Court Opinion

ID: 3173601
Source: CourtListenerOpinion
Date Created: 2016-01-29 20:00:44.132133+00
Date Added: 2024-06-11T12:47:20.922595
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 15-1160

DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,

                Plaintiffs – Appellants,

          and

ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,

                Plaintiffs,

          v.

MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,

                Defendants – Appellees.

-------------------------

UNITED STATES SECRETARY OF LABOR,

                Amicus Supporting Appellants,

AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE        OF   THE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,

                Amicus Supporting Appellees.

                              No. 15-1199

DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,

                Plaintiffs – Appellees,
           and

ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,

                 Plaintiffs,

           v.

MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,

                 Defendants – Appellants.

-------------------------

UNITED STATES SECRETARY OF LABOR,

                 Amicus Supporting Appellees,

AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE             OF   THE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,

                 Amicus Supporting Appellants.

Appeals from the United States District Court for the District
of Maryland, at Greenbelt.    Roger W. Titus, Senior District
Judge. (8:10-cv-01256-RWT)

Argued:   October 28, 2015              Decided:    January 29, 2016

Before SHEDD, DIAZ, and HARRIS, Circuit Judges.

Reversed in part and vacated      in   part;    judgment   affirmed   by
unpublished per curiam opinion.

ARGUED: David C. Frederick, KELLOGG, HUBER, HANSEN, TODD, EVANS
& FIGEL, P.L.L.C., Washington, D.C., for Appellants/Cross-
Appellees.     Jeffrey  Lee   Poston,  CROWELL   & MORING  LLP,
Washington, D.C., for Appellees/Cross-Appellants. David Maurice

                                  2
Ellis, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for
Amicus United States Secretary of Labor.         ON BRIEF: Michael
Klenov, KOREIN TILLERY, L.L.C., St. Louis, Missouri; Timothy F.
Maloney, JOSEPH, GREENWALD & LAAKE, P.A., Greenbelt, Maryland;
Joshua D. Branson, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL,
P.L.L.C.,   Washington,    D.C.,   for  Appellants/Cross-Appellees.
Mark Muedeking, Washington, D.C., Ian C. Taylor, DLA PIPER LLP
(US), Baltimore, Maryland; Clifton S. Elgarten, Aryeh S.
Portnoy, April N. Ross, CROWELL & MORING LLP, Washington, D.C.,
for Appellees/Cross-Appellants. M. Patricia Smith, Solicitor of
Labor, G. William Scott, Associate Solicitor for Plan Benefits
Security, Elizabeth Hopkins, Counsel for Appellate and Special
Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C.,
for Amicus United States Secretary of Labor. Janet M. Jacobson,
AMERICAN BENEFITS COUNCIL, Washington, D.C.; Kate Comerford
Todd,   Warren    Postman,    U.S.   CHAMBER   LITIGATION   CENTER,
Washington, D.C.; Annette Guarisco Fildes, Kathryn Ricard, THE
ERISA INDUSTRY COMMITTEE, Washington, D.C.; Igor V. Timofeyev,
Stephen B. Kinnaird, J. Mark Poerio, Danielle R.A. Susanj, PAUL
HASTINGS LLP, Washington, D.C., for Amici The American Benefits
Council, The Chamber of Commerce of the United States of
America, and The ERISA Industry Committee.

Unpublished opinions are not binding precedent in this circuit.

                                3
PER CURIAM:

       Dennis Bond and Michael Steigman (the Appellants), filed

this      action      against           their          former          employer,           Marriott

International,       Inc.,       alleging         that       Marriott’s            Deferred   Stock

Incentive     Plan    (the          Plan),    a       tax-deferred           Retirement       Award

program,    violates          the     vesting         requirements            of    the    Employee

Retirement    and     Income         Security          Act        of   1974    (ERISA).       After

targeted discovery on the statute of limitations, the district

court found        that    the      claims    were          timely     and     granted      summary

judgment to the Appellants on that issue. Following additional

discovery, the court granted summary judgment on the merits to

Marriott,    concluding          that      the        Plan’s       Retirement        Awards       fell

within the “top hat” exemption to ERISA. The Appellants appeal

that   ruling,      and       Marriott     cross-appeals,              contending          that    the

court erred in finding the Appellants’ claims timely. Because we

conclude that the Appellants’ claims are barred by the statute

of limitations, we affirm judgment in favor of Marriott.

                                               I.

                                     A. The 1970 Plan

       Marriott      created         the     Plan       in     1970,     prior        to    ERISA’s

enactment.    The     1970       Plan      remained          in    effect      until       1978   and

granted Retirement Awards “as a part of a management incentive

program    whereby        a    portion       of       the     annual     bonus        awarded      to

managers    and     other       employees        for     outstanding           performances         is

                                                  4
made   in    the    form       of   deferred        stock.”     (J.A.       93).    Retirement

Awards “contingently vest[ed] in equal annual installments until

age    65”   or     fully       upon    approved       early       retirement,       permanent

disability,        or     death.       (J.A.     94).     The       1970    Plan     expressly

provided      that        “[v]esting           accruals        stop        when     employment

terminates         for        any   other       reason.”           (J.A.     94).     Marriott

distributed        vested       shares     in   “ten     annual       installments         after

retirement, permanent disability or upon reaching age 65” as

long   as    the    employee        refrained         from   “competing,           directly   or

indirectly, with the Company for a period of ten years after

retirement or after age 65 if employment is terminated while in

good standing prior to retirement.” (J.A. 94). Each recipient

received an Award Certificate explaining the vesting schedule.

       The 1970 Plan was open to “any employee . . . whether full-

time or part-time,” including “manager[s] and other employees”

with “outstanding performances.” (J.A. 93). During the relevant

time    period,          in     Marriott’s       workforce,           salaried       employees

comprised about 10% of all employees, and somewhere between 83%

and 91.5% of these salaried employees qualified as “managers.”

Management         employees        were       paid     on     a     salary        scale    that

encompassed a vast number of grades—from 39 to the low 70s.

Grade 56 and above was limited to “executive” managers and grade

61 and above for “senior executives.”

                                                5
       Using an internal four-step process, between 1976 and 1989

Marriott issued Retirement Awards to no more than 1.63% of all

Marriott   employees.   Marriott    issued     roughly     33,000    awards   in

total to almost 10,000 unique individuals, 93% of which were

below grade 56 (executive managers). The individuals held 1,386

unique job titles, including Route Driver, Storekeeper, Tennis

Pro, and Assistant Night Trainee. In every year but one, at

least one Retirement Award recipient totaled $0 gross earnings.

                                  B. ERISA

       In 1974, “after careful study of private retirement pension

plans,” Congress enacted ERISA. Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504, 510 (1981). “Congress through ERISA wanted

to ensure that ‘if a worker has been promised a defined pension

benefit    upon   retirement-and     if   he    has   fulfilled       whatever

conditions are required to obtain a vested benefit- . . . he

actually receives it.’” Id. (quoting Nachman Corp. v. Pension

Benefit Guar. Corp., 446 U.S. 359, 375 (1980)). Congress thus

imposed a variety of new requirements on covered retirement and

pension plans. See 29 U.S.C. § 1001(a). Relevant here, Congress

prohibited the type of vesting schedule present in the Plan and

also   prohibited   “bad   boy”    clauses,    such   as    the     competition

restrictions in the Plan.

       Tucked inside ERISA’s vast statutory text, however, was an

exemption for so-called “top hat” plans. ERISA defines a top hat

                                     6
plan as an unfunded plan that is “maintained by an employer

primarily for the purpose of providing deferred compensation for

a select group of management or highly compensated employees.”

29 U.S.C. § 1051(2). 1 Top hat plans receive a “near-complete

exemption” from “ERISA’s substantive requirements,” In re New

Valley Corp., 89 F.3d 143, 148 (3d Cir. 1996), and “are not

subject      to        certain   vesting,        participation,    and   fiduciary

requirements,” Kemmerer v. ICI Americas Inc., 70 F.3d 281, 286

(3d   Cir.    1995).        Given    the    breadth    of   this   exemption,   the

category of what qualifies as a top hat plan is a “narrow one.”

New Valley Corp., 89 F.3d at 148. That is, a top hat plan “must”

“be unfunded and exhibit the required purpose” and “must also

cover a ‘select group’ of employees.” Id. Whether the group of

employees         is      “select”     is     determined      by    looking     both

      1The Department of Labor (DOL) has never issued notice-and-
comment rules regarding the top hat exemption. In 1990, DOL
issued   an   Advisory   Opinion  interpreting   the   “unfunded”
requirement of the top hat provision. Dep’t of Labor, Opinion
90–14A, 1990 WL 123933 (May 8, 1990). DOL explained that top hat
plan   participants  must   have  the   ability  to   “affect  or
substantially influence . . . their deferred compensation plan.”
Id. at *1. In addition, DOL stated that it interpreted the word
“primarily” in the top hat provision to modify “for the purpose
of providing deferred compensation” and not “for a select group
of management or highly compensated employees.” Id. at *2, n.1.
Thus, in DOL’s view, the top hat exemption was limited to a
“select group of management or highly compensated employees” who
had negotiating power to negotiate the terms of their top hat
plan. Id. DOL filed an amicus brief in this case defending this
interpretation.

                                             7
qualitatively    and    quantitatively.           Demery   v.    Extebank    Deferred

Comp. Plan (B), 216 F.3d 283, 288 (2d Cir. 2000). Thus, “[i]n

number,    the   plan    must    cover       relatively         few   employees.    In

character, the plan must cover only high level employees.” New

Valley Corp., 89 F.3d at 148.

                           C. The Amended Plan

     Following ERISA’s enactment, Marriott internally determined

that the 1970 Plan was a top hat plan. Also, in 1978, Marriott

altered    the   Retirement     Awards       in    response      to   requests     from

management, particularly younger managers who did not like the

long vesting period. Marriott responded by adding an option for

employees to choose either a Retirement Award or an award that

vested and was paid over a period of ten years during employment

(a “Pre-Retirement Award”).

     After Marriott adopted the 1978 Plan, it drafted a lengthy

Prospectus, which it mailed to all management employees eligible

to receive Retirement Awards and filed with the Securities and

Exchange   Commission.     The    Prospectus         described        the   Retirement

Awards program and, in a section titled “ERISA,” disclosed the

following:

     The Incentive Plan is an ‘employee pension benefit
     plan’ within the meaning of the Employee Retirement
     Income Security Act of 1974 (the ‘Act’). However,
     inasmuch as the Plan is unfunded and is maintained by
     the Company primarily for the purpose of providing
     deferred  compensation  for   a  selected   group  of
     management or highly compensated employees, it is

                                         8
        deemed a ‘select plan’ and thus is exempt from the
        participation and vesting, funding and fiduciary
        responsibility provisions of Parts 2, 3 and 4
        respectively of Subtitle B of Title 1 of the Act.

(J.A. 298). The Prospectus explained that Marriott “will not

extend to participants any of the protective provisions of the

Act for which an exemption may properly be claimed.” (J.A. 298).

Additional prospectuses with this language were distributed in

1980, 1986, and 1991, and the Appellants do not dispute that

they received them.

        In 1990, following an Advisory Opinion from the Department

of Labor, supra note 1, Marriott amended the 1978 Plan to limit

Retirement Awards to executive managers—those at pay grade 56 or

above. Managers with a pay grade below 56 were eligible only for

Pre-Retirement       Awards.      Marriott      viewed     such     a   change     as

“necessary in light of changing government interpretations of

provisions     in    [ERISA],”     and    noted     that   by     “narrowing”     the

circumstances of award availability “helps ensure the continued

application     of   this   favorable         treatment    under    ERISA”.   (J.A.

934).

                D. The Appellants’ Tenure with Marriott

        The   Appellants    had    long       and   successful      careers      with

Marriott. Bond joined Marriott in 1973 as an Assistant Sales

Manager at the Airport Marriott in St. Louis and eventually rose

to become the General Manager of the Marriott Pavilion in St.

                                          9
Louis until his resignation in 1992. From 1976, when he was

promoted to Director of Sales and Marketing of the City Line

Avenue Marriott in Philadelphia, until he left Marriott, Bond

occupied       positions        eligible     for   Retirement        Awards       under    the

Plan. Bond received Retirement Awards from Marriott in 1976 and

1977 (as Director of Sales and Marketing), in 1978 and 1979 (as

Regional       Director       of    Marketing),      and    in     1988    and      1989   (as

General Manager of the St. Louis Marriott). In total, Bond was

awarded        1,344     shares      of   Marriott     stock       through        Retirement

Awards. Bond voluntarily resigned from Marriott on October 19,

1991, two years before his awards would have fully vested. In

2006, Marriott paid Bond all of his vested shares.

     Steigman joined Marriott in 1973 as an Assistant Restaurant

Manager        for     the    Capriccio      Restaurant       at     the      Los    Angeles

Marriott, and eventually served as the General Manager of the

Bloomington, Minnesota, Marriott, and later of the Miami Airport

Marriott,        until       Marriott     terminated        him    in     1991.     Steigman

received Retirement Awards from Marriott in 1974 and 1975, both

prior     to     ERISA’s       effective     date.     In     1978      and    every       year

thereafter,          Steigman      elected   to    receive    Pre-Retirement           Awards

under the 1978 Plan. Marriott granted Steigman 693 shares of

Marriott stock under the Retirement Award program between 1978

and 1989. Shortly after his termination in 1991, Steigman signed

a release and Marriott paid him all of his vested shares.

                                             10
                           E. Procedural History

     The    procedural     history     is    recounted       in    detail    in    the

district court’s orders in this litigation. See Bond v. Marriott

Int’l,   Inc.,   971 F. Supp. 2d 480    (D.      Md.   2013);      England   v.

Marriott    Int’l,    Inc.,     764 F. Supp. 2d 761      (D.   Md.    2011).   As

relevant here, on January 19, 2010, Bond, Robert England, Lewis

Foster, and Douglas Craig filed suit in federal court in the

District of Columbia, alleging that the Plan’s Retirement Awards

violated ERISA’s vesting requirements. These plaintiffs sought

equitable   relief     requiring      Marriott    to    reform     the    Retirement

Awards and pay additional benefits. The case was transferred to

the District of Maryland, and only Steigman and Bond remain as

named plaintiffs. 2

     Following       targeted    discovery,      the    parties     filed    cross-

motions for summary judgment on whether the claims are barred by

the statute of limitations. The district court granted judgment

to the Appellants on the timeliness issue. Bond, 971 F. Supp. 2d

at 493. The court also denied Marriott’s request to immediately

certify the ruling for appeal under 28 U.S.C. § 1292(b). Id. at

     2 England’s claim was dismissed because he left Marriott
before ERISA’s effective date. England v. Marriott Int’l, Inc.,
764 F. Supp. 2d 761, 780-81 (D. Md. 2011). Foster and Craig
voluntarily dismissed their claims because they actually were
awarded more shares under the Retirement Awards vesting schedule
than they would have been awarded if ERISA’s vesting schedule
applied.

                                        11
494-95. Following further discovery, Marriott moved for summary

judgment,     arguing     that   the     Retirement   Awards   were   issued

pursuant to a valid top hat plan. After a lengthy hearing, the

court granted the motion. Both sides filed timely appeals.

                                        II.

     We     begin   and   end    with    Marriott’s   cross-appeal,      which

contends     that   the    district      court   erred   in    finding    the

Appellants’ claims timely. We review de novo the court’s grant

of summary judgment on this ground. Wilkins v. Montgomery, 751
F.3d 214, 220 (4th Cir. 2014).

     Except for breach of fiduciary duty claims, ERISA contains

no specific statute of limitations, and we therefore look to

state law to find the most analogous limitations period. White

v. Sun Life Assur. Co. of Canada, 488 F.3d 240, 245 (4th Cir.

2007) abrogated on other grounds by Heimeshoff v. Hartford Life

& Acc. Ins. Co., 134 S. Ct. 604 (2013). Here, we agree with the

parties that Maryland’s three year statute of limitations for

contract actions applies. However, while we apply this three-

year state limitations period, the question of when the statute

begins to run is a matter of federal law. Id. In most cases

“[a]n ERISA cause of action does not accrue until a claim of

benefits has been made and formally denied.” Rodriguez v. MEBA

Pension Tr., 872 F.2d 69, 72 (4th Cir. 1989).

                                        12
       Here,      applying        this    “formal       denial”       rule,       the    district

court concluded that the action is timely because Marriott never

formally denied any claims from Bond or Steigman. In so ruling,

the    court      apparently           adopted    the     Appellants’           position        that

Marriott’s        answer         to     the    federal        complaint         triggered       the

limitations period.

      On    appeal,         Marriott      argues,       as    it    did    below,        that   the

district court applied the wrong analysis. We agree. While the

“formal denial” rule is generally applied in ERISA cases, we

recognized,        just      one      year    after     Rodriguez,         that     in    limited

circumstances the rule is impractical to use. See Cotter v. E.

Conference of Teamsters Ret. Plan, 898 F.2d 424, 429 (4th Cir.

1990). In Cotter, we considered the question of when the statute

of limitations period begins in ERISA cases that did not involve

an    internal         review      process     and    a      formal       claim    denial.       We

explained      that         while       Rodriguez’s          “mandate      is     clear,”       its

“application . . . is tricky” in cases with no formal denial.

Id. We noted that in such cases strict application of Rodriguez

“would     lead    us       to   the    anomalous       result      that    the     statute      of

limitations        .    .    .    did    not     begin       to    run    until    after        [the

plaintiff’s] lawsuit was filed.” Id. 3 To avoid this result and

      3In one of its earlier orders in this litigation, the
district court concluded that the “anomaly” we recognized in
Cotter “may here be the reality.” England, 764 F. Supp. 2d at 772.

                                                 13
remain “consistent” with Rodriguez, we applied the “alternative

approach of determining the time at which some event other than

a denial of a claim should have alerted [the plaintiff] to his

entitlement to the benefits he did not receive.” Id. Under this

approach, “a formal denial is not required if there has already

been a repudiation of the benefits by the fiduciary which was

clear   and     made   known       to   the    beneficiary.”       Miller      v.   Fortis

Benefits Ins. Co., 475 F.3d 516, 520-21 (3d Cir. 2007) (emphasis

in original); see also Carey v. Int’l Bhd. of Elec. Workers

Local     363   Pension      Plan,      201 F.3d 44,   47    (2d     Cir.     1999)

(collecting cases applying the clear repudiation rule from the

Seventh, Eighth, and Ninth Circuits).

      The “clear repudiation” rule serves the goals of statutes

of   limitations,      to    “promote         justice    by   preventing       surprises

through the revival of claims that have been allowed to slumber

until evidence has been lost, memories have faded, and witnesses

have disappeared,” Order of R.R. Telegraphers v. Railway Express

Agency,    Inc.,   321 U.S. 342,      348-49    (1944),    and    to   encourage

“rapid resolution of disputes,” Carey, 201 F.3d at 47. These

goals “are served when the accrual date anchors the limitations

                                              14
period       to     a   plaintiff’s         reasonable       discovery       of   actionable

harm,” Miller, 475 F.3d at 522. 4

       Applying this rule here, we conclude that the Appellants’

claims are untimely. To begin, the 1978 Prospectus—in a section

entitled “ERISA”—plainly stated that the Retirement Awards did

not    need        to   comply       with    ERISA’s     vesting       requirements.        The

Prospectus explained that “inasmuch as the Plan is unfunded and

is    maintained        by     the    Company      primarily         for   the    purpose    of

providing          deferred        compensation        for     a     selected      group     of

management or highly compensated employees,” the Plan was a top

hat plan “exempt from the participation and vesting, funding and

fiduciary responsibility provisions” of ERISA. (J.A. 298). This

language clearly informed plan participants that the Retirement

Awards were not subject to ERISA’s vesting requirements, the

very       claim    made      by   the      Appellants       here.    This    language      was

included in prospectuses distributed in 1980, 1986, and 1991.

       The Appellants’ claim is that the Retirement Awards violate

ERISA’s vesting schedule and that Marriott essentially admitted

this   violation         in    response       to   the   DOL’s       Advisory     Opinion    in

       4
       Applying a discovery rule in this context is consistent
with ERISA. In fact, ERISA’s statute of limitations for breach
of fiduciary duty claims likewise includes a discovery rule. See
29 U.S.C. § 1113(2) (stating limitations period runs from “the
earliest date on which the plaintiff had actual knowledge of the
breach or violation”).

                                                15
1990. See Appellant’s Br. at 26 (arguing that Marriott’s 1990

plan       amendment      was    “an   admission       that      the    prior    Plan    was

deficient”). That argument, however, undermines their contention

that Marriott does not satisfy the clear repudiation standard.

Marriott      informed        the   Appellants       in   1978    that     the    Plan   was

exempt from ERISA’s vesting requirements. The Appellants then

waited more than 30 years to file suit, alleging that the Plan

violates ERISA’s vesting requirements. While the discovery rule

“serve[s]      to    soften      the   hard    edges      of    statutory       limitations

periods,” “[c]ommencement of a limitations period need not . . .

await the dawn of complete awareness.” Brumbaugh v. Princeton

Partners,      985 F.2d 157,   162    (4th   Cir.      1993).    Here,     Marriott

clearly repudiated any right the Appellants had to the vesting

requirements of ERISA in 1978. 5

                                             III.

       For the foregoing reasons, we conclude that the Appellants’

ERISA claims are untimely under Maryland’s three-year statute of

limitations         for    contract     actions.       We      therefore    reverse      the

district court’s grant of summary judgment to the Appellants on

that ground and grant summary judgment to Marriott. Because this

conclusion is dispositive and we do not reach the question of

       5
       The Appellants also argue that the statute of limitations
should be equitably tolled in this case. Having reviewed this
argument, we find it to be without merit.

                                              16
whether Marriott’s Plan was a valid top hat plan, we vacate the

court’s later order granting summary judgment to Marriott. In

light of these rulings, we affirm the judgment in Marriott’s

favor.

                           REVERSED IN PART AND VACATED IN PART;
                                               JUDGMENT AFFIRMED

                              17