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Paul v. RBC Capital Markets LLC

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

July 31, 2018

RBC CAPITAL MARKETS LLC, et al., Defendants.


          Ronald B. Leighton United States District Judge.

         THIS MATTER is before the Court on the parties' second round of cross motions for partial summary judgment [Dkt. #s 37 and 41]. Plaintiffs Marty Paul and Brian Buskirk are financial consultants (FCs) formerly employed by Defendant RBC Capital Markets[1]. Paul and Buskirk allege that after they left RBC, RBC violated the Employee Retirement Income Security Act (ERISA) by improperly forfeiting millions of dollars of deferred, unvested compensation that Paul and Buskirk claim they earned by participating in RBC's Wealth Accumulation Plan (WAP). In a prior Order, the Court determined that the Fifth Circuit's opinion in Tolbert v. RBC Capital Mkts. Corp., 758 F.3d 619 (5th Cir. 2014), collaterally estopped RBC from re-litigating the WAP's status as an employee pension benefit plan under ERISA. [Dkt. # 54].

         RBC now seeks summary judgment on three bases: (1) ERISA cannot provide the relief plaintiffs seek because they do not claim that RBC violated the WAP, they have not identified a breach of fiduciary duty, and they are not entitled to equitable relief; (2) plaintiffs' claims are untimely because they knew of and enjoyed the WAP's provisions for years before they sued; and (3) in any event, the WAP is a “top hat” plan exempt from most of ERISA's substantive provisions because it is an “unfunded plan” “maintained for the benefit of a select group of highly compensated employees.” See 29 U.S.C. §§ 1051(2), 1081(a)(3), and 1101(a).

         Paul and Buskirk seek summary judgment on their claim that the WAP applied to too many employees (including some who were neither select nor highly compensated) to qualify for the top hat exemption. They claim the WAP is therefore subject to ERISA, including provisions relating to vesting, funding, fiduciary obligations, notice, and reporting. They seek a determination that RBC violated ERISA when it forfeited their deferred compensation, leaving for trial the amount of their resulting damages.

         I. DISCUSSION

         A. Summary Judgment 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.” Fed.R.Civ.P. 56(c). 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. 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.

         B. The WAP's status as a top hat plan is a question of fact.

         In the Court's view, the threshold[2] issue is whether RBC's WAP was a top hat plan. RBC emphasizes that it intended it to be such a plan, and Plaintiffs implicitly concede that the ultimate inquiry is one of fact.

         An ERISA “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.” 29 U.S.C. § 1101(a)(1). Top hat plans are generally exempt from ERISA. ERISA does not define the terms of this exemption but various authorities have addressed what is required.

         The Plaintiffs argue that the top hat plans are intended to be a “rare subspecies” of ERISA plans, because that statute's protections are to be “liberally construed” in favor of participants in employee benefit plans. These protections include prohibitions on forfeiting vested and accrued benefits.

         Paul and Buskirk argue that top hat plans must exist primarily for the purpose of providing deferred compensation to a “select group” of “management or highly compensated employees.” They argue the WAP was over-inclusive, with as much as 22% of RBC's American workforce eligible for inclusion in 2008, including some who were neither management nor highly compensated in comparison to others. RBC knew that the WAP had problems- acknowledging internally that it was in “WAP purgatory”-and it ultimately replaced the WAP with a different plan.

         Plaintiffs correctly argue that Courts look to several factors to determine if a plan is a “top hat” plan. See Duggan v. Hobbs, 99 F.3d 307, 309-310 (9th Cir. 1996) (considering whether participation was limited to a small percentage and whether participants exerted influence over the design and operation of the plan); Bakri v. Venture Mfg. Co., 473 F.3d 677, 678 (6th Cir. 2007) (considering Duggan's factors, as well as compensation disparities and the plan language[3]); see also Tolbert v. RBC Capital Mkts. Corp., 2015 WL 2138200 at *9 (S.D. Tex. Apr. 28, 2015).

         Plaintiffs argue that no court has ever determined a plan to be a top hat plan when more than 16% of employees participated. See Guiragoss v. Khouy, 44 F.Supp.2d 649 (E.D. Va. 2006). They seem to suggest that below that figure, a court must look to other factors, but above it, the question is settled as a matter of law. They argue that the WAP was not selective enough to be a top hat plan, and that it fatally permitted non-managers (including specifically FCs like Paul and Buskirk) to participate. They provide expert analysis of the plan, its participants, their compensation and titles, and the like, all in an effort to obtain a judgment as a matter of law that the WAP was not a top hat plan.

         RBC argues that Paul and Buskirk have distorted the facts and focused on “alternative” top hat eligibility tests rather than accepted ones. It argues that the analysis should include reference to RBC's (and Defendant Royal Bank of Canada's, which is the WAP's sponsor) total workforce, not just its U.S. employees, and that when the analysis properly does so, the WAP is indisputably a top hat plan-only 2.8% of defendants' workforce was eligible to participate, and those employees earned more than five times the amount the average employee earned. It points out that the median WAP-eligible employee was in the top 3% to 5% of all RBC and Royal Bank earners.

         RBC also argues that even if only the U.S. employees are considered, the WAP was still a top hat plan, at least for the bulk of the relevant time from, from 2003 and 2011: less than 16% of those employees were eligible, and participating employees earned roughly three times more than the average U.S. employee. It offers its own expert testimony that plaintiffs' expert's methodology is flawed and misleading, because it improperly carves the WAP into subgroups and then compares them to each other.

         The Court is again persuaded by Tolbert, this time by the District Court's post-remand opinion on this same issue. There, Judge Ellison articulated the same two part inquiry this Court faces: whether the primary purpose of the plan is to provide deferred compensation for a group of management or highly compensated employees. Id. at *3. As the parties agree, this involves evaluation of both quantitative and qualitative factors.

         Tolbert rejected the parties' claims that the WAP's status as a top hat plan could be ascertained by looking only at the “math” or percentage of participating employees: “the four selectivity factors are interwoven, and no one factor, standing alone, is determinative. . . . As a result [RBC has] raised a genuine issue of material fact as to this quantitative aspect of the selectivity issue[.]” Id. at *9-10.

         The proper denominator to be used to ascertain the percentage of eligible employees in a large, multinational corporation like the Royal Bank and RBC is not a question that can be or should be resolved on summary judgment. Plaintiffs argue that only U.S. employees were eligible to participate in the WAP (which would not be surprising, since ERISA is a U.S. law) but even that factual point is disputed; RBC points out that 275 non-U.S. Royal Bank employees were WAP-eligible. They also argue that over time, the number of eligible employees was less than the 16% threshold plaintiffs claim is dispositive. And, even if the percentage was too high for some portion of the ...

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