WARREN v. COCHRANE

235 F. Supp.2d 1 (2002) | Cited 0 times | D. Maine | December 23, 2002

FINDINGS OF FACT AND CONCLUSIONS OF LAW1

Former Guy Gannett Publishing Company employee Harold Warren filed suiton December 12, 2001, alleging that four named defendants had deprivedhim of a pension-benefit increase in violation of the Employee RetirementIncome Security Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001,et seq. See Complaint (Docket No. 1).

Defendants Charles C. Cochrane, Blethen Maine Newspapers, Inc. PensionPlan and Blethen Maine Newspapers, Inc. (collectively, "BlethenDefendants") filed a motion for summary judgment in their favor, as diddefendant Wells Fargo Master Trust & Custody ("Wells Fargo"). SeeBlethen Defendants' Motion for Summary Judgment, etc. (Docket No. 10);Defendant Well [sic] Fargo Bank Minnesota, N.A.'s Motion for SummaryJudgment, etc. (Docket No. 13). Wells Fargo's motion was granted, whilethat of the Blethen Defendants was denied. See Recommended Decision onDefendants' Motions for Summary Judgment (Docket No. 22); Order Affirmingthe Recommended Decision of the Magistrate Judge (Docket No. 29).

Subsequently the parties consented to have me conduct trial and allother proceedings in this matter, see Consent to a Magistrate Judge(Docket No. 34), and a bench trial was held before me as to Warren'sERISA claim against the Blethen Defendants on Monday, December 16, 2002.The parties stipulated to the admissibility of all exhibits offered(Plaintiff's Exhs. 1-12 and Defendants' Exhs. 1-4), and all accordinglywere admitted.2 On the basis of the following findings of fact andconclusions of law, I now rule in Warren's favor.

I. Findings of Fact

1. Warren, who was born on June 18, 1933, became an employee of the GuyGannett Publishing Company, later known as Guy Gannett Communications(either, "Gannett"), in 1964. Stipulations (Docket No. 31) ¶¶ 1-2.

2. Warren is and was at all relevant times a qualified and vestedparticipant in the Guy Gannett Retirement Plan ("GGRP"), as amended andrestated, that became effective on January 1, 1984 ("GGRP84"). Id.¶ 3. His GGRP "participation date," so-called, is July 1, 1967.Id. ¶ 4.

3. Warren retired on September 1, 1988 at age 55, after twenty-fouryears of employment with Gannett. Id. ¶ 5. He is a "retiredparticipant" as defined under Article 1, paragraph 1.03(ee) of theGGRP84. Id. ¶ 6.3

4. At the time of his retirement, Warren was employed in Gannett'sDivision 42 and was not a member of the Portland Typographical Union,Local 66, also known as PTU-66. Id. ¶ 7.

5. Warren elected to retire early upon attaining age 55, an electionpermitted pursuant to the GGRP84. Id. ¶ 8. He was given the choiceto begin receiving his monthly pension benefit immediately or defercollecting it. Id. ¶ 9. He elected the deferred-payment option,which allowed him to receive a highly monthly benefit than he would havereceived had he chosen the immediate-payment option. Id. ¶ 10.

6. Prior to electing to defer his retirement benefit, Warren wasinformed that he would receive approximately $250.00 per month if hechose the deferred-payment option. Id. ¶ 11.

7. The GGRP84 provided the Gannett Board of Directors the authority toamend the plan through the following provision:

15.01 Right to Amend

The Employer reserves the right at any time or times to modify or amend the Plan by resolution of it's [sic] Board of Directors setting forth such modification or amendment; provided, however, that (i) the Board may delegate such authority to the Committee with respect to a modification or amendment which is required to comply with the laws and regulations governing this plan or any modification or amendment which is administrative in nature . . . .

Id. ¶ 12.

8. After Warren's retirement, on September 25, 1990, the Gannett Boardof Directors ("Board") voted unanimously to authorize management toimprove pension benefits for eligible retired employees under theGGRP84, effective January 1, 1991 ("1991 Increase"). Id. ¶ 13.

9. The official minutes of the September 25, 1990 meeting, recordedby corporate secretary Rachel M. Beaudoin and approved at a subsequentBoard meeting, state that John R. DiMatteo (who was then Gannettpresident) "explained a series of related motions," including one "toimprove benefits for both active and retired employees in the PortlandPension Plan, since those benefits have not been improved in seven yearsand to make the pension plan more attractive for employees consideringearly retirement." Plaintiff's Exh. 1 at 3-4. It was Beaudoin'spractice to include all significant discussion in her minutes.

10. The minutes reflect that the Board unanimously voted to approve thefollowing resolution ("Resolution"):

TO AUTHORIZE MANAGEMENT TO IMPROVE THE GUY GANNETT RETIREMENT PLAN PENSION BENEFITS FOR RETIRED EMPLOYEES (AS OF DECEMBER 31, 1990) EFFECTIVE JANUARY 1, 1991, IN ACCORDANCE WITH THE SCHEDULE DESCRIBED IN THE VOTE IMMEDIATELY PRECEDING.

Id. at 5. The "schedule described in the vote immediately preceding"(pertaining to active employees) provided for a 12 percent increase forthose with "participation dates" prior to January 2, 1978. Id. at 4.

11. James Baker, who was employed by Gannett from November 1975 toDecember 1999 in the capacity of treasurer and vice-president of finance— to wit, chief financial officer — drafted the two Boardresolutions providing the 1991 Increase to employees and retirees.

12. Baker viewed GGRP participants as consisting of three groups: (i)activeemployees, (ii) those who had left and deferred taking benefits,known internally as either "deferred vesteds" or "terminated vesteds,"and (iii) retirees receiving benefits.

13. Gannett historically had increased pension benefits from time totime to counter the effects of inflation. In so doing, prior to the 1991Increase, it had never categorically excluded any of these three groupsfrom pension-benefit upgrades. However, with respect to the 1991Increase, Baker and Gannett Vice-President for Human Resources LarrySiegel evaluated the impact of excluding different groups, with technicalassistance from Benefits Manager Deborah Mahoney and Gannett's outsidebenefits — consulting firm, Watson Wyatt & Company ("WatsonWyatt").4

14. Ultimately, Baker and Siegel, in consultation with DiMatteo,embraced the idea of excluding the deferred-vested group fromparticipation in the upgrade. According to Baker, exclusion of thedeferred-vested group from the 1991 Increase was considered consistentwith a conscious decision made by Gannett in 1984 (in the wake of aprevious pension-benefit increase) to begin shifting responsibility forprotection against inflation from the company to employees. Many in thedeferred-vested group had gone onto other jobs and were covered by otherretirement plans, as a result of which they were considered able toprotect themselves from the effects of inflation.

15. On the afternoon prior to the September 25, 1990 Board meeting,Baker (as was his custom) went over agenda items with the so-called"Executive Compensation" or "Outside Directors" Committee, whichconsisted of the four to six "outside," or non-Gannett-family, members ofthe Gannett Board.5 No minutes were kept of such meetings. Bakerrecalls that he presented management's pension-upgrade proposal, thatmanagement's intent to exclude the deferred-vested group was made clearand that those outside directors present agreed with the proposal. Alsoin attendance were DiMatteo, Gannett Newspapers Division Vice-PresidentJohn Hooper and possibly Portland Newspapers General Manager SteveBraver.

16. Baker also recalls that, in presenting the Resolution to the Boardon September 25, 1990, DiMatteo expressly explained that thedeferred-vested group was to be excluded.

17. In the wake of the September 25, 1990 Board meeting Gannettexecutives issued several memoranda announcing or commenting on the 1991Increase.

18. In a memorandum dated October 17, 1990, addressed to a distributionlist that included Braver, DiMatteo, Baker and Siegel, Hooper stated inpart:

As you are aware, it was our plan to improve the GGPC pension plan for all retirees and actives, effective January 1, 1991. Our tradition has been to make periodic improvements, put them in place at the same time for everyone, and merely inform the Union we were doing so. Current timing has been driven by design and announcement of an early retirement program for Portland, although it's fair to say an improvement has been in the works and would have been announced in 1991 in any case. The last improvement was seven years ago.

Here's the issue. We may want to reconsider our tradition of providing this upgrade simultaneously for everyone currently in the plan. . . .

Plaintiff's Exh. 12 (emphasis in original). Hooper had attended theSeptember 25, 1990 Board meeting, see Plaintiff's Exh. 1 at 1, as well asthe Outside Directors Committee meeting the day prior.

19. In November 1990 Warren received a memorandum dated November 2,1990 from Braver to "All Portland Newspapers Employees (except members ofPTU-66)," stating among other things:

I have two important items to share with you.

First, the Company will be improving its retirement plan for eligible employees and retirees by as much as 12% effective January 1, 1991. A detailed letter from Mrs. Hawley will follow in the very near future. This increase will be funded out of monies already set aside in our retirement plan fund.

Plaintiff's Exh. 2.6 Braver was present for the discussion and voteon the 1991 Increase at the September 25, 1990 board meeting, seePlaintiff's Exh. 1 at 1, 5, and may have been present at the OutsideDirectors Committee meeting the day prior.

20. By letter dated November 8, 1990 to "Retirees," Jean GannettHawley, publisher and chairman of the Board, wrote:

I am pleased to announce that effective January 1, 1991, benefits under the Guy Gannett Retirement Plan will be increased for retirees. The increase does not apply to retired employees of the Portland Typographical Union in accordance with prior agreement between the Company and PTU, Local 66.

In spite of declining markets locally and nationally, the decision to upgrade benefits has been made consistent with our past practice of increasing benefits from time to time to help counter the effects of inflation.

The benefit increase will be reflected in your January pension check.Plaintiff's Exh. 3. Hawley presided over the September 25, 1990 Boardmeeting. See Plaintiff's Exh. 1 at 1. Warren did not receive thisletter in the mail; however, he was given a copy of it by a formerco-worker.

21. As of January 1, 1991, the GGRP84 was amended to incorporate theBoard-approved benefit increase. Stipulations ¶ 14. The plan, asamended and restated (the "GGRP92"), contained the following provisionrelated to the 1991 Increase:

4.08 1991 RETIREE INCREASE FOR GANNETT PARTICIPANTS

Effective January 1, 1991, the monthly benefit payable to each Retired Gannett Participant who is in pay status as of December 31, 1990, except for an individual whose last employment covered by the Plan was as an Employee of Division 41, shall be increased by the product of:

(a) 1%; and

(b) the lesser of 12, and the number of complete calendar years which elapsed between the date the Retired Gannett Participant first became a Participant and January 1, 1990.

Id. ¶ 16.

22. Watson Wyatt drafted the language of section 4.08. Both Baker andMahoney considered it consistent with management's proposal.

23. The language of section 4.08 of the GGRP requires retirees to havebeen in pay status to benefit from the 1991 Increase, id. ¶ 17— in other words, actually drawing retirement benefits.

24. Warren was not in pay status as of December 31, 1990 or January 1,1991. Id. ¶ 19. He began receiving his monthly pension benefits onJuly 1, 1995. Id. ¶ 20. The amount of his monthly benefit was$250.53 — the amount Gannett had told him he would be getting priorto his election of the deferred-payment option at the time of hisretirement. Id. ¶ 21. His monthly benefit amount has not changedsince July 1, 1995. Id. ¶ 22.

25. Warren was aware at the time he received his first monthly pensionbenefit on July 1, 1995 that it did not include the 1991 increase towhich he believed he was entitled. Id. ¶ 23. In July 1997, duringa conversation with Bonnie Campbell, Gannett's benefits coordinator,regarding a mistake in his health insurance, Warren mentioned that hismonthly benefit did not include the 1991 increase despite his belief thathe was entitled to it. Id. ¶ 24.

26. By letter from Campbell dated July 21, 1997, Gannett informedWarren that his request for an increase in benefits was denied because hewas not in pay status as required by the terms of the GGRP92. Id.¶ 26. By letter dated July 28, 1997 from Mahoney, Gannett'scorporate benefits manager, Gannett reiterated to Warren that his requestfor an increase in his monthly pension benefit was denied because he wasnot in pay status as required by the terms of the GGRP92. Id. ¶ 27.

27. In or about November 1998 Blethen Maine Newspapers, Inc. succeededto and assumed certain of Gannett's responsibilities under the GGRP84 andGGRP92. Id. ¶ 28. The Blethen Maine Newspapers, Inc. Pension Plan("BMNI Plan") is the successor defined-benefit plan to the GGRP84 andGGRP92. Id.

28. Blethen Maine Newspapers, Inc. is a corporation organized under thelaws of the State of Washington authorized to do business in the State ofMaine with offices at 390 Congress Street, Portland, Maine, and is thePlan Administrator of the BMNI Plan, with overall responsibility for itsadministration and operation. Id. ¶ 29.

29. The Gannett Board of Directors that authorized the pension-benefitupgrade on September 25, 1990 did not expressly limit, in writing orotherwise, the pension-benefit upgrade to eligible retirees in a paystatus as of December 31, 1990. Id. ¶ 31. Nor did it expresslyauthorize in writing the inclusion of the "in pay status" language inparagraph 4.08 of the GGRP92. Id. ¶ 32. Baker, drafter of the Boardresolutions, was not at the time familiar with the precise "in paystatus" language (which later was authored by Watson Wyatt).

30. The "in pay status" language contained in paragraph 4.08 of theGGRP92 was not required to comply with the laws and regulations governingthe plan. Id. ¶ 35.

II. Conclusions of Law

1. Prior to bringing this action, Warren exhausted his administrativeremedies as provided under the relevant provisions of the GGRP84, GGRP92and the BMNI Plan. Id. ¶ 33.

2. Warren's claims are not barred, in whole or in part, by applicablestatutes of limitations. Id. ¶ 34.

3. "[I]nformal or unauthorized modification of pension plans isimpermissible under ERISA[.]" Dall v. Chinet Co., 33 F. Supp.2d 26, 42(D.Me. 1998), aff'd, 201 F.3d 426 (1st Cir. 1999) (citation and internalquotation marks omitted); see also, e.g., Curtiss-Wright Corp. v.Schoonejongen, 514 U.S. 73, 85 (1995) ("ERISA . . . follows standardtrust law principles in dictating only that whatever level of specificitya company ultimately chooses, in an amendment procedure or elsewhere, itis bound to that level.").

4. In an ERISA case challenging the validity of a plan amendment, aplaintiff bears the burden of demonstrating not only the invalidity of theamendment but also, for purposes of entitlement to substantive reliefpursuant to 29 U.S.C. § 1132(a), harm or prejudice flowing therefrom.See, e.g., Chinet, 33 F. Supp.2d at 45-47. Warren meets this burden.

5. In accordance with section 15.01 of the GGRP84, which was in effectat the time of the September 25, 1990 Board meeting, the Gannett Boardalone was authorized to exclude "retirees not yet in pay status as ofDecember 31, 1990" from the 1991 Increase.7 Further, it could do soonly "by resolution . . . setting forth such modification oramendment[.]" See Stipulations ¶ 12.

6. Regardless whether Baker and/or DiMatteo explained the exclusion ofthe so-called "deferred vested" group to the Board,8 nothing in theResolution "sets forth" either the language ultimately incorporated intosection 4.08 (excluding retirees not yet in pay status as of December31, 1990) or any other language hinting that this group was to beexcluded.9

7. For that reason, Warren meets his burden of demonstrating that thelanguage "who is in pay status as of December 31, 1990," contained insection 4.08 of the GGRP as amended and restated (i.e., the GGRP92) andcarried forward into the BMNI Plan, was not adopted in accordance withGannett's own plan-amendment procedures, as required by ERISA, andaccordingly is invalid.

8. But for the unauthorized incorporation of this "in-pay status"language into section 4.08 of the GGRP92, Warren would have beenconsidered eligible for, and would have begun receiving as of July 1,1995, the 12 percent pension-benefit increase authorized for persons withparticipation dates prior to January 1, 1978. He therefore meets hisburden of demonstrating harm or prejudice entitling him to substantiverelief pursuant to 29 U.S.C. § 1132(a).

9. In light of the foregoing, judgment is entered in favor of Warrenand against the Blethen Defendants as follows:

A. That Warren be, and he hereby is, awarded a 12 percent increase inhis pension-benefit amount retroactive to July 1, 1995 (thereby affordinghim the benefit increase denied on the basis of the plan language that Itoday hold to have been invalid and unauthorized); and

B. That Warren be, and he hereby is, awarded prejudgment interestcomputed in accordance with 28 U.S.C. § 1961(a) from the date offiling of the instant action through the date of judgment.10

So ordered.

2 I again commend counsel for the care taken in preparing this casefor trial.

3 The GGRP84 defines a "Retired Participant" as "a former Participantwho has retired under the Plan and has become eligible to receivebenefits under the Plan." Plaintiff's Exh. 6 at 4.

4 Baker had a close working relationship, on this and other matters,with both Siegel and Mahoney.

5 The Board of Gannett, which was a private corporation, includedapproximately six members of the Gannett family.

6 Although, from a financial perspective, 1990-91 were the worstyears Gannett had ever experienced, the pension-benefit increase wasfunded entirely from excess monies within the plan. Even had the"deferred vested" group been included, excess monies would have remained(although such monies were used for a variety of purposes, including as ahedge against decreases in market value).

7 Section 15.01 authorized the Board to delegate plan-amendmentauthority only with respect to modifications (i) required to comply withlaw or (ii) administrative in nature. The parties have stipulated thatthe 1991 increase was not required to comply with law; and, as defensecounsel acknowledged during closing argument, a decision to exclude anentire class of beneficiaries from a slated increase cannot reasonably bedescribed as "administrative" in nature.

8 Contemporaneous memoranda suggest that, whatever was said orexplained at the Board and Outside Directors Committee meetings, thosepresent did not come away with a monolithic understanding that retireesnot in pay status as of December 31, 1990 were to be excluded. Forexample, the memorandum of Hooper — who was present at bothmeetings — describes the benefits increase as applying to "all"retirees, consistent with past practice of affording such upgrades to"everyone currently in the plan." Plaintiff's Exh. 12. And, althoughHawley's memorandum to "retirees" was not sent to Warren and referred toan increase in upcoming January checks, it (i) expressly mentionedexclusion of the PTU-66 but no other exclusion and (ii) described the1991 Increase as "consistent with our past practice of increasingbenefits from time to time to help counter the effects of inflation."Plaintiff's Exh. 3.

9 To the contrary, the Resolution on its face suggests that thisgroup was to be included. In their trial brief, the Blethen Defendantsargued that "if, as Mr. Warren suggests, the Gannett Board's September25, 1990 resolution increasing pension benefits was meant to apply to allpersons who were retirees in the common parlance, the parenthetical phrase`(as of December 31, 1990)' following `for retired employees' would besuperfluous." Blethen Defendants' Trial Brief ("Defendants' Brief")(Docket No. 32) at 7-8. However, during closing argument, counsel forthe Blethen Defendants acknowledged that the phrase was not superfluousat the time the Board acted in September 1990 (and thus raises no facialambiguity) inasmuch as the Board logically would have had to delineate acutoff date (December 1990) by which persons would have to be "retired"— whether in pay status or not — to qualify for the benefitsincrease effective January 1, 1991. In the absence of the parenthetical"(as of December 31, 1990)," the cutoff date would have been September25, 1990, the date on which the Resolution was adopted.

10 I do not here address Warren's request for attorney fees andcosts, see Complaint at 14, the subject matter of which is covered inLocal Rules 54.2 and 54.3. I further note that, although the Complaintseeks "injunctive relief," evidently in the form of an order that theBlethen Defendants strike the "in pay status" language from section 4.08of the GGRP84, see Complaint at 14, I am confident that the defendantswill understand that, for purposes of Warren's entitlement to theincrease he seeks (both retroactively and henceforth), section 4.08 ofthe GGRP84 is to be treated as though it did not contain the "in-paystatus" language.

1. Pursuant to 28 U.S.C. § 636(c), the parties have consented tohave United States Magistrate Judge David M. Cohen conduct allproceedings in this case, including trial, and to order the entry ofjudgment.

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