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Bluhm v. PNC Financial Services Group, Inc.

United States District Court, S.D. California

February 1, 2013

Elizabeth BLUHM and Evan Becker, Plaintiffs,
v.
PNC FINANCIAL SERVICES GROUP, INC.; Red Capital Group, LLC; Red Capital Markets, LLC; The National City CorporationManagement Severance Plan, as effective January 1, 2005; The National City CorporationManagement Several Plan, as effective September 30, 2008; and The Red Capital Group Management Severance Plan, as effective July 1, 2008, Defendants.

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Joann F. Rezzo, Louis Bert Edleson, Edleson and Rezzo, San Diego, CA, for Plaintiffs.

George S. Howard, Jr., Jones Day, San Diego, CA, James P. Baker, Baker & McKenzie LLP, San Francisco, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

GONZALO P. CURIEL, District Judge.

Before the Court is Defendants' motion for summary judgment as to all claims in the Complaint. Plaintiffs filed an opposition on May 7, 2012. (Dkt. No. 44.) On May 14, 2012, Defendants filed a reply. (Dkt. No. 45.) On May 17, 2012, the matter was taken under submission. (Dkt. No. 46.) On October 4, 2012, the case was transferred to the undersigned judge. (Dkt. No. 49.) Based on the review of the papers, supporting documentation, and applicable law, the Court GRANTS in part and DENIES in part Defendants' motion for summary judgment.

Background

On February 15, 2011, Plaintiffs Elizabeth Bluhm and Evan Becker filed a Complaint in this Court challenging the denial of severance benefits under the four different plans. (Dkt. No. 1.) Plaintiffs assert three causes of action: 1) breach of contract based on the Interim Agreement; 2) denial of severance benefits under one of three severance plans pursuant to ERISA; and 3) retaliation pursuant to 29 U.S.C. § 1140. First, Plaintiff alleges there was an oral " Interim Agreement" that provided severance benefits that is not subject to ERISA but is a breach of contract claim under state law. Alternatively, Plaintiffs seek claims under three management severance plans under ERISA as to:

1. National City Corporation Management Severance Plan as effective January 1, 2005 (the " 2005 Plan" );

2. National City Corporation Management Severance Plan as effective September 30, 2008 (the " 2008 Plan" );

3. Red Capital Group Management Severance Plan as effective July 1, 2008 (the " Red Capital Plan" ).

Factual Background

The following facts are undisputed. Plaintiffs Elizabeth Bluhm and Evan Becker worked for Red Capital Markets, LLC, a national banking business and one of four operating entities that are now collectively known as Red Capital Group, LLC (" Red Capital" ). (Dkt. No. 1, Compl. ¶ 4.) Plaintiff Bluhm was the founding head of Red Capital's Tax Credit Group in 1993-94. (Dkt. No. 35-3, Ferguson Decl., Ex. 10 at 65 [1].) Bluhm opened the firm's San Diego office in 2001. ( Id. at 65.) She was

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directly responsible for all aspects of sales and marketing of the firms' tax credit product. ( Id. ) Plaintiff Becker joined Red Capital in 2001 as Western Director of Originations. (Dkt. No. 35-4, Ferguson Decl., Ex. 11 at 127.)

Red Capital was sold and bought over the years. More recently, in 2004, National City Corporation (" National City" ) acquired Provident Bank which included the acquisition of Red Capital as a subsidiary. (Dkt. No. 1, Compl. ¶ 5.) On December 31, 2008, PNC Financial Services Group, Inc. (" PNC" ) acquired National City, which included Red Capital as a subsidiary. ( Id. ) Effective May 7, 2010, PNC separately sold Red Capital to an investment group led by ORIX. (Dkt. No. 35-5, Ferguson Decl., Ex. 16.)

On March 16, 2010, Plaintiffs and a few others, pursuant to the provision in all the written Plans, sent a letter to Defendants concerning a notice of determination of a change in circumstances following a change in control which would entitle them to severance benefits. (Dkt. No. 35-3, Ferguson Decl., Exs. 4 & 5.) The letters indicated their intent to make severance claims under all the Plans with written notice giving a 10 day opportunity for Defendants to remedy their loss of pay and/or job duties. (Dkt. No. 35-3, Ferguson Decl., Ex. 4 at 51; Ex. 5 at 54.)

When Plaintiffs received no responses to their March 16, 2010 letters, they submitted conditional written resignations on March 31, 2010, the last day of the " Protection Period." (Dkt. No. 35-3, Ferguson Decl., Ex. 8 at 60; Ex. 9 at 62.) Plaintiffs indicated they would resign effective March 31, 2010 if PNC determined that they would be eligible for severance benefits as indicated in their March 16, 2010 letter. (Dkt. No. 35-3, Ferguson Decl., Ex. 8 at 60; Ex. 9 at 62.) On the same day, Kerry Allen, the Plan Administrator, sent Plaintiffs a memo indicating that PNC did not believe they were eligible for benefits under any of the plans, and if they resigned, they would not be paid any severance benefits. (Dkt. No. 35-3, Ferguson Decl., Ex. 10 at 87; Dkt. No. 35-9, Blehi Decl., Ex. C at 593.) The memo also stated that if they did not agree with PNC's position, they could file a claim under the plans. ( Id. ) The official claim forms were attached to the memo. ( Id. ) The memo also indicated that their previous submissions, the letter dated March 16, 2010, would be treated as a " claim" under the plans they designated. ( Id. ) The Plan Administrator further explained that the official claim forms would assist the Plan Committee [2] to fully consider their claims and stated they must be received no later than April 30, 2010.( Id. ) Further, the Plan Administrator explained that the Committee would have 90 days from the date of the claim to review it. ( Id. )

On March 31, 2010, John Johnson, in-house counsel at PNC, sent Bluhm an e-mail indicating that it was PNC's position that she was not eligible for severance benefits under any plan regardless of whether she resigned that day. (Dkt. No. 35-3, Ferguson Decl., Ex. 10 at 88.) He also noted that in order to pursue a claim, she must first be terminated by PNC or terminate employment during the protection period which ended on that day, March 31, 2010.( Id. ) Johnson's e-mail requested that she inform them whether she would be terminating her employment effective that day. ( Id. )

On April 27, 2010, Plaintiffs were notified by PNC that their employment would

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be terminated effective June 26, 2010. (Dkt. No. 35-4, Ferguson Decl., Ex. 12 at 249; Dkt. No. 35-5, Ferguson Decl., Ex. 13 at 367.)

On April 28, 2010, Becker, and on April 30, 2010, Bluhm submitted three separate official claim forms as to each of the plans. (Dkt. No. 35-3, Ferguson Decl., Ex. 10 at 64, 89, 114; Dkt. No. 35-4, Ferguson Decl., Ex. 11 at 126, 181, 212.) On July 13, 2010, Bluhm and Becker submitted an amended and supplemental claim. (Dkt. No. 35-4, Ferguson Decl., Ex. 12; Dkt. No. 35-5, Ferguson Decl., Ex. 13.)

On August 18, 2010, the First Level Claim and Appeal Committee denied Plaintiffs benefits. (Dkt. No. 35-5, Ferguson Decl., Ex. 14 at 478; Ex. 15 at 484.) The First Claim and Appeal Committee consisted of Brian Ferguson, PNC's Vice President, Human Resources; Kerry Allen, PNC's Vice President, Corporate Benefits Manager; and James Popp, PNC's Director, Employee Relations. (Dkt. No. 35-2, Ferguson Decl. ¶ 3.) Plaintiffs filed an appeal of the decision that consisted of over 577 pages of documents. (Dkt. No. 35-7, Blehi Decl., Ex. A.)

On December 17, 2010, the Second Level Claim and Appeal Committee denied Plaintiffs benefits under all the plans. (Dkt. No. 35-9, Blehi Decl., Ex. B at 578; Ex. C at 590.) The Second Level Appeal committee consisted of Joanne Blehi, Senior Vice President and Senior Human Resources Business Partner of PNC; Michael Braunstein, Vice President, Manager of Benefits Planning of PNC; and Kathleen D'Appolonia, Manager, Workplace Solutions and a Senior Vice President of PNC. (Dkt. No. 35-6, Blehi Decl. ¶ 2.)

A. Severance Plans

1. The " 2005 Plan"

The 2005 Plan was effective on January 1, 2005. (Dkt. No. 35-3, Ferguson Decl., Ex. 1 at 1.) The 2005 Plan provided severance benefits to Plaintiffs if National City was subject to a " Change in Control" as defined in the Plan. ( Id. at 4.) " Change of Control" occurs when there is a sale, merger, reorganization or other event as provided in the Plan. ( Id. at 2.) The " Protection Period" was the period of time " commencing on the Effective Date and continuing through to the fifteenth month anniversary of the Implementation Date." ( Id. at 10.) The " Effective Date" is the date " uninterrupted discussion or negotiation" concerning a change of control commenced. ( Id. at 5.)

Under the 2005 Plan, once a Protection Period is triggered due to a Change in Control, a participant is entitled to severance benefits if the Surviving Entity terminates the participant's employment during the Protection Period or the participant terminates employment with the Surviving Entity during the Protection Period with the right to severance benefits based on certain events. ( Id. at 8-9.) These events include, but are not limited to a substantial change in the participant's work responsibilities; a reduction in base salary; and/or a reduction in the base salary and incentive pay. ( Id. )

If the surviving entity fails to pay any severance benefits under the Plan, a participant may make a claim by " submitting a written request to the Committee on the form supplied for this purpose." ( Id. at 10.) The 2005 Plan was administered by a Committee who " shall have full power and authority to interpret, construe and administer this Plan and its interpretations and construction hereof, and actions hereunder, including the timing, form, amount or recipient of any payment to be made hereunder, shall be binding and conclusive on all persons for all purposes." ( Id. at 17.) The Plan also provided that the Committee could amend or discontinue the Plan if it deemed necessary or desirable; however,

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the Plan could not be modified or terminated " after the Effective Date until the later of the end of the Protection Period or such time as all claims payable hereunder have been fully discharged." ( Id. )

The Plan also provided that it " shall be the sole severance compensation a Participant will be entitled to from the Surviving Entity as a result of a Change in Control. Any Employee covered by this Plan shall not receive any other severance benefit after a Change in Control from any other severance plan, policy or agreement." ( Id. at 1.)

2. The 2008 Plan[3]

On September 30, 2008, National City executed the 2008 Plan which became effective on the same day. (Dkt. No. 35-3, Ferguson Decl, Ex. 2 at 17.) The 2008 Plan retained most of the provisions of the 2005 Plan except the 2008 Plan eliminated many of the provisions for eligibility. The 2008 Plan only allowed benefits if, during the Protection Period, the participant was terminated by the surviving entity or if the participant voluntarily terminated employment following a reduction in base salary or a requirement that the participant change his principal location of work changed which is in excess of 50 miles from the location. ( Id. at 24-25.)

3. The Red Capital Plan

The Red Capital Plan was effective as of January 1, 2008. (Dkt. No. 35-3, Ferguson Decl., Ex. 3 at 34.) Plaintiff Bluhm, not Plaintiff Becker was a participant in the Red Capital Plan. (Dkt. No. 35-2, Ferguson Decl., Ex. 3 at 46-47.) The Plan provided severance benefits to certain named persons after a " Change in Control." ( Id. at 39.) A " Change in Control" was triggered by the sale of at least 90% of Red Capital's assets and liabilities to a non-affiliate. ( Id. at 41.) The Plan provided benefits if after a " Change in Control," the participants were terminated during a " Protection Period" and if they voluntarily terminated based upon certain events such as a significant adverse change in job responsibilities, a reduction in base salary and incentive pay, a reduction in base salary and other events almost identical to the 2005 Plan. ( Id. at 38-39.)

Effective April 16, 2010, Joan Gulley, PNC, Executive Vice President and Chief Human Resources Offices discontinued the Red Capital Plan. (Dkt. No. 35-2, Ferguson Decl. ¶ 16; Dkt. No. 35-5, Ferguson Decl., Ex. 17.)

4. The " Interim Agreement"

Plaintiffs also allege an unwritten and oral severance agreement. According to Plaintiffs, Red Capital had its own written and adopted severance plan until National City acquired the company in 2004. When National City took over, it terminated the plan but immediately began negotiations to reach a new separate severance plan specifically for Red Capital's key employees. (Dkt. No. 35-7, Blehi Decl., Ex. A at 126-32.)

Plaintiffs allege that by March 17, 2005, the parties finalized a severance contract. (Dkt. No. 35-8, Blehi Decl., Ex. A at 358-367.) National City kept the severance agreement informal because of possible future changes that might be needed from the new regulatory provision relating to Internal Revenue Code § 409(A). (Dkt. No. 35-4, Ferguson Decl., Ex. 11 at 177-78.)

The alleged Interim Agreement was similar to the 2005 Plan with two increased benefits. First, the definition of " Change of Control" was increased to include a change to either National City or Red Capital. (Dkt. No. 35-8, Blehi Decl., Ex.

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A at 381.) Second, the Interim Agreement increased the amount of severance pay for a subset of ...


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