Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00272/USCOURTS-caed-1_05-cv-00272-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

SIMON GILL,

Plaintiff,

v.

CHEVRONTEXACO CORPORATION, a

Delaware corporation, TEXACO

INC., a Delaware corporation,

Defendants.

________________________________

AND RELATED CROSS-ACTION.

 

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1:05-cv-00272 OWW LJO

SCHEDULING CONFERENCE ORDER 

Cross-Motions for Summary

Judgment Filing Deadline:

7/14/06

Opposition Filing Deadline:

7/31/06

Reply Filing Deadline:

8/7/06

Hearing Date: 8/28/06 9:00

Ctrm. 2

I. Date of Scheduling Conference.

December 8, 2005.

II. Appearances Of Counsel.

Alexander & Associates, PLC, by William L. Alexander, Esq.,

appeared on behalf of Plaintiff. 

Pillsbury, Winthrop, Shaw, Pittman LLP by Dawn M. Bradberry,

Esq., appeared on behalf of Defendants. 

III. Summary of Pleadings. 

Plaintiff’s Statement

1. Plaintiff was an oil field engineer originally employed

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by Defendant Chevron Texaco Corporation’s (“CT”) predecessor in

interest, Texaco, Inc., in about 1980. After the Chevron-Texaco

merger, Mr. Gill continued to work for the new entity, CT, in

rotational overseas assignments. During periods of 2002 and

2003, he was employed as a manager of Kazakhstan operations. 

Because of many years of employment with Texaco, Mr. Gill was

entitled to benefits vested under Texaco’s “Separation Pay Plan”

(“SPP”), which is CT’s denomination for the “Summary Plan

Description (“SPD”) and Employee Welfare Benefit Plan (“EWBF”),

as defined and regulated by ERISA.

2. Texaco’s SPP expressly provided enhanced benefits for

participating employees, such as Mr. Gill, in the event of a

“Change of Control” (hereinafter “COC”). Texaco’s merger with

Chevron was a COC. In or about the summer of 2003, the

defendants advised Mr. Gill that the Kazakhstan oil field project

where he was employed was being sold; that his employment would

be terminated as of September 30, 2003; and that he had to make

prompt decisions regarding options for benefits allowable under

the current EWBP. Mr. Gill inquired as to the options available

and specifically requested a payout estimate under the COC

provisions. Mr. Gill was assured that his separation benefits

would be paid without income tax or other similar deductions

(such as Medicare), as Mr. Gill was not a United States citizen

(and was not obligated to pay taxes to other nations which had

granted him citizenship).

3. Notwithstanding confirmation of these representations,

the defendants improperly withheld taxes and other amounts from

the same. Mr. Gill now seeks declaratory relief, and money

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damages, both of which will require an accounting of all monies

due him under the defendants’ ERISA plan.

4. Many documents and witnesses supportive of Mr. Gill’s

claims were within the actual control of the defendants. While

it is believed that many former employees who had first hand

knowledge of matters relating to Mr. Gill’s claims have been

terminated from the defendants’ employ, the defendants are

largely the only parties in possession of such witnesses’ last

known addresses or other contact information.

5. The money unilaterally withheld by the defendants from

Mr. Gill’s salary, and retained by the defendants, was money

purportedly due for income or other taxes payable by Mr. Gill to

the United States Treasury or other similarly situated taxing

authorities of those countries in which Mr. Gill was a resident

or citizen. This is sometimes known or described as “theoretical

income tax.”

6. Defendants concede that they did not pay the withheld

money to the United States Treasury or any other similarly

situated taxing authority of those countries in which Mr. Gill

was a resident or citizen, and that defendants retain, and

continue to retain, all such amounts withheld. Defendants

contend they have the right to retain such money.

7. Mr. Gill contends that he is entitled to all such money

unilaterally withheld by defendants from Mr. Gill’s salary for

theoretical income taxes purportedly payable by Mr. Gill, that

defendants wrongfully withheld such money, that Mr. Gill has no

such liability for income taxes to the United States Treasury or

any other similarly situated taxing authority of those countries

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in which Mr. Gill was a resident or citizen, and that defendants

are not entitled to possession or ownership of such money.

8. In addition to the above, Mr. Gill’s successful efforts

to not be subject to the income or similar taxes of any

government actually resulted in monetary benefit to the

defendants, as discussed below.

Chevron’s Statement

1. Plaintiff Simon Gill was employed by Texaco Inc., on or

around October 9, 2001, when Texaco Inc., became a subsidiary

within the Chevron Corporation controlled group. Following the

Chevron-Texaco merger, Plaintiff was employed by Chevron on

overseas assignment at Chevron’s North Buzachi operation in

Aktau, Kazakhstan. Plaintiff’s employment terminated effective

October 9, 2003, following Chevron’s sale of the North Buzachi

operation. Plaintiff received substantial Change of Control

payouts under the Separation Pay Plan of Texaco Inc., at that

time, but sued under the Employee Retirement Income Security Act

of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”) contending that those

payouts should have been larger. The parties recently reached a

settlement of Plaintiff’s ERISA claim and that claim was

dismissed. No further issue remains as to the amount of Mr.

Gill’s benefits under ERISA.

2. Mr. Gill’s complaint contains one remaining claim for

declaratory relief challenging amounts withheld from his salary

and Change of Control payout under Chevron’s tax equalization

policy. The Chevron Tax Equalization Policy (the “CTEP”) and its

predecessor, the Texaco Expatriate Tax Equalization Policy (the

“ETEP”), are mandatory programs applicable to expatriate

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employees. The policies “equalize” the tax effect of an

expatriate assignment by ensuring that expatriate employees

shoulder the same tax burden - pay no more and no less - while

working abroad that they would if they were working in their home

country. Pursuant to the policies, Chevron pays the taxes owed

by expatriate employees to their international host countries,

and in some cases to their home countries, during their

international assignment.

3. Under the CTEP, expatriate employees like Mr. Gill are

responsible to Chevron for the home country tax obligation that

they would have incurred if they had worked in their home country

for the duration of their international assignment. Thus,

Chevron withholds from the expatriate employee’s income a

“theoretical home country tax.” At the end of each calendar year

of the international assignment, KPMG LLP (at Chevron’s expense)

performs a “tax equalization calculation,” which involves

comparing the expatriate employee’s theoretical home country tax

and actual home country tax expenditures to a “hypothetical stayat-home calculation.” The hypothetical stay-at-home calculation

reflects what the expatriate employee’s tax liability would have

been had he or she worked in his or her home country for the

entire period in question. Expatriate employees are responsible

to Chevron for the full amount of this “stay-at-home” tax. If,

at the end of a calendar year, the expatriate’s theoretical home

country tax and actual home country tax payments exceed the

hypothetical stay-at-home tax, then Chevron pays the difference

to the employee. Conversely, if the hypothetical stay-at-home

tax exceeds the sum of the theoretical home country tax and

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actual home country taxes paid by the employee, then the

expatriate employee owes the difference to Chevron. For

international expatriates, year-end tax equalizations are

generally initiated by a request from the employee.

4. In accordance with the CTEP and the ETEP, Chevron

retained theoretical home country taxes from Mr. Gill’s pay and

from his Change of Control payout. Mr. Gill was well aware of

the applicable tax equalization policies. With each

international assignment that Mr. Gill accepted, he received a

written breakdown of his pay, the amount of theoretical home

country taxes to be withheld, and the other benefits to which he

was entitled. Theoretical home country taxes were withheld from

Mr. Gill’s pay from the inception of each international

assignment. Mr. Gill, however, did not consistently request

assistance from KPMG at year-end with the filing of his home

country tax returns and a concurrent tax equalization

calculation.

5. When an international expatriate does not request a tax

equalization, Chevron treats the situation as though the

employee’s hypothetical “stay-at-home” tax were equal to the

amount of theoretical home country tax withheld. If Mr. Gill

believed that Chevron had deducted more in theoretical home

country taxes than he would have owed had he worked for Chevron

in his home country for the full tax years in question, he could

have requested that KPMG assist him in filing returns for such

periods and conduct tax equalizations. He did not do so. 

Instead, Mr. Gill has advanced the fiction that he has no “home

country” and thus cannot be liable for any home country taxes. 

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As set forth below, this argument misapprehends expatriate tax

equalization in general, and the CTEP in particular.

Plaintiff’s Summary of Remaining Claims and Defenses

1. Issue No. 1. The first issue is the income tax

deducted from Mr. Gill on a monthly basis from May 2000, until he

left the company on October 9, 2003. This amount is $47,329.26. 

Chevron’s tax equalization policy does not apply to Mr. Gill for

the following reasons. First, in May 2000 Mr. Gill left Canada

at his own expense and established, at his own expense, that he

was no longer subject to home country tax. Based upon the Texaco

policy at the time, if an individual reduced his home country tax

obligation, by moving at his own expense, he and not the company

benefitted from the reduction in home country tax. Second,

between May 2000 and his resignation from CT on October 9, 2003,

he had no home country tax obligation and did not participate in

the company’s tax equalization program. During this time, and

while CT deducted theoretical tax from his paycheck, CT did not

require Mr. Gill to complete CT’s tax equalization calculations.

2. The money due to Mr. Gill under Issue No. 1, plus 10%

per annum interest, equates to roughly $64,000.00.

3. Issue No. 2. The second issue is that after leaving

the company, at which point there can be no doubt that Mr. Gill

was no longer subject to CT policies, defendants deducted

$10,443.66 from a payment that was made in lieu of vacation not

taken. This deduction was made on October 22, 2003. Again, this

money was kept by defendants and not paid to any tax authority.

4. The amount due under this item, plus 10% per annum

interest, equates to roughly $13,000.00.

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5. Issue No. 3. The third issue is that on November 7,

2003, 29 days after Mr. Gill had left the company, CT paid him

the change of control separation lump sum, but deducted 30% for

theoretical tax. This amounted to roughly $110,000.00. The

defendants did not have the right to deduct this money for the

following reasons. First, and as discussed above, Mr. Gill had

not been participating in the tax equalization program since May

2000. Second, prior to electing to take the separation package,

Mr. Gill was assured in writing that tax would not be deducted. 

And third, the separation package lump sum was paid after Mr.

Gill’s separation from the company and, therefore, his tax

obligations were his responsibility.

6. The amount claimed under Issue No. 3 is roughly

$132,000.00.

7. Issue No. 4. The fourth issue is that Mr. Gill’s

successful efforts to not be subject to the income or similar

taxes of any government actually resulted in monetary benefit to

the defendants. Specifically, the defendants were able to avoid

tax payments they would have been required to make, as an

employer, to make payments to the taxing government on the income

earned by Mr. Gill. The defendants would be unjustly enriched if

they were allowed to retain the theoretical taxes withheld. They

would also be unjustly enriched if, in addition, they were

permitted to reap the benefits of Mr. Gill’s efforts to remain

not subject to any taxing authority.

8. The amount claimed under Issue No. 4 is still unknown. 

Much of the evidence will likely come from the defendants, which

has not yet been produced.

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Chevron’s Summary of Remaining Claims and Defenses

1. In this lawsuit, Mr. Gill challenges the theoretical

home country tax that Chevron withheld from his pay and from his

Change of Control payout. Specifically, Mr. Gill contends that:

(1) the funds withheld were not remitted to any taxing authority;

and (2) he does not owe taxes to any country because he is a

citizen of three countries (Canada, the United Kingdom, and

Trinidad).

2. Mr. Gill misunderstands both the purpose and the terms

of the tax equalization policies that applied to his employment. 

First, Mr. Gill’s assertion that the theoretical home country

taxes were not remitted to any taxing authority is a red herring. 

The tax equalization policies required no such remittance. 

Theoretical home country taxes are “theoretical” rather than real

tax obligations; they are owed to Chevron, not the government. 

Theoretical home country taxes are treated as an advance against

the employee’s hypothetical ‘stay-at-home’ calculation, which is

the amount he would have been obligated to pay had he worked in

his designated home country for the entire term of the

international assignment. The hypothetical stay-at-home

calculation is paid to Chevron to equalize the tax effects of

international assignments for expatriate employees.

3. Mr. Gill’s second contention - that he should not have

to pay theoretical taxes to Chevron because he owes no taxes to

any government - is equally meritless. Under the CTEP and the

ETEP, the fact that an expatriate employee may not actually owe

taxes does not relieve the obligation of paying theoretical home

country taxes to Chevron. Assuming without conceding that Mr.

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Gill could have managed his physical presence in three countries

to avoid owing actual taxes in any of them (as well as the

attendant filing requirements), he still cannot avoid liability

under the CTEP and ETEP. The tax equalization policies were

designed to prevent employees from being better or worse off taxwise due to the expatriate assignment. Accordingly, Chevron

withheld from affected employees an amount estimated to equal the

taxes they would have paid had they worked in their home country

for the duration of the international assignment. Where the

employees actually resided is thus irrelevant. Affording Mr.

Gill the relief he seeks would give him an unfair advantage over

other Chevron employees (both domestic and expatriate) by giving

him a “free ride” on all taxes, both theoretical and real. That

would undermine Chevron’s longstanding efforts to equalize the

tax effects of its employees’ expatriate assignments.

4. The sole document that Mr. Gill relies upon to support

his tax equalization claim is a single e-mail message from former

employee Dolores Matzat dated August 12, 2003, which stated: “I

have been told that your COC gross payment would be your net

payment - no taxes taken out.” Ms. Matzat’s e-mail message was

not authorized by Chevron, and was incorrect. Several authorized

representatives of Chevron promptly informed Mr. Gill that his

Change of Control payout was subject to the tax equalization

policy. Moreover, Mr. Gill cannot have relied upon Ms. Matzat’s

representation. Because Mr. Gill was laid off when Chevron

closed the North Buzachi operation, he had no option other than

to accept the Change of Control payout less the theoretical home

country tax deduction.

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Chevron’s Counter-Claim

1. Chevron has responded to Gill’s suit by filing a

counter-claim under the CTEP and ETEP. Chevron’s counter-claim

asserts that: (1) theoretical home country taxes were property

withheld from Mr. Gill’s pay and Change of Control payout; and

(2) had Mr. Gill requested tax equalization calculations for the

last several years of his employment, they would have shown that

Mr. Gill owes Chevron additional funds because his hypothetical

stay-at-home tax exceeded the sum of the theoretical home country

tax withheld by Chevron and the actual home country taxes that

Mr. Gill paid.

2. After discovery, Chevron will ask KPMG to conduct a tax

equalization based on the information obtained from Mr. Gill. 

Based on what we know to date, Chevron is confident that Mr.

Gill’s hypothetical stay-at-home calculation will exceed the sum

of the theoretical home country tax withheld by Chevron and the

actual home country taxes Mr. Gill paid. The reason is simple. 

Absent a designation of home country from Mr. Gill, Chevron

calculated Mr. Gill’s theoretical home country tax withholding

based upon U.S. tax rates. However, Mr. Gill’s hypothetical

stay-at-home calculation most likely would have been calculated

based on Canadian tax rates, which are significantly higher than

those of the U.S., because Mr. Gill’s designated “point of

origin” in company records was Canada. Using Canadian tax rates,

Mr. Gill’s hypothetical stay-at-home tax calculation likely would

have exceeded the sum of the theoretical home country tax

withheld and any actual taxes he paid. Under the CTEP and ETEP,

Mr. Gill owes Chevron the difference.

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Summary of Procedural Background

1. On February 22, 2005, Plaintiffs Simon Gill and William

Hatcher filed separate actions against Chevron under ERISA

alleging that they were entitled to additional severance benefits

under the Separation Pay Plan of Texaco, Inc. As explained

above, Mr. Gill’s complaint also included a tax equalization

claim.

2. Although the Gill and Hatcher cases were filed

separately in the Eastern District of California, this Court

consolidated the cases at the Mandatory Scheduling Conference on

June 23, 2005. Based on the parties’ representation that Mr.

Gill’s tax equalization claim would likely be resolved

informally, the Court scheduled the plaintiffs’ ERISA claims for

resolution by cross-motions for summary judgment on July 17,

2006, and did not set a trial date. The Court also set a

briefing schedule to resolve the extent of discovery, if any,

that would be permitted with respect to the plaintiffs’ ERISA

claims. On August 15, 2005, Magistrate Judge O’Neill granted

Chevron’s motion to limit discovery on the ERISA claims to the

administrative record. In late September 2005, the parties

reached an informal settlement of the ERISA claims. On October

7, 2005, the parties filed a stipulated request and order for

dismissal with prejudice of the ERISA claims, leaving only Mr.

Gill’s tax equalization claim at issue.

3. On November 1, 2005, the parties attended a telephonic

settlement conference with Magistrate Judge O’Neill to attempt to

resolve Mr. Gill’s tax equalization claim. The parties were not

able to resolve the matter during the settlement conference. 

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Apart from initial disclosures, no discovery has been conducted

to date regarding Mr. Gill’s tax equalization claim. Because no

trial date has been set and Chevron plans to file a motion for

summary judgment, the parties requested a further scheduling

conference.

IV. Orders Re Amendments To Pleadings.

1. The parties do not anticipate filing any amendments to

the pleadings at this time as the ERISA claims do not exist and

the Plan and Plan Administrator do not need to be added as

defendants. 

V. Discovery Plan and Cut-Off Date.

1. The parties are ordered to complete all discovery on

or before June 30, 2006.

2. The parties are directed to disclose all expert

witnesses, in writing, on or before April 30, 2006. Any

supplemental expert disclosures will be made on or before May 30,

2006. The parties will comply with the provisions of Federal

Rule of Civil Procedure 26(a) regarding their expert

designations. Local Rule 16-240(a) notwithstanding, the written

designation of experts shall be made pursuant to F. R. Civ. P.

Rule 26(a)(2), (A) and (B) and shall include all information

required thereunder. Failure to designate experts in compliance

with this order may result in the Court excluding the testimony

or other evidence offered through such experts that are not

disclosed pursuant to this order.

3. The provisions of F. R. Civ. P. 26(b)(4) shall 

apply to all discovery relating to experts and their opinions. 

Experts may be fully prepared to be examined on all subjects and

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opinions included in the designation. Failure to comply will

result in the imposition of sanctions. 

VI. Pre-Trial Motion Schedule.

1. All Dispositive Pre-Trial Motions, and cross-motions

for summary judgment, will be filed on or before July 14, 2006. 

Each party’s opposition shall be filed on or before July 31,

2006. Any replies shall be filed by August 7, 2006. The crossmotions for summary judgment shall be heard on August 28, 2006,

at 9:00 a.m. before District Judge Oliver W. Wanger in Courtroom

2. 

2. Depending upon the outcome of the cross-motions for

summary judgment, a further scheduling conference will be

scheduled after disposition of the motions. 

DATED: December 8, 2005.

/s/ OLIVER W. WANGER

 

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

gill v. chevron sch con

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