The opinion of the court was delivered by: COHILL
Before us is a complaint arising under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001 et seq. ("ERISA"), in which the plaintiff, Kurt J. Kann, charges that the defendants, Keystone Resources, Inc. Profit Sharing Plan, Keystone Resources, Inc. Profit Sharing Plan Committee and Robert D. Reese and Herman Becker-Fluegel, Trustees, have violated ERISA and the terms of the Plan by refusing to pay him his accrued vested benefits totalling $261,194.23. Mr. Kann also claims that the defendants violated Section 104(b)(4) of ERISA, 29 U.S.C. § 1024(b)(4), by failing to provide him with a copy of the Trust Agreement which he requested after his application for the benefits was refused.
On July 27, 1983, plaintiff filed a complaint setting forth the aforementioned allegation and praying for various forms of equitable and legal relief. The plaintiff first seeks to enjoin the defendants from continuing to violate the Plan and ERISA and to order them to pay the benefits in which he asserts ownership. He also seeks, inter alia, punitive damages and attorneys' fees.
In addition to the complaint, Mr. Kann filed with this Court a Motion for Preliminary Injunction.
On September 22, 1983, we scheduled a hearing on plaintiff's Motion for Preliminary Injunction. Prior to taking testimony, counsel for the defendants presented a Motion to Intervene as a Plaintiff on behalf of Keystone Resources, Inc. ("Keystone") in which Keystone sought recovery of plaintiff's benefits on the basis that the corporate contributions to the Plan had been improperly and illegally authorized by plaintiff and two other executives of Keystone. We granted this motion to avoid circuity of actions.
Plaintiff then sought to withdraw his Motion for Preliminary Injunction, but still requested equitable relief. We granted the Motion to withdraw the Preliminary Injunction request and treated the hearing as a non-jury trial in equity.
Pursuant to Fed. R. Civ. P. 52(a), we now make the following Findings of Fact and Conclusions of Law.
Plaintiff, Kurt J. Kann is 61 years of age and resides in New York City. He served as an executive vice-president and member of the Board of Directors of Keystone Resources, Inc. from March, 1969 until he resigned on February 17, 1983.
Defendant, Keystone Resources, Inc. Profit Sharing Plan ("Plan") is an individual account, defined contribution pension plan sponsored by Keystone for the benefit of its non-union employees. It was created on March 1, 1972 by the then Keystone Board of Directors, Kurt Kann (plaintiff), Robert S. Kahn and Stanton P. Silmore.
Defendant, Robert Reese, is an executive vice-president of Keystone and a current trustee of the Plan.
Defendant, Herman Becker-Fluegel, is the current president and chairman of the board of Keystone. He is also a trustee of the Plan.
From March, 1969, until March, 1976, Messrs. Kann, Kahn and Silmore were the controlling shareholders, chief executive officers and the only directors of Keystone. With the authority to do so, they established the Plan, which became effective on March 1, 1972.
The Plan was established to benefit the salaried, nonbargaining unit employees of Keystone. Each year, the Trustees of the Plan are to consider the earnings or accumulated earnings of Keystone to determine whether or not contributions should be made to the Plan. If it is decided that contributions are appropriate, payments are made to the Plan for the individual employees based upon the individual's annual compensation.
The general policy is and was to contribute 15% of any member's total yearly compensation. This criteria has been followed since 1972. The number of Plan members has ranged from 50 to 200, depending on the number of salaried employees.
An employee's benefits under the Plan vest 100% after eight years of service to Keystone. Upon leaving the employ of Keystone, a vested employee has the right to payment of benefits "as soon as administratively possible." Plaintiff's Ex. 1, p. 26.
After approximately 14 years of service, plaintiff Kann left the employ of Keystone on February 17, 1983. In a letter dated February 24, 1983, addressed to Mr. Paul Bennett, the Trust Administrator at Pittsburgh National Bank ("PNB"), Mr. Kann requested his share of the Plan fund. Plaintiff's Ex. 4. Receiving no response for a period of time, Mr. Kann then called Mr. Bennett who informed him that he was not permitted to release the money. Mr. Kann then wrote to defendant, Robert D. Reese, one of the Trustees of the Plan, requesting his benefits. Plaintiff's Ex. 4a. Mr. Reese did not respond to the letter, so Mr. Kann telephoned him. In their discussion, Mr. Kann was told that Mr. Becker-Fluegel was in charge and that he made the decisions. Sometime later, the plaintiff again called Mr. Reese who stated that they had not evaluated the amount to which Mr. Kann was entitled. Still Mr. Kann heard nothing from the Trustees regarding his request. In April, 1983, Mr. Kann sought legal advice.
On April 18, 1983, plaintiff's counsel sent a letter to the Plan Administrator requesting the total amount of benefits Mr. Kann had accrued. Plaintiff's Ex. 5. He also requested a copy of the Trust Agreement. Mr. Reese responded in a letter dated May 16, 1983 in which was enclosed a Statement of Participation from PNB which revealed that, as of December 31, 1982, Mr. Kann was 100% vested and the total amount credited to him was $261,194.23. Plaintiff's Ex. 6. A copy of the Agreement was not enclosed. The plaintiff did not receive a copy until July 28, 1983.
As of this date, Mr. Kann has not received his vested accrued benefits.
The foregoing facts are not disputed by the defendants. Instead, they point to additional facts which they allege support their affirmative defense, i.e. the Company's contributions to the Plan after the fiscal year ending February 28, 1975 were not formally approved by Keystone's Board of Directors.
Therefore, those payments were not authorized, and Mr. Kann should only be entitled to the payments which had been officially authorized by the Board, the total being $52,460.00.
From 1969 until February 25, 1981, the chief executive officers of Keystone were Robert S. Kahn, President; Stanton P. Silmore, Executive Vice-President and Treasurer; and plaintiff, Kurt J. Kann, Executive Vice-President. These men retained these positions in 1972 when they also became the Trustees of the Plan. In addition to the aforementioned positions, Messrs. Kahn, Silmore and Kann were also the sole directors of Keystone until March 12, 1976.
From March, 1972 until February 28, 1975, yearly contributions to the Plan were discussed and formally approved at Board meetings, as reflected by the official minutes. After February 28, 1975, the Board of Directors, as such, never made any formal determinations as to amounts of Plan contributions, nor did they formally authorize any contributions. Messrs. Kahn, Silmore and Kann were not aware of the Plan provision which required formal board approval. However, all contributions, after that date, were nevertheless authorized and directed by Messrs. Kahn, Silmore and Kann, as Trustees of the Plan and chief executive officers of Keystone, when, after exercising their business judgment, they believed that the current or accrued earnings of Keystone justified such contributions. In addition, certain employees, including Messrs. Kahn and Silmore, made personal contributions. Mr. Silmore, acting on behalf of the Plan and the chief executive officers of Keystone, would direct the accounting department to make payments to the Plan, and he signed all of the checks. All payments to the Plan after the fiscal year ending February 28, 1975 through January 7, 1981, were made in this manner. No payments were made after January 7, 1981.
In March, 1976, the Lambert Brussels Corporation acquired approximately 80% of the common stock of Keystone. At that time, defendant, Herman Becker-Fluegel, and three other nominees of Lambert Brussels were elected directors.
Following that election, Messrs. Kahn, Silmore and Kann continued as the chief executive officers of Keystone until December, 1980, when they were advised by letter from Mr. Becker-Fluegel that their employment contracts would not be renewed.
On February 12, 1981, Messrs. Kahn, Silmore and Kann met with Mr. Becker-Fluegel, at which time Mr. Becker-Fluegel stated that he knew that the payments to the Plan had not received formal Board approval since 1975 and that this was a legal violation. However, he added that the current Board would not take any action against Messrs. Kahn, Silmore and Kann because he wanted "their continuing cooperation" in the management of the company. Trial Tr. 83.
With the belief that legal actions could be taken against them, Messrs. Kahn, Silmore and Kann agreed to cooperate. Although Mr. Silmore resigned from his position as Treasurer and Vice-President on February 25, 1981, he acted as a consultant and remained on Keystone's Board until September 17, 1981. Mr. Kahn resigned as President on February 25, 1981, however, he remained as Chairman of the Board until November 12, 1982. Mr. Becker-Fluegel assumed the presidency upon Mr. Kahn's resignation on February 25, 1981. The plaintiff remained as Vice-President and as a Director until February 17, 1983.
Concerning their trustee positions, Mr. Silmore relinquished his post on February 25, 1981, and was replaced on that date by Mr. Becker-Fluegel. Mr. Kahn resigned as trustee on November 12, 1982, and was replaced by Mr. Reese. Mr. Kann, though he never formally resigned, was replaced by Joseph R. Tomlinson.
On February 26, 1981, Mr. Silmore requested his vested profit sharing benefits totalling $312,473.94. Plaintiff's Exs. 16, 14a. He was subsequently paid on March 3, 1981. On June 2, 1982, Mr. Kahn asked for his benefits of $466,489.38, and he was paid twenty days later. Plaintiff's Exs. 17, 146. Only Mr. Kann's request was denied.
Mr. Kann's complaint alleges various violations of ERISA. Section 502 of ERISA, 29 U.S.C. § 1132(e)(1), provides that the United States district courts shall have exclusive jurisdiction over any civil action brought under ERISA. Thus, we have jurisdiction to decide the issues in this case.
A prayer for equitable relief is appropriate in ERISA actions. Section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), provides in part that:
A civil action may be brought by a participant, . . ., (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief . . .
In addition to this statutory language, courts have interpreted Congress' silence on the right to a jury trial in ERISA cases as a sign of its intention that suits for pension benefits are equitable. Wardle v. Central States, Southeast and Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir. 1980). See also, Nedd v. Thomas, 316 F. Supp. 74, 75 L.R.R.M. 2699 (M.D. Pa. 1980). As such, even though the defendants argue that this case raises only legal issues, we will proceed to analyze plaintiff's claims with equitable principles and relief in mind.
Several sections of ERISA have been cited by the plaintiff as having been violated by the defendants. To simplify our conclusions as to those various claims, we ...