Kvinlaug v. Claire's Stores, Inc.
Filing
207
AMENDED MEMORANDUM Opinion and Order Written by the Honorable Gary Feinerman on 5/2/2011.Mailed notice.(jlj)
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DEBBIE KVINLAUG,
Plaintiff,
vs.
CLAIRE’S STORES, INC.,
Defendant.
)
)
)
)
)
)
)
)
)
09 C 3511
Judge Feinerman
AMENDED MEMORANDUM OPINION AND ORDER
Plaintiff Debbie Kvinlaug brought this action against her former employer, Defendant
Claire’s Stores, Inc., alleging that Claire’s wrongfully denied her severance benefits due under
the parties’ Termination Protection Agreement. Earlier this year, Judge Guzmán dismissed
Kvinlaug’s state law causes of action, leaving only her claim under section 502(a)(1)(B) of the
Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). See 2010
WL 1325552 (N.D. Ill. Mar. 29, 2010). Claire’s moved for summary judgment, and Kvinlaug
responded on the merits and also with a motion pursuant to then-Rule 56(f) of the Federal Rules
of Civil Procedure, which was re-codified as Rule 56(d) on December 1, 2010. Claire’s Stores’
motion is denied, and Kvinlaug’s motion is denied as moot.
Background
Except where noted, the following facts are undisputed, either by the parties’ agreement
or because the objecting party failed to comply with Local Rule 56.1(b)(3). Claire’s Stores is a
multinational jewelry and accessories retailer. Kvinlaug was hired by Claire’s Boutiques, Inc., a
subsidiary of Claire’s Stores, in May 1998. In May 2003, Claire’s Stores promoted Kvinlaug to
Territorial Vice-President (“TVP”) of its Southeastern Territory, a position Kvinlaug held while
-1-
living in Atlanta. Her initial salary as TVP was $105,000, and by 2006 had risen to a base of
$165,000 and a bonus of $30,000.
In May 2006, Kvinlaug was offered and accepted a new position in the Claire’s Stores
organization, Group Executive Vice-President (“GEVP”) for Switzerland, Austria, Germany,
France, Spain, and Portugal. Kvinlaug’s GEVP position was intrinsically temporary, intended to
last no more than three years, and her assignment letter stated that she would be “[a]ssigned a
comparable position [to the Southeastern TVP position] for Claire’s North America upon
completion of assignment and return to the U.S.” As GEVP, Kvinlaug received a salary of
$250,000 and $200 per month to help maintain her Atlanta residence, was eligible for a bonus,
and had eight to ten weeks of paid vacation. Claire’s also supplied her with a furnished
apartment in Paris, a BMW automobile, and a parking space.
In Fall 2006, Claire’s Stores and Kvinlaug (along with other senior employees) entered
into a Termination Protection Agreement (“TPA”), which provided that she would receive
severance benefits in the event she resigned for “Good Reason” following a change in control of
Claire’s Stores. The TPA defined “Good Reason” as, among other things, “any materially
adverse alteration in Executive’s title or in the nature or status of Executive’s responsibilities or
conditions of employment from those in effect immediately prior to such Change in Control,”
and provided that Kvinlaug “shall have one year from the time [she] first becomes aware of the
existence of Good Reason to resign for Good Reason.” In light of Kvinlaug’s temporary GEVP
assignment in Europe, she and Claire’s Stores in March 2007 executed an Addendum to the
TPA, which reads in pertinent part:
You and the Company hereby agree that, solely for purposes of your TPA
with the Company, the term “Good Reason” shall be deemed to include (in
addition to the terms currently provided under the TPA) the failure by the
Company (or any successor thereto) following a Change in Control to
-2-
provide you with a written offer at least [one month] prior to the end of the
Term under the TPA [May 28, 2009] for continued employment with the
Company upon your return to the United States from France on
employment terms that are substantially similar to the terms of your
employment that were in effect immediately prior to your current
assignment in France.
Except as modified by this letter agreement, your TPA shall continue in full
force and effect.
A “Change in Control” occurred on May 29, 2007, when Claire’s Stores was acquired by
a third party. Several management changes ensued. In May 2007, Mark Smith joined Claire’s
as President and Managing Director of Europe. Smith met with Kvinlaug in August 2007 and,
although the details of the conversation are disputed, directed her to focus on France and also
perhaps on Spain and Portugal. In addition, Ingrid Osmundsen was named Chief Executive
Officer of Europe, with Osmundsen reporting directly to Smith and Kvinlaug to Osmundsen.
Michael Baur joined Claire’s in January 2008, with the parties disputing whether, when, and to
what extent Baur assumed Kvinlaug’s responsibilities for Switzerland, Austria, and Germany.
Claire’s announced a five-year plan for Europe at a presentation to its employees on
March 13, 2008. Claire’s centralized its European operations in the United Kingdom, identified
a Senior Management Team to implement the initiative, and replaced Osmundsen with Paul
Mildenstein. Claire’s divided its European operations into three zones, with Baur leading the
zone encompassing Switzerland, Austria, and Germany. Neither Kvinlaug nor her GEVP
position was identified as part of the Senior Management Team. “Upset” and “humiliated” by
this turn of events, Kvinlaug spoke with Mildenstein and Joe DeFalco, Senior Vice-President of
Human Resources, Supply Chain and Logistics, regarding her continued role in Europe and
future in the United States. The conversations conveyed that Kvinlaug would not be part of the
“go forward” team in Europe.
-3-
The parties dispute whether the plan announced on March 13, 2008 materially altered
Kvinlaug’s GEVP role. Claire’s maintains that, aside from having Kvinlaug’s report to
Mildenstein rather than Osmundsen, the plan did not significantly impact her role. According to
Claire’s, Kvinlaug continued to work full time; retained her title, salary, and benefits; assumed
responsibility for roughly sixteen stores in Belgium; and was not instructed to cease performing
any duties she performed prior to March 13, 2008, though she no longer conducted certain
meetings and conference calls. Kvinlaug takes a different view, listing a variety of “supervising,
managing, directing, overseeing, planning, training, and strategizing” responsibilities that she
alleges were diminished or eliminated by the reorganization. Kvinlaug cites, among other
things, the cessation of her responsibility for Switzerland, Austria, and Germany; her reduced
role in Spain and Portugal; and a reduction in the number of stores and employees for which and
for whom she was responsible.
In January 2009, Claire’s offered Kvinlaug a position in the United States as a TVP for
the Southwestern Region. Claire’s told Kvinlaug she could continue residing in Atlanta, but
Kvinlaug asserts that remaining in Atlanta while holding the Southwestern TVP position—with
its responsibility for Texas, California, and Hawaii—would have entailed significantly longer
travel times than her Southeastern TVP assignment. Kvinlaug adds that the Southwestern TVP
assignment would have required unfavorable time zone changes, returning home from business
trips as late as 2:00 a.m., and the obligation to comply with onerous California regulations.
On February 2, 2009, Kvinlaug sent a letter to Claire’s expressing her view that the
TPA’s “Good Reason” clause had been triggered. A series of communications followed in
which the parties disputed whether the clause, in fact, had been triggered. On March 9, 2009,
Kvinlaug resigned from Claire’s, although due to European labor laws she continued to work
-4-
until June 2009. Claire’s did not provide Kvinlaug with the severance benefits attending a
“Good Cause” resignation under the TPA, and Kvinlaug filed suit.
Discussion
In his opinion dismissing Kvinlaug’s state law causes of action, Judge Guzmán held that
the TPA is a welfare benefit plan subject to ERISA. See 2010 WL 1325552, at *3. Although
Claire’s disagrees with that determination, it has not sought reconsideration, and the parties have
premised their submissions on a mutual understanding that this case involves the alleged denial
of ERISA benefits.
The parties both say that because the TPA does not give the plan administrator
discretionary authority to determine eligibility for benefits, a “de novo standard” governs this
court’s “review” of Claire’s Stores’ decision to deny benefits. The “de novo review”
terminology, while set forth in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111-15
(1989), and reiterated in Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008), has been
disapproved by the Seventh Circuit, which explained:
Firestone holds that ‘de novo review’ is the norm in litigation under
ERISA. Cases such as this show that ‘de novo review’ is a misleading
phrase. The law Latin could be replaced by an English word, such as
‘independent.’ And the word ‘review’ simply has to go. For what
Firestone requires is not ‘review’ of any kind; it is an independent decision
rather than ‘review’ that Firestone contemplates. The Court repeatedly
wrote that litigation under ERISA by plan participants seeking benefits
should be conducted just like contract litigation, for the plan and any
insurance policy are contracts. 489 U.S. at 112-13. In a contract suit the
judge does not ‘review’ either party’s decision. Instead the court takes
evidence (if there is a dispute about a material fact) and makes an
independent decision about how the language of the contract applies to
those facts.
Krolnik v. Prudential Ins. Co., 570 F.3d 841, 843 (7th Cir. 2009). Thus, where (as here) the
ERISA plan does not confer discretion on the administrator, this court’s role is to independently
-5-
decide whether the claimant was entitled to benefits under the plan, not to “review” the denial of
benefits. With this in mind, the court considers Claire’s Stores’ summary judgment motion and
Kvinlaug’s Rule 56(f) motion.
I.
Claire’s Stores’ Summary Judgment Motion
In opposing summary judgment, Kvinlaug advances two independent grounds for why
she had “Good Reason” to resign: (1) her GEVP duties in Europe were materially diminished;
and (2) Claire’s failed to offer her a substantially similar TVP position upon her return from
Europe. Summary judgment is inappropriate if a reasonable factfinder could find for Kvinlaug
on either ground. As shown below, a reasonable factfinder could find for Kvinlaug on both
grounds.
A.
Diminishment of Kvinlaug’s Duties as GEVP
As noted above, the TPA defines “Good Reason” as “any materially adverse alteration in
Executive’s title or in the nature or status of Executive’s responsibilities or conditions of
employment from those in effect immediately prior to such Change in Control.” Kvinlaug
asserts that her GEVP responsibilities were materially altered when Claire’s announced its fiveyear plan and new Senior Management Team for Europe on March 13, 2008, and at points
thereafter. She points to a reduction in the stores, employees, indirect and direct reports, and
countries for which she was responsible, and a diminishment in the sales volume and operating
expenses within her purview. These changes, Kvinlaug asserts, together amounted to a
“materially adverse alteration” within the meaning of the TPA. Claire’s responds with two
arguments that might carry the day at trial, but that do not provide legitimate grounds for
summary judgment.
-6-
First, Claire’s contends that the TPA was not intended to cover changes to Kvinlaug’s
role as GEVP in Europe. Claire’s notes that the position was intrinsically temporary, slated to
end within three years regardless of any change in control, and maintains that the TPA’s “Good
Reason” clause cannot logically apply to the diminishment of responsibilities attached to a job
destined for sure elimination. Because Claire’s would have been within its rights to eliminate
Kvinlaug’s GEVP position at any time without implicating the TPA, Claire’s asks, how could
the lesser step of reducing the position’s responsibilities constitute “Good Reason” for
Kvinlaug’s resignation?
The argument is not without intuitive appeal. But while the greater power often includes
the lesser, it does not always do so, see Metro. Milwaukee Ass’n of Commerce v. Milwaukee
County, 431 F.3d 277, 278-79 (7th Cir. 2005) (State’s greater power to not hire articular
contractor does not give State the lesser power to condition hiring on contractor’s agreement to
provide employees with rights greater than those required by federal labor law), and it may not
do so here given the express terms of the TPA and, especially, the Addendum. Significantly
diminishing Kvinlaug’s GEVP responsibilities constitutes a “materially adverse alteration in …
the nature or status of [Kvinlaug’s] responsibilities,” falling literally within the TPA’s definition
of “Good Reason,” and a reasonable factfinder could (though not must) conclude on the record
that Kvinlaug’s GEVP responsibilities were significantly diminished. Given the TPA’s broad
definition of “Good Reason,” Claire’s might have thought to include in the Addendum a clause
providing, for example, that in the context of Kvinlaug’s temporary GEVP responsibilities,
“Good Cause” is limited to the failure to offer her a comparable TVP position upon her return to
the United States. As noted above, however, the Addendum reads:
[T]he term “Good Reason” shall be deemed to include (in addition to the
terms currently provided under the TPA) the failure by the Company (or
-7-
any successor thereto) following a Change in Control to provide you with a
written offer at least [one month] prior to the end of the Term under the
TPA for continued employment with the Company upon your return to the
United States from France on employment terms that are substantially
similar to the terms of your employment that were in effect immediately
prior to your current assignment in France.
Except as modified by this letter agreement, your TPA shall continue in full
force and effect.
(Emphasis added). A reasonable factfinder could conclude that the Addendum kept the TPA
intact, and that it listed the failure to offer Kvinlaug a comparable TVP position upon her return
stateside as merely an additional example of what might otherwise constitute “Good Reason,”
including materially diminishing her GEVP responsibilities in Europe.
Accordingly, it cannot be said on summary judgment that the TPA’s “Good Reason”
clause categorically excludes any materially adverse alteration of Kvinlaug’s responsibilities as
GEVP. Claire’s is free to advance its interpretation of the TPA and Addendum at trial, unless
Kvinlaug successfully moves pretrial for a finding that her interpretation prevails as a matter of
law. In any event, Claire’s is free to press at trial its view that Kvinlaug’s GEVP duties did not
suffer a materially adverse alteration within the meaning of the TPA.
Second, and in the alternative, Claire’s argues that Kvinlaug resigned too late to obtain
benefits under the “Good Reason” clause. As noted above, the TPA provides that Kvinlaug may
receive “Good Reason” benefits only if she resigns within “one year from the time [she] first
bec[ame] aware of the existence of Good Reason to resign for Good Reason.” Claire’s argues
that the date Kvinlaug resigned, March 9, 2009, was more than a year after her GEVP
responsibilities had been altered. In support, Claire’s notes that Mark Smith, at his August 2007
meeting with Kvinlaug, instructed Kvinlaug to focus her efforts on France (and perhaps Spain
and Portugal). Claire’s maintains that this meeting, as well as the January 2008 hiring of
-8-
Michael Baur as Managing Director of Switzerland, Austria, and Germany, put Kvinlaug on
notice that her responsibilities for Switzerland, Germany, and Austria had been diminished.
That submission might carry the day at trial. However, Kvinlaug has adduced sufficient
facts to substantiate her position that her responsibilities were materially diminished on and after
the presentation on March 13, 2008—within a year of her resignation on March 9, 2009. In
addition to Claire’s Stores’ failure to list Kvinlaug and her GEVP position as part of the Senior
Management Team in Europe, Kvinlaug presents evidence that she participated in weekly
conference calls with the U.S. merchant team before but not after March 13, 2008, and that her
role in monthly merchandise planning review meetings shifted from active to passive. Kvinlaug
further notes that eight of the twelve store operation positions in Paris reporting to her were
eliminated between October 2008 and January 2009. Kvinlaug maintains that despite Baur’s
hiring in January 2008, her role in Switzerland, Austria and Germany did not diminish materially
until after March 13, 2008. And Kvinlaug lists several of her “activities or responsibilities” that
were completely eliminated after March 13, 2008, including financial goal establishment;
participation in the executive level strategy planning meeting; store operations in Paris; regional
sales managers reporting to Kvinlaug for Switzerland, Austria, Germany, and Spain; directing
and setting strategies for Continental Europe; providing the best practice information to store
operation teams in Paris, Zurich, and Madrid; in-store presentations; merchandise planning; loss
prevention; and involvement with the distribution center.
Whether these changes actually occurred on or after March 13, 2008, and the materiality
(or immateriality) of the post-March 9, 2008 changes in light of Kvinlaug’s overall
responsibilities, are fact issues inappropriate for resolution on summary judgment. Accordingly,
-9-
unresolved questions regarding the alleged diminishment of Kvinlaug’s GEVP responsibilities
require denial of Claire’s Stores’ summary judgment motion.
B.
Failure to Offer Kvinlaug a “Substantially Similar” TVP Position
Upon Her Return From Europe
As noted above, the Addendum provides that “Good Reason” includes Claire’s Stores’
failure to provide Kvinlaug “with a written offer” by April 28, 2009 “for continued employment
with the Company upon your return to the United States from France on employment terms that
are substantially similar to the terms of your employment that were in effect immediately prior
to your current assignment in France.” A second ground for denying summary judgment arises
from the court’s inability to conclude as a matter of law that the “terms” of the Southwestern
TVP position that Claire’s offered Kvinlaug were “substantially similar” to the “terms” of the
Southeastern TVP position she held prior to her posting in Europe. Claire’s told Kvinlaug she
did not have to relocate from Atlanta to take the Southwestern TVP position—perhaps because
the TPA provides that relocating an employee’s principal place of employment more than 35
miles is per se “Good Cause.” But Kvinlaug asserts that the increased travel and other
downsides (e.g., dealing with California regulatory issues) of the Southwestern TVP position
made it significantly less attractive than the Southeastern TVP position. Claire’s disagrees, but
deciding who is correct requires examination of several factual issues—including the precise
nature of the travel and other differences between the two positions and, once those differences
are ascertained, determining whether they are significant enough in context to render the
positions not “substantially similar”—that cannot be resolved on summary judgment.
Claire’s maintains that even if the Southwestern TVP position was not “substantially
similar” to the Southeastern TVP position, Kvinlaug is not entitled to severance benefits under
the TPA because her March 9, 2009 resignation deprived Claire’s of its rightful opportunity to
-10-
offer another “substantially similar” position by the April 28, 2009 deadline. The argument is
without merit. The principle of contract law invoked by Claire’s—that “the failure to perform a
contract according to its terms is excused, when such performance is prevented by the acts of the
opposite party, as where such party improperly refuses to allow performance, or where he or she,
by his or her acts or conduct, makes performance impossible,” 12A Ill. Law & Prac. Contracts §
258—is beyond dispute. Yet Claire’s fails to explain how Kvinlaug’s March 9, 2009 resignation
prevented it from tendering a second, more attractive offer by April 28, 2009, particularly given
that Kvinlaug continued to work for Claire’s until June 2009.
II.
Kvinlaug’s Rule 56(f) Motion
In addition to responding on the merits to Claire’s Stores’ summary judgment motion,
Kvinlaug filed a Rule 56(f) (now Rule 56(d)) motion asserting that Claire’s has not produced
discovery essential to her opposition to summary judgment. Because summary judgment has
been denied on the present record, Kvinlaug’s motion is moot.
To avoid unnecessary motion practice, the court will add that Kvinlaug’s motion would
fail on the merits in any event. The discovery that (according to Kvinlaug) Claire’s Stores
withheld consists of the ERISA administrative record, which (again according to Kvinlaug, with
support from the First and Tenth Circuits) provides the only evidence this court may consider in
deciding whether Claire’s breached the TPA. See Richards v. Hewlett-Packard Corp., 592 F.3d
232, 239 (1st Cir. 2010); Jewell v. Life Ins. Co. of N. Am., 508 F.3d 1303, 1308 (10th Cir. 2007).
Claire’s responds that no true “administrative record” exists because it did not consider the TPA
to be an ERISA plan, and adds that all documents that conceivably could be deemed part of the
administrative record have been produced. The dispute amounts to nothing in this Circuit, where
so long as the ERISA plan does not confer interpretative or operational discretion on its
-11-
administrator, a court deciding whether the denial of benefits violates ERISA may consider
evidence outside the administrative record. See Krolnik, 570 F.3d at 842-43; Casey v. Uddeholm
Corp., 32 F.3d 1094, 1099 n.4 (7th Cir. 1994). Because the court “decides on the record made in
the litigation,” Krolnik, 570 F.3d at 843, Kvinlaug’s concerns about what constitutes the
administrative record, and about whether Claire’s Stores produced an intact administrative
record, are immaterial.
Conclusion
For the foregoing reasons, Claire’s summary judgment motion is denied, and Kvinlaug’s
Rule 56(f) motion is denied as moot.
May 2, 2011
United States District Judge
-12-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?