Dennis Bond, Sr. v. Marriott International, Inc.

Filing

UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 8:10-cv-01256-RWT Copies to all parties and the district court/agency. [999744406].. [15-1160, 15-1199]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-1160

DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,
Plaintiffs – Appellants,
and
ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,
Plaintiffs,
v.
MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,
Defendants – Appellees.
------------------------UNITED STATES SECRETARY OF LABOR,
Amicus Supporting Appellants,
AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,
Amicus Supporting Appellees.

No. 15-1199

DENNIS WALTER BOND, SR.; MICHAEL P. STEIGMAN,
Plaintiffs – Appellees,

OF

THE

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and
ROBERT J. ENGLAND; LEWIS F. FOSTER; DOUGLAS W. CRAIG,
Individually, and on behalf of all others similarly
situated,
Plaintiffs,
v.
MARRIOTT INTERNATIONAL, INC.; MARRIOTT INTERNATIONAL, INC.
STOCK AND CASH INCENTIVE PLAN,
Defendants – Appellants.
------------------------UNITED STATES SECRETARY OF LABOR,
Amicus Supporting Appellees,
AMERICAN BENEFITS COUNCIL; CHAMBER OF COMMERCE
UNITED STATES OF AMERICA; ERISA INDUSTRY COMMITTEE,

OF

THE

Amicus Supporting Appellants.

Appeals from the United States District Court for the District
of Maryland, at Greenbelt.
Roger W. Titus, Senior District
Judge. (8:10-cv-01256-RWT)

Argued:

October 28, 2015

Decided:

January 29, 2016

Before SHEDD, DIAZ, and HARRIS, Circuit Judges.

Reversed in part and vacated
unpublished per curiam opinion.

in

part;

judgment

affirmed

by

ARGUED: David C. Frederick, KELLOGG, HUBER, HANSEN, TODD, EVANS
& FIGEL, P.L.L.C., Washington, D.C., for Appellants/CrossAppellees.
Jeffrey
Lee
Poston,
CROWELL
&
MORING
LLP,
Washington, D.C., for Appellees/Cross-Appellants. David Maurice
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Ellis, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for
Amicus United States Secretary of Labor.
ON BRIEF: Michael
Klenov, KOREIN TILLERY, L.L.C., St. Louis, Missouri; Timothy F.
Maloney, JOSEPH, GREENWALD & LAAKE, P.A., Greenbelt, Maryland;
Joshua D. Branson, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL,
P.L.L.C.,
Washington,
D.C.,
for
Appellants/Cross-Appellees.
Mark Muedeking, Washington, D.C., Ian C. Taylor, DLA PIPER LLP
(US), Baltimore, Maryland; Clifton S. Elgarten, Aryeh S.
Portnoy, April N. Ross, CROWELL & MORING LLP, Washington, D.C.,
for Appellees/Cross-Appellants. M. Patricia Smith, Solicitor of
Labor, G. William Scott, Associate Solicitor for Plan Benefits
Security, Elizabeth Hopkins, Counsel for Appellate and Special
Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C.,
for Amicus United States Secretary of Labor. Janet M. Jacobson,
AMERICAN BENEFITS COUNCIL, Washington, D.C.; Kate Comerford
Todd,
Warren
Postman,
U.S.
CHAMBER
LITIGATION
CENTER,
Washington, D.C.; Annette Guarisco Fildes, Kathryn Ricard, THE
ERISA INDUSTRY COMMITTEE, Washington, D.C.; Igor V. Timofeyev,
Stephen B. Kinnaird, J. Mark Poerio, Danielle R.A. Susanj, PAUL
HASTINGS LLP, Washington, D.C., for Amici The American Benefits
Council, The Chamber of Commerce of the United States of
America, and The ERISA Industry Committee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
Dennis Bond and Michael Steigman (the Appellants), filed
this

action

against

International,
Incentive

Inc.,

Plan

program,
Retirement

alleging

(the

violates
and

their

Plan),

the

Income

former
that

employer,

Marriott’s

Marriott

Deferred

Stock
Award

a

tax-deferred

Retirement

vesting

requirements

of

Security

Act

of

1974

the

Employee

(ERISA).

After

targeted discovery on the statute of limitations, the district
court found

that

the

claims

were

timely

and

granted

summary

judgment to the Appellants on that issue. Following additional
discovery, the court granted summary judgment on the merits to
Marriott,

concluding

that

the

Plan’s

Retirement

Awards

fell

within the “top hat” exemption to ERISA. The Appellants appeal
that

ruling,

and

Marriott

cross-appeals,

contending

that

the

court erred in finding the Appellants’ claims timely. Because we
conclude that the Appellants’ claims are barred by the statute
of limitations, we affirm judgment in favor of Marriott.
I.
A. The 1970 Plan
Marriott
enactment.

created

The

1970

the
Plan

Plan

in

remained

1970,
in

prior

effect

to

until

ERISA’s
1978

and

granted Retirement Awards “as a part of a management incentive
program
managers

whereby
and

a

other

portion

of

employees

the

for
4

annual

bonus

outstanding

awarded

to

performances

is

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in

the

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form

of

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deferred

stock.”

(J.A.

93).

Retirement

Awards “contingently vest[ed] in equal annual installments until
age

65”

or

disability,
provided

fully
or

that

upon

death.

approved
(J.A.

94).

“[v]esting

terminates

for

any

distributed

vested

retirement,

The

accruals

other

shares

early

stop

reason.”

in

“ten

1970

when

(J.A.

annual

Plan

permanent
expressly
employment

94).

Marriott

installments

after

retirement, permanent disability or upon reaching age 65” as
long

as

the

employee

refrained

from

“competing,

directly

or

indirectly, with the Company for a period of ten years after
retirement or after age 65 if employment is terminated while in
good standing prior to retirement.” (J.A. 94). Each recipient
received an Award Certificate explaining the vesting schedule.
The 1970 Plan was open to “any employee . . . whether fulltime or part-time,” including “manager[s] and other employees”
with “outstanding performances.” (J.A. 93). During the relevant
time

period,

in

Marriott’s

workforce,

salaried

employees

comprised about 10% of all employees, and somewhere between 83%
and 91.5% of these salaried employees qualified as “managers.”
Management

employees

were

paid

on

a

salary

scale

that

encompassed a vast number of grades—from 39 to the low 70s.
Grade 56 and above was limited to “executive” managers and grade
61 and above for “senior executives.”

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Using an internal four-step process, between 1976 and 1989
Marriott issued Retirement Awards to no more than 1.63% of all
Marriott

employees.

Marriott

issued

roughly

33,000

awards

in

total to almost 10,000 unique individuals, 93% of which were
below grade 56 (executive managers). The individuals held 1,386
unique job titles, including Route Driver, Storekeeper, Tennis
Pro, and Assistant Night Trainee. In every year but one, at
least one Retirement Award recipient totaled $0 gross earnings.
B. ERISA
In 1974, “after careful study of private retirement pension
plans,” Congress enacted ERISA. Alessi v. Raybestos-Manhattan,
Inc., 451 U.S. 504, 510 (1981). “Congress through ERISA wanted
to ensure that ‘if a worker has been promised a defined pension
benefit

upon

retirement-and

if

he

has

fulfilled

whatever

conditions are required to obtain a vested benefit- . . . he
actually receives it.’” Id. (quoting Nachman Corp. v. Pension
Benefit Guar. Corp., 446 U.S. 359, 375 (1980)). Congress thus
imposed a variety of new requirements on covered retirement and
pension plans. See 29 U.S.C. § 1001(a). Relevant here, Congress
prohibited the type of vesting schedule present in the Plan and
also

prohibited

“bad

boy”

clauses,

such

as

the

competition

restrictions in the Plan.
Tucked inside ERISA’s vast statutory text, however, was an
exemption for so-called “top hat” plans. ERISA defines a top hat
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plan as an unfunded plan that 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. § 1051(2). 1 Top hat plans receive a “near-complete
exemption” from “ERISA’s substantive requirements,” In re New
Valley Corp., 89 F.3d 143, 148 (3d Cir. 1996), and “are not
subject

to

certain

vesting,

participation,

and

fiduciary

requirements,” Kemmerer v. ICI Americas Inc., 70 F.3d 281, 286
(3d

Cir.

1995).

Given

the

breadth

of

this

exemption,

the

category of what qualifies as a top hat plan is a “narrow one.”
New Valley Corp., 89 F.3d at 148. That is, a top hat plan “must”
“be unfunded and exhibit the required purpose” and “must also
cover a ‘select group’ of employees.” Id. Whether the group of
employees

is

“select”

is

determined

1

by

looking

both

The Department of Labor (DOL) has never issued notice-andcomment rules regarding the top hat exemption. In 1990, DOL
issued
an
Advisory
Opinion
interpreting
the
“unfunded”
requirement of the top hat provision. Dep’t of Labor, Opinion
90–14A, 1990 WL 123933 (May 8, 1990). DOL explained that top hat
plan
participants
must
have
the
ability
to
“affect
or
substantially influence . . . their deferred compensation plan.”
Id. at *1. In addition, DOL stated that it interpreted the word
“primarily” in the top hat provision to modify “for the purpose
of providing deferred compensation” and not “for a select group
of management or highly compensated employees.” Id. at *2, n.1.
Thus, in DOL’s view, the top hat exemption was limited to a
“select group of management or highly compensated employees” who
had negotiating power to negotiate the terms of their top hat
plan. Id. DOL filed an amicus brief in this case defending this
interpretation.

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qualitatively

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and

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quantitatively.

Demery

v.

Extebank

Deferred

Comp. Plan (B), 216 F.3d 283, 288 (2d Cir. 2000). Thus, “[i]n
number,

the

plan

must

cover

relatively

few

employees.

In

character, the plan must cover only high level employees.” New
Valley Corp., 89 F.3d at 148.
C. The Amended Plan
Following ERISA’s enactment, Marriott internally determined
that the 1970 Plan was a top hat plan. Also, in 1978, Marriott
altered

the

Retirement

Awards

in

response

to

requests

from

management, particularly younger managers who did not like the
long vesting period. Marriott responded by adding an option for
employees to choose either a Retirement Award or an award that
vested and was paid over a period of ten years during employment
(a “Pre-Retirement Award”).
After Marriott adopted the 1978 Plan, it drafted a lengthy
Prospectus, which it mailed to all management employees eligible
to receive Retirement Awards and filed with the Securities and
Exchange

Commission.

The

Prospectus

described

the

Retirement

Awards program and, in a section titled “ERISA,” disclosed the
following:
The Incentive Plan is an ‘employee pension benefit
plan’ within the meaning of the Employee Retirement
Income Security Act of 1974 (the ‘Act’). 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
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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.
(J.A. 298). The Prospectus explained that Marriott “will not
extend to participants any of the protective provisions of the
Act for which an exemption may properly be claimed.” (J.A. 298).
Additional prospectuses with this language were distributed in
1980, 1986, and 1991, and the Appellants do not dispute that
they received them.
In 1990, following an Advisory Opinion from the Department
of Labor, supra note 1, Marriott amended the 1978 Plan to limit
Retirement Awards to executive managers—those at pay grade 56 or
above. Managers with a pay grade below 56 were eligible only for
Pre-Retirement

Awards.

Marriott

viewed

such

a

change

as

“necessary in light of changing government interpretations of
provisions

in

[ERISA],”

and

noted

that

by

“narrowing”

the

circumstances of award availability “helps ensure the continued
application

of

this

favorable

treatment

under

ERISA”.

(J.A.

934).
D. The Appellants’ Tenure with Marriott
The

Appellants

had

long

and

successful

careers

with

Marriott. Bond joined Marriott in 1973 as an Assistant Sales
Manager at the Airport Marriott in St. Louis and eventually rose
to become the General Manager of the Marriott Pavilion in St.

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Louis until his resignation in 1992. From 1976, when he was
promoted to Director of Sales and Marketing of the City Line
Avenue Marriott in Philadelphia, until he left Marriott, Bond
occupied

positions

eligible

for

Retirement

Awards

under

the

Plan. Bond received Retirement Awards from Marriott in 1976 and
1977 (as Director of Sales and Marketing), in 1978 and 1979 (as
Regional

Director

of

Marketing),

and

in

1988

and

1989

(as

General Manager of the St. Louis Marriott). In total, Bond was
awarded

1,344

shares

of

Marriott

stock

through

Retirement

Awards. Bond voluntarily resigned from Marriott on October 19,
1991, two years before his awards would have fully vested. In
2006, Marriott paid Bond all of his vested shares.
Steigman joined Marriott in 1973 as an Assistant Restaurant
Manager

for

the

Capriccio

Restaurant

at

the

Los

Angeles

Marriott, and eventually served as the General Manager of the
Bloomington, Minnesota, Marriott, and later of the Miami Airport
Marriott,

until

Marriott

terminated

him

in

1991.

Steigman

received Retirement Awards from Marriott in 1974 and 1975, both
prior

to

thereafter,

ERISA’s

effective

Steigman

elected

date.
to

In

receive

1978

and

every

Pre-Retirement

year
Awards

under the 1978 Plan. Marriott granted Steigman 693 shares of
Marriott stock under the Retirement Award program between 1978
and 1989. Shortly after his termination in 1991, Steigman signed
a release and Marriott paid him all of his vested shares.
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E. Procedural History
The

procedural

history

is

recounted

in

detail

in

the

district court’s orders in this litigation. See Bond v. Marriott
Int’l,

Inc.,

Marriott

971

Int’l,

F.Supp.2d

Inc.,

764

480

(D.

F.Supp.2d

Md.
761

2013);
(D.

Md.

England

v.

2011).

As

relevant here, on January 19, 2010, Bond, Robert England, Lewis
Foster, and Douglas Craig filed suit in federal court in the
District of Columbia, alleging that the Plan’s Retirement Awards
violated ERISA’s vesting requirements. These plaintiffs sought
equitable

relief

requiring

Marriott

to

reform

the

Retirement

Awards and pay additional benefits. The case was transferred to
the District of Maryland, and only Steigman and Bond remain as
named plaintiffs. 2
Following

targeted

discovery,

the

parties

filed

cross-

motions for summary judgment on whether the claims are barred by
the statute of limitations. The district court granted judgment
to the Appellants on the timeliness issue. Bond, 971 F.Supp.2d
at 493. The court also denied Marriott’s request to immediately
certify the ruling for appeal under 28 U.S.C. § 1292(b). Id. at
2

England’s claim was dismissed because he left Marriott
before ERISA’s effective date. England v. Marriott Int’l, Inc.,
764 F.Supp.2d 761, 780-81 (D. Md. 2011). Foster and Craig
voluntarily dismissed their claims because they actually were
awarded more shares under the Retirement Awards vesting schedule
than they would have been awarded if ERISA’s vesting schedule
applied.

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494-95. Following further discovery, Marriott moved for summary
judgment,

arguing

that

the

Retirement

Awards

were

issued

pursuant to a valid top hat plan. After a lengthy hearing, the
court granted the motion. Both sides filed timely appeals.
II.
We
contends

begin
that

and
the

end

with

district

Marriott’s
court

cross-appeal,

erred

in

finding

which
the

Appellants’ claims timely. We review de novo the court’s grant
of summary judgment on this ground. Wilkins v. Montgomery, 751
F.3d 214, 220 (4th Cir. 2014).
Except for breach of fiduciary duty claims, ERISA contains
no specific statute of limitations, and we therefore look to
state law to find the most analogous limitations period. White
v. Sun Life Assur. Co. of Canada, 488 F.3d 240, 245 (4th Cir.
2007) abrogated on other grounds by Heimeshoff v. Hartford Life
& Acc. Ins. Co., 134 S.Ct. 604 (2013). Here, we agree with the
parties that Maryland’s three year statute of limitations for
contract actions applies. However, while we apply this threeyear state limitations period, the question of when the statute
begins to run is a matter of federal law. Id. In most cases
“[a]n ERISA cause of action does not accrue until a claim of
benefits has been made and formally denied.” Rodriguez v. MEBA
Pension Tr., 872 F.2d 69, 72 (4th Cir. 1989).

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applying

this

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“formal

denial”

rule,

the

district

court concluded that the action is timely because Marriott never
formally denied any claims from Bond or Steigman. In so ruling,
the

court

apparently

Marriott’s

answer

adopted

to

the

the

Appellants’

position

that

complaint

triggered

the

federal

limitations period.
On

appeal,

Marriott

argues,

as

it

did

below,

that

the

district court applied the wrong analysis. We agree. While the
“formal denial” rule is generally applied in ERISA cases, we
recognized,

just

one

year

after

Rodriguez,

that

in

limited

circumstances the rule is impractical to use. See Cotter v. E.
Conference of Teamsters Ret. Plan, 898 F.2d 424, 429 (4th Cir.
1990). In Cotter, we considered the question of when the statute
of limitations period begins in ERISA cases that did not involve
an

internal

explained

review

that

process

while

and

a

claim

“mandate

Rodriguez’s

formal

is

denial.

We

clear,”

its

“application . . . is tricky” in cases with no formal denial.
Id. We noted that in such cases strict application of Rodriguez
“would

lead

limitations

us
.

to
.

.

the
did

anomalous
not

result

begin

to

that
run

the

until

statute
after

of

[the

plaintiff’s] lawsuit was filed.” Id. 3 To avoid this result and

3

In one of its earlier orders in this litigation, the
district court concluded that the “anomaly” we recognized in
Cotter “may here be the reality.” England, 764 F.Supp.2d at 772.

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remain “consistent” with Rodriguez, we applied the “alternative
approach of determining the time at which some event other than
a denial of a claim should have alerted [the plaintiff] to his
entitlement to the benefits he did not receive.” Id. Under this
approach, “a formal denial is not required if there has already
been a repudiation of the benefits by the fiduciary which was
clear

and

made

known

to

the

beneficiary.”

Miller

v.

Fortis

Benefits Ins. Co., 475 F.3d 516, 520-21 (3d Cir. 2007) (emphasis
in original); see also Carey v. Int’l Bhd. of Elec. Workers
Local

363

Pension

Plan,

201

F.3d

44,

47

(2d

Cir.

1999)

(collecting cases applying the clear repudiation rule from the
Seventh, Eighth, and Ninth Circuits).
The “clear repudiation” rule serves the goals of statutes
of

limitations,

to

“promote

justice

by

preventing

surprises

through the revival of claims that have been allowed to slumber
until evidence has been lost, memories have faded, and witnesses
have disappeared,” Order of R.R. Telegraphers v. Railway Express
Agency,

Inc.,

321

U.S.

342,

348-49

(1944),

and

to

encourage

“rapid resolution of disputes,” Carey, 201 F.3d at 47. These
goals “are served when the accrual date anchors the limitations

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period

to

a

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plaintiff’s

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reasonable

discovery

of

actionable

harm,” Miller, 475 F.3d at 522. 4
Applying this rule here, we conclude that the Appellants’
claims are untimely. To begin, the 1978 Prospectus—in a section
entitled “ERISA”—plainly stated that the Retirement Awards did
not

need

to

comply

with

ERISA’s

vesting

requirements.

The

Prospectus explained that “inasmuch as the Plan is unfunded and
is

maintained

providing

by

the

deferred

Company

primarily

compensation

for

a

for

the

selected

purpose

of

group

of

management or highly compensated employees,” the Plan was a top
hat plan “exempt from the participation and vesting, funding and
fiduciary responsibility provisions” of ERISA. (J.A. 298). This
language clearly informed plan participants that the Retirement
Awards were not subject to ERISA’s vesting requirements, the
very

claim

made

by

the

Appellants

here.

This

language

was

included in prospectuses distributed in 1980, 1986, and 1991.
The Appellants’ claim is that the Retirement Awards violate
ERISA’s vesting schedule and that Marriott essentially admitted
this

violation

in

response

to

the

4

DOL’s

Advisory

Opinion

in

Applying a discovery rule in this context is consistent
with ERISA. In fact, ERISA’s statute of limitations for breach
of fiduciary duty claims likewise includes a discovery rule. See
29 U.S.C. § 1113(2) (stating limitations period runs from “the
earliest date on which the plaintiff had actual knowledge of the
breach or violation”).

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1990. See Appellant’s Br. at 26 (arguing that Marriott’s 1990
plan

amendment

was

“an

admission

that

the

prior

Plan

was

deficient”). That argument, however, undermines their contention
that Marriott does not satisfy the clear repudiation standard.
Marriott

informed

the

Appellants

in

1978

that

the

Plan

was

exempt from ERISA’s vesting requirements. The Appellants then
waited more than 30 years to file suit, alleging that the Plan
violates ERISA’s vesting requirements. While the discovery rule
“serve[s]

to

soften

the

hard

edges

of

statutory

limitations

periods,” “[c]ommencement of a limitations period need not . . .
await the dawn of complete awareness.” Brumbaugh v. Princeton
Partners,

985

F.2d

157,

162

(4th

Cir.

1993).

Here,

Marriott

clearly repudiated any right the Appellants had to the vesting
requirements of ERISA in 1978. 5
III.
For the foregoing reasons, we conclude that the Appellants’
ERISA claims are untimely under Maryland’s three-year statute of
limitations

for

contract

actions.

We

therefore

reverse

the

district court’s grant of summary judgment to the Appellants on
that ground and grant summary judgment to Marriott. Because this
conclusion is dispositive and we do not reach the question of
5

The Appellants also argue that the statute of limitations
should be equitably tolled in this case. Having reviewed this
argument, we find it to be without merit.

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whether Marriott’s Plan was a valid top hat plan, we vacate the
court’s later order granting summary judgment to Marriott. In
light of these rulings, we affirm the judgment in Marriott’s
favor.
REVERSED IN PART AND VACATED IN PART;
JUDGMENT AFFIRMED

17