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Paul v. RBC Capital Markets LLC

United States District Court, W.D. Washington, Tacoma

February 8, 2018

MARTY PAUL, an individual, and BRIAN BUSKIRK, an individual, Plaintiffs,
v.
RBC CAPITAL MARKETS LLC, et al., Defendants.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          Ronald B. Leighton United States District Judge.

         THIS MATTER is before the Court on the parties' cross motions for partial summary judgment [Dkt. #24 and Dkt. #26]. Plaintiffs Marty Paul and Brian Buskirk are financial consultants formerly employed by Defendant RBC Capital Markets (RBC). Paul and Buskirk allege that after they separated from RBC, Defendants violated the Employee Retirement Income Security Act (ERISA) by improperly forfeiting millions of dollars of compensation that Paul and Buskirk earned through participation in RBC's Wealth Accumulation Plan (WAP). Paul and Buskirk assert that the Fifth Circuit has already determined that RBC's WAP is an “employee pension benefit plan” subject to ERISA, and that RBC is collaterally estopped from re-litigating the issue here. RBC disputes that they are collaterally estopped by the Fifth Circuit's decision, and contend that the WAP is a bonus plan designed to recruit and retain top-performing employees, and not an employee pension benefit plan covered by ERISA. Because the Court would not be aided by oral argument, it resolves this matter on the parties' written submissions.

         I. BACKGROUND

         A. RBC's Wealth Accumulation Plan

         The WAP is a deferred compensation plan instituted by RBC's predecessor company for select high-earning RBC employees. RBC made minor modifications in the administration of the WAP from year-to-year, but the “General Nature and Purpose” of the WAP announced at the beginning of the plan document remained largely unchanged:

[The WAP] is a nonqualified, deferred compensation plan pursuant to which a select group of management or highly compensated employees of [RBC] may be offered the opportunity to elect to defer receipt of a portion of their compensation to be earned with respect to the upcoming Plan Year. The [WAP] is designed to provide an opportunity for such employees to invest a portion of their compensation in tax-deferred savings and investment options in an effort to support long-term savings and allow such employees to share in [RBC's] growth and profitability, if any.

See e.g., Dkt. 25 at 87; Dkt. 27 at 175, 198.

         WAP participants' accounts are comprised by three categories of contributions: (1) voluntary deferred compensation, (2) mandatory deferred compensation, and (3) company contributions. Dkt. 24 at 7-9; Dkt. 26 at 4. Voluntary compensation contributions vested immediately whereas mandatory deferred compensation and company contributions typically vested at a later date or upon death or separation of an employee. See e.g., Dkt. 25 at 95. A provision in the WAP states that if an employee is terminated for cause, all of that employee's mandatory deferred compensation and company contributions will be forfeited back to RBC. See e.g., id. at 199. RBC froze employee participation in the WAP, effective January 1, 2012, and replaced it with a new deferred compensation plan that was “wholly separate from the [WAP].” Dkt. 27 at 221.

         B. Factual and Procedural Background

         Paul and Buskirk participated in the WAP while employed as financial consultants for RBC. Paul was fired by RBC for cause in 2011. RBC informed Paul that because his termination was for cause, it was forfeiting $1, 612, 152 in vested and unvested company contributions and mandatory deferrals from his WAP account. Dkt. 25 at 187. Paul subsequently recruited Buskirk to leave RBC and join him at a new financial advising firm in 2012. Although Buskirk voluntarily left RBC for the new firm, RBC still forfeited $297, 676 in unvested company contributions and mandatory deferred compensation from Buskirk's WAP account. Dkt. 24 at 11. Both Paul and Buskirk appealed the forfeiture of funds from their WAP accounts through RBC's WAP Committee to no avail.

         After exhausting RBC's internal appeals process, Paul initially filed suit in this Court in 2013. See Paul v. RBC Capital Mkts., No. 3:13-cv-5119-RBL. The parties were aware of pending litigation in the Southern District of Texas involving similar claims against RBC by former employees on appeal to the Fifth Circuit. Realizing the potential implications of that appeal, the parties reached a tolling agreement in which Paul voluntarily dismissed his complaint without prejudice and RBC agreed to toll the applicable statute of limitations. Dkt. 1 at 11; Dkt. 24 at 11. Although Buskirk was not a party to the original lawsuit in 2013, he entered into a similar tolling agreement with RBC after the WAP Committee denied his appeal. Dkt. 24 at 11. Buskirk joined Paul in refiling the present lawsuit against RBC in 2016.

         C. Fifth Circuit's Opinion in Tolbert v. RBC Capital Markets Corp.

         Similar to this case, Tolbert v. RBC Capital Mkts. Corp., 758 F.3d 619 (5th Cir. 2014), involved ERISA claims by former RBC employees who had portions of their WAP accounts forfeited when they left their jobs at RBC. The district court in Texas granted RBC's motion for summary judgment, concluding that the WAP was not an employee pension benefit plan subject to ERISA. Id. at 621. The Fifth Circuit reversed and remanded, holding that while the WAP was not designed to provide retirement income, it nonetheless qualified as a pension benefit plan under ERISA because it resulted in the deferral of income by employees for periods extending to separation from employment or beyond. See 29 U.S.C. § 1002(2)(A)(i)-(ii); id. at 624-26.

         II. LEGAL STANDARD

         Summary judgment is proper if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56. In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Anderson Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. at 251-52. Factual disputes whose resolution would not affect the outcome of the suit are irrelevant to the consideration of a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the initial burden of showing that there is no evidence which supports an element essential to the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant has met this burden, the nonmoving party then must show that there is a genuine issue for trial. Anderson, 477 U.S. at 250. If the nonmoving party fails to establish the existence of a genuine issue of material fact, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323-24.

         III. ANALYSIS

         At issue is whether the WAP is an employee pension benefit plan subject to ERISA. RBC argues that the WAP is not a pension plan, but rather a system for distributing bonuses to attract and retain top employees.[1] Paul and Buskirk contend that RBC is collaterally estopped from re-litigating whether the WAP is a pension plan by the Fifth Circuit's decision in Tolbert. Even if collateral estoppel does not apply, Paul and Buskirk argue that the Tolbert opinion is ...


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