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Kemmerer v. ICI Americas Inc.

November 17, 1995

JOHN L. KEMMERER; JAMES H. JORDAN, APPELLANTS IN NO. 95-1071

v.

ICI AMERICAS INC. JOHN L. KEMMERER; JAMES H. JORDAN

v.

ICI AMERICAS INC., APPELLANT IN NO. 95-1098



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 92-5986)

BEFORE: GREENBERG, LEWIS, and ROSENN, Circuit Judges

GREENBERG, Circuit Judge.

Argued October 11, 1995

(Filed: November 17, 1995)

OPINION OF THE COURT

In this case, arising under the Employee Retirement Income Security Act (ERISA), the district court held that the defendant company breached the terms of the executive deferred compensation plan that it offered to its highly compensated employees. Yet it also held that the appellants -- participants in that plan -- failed to prove they suffered any damages as a result of the breach. We hold that the district court correctly decided both issues and therefore we will affirm its judgments.

I. Introduction

Appellants John L. Kemmerer and James H. Jordan were high level executives of the defendant, ICI Americas Inc. *fn1 ICI offered its employees the opportunity to participate in a number of benefit plans. The dispute on appeal centers around its executive deferred compensation plan (the DEC plan), which like all such plans is commonly referred to as a "top hat" plan. Specifically, ICI encouraged its high level executives to participate in the DEC plan, under which participants deferred receipt of a percentage of their income, and thus initially reduced their annual taxable income. Although the DEC plan was unfunded, its participants were allowed to track or shadow investment portfolios available to participants of an ICI deferred contribution plan. ICI would credit the participants' balances in the DEC plan as though the hypothetical investments actually had been made. Appellants participated in the DEC plan.

An executive's account balance in the DEC plan became payable after the executive left ICI's employ. The DEC plan permitted participants to elect the method of payment by which distributions would be made. In this regard, the plan was amended on February 1, 1985, to state:

Amounts deferred under this agreement shall be paid to Optionee commencing January 15 of the year following the year of his separation from service in five percentage installments . . . unless, prior to separation from service the Optionee files a written notice with the Secretary of Company, ('Secretary') requesting a different form of distribution. Such notice shall be treated as an election by the Optionee to receive payment by the method requested. The method of distribution requested shall be irrevocable after the close of business on the date of Optionee's separation from service. Kemmerer v. ICI Americas, Inc., 842 F. Supp. 138, 139-40 (E.D. Pa. 1994). *fn2

Pursuant to this provision, "Jordan elected to have his DEC benefits paid in specific annual amounts until the year 2007. Kemmerer elected to have his plan balance distributed in fixed annual amounts until such time as his account balance would be exhausted." Id. at 140. After Kemmerer and Jordan retired (in 1986 and 1989 respectively), ICI began distributing their benefits in accordance with their respective elections. In 1991, however, ICI unilaterally decided to terminate the DEC plan. At that point, rather than complying with its retired executives' elections, ICI decided to distribute their accumulated account balances in three annual installments, with 10% interest on the unpaid balances, to be paid in January 1992, January 1993, and January 1994. ICI advised appellants of this change by letters dated November 29, 1991.

On October 16, 1992, after ICI made one payment on the new distribution schedule, appellants filed this action in the district court contending that, by terminating the DEC plan after their rights in it had vested, ICI breached its contractual obligations and thereby violated ERISA. They requested monetary damages for the benefits lost as a consequence of ICI's breach of the plan. In this litigation, they contend that the early termination of the plan had adverse tax consequences to them and required them to incur fees for financial management they otherwise would not have incurred. They do not contend, however, that ICI did not pay them the full amount of their account balances. Consequently, they are in the position, unusual if not unprecedented for plaintiffs, of suing for damages because they were paid money owed to them. Eventually appellants and ICI filed cross-motions for summary judgment on liability, and ICI filed a motion for summary judgment on damages. In an opinion filed on January 4, 1994, reported at 842 F. Supp. 138, the district court granted appellants' motion for summary judgment on liability, and denied ICI's motions on both liability and damages. The court entered an order on January 5, 1994, in accordance with its opinion.

The district court held a non-jury damages trial in October 1994. In an unreported memorandum opinion filed on December 22, 1994, the court rejected appellants' argument that ICI had the burden of proof and held that appellants had failed to prove that they suffered damages as a result of ICI's conduct. Accordingly, it entered a judgment in favor of ICI on December 23, 1994. On January 19, 1995, the parties stipulated, and the court ordered, that all claims except those for attorneys' fees and costs had been resolved. The court stayed proceedings as to those items pending the completion of this appeal. Both parties then filed appeals, appellants from the order of December 23, 1994, and ICI from the order of January 5, 1994.

Arguably, we should dismiss ICI's appeal, as ICI could challenge the district court's finding of liability in this court as an alternative ground for us to affirm. See Armotek Indus., Inc. v. Employers Ins. of Wausau, 952 F.2d 756, 759 n.3 (3d Cir. 1991). But we will not do so because appellants have filed a fee petition which, as we have indicated, the district court has stayed pending disposition of this appeal. Thus, even though we affirm on the damages issue, ICI may be aggrieved by the judgment on liability, because the district court may conclude that, on the basis of that judgment alone, it can award the appellants counsel fees. *fn3 Of course, we express no opinion on this point. However, in view of ICI's success at trial on the damages issue, its appeal from the denial of its motion for summary judgment on damages is moot and we will not consider it. See McDaniels v. Flick, 59 F.3d 446, 448 n.1 (3d Cir. 1995). We ...


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