Dowman v. Chubb Corp.

          MEMORANDUM

          PETER G. SHERIDAN, U.S.D.J.

         This action arises out of Defendants' denial of ERISA benefits to Plaintiffs Walter Dowman and Jonathan Needham, employees of Defendant Halifax Plantation Golf Management, Inc. ("Halifax")^[1]. The review of this ERISA decision is brought before the Court on three motions:

1. Defendants' Motion for Summary Judgment. (ECF No. 38), seeks (a) to dismiss Plaintiffs' claims against Defendants Halifax, Bellemead, and Chubb because they are not fiduciaries under the plan and (b) to uphold the Committee's determination as reasonable and based on substantial evidence, thus dismissing Plaintiffs' claim against the Committee

2. Plaintiffs' Motion for Partial Summary Judgment. (ECF No. 40), seeks an order finding that the Committee's denial of benefits to Plaintiffs was arbitrary and capricious.

3. Defendants' Motion to Strike Exhibit G to Plaintiffs' Motion for Partial Summary Judgment and the Declaration of Jonathan Needham, submitted with Plaintiffs' Reply Brief (ECF No. 56).

         Plaintiffs aver that in the nineties they were employees of Bellemead and/or Chubb, and as such, they should be qualified members of the Chubb Pension Plan. The relationship among Halifax, Bellemead and Chubb is explained below.

         I.

         Halifax is a subsidiary of Bellemead, which, in turn, is a subsidiary of Chubb. The Committee is the current administrator of Chubb's Pension Plan ("Pension Plan"), Capital Accumulation Plan ("CCAP"), and Employee Stock Ownership Plan ("ESOP") (collectively, "the Plans").^[2] Although Bellemead is a participating employer in the Plans, Halifax is not. Plaintiffs, relying upon corporate-veil-piercing arguments, contend they are in fact employees of Bellemead; not Halifax, and thus are eligible to participate in the Plans. More specifically, Plaintiffs contend that Chubb has created "sham" corporations "to wrongfully exclude employees from participating in the ERISA benefits plans offered to [Bellemead] and Chubb employees." (Complaint, ECF No. 1, at ¶ 8, 43). Specifically, "[Halifax] officers and/or directors were mainly management level employees of [Bellemead] or Chubb. Through these officers and directors, [Bellemead] and Chubb controlled the operations and management of [Halifax]." (Id. at ¶ 26). Plaintiffs also claim that "[Bellemead] employees worked right alongside [Halifax] employees, in some instances perform[ed] the exact same jobs under the direction and supervision of [Bellmead] management." (Id. at ¶ 15). Nonetheless, when Plaintiffs applied for Chubb's Plans, which were available to Bellemead employees, the plan administrator, citing their status as Halifax employees, denied their claims. (CD^[3] 1105-17).

         IL

         Halifax was incorporated in Florida in 1992 as a wholly-owned subsidiary of Bellemead. It manages a single golf course in Ormond Beach, Florida. (Defendant's Statement of Material Facts, at ¶ 7-8; CD 1020, 1024-26, 1085). Plaintiff Needham worked at Halifax from April 12 to September 12, 1993, and then returned to the company as a general manager on July 29, 1996, and he still works there today. (Id. at ¶¶ 1-3; CD 773-74, 1119). Plaintiff Dowman has worked at Halifax since April 12, 1993, and is currently employed as a golf pro. (Id. at ¶¶ 4-5; CD 773-74).

         Bellemead was incorporated in the State of Delaware in 1923 and became a wholly-owned subsidiary of Chubb INA Holdings, Inc., or its predecessor in the mid-1970s. (Id. at ¶ 9; CD 1105-06). Bellemead is a real estate management company that owns and manages multiple properties in the United States through subsidiary companies. (Def. SOMF ¶ 10; CD 1576). Chubb owns 100% of the outstanding stock of Bellemead, (Def. SOMF ¶ 11; CD 1120, 1575), which owns 100% of the outstanding stock of Halifax, (id. at ¶ 12; CD 1120, 1576).

         From 1992 to February 1998, Halifax employees, including Plaintiffs, were paid from Bellemead's payroll. (Defendant's SOMF, at ¶ 13; CD 1106, 1119, 1127, 1146-47). Bellemead issued W-2 Forms, and paychecks, which listed Bellemead as the payor and included the Chubb logo. (Id. at ¶¶ 14-15; CD 1119; 1797-1826). Plaintiffs' payroll profile history lists their "Branch" as "Halifax PI Golf and their "Department and Section" as "Bellemead." (Defendant's SOMF, at ¶ 16; CD 1150-51, 1751-53). Despite the payroll records, Dowman was included on the June 27, 1996 Halifax employee list, (Def. SOMF ¶I7; CD 1119, 1152-54); the Halifax "Salary Control Report as of 07/02/97," (Id. at ¶ 18; CD 1119, 1152-54), and the July 23, 1997 Halifax employee list, (Id. at ¶ 19; CD 1119, 1157-59).

         III.

         At a May 8, 1990 meeting, the Committee approved changes to the Pension Plan, the CCAP, and the ESOP, which had been adopted in the 1980s. (Def. SOMF, at ¶ 28; CD 1120, 1957-63). The meeting minutes indicate that "'Affiliated Employer' shall mean the Employer and any corporation which is a member of a controlled group of corporations . . . which includes the Employer; any trade or business (whether or not incorporated) which is under common control. . . with the Employer." (PI. SOMF ¶ 2; CD 1958). Employees of an affiliated employer not participating in the Plans would "be eligible to be a Participant... in accordance with Subsection 2.2(A)(i) if such employee was not a Participant in the Bellemead Development Corporation Employee Profit Sharing Plan and the Chubb Life Profit Sharing Plan" (Plaintiffs' SOMF ¶ 3; CD 1960).

         Pursuant to the express terms of the Pension Plan and CCAP, "Any subsidiary or affiliate may adopt [a] Plan by (1) having its board of directors adopt [the] Plan, and (2) obtaining the consent to such adoption by the [Chubb] Board of Directors." (CD 0006, 0095, 0276). The ESOP provides, "If any company is or becomes an Affiliate, the board of Directors may include the Employees of that Affiliate as eligible for participation in the Plan upon appropriate action by that Affiliate necessary to adopt the Plan." (CD 0451).

         The parties do not dispute that the Bellemead board of directors adopted the CCAP in a November 7, 1991 meeting. (Defendants' SOMF at ¶ 28; Plaintiffs' CSOMF at ¶ 28; CD 1120). At a December 6, 1991 Chubb Board of Directors meeting, Bellemead adopted the CCAP and Pension Plan. About six years later, on December 12, 1997, Chubb's Board of Directors amended the Plans to include an approved list of participating employers: Federal Insurance Company, Chubb Custom Insurance Company, Chubb Custom Market, Inc., and Chubb & Son of Illinois. (Defendants' SOMF at ¶ 30; CD 1171). The Board did so "in connection with ... the transfer of employees to different payroll companies." (CD 1120, 1171; Defendants' SOMF at ¶ 31). Halifax was never named as a participating employer under the terms of the Plans. (Defendants' SOMF at ¶ 28; CD 1120, 1166).

         Absent from the record is any indication that Halifax undertook the steps necessary to adopt the Plans. In early March 1998, Halifax created its own payroll system, which paid its employees directly and, the following year, created the Halifax Plantation 4Ol(k) Profit Sharing Plan & Trust, of which Plaintiffs are participants.^[4] (Defendants' SOMF at ¶¶ 20-21; see 1797-1826, 1902).

         In 2012, Halifax "merge[d] the Halifax Plantation 4Ol(k) Profit Sharing Plan & Trust. . . into the ADP TotalSource Retirement Savings Plan." (Defendants' SOMF at ¶ 22; CD 1119, 1160). Under this arrangement, all "personnel account information and account transaction history" from employees' plans were transferred to ADP, and ADP assumed responsibility for critical HR management processes, including payroll, benefits and policy administration. (Defendants' SOMF ¶22, 231 CD 1119, 1160-63). The record does not indicate that the new agreement affected Halifax's responsibility for overseeing the day-to-day activities of the employees. (Id. at ¶ 25; CD 1119, 1160-63).

         In 2014, Needham was named President of Halifax and learned that Bellemead employees were entitled to Chubb-sponsored employee plans that were not available to Halifax employees. (Complaint at ¶¶ 20-23). On July 1, 2015, Plaintiffs submitted a claim for benefits with the Committee, contending that they were "entitled to the rights and benefits of the [CCAP] or [the ESOP]." (Complaint, ¶ 33; CD 0745; Defendants' SOMF, ¶ 34; CD 0745). According to the ERISA documents, with regard to the Pension Plan and the CCAP, the Committee had "the exclusive right to interpret [the Plans] and to decide all matters arising [t]hereunder, including the right to remedy ambiguities, inconsistencies or omissions in [the Plans]." (CD 0055; CD 0140-41; Defendants' SOMF ¶ 36, 37). In replying to Needham's claim, Carolyn Kennedy, the Chairperson of the Committee, responded with two letters. The first letter dated July 28, 2015, notified Plaintiffs' counsel that "as of October 29, 2004, [ESOP] merged with and became part of CCAP and ceased to exist as a separate plan." (CD 0795). The second letter, dated December 29, 2015, denied Plaintiffs' claims for benefits (hereinafter, "Initial Denial"), explaining that under both the CCAP and Pension Plan, only eligible employees and participating employers were entitled to participate in either plan. (Defendants' SOMF at ¶ 39; CD 760-63).

         In the Initial Denial, the Committee determined that because Halifax was not a participating employer, Plaintiffs were not entitled to benefits under either plan. (Id.). In addition, the letter explained:

Regardless of whether Halifax employees are or were under the review, supervision and control of [Bellemead] or of Chubb, or whether they are deemed to be or reclassified as employees of [Bellemead] or another Affiliate of [Bellemead] or Chubb, such characterization or reclassification does not create an entitlement of benefits if Halifax is not a Participating Employer.

(CD 762). In the Initial Denial, Kennedy set forth a review of Plaintiffs' claim, which, in ...