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Berg v. BCS Financial Corp.

February 2, 2006


The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge


Plaintiff, Wendell H. Berg ("Berg"), filed suit against Defendants BCS Financial Corporation ("BCS"), BCS Financial Corporation Appeals Committee (the "Committee"), and the Supplemental Retirement Program for Certain Employees of BCS Financial Corporation (the "Plan").*fn1 The Court has dismissed Berg's claims against BCS and the Appeals Committee. Berg's remaining claims consist of two counts against the Plan, alleging that it is liable under ERISA Section 502(a)(1)(B) for wrongly denying benefits due under the SRP. Berg and the Plan have filed cross motions for summary judgment. For the reasons set forth below, the Court and grants the Plan's motion and denies Berg's motion.


I. Legal Standard

A. Federal Rule of Civil Procedure 56

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists only if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed. 2d 202 (1986). In determining whether a genuine issue of material fact exists, the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable and justifiable inferences in favor of that party. Id. at 255. The party seeking summary judgment must establish that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). To prevail, the responding party must then come forward with facts "sufficient to establish the existence of an element essential to the party's case, and on which the party will bear the burden of proof at trial." Id. at 322. The existence of a factual dispute is not sufficient to defeat a summary judgment motion, instead the non-moving party must present definite, competent evidence to rebut the summary judgment motion. Butts v. Aurora Health Care, Inc., 387 F.3d 921, 924 (7th Cir. 2004).

These "principles apply to cross-motions for summary judgment just as they would to a garden-variety summary judgment motion." Steinberg v. Railroad Maint. & Indus. Health and Welfare Fund, No. 03 C 4539, 2004 WL 1151619, *2 (N.D. Ill. Apr. 13, 2004) (citing Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002)). That is to say, "the court is to evaluate each motion on its merits, resolving factual uncertainties and drawing all reasonable inferences against the movant." Crespo v. Unum Life Ins. Co. of Am., 294 F. Supp. 2d 980, 991 (N.D. Ill. 2003). Because "each motion must be assessed independently [ ] denial of one does not necessitate the grant of the other." Local 710 I.B.T. Pension Fund v. United Parcel Serv., Inc., No. 02 C 4420, 2004 WL 2403123, *3 (N.D. Ill. Oct. 26, 2004) (citation omitted).

B. Judicial Review of ERISA Benefits Determinations

In ERISA cases like the one here, "the scope of the district court's . . . review is governed by the rule that a denial of benefits is reviewed de novo unless the plan gives the plan administrator discretion to construe policy terms." See Hess v. Reg-Ellen Machine Tool Corp., 423 F.3d 653, 658 (7th Cir. 2005) (citing Ruttenberg v. U.S. Life Ins. Co., 413 F.3d 652, 659 (7th Cir. 2005)); see also Olander v. Bucyrus-Erie Co., 187 F.3d 599, 607 (7th Cir. 1999) (where discretionary authority exists under a "top-hat plan" like the one here, courts apply an "extremely deferential" review that examines only whether a plan administrator's determination was "arbitrary and capricious"); Perlman v. Swiss Bank Corp., 195 F.3d 975, 981 (7th Cir. 1999) ("a plan administrator's self-interest does not affect the standard of review"). Here, the Court already has determined that the SRP provides ample discretion to give rise to review under the deferential arbitrary and capricious standard. Berg v. BCS Financial Corp., 372 F. Supp. 2d 1080, 1092-94 (N.D. Ill. 2005). Under this "least demanding form of judicial review," Olander, 187 F.3d at 607, a court limits its review to the administrative record presented to the committee and "will not set aside a denial of benefits based on any reasonable interpretation of the plan." Hess, 423 F.3d at 658 (citing Mers v. Marriott Int'l Group Accidental Death and Dismemberment Plan, 144 F.3d 1014, 1021 (7th Cir.1998)); Perlman, 195 F.3d at 981-82 ("Deferential review of an administrative decision means review on the administrative record"). "This standard gives great deference to the decision of a committee which cannot be overturned unless the committee's decision was a downright unreasonable one. It is not the function of the district court to decide whether it would have reached the same conclusion as the committee or to substitute its judgment for the judgment of the committee." Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 828 (7th Cir. 2004) (citation omitted).

"But even review under this most deferential standard does not amount to a rubber stamp. The committee must articulate a rational connection between the facts found, the issue to be decided, and the choice made." Id. (citation omitted); Gallo v. Amoco Corp., 102 F.3d 918, 922 (7th Cir. 1996) ("Deferential review is not no review; deference need not be abject."). A committee, however, is not limited to the reasons it originally offered to the plan participant. Rather, "[w]hen challenged in court, the plan administrator can defend his interpretation with any arguments that bear upon its rationality. He cannot augment the administrative record with new facts bearing upon the application for benefits (for example, new facts concerning the applicant's earnings or years of service), but he is not limited to repeating what he told the applicant." Gallo, 102 F.3d at 923 (citation omitted; parentheses in original) (further noting that "[t]he district judge went astray by requiring that the plan administrator articulate the grounds for the interpretation in the course of reviewing an adverse determination on a claim for benefits, as if the plan administrator were an administrative agency."). With these standards in mind, the Court turns to the merits of the parties' motions.*fn2

II. Background

A. Parties

Berg is a resident of Chicago, Illinois and participated in the SRP, which is an unfunded benefit plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as described in Section 201(2) of ERISA. (R. 34-1, Pl.'s Am. Stmt. of Material Facts ("Pl.'s SMF") at ¶¶1-2; R. 32-1, Def.'s Stmt. of Material Facts ("Def.'s SMF") at ¶2.) BCS sponsors and administers the SRP. (R. 34-1, Pl.'s SMF at ¶1, ¶18 (stating that the National Employee Benefits Administration is the SRP's administrator).) The Court previously held that the Plan is the proper party for Berg to sue to recover benefits under the SRP. See Berg, 372 F. Supp. 2d at 1090-91.

B. Berg's Employment with BCS

On March 16, 1982, BCS hired Berg as Vice-President and General Counsel. (R. 32-1, Def.'s SMF at ¶6.) At the time of his resignation -- roughly 21 years later -- Berg served as BCS's Executive Vice-President, General Counsel and Secretary and a Director of BCS Insurance Company and BCS Life Insurance Company, which are subsidiaries of BCS. (Id. at ¶6; R. 34-1; Pl.'s SMF at ¶4.) Berg ended his employment with BCS on March 31, 2003. (R. 34-1, Pl.'s SMF at ¶5.)

For fifteen years prior to Berg's departure from BCS, Edward Baran ("Baran") served as the Chairman, President and Chief Executive Officer of BCS. (Id. at ¶6.) Baran retired from BCS on March 31, 2003, the same date as Berg's last day of employment. (R. 32-1, Def.'s SMF at¶7.) Daniel Ryan ("Ryan") succeeded Baran as BCS's President and CEO, effective March 1, 2003. (R. 34-1, Pl.'s SMF at ¶7.) BCS has employed Ryan since 1980 in various capacities including Vice President, Senior Vice President, and Executive Vice President, Underwriting/Actuarial at BCS. (Id.)

1. The Employment Agreement

When Berg resigned, his employment with BCS was governed by an Employment Agreement. (Id. at ¶5.) The Employment Agreement specified Berg's employment responsibilities, the compensation he would receive (including his base salary, incentive compensation programs, severance payments as well as miscellaneous benefits), and the retirement plans in which Berg was eligible to participate (including the SRP). (Id. at ¶8; R. 16-1, Admin. Record at FOR00222-23.)

The Employment Agreement also set forth specific events that could result in the termination of Berg's employment with BCS. (R. 34-1, Pl.'s SMF at ¶10; R. 16-1, Admin. Record at FOR00223 (providing that termination would occur upon (1) Berg's written resignation, (2) his receipt of written notice from BCS of his termination of employment, (3) his death or disability, or (4) the expiration of his employment period).) Upon termination, the amount of Berg's severance payments would vary depending on whether Section 6(c) or 6(d) of the Employment Agreement applied:

[Section 6(c)]: "Termination by the Company For Cause" shall mean the Executive's employment termination for:

(i) the Executive's violation of a significant company policy (e.g. falsification of records, sexual harassment policy, possession and/or use of illegal drugs) or the Executive's failure to perform the duties and responsibilities of his employment hereunder, which failure is willful and deliberate on the Executive's part and is not remedied by him in a reasonable period of time . . . after the Executive's receipt of written notice from the Company of such failure;

(ii) the Executive's commission of fraud, misappropriation, or embezzlement affecting the Company;

(iii) the Executive's conviction of any felony under any federal or state law;

(iv) the Executive's violation of a governmental regulation that adversely affects the financial condition of the Company; or

(v) the Executive's breach of any obligation described in Section 8 of [the Employment Agreement]. [Section 6(d)]: "Good Reason" for resignation by the Executive shall mean his resignation because of:

(i) the material reduction in the Executive's responsibilities, duties, authority, or title, or a change in the Executive's reporting responsibilities such that the Executive no longer reports to the Chief Officer of the Board . . .

(iv) a reduction in the Executive's base salary;

(v) the elimination, substantial reduction or adverse modification of the incentive compensation plans and programs applicable to the Executive; or

(vi) the Company's breach of any material term of this Agreement, including, but not limited to, the Company's failure, after due demand, to provide or to pay the executive any of the compensation or benefits due under this Agreement . . .

(R. 34-1, Pl.'s SMF at ¶¶11-12; R. 16-1, Admin. Record at FOR00228-29.) Berg executed the Employment Agreement on January 28, 1998. (R. 34-1, Pl.'s SMF at ¶5.)

2. The SRP

While employed at BCS, Berg enrolled in the SRP, a plan that BCS created for its executives in 1990. The SRP grants discretion to the Administrator in interpreting the SRP and determining benefits thereunder:

The Administrator shall administer the Supplemental Program in accordance with its terms and purposes and shall have authority to interpret the Supplemental Program, to make any necessary rules and regulations, and to determine benefits under the Supplemental Program . . .

(R. 16-1, Admin. Record at FOR00201 ¶3.2.) Likewise, the Plan Administrator maintains ample discretion under Section 2.9 of the SRP, which sets forth the conditions that can cause a forfeiture of benefits:

[T]he amounts to which a Participant. . . would be entitled under this Supplemental Program shall be forfeited if:

(i) the Participant is discharged from Employment with [BCS] for acts which, in the sole judgment of the Administrator, ...

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