Rybicki v. Anesthesia & Analgesia Assoc., Ltd.
| Decision Date | 24 June 1993 |
| Docket Number | No. 4-92-0658,4-92-0658 |
| Citation | 615 N.E.2d 1236,246 Ill.App.3d 290,186 Ill.Dec. 179 |
| Parties | , 186 Ill.Dec. 179 Witold RYBICKI, M.D., Plaintiff-Appellant, v. ANESTHESIA & ANALGESIA ASSOC., LTD., and Ettore Dimiceli, M.D., Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
William A. Allison (argued), Allison & Kelly, Bloomington, for plaintiff-appellant.
Jeffrey Alan Ryva (argued), Husch & Eppenberger, Peoria, for defendants-appellees.
Plaintiff Witold Rybicki, an anesthesiologist, entered into employment contracts with Anesthesia & Analgesia Associates, Ltd. (Associates), a corporation solely owned by Ettore DiMiceli. DiMiceli is also an anesthesiologist, and the Associates was in the business of providing analgesia services to a hospital medical center. The present action initially arose following plaintiff's termination in December 1989 and a dispute over profit-sharing contributions, proper bonus payments, and severance pay. The principal issue on appeal relates to the profit-sharing issue. Plaintiff appeals following a bench trial and a judgment in defendants' favor by the circuit court of McLean County.
Plaintiff's first contract with Associates was dated November 17, 1985, and ran from December 9, 1985, until June 13, 1986. This contract did not provide for profit sharing or a bonus. The second contract was dated July 18, 1986, and provided for a period beginning July 1, 1986, "and continuing unless terminated in a manner set forth in Paragraph 7." This contract provided for an annual salary of $95,000, plus a 10% bonus of paid fees earned by plaintiff over $140,000 and under $180,000, and 25% of paid fees over $180,000. The contract further provided:
"Employee will receive a contribution in his behalf to the corporate profit[-]sharing plan which shall be subject to all the rules and regulations set forth by the Internal Revenue Service and those laws governing such plans."
Admitted into evidence was plaintiff's exhibit No. 3, a summary dated July 14, 1986, prepared by DiMiceli on Associates' letterhead, which provided:
Plaintiff testified that the $14,250 listed on exhibit No. 3 was the amount agreed by DiMiceli to be paid into the corporate profit-sharing plan each year on plaintiff's behalf. DiMiceli testified that exhibit No. 3 was prepared to establish a basis for bonus payments and used to explain the basis to plaintiff. DiMiceli contends contributions to the profit-sharing plan were always discretionary, and not intended to be fixed.
The profit-sharing trust and plan (plan) for Associates was adopted on October 1, 1978, as shown by an amendment adopted on June 20, 1985. The plan provided for deferment of taxation and provided that all contributions must be paid from Associates' profits. Plan qualifications apparently require one year of employment, with at least 1,000 working hours during that year before eligibility. (The copy of the 69-page plan in the record before us, exhibit No. 10, is missing every other page.)
It is apparent that the contribution of income to the plan would be allocated on a proportional basis to all included employees. Plaintiff's exhibit No. 13 was a "CERTIFICATE OF PARTICIPATION AND SUMMARY PLAN DESCRIPTION FOR WITOLD RYBICKI--A PARTICIPANT IN THE EMJAY PROFIT[-]SHARING PLAN FOR ANESTHESIA AND ANALGESIA ASSOC., LTD." The summary clearly states contributions are dependent upon profits. The summary includes a statement that "[t]he Company decides each year, depending on profits, how much of a contribution will be made." Paragraph No. 4.2 of the plan provides for allocation of contributions. The allocation of company contributions is integrated with social security, with the company paying social security taxes up to the maximum allowable amount.
This example is provided in an attempt to illustrate why an employee's employment contract containing an annual fixed profit-sharing amount has the effect of determining the total employer annual contribution and the amount allocated to each employee's account. If two employees had contracts with fixed annual contributions, the plan allocation provisions could not be implemented unless there were identical incomes and agreed-to contributions.
For purposes of this explanation, we are ignoring the top-heavy provisions. Of the total amount allocated by the employer to the plan, the plan trustee shall first allocate to the account of each participant an amount up to 5.7% of the participant's compensation which is in excess of the maximum taxable wage base (maximum subject to social security tax) which, for 1987, was $43,800. Assuming the contribution exceeded the amount computed by the 5.7%, then the balance must be allocated in the same proportion that the participant's compensation bears to the compensation of all such participants.
Taking the year 1987 as an example, and assuming two employees being paid $95,000 and the corporate officer being paid $200,000:
First Step
Pay Social Excess 5.7% Based Upon
Security Pay Required Salary-- Each
Maximum Receives of
Base Balance of Total
Contribution
Employee A $95,000 -$43,800 $51,200 2,918.40 24%
Employee B $95,000 -$43,800 $51,200 2,918.40 24%
Officer C $200,000 -$43,800 $156,200 8,903.40 52%
------------
$14,740.20
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To be able to deposit $14,250 in plaintiff's account in 1987, based upon the
above assumptions, first deduct $2,918.40 from $14,250.00 equals $11,331.60
and then divide $11,331.60 by 24% equals $47,215; and add the total of
the 5.7% payments (or $14,740.20), for a required contribution by the
corporation of $61,955.20 ($47,215 plus $14,740.20) to the 1987 profit-sharing
plan
[246 Ill.App.3d 294] III. CORPORATE TAX RETURN INFORMATION
Associates' corporate tax returns contained the following totals
Return Period Gross Officer Other Employee CorporateIncome
(DiMiceli) Compensation
Compensation
June 1, 1986,
through May 31,
1987 $753,923 $270,000 $276,444 $43,864
June 1, 1987,
through December
31, 1987
(six months) $472,269 $113,846 $216,124 $51,840
1988 $816,417 $444,746 $389,138 ($159,784 )
1989 $984,629 $448,325 $435,129 ($11,457 )
Shareholder equity: May 31, 1987""$467,886
December 31, 1987""$414,407
December 31, 1988""$316,940
December 31, 1989""$7,444
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Shareholder equity on May 31, 1987, December 31, 1987, and December 31, 1988, consisted basically of cash and accounts receivable, and was probably accumulated corporate net income which could be used for profit-sharing contributions.
IV. SUBSEQUENT EMPLOYMENT CONTRACTS
A letter to plaintiff from DiMiceli dated June 22, 1988, had given plaintiff three options: (1) continue the July 18, 1986, contract; (2) terminate that contract and sign the new one enclosed; or (3) sign a termination of the July 18, 1986, contract with no new contract available. Plaintiff evidently signed the enclosed (June 27, 1988) contract. The new employment contract provided "for a period beginning on the first day of July, 1988, and continuing unless terminated in a manner set forth in Paragraph 7." Salary was set at $100,000 per year, and the same bonus provision was included. The profit-sharing provision was deleted. On July 25, 1989, a new contract was executed which provided for a salary of $10,000 per month and a different bonus arrangement. No profit-sharing plan was included. The hospital contract with Associates was terminated, plaintiff's employment was terminated in December 1989, and the plan was terminated the following year. A benefit statement to plaintiff from the plan at the end of 1989 showed $3,890.37 vested in his account, of which $3,276.64 appears to have been contributed by Associates.
V. ISSUES ON APPEAL
This appeal is centered on counts I, II, III, and VI of plaintiff's complaint. The crux of counts I and II is that Associates contracted with plaintiff to contribute to the plan pursuant to the agreement in the contract dated July 18, 1986, and that Associates promised the contribution would be $14,250 per year. Count III alleged that the $14,250 contribution was also an entitlement, under some theory, within the 1988 contract. Count VI was against DiMiceli, charging intentional misrepresentation to plaintiff that Associates would make a...
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