Opinion ID: 766103
Heading Depth: 2
Heading Rank: 3

Heading: The Pension Benefits Litigation

Text: 16 As a consequence of Aramony's misconduct, United Way determined to deny him pension benefits under both the RBP and the SBA. Aramony responded by filing this lawsuit, in which he claimed among other things that he is entitled to benefits under the RBP and SBA pursuant to §502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §1132(a)(1)(B) (providing a civil action to recover benefits due under certain employee benefit plans). Aramony also sought a declaratory judgment pursuant to 28 U.S.C. §2201 as to the scope of the benefits to which he is entitled under these plans. United Way counterclaimed arguing among other things that Aramony had breached his fiduciary duty to the organization and should therefore forfeit certain pension benefits and return other compensation already paid to him. 17 After conducting a five-day bench trial, the district court, in a lengthy, thoughtful, and meticulous opinion, issued a split decision. The court determined that, despite his felony conviction, Aramony was entitled to benefits under the RBP. This conclusion followed from the court's determination that the signed plan rather than the draft plan controlled. The signed plan unlike the draft plan contained no felony forfeiture provision, providing to the contrary that rights under the RBP become nonforfeitable upon termination of employment. See Aramony, 28 F. Supp. 2d at 166-68. The court also determined, applying principles of promissory estoppel, that the RBP included 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 otherwise would have the effect of limiting the amount of § 415 make-up benefits available to highly compensated individuals such as Aramony under the RBP, even though that benefit was never formally included in the RBP. Seeid. at 168 71. 18 On the other hand, the district court rejected Aramony's claim that he was entitled to benefits under the SBA. The court reasoned that the federal common law of forfeiture was applicable to that agreement because the agreement was silent as to forfeitability. Aramony's disloyalty throughout the period the SBA was in force therefore precluded him from receiving benefits under that agreement. See id. at 171. The court also rejected Aramony's request for attorneys' fees. See id. at 174-75. 19 Addressing United Way's counterclaims, the district court had little trouble concluding that Aramony was liable to United Way for, among other things, breach of his common-law fiduciary duty. Seeid. at 175-76. The court determined, first, that as a result of this breach Aramony was obligated to disgorge the $951,250 in salary paid to him during the limitations period applicable to this claim. The court then considered United Way's claims of consequential damages, concluding that it was entitled to recover for any injuries as to which Aramony's misconduct was a substantial factor. See id. at 177 (citing Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537, 543 (2d Cir. 1994)). Applying this standard, the court awarded consequential damages of: (1) $65,400 out of a requested $1,586,695 in legal fees paid to Verner Liipfert; (2) $20,000 out of a requested $217,390 in legal fees paid to Weil, Gotshal and Manges, which United Way had retained to provide counsel to its board members; (3) $62,000 out of a requested $140,426 in investigative fees paid to IGI; (4) $75,000 out of a requested $373,653 in accounting fees paid to Coopers & Lybrand; (5) $4,950 paid to the public relations firm Smith & Haroff which United Way had hired to provide media training to its senior officials; and (6) $4,788 expended on the production and distribution of a videotape explaining United Way's position on Aramony's misconduct. See id. at 179-81. The court permitted no recovery, however, on United Way's claims for: (1) public relations fees paid to Hill & Knowlton in connection with efforts to deal with the initial media reports concerning possible wrongdoing at United Way; (2) costs associated with locating a new president; (3) various travel expenses; (4) decreases in dues revenue received by United Way from its local chapters in 1992, 1993, and 1994; and (5) costs related to the decrease in dues, such as the cancellation of a 1992 conference, the interest costs incurred by United Way when it was compelled to borrow funds to meet payroll obligations in 1992 and 1993, and the costs associated with instituting an early-retirement program that had to be adopted in the wake of the reduction in dues. See id. at 177-81. The district court determined also that United Way was entitled to punitive damages in the amount of $50,000. See id. at 182-84. 20 Ultimately, the court awarded to Aramony $3,221,057 under the RBP, plus an additional $1,177,121.39 in prejudgment interest. See id. at 184. The court awarded to United Way a total of $1,233,388 in actual, consequential, and punitive damages, plus an additional $788,555.92 in prejudgment interest. See id. at 185. Both parties appeal.