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GECHT v. SAYLES

August 25, 2005.

SHELDON GECHT, Plaintiff,
v.
HELEN E.R. SAYLES, Senior Vice President of Human Resources and Administration, in her capacity as Administrator of the Liberty Mutual Severance Pay Plan, and LIBERTY MUTUAL INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: JOHN GRADY, Senior District Judge

MEMORANDUM OPINION

Before the court are defendants' motion for summary judgment and defendants' motion to strike portions of plaintiff's statement of additional material facts. For the reasons explained below, defendants' motion for summary judgment is granted in part and denied in part, and defendants' motion to strike is denied.

BACKGROUND

  Plaintiff, Sheldon Gecht, claims that defendants, Liberty Mutual Insurance Company and the Administrator of its Severance Pay Plan, Helen E.R. Sayles (collectively, "Liberty"), violated ERISA by failing to pay him the full amount of severance pay to which he was entitled and breached a contract by failing to pay him the full amount of a retention bonus. Liberty contends that plaintiff was not unlawfully denied severance benefits because its interpretation of the plan was reasonable and that there was no breach.

  The undisputed material facts are as follows. Gecht is a former employee of OneBeacon Corporation ("OneBeacon"), which was an insurance carrier that provided property and casualty insurance. As of October 2001, Gecht had been employed by OneBeacon for approximately twenty-eight years. He was eligible to receive severance benefits equal to one week of his base salary per year of service.

  In early 2001, OneBeacon and Liberty entered into an agreement that Liberty would acquire certain OneBeacon business and a significant number of OneBeacon employees. The agreement contemplated that those employees would transfer to various of Liberty's subsidiaries, including its subsidiary Indiana Insurance Company ("Indiana Insurance"), a part of Liberty's Regional Agency Markets ("RAM") business unit. On October 30, 2001, OneBeacon and Liberty entered into a Master Agreement, which governed all of the terms and conditions of the transaction. Pursuant to the Master Agreement, Liberty offered employment to some of OneBeacon's employees.

  On November 1, 2001, Liberty sent Gecht a letter offering him employment with Indiana Insurance, to begin on January 1, 2002. The offer letter stated in relevant part: It is my pleasure to offer you employment with Indiana Insurance effective January 1, 2002. If you accept this offer, the following information is applicable and also provides you with details regarding next steps.

 
As a current employee of a OneBeacon Group Company, your salary and benefits will remain the same through December 31, 2001, subject to your continued acceptable performance of the terms and conditions of your current position and title. . . .
. . .
On January 1, 2002, you will also become eligible for the various Liberty Mutual Benefits programs that you will elect within the next several weeks, including Medical, Dental, Vision, Life and Disability Plans. You will receive more information about these programs, as well as information regarding eligibility for 401K, Retirement and Flexible Time Off and how to enroll in these programs. . . .
. . .
Please review this offer and indicate that you accept or decline it by signing and returning this letter to your local Human Resource representative within the next five (5) business days.
(Letter from Richard T. Bell, President and CEO of Liberty, to Sheldon Gecht, November 1, 2001, at 1-2, Ex. A to Declaration of Debra Waldstein, Ex. 2 to Defendants' Memorandum in Support of Motion for Summary Judgment.) Gecht signed the letter on November 7, 2001.
  On January 15, 2002, Liberty sent Gecht a letter offering him a retention bonus for which he would be eligible if his job was eliminated for reasons unrelated to performance. The letter stated in pertinent part:
During your employment with the One Beacon organization, you made contributions to the company's completion of its business plans. Now that you have migrated to the Indiana Insurance organization, your efforts are part of our plans to continue servicing the OneBeacon business. I am pleased to inform you are eligible to receive a retention bonus in consideration of your work efforts during the transition period ahead.
The details regarding your eligibility for this retention bonus are outlined below.
Retention Payout
• Your retention payment will be 30% of your base pay as of 12/31/01 or $36,900.00 (before applicable taxes and withholding) subject to the terms and conditions outlined below, including continued acceptable performance of your job duties.
Retention Period
• Period #1 ends August 1, 2002. If you remain employed through this date, subject to the conditions below, you will receive 30% of your bonus, or $11,070.00 (before applicable taxes and withholding).
• Period #2 ends April 1, 2003. If you remain employed through this date, subject to the conditions below, you will receive 70% of your bonus, or $25,830.00 (before applicable taxes and withholding).
. . .
. . . If, prior to the payout date, the Company at its sole discretion, eliminates your position for any reason unrelated to your job performance, your award distribution will be paid to you on a pro-rata basis, based upon the length of time you were an active participant in the retention plan. If the Company, at its sole discretion, determines that your employment will extend beyond the end of the retention period of April 1, 2003, and your performance during the Retention Period has been satisfactory, you will be paid the Retention Payout as set forth above.
During the Retention Period, you will be eligible for employee benefits on the same basis as other employees with similar job equivalencies and length of service, including time off as eligible to be earned under the Company's FTO (Flexible Time Off) schedule. . . . . . . If you are in agreement with and accept the terms and conditions of your employment as set forth above, please sign, date, and return a copy of this letter to me no later than January 22, 2002. . . .
(Letter from Robert J. Jacobson, Vice President, Personal Lines Operations, to Sheldon Gecht ("Retention Bonus Agreement"), January 15, 2002, at 1-2, Ex. A to Declaration of Debra Waldstein, Ex. 2 to Defendants' Memorandum in Support of Motion for Summary Judgment.) Gecht signed the letter on January 21, 2002.
  On February 27, 2002, Gecht received a letter from Liberty informing him that his position was being eliminated, which read in part:
Restructuring of our Personal Lines Department will result in the elimination of your current position effective March 15, 2002. If it becomes necessary to eliminate your position prior to March 15, 2002, and you are still employed in your current position at the time of that decision, you will be paid through March 15, 2002 and receive the severance benefit listed below.
. . .
If you do not accept a new position with the Company by March 15, 2002, you will be eligible for the following:
1 — The usual benefits available to terminating employees (i.e., COBRA coverage for extending medical benefits, conversion of life coverage to an individual policy). . . .
2 — Severance pay as per the attached severance pay plan. In order to receive severance, you must work in your current position through March 15, 2002 and maintain continued good performance.
. . .
3 — You will receive a Prorated Retention Bonus, as outlined in the retention bonus agreement in the total amount of $10,701.00 (before applicable taxes). You will receive a regular salary check, as well as payment for any applicable FTO time, in the first pay cycle following March 15, 2002. Unless you notify us that you wish to receive a lump sum payment, you will receive your severance benefits in biweekly installments beginning with the first pay cycle following your last regular check. . . .
(Letter from Rob Jacobson and Teresa Daniels to Sheldon Gecht ("Separation Letter"), February 27, 2002, Ex. F to Plaintiff's Rule 56.1 Statement.)*fn1 It appears that the copy of the severance pay plan referred to as attached to the Separation Letter was not the actual plan, but an undated, single-page "Severance Payment Schedule" that states as follows:
According the [sic] Master Agreement negotiated between OneBeacon Insurance and Liberty Mutual's Regional Agency Markets Group, the following schedule of severance payments applies to those OneBeacon Insurance employees who transfer employment to the Regional Agency Markets group effective January 1, 2002.
This schedule will remain in effect through June 1, 2003.
Complete Years of Service Severance Weeks
. . .
26 1 week per year of service
. . .
(Id.)

  Shortly thereafter, Gecht received another letter stating in part as follows: On February 27th, we met with you to communicate the timing for the elimination of your position. During this meeting, you were given a letter that discussed your eligibility for severance, post-employment benefits (such as COBRA), and a pro-rated payment of the retention bonus. The letter you received correctly referenced the original letter communicating the retention bonus on January 15, 2002; unfortunately, it has come to our attention that an administrative error caused the inclusion of an incorrect amount for your pro-rated retention bonus payout.

 
The retention bonus agreement, which you accepted and signed, stated that, "If, prior to the payout date, the Company at its sole discretion, eliminates your position for any reason unrelated to your job performance, your award distribution will be paid to you on a pro-rata basis, based upon the length of time you were an active participant in the retention plan." The first retention period runs from January 15th to August 1st, 2002, which is a total of 28 weeks.
The effective date of the elimination of your position is March 15, 2002. This date is 8 weeks from the original communication date of the retention bonuses. This represents 29% of the length of the first retention period. Your pro-rated retention payment, therefore, is $3,210.30 (or 29% of the first retention payment of $11,070.00 communicated on January 15th). Since the second retention period does not commence until August 1, 2002, there will be no payment under the second retention period.
We apologize for the confusion caused by this administrative error and trust that you understand why we must comply with the originally agreed retention plan. . . .
(Letter from Robert J. Jacobson and Loralie Levenhegen, Assistant Vice President, Human Resources, to Sheldon Gecht, March 8, 2002, at 1-2, Ex. A to Declaration of Debra Waldstein, Ex. 2 to Defendants' Memorandum in Support of Motion for Summary Judgment.) On March 15, 2002, Gecht's position was eliminated, and his employment with Liberty therefore was terminated for a reason unrelated to performance. Thereafter, Gecht received a $68,596.24 lump-sum payout from Liberty, which Liberty viewed as the total amount of severance benefits that were due to Gecht (twenty-nine weeks of base salary based on twenty-nine years of service — one week severance pay for each year of service). Evidently, Gecht also received the recalculated $3,210.30 retention bonus.

  Some months later, in December 2002, Gecht initiated an administrative appeal of Liberty's calculations of his severance pay and retention bonus. Gecht contended that he should have been awarded severance pay of fifty-two weeks of base salary pursuant to Liberty's Severance Payment Plan, which he had viewed on the Web site that Liberty had provided for former OneBeacon employees transferring to Liberty (www.lrambound.com). Gecht stated that attached to the letter of termination he received on February 26, 2002, he received a document called "Attachment A," which referred to the Master Agreement negotiated between OneBeacon and Liberty that exempted former OneBeacon employees from Liberty's Severance Pay Plan and provided different severance benefits for those employees. According to Gecht, "Attachment A" had never been disclosed to him prior to his termination and had not been posted on the www.lrambound.com Web site, either. Gecht did not indicate on what basis he was appealing the bonus calculation. Liberty denied Gecht's appeal in a letter dated January 13, 2003, from Debra Waldstein, Liberty's Vice President of Employment and Employee Relations. In February 2003, Gecht appealed the first-level denial to Liberty's Plan Administrator, defendant Helen E.R. Sayles. In a letter dated May 22, 2003, Sayles denied the appeal and advised Gecht that the decision was final. We will quote from both letters denying Gecht's appeals in our discussion infra.

  Gecht filed the instant action on December 18, 2003, alleging that Liberty "arbitrarily, capriciously, and unreasonably failed and refused to pay Plaintiff's severance pay of the promised amount of 52 weeks salary under the Liberty Mutual Severance Pay Plan and has only agreed to pay 29 weeks of Plaintiff's salary as severance" and "unlawfully reduced Plaintiff's retention bonus from $10,701.00 to $3,210.30." (Complaint, ¶ 6.) ...


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