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Sotak v. Baxter Healthcare Corp.

August 20, 2010

MICHAEL J. SOTAK, PLAINTIFF,
v.
BAXTER HEALTHCARE CORPORATION; BAXTER INTERNATIONAL AND SUBSIDIARIES PENSION PLAN, DEFENDANTS.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

ELECTRONICALLY FILED

MEMORANDUM OPINION

Before the Court are the parties‟ cross-motions for summary judgment. Plaintiff brought this Employee Retirement Income Security Act ("ERISA") action seeking additional benefits under defendants‟ pension plan. Defendants calculated plaintiff‟s disability pension benefit (in part) based on plaintiff‟s 1985 earnings. Plaintiff contends that his disability pension benefit should have been calculated using his 1986 earnings.

For the reasons set forth in greater detail below, we will grant plaintiff‟s Motion for Summary Judgment and deny defendants‟ Motion for Summary Judgment.

I. FACTUAL BACKGROUND

The following relevant facts are not contested:

Plaintiff began to work for defendant Baxter‟s predecessor, Dade/American Hospital Supply Company ("AHSC"), in 1970. Doc no. 30, ¶1. From the date of his hire in 1970, plaintiff worked continuously for defendant Baxter and its predecessor, until May of 1987, when he stopped working due to health problems. Id. As a result of his health problems, plaintiff filed for Social Security Disability ("SSD") benefits and for disability benefits under a group disability plan administered by defendants. Id., at ¶10.

In 1985, Dade/AHSC merged with defendant Baxter and effective January 1, 1986, the Baxter Travenol Laboratories, Inc. and Subsidiaries Pension Plan ("the 1986 Plan") was established. Id., at ¶2. The 1986 Plan was amended and restated and the new plan became effective on January 1, 1987 ("the 1987 Plan"). Id. The 1987 Plan was revised, and the new plan became effective on January 1, 2007 ("the 2007 Plan"). Id.

Plaintiff was last employed by defendant Baxter when the 1987 Plan was effective. Id. Plaintiff reached the age of retirement (65 years old) on November 1, 2008 when the 2007 Plan was effective. Id.

Although the parties agree that plaintiff is entitled to disability benefits under one of the Plans, they disagree as to which plan (the 1987 Plan or the 2007 Plan) controls the benefit amount.

The pertinent parts of the relevant sections of the 2007 Plan are as follows:

1.3 Benefits of Participants Terminating Employment prior to Effective Date.

The benefits payable with respect to Participants whose benefits were in pay status prior to the Effective Date and who do not again become Eligible Employees will in all respects continue to be governed by the terms and conditions of the Plan as in effect at the time such benefits commenced. Except to the extent expressly provided to the contrary in an applicable supplement or elsewhere in the Plan, the Accrued Benefits, eligibility, vesting and other rights of other Participants incurring a Termination of Employment prior to the Effective Date will continue to be governed by the terms and conditions of the Plan as in effect at the time of such Termination of Employment.

2.45 "Termination of Employment" occurs when a person ceases to be an Employee. The Termination of Employment for an Employee incurring a separation from service prior to May 1, 1996, will occur as of the last day he is listed on an Employer‟s payroll.

Doc. no. 20-4, at BAT00182; and doc. no. 20-5, at BAT00203.

Based upon these two sections found in the 2007 Plan, plaintiff contends that the 1987 Plan‟s definition of "disability" applies. "Disability" is defined by the 1987 Plan as follows:

2.15 "Disability" means a mental or physical condition which renders a Participant eligible for and in actual receipt of a disability benefit under the Federal Social Security Act.

Doc. no. 20-3, at BAT00106. In addition, plaintiff contends that eligibility for, and the amount of pension benefits due and owing to him, is governed by the 1987 Plan which states in pertinent part:

Section 4.4 Disability Retirement. Subject to the limitations of 15.10 and 15.11, a Participant who is an Eligible Employee and who incurs a Disability after he has completed at least ten Years of Vesting Service shall be entitled to his Accrued Benefit determined as of his Normal Retirement Date in accordance with the following:

(a) Amount of Benefit. The Accrued Benefit payable under this Section 4.4 shall be determined by using the Participant‟s Years of Benefit Service earned at the time of his Disability plus the Years of Benefit Service that he would have earned had he continued in employment as an Eligible Employee from the time of his Disability until his Normal Retirement Date. The Accrued Benefit shall be calculated using the Participant‟s Compensation in the Plan Year preceding his Disability for the first year of Disability and for each year thereafter in order to calculate Participants Average Monthly Compensation.

Doc. no. 20-3, at BAT00120.

Defendants disagree that the definition of "Termination of Employment" is as plaintiff purports, and states that Section 2.45 must be read in its entirety, specifically the portion of Section 2.45 which reads, "For purposes of determining his Accrued Benefit under Section 4.4(a), a Disabled Participant‟s Termination Date is his Normal Retirement Date, or if earlier, the date he elects to commence his Disability Retirement under Section 4.4(b)." Doc. no. 20-5, at BAT00203.

In addition, defendants contend "disability" is not controlled by the 1987 Plan; to the contrary, defendants contend the term "disability" should be defined by the 2007 Plan which indicates as follows:

2.14 "Disability" means a mental or physical condition which occurs prior to a Participant‟s Termination of Employment which entitles the Participant to disability benefits under the federal Social Security Act. To qualify as a Disability, the Participant must be determined to be disabled by the Social Security Administration as of a date which falls on or before his Termination of Employment (determined without regard to Section 2.45(b)).

Doc. no. 20-4, at BAT00194. Defendants also disagree that the 1987 Plan governs plaintiff‟s eligibility for, and the amount of pension benefits due and owing to him; instead, defendants contend plaintiff‟s eligibility for, and amounts due and owing to him, are governed by the 2007 Plan. Defendants rely on several sections in the 2007 Plan to reach this conclusion, and those sections are set forth herein in pertinent part:

4.4 Disability Retirement. A Participant is entitled to a Disability Pension Benefit if he incurs a termination of ...


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