Musmeci v. Schwegmann Giant Super Markets
| Decision Date | 23 August 2001 |
| Docket Number | Civ.A. No. 97-2757. |
| Citation | 159 F.Supp.2d 329 |
| Parties | John MUSMECI, et al. v. SCHWEGMANN GIANT SUPER MARKETS, et al. |
| Court | U.S. District Court — Eastern District of Louisiana |
Nancy Picard, Edward K. Newman, Robein, Urann & Lurye, Metairie, LA, for plaintiffs.
John A. Gegenheimer, Jon A. Gegenheimer, Attorney at Law, Gretna, LA, for Swegmann Giant Supermarkets, Inc., John F. Schwegmann, and John Schwebmann, Jr. Trust Estate.
Howard Bruce Kaplan, Bernard, Cassisa, Elliott & Davis, Metairie, LA, for U.S. Fidelity & Guaranty Co.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs are former employees of Schwegmann Giant Super Markets ("SGSM") who have filed suit under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., or alternatively, under state law, seeking to have their pension benefits in the form of retirement grocery vouchers and/or monetary payments reinstated, and for equitable relief requiring Schwegmann, the plan sponsor, to fulfill accrual, vesting, and funding requirements under ERISA. Schwegmann terminated the voucher program in February 1997, when it sold its chain of grocery stores. Plaintiff, John Musmeci, and other plaintiffs, on behalf of themselves and others similarly situated, claim that they are vested in their retirement benefits by effect of law and under the terms of the benefit plan and are entitled to receive the vouchers or their equivalent for life.
Plaintiffs filed this suit in September 1997. In July 2000, this Court certified the matter as a class action. The plaintiff class is defined as
Those individuals who were SGSM employees and (1) who were retired and receiving the grocery vouchers when SGSM stopped the program, or (2) who, although not retired or receiving the grocery vouchers at the time SGSM stopped the grocery program, were (i) supervisors for at least one year before retirement, and (ii) had at least 20 years experience with SGSM.
Defendant SGSM is the partnership that employed plaintiffs and is alleged to have sponsored the retirement grocery voucher plan.1 SGSM, Inc., G.G. Schwegmann Company, and the John Schwegmann, Jr. Trust Estate are the constituent partners. Defendant SGSM Pension Plan is alleged to be the retirement grocery voucher plan, although Schwegmann never identified it as such. Plaintiffs allege that John F. Schwegmann, who was chief executive officer of SGSM, Inc., is a fiduciary of the voucher plan, and is therefore personally liable for various violations of the duties concomitant to that status. Defendant United States Fidelity & Guaranty Company ("USF&G") is the insurer of the Schwegmann entities.
This matter came on for trial before the Court, sitting without a jury, on July 30 and 31, 2001. At the close of the evidence and following closing arguments, the Court took the matter under advisement.2 Having considered the pleadings, evidence at trial, arguments of counsel, and applicable law, the Court now renders its Findings of Fact and Conclusions of Law, pursuant to Federal Rule of Civil Procedure 52(a).
Making groceries Schwegmann's style3
A popular television commercial jingle once boasted of "Makin' groceries, Schwegmann's style." The jingle required no explanation for the generations of New Orleanians who grew up shopping for groceries (and other sundry items) at Schwegmann Giant Supermarkets, until recently a dominant player in the local retail grocery business. So well-known and so popular was Schwegmann's at one time, that other businesses would advertise their locations by proclaiming "And Schwegmann's is still next door".4 Still later, when Schwegmann's market dominance was being challenged by large, national chain grocery stores, one of its chief competitors advertised that its prices were "Cheaper than Schwegmann's". Schwegmann's was not simply in New Orleans ___ for most of its customers, Schwegmann's was New Orleans.
The first Schwegmann grocery store in New Orleans was founded as a "mom and pop" business in 1869. In 1946, John G. Schwegmann, the grandson of the original founders, joined the family business along with two of his brothers. Together they opened the first Schwegmann Bros. Giant Supermarket on St. Claude Avenue. John G. Schwegmann was considered a genius by many in the retail grocery business. He turned grocery stores into large, self-service operations, instead of having store clerks retrieve items for each customer.5 He conceived and pioneered the "superstore" concept so popular today____ providing his customers with one-stop shopping by including service stations, banking, shoe stores, jewelry departments, pharmacies, and selling sundry items such as lawnmowers, air-conditioners, bicycles, etc.
Over the next approximately one-half of a century, SGSM partnership ("the partnership" or "Schwegmann") operated a chain of grocery stores which eventually grew to more than 40 stores employing over 5000 employees, mostly in the New Orleans area. The Schwegmann partnership was comprised of SGSM, Inc., G.G. Schwegmann Company, and the Trust of John Schwegmann, Jr. in favor of John Francis Schwegmann and Guy George Schwegmann. SGSM, Inc. had a 70 percent interest in the partnership and was its managing partner. The Schwegmann partnership employed all employees in the Schwegmann grocery stores at all times pertinent to this litigation. For many years and until its sale in 1997, the Schwegmann chain of grocery stores continued to be a dominant player in the local retail food market.6
Until 1979, SGSM, Inc.'s majority shareholder was John G. Schwegmann, the grocery chain's founder, and father of John F. Schwegmann, a defendant herein. In 1979, John F. Schwegmann ("Mr.Schwegmann") purchased his father's stock in SGSM, Inc., becoming its majority stockholder and chief executive officer. As chief executive of SGSM, Inc.,7 Mr. Schwegmann was ultimately responsible for the daily operations of the Schwegmann partnership and was involved in making overall company policy-related decisions for the grocery chain. At all times pertinent, Mr. Sam Levy, who is not a party to this suit, served as president of SGSM, Inc. and as director of operations for the Schwegmann partnership. Mr. Schwegmann and Mr. Levy were also members of SGSM, Inc.'s board of directors.
In 1984 or 1985, Mr. Schwegmann conceived the arrangement referred to in this litigation as the retirement grocery voucher program. In 1985, Messrs. Schwegmann and Levy, along with Joe Warnke, the partnership's director of human resources, discussed creating a grocery voucher program that might be given to loyal long-term employees at their retirement. The program was designed to assist retirees in meeting their monthly food needs by providing them with vouchers that could be used in lieu of cash to purchase goods in the Schwegmann stores. One factor that motivated Mr. Schwegmann to establish the program was his desire to help ensure that certain long term and loyal employees would always "have food on their tables." Messrs. Schwegmann, Levy, and Warnke discussed possible guidelines for the program as well as qualifications for participation. On July 2, 1985, Mr. Warnke sent a memorandum to Mr. Schwegmann captioned "Retirement/Compensation Policy." (Exhibit 3). In that memorandum, Mr. Warnke memorialized the criteria, as discussed at the Schwegmann-Levy-Warnke meeting, an employee would have to meet in order to qualify for the grocery voucher program. In particular, the employee:
* Must have completed twenty (20) years of service.
* Must have achieved the age of sixty (60).
* Must have been employed in the position of supervisor or a position of greater responsibility for at least one year at the time of retirement.
The memo also memorialized Mr. Schwegmann's desire to compensate some managers monetarily in addition to or in lieu of grocery vouchers, and made reference to certain managers who were already retired and receiving monetary compensation. One individual receiving monetary compensation as of July 2, 1985, was Mr. Joseph T. Spitelera, a non-class plaintiff. Mr. Spitelera began receiving $305 dollars per month when he retired from the Schwegmann partnership in 1980. Mr. Spitelera worked for the partnership for over 25 years. During part of that time, he served as an assistant store manager and supervised about eight other employees. Spitelera deposition at 9. Mr. Spitelera never received food vouchers.
Aside from Mr. Warnke's July 2, 1995, memorandum, the voucher program was never formally reduced to writing. And while other benefits such as 401(k) ERISA benefits, certain insurance and hospitalization benefits, and other specified benefits were itemized in a "draft" employee handbook, the grocery voucher program was never included in the book.8 Nevertheless the voucher program was common knowledge among the partnership employees who learned of the program from supervisors, other employees, and by seeing the vouchers used in the Schwegmann stores.9 Employees also learned of the program at retiree luncheons and annual banquets held to honor employees who had attained 20 years of service or more. At those functions, in the presence of family and coworkers, retirees were often personally notified of the Schwegmann grocery voucher program.
Each grocery voucher had a face value of $54 dollars and qualified retirees received a total of $216 dollars worth of vouchers each month. Exhibit 1. Messrs. Schwegmann and Levy found this amount to be adequate to satisfy the basic nutritional needs of the employee and his or her spouse. A notation was printed on each voucher indicating that it was valid for a period of thirty days.
Although the vouchers were intended to be used only for groceries with no cash redemption, store personnel, including some managers responsible for...
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