The opinion of the court was delivered by: Bissell, Chief Judge
Following the conclusion of a bench trial in the above-captioned matter, Plaintiff William Colarusso ("Plaintiff" or "Colarusso") and the one remaining Defendant in the action, Estate of Eugene T. Day, Jr. ("Day"), submitted post-trial memoranda of law on the issue of Day's liability. *fn1 Plaintiff alleges that Day violated Section 502(c)(1) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. 1132(c)(1)(B), for failure to provide information related to the employee benefit plan in which Plaintiff was a participant and Day was an administrator. Accordingly, Plaintiff requests that the Court impose civil penalties against Day in the maximum amount of $100.00 per day from the time of Plaintiff's request for information to the present. To determine whether Day is liable to Plaintiff the Court must answer the following questions:
1) Was the employee benefit plan at issue covered by ERISA regulations?
2) If the plan was an ERISA plan, did it impose fiduciary duties?
3) If the plan was an ERISA plan and imposed fiduciary duties, was Defendant Day a fiduciary to the plan as defined by ERISA?
4) If the plan was an ERISA plan, imposed fiduciary duties, and Day was a fiduciary, is Day subject to the penalty provision of 29 U.S.C. § 1132(c)(1)(B) for failing to furnish Plaintiff Colarusso with plan-related information in violation of ERISA regulations?
5) If the plan was an ERISA plan, imposed fiduciary duties, Day was a fiduciary, and Day is subject to the penalty provision of 29 U.S.C. § 1132(c)(1)(B), what is the appropriate per diem penalty and should penalties be imposed upon his estate only up to the date of his death or beyond?
Plaintiff Colarusso filed a Complaint on May 25, 1999 against Defendants Transcapital Fiscal Systems, Inc. Top Hat Value Added Plan, Transcapital Fiscal Systems, Inc., Transcapital Warranty Corp., Estate of Eugene T. Day, Jr., James Mulligan, Richard C. Gardner ("Gardner"), Connelly Campion Wright, Inc. ("CCW"), and John Does 1-20 (unidentified members of the Board of Directors of Transcapital and Transcapital Warranty), alleging violations of ERISA and a pendant state law claim for unpaid commissions earned by Plaintiff. Plaintiff did not pursue his claims against the Transcapital Defendants nor James Mulligan, the president of Transcapital following Day's death in February 1997, because the company filed for bankruptcy protection in the United States Bankruptcy Court for the Eastern District of New York during the instant litigation. Defendant Gardner was an insurance agent who played a key role in the creation of the Plan. CCW is the agency for which Gardner worked. After the bench trial, the Court issued an oral opinion and order on January 11, 2002 dismissing Plaintiff's claims in Counts I and III of his Complaint against Defendants CCW, Gardner and Day as time-barred by the applicable statute of limitations. However, Plaintiff's claim in Count II of his Complaint against Day demanding the imposition of penalties pursuant to 29 U.S.C. § 1132(c)(1)(B) remained. The Court will herein resolve the issue of Day's liability based on the trial record and the post-trial memoranda submitted by the parties.
Plaintiff Colarusso was an employee of Transcapital Fiscal Systems, Inc. ("Transcapital") from in or about 1986 until November 1993. On December 15, 1987, Day, Gardner and Douglas Brown, a representative of CIGNA Financial Advisors, proposed a retirement plan to a select group of Transcapital employees, including Colarusso, and distributed documents summarizing the proposed plan. The Transcapital Fiscal Systems, Inc. Top Hat Value Added Plan (the "Plan") included a Summary Plan Description ("SPD"), Summary Plan Projection, Corporate Resolution, Top-Hat Value Added Plan Corporate Document, and Salary Continuation Document. The SPD provided that the effective date of the Plan was December 23, 1987. Plaintiff asserts that the Plan was to be established as follows: Transcapital would purchase an insurance policy on Plaintiff's life in the face amount of $950,000.00. While Transcapital was to own the insurance policy, Plaintiff was to own the cash value of the program. The life insurance policy would have an annual premium of $10,000.00. To pay the annual life insurance premium, Transcapital was to deduct $5,000.00 per year from Plaintiff's salary and then pay a 100% matching contribution. The program was to run for ten years after which the premium would stop and the policy would be owned entirely by the employee. From the documents submitted with the SPD it appears that if the employee were to die during the ten year premium payment schedule, the employer would be entitled to the death benefit and the employee's beneficiaries would be entitled to the remaining cash value.
Pertinent facts listed in the SPD include: the Plan administrator was Eugene T. Day, Jr.; eligibility for the Plan would be determined by the Board of Directors; Transcapital would match each dollar contributed by the employee at a ratio of 100%; and vesting would be 100% upon entering the Plan. The SPD further provided that the employee owns the cash value of the program and, at the end of the premium payment schedule, the employee could either (1) cancel the policy and take its cash value, (2) convert the policy's cash value to an annuity, (3) elect paid-up life insurance coverage, (4) continue paying premiums under the policy, or (5) elect paid-up insurance coverage and take tax-free annual loans from the policy for life.
On or about March 3, 1988, Plaintiff enrolled in the Plan by signing a form authorizing bi-weekly deductions from his wages in the amount of $250.00 to be contributed to the Plan. Plaintiff asserts that for the next three years, the Plan appeared to operate as represented in the SPD. During each of the three years, Transcapital deducted $5,000.00 from Plaintiff's wages as his contribution toward the costs of the insurance policy and then matched that contribution. In addition, Transcapital contributed an extra $13,853.00 of Plaintiff's money to the Plan in lieu of commissions and bonus. Day periodically arranged for an "account statement" to be sent to Plaintiff showing the status of his benefits under the Plan.
However, by adopting the arguments presented by Defendants CCW and Gardner in their Trial Memorandum, Defendant Day asserts that no plan was every actually established. Day acknowledges that the transactions initially contemplated that the cash value was to be owned by the employee and the death benefit by the employer. Defendant also acknowledges that although the policies were issued with Transcapital as owner and beneficiary, policy ownership was to be changed once the requisite legal documents were drafted and signed by lawyers for Transcapital. However, such documents were never completed. Accordingly, Defendant asserts, Transcapital remained the owner and beneficiary of the Plan. Thus, Defendant maintains that only a life insurance policy was established, not an employee benefit plan subject to ERISA regulations.
In late 1990, Day informed Gardner that Transcapital was experiencing financial problems and could not continue making the payments to the Plan that he was presently making. Day was advised to determine what the mortality charges on the life insurance would be and pay at least that portion of the premium. Thereafter, Day explained his financial situation to each participant in the Plan, including Plaintiff, and informed them that he was "canceling" the matching contribution aspect of the Plan. Thereafter, deductions from Plaintiff's account ceased. Plaintiff asserts that Transcapital did continue to pay the policy premiums to keep the policy and the Plan in force.
In or about 1990 or 1991, a few individuals left Transcapital and took some of the cash value from their life insurance policies as they requested. Plaintiff claims that upon voluntarily leaving Transcapital in November 1993, he made several inquiries to Day and Gardner regarding his rights under the Plan and requested a policy summary and statement of his non-forfeitable benefits and options. Plaintiff alleges that out of frustration at the failure of Day and Gardner to respond, he sent requests for information about the Plan directly to CIGNA, the company that issued the insurance policies. On March 17, 1994, Gardner sent Plaintiff a letter notifying him of the status of his policy. Enclosed with the letter was an election form providing Plaintiff with the option to pay the premiums himself and have the life insurance policy transferred to his name, or, in the alternative, to reject the transfer of the policy and allow the policy to be returned to CIGNA. Gardner asserts that he never received the signed form from Plaintiff and never knew whether the form was returned to Day. Therefore, in or about June 1994, at Day's request, Gardner sent Day the cash surrender forms for the life insurance policy on Plaintiff. Day signed the surrender forms in July 1994 and returned them to Gardner who signed as a witness. Gardner then forwarded the forms to CIGNA and requested that they be cashed in.
Plaintiff acknowledges that he received the letter of March 17, 1994 with an election form regarding a transfer of ownership of the policy. While Plaintiff does not assert that he returned a completed form to either Day or Gardner, he claims that he spoke with Gardner several times throughout March and April 1994. Plaintiff also asserts that Gardner told him that Day had not yet authorized the release of the policy to Plaintiff even though Gardner had previously told him that Transcapital would transfer the ownership of the policy to him if Plaintiff so elected. Plaintiff further claims that Gardner told him not to worry about paying the insurance premium on the policy because Transcapital was paying it for him.
In his certification in support of his opposition to Garnder and CCW's motion for summary judgment, Plaintiff asserts that on or about June 20, 1994, he asked Day via telephone to provide information and documentation relating to the Plan, including: (1) an insurance policy summary with an individual account statement for his account under the Plan; (2) a list of his non-forfeitable benefits and options; and (3) copies of all documents relating to the Plan that were signed by him. Plaintiff further claims that in response, Day indicated he had no reason to cooperate with Plaintiff and stated that the Plan would remain in place for the ten year period as originally contemplated, at the expiration of which Plaintiff could exercise his rights under the Plan. Plaintiff asserts that he never received the information he requested.
At trial, Plaintiff testified that after leaving several messages for Day, he finally spoke with him around June 20, 1994. Plaintiff testified that he reminded Day that he had been asking for his "plan summary lists of nonforfeiture benefits, [his] options and that they had not yet been provided." (January 8, 2002 Transcript, 46:7-9). Plaintiff further testified that Day told him that "as far as he's concerned it's a ten year plan and he's going to have [Plaintiff] wait for the ten years to complete. At the end of the ten years he would turn it over to [Plaintiff]." (January 8, 2002 Transcript, 46:9-12).
The ten year premium payment schedule expired in December 1997. Plaintiff testified at trial that prior to that date, in October and early December 1997, he wrote to James Mulligan, then-president of Transcapital, requesting that the policy be turned over to him. Plaintiff never received a response from Mulligan and only after filing the instant suit did Plaintiff learn that his policy had been cashed in at the direction of Day in July 1994.
Plaintiff alleges that the Plan at issue in the instant case is an employee welfare benefit plan, an employee pension benefit plan, or a combination of both within the meaning of ERISA, and therefore, the Plan imposes duties upon its fiduciaries. Plaintiff claims that Day was a fiduciary to the Plan and that he is subject to the penalty provision of 29 U.S.C. § 1132(c)(1)(B) for failing to provide the information Plaintiff requested concerning the Plan and/or information regarding modifications made to the Plan. Accordingly, Plaintiff alleges Day is liable to Plaintiff for civil penalties in the amount of $100.00 per day since June 20, 1994, the date of Plaintiff's request for the information.
I. The Transcapital Fiscal Systems, Inc. Top Hat Value Added Plan was an Employee Benefit Plan Subject to ERISA Regulations
Defendant Day argues that ERISA does not apply to the transactions at issue because the alleged plan was never actually established. While Defendant acknowledges that Transcapital obtained a policy insuring Plaintiff's life, Defendant denies that the policy was part of the Plan pursuant to which Plaintiff alleges he should have received benefits. Rather, Defendant asserts that because Transcapital failed to execute certain plan documents, nothing more than an insurance policy existed. Based on Congress' liberal interpretations of ERISA's application to employee benefit plans and the relevant evidence submitted by Plaintiff ...