United States District Court, D. Maryland
Filed: October 25, 2013
For Dennis Walter Bond, Sr., Plaintiff: George A Zelcs, PRO HAC VICE, Korein Tillery LLC, Chicago, IL; Michael E Klenov, Michael M Winter, Steven Arthur Katz, PRO HAC VICE, Korein Tillery LLC, St Louis, MO; Timothy Francis Maloney, Joseph Greenwald and Laake PA, Greenbelt, MD; William Herbert Bode, PRO HAC VICE, Bode and Grenier LLP, Washington, DC.
For Michael P Steigman, Plaintiff: Michael E Klenov, LEAD ATTORNEY, Korein Tillery LLC, St Louis, MO; William Herbert Bode, Bode and Grenier LLP, Washington, DC.
For Marriott International, Inc., Marriott International, Inc. Stock and Cash Incentive Plan, Defendants: Benjamin David Schuman, Mark Muedeking, DLA Piper LLP US, Baltimore, MD; Charles P Scheeler, Ian Cameron Taylor, DLA Piper U.S. LLP, Baltimore, MD.
For Host Hotels & Resorts, Inc., Host Hotels & Resorts 1009 Comprehensive Stock and Cash Incentive Plan, Movants: Elizabeth Anne Reidy, Nystrom Beckman and Paris LLP, Boston, MA; Gary S Thompson, Reed Smith LLP, Washington, DC.
ROGER W. TITUS, UNITED STATES DISTRICT JUDGE.
On January 19, 2010, the Plaintiffs, former employees of Marriott International, Inc. (" Marriott" ) and/or its corporate predecessors, filed a Class Action Complaint against Marriott and Marriott International, Inc. Stock and Cash Incentive Plan in the United States District Court for the District of Columbia. ECF No. 1. The Plaintiffs, who received Retired Deferred Stock Bonus Awards (" Retirement Awards" ), claimed that Marriott was failing to issue stock to Retirement Award recipients, or issuing less stock than what is due under the Retirement Awards and the Employee Retirement Income Security
Act of 1974 (" ERISA" ). Id. at 2. The Plaintiffs sought to recover damages for the Defendants' failure to comply with the Retirement Awards and ERISA, and to clarify their rights under ERISA. Id.
On May 17, 2010, Judge Emmet G. Sullivan granted the Defendants' unopposed motion to transfer venue, and ordered that the case be transferred to this Court. ECF No. 26. After the Plaintiffs filed their First Amended Complaint in this Court, ECF No. 39, the Defendants filed a Motion to Dismiss Plaintiffs' First Amended Complaint, ECF No. 42. On February 14, 2011, this Court issued a Memorandum Opinion, ECF No. 51, and Order, ECF No. 52, granting in part and denying in part the Defendant's Motion to Dismiss, dismissing Count I of the Plaintiffs' First Amended Complaint as to one Plaintiff.
On October 17, 2011, the Plaintiffs filed a Second Amended Complaint. ECF No. 69. On September 10, 2012, the Plaintiffs filed a Motion for Class Certification, ECF No. 80, proposing two classes: (1) The " Top-Hat" Class; and (2) The Limitations Class. Marriott filed a Motion for Summary Judgment on December 19, 2012, ECF No. 97, arguing that the Plaintiffs' ERISA claims are barred by the statute of limitations and the doctrine of laches. On January 23, 2013, the Plaintiffs filed their Cross-Motion for Summary Judgment on the statute of limitations and laches issues. ECF No. 100.
I. Marriott Implements a Retirement Award Program in 1963
Between 1963 and 1990, Marriott (formerly known as Hot Shoppes, Inc.) provided deferred stock bonus awards (" Retirement Awards" ) to management employees. Defs.' Summ J., Exs. 1-4, ECF No. 98. Marriott provided award certificates to each recipient, which included terms of the Retirement Awards, such as the number of shares granted, grant date, vesting provisions, share distribution schedule, anti-dilution protections, forfeiture conditions, noncompetition covenants, and recordkeeping obligations. Id. Exs. 6-8. The certificates noted that the recipient would receive a specified number of shares at a later date subject to vesting requirements; specifically, they stated that the shares would vest in pro-rata annual installments from the grant date until a recipient reached age 65. Id. Awards also vested upon a recipient's death, disability, or approved early retirement. Id.
Vested shares were generally paid in ten annual installments beginning upon retirement, disability, or age 65. Id. Retirement Awards were designed to be " tax sheltered" so that recipients did not have to pay taxes on them until stocks were actually distributed to them. Id. Ex. 16, 1978 Prospectus. When Marriott first distributed Retirement Awards in 1963, only sixteen managers received them. Id. Ex. 24, Marriott Annual Reports. By the mid-1970s, however, Marriott had expanded its distribution of Retirement Awards to include any " key employee," and issued them to nearly a thousand employees per year with varying job titles and salaries. Deposition of Tracy Anne Ballow as Marriott's Rule 30(b)(6) designee, at 20:18-21:4 (" Ballow Dep." ); Declaration of Michael E. Klenov in Support of Plaintiffs' Motion for Class Certification ¶ 10 (" Klenov Decl." ).
II. Congress Enacts ERISA in 1974
In 1974, Congress enacted ERISA and imposed participant protective requirements on pension plans, including funding, vesting, and fiduciary requirements. 29 U.S.C. § § 1051-1061; § § 1061-1086; § § 1104-1114. Because the Retirement Awards program was designed to provide
retirement income to Marriott employees, it became an ERISA-governed " pension plan" upon ERISA's January 1, 1976 effective date. Congress included exemptions from ERISA's substantive obligations for certain types of pension plans, including the " top-hat" plan. A top-hat plan is " a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees." Id. § § 1051(2), 1081(a)(3), 1103(a)(1). Top-hat plans are still ERISA " pension plans," but they are exempt from ERISA's participation, funding, vesting, and fiduciary requirements. Id.
In 1978, after ERISA's passage, Marriott determined that ERISA's vesting requirements were inapplicable to Retirement Awards because the awards fell within the top-hat exemption. That same year, Marriott issued a Prospectus to Retirement Award recipients. Defs.' Summ. J., Ex. 16, 1978 Prospectus. A prospectus is a document that publicly-traded companies were required to distribute to shareholders when they sponsored stock-based employee benefit plans, to inform shareholders of the creation of additional shares that could dilute their ownership and voting rights in the company. Ballow Dep. at 85:16-86:8. Marriott's 1978 Prospectus included a paragraph commenting on the ERISA status of its employee benefit plan, as follows: ERISA:
The Incentive Plan is an " employee pension benefit plan" within the meaning of [ERISA]. 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 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. The reporting and disclosure provisions of Part 1 of Subtitle B of the Act continue to apply and under Section 2520.104-23 of the regulations, the Company has filed a statement with the Department of Labor providing certain information with respect to the Incentive Plan. The Company will not extend to participants any of the protective provision of the Act for which an exemption may properly be claimed.
Defs.' Summ. J., Ex. 16, 1978 Prospectus at p. 6. Similar disclaimers regarding ERISA were included in later prospectuses in 1980, 1986, 1991, 1993, 1996, and 1998. Id. Exs.17-22.
By the mid-1980s, several thousand Marriott employees were receiving Retirement Awards annually. In May of 1990, the United States Department of Labor (" DOL" ) issued an advisory opinion concerning the top-hat exemption. Dep't of Labor, Office of Pension & Welfare Benefit Programs, Opinion 90-14A, 1990 WL 123933 (May 8, 1990). In this opinion, DOL provided that the top-hat exemption was designed for top-level executives capable of negotiating their own deferred compensation packages and who did not need ERISA's substantive protections, and provided that a plan which extends coverage " beyond 'a select group of management or highly compensated employees' would not constitute a 'top hat' plan." Id. at n.1
Shortly after DOL's 1990 advisory opinion, Marriott amended its pension schemes to conform to DOL's interpretation of the top-hat exemption, and entirely discontinued Retirement Awards. Ballow Dep. at 111:9-112:11. Marriott replaced Retirement Awards with another form of stock award that deferred payment until the recipient's
termination from Marriott. Pl.'s Class Cert. Br., Ex. 2, p. 25 (MI-1_00021). Marriott restricted eligibility for the award to associates with a pay grade of 56 and above. Id. As a result of this restriction, the number of Marriott employees receiving ERISA-governed deferred stock awards dropped from roughly 2,500 in 1989, to less than 100 in 1990. Klenov Decl. ¶ 16.
Marriott informed participants of the amendments to its pension plan in a November 1990 Memo. Pl.'s Class Cert Br., Ex. 8 (1990 Memo to Plan participants announcing changes to the Plan). The Memo informed participants that " [r]equirements under [ERISA] have prompted recent changes to the way in which Marriott associates may request their award payments." Id. at 2. The Memo then announced the eligibility changes, as well other changes in how awards were calculated, distributed, and subject to noncompetition provisions. Ballow Dep. at 117:21-120:15. Because the amendments to the Marriott Plan had to be approved by a vote of shareholders, Marriott announced the proposed amendments in a 1991 Proxy Statement sent to all shareholders (including participants). Pl.'s Class Cert Br., Ex. 9 (1991 Proxy Statement).
III. Plaintiffs Received Retirement Awards As Former Marriott Employees
Plaintiffs Dennis Walter Bond, Sr., and Michael P. Steigman, former Marriott employees, bring this action on behalf of all Retirement Award recipients to force Marriott to reform the vesting terms of the Retirement Awards to comply with ERISA, and to collect the additional benefits recipients are entitled to ...