The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
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.
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
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
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
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.
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.
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,
On February 27, 2002, Gecht received a letter from Liberty
informing him that his position was being eliminated, which read
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
. . .
If you do not accept a new position with the Company
by March 15, 2002, you will be eligible for the
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,
This schedule will remain in effect through June 1,
Complete Years of Service Severance Weeks
. . .
26 1 week per year of
. . .
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
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
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.) ...