Dennis Bond, Sr. v. Marriott International, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1160
DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,
Plaintiffs – Appellants,
and
ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,
Plaintiffs,
v.
MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,
Defendants – Appellees.
-------------------------
UNITED STATES SECRETARY OF LABOR,
Amicus Supporting Appellants,
AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE OF THE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,
Amicus Supporting Appellees.
No. 15-1199
DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,
Plaintiffs – Appellees,
and
ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,
Plaintiffs,
v.
MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,
Defendants – Appellants.
-------------------------
UNITED STATES SECRETARY OF LABOR,
Amicus Supporting Appellees,
AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE OF THE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,
Amicus Supporting Appellants.
Appeals from the United States District Court for the District
of Maryland, at Greenbelt. Roger W. Titus, Senior District
Judge. (8:10-cv-01256-RWT)
Argued: October 28, 2015 Decided: January 29, 2016
Before SHEDD, DIAZ, and HARRIS, Circuit Judges.
Reversed in part and vacated in part; judgment affirmed by
unpublished per curiam opinion.
ARGUED: David C. Frederick, KELLOGG, HUBER, HANSEN, TODD, EVANS
& FIGEL, P.L.L.C., Washington, D.C., for Appellants/Cross-
Appellees. Jeffrey Lee Poston, CROWELL & MORING LLP,
Washington, D.C., for Appellees/Cross-Appellants. David Maurice
2
Ellis, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for
Amicus United States Secretary of Labor. ON BRIEF: Michael
Klenov, KOREIN TILLERY, L.L.C., St. Louis, Missouri; Timothy F.
Maloney, JOSEPH, GREENWALD & LAAKE, P.A., Greenbelt, Maryland;
Joshua D. Branson, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL,
P.L.L.C., Washington, D.C., for Appellants/Cross-Appellees.
Mark Muedeking, Washington, D.C., Ian C. Taylor, DLA PIPER LLP
(US), Baltimore, Maryland; Clifton S. Elgarten, Aryeh S.
Portnoy, April N. Ross, CROWELL & MORING LLP, Washington, D.C.,
for Appellees/Cross-Appellants. M. Patricia Smith, Solicitor of
Labor, G. William Scott, Associate Solicitor for Plan Benefits
Security, Elizabeth Hopkins, Counsel for Appellate and Special
Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C.,
for Amicus United States Secretary of Labor. Janet M. Jacobson,
AMERICAN BENEFITS COUNCIL, Washington, D.C.; Kate Comerford
Todd, Warren Postman, U.S. CHAMBER LITIGATION CENTER,
Washington, D.C.; Annette Guarisco Fildes, Kathryn Ricard, THE
ERISA INDUSTRY COMMITTEE, Washington, D.C.; Igor V. Timofeyev,
Stephen B. Kinnaird, J. Mark Poerio, Danielle R.A. Susanj, PAUL
HASTINGS LLP, Washington, D.C., for Amici The American Benefits
Council, The Chamber of Commerce of the United States of
America, and The ERISA Industry Committee.
Unpublished opinions are not binding precedent in this circuit.
3
PER CURIAM:
Dennis Bond and Michael Steigman (the Appellants), filed
this action against their former employer, Marriott
International, Inc., alleging that Marriott’s Deferred Stock
Incentive Plan (the Plan), a tax-deferred Retirement Award
program, violates the vesting requirements of the Employee
Retirement and Income Security Act of 1974 (ERISA). After
targeted discovery on the statute of limitations, the district
court found that the claims were timely and granted summary
judgment to the Appellants on that issue. Following additional
discovery, the court granted summary judgment on the merits to
Marriott, concluding that the Plan’s Retirement Awards fell
within the “top hat” exemption to ERISA. The Appellants appeal
that ruling, and Marriott cross-appeals, contending that the
court erred in finding the Appellants’ claims timely. Because we
conclude that the Appellants’ claims are barred by the statute
of limitations, we affirm judgment in favor of Marriott.
I.
A. The 1970 Plan
Marriott created the Plan in 1970, prior to ERISA’s
enactment. The 1970 Plan remained in effect until 1978 and
granted Retirement Awards “as a part of a management incentive
program whereby a portion of the annual bonus awarded to
managers and other employees for outstanding performances is
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made in the form of deferred stock.” (J.A. 93). Retirement
Awards “contingently vest[ed] in equal annual installments until
age 65” or fully upon approved early retirement, permanent
disability, or death. (J.A. 94). The 1970 Plan expressly
provided that “[v]esting accruals stop when employment
terminates for any other reason.” (J.A. 94). Marriott
distributed vested shares in “ten annual installments after
retirement, permanent disability or upon reaching age 65” as
long as the employee refrained from “competing, directly or
indirectly, with the Company for a period of ten years after
retirement or after age 65 if employment is terminated while in
good standing prior to retirement.” (J.A. 94). Each recipient
received an Award Certificate explaining the vesting schedule.
The 1970 Plan was open to “any employee . . . whether full-
time or part-time,” including “manager[s] and other employees”
with “outstanding performances.” (J.A. 93). During the relevant
time period, in Marriott’s workforce, salaried employees
comprised about 10% of all employees, and somewhere between 83%
and 91.5% of these salaried employees qualified as “managers.”
Management employees were paid on a salary scale that
encompassed a vast number of grades—from 39 to the low 70s.
Grade 56 and above was limited to “executive” managers and grade
61 and above for “senior executives.”
5
Using an internal four-step process, between 1976 and 1989
Marriott issued Retirement Awards to no more than 1.63% of all
Marriott employees. Marriott issued roughly 33,000 awards in
total to almost 10,000 unique individuals, 93% of which were
below grade 56 (executive managers). The individuals held 1,386
unique job titles, including Route Driver, Storekeeper, Tennis
Pro, and Assistant Night Trainee. In every year but one, at
least one Retirement Award recipient totaled $0 gross earnings.
B. ERISA
In 1974, “after careful study of private retirement pension
plans,” Congress enacted ERISA. Alessi v. Raybestos-Manhattan,
Inc., 451 U.S. 504, 510 (1981). “Congress through ERISA wanted
to ensure that ‘if a worker has been promised a defined pension
benefit upon retirement-and if he has fulfilled whatever
conditions are required to obtain a vested benefit- . . . he
actually receives it.’” Id. (quoting Nachman Corp. v. Pension
Benefit Guar. Corp., 446 U.S. 359, 375 (1980)). Congress thus
imposed a variety of new requirements on covered retirement and
pension plans. See 29 U.S.C. § 1001(a). Relevant here, Congress
prohibited the type of vesting schedule present in the Plan and
also prohibited “bad boy” clauses, such as the competition
restrictions in the Plan.
Tucked inside ERISA’s vast statutory text, however, was an
exemption for so-called “top hat” plans. ERISA defines a top hat
6
plan as an unfunded plan that 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. § 1051(2). 1 Top hat plans receive a “near-complete
exemption” from “ERISA’s substantive requirements,” In re New
Valley Corp., 89 F.3d 143, 148 (3d Cir. 1996), and “are not
subject to certain vesting, participation, and fiduciary
requirements,” Kemmerer v. ICI Americas Inc., 70 F.3d 281, 286
(3d Cir. 1995). Given the breadth of this exemption, the
category of what qualifies as a top hat plan is a “narrow one.”
New Valley Corp., 89 F.3d at 148. That is, a top hat plan “must”
“be unfunded and exhibit the required purpose” and “must also
cover a ‘select group’ of employees.” Id. Whether the group of
employees is “select” is determined by looking both
1The Department of Labor (DOL) has never issued notice-and-
comment rules regarding the top hat exemption. In 1990, DOL
issued an Advisory Opinion interpreting the “unfunded”
requirement of the top hat provision. Dep’t of Labor, Opinion
90–14A, 1990 WL 123933 (May 8, 1990). DOL explained that top hat
plan participants must have the ability to “affect or
substantially influence . . . their deferred compensation plan.”
Id. at *1. In addition, DOL stated that it interpreted the word
“primarily” in the top hat provision to modify “for the purpose
of providing deferred compensation” and not “for a select group
of management or highly compensated employees.” Id. at *2, n.1.
Thus, in DOL’s view, the top hat exemption was limited to a
“select group of management or highly compensated employees” who
had negotiating power to negotiate the terms of their top hat
plan. Id. DOL filed an amicus brief in this case defending this
interpretation.
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qualitatively and quantitatively. Demery v. Extebank Deferred
Comp. Plan (B), 216 F.3d 283, 288 (2d Cir. 2000). Thus, “[i]n
number, the plan must cover relatively few employees. In
character, the plan must cover only high level employees.” New
Valley Corp., 89 F.3d at 148.
C. The Amended Plan
Following ERISA’s enactment, Marriott internally determined
that the 1970 Plan was a top hat plan. Also, in 1978, Marriott
altered the Retirement Awards in response to requests from
management, particularly younger managers who did not like the
long vesting period. Marriott responded by adding an option for
employees to choose either a Retirement Award or an award that
vested and was paid over a period of ten years during employment
(a “Pre-Retirement Award”).
After Marriott adopted the 1978 Plan, it drafted a lengthy
Prospectus, which it mailed to all management employees eligible
to receive Retirement Awards and filed with the Securities and
Exchange Commission. The Prospectus described the Retirement
Awards program and, in a section titled “ERISA,” disclosed the
following:
The Incentive Plan is an ‘employee pension benefit
plan’ within the meaning of the Employee Retirement
Income Security Act of 1974 (the ‘Act’). However,
inasmuch as the Plan is unfunded and is maintained by
the Company primarily for the purpose of providing
deferred compensation for a selected group of
management or highly compensated employees, it is
8
deemed a ‘select plan’ and thus is exempt from the
participation and vesting, funding and fiduciary
responsibility provisions of Parts 2, 3 and 4
respectively of Subtitle B of Title 1 of the Act.
(J.A. 298). The Prospectus explained that Marriott “will not
extend to participants any of the protective provisions of the
Act for which an exemption may properly be claimed.” (J.A. 298).
Additional prospectuses with this language were distributed in
1980, 1986, and 1991, and the Appellants do not dispute that
they received them.
In 1990, following an Advisory Opinion from the Department
of Labor, supra note 1, Marriott amended the 1978 Plan to limit
Retirement Awards to executive managers—those at pay grade 56 or
above. Managers with a pay grade below 56 were eligible only for
Pre-Retirement Awards. Marriott viewed such a change as
“necessary in light of changing government interpretations of
provisions in [ERISA],” and noted that by “narrowing” the
circumstances of award availability “helps ensure the continued
application of this favorable treatment under ERISA”. (J.A.
934).
D. The Appellants’ Tenure with Marriott
The Appellants had long and successful careers with
Marriott. Bond joined Marriott in 1973 as an Assistant Sales
Manager at the Airport Marriott in St. Louis and eventually rose
to become the General Manager of the Marriott Pavilion in St.
9
Louis until his resignation in 1992. From 1976, when he was
promoted to Director of Sales and Marketing of the City Line
Avenue Marriott in Philadelphia, until he left Marriott, Bond
occupied positions eligible for Retirement Awards under the
Plan. Bond received Retirement Awards from Marriott in 1976 and
1977 (as Director of Sales and Marketing), in 1978 and 1979 (as
Regional Director of Marketing), and in 1988 and 1989 (as
General Manager of the St. Louis Marriott). In total, Bond was
awarded 1,344 shares of Marriott stock through Retirement
Awards. Bond voluntarily resigned from Marriott on October 19,
1991, two years before his awards would have fully vested. In
2006, Marriott paid Bond all of his vested shares.
Steigman joined Marriott in 1973 as an Assistant Restaurant
Manager for the Capriccio Restaurant at the Los Angeles
Marriott, and eventually served as the General Manager of the
Bloomington, Minnesota, Marriott, and later of the Miami Airport
Marriott, until Marriott terminated him in 1991. Steigman
received Retirement Awards from Marriott in 1974 and 1975, both
prior to ERISA’s effective date. In 1978 and every year
thereafter, Steigman elected to receive Pre-Retirement Awards
under the 1978 Plan. Marriott granted Steigman 693 shares of
Marriott stock under the Retirement Award program between 1978
and 1989. Shortly after his termination in 1991, Steigman signed
a release and Marriott paid him all of his vested shares.
10
E. Procedural History
The procedural history is recounted in detail in the
district court’s orders in this litigation. See Bond v. Marriott
Int’l, Inc., 971 F. Supp. 2d 480 (D. Md. 2013); England v.
Marriott Int’l, Inc., 764 F. Supp. 2d 761 (D. Md. 2011). As
relevant here, on January 19, 2010, Bond, Robert England, Lewis
Foster, and Douglas Craig filed suit in federal court in the
District of Columbia, alleging that the Plan’s Retirement Awards
violated ERISA’s vesting requirements. These plaintiffs sought
equitable relief requiring Marriott to reform the Retirement
Awards and pay additional benefits. The case was transferred to
the District of Maryland, and only Steigman and Bond remain as
named plaintiffs. 2
Following targeted discovery, the parties filed cross-
motions for summary judgment on whether the claims are barred by
the statute of limitations. The district court granted judgment
to the Appellants on the timeliness issue. Bond, 971 F. Supp. 2d
at 493. The court also denied Marriott’s request to immediately
certify the ruling for appeal under 28 U.S.C. § 1292(b). Id. at
2 England’s claim was dismissed because he left Marriott
before ERISA’s effective date. England v. Marriott Int’l, Inc.,
764 F. Supp. 2d 761, 780-81 (D. Md. 2011). Foster and Craig
voluntarily dismissed their claims because they actually were
awarded more shares under the Retirement Awards vesting schedule
than they would have been awarded if ERISA’s vesting schedule
applied.
11
494-95. Following further discovery, Marriott moved for summary
judgment, arguing that the Retirement Awards were issued
pursuant to a valid top hat plan. After a lengthy hearing, the
court granted the motion. Both sides filed timely appeals.
II.
We begin and end with Marriott’s cross-appeal, which
contends that the district court erred in finding the
Appellants’ claims timely. We review de novo the court’s grant
of summary judgment on this ground. Wilkins v. Montgomery, 751
F.3d 214, 220 (4th Cir. 2014).
Except for breach of fiduciary duty claims, ERISA contains
no specific statute of limitations, and we therefore look to
state law to find the most analogous limitations period. White
v. Sun Life Assur. Co. of Canada, 488 F.3d 240, 245 (4th Cir.
2007) abrogated on other grounds by Heimeshoff v. Hartford Life
& Acc. Ins. Co., 134 S. Ct. 604 (2013). Here, we agree with the
parties that Maryland’s three year statute of limitations for
contract actions applies. However, while we apply this three-
year state limitations period, the question of when the statute
begins to run is a matter of federal law. Id. In most cases
“[a]n ERISA cause of action does not accrue until a claim of
benefits has been made and formally denied.” Rodriguez v. MEBA
Pension Tr., 872 F.2d 69, 72 (4th Cir. 1989).
12
Here, applying this “formal denial” rule, the district
court concluded that the action is timely because Marriott never
formally denied any claims from Bond or Steigman. In so ruling,
the court apparently adopted the Appellants’ position that
Marriott’s answer to the federal complaint triggered the
limitations period.
On appeal, Marriott argues, as it did below, that the
district court applied the wrong analysis. We agree. While the
“formal denial” rule is generally applied in ERISA cases, we
recognized, just one year after Rodriguez, that in limited
circumstances the rule is impractical to use. See Cotter v. E.
Conference of Teamsters Ret. Plan, 898 F.2d 424, 429 (4th Cir.
1990). In Cotter, we considered the question of when the statute
of limitations period begins in ERISA cases that did not involve
an internal review process and a formal claim denial. We
explained that while Rodriguez’s “mandate is clear,” its
“application . . . is tricky” in cases with no formal denial.
Id. We noted that in such cases strict application of Rodriguez
“would lead us to the anomalous result that the statute of
limitations . . . did not begin to run until after [the
plaintiff’s] lawsuit was filed.” Id. 3 To avoid this result and
3In one of its earlier orders in this litigation, the
district court concluded that the “anomaly” we recognized in
Cotter “may here be the reality.” England, 764 F. Supp. 2d at 772.
13
remain “consistent” with Rodriguez, we applied the “alternative
approach of determining the time at which some event other than
a denial of a claim should have alerted [the plaintiff] to his
entitlement to the benefits he did not receive.” Id. Under this
approach, “a formal denial is not required if there has already
been a repudiation of the benefits by the fiduciary which was
clear and made known to the beneficiary.” Miller v. Fortis
Benefits Ins. Co., 475 F.3d 516, 520-21 (3d Cir. 2007) (emphasis
in original); see also Carey v. Int’l Bhd. of Elec. Workers
Local 363 Pension Plan, 201 F.3d 44, 47 (2d Cir. 1999)
(collecting cases applying the clear repudiation rule from the
Seventh, Eighth, and Ninth Circuits).
The “clear repudiation” rule serves the goals of statutes
of limitations, to “promote justice by preventing surprises
through the revival of claims that have been allowed to slumber
until evidence has been lost, memories have faded, and witnesses
have disappeared,” Order of R.R. Telegraphers v. Railway Express
Agency, Inc., 321 U.S. 342, 348-49 (1944), and to encourage
“rapid resolution of disputes,” Carey, 201 F.3d at 47. These
goals “are served when the accrual date anchors the limitations
14
period to a plaintiff’s reasonable discovery of actionable
harm,” Miller, 475 F.3d at 522. 4
Applying this rule here, we conclude that the Appellants’
claims are untimely. To begin, the 1978 Prospectus—in a section
entitled “ERISA”—plainly stated that the Retirement Awards did
not need to comply with ERISA’s vesting requirements. The
Prospectus explained that “inasmuch as the Plan is unfunded and
is maintained by the Company primarily for the purpose of
providing deferred compensation for a selected group of
management or highly compensated employees,” the Plan was a top
hat plan “exempt from the participation and vesting, funding and
fiduciary responsibility provisions” of ERISA. (J.A. 298). This
language clearly informed plan participants that the Retirement
Awards were not subject to ERISA’s vesting requirements, the
very claim made by the Appellants here. This language was
included in prospectuses distributed in 1980, 1986, and 1991.
The Appellants’ claim is that the Retirement Awards violate
ERISA’s vesting schedule and that Marriott essentially admitted
this violation in response to the DOL’s Advisory Opinion in
4
Applying a discovery rule in this context is consistent
with ERISA. In fact, ERISA’s statute of limitations for breach
of fiduciary duty claims likewise includes a discovery rule. See
29 U.S.C. § 1113(2) (stating limitations period runs from “the
earliest date on which the plaintiff had actual knowledge of the
breach or violation”).
15
1990. See Appellant’s Br. at 26 (arguing that Marriott’s 1990
plan amendment was “an admission that the prior Plan was
deficient”). That argument, however, undermines their contention
that Marriott does not satisfy the clear repudiation standard.
Marriott informed the Appellants in 1978 that the Plan was
exempt from ERISA’s vesting requirements. The Appellants then
waited more than 30 years to file suit, alleging that the Plan
violates ERISA’s vesting requirements. While the discovery rule
“serve[s] to soften the hard edges of statutory limitations
periods,” “[c]ommencement of a limitations period need not . . .
await the dawn of complete awareness.” Brumbaugh v. Princeton
Partners, 985 F.2d 157, 162 (4th Cir. 1993). Here, Marriott
clearly repudiated any right the Appellants had to the vesting
requirements of ERISA in 1978. 5
III.
For the foregoing reasons, we conclude that the Appellants’
ERISA claims are untimely under Maryland’s three-year statute of
limitations for contract actions. We therefore reverse the
district court’s grant of summary judgment to the Appellants on
that ground and grant summary judgment to Marriott. Because this
conclusion is dispositive and we do not reach the question of
5
The Appellants also argue that the statute of limitations
should be equitably tolled in this case. Having reviewed this
argument, we find it to be without merit.
16
whether Marriott’s Plan was a valid top hat plan, we vacate the
court’s later order granting summary judgment to Marriott. In
light of these rulings, we affirm the judgment in Marriott’s
favor.
REVERSED IN PART AND VACATED IN PART;
JUDGMENT AFFIRMED
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