Keller v. GRAPHIC SYSTEMS OF AKRON, INC., ETC.

• Decision Date: 10 November 1976
• Docket Number: Civ. A. No. C 76-72 A.
• Citation: 422 F. Supp. 1005
• Parties: Richard F. KELLER, Plaintiff, v. GRAPHIC SYSTEMS OF AKRON, INC., EMPLOYEES PROFITSHARING PLAN, Defendant.
• Court: U.S. District Court — Northern District of Ohio

422 F. Supp. 1005

Richard F. KELLER, Plaintiff, v. GRAPHIC SYSTEMS OF AKRON, INC., EMPLOYEES PROFITSHARING PLAN, Defendant.

Civ. A. No. C 76-72 A.

United States District Court, N. D. Ohio, E. D.

November 10, 1976.

Charles J. Tyburski, Black, McCuskey, Souers & Arbaugh, Canton, Ohio, for plaintiff.

William B. Gore, Akron, Ohio, for defendant.

MEMORANDUM OPINION AND ORDER

CONTIE, District Judge.

Richard F. Keller (hereinafter plaintiff) initiated this action under 29 U.S.C. § 1132(a)(1)(B) against defendant Graphic Systems of Akron, Inc., Employees Profitsharing Plan (hereinafter Plan) on March 5, 1976. Plaintiff seeks recovery of benefits allegedly due him under the Plan, together with reasonable attorney's fees. The jurisdiction of this Court is invoked pursuant to 29 U.S.C. § 1132(e)(1). This matter is before the Court on the parties' stipulation of facts.

FACTS

On or about July 24, 1961, plaintiff was employed as a salesman by Graphic Systems of Akron, Inc. (hereinafter Graphic Systems). Graphic Systems was and is a corporation engaged in the business of selling and distributing office equipment, including 3M Brand duplicating equipment, in approximately thirteen (13) counties in Ohio, including Stark County. Plaintiff worked for Graphic Systems initially as a salesman and later as sales manager until he voluntarily terminated his employment on August 31, 1973.

The following month, September, 1973, plaintiff secured a position with Xerox Corporation as a salesman of Xerox duplicating equipment in the Stark County area. Plaintiff's employment by Xerox continued until January of 1975. Thereafter, on February 17, 1975, plaintiff was employed by American Business Machines as a salesman of duplicating equipment in the Stark County area. Plaintiff's association with American Business Machines has continued until the present time. It is stipulated by the parties that both Xerox Corporation and American Business Machines are in direct competition with Graphic Systems in the market areas Graphic serves with respect to the sale of duplicating equipment.

While plaintiff was still employed by Graphic Systems, it adopted the Plan in order "to make it possible for eligible employees of said Company to participate in profits of the corporation, and to have greater security proportionate to the profitmaking ability of the Company as a whole." The Plan is an "employee benefit plan" within the meaning of 29 U.S.C. § 1002(3) and is qualified under 26 U.S.C. § 401(a). It provides a monetary fund to be used for the welfare of eligible employees by providing benefits upon retirement, permanent and total disability, death or severance of employment. The Plan became effective March 1, 1969, and has continued in operation until the present.

Under the terms of the Plan, plaintiff, having completed two years of continuous service for Graphic Systems on the effective date of the Plan, became an eligible participating employee as of that date. By August 31, 1973, when plaintiff voluntarily ended his employment with Graphic Systems, there had been credited to his account under the Plan the sum of $11,737.77.

Article VIII(a) of the Plan sets forth the events upon which an eligible employee is entitled to payment from the fund, and the amounts of such payments. Specifically, Article VIII(a)(iii) governs when an eligible employee terminates his employment with Graphic Systems for reasons other than retirement, disability or death. It provides for payment of a percentage of the amount credited to an eligible employee's account in equal annual installments. Such percentage is fixed by a schedule set forth in the Plan and based upon the length of an employee's Plan participation. Payment of the initial installment is to be made subsequent to termination and after the expiration of the applicable waiting period for the particular group into which the employee falls under the Plan provisions. Significantly, this Article further provides that:

Notwithstanding any other provisions contained in this Plan, if a participant's employment with the Company shall terminate by reason of dishonesty, fraud, theft, or if such employee should enter the employ of a competitor of the Company, which competitor is in direct competition with the Company in any manner within the area in which the Company is selling its products or rendering services, or if a participant while employed by the Company, or after he severs his employment with the Company, shall establish his own business in direct competition with the Company in any manner within the area in which the Company is selling its products or rendering services, all vested rights of such participant shall be forfeited and the amount credited to such participant's account shall be allocated to the accounts of the remaining participants.

It is Article VIII(a)(iii) and the above clause in particular that form the basis of the present controversy.

Applying the terms of Article VIII(a)(iii) to the instant case, plaintiff as of the date his employment terminated, August 31, 1973, was apparently entitled to 40% of the amount credited to his account as he had been a Plan participant for more than four years but less than five years. As stipulated, plaintiff was classified as a "Group A" employee (Salesman), and as such was required to wait two years after his termination before being able to receive any payment to which he might be entitled. Plaintiff's two year waiting period expired on August 31, 1975.

In the interim, however, plaintiff was informed by Graphic Systems, through a letter dated July 12, 1974, that it was the intention of the Plan trustees to declare plaintiff's interest in Plan assets forfeited because Graphic had learned of plaintiff's employment with Xerox, and that by reason of such employment plaintiff violated the so-called "non-competition" clause of Article VIII(a)(iii) set forth above. Not until after August 31, 1975, the date on which the two year waiting period expired, did plaintiff through his counsel make a demand of the Plan and Graphic Systems for payment of his asserted interest. No amounts have been paid to plaintiff from the Plan fund. It is plaintiff's contention that he is entitled to receive $4,724.22, which sum represents the value of plaintiff's asserted vested interest in the Plan as of his termination date.

DISCUSSION

Initially, the Court is confronted by the question of what law is to be applied to the instant action. Plaintiff contends that the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., govern the disposition of this action. ERISA, signed into law on Labor Day, September 2, 1974,¹ is comprehensive legislation providing minimum standards for the regulation of private retirement systems, and is designed to protect individual pension rights.

ERISA envisions and specifically provides for private civil enforcement of its terms. See 29 U.S.C. § 1132. Thus plaintiff's assertion that he is a plan participant or beneficiary properly brings this action under 29 U.S.C. § 1132(a)(1)(B) "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." This Court has concurrent jurisdiction with state courts of competent jurisdiction of actions commenced under said subsection. See 29 U.S.C. § 1132(e)(1).

The provisions of subchapter 1 of ERISA, which governs among other matters plan participation and vesting, supersede state laws as they relate to plans described in 29 U.S.C. § 1003(a) effective January 1, 1975. See 29 U.S.C. § 1144(a). Further, it is specifically stated that those provisions do not apply "with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." See 29 U.S.C. § 1144(b)(1). Thus the first question becomes: when did plaintiff's cause of action arise?

Both parties have agreed that plaintiff's cause of action arose on August 31, 1975. On that date the aforesaid two year waiting period expired and plaintiff was first able to receive any payment to which he might be entitled under the Plan from the account credited to him. It is well established that a cause of action accrues when facts exist enabling a party to maintain a present suit against another. See Great American Insurance Co. v. Louis Lesser Enterprises, Inc., 353 F.2d 997, 1001 (8th Cir. 1965). In other words, a cause of action arises at the first instance when a party can legally maintain a suit in a court of competent jurisdiction. Id. See 1 C.J.S. Actions § 124a (1936).

In the case at bar, plaintiff presumably could have first brought an action for payment of benefits under the Plan on or after August 31, 1975. Prior to that time the specific provisions of the Plan relating to the two year waiting period precluded the initiation of any action under it. Any demand or suit for payment prior to that date presumably would have been premature as plaintiff's asserted right to the same was not fixed. In light of the terms of the Plan and the stipulations by the parties, plaintiff's cause of action arose on August 31, 1975, more than seven months after the effective date of Section 1144 above. Thus the provisions of ERISA would seem to govern this action.

The dispute herein essentially centers around the application and validity of Article VIII(a)(iii) of the Plan. The main issues outlined by the parties are the vesting of plaintiff's rights to plan assets, and the forfeiture clause of the said Article. Thus the ERISA provisions relating to vesting and forfeiture must be viewed as controlling if applicable.

Section 1053 of ERISA sets forth minimum vesting standards for private retirement plans which assure employees of attaining vested rights to benefits after a stated period of service. 29 U.S.C. § 1053. It further delineates a limited number of situations in...