Paul Sikora v. UPMC

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 17-1288
_____________
PAUL F. SIKORA,
Appellant
v.
UPMC, a Pennsylvania non-stock non-profit corporation
a/k/a UPMC Health System;
UPMC HEALTH SYSTEM AND AFFILIATES NON
QUALIFIED SUPPLEMENTAL BENEFIT PLAN
_____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
W.D. Pa. No. 2-12-cv-01860
District Judge: Honorable Mark R. Hornak
_____________
Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
September 25, 2017
Before: SMITH, Chief Judge, McKEE, and RESTREPO,
Circuit Judges
(Filed: November 24, 2017)
Michael E. Hoover
Diefenderfer Hoover McKenna & Wood
310 Grant Street
Suite 1420
Pittsburgh, PA 15219
Counsel for Appellant
John J. Myers
Eckert Seamans Cherin & Mellott
600 Grant Street
44th Floor, US Steel Tower
Pittsburgh, PA 15219
Counsel for Appellees
_____________________
OPINION of the COURT
_____________________
SMITH, Chief Judge.
A so-called “top-hat” plan is “a plan which is
unfunded and is maintained by an employer primarily for
the purpose of providing deferred compensation for a
select group of management or highly compensated
employees.” 29 U.S.C. §§ 1101(a)(1), 1051(2),
1081(a)(3). These plans need not comply with many of
the substantive provisions of the Employee Retirement
2
Income Security Act of 1974 (“ERISA”). When Paul F.
Sikora sought to recover pension benefits under ERISA,
the District Court held that he was not entitled to obtain
such relief because he sought benefits under a top-hat
plan. Sikora appeals, arguing that the District Court
should have required Defendants, the University of
Pittsburgh Medical Center and its Health System and
Affiliates Non-Qualified Supplemental Benefit Plan
(collectively, “UMPC”), to prove that plan participants
had bargaining power before concluding that he
participated in a top-hat plan.1 Plan participant
bargaining power, though, is not a substantive element of
a top-hat plan. We will therefore affirm the District
Court’s judgment.
I
1
While Sikora’s notice of appeal also references the
District Court’s entry of summary judgment on his
contract claim, he makes no argument in support of that
claim in his briefing. We therefore deem it abandoned.
See New Jersey v. Merrill Lynch & Co., 640 F.3d 545,
547 n.3 (3d Cir. 2011) (quoting Kost v. Kozakiewicz, 1
F.3d 176, 182 (3d Cir. 1993) (“Failure to set forth an
issue on appeal and present arguments in support of that
issue in one’s opening brief generally amounts to
‘abandon[ment] and waive[r of] that issue . . . and it need
not be addressed by the court of appeals.’”) (alterations
in original).
3
Sikora is a former employee of UPMC. He
became the Vice President of IT Transformation & IT
Infrastructure Services in 2005. Following that position
change, Sikora became a participant in UPMC’s Non-
Qualified Supplemental Benefit Plan (“the Plan”) in
2008. Sikora’s participation in the Plan ended upon his
voluntary termination from UPMC in 2011. Sikora
applied for benefits under the Plan following his
voluntary termination but was denied benefits for reasons
unrelated to the current appeal.
Sikora filed suit against UPMC in the United
States District Court for the Western District of
Pennsylvania in December 2012. During discovery,
UPMC and Sikora each filed motions for partial
summary judgment. UPMC argued that the Plan was a
top-hat plan, and, because three of Sikora’s claims relied
on ERISA provisions inapplicable to top-hat plans, those
claims should be dismissed. Concluding that the Plan
was a top-hat plan, the District Court granted UPMC’s
partial summary judgment motion and denied Sikora’s
motion. Following completion of discovery, UPMC filed
a motion for summary judgment as to Sikora’s remaining
non-ERISA claim, which the District Court granted.
Sikora timely appealed.
II
4
The District Court exercised jurisdiction pursuant
to 28 U.S.C. § 1331. We have appellate jurisdiction
pursuant to 28 U.S.C. § 1291.
We exercise plenary review over the District
Court’s decision to grant summary judgment, and so we
apply the same standard of review the District Court
should apply. See Willis v. UPMC Children’s Hosp. of
Pittsburgh, 808 F.3d 638, 643 (3d Cir. 2015). We review
questions of law de novo. See Samaroo v. Samaroo, 193
F.3d 185, 189 (3d Cir. 1999) (“We must review legal
conclusions and questions of statutory construction de
novo.”).
III
ERISA defines top-hat plans as those that are
“unfunded and . . . maintained by an employer primarily
for the purpose of providing deferred compensation for a
select group of management or highly compensated
employees.” 29 U.S.C. §§ 1101(a)(1), 1051(2),
1081(a)(3). This Court previously described the top-hat
plan derived from this statutory definition as having three
elements: (1) “the plan [must] be unfunded”; (2) it must
“exhibit the required purpose”; and (3) “it must also
cover a ‘select group’ of employees.” In re New Valley
Corp., 89 F.3d 143, 148 (3d Cir. 1996). Sikora has the
burden of showing that the Plan is not a top-hat plan to
obtain relief under ERISA. See Pane v. RCA Corp., 868
F.2d 631, 637 (3d Cir. 1989) (rejecting contention that a
5
plan’s status as a top-hat plan is an affirmative defense
and concluding that § 1101(a)(1) “does not provide for an
exemption from liability under section 502(a)” but
instead “merely provides the legal standard by which [a
defendant’s] section 502(a) liability is to be
determined”).2
Sikora does not dispute that the Plan is both
unfunded and maintained by UPMC for the statutorily
prescribed purpose. Sikora takes issue only with the
third element of the test laid out in In re New Valley
Corp., which requires that the Plan “cover a ‘select
group’ of employees.” In re New Valley Corp., 89 F.3d
at 148. This Court has previously described this “select
group” element as having “both quantitative and
qualitative restrictions. In number, the plan must cover
relatively few employees. In character, the plan must
2
Sikora contends that UPMC waived reliance on Pane
by assuming the burden of proving the Plan’s top-hat
status in its opening summary judgment brief. Because
UPMC did (albeit belatedly) raise the issue before the
District Court, and the District Court did not conclude the
issue of burden was waived (instead providing Sikora
with the opportunity to respond to UPMC’s reliance on
Pane), we too will not deem the issue waived. Even if
UPMC had the burden of proving the Plan’s top-hat
status, it has done so for the reasons explained infra.
6
cover only high level employees.” Id. Applying both the
quantitative and qualitative restrictions of the “select
group” element reveals that the Plan qualifies as a top-hat
plan.
Turning first to the quantitative restriction, the
Plan covers relatively few employees. During Sikora’s
participation in the Plan, approximately 0.1% of the
entire UPMC workforce was a participant in the Plan.
See Pane, 868 F.2d at 637 (holding that a plan-participant
group comprising less than one-tenth of one percent of
the workforce was numerically select); see also
Alexander v. Brigham & Women’s Physicians Org., Inc.,
513 F.3d 37, 46 (1st Cir. 2008) (concluding that a plan’s
participants comprising only 8.7% of entire workforce
was select); Demery v. Extebank Deferred Comp. Plan
(B), 216 F.3d 283, 289 (2d Cir. 2000) (stating that a
plan’s participants comprising 15.34% of the relevant
workforce was sufficiently select). The quantitative
restriction of the “select group” element is met.
As to the qualitative restriction, although the
relevant statutory language only requires participants to
be members of a select group of management or highly
compensated employees, here the Plan covers high-level
employees who are both a select group of management
and highly compensated employees. 29 U.S.C.
§§ 1101(a)(1), 1051(2), 1081(a)(3) (requiring “a select
group of management or highly compensated
employees” (emphasis added)). UPMC allowed only
7
members of management to participate in the Plan.
Sikora speculates that some Plan participants may have
had duties rendering them “non-management,” but that
assertion is without record support. Even if Sikora’s
assertion is true, the Plan participants were also highly
compensated. During Sikora’s participation in the Plan,
the lowest paid Plan participant earned an annual salary
of over $200,000.3 Between 2007 and 2011, the average
annual salary of Plan participants hovered around
$500,000, as compared to the average annual salary of all
UPMC employees, which was around $55,000. See
Alexander, 513 F.3d at 46 (observing that plan
participants earned an average income of $440,000,
“more than five times the average income” of the
employer’s workforce and concluding that the question
of whether plan participants were highly compensated
was “open-and-shut” in “relative and absolute terms” and
“nowhere near the gray area”); Demery, 216 F.3d at 289
(citing evidence that “the average salary of plan
participants was more than double that of the average
salary of all . . . employees” to conclude that plan
participants were highly compensated). The Plan
participants were indisputably select members of
management, and were highly compensated employees.
The qualitative restriction of the “select group” element
3
In 2008, the lowest paid participant earned only
$80,000, but that employee was UPMC’s new CEO, who
earned that amount in only one month of work.
8
is therefore satisfied. Given that both the quantitative and
qualitative restrictions of the “select group” element have
been satisfied, we hold that the Plan in question qualifies
as a top-hat plan.
IV
Although both the quantitative and qualitative
restrictions of the “select group” element have been
satisfied, Sikora nonetheless argues that the Plan does not
cover a “select group” because there is no evidence
regarding the “bargaining power” of the Plan
participants. Sikora’s argument would require a district
court to inquire not only into the qualitative and
quantitative restrictions discussed above, but also into the
presence of “bargaining power” before concluding that a
particular plan is a top-hat plan. The argument is
unpersuasive.
Sikora cites to no text in ERISA nor to any
legislative history to support his argument. Instead, he
relies on a paragraph from a 1990 Department of Labor
(“DOL”) opinion letter. The DOL opinion letter states in
relevant part:
It is the view of the Department that in
providing relief for “top hat” plans from the
broad remedial provisions of ERISA,
Congress recognized that certain
individuals, by virtue of their position or
9
compensation level, have the ability to affect
or substantially influence, through
negotiation or otherwise, the design and
operation of their deferred compensation
plan, taking into consideration any risks
attendant thereto, and, therefore, would not
need the substantive rights and protections
of Title I.
U.S. Dep’t of Labor, Pension & Welfare Benefit
Programs, Opinion Letter 90-14A at 2 (May 8, 1990).
In interpreting this opinion letter, three of our
sister circuits have inquired into participants’ bargaining
power before determining whether a particular plan
qualifies as a top-hat plan. In Bakri v. Venture Mfg. Co.,
the Sixth Circuit favorably quoted a district court opinion
highlighting the importance of participants engaging in
“direct negotiations with the employer.” Bakri v.
Venture Mfg. Co., 473 F.3d 677, 678-79 (6th Cir. 2007)
(quoting Carrabba v. Randalls Food Markets, Inc., 38 F.
Supp. 2d 468, 478 (N.D. Tex. 1999)). Quoting the
district court’s opinion, the Bakri court noted that “the
‘select group’ test is whether the members of the group
have positions with the employer of such influence that
they can protect their retirement and deferred
compensation expectations by direct negotiations with
the employer.” Id. Writing that the plan in question
“consisted of employees . . . who had no supervisory,
policy making, or executive responsibility, and had little
10
ability to negotiate pension, pay or bonus compensation”
the Sixth Circuit concluded that the “select group”
element had not been satisfied. Id. at 680.
In Demery v. Extebank Deferred Comp. Plan (B),
the Second Circuit similarly inquired into participants’
ability to negotiate. As the Second Circuit wrote in that
case:
Plaintiffs also claim that the participants in
Plan B did not have the ability to negotiate
the terms of the Plan. Ability to negotiate is
an important component of top hat plans . . .
. We do not think plaintiffs have proffered
either direct or circumstantial evidence
suggesting an absence of bargaining power
sufficient to raise a question of fact on this
issue.
Demery, 216 F.3d at 289.
Finally, in Duggan v. Hobbs, the Ninth Circuit
wrote that “the ‘select group’ requirement includes more
than a mere statistical analysis.” Duggan v. Hobbs, 99
F.3d 307, 312 (9th Cir. 1996). Citing to the DOL opinion
letter, the Duggan court noted that the “Department of
Labor has explained that the top-hat exception was
intended to apply to employees who ‘by virtue of their
position or compensation level, have the ability to affect
or substantially influence, through negotiation or
11
otherwise, the design and operation of their deferred
compensation plan.’” Id. at 312-13 (quoting U.S. Dep’t
of Labor, Pension & Welfare Benefit Programs, Opinion
Letter 90-14A at 2 (May 8, 1990)). After noting that the
participant in the plan in question “exerted sufficient
influence,” the Ninth Circuit concluded that the plan
“was maintained for a ‘select group’” within the relevant
statutory language. Id. at 313.
The First Circuit has expressed a different view,
one which is in tension with the positions taken by the
Second, Sixth, and Ninth Circuits. In Alexander v.
Brigham & Women's Physicians Org., Inc., that court
declined “the appellant’s invitation to depart from the
plain language of the statute and jerry-build onto it a
requirement of individual bargaining power.” Alexander
v. Brigham & Women’s Physicians Org., Inc., 513 F.3d
37, 47 (1st Cir. 2008). The First Circuit explained:
The DOL opinion letter speaks only to
Congress’s rationale for enacting the top-hat
provision. It does not present itself as an
interpretation of the provision’s
requirements, nor does it make any mention
of the need for or propriety of demanding
that employers demonstrate their employees’
ability to negotiate the terms of deferred
compensation plans.
Id. We agree with the First Circuit’s approach. On its
12
face, the opinion letter does not require that participants
in a top-hat plan possess bargaining power. The opinion
letter does, however, explain Congress’s intent for
creating top-hat plans. On that point, the opinion letter is
therefore entitled to persuasive deference under Skidmore
v. Swift & Co, 323 U.S. 134 (1944). See Alexander, 513
F.3d at 47 (“We have no quarrel with the letter’s
persuasiveness as a gloss on Congress’s intentions in
enacting the top-hat provision.”); see also Parker v.
NutriSystem, Inc., 620 F.3d 274, 278 (3d Cir. 2010)
(stating that, under Skidmore, statutory interpretations in
opinion letters are given deference to the extent they
persuade).
The opinion letter’s explanation undermines
Sikora’s position. Rather than suggest that courts inquire
into whether a particular participant wielded the requisite
level of “bargaining power,” the opinion letter observes
that participants in top-hat plans were deemed by
Congress to possess bargaining power “by virtue of their
position or compensation level.” In other words,
Congress felt justified in including the top-hat plan
provisions in ERISA, at least in part because individuals
in positions such as Sikora’s “have the ability to affect or
substantially influence, through negotiation or otherwise,
the design and operation of their deferred compensation
plan.” In short, reading the DOL opinion letter in light of
Skidmore does not support Sikora’s position.
Although the Second, Sixth, and Ninth Circuits
13
have inquired into plan participants’ bargaining power,
those decisions do not clearly adopt bargaining power as
an additional requirement.4 Even assuming that those
opinions did adopt bargaining power as an additional
requirement, they offer no reason for doing so. Given
that lack of reasoning, the plain text of ERISA’s top-hat
provisions, and our reading of the DOL’s opinion letter,
we decline to engraft a bargaining power requirement
onto the elements of a top-hat plan. We conclude that
plan participants’ bargaining power is not a substantive
element of a top-hat plan.
V
For the reasons set forth above, we will affirm the
judgment of the District Court.
4
The Sixth Circuit in Bakri, for example, did not
explicitly mention bargaining power when it laid out the
factors it uses to determine whether a plan qualifies as a
top-hat plan. Bakri 473 F.3d at 678 (6th Cir. 2007) (“In
determining whether a plan qualifies as a top hat plan, we
consider both qualitative and quantitative factors,
including (1) the percentage of the total workforce
invited to join the plan (quantitative), (2) the nature of
their employment duties (qualitative), (3) the
compensation disparity between top hat plan members
and non-members (qualitative), and (4) the actual
language of the plan agreement (qualitative).”).
14