Peck v. Selex Systems Integration, Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RONALD E. PECK, )
)
Plaintiff, )
)
v. ) Civil Case No. 13-00073 (RJL)
)
SELEX SYSTEMS INTEGRATION, INC., )
et al., )
)
Defendant. ) F 1 l- E o
MAR 2 4 2016
C,a,k_ U‘S_ D,,,,,,,, & B,,,mm
\I\J Courts for the D|strlct of Co||lmb|l
(Mar¢h §§ 2016) [Dias. ## 45, 501
Plaintiff Ronald E. Peck ("Peok" or "plaintiff’) brought this suit against defendant
SELEX Systems lntegration, lnc. ("SELEX") in D.C. Superior Court, alleging three
contract claims arising from plaintiff s employment termination. SELEX removed the
case to this Court on January 17, 2013 on the grounds that Count Il’s claim for plaintiff s
accrued Plan benefit, pled in the original complaint as a common law breach of contract
claim, arose under ERlSA. Notice of Removal Ex. A; Am. Notice of Removal [Dkts.
## 1-l, 6]. On January 28, 2013, SELEX moved to dismiss Count ll on ERISA
preemption grounds. Defs.’ Mot. to Dismiss [Dkt. # 8]. On February l9, 2013, plaintiff
voluntarily dismissed that claim with prejudice Stipulation of Dismissal of Count ll with
Prejudice [Dkt. # ll]. Pursuant to the Court’s order allowing amendment, plaintiff filed
his Amended Complaint on January 28, 2014, adding new defendant Selex Sistemi
lntegrati, lnc. Key Employee Deferred Compensation Plan ("the Plan") (together
"defendants"), and including an ERISA claim as Count II. Min. Order, Jan. 28, 2014;
Am. Compl. [Dkt. # 33]. Currently before the Court are Defendants’ Motion for
Summary Judgment on Count II of Plaintiff’ s Amended Complaint [Dkt. # 44], and
Plaintiff``s Motion for Summary Judgment [Dkt. # 45]. Upon consideration of the
pleadings, record, and relevant law, l find that defendants are entitled to summary
judgment on Count Il, and that there are genuine issues of material fact as to the
remaining counts. Therefore, defendants’ motion is GRANTED, plaintiff’ s motion is
DENIED, and Count II is dismissed with prejudice.
BACKGROUND‘
Defendant SELEX Systems Integration, Inc. is an Overland Park, Kansas-based
company producing aviation navigation, landing, and surveillance systems. Defs.’
Statement of Uncontroverted Facts 1] l ("Defs.’ SOF"); Pl.’s Statement of Undisputed
Material F acts ("Pl.’s SOF") ‘l[ l. Plaintiff Ronald Peck worked as an at-will employee in
various positions for SELEX and its predecessor entities from April 1997 until September
2012. Defs.’ SOF M 2-3; Pl.’s SOF 11 2. Each of Peck’s positions resulted from a change
in his assigned role initiated by SELEX. Defs.’ SOF 11 6. Peck held various positions in
technical and/or quality roles at SELEX’s offices in Kansas from April 1997 until 2008.
Defs.’ SOF 1[ 5; Pl.’s SOF 1[ 3. In March 2008 Peck accepted a position as Vice President
of Business Development, responsible for marketing and sales in the U.S. market, also at
SELEX’s Kansas offices. Pl.’s SOF 11 4. By letter dated July 30, 2008, Peck was
' The following is factual background relevant to Count ll of Plaintiff’ s Amended Complaint.
2
reasonableness of the challenged decision. See Block, 952 F.2d at l452. lt is undisputed
that Warner initially provided Peck notice of SELEX’s determination that Peck’s refusal
to accept the new position would constitute "cause" under the Plan, Peck was given two
weeks to cure his refusal, Peck continued to decline the position, and SELEX then
terminated him for cause. The fact that Warner was the voting member of the
Administrative Committee that made the for-cause determination does not alter my
conclusion that it was a reasonable one.
I also find that the Administrative Committee’s denial of plaintiffs appeal was
reasonable. Peck’s appeal failed to identify any new evidence or basis for his entitlement
to benefits." Defs.’ SOF 32; Ex. N (July ll, 2013 Letter from Peck to the Administrative
Committee). In the appeal Peck continued to argue his conduct did not amount to an
intentional refusal to perform any materials duties, and that SELEX failed to provide him
notice of circumstances constituting such cause. Id. As explained above, however, as
well as in the denial of plaintiff s appeal, see Ex. O (Sept. 6, 2013 Letter from Warner to
Peck), it is undisputed SELEX notified him by letter dated September 24, 2012 that his
refusal to accept the new position would constitute intentional refusal to perform his
material duties, gave him two weeks to accept, and~after the two weeks had elapsed
without his acceptance of the position-terminated him for that reason. Absent any
material change in circumstances, I find the denial of Peck’s appeal to be reasonable.
4 The only potentially new material fact_that SELEX terminated him without cause August 27, 2012
"when it terminated [his] position as Vice-President of Strategy and Product Planning," Defs.’ SOF 32-
is no longer asserted by Peck, who concedes he was terminated September 30, 2012 and was paid through
that date. Pl.’s SOF 1111 22-23.
ll
CONCLUSION
Thus, for all of the foregoing reasons, Defendants’ Motion for Surnmary Judgment
on Count II of Plaintifi’ s Amended Complaint is GRANTED, Plaintiff’ s Motion for
Summary Judgment is DENIED, and Count II is DISMISSED with prejudice A separate
Order consistent with this decision accompanies this Memorandum Opinion.
informed SELEX had established a Key Employee Deferred Compensation Plan ("the
Plan") and that he was a participant therein. Pl.’s SOF 11 5. SELEX opened a D.C. office
in early 20l0. Pl.’s SOF 11 7. At some point between August 2010 and October 20ll
Peck assumed the position of Vice President of Strategy and Product Planning,
essentially a marketing role. Defs.’ SOF 11 9; Pl.’s SOF 1111 7, 10. For approximately one
year before October 201 l, Peck "commuted" from the Kansas City area to SELEX’s
Washington D.C. office on a weekly basis. Defs.’ SOF 11 8; Pl.’s SOF 11 7. In October
2011 Peck his wife moved to the Washington D.C. area where Peck continued to work
out ofthe D.C. office. Defs.’ SOF 1111 9-l0; Pl.’s SOF 1111 7, 10.
On August 23, 2012, SELEX Chief Executive Officer Mike Warner met with Peck
and informed him that, based on Warner’s assessment of Peck’s performance, Peck
would no longer have his position in D.C. but was being offered the position of Vice
President of Quality Control and Business Improvement back in the Kansas office, based
on his background in the quality area. Defs.’ SOF 1111 l3, 15; Pl.’s SOF 1111 l7-l8. In a
letter dated August 29, 2012, CEO Warner explained that waiting for further
development in Peck’s marketing abilities would jeopardize SELEX’S business initiatives
and SELEX needed to enhance its quality and business practices to keep pace with the
growth of its programs. Defs.’ SOF 11 l4; Pl.’s SOF 11 2l.
Peck declined SELEX’s offer for him to assume the position of Vice President of
Quality Control and Business Improvement-initially by phone on August 29, 2012, and
in a letter dated September 3, 2012-because he did not want to return to Kansas at that
time and he did not believe it was the right step for him from a career standpoint. Defs.’
3
SOF ‘H 20; Pl.’s SOF ‘l[ 2l. By letter dated September 14, 2()12, SELEX informed Peck
that although no "cause" was needed because he was an at-will employee, it regarded his
refusal of the assignment to the position of Vice President of Quality Control and
Business Improvement as cause for termination of employment, and allowed him two
weeks to cure his refusal of the assignment. Defs.’ SOF il 22; Ex. I (Sept. l4, 2012 Letter
from Warner to Peck); Pl.’s SOF w 23, 25. Peck still did not accept the assignment.
Defs.’ SOF 1] 23; Pl.’s SOF 1[ 2l.
SELEX terminated Peck’s at-will employment for cause, effective September 30,
2012, based on what it considered to be his "voluntary and deliberate or intentional
refusal to perform [his] material duties and obligations of his employment with SELEX."
Defs.’ SOF 1111 24-25; Ex. J (Oct. l, 2012 Letter from Warner to Peck); Pl.’s SOF wl 22-
23. In terminating Peck for "cause," SELEX relied on its definition therefore found in its
Key Employee Deferred Compensation Plan ("Plan") at Section l.2.6(i). Defs.’ SOF
il 26; Ex. K (Plan).z By the Plan’s terms, the Administrative Committee has
"discretionary authority and responsibility to interpret and construe the Plan and to
determine all factual and legal questions under this Plan, including but not limited to the
2 The Plan provides; "[T]he Participant’s habitual neglect of or deliberate or intentional refusal to
perform any of his or her material duties and obligations of his or her employment (including compliance
with the Company’s Code of Conduct) with the Company other than due to an eligible employee’s death
or Disability, provided that, if the nature of the circumstance is such that it may be cured, then the
circumstance will not constitute Cause unless the Company provides written notice of the circumstance
and provides the Participant with an opportunity to cure the circumstance and the circumstance is not
cured (if capable of being cured) two (2) weeks from receipt of the notice . . . ." Ex. K. at l.
4
entitlement of Participants and Beneficiaries, and the amounts of their respective
interests." Defs.’ SOF 1 27; Ex. K.
On or about April 5, 2013, Peck submitted a claim for benefits under the Key
Employee Deferred Compensation Plan. Defs.’ SOF 1] 30; Ex. L; Pl.’s SOF 1 33. On
June 21, 2013, the Key Employee Deferred Compensation Plan’s Administrative
Committee (the CEO, CFO, and Human Resources Director) timely denied Peck’s claim
for benefits and informed Peck of his right to appeal that decision. Defs.’ SOF 1[ 3 l; Pl.’s
SOF ‘ll 33. On July ll, 2013, Peck sent an appeal to the Key Employee Deferred
Compensation Plan Administrative Co1nmittee. Defs.’ SOF 11 32; Pl.’s SOF 11 33. On
September 6, 2013, the Key Employee Deferred Compensation Plan Administrative
Committee timely denied plaintiffs appeal. Defs.’ SOF 1[ 33; Pl.’s SOF 1[ 33.
LEGAL STANDARD
Summary judgment is appropriate when the pleadings and the record demonstrate
that "there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law." Fed. R. Civ. P. 56(a). "A fact is material if it ‘might affect
the outcome of the suit under the governing laW,’ and a dispute about a material fact is
genuine ‘if the evidence is such that a reasonable jury could retum a verdict for the
nonmoving party."’ Szeele v. Schafer, 535 F.3d 689, 692 (D.C. Cir. 2008) (quoting
Anderson v. Lz``berlj) Lobby, Inc., 477 U.S. 242, 248 (1986)). The moving party bears the
initial burden of demonstrating the absence cfa genuine dispute of material fact. See
Celotex Corp. v. Catrett, 477 U.S. 3 l7, 323 (l986). Once the moving party has met its
burden, the nonmoving party must "designate specific facts showing there is a genuine
5
issue for trial” to defeat summaryjudgment. Ia’. at 324 (quotation marks omitted). The
nonmovant’s opposition, however, may not rest upon the mere allegations or denials of
the pleadings, but must be supported by affidavits or other competent evidence. Ia’.
Thus, by pointing to the absence of evidence sufficient to establish the existence of an
element essential to the nonmovant’s case, a moving party may succeed on summary
judgment. Id. at 325. The court "must view the evidence in the light most favorable to
the nonmoving party and . . . draw all reasonable inferences in favor of the nonmoving
party." Grosdz``dier v. Broaa'. Ba’. of Governors, Chaz'rman, 709 F.3d l9, 23-24 (D,C. Cir.
2013) (quotation marks omitted).
ANALYSIS
Peck challenges defendants’ denial of his accrued deferred compensation Plan
benefit. He brings suit pursuant to 29 U.S.C. § ll32(a)(l)(B), which provides a cause of
action for an ERISA plan participant like Peck "to recover benefits due to him under the
terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights
to future benefits under the terms of the plan."
A. Standard of Review.
Before reaching the merits, the parties dispute the applicable standard of review.
Defendants argue that the Court’s review is limited to determining, on the basis of the
evidence available to the Administrative Committee, whether the Committee acted
arbitrarily and capriciously in reaching its decision. Defs.’ Mem. 4-5 (citing Pettaway v.
Teachers Ins. & Annuz``lj/ Ass ’n ofAm., 644 F.3d 427, 433 (D.C. Cir. 2011)). ln Firestone
Tz``re & Rubber Co. v. Bruch, the Supreme Court held that a denial of benefits challenged
6
under ERISA § ll32(a)(l)(B) is to be reviewed under a de novo standard "unless the
benefit plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan" in which case the deferential
arbitrary and capricious standard applies. 489 U.S. lOl, 115 (l989). The Firestone
standard is "one of reasonableness." Pettaway, 644 F.3d at 435 (quotation marks
omitted). The "essential inquiry" is whether the Administrative Committee "reasonably
construe[d] and appl[ied] the . . . Plan in [Peck’s] case" rather than whether the decision
was the correct one or what the Court might reach if reviewed de novo. Block v. Pitney
Bowes Inc., 952 F.2d l450, 1454 (D.C. Cir. 1992).
P1aintiff contends that the deferential Fz``restone standard of review does not apply
here where a "top hat" deferred compensation plan is at issue. Top hat plans are
unfunded plans "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), and "are wholly exempt from ERISA’s fiduciary
requirements." 1n re ULLICO Inc. Lz'tig., 605 F. Supp. 2d 2l0, 221 (D.D.C. 2009).
Relying upon the approach taken by the Third and Eighth Circuits, plaintiff maintains
that de novo review applies to top hat plans even where, as here, administrators are given
interpretive discretion. Goldstein v. johnson & Johnson, 251 F.3d 433, 443 (3d Cir.
2001); see also Cmz``g v. Pz'llsbury Non-Qualzfied Pensz``on Plan, 458 F.3d 748, 752 (8th
Cir. 2006). Those courts have reasoned that top hat plans should be reviewed "in
accordance with ordinary contract principles" and subject to de novo review because the
policy considerations relied upon in Firestone to support a more deferential standard of
7
review-namely, analogizing ERISA fiduciaries with common-law trustees-are not
present with top hat plans and their non-fiduciary administrators. See Gola’stein, 251
F.3d at 443; see also Craz``g, 458 F.3d at 752. Other circuits have reached the opposite
conclusion, however, finding de novo review applies with even greater force to a top hat
plan. See, e.g., Comrie v. IPSCO, Inc., 636 F.3d 839, 842 (7th Cir. 201 l) (rejecting
Goldstez``n’s analysis and applying deferential review, noting it should be "easier, not
harder . . . to honor discretion-conferring clauses in contracts that govern the actions of
non-fiduciaries"). Our Circuit, however, has not yet opined on this particular issue.
Given our Circuit’s directive to review ERISA plan benefit determinations under
an arbitrary-and-capricious standard when interpretive discretion is given to a plan
administrator, see Pettaway, 644 F.3d at 433, I will apply that standard here.3
Accordingly, I must determine whether the Plan’s decisions were reasonable. l conclude
they were.
B. The Denial of Peck’s Claim for Benef``lts Was Reasonable.
Peck contends he was terminated without cause and therefore wrongfully denied
benefits. On or about April 5, 2013 Peck sent his initial claim for benefits under the Key
Employee Deferred Compensation Plan, stating in relevant part:
I am qualified to receive this vested accrued benefit under 4.1(a) of the
Plan in that l was terminated by SELEX without cause as defined
3 1 note, however, that the apparent difference between the two standards is ultimately a distinction
without a difference. lt is undisputed that the Plan grants its administrator discretion to interpret its terms.
Plaintiff concedes that, even under de novo review, "[o]rdinary contract principles require that, where one
party is granted discretion under the terms of the contract, that discretion must be exercised in good
faith-a requirement that includes the duty to exercise the discretion reasonably." Pl.’s Opp’n (quoting
Goldstez``n v. johnson & Johnson, 251 F.3d 433, 443 (3d Cir. 200l) (citations omitted)). Likewise, the
applicable deferential standard is one of reasonableness. Pettaway, 644 F.3d at 435.
8
under Section l.2.6 of the Plan. At no time prior to the date of my
termination from the position of Vice-President of Strategy and
Product Planning was I informed by any Company representative that
I engaged in habitual neglect of or deliberate or intentional refusal to
perform any of my material duties and obligations of my employment.
Further, at no time was I given a notice of circumstances constituting
such action and given an opportunity to cure those circumstances. l
remained ready, willing and able to perform my duties in that position
and it was SELEX which terminated me from that position as
established in Treas. Reg. §l.4()9A-l(n)(l).
EX. L (Apr. 5, 2013 Letter from Peck to the Administrative Committee). lt is undisputed,
however, that after Peck initially declined the position of Vice President of Quality
Control and Business Improvement, SELEX informed him on September l4, 2012 that it
regarded his refusal of the assignment to that position as "voluntary and deliberate refusal
to perform [his] material duties and obligations of [his] employment with SELEX, and as
such, would constitute cause," "urge[d] [him] to reconsider," and allowed him two weeks
from his receipt of the letter to cure his refusal of the assignment. Defs.’ SOF 1 22; Ex.
G; Pl.’s SOF {Hl 23, 25. Peck in turn argues that his declination of the new position
"cannot logically or legally be an ‘intentional refusal to perform any of his . . . material
duties and obligations his . . . employment’ because he was never employed in that
position." Pl.’s Mot. for Summ. J. 23.
The ultimate question before the Court is whether the Administrative Committee
reasonably construed and applied the Plan in terminating Peck for cause. That is, was it
reasonable to find Peck’s declination of the assignment to be Vice President of Quality
and Business Improvement constituted "deliberate or intentional refusal to perform any
of his . . . material duties and obligations of his . . . employment . . . with the Company
. . . ." Ex. K at l (emphasis added). I find it was reasonable, A reasonable decision is
one that "is the result of a deliberate, principled reasoning process and . . . supported by
substantial evidence[,]" that is, "more than a scintilla" of evidence. Buford v. UNUMLzfe
Ins. Co. ofAm., 290 F. Supp. 2d 92, 100 (D.D.C. 2003) (intemal quotation marks
omitted). Peck’s argument-that his refusal to accept an offer for a new position cannot
constitute refusal to perform his material duties and obligations of his then-position-is
one possible reasonable interpretation of the Plan. lt is equally if not more reasonable,
however, for SELEX to construe Peck’s refusal to accept a new assignment-offered
based on its assessment of Peck’s performance-as refusal to perform his "material
duties and obligations of his . . . employment . . . with the Company[,]" which is grounds
to be terminated for cause. Ex. K at l. And the plain language of the Plan prevents an
employee terminated for cause from receiving Plan benefits. Ia’. The "Court must not
overtum a decision found to be reasonable, even if an alternative decision also could have
been considered reasonable." Block, 952 F.2d at 1452 (internal quotation marks omitted).
l am not persuaded by Peck’s argument that the reasonableness of the
Administrative Committee’s decision is undermined by CEO Warner’s dual role in
notifying Peck that his refusal would constitute cause and later finding that to be the case.
Peck points out Wamer was the sole voting member of the Administrative Committee
that "reviewed [Wamer’s] initial determination" that Peck’s termination was for cause,
and argues that a "party acting in good faith and reasonably would have disqualified
Warner from reviewing his own decision." P1.’s Mot. for Summ. J. 23. The relevant
question is not if an altemative decision would have been reasonable, but rather the
lO