ORDER
Wе affirm for the reasons stated by the district court in its published opinion at
AFFIRMED.
APPENDIX A
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
HUGO SLUIMER, Plaintiff,
v.
VERITY INC, and THE VERITY, INC., CHANGE IN CONTROL AND SEVERANCE BENEFIT PLAN, Defendants.
No. C 08-01220 SI
ORDER RANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGEMENT AND DENYING DEFENDANTS'S MOTION TO DISMISS AND MOTION FOR SUMMARY JUDGMENT
The parties have filed cross-motion for summary judgment, and defendant has
BACKGROUND
This case raises the question of whether a former employee was properly denied benefits under a plan governed by the Employee Retirement Income Security Act (“ERISA”). The parties do not dispute the following facts. Plaintiff Hugo Sluimer was employed by defendant Verity, Inc., a computer software provider, from 1990 until december 2005, when defendant was acquired by Autonomy Company. In anticipation of a pоssible acquisition, defendants Verity created, in April 2005, a “Change in Control and Severance Benefit Plan” (“Plan”), which provided that if a Plan participant experienced a “covered termination” following a change in control, the participant would receive benefits such as a cash severance, accelerated stock option vesting, and continued medical benefits. See generally Kanter Deck at ex. A. The Plan defined a “covered termination” as either an involuntary termination without cause or a voluntary termination after “a substantial reduction in the Participant’s duties or responsibilities.” Id. at ex. a, §§ 2(g) & (f). The Plan labeled this latter termination a “constructive termination.” Id. On May 4, 2005, defendants informed plaintiff that he would be considered a particiрant in the Plan. Plaintiff confirmed his participation and both parties signed a notice indicating that plaintiff would not be eligible for any cash severance under the plan and that his entitlement to a cash severance would be determined under Dutch Law “without reference to the Plan.” Kanter Deck at ex. B.
After Autonomy acquired defendant Verity, plaintiff was informed that he was at risk of termination unless suitable alternative position was identified. On January 5, 2006, Autonomy’s chief operating officer, Andrew Kanter, contacted plaintiff and informed him that there likely would not be a similar position available for him at Autonomy; a few hours later, plaintiffs access to his company email address was terminated. Plaintiff, however, continued to receive his base sаlary for the next few months, on March 23, 2006, Kanter sent plaintiff a letter alerting him to an alternative position at Neurodynamics, an entity controlled by Autonomy. The letter did not contain many details about the new position, and over the next months or so plaintiff attempted to learn more about the position to determined whether it was comparable to his former position. Plaintiff now alleges, and defendant does not dispute, that the new position would have meant a significant reduction in the amount of revenue for which plaintiff was responsible, the number of employees plaintiff had managed, and the variety of duties and responsibilities with which plaintiff had been charged.
On april 19, 2006, plaintiff filed a lawsuit in a court in the netherlands seeking a cash severance benefit under Dutch law (not under the Plan).
1
On June 7, 2006, the Dutch court issued an order declaring
During the pendency of the Dutch proceeding, sought a determination from the Verity plan administrator that he was entitled to benefits under the Plan. Plaintiffs letter of May 1, 2006, asked for a confirmation that he was addressed to Jack Landers, who plaintiff believed was the plan administrator. Kanter, not Landers, responded to plaintiff on May 3, 2006, stating that plaintiff was not entitled to benefits under the Plan because he had been offered “immediate reemployment” within the meaning of the Plan, had not confirmed in writing that he would be subject to Autonomy’s confidentiality and non-compete agreements, as required by the Plan, and had not executed a waiver and release of claims against Autonomy, as required by the Plan. Kanter sent another letter on July 6, 2006, confirming that plaintiffs application for benefits had been denied. This letter stated the same grounds for denial as the May 3rd letter, but added that plaintiff had not suffered a “constructive termination” within the meaning of the Plan. On July 13, 2006, plaintiff requested a review of this decision and raised arguments regarding each of Kanter’s grounds for denying benefits. On September 29, 2006, Kanter announced that he had reviewed the prior decision and it was upheld. Kanter also informed plaintiff that he had assumed the duties of the plan administrator becausе landers had recently left the company.
On February 29, 2008, plaintiff filed the instant action against Verity and the Plan. Plaintiffs complaint argued that he had been constructively terminated and thus entitled to benefits under the Plan, such as the accelerated vesting of stock options and continued medical benefits. Plaintiff also sought statutory penalties under § 502(c)(1) of ERISA for defendant’s failure to produce documents related to the plan administrator’s decision. Now before the Court are the parties’ cross-motion for summary judgment, as well as defendant’s motion to dismiss the complaint.
LEGAL STANDARD
Summary judgment is proper “if the pleadings’ depositions, answer to interrogatories, and admission on file, together with the affidavits, if any, show that there is no genuine issue as to any material fаct and the moving party is entitled to a judgment as a matter of law.” Fed R. Civ. p. material fact,
See Celotex Corp. v. Catrett,
The burden then shifted to the non-moving party to “designate specific facts showing that there is a genuine issue for trial.’ ”
Id.
at 324,
DISCUSSION
Currently before the Court is defendant’s motion to dismiss or, in the alternative, motion for summary judgment, as well as plaintiffs motion for summary judgment. Defendant ask the Court to uphold the decision of the plan administrator deny plaintiffs claims for benefits under the Plan, while plaintiff ask the Court to find that he is eligible and entitled to receive. As an initial matter, the Court DENIES defendant’s motion to dismiss. As discussed below, the Court also GRANTS plaintiffs motion for summary judgment and DENIES defendant’s motion for summary judgment.
I. Standard of review
A threshold issue disputed by the parties is whether the Court should review Ranter’s decision
de novo or
under the abuse of discretion standard, the Supreme Court has held that denials of benefits under ERISA are reviewed
de novo
by the district court “unless the benefits plan gives the administrator or fiduciary discretionary authority to determined eligibility for the benefits or to construe the terms of the plan.”
Firestone Tire & Rubber Co. v. Bruch,
The abuse of discretion standard, however, can be heightened by the presence of a conflict interest.
Atwood v. Newmont Gold Co.,
evidence of malice, of self-dealing, or of a parsimonious claims-granting history, the administrator provides inconsistent reasons for denial, fails adequately to investigate a claim or ask the plaintiff for necessary evidence, fails to credit a claimant’s reliable evidence, or has repeatedly denied benefits to deserving participants by interpreting plаn terms incorrectly or by making decision against the weight of evidence in the record.
Id.
at 968-69. Recently, the Supreme Court confirmed that a conflict of interest will also be found where the “entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible and pays benefits out of its own pocket.”
Metropolitan Life Ins. Co. v. Glenn,
Plaintiff argues that the Court should not defer to Ranter’s decision regarding plaintiffs eligibility for benefits because Ranter has a conflict of interest and a persоnal bias against plaintiff. Defendant does not seriously dispute the existence of some degree of conflict, and the Court agrees with plaintiff that Ranter’s roles as chief operating officer of autonomy and plan administrator create a conflict of interest because Ranter is responsible for determining eligibility under the plan and also serves as high-level executive and director of the entity that would serve as the source of funding for plaintiffs benefits were plaintiff found eligible.
See Metropolitan Life Ins.,
Plaintiff also argues the Court owes no deference to Ranter’s decision because Ranter was not the plan administrator at the time he made the decision to deny benefits to plaintiff. 2 The Plan defies the plan administrator as
the board or any committee duly authorized by the Board to administer the Plan. The Plan administrator may, but is not required to be, the Compensation Committee of the Board. The Board may at any time administer the plan, in whole or in part notwithstanding that the board has previously appointed to act as the Plan administrator.
Ranter Decl. at ex. A, § 2(1). Ranter claims that he was made plan administrator on or about May 1, 2006,
see
Ranter Decl. at ¶ 4, and this confirmed by a member of verity’s board of directors,
see
Hussain Decl. at ¶ 2, However, Jack Landers, the former plan administrator, testified that he was never informed that he had been relieved as plan administrator. Ehrman Decl. at ex. A (Deposition of Jack Landers at 18-20). In addition, Ranter never identified himself to plaintiff as the plan administrator until September 29, 2006, when Ranter sent plaintiff a letter explaining that “Jack Landers ... has recently left the company, and as such I have assumed his duties as Plan Administrator within the meaning” of the Plan. Sluimer Decl. at ex. B, HS 65. Thus, the facts are in dispute as to whether Ranter was the plan administrator. However, this dispute is of no relevance beсause, as explained below, the court finds it appropriate to
II. Plaintiffs compliance with the Plan’s notice requirement
Plaintiff argues that he is entitled to benefits because, although he was offered an alternative position after Autonomy purchased Verity, this position would have resulted in a substantial reduction in his responsibilities and thus should be considered a “constructive termination.” See Kanter Decl. at ex. A, § 2(f). Plaintiffs reliance on the constructive termination provision of the Plan poses a second threshold question: whether plaintiff is precluded from seeking benefits because he failed to comply with the notice requirements for constructive termination. The Plаn provides that a participant’s voluntary termination after a reduction in duties or responsibilities “shall not be deemed a constructive termination unless ... the Participant provides the company with written notice ... that the participant believes that an event described in this section 2(f) has occurred.” Id. Such notice must be provided within three months of the date the constructive termination occurred, and the company has 15 days after receipt of the notice to cure the conduct giving rise to the termination. Id.
The parties dispute the date the constructive termination should' be deemed to have occurred, and thus when the three-month window for plaintiff on leave should have his notice requirement, resulting in either a march 5, 2006 or marсh 29, 2006, deadline for plaintiff to give notice. In response, plaintiff contends that the event triggering his notice requirement could not have occurred until at least April 18, 2006, when plaintiff learned, for the first time, what the alternative position would entail. The Court agrees. It would have been impossible for plaintiff to notify Autonomy that he believed a constructive termination had occurred until he had been provided with sufficient detail about the alternative position to determine whether the position would result in “a substantial reduction in [his] duties or responsibilities.” Kanter Decl. at ex. A, § 2(f). the earliest date plaintiff possibly could have been in possession of this information was March 23, 2006, when Autonomy first offered plaintiff an alternative position with Neurodynamics. See Sluimer Deсl. at ex. B, HS 35-36. The March 23 letter did not provide any details about the alternative position, and defendant dqes not appear to dispute that plaintiff did not learn the necessary details until at least April 18, 2006, when plaintiff met with David Humphrey, the would-be supervisor of the position, See Sluimer Decl. at ¶ 9. Accordingly, plaintiffs constructive termination notice was due or before July 18, 2006.
Defendant also argues that even if plaintiffs notice was not due until July 18, plaintiff failed to comply with the notice requirement because his correspondence did not clearly notify defendant that he believe a constructive termination had occurred. The Court disagrees. Plaintiff first notified Kanter on April 25, 2008, via email, that “[t]he alternative position that autonomy offered to me is just not сomparable at all to my former job with Verity.” Sluimer Decl. at ex. B, HS 54. Later, in a letter sent by email and “registered delivery” on July 13, 2006, plaintiff notified the plan administrator that “I claim, per section 2(f) ‘constructive termination’ (i) due to a substantial reduction in the participant’s duties and responsibilities.”
Id.
at ex. B, HS 61. In addition, it is clear to the court that defendant received actual notice that plaintiff believed he had been constructively terminated because Kanter indicated in two separate letters to plaintiff that he did not agree that the alternative position amounted to a constructive termi
III. Determination of eligibility by the plan administrator
Applying the abuse of discretion standard, the Court must reverse the determinations of the plan administrator if they are arbitrary and capricious.
See Schikore v. BankAmerica Supplemental Ret. Plan,
Here, the plan administrator, Kanter, denied plaintiffs request for benefits under the plan for four reasons (1) plaintiff had been offered “immediate reemployment” in accordance with § 3(b)(iii) of the plan;(2) plaintiff did not suffer a “constructive termination” under § 2(f) of the plan;(3) plaintiff had failed to confirm in writing, per § 3(b)(iv), that he would be subject to a confidentiality and non-compete agreement; and (4) plaintiff had failed to execute a waiver and release generally releasing Autonomy from all claims and liabilities.
A. Immediate reemployment
The plan provides that “[a]n employee ... will not receive benefits under the Plan” if the employee “is offered immedi
Pursuant to this provision, Kanter denied plaintiff benefits because he was offered immediate reemployment that was “continuous, with uninterrupted payment of salary, commission and other benefits such as stock option vesting.” Sluimer Decl. at ex. B, HS 65; see also id. at HS 59. Defendant continues to argue that this decision was correct because plaintiff was offered the Neurodynamics position without an interruption in his salary. Plaintiff, on the other hand, argues that this job offer did not constitute immediate reemployment because he was offered employment with a third party, not Autonomy, and because he suffered a “lapse in pay” when his average monthly income declined following the acquisition of Verity. More importantly, plaintiff also argues that the immediate reemployment provision of the Plan, § 32(b)(iii), must be read in conjunction with the constructive termination provision, § 2(f), and thus that plaintiff would be ineligible for benefits under § 3(b)(iii) only if the new position constituting uninterrupted employment would not lead to a substantial reduction in duties and responsibilities.
The Court agrees with plaintiffs interpretation of the plan and therefore need not reach plaintiffs other arguments. The Plan is explicit that severance benefits will be provided in the event of a “covered termination,” Kanter Decl. at ex. A, § 3(a), which is defined a “an Involuntary Termination Without Cause or a Constructive Termination,”
id.
at ex. A, § 2(g). A constructive termination, in turn, is defined as,
inter alia,
“a substantial reduction in the participant’s duties or responsibilities” or “a change in the participant’s business location of more than 20 miles.”
Id.
at ex. A, § 2(f). Thus the Plan unambiguously provides that an employee may be eligible for benefits under the plan as the results of reassignment to a position that not comparable to the employee’s former position. Reading the immediate reemployment provision of the plan exclude any consideration of the differences between the former position and the new position, as defendants suggests, would render the constructive termination provision mere surplusage whenever an employee’s pay remains constant. It would mean that, as plaintiff suggest, plaintiff would be ineligible to receive benefits even if Autonomy had shifted his position from senior vice presidents to janitor, as long as the transition was immediate and he suffered no lapse in pay.
See
Kanter Decl. at ¶ 13 (“thus, the only criteria I was to consider in determining whether Sluimer had been offered ‘immediate reemployment’ was whether he suffered a lapse in pay.”). The Court does not believe the Plan was intended to lead to such an anomalous result, and cannot permit the constructive
B. Constructive termination
As discussed above, the Plan provides that an employee may be eligible for severance benefits when he is offered a position that would results in “a substantial reduction in the Participant’s duties or responsibilities (and not simply a change in title or reporting relationship) in effect immediately prior to the effective date of the Change in Control.” Kanter Decl. at A., § 2(f)(i). A constructive termination will not be found, however, where “the participant holds a position with duties and responsibilities of the participant prior to the effective date of the Change in Control.” Id. Kanter determined that plaintiff did not experience a constructive termination because “it is the company’s position that you did not suffer a substantial reduction in your duties or responsibilities in effect immediately prior to the effective date of the Change in Control,” Sluimer Decl. at ex. HS 65; see also id. at ex B, HS 59. Kanter also determined that the decision of the Dutch court with regard to the offered position was neither binding nor persuasive. Id. at ex. B, HS 66.
Plaintiff argues that the decision of the Dutch court should have preclusive effect on the question whether the new position offered by Autonomy resulted in a constructive termination. In support of this argument, plaintiff points to the Dutch court’s decision that “seeing the kind and the important of the job offered at Neurodynamics, Sluimer made it sufficiently convincing that from the point of view of labor law, the job cannot be considered a suitable alternative job.” Reilly Decl. at ex. H, ¶ 5. collateral estoppel, also known as issue preclusion, “bars the relitigation of issues actually adjudicated in previous litigation between the same parties.”
Clark v. Bear Stearns & Co., Inc.,
Plaintiff next argues that the Neurodynamics position would have led to a substantial reduction of plaintiffs duties and responsibilities. The Court agrees. Although Kanter determined that plaintiff would not have suffered a substantial reduction in his duties or responsibilities had taken the position offered to him, the court finds that, under heightened abuse of discretion review, this decision was unreasonable and contrary to the uncontroverted evidence. It is undisputed that at the time Autonomy acquired Verity, plaintiff was a Senior Vice President for operations in Europe, the Middle East, Africa, and Asia, managing over 100 employees including 10 country managers. Sluimer Decl. at ¶¶ 2, 8. It is also undisputed that plaintiff “was responsible for overseeing operations generating approximately $50,000,000 in revenue,” that he facets of Verity’s business, including sales, marketing, finance, administration, and technical operation. Id. In contrast, the Neurodynamics position that Kanter offered to plaintiff would have put him in charge of roughly $5,000,000 in revenue and only 15 employees. Id. at ¶ 8. The Neurodynamics position also would have involved only sales, and would have required plaintiff to report to a general manager rather than the CEO. Id. These differences are undisputed, and defendant has made no attempt — either in its briefing before this Court or in the plan administrator decision — to refute the factual differences between the two position or to explain how the two position cоuld have comparable duties and responsibilities. The Court therefore holds that plaintiff suffered a constructive termination within the meaning of § 2(f) of the Plan.
C. Condition precedent to receipt of benefits
The “exception to benefit entitlement” section of the Plan provides that an employee “will not receive benefits under the plan” if the employee “does not confirm in writing that he or she shall be subject to the Company’s Confidentiality Agreement and Non-Compete Agreement.” Kanter Deck ex. A, § 3(b)(iv). Similarly, the “Limitations on Benefits” section of the Plan provides that “[i]n order to be eligible to receive benefits under the Plan, a plan also must execute a general waiver and release in substantially the form attached hereto as Exhibit B, Exhibit C, or Exhibit D.” Id. at ex. A, § 7(a). In addition to determining that plaintiff had beеn offered immediate reemployment and that he had not suffered a constructive termination, Kanter determined that plaintiffs failure to comply with these provision meant that plaintiff was ineligible to receive benefits, See Sluimer Deck at ex. B, HS 59, 66, and it is undisputed that plaintiff never executed a general waiver and release or provided written confirmation that he would be subject to Autonomy’s confidentiality and non-compete agreements.
Defendants argues that these requirements were conditions precedent to plaintiffs participation in the plan, i.e. his eligibility to be considered for benefits. See, e.g. Defendants’ Reply at 2. Plaintiff argues the requirement were only precedent to receipt of benefits, not to participation in the Plan or a determination of eligibility, and thаt he would have fulfilled these conditions if and when he was to be awarded benefits. For the following reason, the Court holds that it was an abuse of discretion for Kanter to base his denial of eligibility on condition that not need to be fulfilled unless and until plan tiff was to be awarded benefits.
This understanding of the proper timing of these condition precedent is supported by the language of the Plan itself. The Plan provides no direct indication that these requirements are conditions precedent to an employee’s participation in the Plan, and defendant has not pointed to any such language. Instead, the plan’s language indicates that the requirements are condition to receipt of benefits. The Plan states that an employee who does not provide written confirmation regarding the confidentiality and non-compete agreements “will not receive benefits.” Kanter Decl. ex. A § 3(b) (emphasis added). Similarly, the plan states that an employee who fails to execute a general waiver and release will not “will not be eligible to receive benefits.” Id. at ex A, § 7(a) (emphasis added). 4 section 7(a) also states that the employer “shall determine the form of the required release,” indicating that plaintiff could not have signed the release until Autonomy provided him with the appropriate form, a process that presumably would take place at the time the Plan was to take effect and benefits were to be awarded, nоt prior to decision whether plaintiff was eligible for benefits. Accordingly, the court concludes that the signing of a waiver and release and the written confirmation regarding the confidentiality and non-compete agreements are conditions precedent only to plaintiff receipt, not to plaintiffs eligibility for benefits, and that Kanter abused his discretion when he relied on these conditions to reject plaintiffs benefits application before determining whether plaintiff should be awarded benefits.
Having decided that it was unnecessary for plaintiff to perform the condition of
For these reasons, the Court holds that the plan administrator abused his discretion denying plaintiff benefits, that plaintiff is eligible to receive benefits because he suffered a constructive termination under the terms of the Plan, and that plaintiff may fulfill the § 3(b)(iv) and § 7(a) conditions in еxchange for receiving benefits under the Plan.
IV. Entitlement to statutory penalties
Plaintiff also moves for summary judgement on the question whether defendant should be subject to statutory penalties for failure to furnish documents requested by plaintiff. See 29 U.S.C. §§ 1022(a), 1024(b)(4) & 1132(c)(1). the Court finds that plaintiff has not, at this time, met his burden of showing that documents that were statutory-required to be produced were not in fact produced, Plaintiffs motion for summary judgment on this ground is DENIED.
CONCLUSION
For the foregoing reasons and for good cause shown, the Court hereby GRANTS plaintiffs motion for summary judgment in part [docket No. 22] and DENIES defendant’s motion to dismiss and motion for summary judgment [Docket No. 18].
IT IS SO ORDERED.
Notes
. Defendant objected to plaintiff's a submission related to dutch court proceeding. The court takes judicial notice of the decision of the dutch court, and does not rely on the othеr documents submitted in connection with the Dutch proceeding. In any event, the Court notes that the Dutch court "decision [was] considered in reaching” Kanter’s decision to deny benefits. Sluimer Deck at ex. B, HS 66.
. Plaintiff also argues the Court owes no deference to Kanter's decision because his September 29, 2006 "decision on review” was not made within of 60 days of plaintiff's "request for review,” as required by § 11(d) of the plan ass well as by 29 C.F.R. § 2560.503-l(i)(l)(i), and thus should be "deemed denied” rather than denied following an exercise of discretion.
See Jebian v. Hewlett-Packard Co. Employee Benefits Org.,
. Two additional arguments raised by defendant should be addressed. Defendant contends that the July 13 th letter cannot constitute proper notice because the letter was not "delivered personally or deposited in the U.S. mail, First Class with postage prepaid,” as per the general notice provision of the Plan. Kanter Decl. at ex. A, § 15(a). Although plaintiff does not appear to respond to this argument the court find that the letter was appropriate sent by registered foreign mail because plaintiff resides in Monaco, and in any case defendant received the letter through the United Statеs mail at its California address. Defendants also puts forth the argument, raised for the first time in its reply brief, that plaintiff's July 13th letter could not have constituted notice because his claim for benefits had already been denied at the time and because his employment contract had already been dissolved by the Dutch court, such that Autonomy would have been unable to exercise its right to cure the alleged constructive termination. The Court does not agree, and need not reach this untimely argument.
. Part of defendant’s confusion may stem from defendants’s misunderstanding of this provision. Defendant misquotes § 7(a) as stating "in order to be eligible for benefits under the Plan....." See Defendants’ reply at 2. The plan, however, states "[i]n order to be eligible to receive benefits under the Plan.....” Kanter Decl. ex. A, § 7(a).