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Kirby v. Frontier Medex, Inc.

United States District Court, Fourth Circuit

October 30, 2013

BRUCE KIRBY, Plaintiff,


Ellen L. Hollander, United States District Judge

Bruce Kirby, plaintiff, has filed suit against his former employer, Frontier Medex, Inc. (“Frontier”), defendant, alleging violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. The dispute arises from Frontier’s denial of severance benefits to Kirby under an Executive Change in Control Severance Pay Plan (the “Severance Plan” or the “Plan”), an unfunded Employee Welfare Benefit Plan as defined in 29 U.S.C. § 1002(1).

While plaintiff was an employee of MEDEX Global Group, Inc. (“MEDEX”), he was a Participant in its Severance Plan. MEDEX subsequently merged with Exploration Logistics Group (“ELG”) to form Frontier, and plaintiff became an employee of Frontier. The merger constituted a “Change in Control” event under the Plan. According to Kirby, he experienced a “Qualifying Termination” from his employment with Frontier because he was terminated within one year following the change in control event. As a result, plaintiff claims that he is entitled to severance benefits under the Plan; he seeks to recover $750, 000 in benefits, along with prejudgment interest and attorney’s fees.

In particular, Kirby contends in Count I that Frontier breached its obligations under the Severance Plan by failing to pay severance benefits due under the Plan, in violation of 29 U.S.C. § 1132(a)(1)(B). As to Count II, plaintiff claims, in the alternative, that Frontier unlawfully interfered with his right to obtain severance benefits, in violation of 29 U.S.C. § 1140, by manipulating the date of his termination so that it occurred just beyond the window that otherwise would have made him eligible for severance benefits.[1]

Defendant has filed a motion to dismiss (“Motion, ” ECF 14), along with a memorandum (“Memo, ” ECF 14-1) and exhibits. According to Frontier, pursuant to the express terms and conditions of the Severance Plan, Kirby is not eligible for severance benefits. Plaintiff opposes the Motion (“Opp., ” ECF 15), and defendant has replied. See ECF 20. No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I will grant the Motion, in part, and deny it, in part.

Factual and Procedural Background[2]

Kirby was employed as the President and Chief Executive Officer of MEDEX, which established and implemented an Executive Change in Control Severance Pay Plan on January 1, 2010. Complaint, ECF 1 ¶¶ 5, 6. The Plan was designed to “provide severance benefits to a select group of executives in the event of the executive’s separation of employment in connection with a change in control” of MEDEX. Plan at 1. The Plan was “adopted with the understanding that it is an unfunded welfare plan maintained primarily for benefit of a select group of management or highly compensated employees within the meaning of [ERISA]. . . .” Id. § 5.1. As noted, Kirby was a Participant in the Plan. Complaint ¶ 7.

On February 16, 2011, MEDEX stockholders approved a merger between MEDEX and ELG. The parties agree that the merger constituted a “Change in Control” event as defined in § 6.1.7 of the Severance Plan. See Id . ¶ 8; Memo at 4. The merger was consummated on March 10, 2011, and MEDEX and ELG began operation as Frontier Medex, Inc. Complaint ¶ 10. After the merger, Kirby served as President of Frontier and as Chief Operating Officer of the Americas. Id. ¶ 11.

Among other things, the Plan provided that a Participant would be eligible for severance benefits if he “experience[s] a Qualifying Termination that occurs within one year following [a] Change in Control . . . .” Plan § 2.1(b). It is undisputed that, because the Change in Control occurred on February 16, 2011, plaintiff’s eligibility for severance benefits under the Plan expired one year from that date. Therefore, if plaintiff was terminated prior to February 16, 2012, he would qualify for severance benefits under the Plan. If Kirby was terminated after that date, he would not be eligible for severance benefits. See Plan §§ 2.1(b) and 3.3.

According to plaintiff, Tim Mitchell, Frontier’s Chief Executive Officer, told plaintiff on November 16, 2011, that he intended to terminate plaintiff’s employment upon the expiration of the “change in control period.” Complaint ¶¶ 12, 13. On January 24, 2012, Kirby was informed, in writing, that he would be terminated, effective February 23, 2012—one week after the expiration of the qualifying period for severance benefits. See Notice of Termination, ECF 14-3. But, as of January 24, 2012, Kirby was immediately placed on “garden leave, ” i.e., he was relieved of all of his responsibilities, and his access to Frontier’s systems and facilities was terminated as of that date. Complaint ¶ 16. Nevertheless, Kirby’s pay and benefits continued through February 23, 2012. See Notice of Termination.

The Notice of Termination provided to Kirby on January 24, 2012, stated, in part:

This constitutes written notice of the termination . . . From today through your termination date, you will be placed on garden leave, meaning that you will continue to receive full pay and benefits, but you will not be asked to provide any additional services to the company. You should not take any company property with you when you leave today. Any company property that you possess that is not with you today should be returned to the company promptly. Your building access to Frontier MEDEX systems and facilities will be terminated, effective immediately. After your termination date, your accrued but unused vacation will be paid to you.

Thereafter, plaintiff filed a claim for severance benefits pursuant to the Plan. Complaint ¶ 32. The claim was denied by the Plan administrator and upheld on internal appeal. Id. ¶ 19.

Several provisions of the Plan are relevant to the parties’ dispute.

Under § 2.1 of the Plan, severance benefits are provided to eligible Participants. However, two conditions must be satisfied to qualify for severance benefits. First, there must be a change in control, Plan § 2.1, and second, “a Participant must: . . . experience a Qualifying Termination that occurs within one year following such Change in Control . . . .” Plan § 2.1(b).

Pursuant to § 6.1.20 of the Plan, a Qualifying Termination is a “termination of employment of a Participant with the Employer as a result of a termination: (a) by the Employer for any reason other than Cause; or (b) by a Participant for Good Reason. Qualifying Termination shall not include termination or reassignment of the Participant’s employment for Cause, or by reason of Disability or death.” Id. § 6.1.20. The phrase “termination of employment” is not defined in the Plan.

Section 2.2 of the Plan, titled “Notice of Termination, ” is also relevant. It provides, in part, that “any termination of employment by the Employer or the Participant shall be communicated by Notice of Termination to the other party . . . .” Id. § 2.2. A Notice of Termination is defined as “a written notice which sets forth in reasonable detail the facts and circumstances claimed for termination of the Participant’s employment . . . and, if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination (which Date of Termination shall not be more than the 30 days after the giving of such notice) . . . .” Id. § 6.1.16. And, § 6.1.9 defines “Date of Termination” as “the date specified in the Notice of Termination . . . .”

Section 3.3 of the Plan, titled “Automatic Sunset, ”[3] provides, in part: “If a Change in Control occurs, the Plan shall terminate without required action by the Company after the expiration of a one ...

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