh Valley Vascular Surgeons Ltd. Retirement Plan; Lehigh Valley Vascular Surgeons Ltd.; and Kenneth M. McDonald, Trustee, Defendants.

Civ. A. No. 88-1853.

United States District Court, E.D. Pennsylvania.

May 12, 1993.

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Paul R. Fitzmaurice, David L. Hall, Drinker, Biddle & Reath, Philadelphia, PA, Thomas J. Maloney, Bruce E. Davis, Bethlehem, PA, Sharon L. Klingelsmith, Philadelphia, PA, for plaintiff.

Kevin T. Fogerty, Traub, Butz & Fogerty, P.C., Allentown, PA, for defendants.

FINDINGS OF FACT, DISCUSSION, AND CONCLUSIONS OF LAW

HUYETT, District Judge.

Plaintiff Ruth Haberern from 1974 to 1985 worked full-time as a secretary-bookkeeper for a professional corporation formerly known as Kaupp Vascular Surgeons, Ltd., and later known as Lehigh Valley Vascular Surgeons, Ltd. Defendants are the professional corporation, its defined benefit and defined contribution pension plans, and the trustee of those plans. Plaintiff commenced this action under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. §§ 1001-1461 (West 1985 & Supp.1992). Plaintiff seeks to recover back salary and pension benefits that Defendants have allegedly wrongfully withheld, as well as costs and attorney's fees. Following a nonjury trial, the Court makes the following findings of fact and conclusions of law.

I. Findings of Fact

A. Identity of the Parties

Plaintiff Ruth Haberern is an adult individual who resides at 5677 Merion Lane, Macungie, Pennsylvania. (Plaintiff's Testimony, Transcript 11/23/92 at 10.) Kaupp Vascular Surgeons, Ltd. (later known as Lehigh Valley Vascular Surgeons, Ltd.) is a professional corporation that was incorporated on November 30, 1973. (Uncontested Statement of Facts dated September 11, 1990 ¶ 2.) The corporate name of Kaupp Vascular Surgeons, Ltd. was changed to Lehigh Valley Vascular Surgeons, Ltd. (Lehigh Valley) in November 1984. Defendant Lehigh Valley Vascular Surgeons, Ltd. Retirement Plan (the Defined Contribution Plan) and Defendant Kaupp Vascular Surgeons, Ltd. Defined Benefit Pension Plan and Trust Agreement (the Defined Benefit Plan), at all times relevant to this action were "employee pension benefit plans" and "pension plans," as defined in 29 U.S.C.A. § 1002(2) (West Supp.1992) and governed by ERISA. The Defined Contribution Plan and the Defined Benefit Plan are separate entities from, and independent of, the employer that sponsors the Plans. (Uncontested Facts and Admissions dated November 23, 1992 and received into evidence as Court Exhibit 1 ¶ 2.) Defendant Lehigh Valley is, and was at all times relative to this action, the employer that sponsored the Defined Benefit and Defined Contribution Plans. Defendant Lehigh Valley was also the administrator of the Plans, as that term is defined under ERISA, 29 U.S.C.A. § 1002(16) (West Supp.1992). (Ct. Ex. 1 ¶ 3.) The principal place of business of Defendant Lehigh Valley is 1275 South Cedar Crest Boulevard, Allentown, Lehigh County, Pennsylvania 18103. (Uncontested Statement of Facts dated September 11, 1990 ¶ 5.) Defendant Kenneth M. McDonald, M.D. (McDonald) is an adult individual who maintains a business address at Defendant Lehigh Valley. (Ct. Ex. 1 ¶ 5.) In 1976 McDonald became an employee of Lehigh Valley. (Pl. Test. Tr. 11/23/92 at 23.) McDonald served as a trustee of the Defined Contribution Plan from May 1, 1978 to the present, and as a trustee of the Defined Benefit Plan from its inception on September 1, 1979. (Ct. Ex. 1 ¶ 6.) McDonald is currently the trustee of the Defined Contribution Plan and, at all times relevant to this action, served as a trustee of the Defined Benefit Plan.

B. Plaintiff's Employment With Lehigh Valley

Plaintiff began working for Kaupp Vascular Surgeons, Ltd. on July 1, 1974. At that time the only employees of the corporation were Plaintiff and Harry A. Kaupp, M.D. Kaupp was the sole shareholder, director, and officer of the corporation. Plaintiff's duties as a secretary-bookkeeper involved handling the telephone, scheduling appointments, processing insurance claims forms, typing letters, receiving payments, bookkeeping, taking care of checkbooks, and paying all the bills. Plaintiff's duties with respect to the Defined Contribution Plan involved keeping an accounting of the contributions for each employee and where those contributions were deposited. When the number of employees of Kaupp Vascular Surgeons, Ltd. and later Lehigh Valley expanded beyond Plaintiff and Dr. Kaupp, Plaintiff continued to perform all the same duties that she had performed previously. (Uncontested Statement of Facts dated September 11, 1990 ¶¶ 8-10, 13-15.) Plaintiff worked for Defendant Lehigh Valley on a full-time basis until January 2, 1985. She worked on a part-time basis from January 3, 1985 until December 16, 1986. (Id. ¶ 8.)

To attract Plaintiff to work for him, Dr. Kaupp offered Plaintiff an annual salary of $11,500. (Pl. Test. Tr. 11/23/92 at 13.) As part of her compensation package, Dr. Kaupp offered to pay Plaintiff a percentage of the gross receipts of the corporation. The corporation also provided a defined contribution pension plan as well as health insurance for Plaintiff. (Pl. Test. Tr. 11/23/92 at 14; Kaupp Deposition at 112-113.) Plaintiff accepted these terms and began working for Dr. Kaupp. There was, however, no written employment contract. (Tr. 11/23/92 at 107.)

Plaintiff received biweekly salary checks as well as a check at the end of the corporation's fiscal year representing her percentage of the receivables collected by the corporation for the fiscal year. Plaintiff's salary as reported on her W-2 forms increased every year from 1975 to 1979. (Pl. Test. Tr. 11/23/92 at 15-18; Pl.Ex. 90.) Commencing September 1, 1979 Plaintiff's biweekly salary checks were increased from $561.80 to $601.20 up to and including August 30, 1984. Effective September 1, 1984, up to and including December 31, 1984, Plaintiff's biweekly salary checks were increased to $839.58. (Uncontested Statement of Facts dated September 11, 1990 ¶¶ 18, 19.)

Beginning in June 1984, Plaintiff gave frequent and repeated notices to Lehigh Valley that she intended to retire on August 31, 1984. Before August 31, 1984 Plaintiff postponed her retirement date to January 2, 1985, and gave notice to Lehigh Valley. Lehigh Valley held a retirement dinner in Plaintiff's honor in October 1984. (Pl. Test. Tr. 11/23/92 at 30-35; Kaupp Dep. at 17-19.) Although Plaintiff retired on January 2, 1985, Dr. McDonald asked Plaintiff to work part-time thereafter and Plaintiff worked one day per week or less until December 16, 1986. (Pl. Test. Tr. 11/23/92 at 34.) During the period that Plaintiff worked for Lehigh Valley on a part-time basis, Lehigh Valley paid her biweekly and deducted taxes from her pay. Plaintiff received W-2 forms for 1985 and 1986 and the corporation covered her under its medical plan. (Uncontested Statement of Facts dated September 11, 1990 ¶¶ 20-22.)

C. The Defined Contribution Plan and the Defined Benefit Plan

Kaupp Vascular Surgeons, Ltd. established a pension plan, the Defined Contribution Plan, effective December 15, 1973. (Pl.Ex. 4.) The initial trustees of the Defined Contribution Plan were Dr. Kaupp and his wife, Barbara Kaupp. Plaintiff was a participant in the Plan from its effective date. (Pl. Test. Tr. 11/23/92 at 13.) Under section 4.1 of the Plan, Lehigh Valley agreed to contribute each year on behalf of each participant an amount equal to 20.5 percent of the first $10,800 of the participant's annual compensation plus 27.5 percent of compensation in excess of $10,800. (Pl.Ex. 4.) Section 7.3 of the Plan provides that participants may direct the investments of their contributions under the Plan. Plaintiff made this election in 1974. To the extent a participant has given specific directions, the Trustee is subject to these directions. Pursuant to section 5.1, the amounts contributed by the employer on behalf of a participant could be held in one or more accounts in a participant's name. These accounts would be credited with investment earnings or losses. § 5.6. Plaintiff deposited the amounts Lehigh Valley contributed on her behalf into funds maintained for her benefit at Dean Witter Reynolds, Inc. (Dean Witter) and Gruntal & Co. (Gruntal). Plaintiff, consistent with the Plan, self-directed these accounts. (Pl.Ex. 4) Under section 6.8 of the Plan, an employee's share at any time is the amount in his or her account, subject to any vesting provisions of the Plan. At the time of her retirement, Plaintiff was fully vested in her Plan accounts. (Pl.Ex. 4; Ct. Ex. 1 ¶ 17.)

Effective September 1, 1979, Defendant McDonald and Dr. Kaupp, the two shareholders of Kaupp Vascular Surgeons, Ltd., established a defined benefit pension plan, Kaupp Vascular Surgeons, Ltd. Defined Benefit Plan and Trust Agreement (the Defined Benefit Plan). A defined benefit plan differs from a defined contribution plan in that there are no individual accounts in a defined benefit plan. Rather, a person's pension is based upon a formula taking into account factors such as age, compensation, and years of service. Thus, the employer guarantees a certain benefit based on a formula and benefits are paid out of a fund under the plan. (Pl. Ex. 2; John Lisicky Test. Tr. 11/23/92 at 126.)

Plaintiff was, at all times relevant, a participant in both plans, and, at the time of her retirement, Plaintiff was fully vested in both plans. (Pl. Test.; Ct. Ex. 1 ¶ 17.) Lehigh Valley was the sponsor and administrator of both plans. Lehigh Valley had the power to appoint trustees and to direct the trustees to make distributions of benefits. (Ct. Ex. 1 ¶¶ 2-4.) As fiduciaries of the Plans, McDonald and Lehigh Valley exercised authority and control in the management of the...