Opinion ID: 766103
Heading Depth: 2
Heading Rank: 1

Heading: United Way's Appeal

Text: 23 A. Whether the district court erred in concluding that Aramony was entitled to benefits under the RBP 24 United Way contended in the district court that Aramony was not entitled to benefits under the RBP because: (1) the draft plan with its felony forfeiture provision, rather than the signed plan without it, controls as to the specific terms of the RBP; (2) in any event, the signed plan should be construed as containing a felony forfeiture provision; and (3) even if not, the benefit calculation formula provided in the signed plan refers to and depends upon a non-existent qualified contribution plan and, therefore, the RBP provides no benefits to anyone. The district court rejected these arguments, and United Way now appeals. 25 1. Whether the district court erred in determining that the signed plan controls as to the terms of the RBP 26 The district court's determination that the RBP does not contain a felony forfeiture provision turned in the first instance on its conclusion that the signed rather than the draft plan is the controlling manifestation of United Way's intent. In support, the court observed that the signed plan is an executed agreement, is complete as to all its terms, and has been disseminated to United Way's employees. SeeAramony, 28 F. Supp. 2d at 166. In contrast, the draft plan is unsigned, is incomplete in significant respects, and has not been disseminated at all. See id. The court then considered and rejected United Way's arguments that (1) the Executive Committee, by voting at the February 1984 meeting to adopt a replacement benefit plan, intended to incorporate all specific terms, including the felony forfeiture provision in the draft plan that was submitted to the Committee, see id., and (2) Paulachak, the senior vice president who signed the RBP, lacked authority to bind United Way to an agreement that lacked a felony forfeiture provision, see id. at 166-67. 27 On appeal, United Way argues that the district court erred both in determining that the February 1984 vote was not intended to bind United Way to the terms of the draft plan, and in concluding that senior vice president Paulachak had implied authority to bind United Way to the terms of the signed plan. These were factual determinations, made after a bench trial by the district court in its capacity as fact-finder. See Eli Attia Architects v. Safra, No. 94 CIV. 2928 (KMW), 1996 WL 480721, at  (S.D.N.Y. Aug. 23, 1996) (intent to enter into binding contract is question of fact under New York law); Rubin v. Dairymen's League Co-operative Ass'n, 259 A.D. 23, 25, 18 N.Y.S.2d 466, 468-69 (3d Dep't) (implied authority of agent to enter into a contract on company's behalf is question of fact under New York law) (citing Burke v. Bonat, 255 N.Y. 226, 174 N.E. 635 (1931)), aff'd, 284 N.Y. 32, 29 N.E. 458 (1940). Our review is therefore for clear error. See Fed. R. Civ. P. 52(a); Apex Oil Co. v. Vanguard Oil & Serv. Co., 760 F.2d 417, 421-22 (2d Cir. 1985) (clear error review applies to bench trial determination that contract was formed); cf. Masuda v. Kawasaki Dockyard Co., 328 F.2d 662, 664 (2d Cir. 1964) (reviewing, in the light most favorable to the plaintiff, the sufficiency of the evidence supporting jury's finding in the plaintiff's favor of implied authority). 28 We consider first United Way's claim that the Executive Committee, by voting in favor of a replacement benefit plan at the February 1984 meeting, intended to bind itself to the specific terms set forth in the draft plan put before it, including the felony forfeiture provision, and that the district court's contrary finding, that the board intended only to approve the general concept of an RBP while leaving the relevant details to be worked out between Paulachak and Mutual, was clearly erroneous. We conclude to the contrary that the district court's conclusion was well-supported by the record. 29 Robert Beck, the former chairman of United Way's board, testified that, in approving pension proposals, the Board and/or the Executive Committee would get into enough detail to understand what was being proposed but certainly not into the drafting phase or -- or the real details of the particulars of the plan. Such details, Beck explained, would be left to the employee benefit people who are our advisors. The agenda accompanying the draft plan, moreover, made no mention of specific details aside from the purpose of the RBP. There is no evidence that details of the RBP generally or the forfeiture provision in particular were discussed by the Executive Committee. The draft plan attached to the agenda was patently incomplete. And Paulachak testified that the board actually issued a resolution directing him to develop the RBP plan document in conjunction with Mutual. On this record, we cannot conclude that the district court erred, clearly or otherwise, in finding as a matter of fact that the board did not by its February 1984 vote intend to bind itself to the specific terms of the draft plan attached to the agenda before it rather than the formal draft prepared as a result of the action taken at the meeting. 30 For similar reasons, we cannot conclude that the district court erred in finding that senior vice president Paulachak had authority to bind United Way to the terms of the signed plan. Implied authority may be viewed as 'actual authority given implicitly by a principal to his agent' or as a 'kind of authority arising solely from the designation by the principal of a kind of agent who ordinarily possesses certain powers.' Masuda, 328 F.2d at 664-65 (quoting Lind v. Schenley Indus., Inc., 278 F.2d 79, 85 (3d Cir.) (applying New York law), cert. denied, 364 U.S. 835 (1960)). The general rule followed in New York is that 'an agent employed to do an act is deemed authorized to do it in the manner in which the business intrusted to him is usually done.' Masuda, 328 F.2d at 665 (quoting Wen Kroy Realty Co. v. Public Nat. Bank & Trust Co., 260 N.Y. 84, 89-90, 183 N.E. 73, 74 (1932) (quoting Argersinger v. MacNaughton, 114 N.Y. 535, 537, 21 N.E. 1022, 1022 (1889))). In light of Paulachak's uncontradicted testimony that the board directed him to develop the RBP document in conjunction with Mutual, the court's finding of implied actual authority was warranted. The district court therefore did not err in concluding that the signed rather than the draft plan controls as to the terms of the RBP. 31 2. Whether the district court erred in concluding that the signed plan unambiguously does not include a felony forfeiture provision 32 United Way argues that even assuming the signed plan was effective, the district court erred by failing to read it to contain a felony forfeiture clause. The district court rejected this argument on the ground that the signed plan does not contain such a clause, providing unambiguously instead that 'rights under this Plan shall become nonforfeitable upon termination of employment.' See Aramony, 28 F. Supp. 2d at 168. 33 As a general matter, unambiguous language in an ERISA plan must be interpreted and enforced in accordance with its plain meaning. See, e.g., Devlin v. Transportation Communications Int'l, 173 F.3d 94, 103 (2d Cir. 1999); American Fed'n of Grain Millers v. International Multifoods Corp., 116 F.3d 976, 980 (2d Cir. 1997). Language is ambiguous when it is capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement. O'Neil v. Retirement Plan for Sal. Empl. of RKO Gen., Inc., 37 F.3d 55, 59 (2d Cir. 1994) (internal quotation marks omitted). In making this determination, moreover, reference may not be had to matters external to the entire integrated agreement. See id. at 58-59. We subject the determination that an ERISA plan provision is unambiguous to de novo review. SeeI.V. Servs. of Am., Inc. v. Trustees of Am. Consulting Eng'rs Council Ins. Trust Fund, 136 F.3d 114, 119 (2d Cir. 1998). 34 Applying these standards to the signed plan, we agree with the district court's conclusion that the language is unambiguous. The signed plan simply does not include a felony forfeiture exception to its otherwise sweeping non-forfeiture clause. There is no basis upon which to read one into the contract. 35 3. Whether the district court erred in concluding that the signed plan's benefit formula is ambiguous and should be construed as referring to United Way's qualified defined benefit plan 36 United Way argues that the district court erred by failing to find that the signed plan's benefit calculation formula, referring as it does to a non-existent qualified defined contribution plan rather than United Way's qualified defined benefit plan, renders the entire document meaningless. The district court agreed that the benefit formula, on its face, would not require the payment of any benefits. Aramony, 28 F. Supp. 2d at 167. Nonetheless, because the provisions of an ERISA plan should be construed so as to render all provisions meaningful and to avoid illusory promises, the court concluded that the apparently meaningless provision is ambiguous. Id.at 167 (citing an earlier unpublished opinion of the district court in this case in turn citing Carr v. First Nationwide Bank, 816 F. Supp. 1476, 1493 (N.D. Cal. 1993) (internal quotation marks omitted)). The district court, referring to the mistaken reference as akin to a scrivener's error, id. at 168, then resorted to external evidence of United Way's intent. It being undisputed that United Way had intended to base the benefit formula on its qualified defined benefit plan, the court so construed the signed plan. See id. at 167-68. 37 On appeal, United Way argues that the district court erred by failing to apply the four-corners-of-the-document approach to the determination of ambiguity in this instance despite having applied it strictly in the context of the forfeiture provision issue. We see no such inconsistency. It is true, of course, that in order to know that the signed plan's benefit formula is meaningless one must know also that United Way's underlying plan is a defined benefit plan. But it is not necessary to go beyond the scope of the entire integrated agreement, O'Neil, 37 F.3d at 59 (internal quotation marks omitted), in order to know that. The signed plan specifically refers to and depends upon the existence of United Way's pension plan, incorporating it by reference. The entire integrated agreement therefore includes United Way's qualified defined benefit plan. It is this underlying plan that the benefit formula mistakenly calls a contribution plan, a mistake made obvious by reference to the qualified defined benefit plan itself. The ambiguity of the benefit formula in the signed plan is thus ascertainable without need to resort to matters outside the four-corners of the entire integrated agreement. There is no basis for concluding that the district court employed a double-standard in construing the forfeiture and benefit formula provisions. 38 We therefore affirm the decision of the district court that Aramony is entitled to benefits under the RBP. 39 B. Whether the district court erred in concluding that the RBP includes a benefit accounting for the subsequent enactment of I.R.C. §401(a)(17) 40 United Way contends next that, even assuming Aramony is entitled to benefits under the RBP, the district court erred in calculating the scope of the benefits provided under that plan to include a benefit offsetting the impact of I.R.C. §401(a)(17), a tax-code provision enacted subsequent to the adoption of the RBP that can limit significantly the amount of benefits available under the RBP. 3 United Way gave Aramony projections of the amount of his benefits that reflected inclusion of the §401(a)(17)-neutralizing benefit. SeeAramony, 28 F. Supp. 2d at 169-71. United Way challenges the district court's conclusion that United Way is thereby estopped from denying that the RBP provides this benefit. 41 ERISA is a federal law regime for regulating employee benefits designed to eliminate the threat of conflicting state and local regulation of benefit plans. Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 79 (2d Cir.), cert. denied, 519 U.S. 1008 (1996). Federal courts hearing ERISA claims are not bound by the law of the state in which the claim arises. See id. With respect to claims of promissory estoppel in suits brought under ERISA, this Court has therefore adopted principles of promissory estoppel drawn from the law of various states. Under our case law, promissory estoppel in ERISA cases requires satisfaction of four elements drawn from the state common law of promissory estoppel: (1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, and (4) an injustice if the promise is not enforced. Id. 42 In order to lessen the danger that commonplace communications from employer to employee will routinely be claimed to give rise to employees' rights beyond those contained in formal benefit plans, however, we have added that an ERISA plaintiff must adduce[] not only facts sufficient to support the four basic elements of promissory estoppel, but facts sufficient to [satisfy an] 'extraordinary circumstances' requirement as well. Devlin, 173 F.3d at 102; see also Schonholz, 87 F.2d at 78; Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993), and cased cited therein. 43 Mutual, acting as United Way's agent, on two occasions gave benefit projections to Aramony that Aramony claimed amounted to representations that the RBP provides a §401(a)(17)-neutralizing benefit. 4 It was these promises that Aramony claimed and the district decided estopped United Way from denying that it was bound to provide the benefit. The court found that Aramony relied (common-law element no. 2) on the representations (element no.1) contained in the projections when he allocated the benefit to his wife during his divorce settlement, and that he consequently would be injured (element no.3) if he did not receive these funds. The court concluded also that it would be unjust (element no. 4) to deny the benefit to Aramony because the RBP was ambiguous as to whether it was intended to offset subsequently enacted tax laws such as §401(a)(17), and because Mutual's benefit projections implied that the RBP did in fact provide that benefit. Aramony, 28 F. Supp. 2d at 169-70. 44 The district court found the added requirement that extraordinary circumstances be shown in ERISA cases to be satisfied based on the same facts underlying its finding that it would be unjust to deny the benefit, especially the court's conclusion that the RBP is ambiguous on this point. In support, the court cited James v. New York City Dist. Council of Carpenters' Benefits Funds, 947 F. Supp. 622 (E.D.N.Y. 1996), which held that the extraordinary circumstances requirement may be satisfied if the promise in issue amounts to an interpretation of an ambiguous provision and not a modification of the plan. See Aramony, 28 F. Supp. 2d at 170-71. James derived this rule from the Eleventh Circuit's decision in Kane v. Aetna Life Ins. Co., 893 F.2d 1283, 1285-86 (11th Cir.) (oral representations on behalf of an employer interpreting ambiguous provisions in a medical benefit plan as to coverage of the plan binding on employer on promissory estoppel theory), cert. denied, 498 U.S. 890 (1990). Purporting to apply the Kane rule, and interpreting the representation that the RBP offsets the effects of §401(a)(17) as an interpretation of an ambiguity in the RBP, the district court in the case at bar apparently concluded that, because the projections were an interpretation not a modification of the RBP, the requisite extraordinary circumstances were present. 45 The problem with the district court's approach is that the Kane rule does not control in this Circuit. See Bonovich v. Knights of Columbus, 146 F.3d 57, 63 (2d Cir. 1998) (stating that the Kane rule is not the law in this circuit.... Nor do we see any reason to adopt Kane at this time. ). Even if it did, however, it would not support the district court's analysis. The effect of the Kane rule is to limit the category of cases capable of otherwise satisfying the extraordinary circumstances requirement to the subset of those cases that involve an interpretation of an ambiguous ERISA plan provision; it does not follow from Kane -- or James, for that matter -- that all cases involving an interpretation of ambiguous plans necessarily present extraordinary circumstances. Irrespective of whether the extraordinary circumstances requirement may be satisfied only in the context of a representation interpreting an ambiguity in an ERISA plan, the requirement is in any event not satisfied unless the surrounding circumstances are indeed beyond the ordinary. Cf. Devlin, 173 F.3d at 102 (emphasizing that a finding of extraordinary circumstances requires a remarkable consideration such as the use of a promise of benefits to induce certain behavior on the employee's part). 5 46 Aramony points to nothing beyond the ordinary about the circumstances surrounding the promises allegedly made to him except his asserted ability to satisfy the common-law elements of promissory estoppel. Nothing, for example, suggesting that United Way made a promise to Aramony in order to induce him to take action for United Way's benefit only later to renege on the promise. That sort of behavior by an employer could, under Schonholz and Devlin, amount to extraordinary circumstances. 47 Aramony relies on two determinations by the district court: that the RBP is ambiguous as to whether it provides this benefit, and that Mutual's benefit projections constituted a promise that the benefit is included. But this combination of ambiguity -- which we have concluded does not alone suffice to establish extraordinary circumstances -- and the promise element of ordinary estoppel analysis does not meet the standard articulated in Devlin either. We therefore conclude that Aramony's ERISA promissory estoppel claim fails. 48 The district court's alternative basis for its ruling does not rescue the claim. The court suggested in a footnote that extraordinary circumstances need only be shown where the actuarial soundness of an ERISA plan is in jeopardy and, because extension of the RBP to account for §401(a)(17) would not trigger this concern, Aramony was not obliged to make such a showing. See Aramony, 28 F. Supp. 2d at 171 n.25. We disagree. 49 It is true, as the district court pointed out, that in Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032, 1041 (2d Cir. 1985), cert. denied, 475 U.S. 1012 (1986), we indicated that the adoption of the extraordinary circumstances requirement as a prerequisite for the maintenance of an estoppel claim in the ERISA context was rooted, at least in part, in a concern for the actuarial soundness of pension plans. In so doing, however, we did not bifurcate ERISA-context estoppel claims into those claims that threaten the actuarial integrity of a pension plan and therefore are subject to the extraordinary circumstances requirement, and those that do not and therefore are not subject to the requirement. Cf. Devlin, 173 F.3d at 102 (no mention of actuarial soundness); Bonovich, 146 F.3d at 63 (same); Schonholz, 87 F.3d at 79-80 (same); Lee, 991 F.2d at 1009 (same). It is well that we did not, given the difficulties that would confront courts attempting to determine whether an actuarial threat is or is not present. We thus disagree with the suggestion of the district court that because actuarial soundness is not in issue here, Aramony was not obliged to demonstrate extraordinary circumstances in this instance. 50 We therefore reverse the determination of the district court that United Way is estopped from denying that the RBP provides a benefit offsetting the effect of § 401(a)(17). As part of its estoppel analysis, the district court decided, however, that the RBP was ambiguous on this point. We remand, therefore, so that the district court may consider whether United Way is contractually bound by the RBP itself to provide the benefit to Aramony. 51 C. Whether the district court erred in calculating damages on United Way's breach of fiduciary duty counterclaim 52 After finding in United Way's favor on its breach of fiduciary duty counterclaim, the district court turned to the question of damages. The court first determined that, under New York state law, which the parties agree governs the counterclaims, Aramony was obliged to forfeit salary paid to him during his period of disloyalty. SeeAramony, 28 F. Supp. 2d at 176. The court concluded, however, that this forfeiture did not extend beyond the seven-year limitations period applicable to the breach of fiduciary claim, a period the court fixed as beginning in September 1989. 6 Seeid. 53 United Way contends that it was error for the district court thus to limit its recovery and that, because its claim was timely with respect to Aramony's misconduct occurring from 1989 onward, it should recover also for Aramony's earlier misconduct insofar as it, too, constituted a breach of fiduciary duty. In our view, United Way's argument amounts to a naked invitation to disregard the statute of limitations, and this we decline to do. 54 After determining the extent of Aramony's salary forfeiture, the district court next considered the question of consequential damages, determining that United Way was entitled to recover for any injury as to which Aramony's breach was a substantial factor. 7 See id. at 176-77 (citing Milbank, 13 F.3d at 543). Applying this standard, the court concluded that United Way was entitled to recover for much but not all of the legal, investigative, and accounting costs it allegedly incurred as a consequence of Aramony's misconduct. 55 On appeal, United Way contends that the district court erred by failing to award it a full recovery as to each of these costs. The nub of United Way's argument is that, in order for it to recover one hundred percent of these costs, it was only necessary for it to demonstrate that Aramony's misconduct was a substantial factor as to some portion of them. We are not persuaded. 56 It is true, as United Way argues, that it is unnecessary under the substantial factor standard to demonstrate that a defendant's breach is the sole cause of an injury in order to recovery for the entire injury. But the fact that Aramony's misconduct was a substantial factor in causing United Way to pay for a wide variety of services does not entitle it to recover for other services that the court found to be unrelated to Aramony's misconduct simply because the same providers rendered the services and they bore some tangential relationship to Aramony's behavior. The district court therefore correctly concluded that United Way was obliged to establish separately the requisite causation as to these distinct services and costs, and we affirm its conclusion that United Way failed to do so. 57 Finally, United Way challenges the district court's decision to award no damages with respect to decreases in United Way's annual dues revenue and costs associated with those decreases. United Way characterizes the district court's opinion on this point as recognizing that Aramony's misconduct may have been a substantial factor in causing these injuries, but nonetheless declining to award damages on the inappropriate basis that the court could not quantify the extent of the decreases attributable to the misconduct. This is a misreading of the district court's ruling. The court specifically found that Aramony's criminal conduct was not a 'substantial factor' in causing the post-1991 reduction in dues percentage or in contributions. Id. at 178. 58 United Way's argument that that conclusion was clearly erroneous is unpersuasive. United Way contends that the district court should have found that the misconduct was a substantial factor in the revenue decreases in light of press reports and opinion polls indicating the possibility that donors and potential donors may have been adversely affected by media reports of abuse of perks, mismanagement of funds, and embezzlement at United Way. While these reports and polls are consistent with United Way's interpretation of events, it does not follow that the district court's contrary conclusion was wrong. The evidence at trial supported the court's finding that, during the relevant period, United Way reduced the percentage of dues it collected from its local chapters, and there was no evidence conclusively linking this reduction with Aramony's misconduct. On the contrary, there was evidence that the reductions began prior to public revelation of Aramony's misconduct. Similarly, the district court's analysis of the opinion polls upon which United Way relies demonstrates persuasively that the polls fail to show the extent, if any, to which Aramony's misconduct may have contributed to a drop-off in donations to the locals. See Aramony, 28 F. Supp. 2d at 177-78. The district court's finding of fact was not clearly erroneous. Finally, we reject also United Way's token argument that the district court erred in failing to award it damages for the costs of public relations services provided to it by the firm of Hill & Knowlton. The district court concluded that none of Aramony's conduct occurring within the statute of limitations period was a substantial factor in causing this expense, see id. at 180, and United Way points to no particular or persuasive basis for reversing this conclusion.