Browe et al v. CTC Corporation et al

Filing 216

FINDINGS OF FACT AND CONCLUSIONS OF LAW: The Court GRANTS judgment for Defendants re: Count I, for Plaintiffs on Counts III through V, for Plaintiffs on Count VI and for Defendants re: counterclaim seeking a right of contribution and indemnification. The Court DENIES Plaintiffs' request re: Count II. Award of attorney's fees is declined at this time for either party. Plaintiffs shall have thirty (30) days from the date of this Order to specify their requested relief. Defendants shall file an opposition and specify the contribution and indemnification they seek within thirty (30) days of Plaintiffs' request. Signed by Judge Christina Reiss on 6/22/2018. (esb)

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
DONNA BROWE, TYLER BURGESS,
BONNIE JAMIESON, PHILIP JORDAN,
LUCILLE LAUNDERVILLE, and
THE ESTATE OF BEYERL Y BURGESS,
Plaintiffs,
V.

CTC CORPORATION and
BRUCE LAUMEISTER,
Defendants.

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U.S. O! ST RIC T COURT
DIST RICT O VERMONT
F
FIL ED

2018 JUN 22 PH 2: 3,
BY

~

D
EPUTY CLE RK

Case No. 2:15-cv-267

FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs Donna Browe, Tyler Burgess, Bonnie Jamieson, Philip Jordan, Lucille
Launderville, and the Estate of Beverly Burgess (collectively, "Plaintiffs") allege that
Defendants CTC Corporation ("CTC") and Bruce Laumeister ( collectively,
"Defendants") violated the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. §§ 1001-l 19lc, by failing to adequately fund and by wrongfully
denying them benefits under 1990 and 1997 deferred compensation plans (collectively,
the "Plan"). They further allege that Defendants breached fiduciary duties and reporting
and disclosure obligations owed to them under ERISA.
Defendants deny liability and assert that the Plan is a nonqualified "top hat" plan
pursuant to which they have no further obligations. They further assert that the
applicable statute oflimitations bars Plaintiffs ' claims. In the alternative, if they are
found liable for Plaintiffs ' claims, pursuant to the counterclaims they have asserted, they
contend that Plaintiff Lucille Launderville should be held jointly and severally liable and
indemnify them for any ERISA damages awarded against them.

From December 6-8, 2017 and March 5-6, 2018, the court conducted a bench trial.
On March 26, 2018, the parties submitted supplemental briefing, at which time the court
took the matter under advisement.
Patrick J. Bernal, Esq. and John D. Stasny, Esq. represent Plaintiffs. A. Jay
Kenlan, Esq. represents Defendants.
I.

Findings of Fact.

Based upon the preponderance of the evidence, the court makes the following
findings of fact:
Absence of Relevant Records.

The court's ability to make findings of fact in this matter is severely
hampered by the destruction of most of CTC ' s corporate records and by Plaintiffs'
failure to retain copies of the documents that they rely on for their claims. 1
1.

2.
In many instances, there is a lack of reliable evidence especially with regard
to key issues such as the number of CTC employees; the number of employees to
whom the Plan was offered; the number of Plan Participants; and the salary and
wages of CTC employees including Plaintiffs.
The Parties.

3.
Plaintiff Donna Browe was employed by CTC from its inception until on or
about November 12, 2012. Ms. Browe began her work at the company as a
"minimum-wage" clerk, and continued working as a "clerk" in CTC ' s accounting
department. She became the manager of CTC' s accounting department in
approximately 2000. Ms. Browe voluntarily left the employ of CTC on or about
November 12, 2012 for a position at Morris Repair Company in Bennington,
Vermont.
4.
Beverly Burgess was employed by CTC from the time of its formation in
1980 until approximately 2004. She passed away on November 29, 2004.
Plaintiffs Tyler Burgess and Bonnie Jamieson are the children of Ms. Burgess and
are the sole beneficiaries of their mother's estate.
5.
Plaintiff Philip Jordan was employed by CTC from its inception until on or
about October 1986 and again from on or about October 1988 until January 4,
2008. Mr. Jordan worked initially as a salesman and eventually became the sales
manager for CTC in or around 1997.

1

Each party appeared at trial with a binder of exhibits, however, they introduced into evidence
only a small subset of those documents.
2

6.
Plaintiff Lucille Launderville began her employment with CTC at its
inception. She was initially employed in customer service and was eventually
promoted to, among other positions, President of CTC, Director, and general
manager/Chief Operating Officer ("COO"). She resigned from CTC in 2008 for a
position at Plasan Industries.
7.
Defendant Bruce Laumeister was CTC's sole shareholder, Chief Executive
Officer ("CEO"), and Chairman of the Board of Directors throughout its existence.
He was CTC ' s President from 1979 until 2000 and from 2008 until its dissolution
in 2014. He is an experienced business executive with a bachelor' s degree in
engineering and a master' s degree in business administration, as well as an
honorary Ph.D. from Southern Vermont College. Prior to forming CTC, he held
executive positions in several major companies, supervised over three hundred
employees, and managed a multi-million dollar company.
8.
Defendant CTC is a dissolved corporation that ceased doing business in
2014.
CTC's History.

9.
In approximately 1979, Mr. Laumeister formed CTC, a photo-finishing and
processing company, for the purpose of acquiring the assets of Cap Tan, a film
developing and photo processing plant and photographic equipment retail store. In
addition to acquiring Cap Tan's business assets, CTC hired several Cap Tan
employees. When CTC purchased its assets, Cap Tan was generating
approximately $800,000 in annual sales and had approximately thirty employees.
10.
From approximately 1979 until 2014, CTC operated a retail photo-finishing
facility and retail store located on Benmont Avenue in Bennington, Vermont (the
"Bennington facility") from which it serviced walk-in and mail-order customers
under the tradename "Vermont Color Photo Lab."
11.
In addition to its headquarters in Bennington, CTC operated between
twenty-three and twenty-six one-hour photo labs in Vermont, Connecticut,
Massachusetts, New Hampshire, and New York (the "One-Hour Labs") which
were engaged in developing, processing, and printing film as well as operating
retail stores selling photographic equipment and supplies.
12.
The One-Hour Labs were incorporated in the states in which they
conducted business, filed their own tax returns, and paid their employees through
three corporations which held separate bank accounts controlled by CTC: VSL
Corporation (New Hampshire) ("VSL"), LWB Corporation (Massachusetts)
("LWB"), and BRL Corporation (Vermont and New York) ("BRL").
13.
Although Mr. Laumeister testified that the One-Hour Labs were CTC ' s
wholly owned subsidiaries and that the One-Hour Labs' employees should be
considered employees of CTC, Defendants have proffered no evidence to support
3

this cla, m beyond Mr. Laumeister's testimony. L WB was not a wholly owned
i
subsidiary but was instead owned by Mr. Laumeister and Christopher Belknap, a
fact which Mr. Laumeister conceded when impeached.
14.
To avoid liability after a major accident with one of its route drivers, Mr.
Laumeister formed a separate Vermont corporation, ES Services ("ESS") to
employ the drivers who serviced the One-Hour Labs and the convenience stores,
drugstores, and other customers that offered CTC photo processing. All of the
route drivers were employed part-time although some drivers worked up to thirty
hours per week. Mr. Laumeister created a chart that indicated that there were
eight part-time route drivers. He, however, also testified that they had "at least 15
or 16" route drivers and "16 to 18[,]" all of whom worked part-time. (Doc. 209 at
134.) He and his wife owned ESS's stock.
15.
In 1990, CTC acquired an interest in Weybridge Partners, LP ("Weybridge
Partners"), a Vermont limited partnership that owned and operated an apartment
complex in Middlebury, Vermont. At the time CTC acquired its limited
partnership interest in Weybridge Partners, Mr. Laumeister was Weybridge
Partners' general partner. The residential housing property owned by Weybridge
Partners was a federally subsidized property that generated significant tax losses.
Approximately ninety-five percent of those losses were allocated to CTC,
allowing CTC to shelter a significant amount of its income from state and federal
taxation.
16.
Starson Services ("Starson") was a corporation formed prior to CTC and
owned by Mr. Laumeister and his wife. Starson acted as the property manager for
Weybridge Partners' apartment complex, providing services such as rent
assessment and collection, property management and maintenance, and general,
administrative, and accounting services. Weybridge Partners paid Starson fees for
its property management services. Starson also owned the photo-finishing
equipment and other equipment in the Bennington facility and leased it to CTC.
17.
The records of both Weybridge Partners and Starson appear to have been
destroyed with the CTC records, although the parties did not address this issue
directly.
18.
Ms. Launderville claims she was never employed by Starson, however, she
admits she received a bonus check on at least one occasion from Starson. She
testified that the amount in question was approximately $20,000. In contrast, Mr.
Laumeister testified that both Mr. Massari and Ms. Launderville received
substantial bonuses from Starson, that almost half of their compensation was paid
by Starson in certain years, and that they received bonuses in some years of
approximately $50,000.
19.
In 2009, Weybridge Partners sold its real property, paid its creditors, and
dissolved.
4

20.
Between 1980 and around 2000, CTC grew significantly. At its peak
operation, CTC' s Bennington facility operated three and sometimes four shifts per
day, depending on the seasonal volume of the film to be developed and printed.
During peak times, CTC and One-Hour Labs employed additional employees,
typically on a part-time basis.

Credibility and Reliability of Mr. Laumeister's Testimony.
21.
Although at times in his testimony Mr. Laumeister demonstrated an
impressive recall of the relevant facts, the court did not find his testimony wholly
reliable or credible because Mr. Laumeister issued a number of statements under
the penalties of perjury which he now concedes are incorrect. For example:
A.
In his declaration dated May 23, 2016 (the "5/23/16 declaration") he
averred that: "From 1997 until about 2000, I was the president and chief
operating officer of CTC Corporation." (Doc. 195 at 11.) In crossexamination, Mr. Laumeister testified that the date should be "late 1995."
Id. This date, however, conflicts with his testimony that he was president
of CTC from 1979 until 1996. Id. at 7.
B.
In his 5/23/16 declaration, Mr. Laumeister stated that: "In 2000,
when I retired to Tucson, Arizona, [Lucille Launderville] was promoted to
president of CTC Corporation and made a member of the board of
directors[.]" Id. at 12. In his testimony, he admitted that this was incorrect
and averred that the correct year was 1996. Id. at 12-13. In his February
24, 2017 deposition he testified: "When she was made president and
director, I think that was about 1990. Maybe later. Maybe as late as '95,
but there's a record of that. I'm sure I have a copy somewhere." Id. at 16.
Elsewhere he stated that he never actually retired.
C.
In his 5/23/16 declaration, he averred that Ms. Launderville was
CEO of CTC in November 2004. In his testimony, he admitted that that
was in error and was a "typo." (Doc. 195 at 26.)
D.
In his testimony, he testified that the Mission Management & Trust
account was opened while Mr. Massari was still working at CTC. Id. at 53.
When confronted with account documentation, he agreed· his testimony was
incorrect and the account in question was opened in 2003 after Mr.
Massari's stroke. Id. at 54.
E.
Although he initially testified that both he and Ms. Launderville
made the decision regarding how much Mr. Massari should receive in
deferred compensation, in his deposition he testified that the decision
"probably came down to me." Id. at 56.

5

F.
Mr. Laumeister testified that Ms. Launderville advised Hope
Leonard that CTC would cease paying her benefits. Id. at 57 ("Had to be
Lucille. I didn't."). However, in a December 31, 2007 letter he authored to
Ms. Leonard, he advised her that there would be no further deferred
compensation payments.
G.
Mr. Laumeister testified that ESS was a wholly owned subsidiary of
CTC but acknowledged that in 1995, his wife, Elizabeth Small, owned all
outstanding ESS stock. He also inconsistently testified that CTC and Ms.
Small owned the shares in ESS.
H.
Although Mr. Laumeister testified that in 1997 the gross receipts for
CTC were approximately five million dollars, CTC's 1997 corporate
income tax return shows gross receipts of $2.78 million. Mr. Laumeister
explained that this discrepancy reflects his inclusion of the revenue from
Weybridge Partners.
22.
For the foregoing reasons and in the absence of corroboration by CTC ' s
business records, the court concludes that Mr. Laumeister' s testimony regarding
the number of CTC employees and specific employees' compensation is not
wholly reliable. Accordingly, all of the facts governing the number of CTC
employees and their compensation remain an approximation.
23.
In 1997, CTC employees Wayne Massari and Ms. Launderville each
received a combined annual compensation with bonuses of approximately
$105 ,000.
24.
The hourly employees at CTC ' s Bennington facility were paid at or slightly
above the federal minimum wage.
25.
With the exception of the managers of the Keene, New Hampshire and
Manchester, Vermont locations, managers of One-Hour Labs were full-time
employees who were paid between $18,000 and $19,000 in annual compensation.
26.
Because of the size of the stores and the volume of business, the managers
of the Keene, New Hampshire and Manchester, Vermont One-Hour Labs were
salaried employees who were paid approximately $24,000 per year between 1990
and approximately 2006.
27.
The remaining One-Hour Labs employees were paid at or slightly above
minimum wage and were generally employed part-time.
28.
The federal minimum wage on September 1, 1997 was $5 .15 for all
covered, non-exempt workers.
The Number of CTC Employees.

29.
Defendants assert that CTC employed 196 people at its peak. Mr.
Laumeister testified that this number is based on his memory and his consideration
6

of the One-Hour Labs. He did not consult any records in determining this number.
He further testified that by 1997 CTC and its affiliates employed "between 150
and 180" employees (Doc. 209 at 120), that, "total employment [was] about 150,
including 23 retail stores, with 90 part-time and 20 part-time at CTC Bennington.
That's all on the asterisk in 2005" (Doc. 195 at 73), and that total employment was
"[s]omewhere around 175 to 185" but "during .. . the summer months we actually
got up over 200." (Doc. 209 at 137.) In his interrogatory responses dated August
10, 2016, he averred: "To the best of my knowledge, CTC Corporation employed
approximately 196 people each year during the years from about 1990 until about
2006 when ... CTC Corporation' s business began to decline significantly as a
result of the digital photo revolution." (Doc. 195 at 100.) During his deposition,
he estimated that "CTC Corporation, at its peak, employed approximately 185
employees." Id. at 101. Julia Case, a former CTC employee, testified that at its
peak there were 186 employees but that this number includes VSL, L WB, BRL,
and ESS employees.
30.
Based upon Mr. Laumeister's review of CTC ' s tax returns from 2004 to
2006, he opined that CTC ' s total payroll in 1997 was $623 ,502. (Doc. 196 at 12.)
CTC ' s corporate income tax return for 1997 shows: $113 ,230 for compensation of
officers; $262,845 for salaries and wages (less employment credits); $623 ,785
costs of labor; and $31,547 for employee benefit programs. CTC' s total payroll in
1997 was therefore $999,860. Mr. Laumeister further testified that in 1997, other
than Mr. Massari and Ms. Launderville, there were eleven Plan Participants with
an average salary of$27,000, for a total of$297,000, and that each of the OneHour Labs had a full-time manager who was paid no less than $18,000 per year
($18,000 x 23 = $414,000). Id. at 13. Using the $999,860 total payroll and
subtracting the compensation of officers ($113 ,230), the One-Hour Lab managers
($414,000), and the Plan Participants ($297,000) leaves $175 ,630 to pay the
remaining employees during a year in which he testified he did not "recall that that
was ever a problem[] ... [with] sufficient cash flow. " Id.
31.
As a matter of arithmetic, Mr. Laumeister' s estimate of the number of CTC
employees is unsupported by CTC ' s 1997 tax return. The remaining payroll of
$175 ,630 would only be sufficient to pay 17 .05 additional full-time employees at
minimum wage (2,000 hours x $5.15 = $10,300 per employee) or 34.10 part-time
employees at minimum wage (1 ,000 hours x $5.15 = $5 ,150 per employee). Mr.
Laumeister was presented with these calculations and had no explanation for the
discrepancy between CTC ' s 1997 tax return and his estimate of the number of its
employees.
32.
Ms. Launderville offered an estimate of sixty CTC employees in the late
1990s. Her testimony also reflects a lack of precision. 2
2

Ms. Launderville testified as follows:

7

33.
The court finds there is no reliable evidence of the number of CTC
employees during much of the company's existence. There is also no reliable
record of how many employees worked full-time versus part-time. The best
evidence is that CTC had no more than sixty full-time employees in 1997.

Roles and Identities of CTC's Corporate Officers and Directors.
34.
Mr. Massari served as CTC's Treasurer, Chief Financial Officer ("CFO"),
and a Director until he suffered a stroke in 1999, became disabled, and retired. In
his work for CTC, Mr. Massari was a meticulous, detail-oriented, honest,
competent, and reliable employee.
35.
The parties dispute Ms. Launderville's role in CTC. Mr. Laumeister
testified that Ms. Launderville was named a President and Director of CTC and
that press releases regarding her assumption of the role of President were
disseminated among stakeholders in their industry. He further testified that her
status as CTC ' s President was reflected in CTC's corporate filings with the
Vermont Secretary of State. He contends she participated in annual Board of
Directors meetings.
36.
In contrast, Ms. Launderville testified that she was President "in name
only" at CTC, was never a member of the Board of Directors, and never
participated in Directors meetings. (Doc. 196 at 24 7.) The court does not find her
testimony on this point credible. Although CTC may not have formally
designated its end of the year meetings as meetings of the Board of Directors,
there is credible evidence that Ms. Launderville attended and participated in those
meetings and played a role in CTC's business decisions. Mr. Massari prepared
and disseminated meeting minutes reflecting her attendance and participation and
provided a copy of those minutes to Ms. Launderville. Those minutes describe Ms.
Launderville as a Director of CTC as of December 16, 1995. In addition, the court
found credible the testimony of Ms. Case that Ms. Launderville acted as President

Q. At the peak of its operations, how many employees did CTC itself ever
employ?
A. CTC itself, probably in the peak, employed about 60 people.

Q. And when you say the peak, which year or years do you mean?
A. I'm going to say late '90s.

Q. Do you have an opinion about the number of employees that worked for CTC
in 1990?
A. For CTC, I would say that might have been 60 .... No, there was probably
less -- less than 1990. I'm -- I'm -- you know, just shot. Maybe 40, 45.

(Doc. 197 at 19-20.)
8

of CTC during her employment there from 1999 until Ms. Launderville's
resignation.
3 7.
Ms. Launderville has a high school education and was a competent and
dedicated CTC employee and corporate officer.

The Plan.
38.
In late 1989 to early 1990, CTC decided to offer certain employees a
deferred compensation plan. It appears that some form of earlier plan, funded by
life insurance purchased by CTC, may have been offered to a few employees, but .
no copy of this plan was introduced and no witness claims to have seen it. The
1990 and 1997 Plans are thus the only retirement or deferred compensation plans
CTC offered to its employees. Plaintiffs concede this point in their Proposed
Statement of Undisputed Facts for Trial. (Doc. 164 at 4, ,i 10.)

Mr. Massari drafted the 1990 Plan. Although Mr. Laumeister contends that
39.
Mr. Massari did so with the assistance of Massachusetts Mutual Insurance
Company ("Mass. Mutual"), he testified inconsistently on this point, claiming
Mass. Mutual did not handle "nonqualified plans" which is the type of plan he
believes Mr. Massari drafted. Id. at 82. In any event, no evidence was introduced
of the type of assistance, if any, Mass. Mutual provided. Similarly, although Mr.
Laumeister testified at one point that Peter Holden, Esq. reviewed both the 1990
and 1997 Plans, the court found this testimony uncorroborated and inconsistent
with Mr. Laumeister's testimony that Mr. Massari drafted both Plans based on his
"knowledge of the tax laws."
40.
Mr. Laumeister intended the 1990 Plan to accomplish three objectives.
First, to reward CTC ' s senior managers for the performance and growth of the
company. Second, to incentivize CTC ' s senior managers to remain as employees
of CTC until their retirement at age sixty-five or their death or disability while in
CTC ' s employ. And third, to encourage CTC ' s senior managers to make annual
contributions of a minimum of 3% of their salary to their own Individual
Retirement Accounts.
41 .
Mr. Laumeister intended the 1990 Plan to be a nonqualified "top hat" plan
that was offered to a select group of management level, highly compensated
employees of CTC so that it would satisfy the requirements of ERISA.
Defendants ' expert witness James Herlihy credibly testified that he advises that
such plans be offered only to "a small percentage of the total work force" and
"they should be managerial or highly compensated people." (Doc. 196 at 203.)
The 1990 Plan does not state that it is a "top hat" plan, does not state it is a
"nonqualified plan," and does not refer to ERISA.
42.
In relevant part, the 1990 Plan states: "The employer agrees to contribute an
amount sufficient to provide a total retirement benefit, including social security,
and the participant's personal IRA account, which will approximately equal each
9

participant's salary at the date of this Plan." (Doc. 29-1 at 2, i1 5.) The Plan states
that CTC ' s Directors shall be the Plan Administrators. When CTC adopted the
1990 Plan, Mr. Laumeister and Mr. Massari were CTC's only Directors. After
Mr. Massari's stroke, Ms. Launderville became a CTC Director.
43.
According to Mr. Laumeister, Ms. Launderville and Mr. Massari proposed
each of the Plan Participants. This testimony however, was at odds with his
further testimony regarding to whom he decided to offer the Plan. Mr. Laumeister
testified that in selecting Plan Participants, he examined employees' "job duties
and their level of responsibility in accomplishing their job duties and their job
descriptions and how that contributed to [CTC ' s] success in faster turnaround and
higher quality." (Doc. 209 at 87.) They needed to be "employees that did not
need to be managed or coddled all the time" and "knew what they were supposed
to do and how they were going to do it." Id. at 91-92. He also considered "their
employment history before [CTC]" and with CTC, "what was their personal life
like[,]" where they lived and whether they had "nice homes" and "good families ,"
and whether "their kids [got] in big trouble or themselves." Id. at 95.
44.
Ms. Launderville testified that she had no voice and no role in Plan
administration. The court did not find this testimony credible. As President, a
Director, and the COO of CTC, she had the most knowledge of employee
performance and proposed employees for Plan participation on this basis. She
also participated in Plan administration and was identified as a Plan Administrator
on a cover letter that was disseminated to Plan Participants. (Plaintiffs' Ex. 14.)
45 .
Mr. Massari ' s role in Plan administration appeared to be confined to
managing the financial aspects of the Plan, attending Board of Directors meetings,
and approving Plan Participants. After Mr. Massari left CTC's employ, there is no
evidence that the remaining Plan Administrators, Mr. Laumeister and Ms.
Launderville, complied with ERISA's reporting and disclosure requirements.
46.
To fund the 1990 Plan, CTC established accounts with Mass. Mutual into
which CTC deposited funds with which it intended to pay deferred compensation
(the "Mass. Mutual accounts"). In addition, 1990 Plan Participants were required
to establish and fund their own IRA accounts. No Plaintiff claims entitlement to
deferred compensation under the 1990 Plan.
4 7.
By 1997, Mr. Laumeister had become dissatisfied with the investment
returns generated by investments in the Mass. Mutual accounts. As a result, CTC
terminated its relationship with Mass. Mutual and adopted a new deferred
compensation plan (the " 1997 Plan") that, by its terms, superseded and replaced
the 1990 Plan.
48.
Mr. Massari drafted the 1997 Plan, which Mr. Laumeister again intended to
be a "top hat" nonqualified plan. Mr. Laumeister intended that the 1997 Plan
further the same objectives as the 1990 Plan. The 1997 Plan does not state it is a
10

"top hat" plan, does not indicate that it is "nonqualified," and contains no
reference to ERISA.
49.
The 1997 Plan provides in relevant part that it is an "employer paid fund[,]"
and that CTC "agrees to contribute funds which will accumulate and be payable in
accordance with Section 6." (Defendants' Ex. Bat 1, ,r,r 2, 5.)
50.

Section 6 of the 1997 Plan states:
6.
BENEFITS UNDER PLAN - The Plan provides for
alternative types of payment as follows:
Deferred Compensation Payments, payable upon the happening of
any of the following events:
1)
Retirement of the Participant
2)
Death Benefits, payable when a Participant dies before
Deferred Compensation payments start.
a)
death benefit equals market value of a
participant' s account, less any insurance payment
provided under 2b.
b)
employer has also funded, group term life
insurance equal to one time participant's annual salary,
for which the participant has named a beneficiary.
(This benefit is in addition to the one time salary
provided with the participant' s group insurance benefit
package, and will be equal to one time the
Participant's current annual salary.)
The Employer and each Participant will execute an agreement in
writing, confirming their assumptions of the obligations set forth in
this Plan and the method of Death Benefits payable.
Subject to all provisions hereof, the Employer agrees to pay
Deferred Compensation Payments, as follows:
In the event of normal, or postponed retirement, and in the
event of disability, to the Participant so qualifying, payment
for 120 consecutive months . ... A monthly payout amount
will be computed, subject to periodic review and adjustment
based on the rate of growth, to [P]lan exhaustion of the
Participant's fund at the final, 120th, payment.

Id. at 2, ,r 6.

51.
The 1997 Plan defines the term "retirement" as "withdrawal from full time
active employment at or after age 65." Id. at 1, ,r 3(c). The parties dispute
whether this provision requires the employee to retire from CTC. Other than
Plaintiff Browe, no Plaintiff testified that they understood the 1997 Plan to offer
11

retirement benefits if they were no longer in CTC's employ when they retired. See
Doc. 209 at 61, 65. The court does not find PlaintiffBrowe's testimony credible
as it is inconsistent with her proposal that Mr. Laumeister include her in his will
because she would not receive deferred compensation under the Plan. It is also
inconsistent with her own testimony. See id. at 65 (Browe testimony: "Q. Up
until Ms. Launderville contacted you about this suit did you have any belief or
basis for claiming deferred compensation under the plan? A. No.").
52.
The 1997 Plan provides that death benefits would "commence on the first
day of the month following the Participant's death and be payable for 120
consecutive months, or lump sum at the option of the beneficiary." Id. at 3, ,i 6. It
provides that "[a] Participant may designate one or more beneficiaries, but any
named beneficiaries must be a member of his/her immediate family, that is spouse
and or children under the age of twenty-one, of Participant." Id.
53.

The 1997 Plan further states that:
[Neither] [t]he Employer, nor the plan Administrators make any
guarantee to the Participant, nor the ... Participant's beneficiary, as
to the market value of the Participant's account upon retirement or in
the event of disability payments or death benefit payments. The
account balance is not targeted to any preconceived amount nor [is
it] associated to a percentage of the Participant's salary. The balance
of the account will be driven only by the economic market growth of
the funds which the Employer has funded. The monthly payout
amount will be reviewed and adjusted annually to reflect the growth
of the account and to exhaust the fund balance over the remainder of
the 120 month payout period.

Id.

54.
Under the 1997 Plan, CTC's Board of Directors were Plan Administrators
and were authorized to make "[a]ll decisions concerning withdrawal, payment,
method of payment, [and] investments of funds[.]" Id. at 1, ,i 4. Participants in
the 1997 Plan have the same rights as a "general creditor of the Employer[,] ...
and then solely to the extent of the net value of the Participant's deferred
compensation account." Id. at 3, ,i 7.
55.
Pursuant to the 1997 Plan, Plan Administrators were required to "advise the
Participant[s] of the actual cash value of their account annually, and at the time of
retirement." Id. at 3, ,i 6.
56.

The 1997 Plan prohibits "funding" as follows:
11.
PROHIBITION AGAINST FUNDING - If the Employer
acquires a mutual fund, an annuity contract or life insurance policy,
or any other asset in connection with its liabilities hereunder, neither
12

a Participant nor any beneficiary of the Participant shall have any
right with respect to, or claim against, such contract, policy or other
asset and the Employer shall be named the owner and beneficiary of
any such contract, policy or other asset. Such contract, policy, or
other asset shall not be held under any trust for the benefit of a
Participant or [beneficiaries] of a Participant or held in any way as
collateral security for the performance of any obligation of the
Employer under the Plan. Any such policy or other asset shall be,
and remain, a general, unpledged, unrestricted asset of the Employer.
Id. at 4-5 , ,r 11.

Plan Application.
57.
Each employee to whom the 1997 Plan was offered signed an "Application
to Participate in the CTC Corporation Deferred Compensation Plan" that provided
in relevant part:
To: Plan Administrators
Please be advised that I wish to participate in the Deferred Compensation
Plan. I understand that the company funding of this Plan is contingent upon
my annual contribution of a minimum of 3% of my base salary to my
personal individual retirement account for each year I participate in the
Plan.
I understand that the corporate funding of this Plan and some provisions
have changed from the original Plan document. I further understand that
this Plan supersedes any and all Deferred Compensation Plan documents
provided by CTC Corporation.
I wish to designate the following beneficiary ( or beneficiaries) in
accordance with the articles of the Plan agreement:

***
I acknowledge receipt of a copy of the Deferred Compensation Plan
agreement and confirm that I have reviewed and understand all of the terms
and conditions thereof.
Signed
Home Address
Date
This document must be signed, dated and returned to the Employer in order
to participate in this Plan. It is the responsibility of the Participant to notify
the Employer of any intended change in the designated beneficiaries.
(Defendants' Ex. C) (the "Plan Application").
13

58.
Defendants introduced into evidence Exhibit D, which is a one-page
document dated August 20, 1997, signed by Mr. Massari, and entitled "CTC
Deferred Compensation Plan" which states as follows:
The Assumption for rate of growth used to illustrate your fund balance is
10%. This is an assumption only, based on previous growth of this mutual
fund. Your account will be adjusted periodically to reflect the actual
growth rate and fund balance of your account.
Please complete and sign the last page "Application" and return this to me.
I will return a copy to you for your files.
Please provide evidence of your current active "IRA" account as required
by the Plan Document. This is not necessary if you are funding your IRA
by payroll deduction.
Contact me if you have any questions regarding this Plan.
(Defendants ' Ex. D.)
Plan Statements.
59.
Defendants periodically provided the Plan Participants with account
statements showing the amounts held in the Plan, however, there is no evidence
that those reports were provided with any regularity. Mr. Laumeister does not
recall ever providing a statement, although he believes Mr. Massari and Ms.
Browe may have done so.
60.
Neither Defendants nor Plaintiffs retained copies of Plan statements with
the exception of one "worksheet" retained by Ms. Launderville and two
documents retained by Mr. Laumeister.
61.
Ms. Launderville credibly testified that she was given the undated
worksheet identified as Plaintiffs ' Exhibit 3 by Mr. Massari. Plaintiffs ' Exhibit 3
identifies fifteen "Retirees": Wayne Massari; Lucille Launderville; Donald
Loseby; Don Hollner; Eileen Bliss; Donna Browe; Beverly Burgess; Ed
Hojnowski; William Elliott; Sharon Fish; Phil Jordan; Robin Secord; Steve
Brown; Garry Pleasant; and Hope Leonard. The spreadsheet purports to show an
"Initial Investment" for each individual, "Additional Annual Funding," "Total
CTC Funding," projected retirement years, projected payouts (annual and
monthly), fund balance at the time of retirement, and fund balance after payout. It
indicates that payouts will occur over 180 months/fifteen years at ten percent
growth. (Plaintiffs ' Ex. 3.)
62.

Plaintiffs ' Exhibit 3 reflects the following "Assumptions:"
•
Projections "assume" continued corporate funding of $20,325.00
15% current payroll per year through year 2000 (see notes below for
additional funding explanation)
14

•
Funding will continue as prescribed above, at a rate of 5% of
participants earnings (adjustment for increased future earnings not reflected
in worksheet)
•

Growth rate of fund 10%

•

Benefits paid out monthly for 15 years

•
Benefits amount paid calculated to exhaust fund balance at the end
of fifteen years
•
Fund balance continues to grow as benefits are paid, until exhausted
at end of 15 years
•
Benefits subject to change relative to actual rate of fund growth and
balance at retirement[.]
Id.

63.
Plaintiffs' Exhibit 3 contains notes specific to certain "Retirees," including
the following: "Initial funding for these new entrants is a dollar amount
determined by Bruce Laumeister, paid from the surrender proceeds of terminated
participants. The balance of the proceeds from terminated employees was
allocated 55% to Lucille Launderville, and 45% to Wayne Massari, as instructed
by Bruce Laumeister[.]" Id.
64.

Plaintiffs' Exhibit 3 also contains the following general "Notes:"
•

All accounts adjusted to actual mutual discovery balance at 03-18-97

•
Account for Don Hollner closed at 03-18-97, balance of $4,582.9
transferred to the account of Donna Browe per instructions of Bruce
Laumeister
•
Don Hollner will be considered for plan participation in 1998, per
Bruce Laumeister
•

Account established for Garry Pleasant 6-97 per Bruce Laumeister[.]

Id.

65.
Plaintiffs' Exhibit 3 indicates "total CTC funding" of$261,368.14 and total
CTC funding for Plaintiffs as follows: Lucille Launderville: $40,104.75; Donna
Browe: $15,611.14; Beverly Burgess: $19,906.23; and Phil Jordan: $17,417.30.
Assuming a ten percent rate of growth, "total payouts" of $3,034,470 were
projected to be made, including $215,280 to Ms. Browe; $169,920 to Ms. Burgess;
$269,280 to Mr. Jordan; and $592,470 to Ms. Launderville. Id.
66.
The assumption of a fifteen year payout in Plaintiffs' Exhibit 3 conflicts
with the 1997 Plan which reflects a ten year payout. Although Plaintiffs'
Exhibit 3 reflects an annual percent of payroll annual contribution by CTC, the
15

1997 Plan does not require this contribution. The amounts set forth in Plaintiffs'
Exhibit 3 conflict with Mr. Laumeister' s testimony that when the 1990 Plan was
replaced by the 1997 Plan approximately $130,000 to $140,000 remained in the
Mass. Mutual accounts. These funds were deposited in a CTC account with
Mission Management & Trust Company and in an investment account referred to
as the "Mutual Discovery Account."
67 .
Plaintiffs' damages estimate offered by their expert witness, economist
Richard Heaps, is based on the amounts set forth in Plaintiffs' Exhibit 3. Mr.
Heaps opined that performing the same calculations as set forth in Plaintiffs'
Exhibit 3, he was able to project account balances for each Plaintiffs deferred
compensation account as of the time of trial.
68.
The court finds Plaintiffs' Exhibit 3 "worksheet" reliable for the following
purposes. First, to establish that Mr. Laumeister was the primary decision-maker
with regard to the 1997 Plan. Second, to reflect account balances adjusted to
reflect "Actual Mutual Discovery Balance at 03-18-97." Third, to confirm that it
was a document generated by Mr. Massari to project how the 1997 Plan might
perform under certain assumptions, several of which are inconsistent with the
1997 Plan.
69.
In addition to Plaintiffs' Exhibit 3, the only other financial statements
related to the Plan and introduced into evidence were two statements retained by
Mr. Laumeister. A May 1998 statement introduced as Plaintiffs' Exhibit 14
provides a "revised projection" of Ms. Launderville' s retirement account and
shows "total payouts" to Ms. Launderville of $657,900 upon her retirement,
assuming a ten percent growth rate. (Plaintiffs' Ex. 14 at 1-2.) Defendants '
Exhibit Al is a statement dated December 23 , 2004 that indicates a balance of
$279,803 , above which Mr. Laumeister wrote "I met with Wayne [Massari] on
this. He had data which agreed with this." (Defendants' Ex. Al at 1.)
70 .
Plaintiffs ' Exhibit 14 is a statement sent from Mr. Laumeister to Ms.
Launderville with the following cover letter:
Dear Lucille [name handwritten]
Attached is [a] revised projection of your retirement fund as a
participant in the CTC Corporation Deferred Compensation Plan. A
strong stock market has reflected a substantial growth in your fund
balance. While the projection attached reflects a more conservative
10% market growth, this projection will be adjusted each year to
reflect actual market conditions. Pursuant to the plan document you
have received, CTC Corporation nor the plan Administrators
guarantee the value of the value of your account upon your
retirement or in the event of your death, payments to your
beneficiaries. The fund balance will be driven only by the economic
16

market growth of the funds which have been invested. The fund is
currently invested with the Franklin Mutual Series Class Z Fund.
Your participation in this fund continues to be contingent upon the
terms and conditions expressed in the plan document which you
have received. If you have any questions about this plan, please
direct them to me, Lucille or Wayne.
Please note that you have been selected to receive benefits under this
plan based on your service to CTC Corporation. This plan is entirely
funded and owned by the employer and has not been open to all
employees. Therefore I ask that you discuss this matter only
with the above mentioned plan Administrators.
(Plaintiffs' Ex. 14 at 1) (emphasis supplied).
71.
The spreadsheet attached to Plaintiffs' Exhibit 14 reflects "total payouts
[of] 180 months" and ten percent growth. Id. at 2. It depicts the same annual
funding of $2,850 of Ms. Launderville's account reflected in Plaintiffs' Exhibit 3.
It notes that the account balance for March was "Adjusted to Actual 3/18/98[,]"
id., one year after the notation in Plaintiffs' Exhibit 3 that "all accounts adjusted to
Actual Mutual Discovery Balance at 03-18-97[.]" Plaintiffs' Ex. 3. The monthly
balance in March 1998 is $46,550.06 in Plaintiffs' Exhibit 14 and $40,104.75 in
March 1997. The court concludes that Plaintiffs' Exhibits 3 and 14 are both
business records of CTC, despite their inconsistencies with the 1997 Plan.
72.
Ms. Launderville was provided with the 1997 Plan which states that CTC's
Directors are the Plan Administrators. She is identified in Plaintiffs' Exhibit 14 as
a person to whom questions about the Plan could be directed. She proposed
participants to the Plan, discussed potential Plan Participants with Mr. Laumeister
and Mr. Massari, and voted on certain decisions with regard to the 1997 Plan.
73.
Between 1990 and 2014, CTC paid deferred compensation to
approximately four Plan Participants in accordance with the 1997 Plan: Don
Loseby, Hope Leonard, Eileen Bliss, and Wayne Massari. In addition, the Plan
Administrators determined that both Sharon Fish and William Elliott should be
permitted to retire early and receive Plan benefits on that basis. In Ms. Fish's
case, she was tired of the commute from Rutland to Bennington and was offered
Plan participation even though she worked part-time. In Mr. Elliott's case, his
family had a history of early mortality and he wanted to enjoy his remaining years
through an early retirement.
74.
Between 1997 and about 2001, CTC continued to deposit funds in its
Mission Management & Trust and Mutual Discovery accounts from which it
intended to pay deferred compensation.

17

CTC's Decline and Dissolution.

75.
In approximately 2004, CTC experienced a significant decline in sales due
to the advent of digital photography and internet photo-finishing services. In
addition, a change of policy purportedly announced by the U.S. Postmaster
regarding the speed with which first class U.S. mail would be delivered impaired
CTC's ability to deliver expeditious service to its customers.
76.
From 2004 until its dissolution, CTC's cash flow from its annual sales
became insufficient to support its operating expenses. As a result, all monies
deposited in CTC' s deferred compensation accounts were transferred to CTC' s
general business account and used to pay CTC' s general business expenses,
including payroll. In 2004, Mr. Laumeister told Ms. Launderville "that because of
the deteriorating financial condition of CTC, the [P]lan was being terminated and
the funds would be used to pay business operating expenses." (Doc. 195 at 69.) It
does not appear that CTC, Mr. Laumeister, or Ms. Launderville otherwise
announced the termination of the 1997 Plan.
77.
Ms. Launderville and Ms. Browe kept Mr. Laumeister apprised of CTC's
operating shortfalls. Mr. Laumeister then directed withdrawals from CTC's
deferred compensation accounts to cover them. When CTC's cash reserves were
exhausted, Mr. Laumeister made a series of personal loans to CTC to fund
operating expenses. Both Ms. Launderville and Ms. Browe were aware of both
the use of the deferred compensation accounts and the personal loans from Mr.
Laumeister.
78.
In approximately 2006, Mr. Laumeister convened a meeting attended by
Ms. Launderville and others during which he explained that CTC was in financial
distress. He proposed that employees accept a twenty percent pay-cut which was
apparently accepted by those employees who chose to remain in CTC's employ.
79.
By February 2008, the only remaining employees of CTC who were 1997
Plan participants were Ms. Browe and Ms. Launderville. At the time, CTC's cash
flow was insufficient to pay its general creditors or to fund its deferred
compensation accounts. Both Ms. Browe and Ms. Launderville were aware of this
fact.
80.
By 2014, Mr. Laumeister's outstanding unpaid loan balance to CTC was
approximately $600,000. Because of the significant decline in CTC's sales, he
realized that CTC could not repay those loans and decided he would no longer try
to keep CTC operational.
81.
On October 6, 2014, at the direction of Mr. Laumeister, CTC ceased doing
business and filed Articles of Dissolution with the Vermont Secretary of State.
82.
When CTC dissolved in 2014, Starson sold the film developing and photo
processing equipment that it had leased to CTC at a loss of approximately
$450,000.
18

83.
At the time of its dissolution, CTC purportedly had no outstanding accounts
payable, other than its obligations with regard to the loans from Mr. Laumeister.
84.
With regard to the destruction of CTC ' s business records, Mr. Laumeister
testified that in 2012:
[W]e had a small business advisory service. We got monthly information
from them, especially on taxes and so on. And I asked Donna [Browe] to
contact them and ask them what was the requirement when you dissolved a
corporation, what records had to be kept, and that was eight years back plus
tax returns.
(Doc. 196 at 52-53.)
85.
Ms. Browe credibly denied any involvement in the destruction of business
records and denied giving Mr. Laumeister any advice or guidance on this point.
The records were not destroyed until 2014 after Ms. Browe left CTC ' s employ. It
appears that the true impetus for their destruction was Mr. Laumeister' s desire not
to leave them behind in the Bennington facility for which CTC had not paid its
property taxes.

Retention of Plan Documents.
86.
Defendants' expert witness, Mr. Herlihy, testified that Plan records should
be maintained over the life of the Plan. He opined that even with a non-qualified
"top hat" plan, although an employer can use the assets in the plan, it retains the
obligation to pay plan participants the amounts it contributed to their accounts
consistent with the terms of the plan:
Q. [I]fthe company goes completely out of money, spends all their money,
does that bear on how much money they ultimately wind up paying the
participant?
A. Well, if they-yeah. If they don 't have the money to pay them, then
they can' t pay it because they're paying it out of the assets of the company.

Q. I'm sorry. I should rephrase that. In terms of how you would have your
clients account for what they owe to that participant.
A. They would still-then our bookkeeping entry would indicate that they
still owed it.

*

*

*

Q. The last questions that came up went to the obligations of the company
that established the nonqualified plan to the plan participants, right? And
you had indicated that if a company has a thousand dollars in a plan
participant's name in its account, and spent 900 of those dollars on other
company obligations, that the company would still owe that $900 to the
plan participant; is that correct?
19

A. Yes.

Q. Okay. Under what circumstances would that $900 be owed to the plan
participant?
A. It would be owed to the plan participant according to the provisions in
the plan document where they were entitled to get the benefit that they had
been promised by either the-by the formula in the document.

Q. Supposing the formula in the document said to participate in the
benefits of a plan you have to be employed by the company until age 65,
and the person whose account had the $900 in it left the employment of the
company at age 45, would that person be entitled to payments under the
plan?
A. No, they wouldn 't.
(Doc. 196 at 208-10.)

Employees Offered Participation in 1997 Plan.
87.
The parties dispute the number of CTC employees who were offered
participation in the Plan. Mr. Laumeister testified that fifteen employees were
offered the Plan and thirteen accepted but he also testified that eighteen employees
were offered participation, all of whom were proposed by Ms. Launderville. 3
Plaintiffs contend eighteen CTC employees were offered Plan participation. Ms.
Launderville further testified that all Plan Participants were chosen by Mr.
Laumeister. The court finds that the best evidence is that the 1997 Plan was
offered to eighteen CTC employees.
88.
Participation in the 1997 Plan was offered by CTC to all of the participants
in the 1990 Plan and to additional employees selected by the Plan Administrators.
Evidence regarding employees to whom the Plan was offered is limited and is for
the most part uncorroborated by business records. Mr. Laumeister testified
regarding the duties and responsibilities of each of the employees to whom the
Plan was offered, often exaggerating their managerial responsibilities while
Plaintiffs' witnesses denied certain Plan Participants had any management
responsibility. The court found neither version of the facts wholly credible. On
balance, it appears that there is insufficient evidence to support a conclusion that
Hope Leonard, Pat DeCoff, William Elliott, Ed Hojnowski, Donald Loseby, and
Sue Carman/Caraman were either highly compensated employees or had

3

Q. Now, CTC offered plan participation to at least 18 employees, correct?
A. I believe there were 18 that were nominated by Lucille Launderville, and I had
no reason to object to any of ' em.

(Doc. 196 at 10.)
20

significant management responsibilities. The court briefly recites the limited facts
introduced regarding individuals to whom the 1997 Plan was offered. 4
Wayne Massari.

89.
Wayne Massari was CTC's Treasurer and CFO as well as a CTC Director
and Plan Administrator until he experienced a stroke in 1999, became disabled,
and retired. Mr. Laumeister and Ms. Launderville agreed that he was entitled to
deferred compensation benefits under the 1997 Plan. Of the Plan Participants who
received deferred compensation benefits, Mr. Massari received the most.
90.
Mr. Massari's maximum combined compensation was approximately
$105,000, which reflected Starson bonuses.
Lucille Launderville.

91.
Lucille Launderville was born on November 18, 1951. She was employed
by Cap Tan in customer service and paid approximately minimum wage as an
hourly employee. CTC hired Ms. Launderville on the same terms in 1980 when it
purchased the assets of Cap Tan. In addition, Ms. Launderville performed
secretarial work for Mr. Laumeister.
92.
Ms. Launderville credibly testified that she had a poor recall for dates and
could not recall when she received certain promotions and changes in her
compensation at CTC. Mr. Laumeister's testimony regarding Ms. Launderville's
employment also reflected inconsistencies.
93.
In 1982 or 1983, Ms. Launderville was promoted to assistant to the plant
manager. She received a raise with her promotion and worked in that position for
approximately three years. In 1989-92, Ms. Launderville was promoted to plant
manager of the Bennington production facility and received compensation of
approximately $22,000 per year. In 1994, she was promoted to Vice President and
General Manager with a salary increase to approximately $44,000 per year. In
1995, she was promoted President of CTC and general manager/COO handling
CTC's day-to-day operations and received an increase in compensation. As of
December 16, 1995, she was a Director of CTC.
94.
During the period between 1990 and 2008, Ms. Launderville was a salaried
employee of CTC with annual compensation for the years from 1985 until 1999
ranging between approximately $22,000 and $59,000, with bonuses during the
years between 1990 and approximately 2004 ranging between approximately
$12,000 and $50,000. As a result of the bonuses paid by Starson, Ms.
Launderville's maximum combined total compensation was approximately
$105,000.

4

The court cannot identify the eighteenth employee who was offered participation in the Plan.
21

95.
In 2008, Ms. Launderville voluntarily left employment at CTC and
accepted employment at Plasan Industries in Bennington, Vermont. At the time,
Ms. Launderville was fifty-seven years old and was not disabled. She testified as
follows with regard to her understanding of the 1997 Plan:

Q. Now, doesn't section six of the plan tell you that because you were not
65 at the time you left the employ of CTC Corporation, that-you hadn't
died, of course, and you were not disabled, that you were not entitled to any
benefits under the plan? Isn 't that what section six says?
A. That' s what it says.

Q. And that' s what you agreed to?
A. At the time, but that's also why I contacted Bruce before I left the
company regarding the deferred compensation plan, because of my
concern.
(Doc. 197 at 45.) She also agreed that under the terms of the 1997 Plan, her rights
in CTC ' s deferred compensation accounts were no greater than that of a general
creditor.
96.
Before accepting employment at Plasan Industries, Ms. Launderville
emailed Mr. Laumeister on February 24, 2008 and stated in relevant part: "I have
been offered a position. I think it is a good move for me, but before I accept, I
wonder what this will mean regarding my Deferred Compensation." (Plaintiffs'
Ex. 10 at 2.) Mr. Laumeister responded to her inquiry in pertinent part as follows:
"My intention is exactly what I showed you before. I am putting in my will and
trust and instructing Mission Trust to pay your d.c. when you are 65 or when I
check out. Donna[ Browe]'s will be in the same instruction." Id. at 1.
97.
While employed at Plasan Industries in Human Resources, Ms.
Launderville determined that ERlSA might apply to the 1997 Plan and contacted
counsel on that basis. In 2015 , she also contacted each of the other Plaintiffs in
this lawsuit and encouraged them to join her in a lawsuit against Defendants.
Donna Browe.

98.
In 1986, Donna Browe earned $15 ,850 from CTC. In approximately 2000,
she became the manager of CTC ' s accounting department. From 1990 until 2013 ,
Ms. Browe was a salaried employee of CTC with a salary ranging between
approximately $28,000 and $37,000, with bonuses during the years between 1990
and approximately 2001 ranging between approximately $2,000 and $4,000. Her
highest annual compensation at CTC was in 2001 and was $37,692.
99.
At the time Ms. Browe left the employ of CTC on November 12, 2012, she
was sixty-one years old and not disabled. She did not request any information
about the 1997 Plan or make any claim or request that 1997 Plan funds be
transferred to her or to her new employer. No claim was made by Ms. Browe

22

against CTC for deferred compensation until after she was contacted by Ms.
Launderville in 2015 and encouraged to participate in this litigation.
Philip Jordan.

100. As CTC ' s sales manager, Philip Jordan was responsible for managing and
overseeing the sales and distribution of CTC ' s photo processing, photo printing,
and photo equipment retail businesses, CTC ' s One-Hour Labs, the retail stores,
and the convenience stores and drug stores with which CTC had agreements to
provide film developing and printing services for their customers.
101. During the period between 1990 and the termination of his employment at
CTC in 2008, Mr. Jordan was a salaried employee with a salary ranging between
approximately $22,000 and $28,000, with bonuses during the years between 1990
and approximately 2001 ranging between approximately $2,000 and $4,000. Mr.
Jordan' s highest annual salary with CTC was $30,009.
102. Mr. Jordan did not deposit a minimum of 3% of his CTC salary into an IRA
during the years that he was employed by CTC and was a participant in the Plan.
When he voluntarily left the employ of CTC in October 1988 for a position with
another company, Mr. Jordan had not reached the age of sixty-five and was not
disabled. At the time he left CTC, he did not request any information about the
Plan, or make any claim or request that the Plan funds be transferred to him or to
his new employer. No claim was made by Mr. Jordan against CTC for deferred
compensation until after he was contacted by Ms. Launderville in 2015 and
encouraged to participate in this litigation.
Beverly Burgess.

103. In 1990, CTC offered the Plan to Beverly Burgess, who at that time served
as manager of the CTC retail store at the Bennington facility. She was also
responsible for management of retail inventory and sales activities at the OneHour Labs operated by CTC. In 1997, her job responsibilities were essentially
unchanged.
I 04. During the period between 1990 and 2004, Ms. Burgess was a salaried
employee and earned between $10,811.61 and $29,039.32.
105. Mr. Burgess and Ms. Jamieson do not have a copy of their mother' s Plan
Application and she apparently did not retain a copy of the 1997 Plan or any Plan
statements. According to Mr. Laumeister, he was unable to find any evidence of a
Plan Application by Ms. Burgess although she is mentioned as a "Retiree" in
Plaintiffs' Exhibit 3.
106. Ms. Launderville advised Ms. Jamieson shortly after Ms. Burgess' s death
on November 29, 2004 that there was nothing available to her under the Plan other
than her mother' s own IRA. Mr. Laumeister testified that he believed Ms.
Burgess had applied for long-term disability based on her representation that she
23

was no longer employed by CTC. Ms. Jamieson recalled her mother receiving
short-term disability payments prior to her death. There is no other evidence
regarding Beverly Burgess's status as a CTC employee at the time of her death.
Ms. Jamieson testified that her mother' s death was sudden, while Mr. Laumeister
testified that it was preceded by a lengthy period of hospitalizations and absences
from work.
107. Following Ms. Launderville's denial of benefits based on Ms. Burgess' s
participation in the 1997 Plan, neither Ms. Jamieson nor Mr. Burgess spoke with
Mr. Laumeister about any possible claim that they may have had against CTC for
deferred compensation payable as death benefits. Neither Ms. Jamieson nor Mr.
Burgess made any other claim against the Plan until after they were contacted by
Ms. Launderville in 2015 and encouraged to join in this lawsuit. Ms. Launderville
told Ms. Jamieson that she "thought it was unfair, that people were not getting
their benefits that they deserved." (Doc. 196 at 98.)
Sharon Fish.

108. Sharon Fish was the administrative manager of Wilson Photo when CTC
absorbed that company in 1988. Thereafter, she became employed by CTC and
assisted with the transition. Her job responsibilities included transporting and
logging in product from Rutland to the Bennington facility. She was allowed to
work part-time because she lived in Rutland and commuted to Bennington. In
1992, she requested approval to retire early from employment at CTC before she
reached age sixty-five. Her retirement was approved, and, as a Plan Participant,
she received deferred compensation payments.
109. During the period between 1990 and her retirement from CTC in 1992, Ms.
Fish was a salaried employee of CTC with an annual compensation of
approximately $23 ,000, with bonuses during the years between 1990 and
approximately 1992 ranging between approximately $2,000 and $4,000. The most
she earned at CTC was between $28,000 and $32,000.
Hope Leonard.

110. Hope Leonard was employed by Cap Tan in its production and inspection
department prior to CTC ' s purchase of Cap Tan' s assets. She was employed by
CTC from the time of its formation in 1980 until her retirement. She credibly
testified that she was a print operator who never managed employees throughout
her employment at CTC. The court finds Mr. Laumeister' s testimony that Ms.
Leonard managed part-time seasonal employees not credible.
111. In 1990, CTC offered the Plan to Ms. Leonard who accepted participation.
She was offered participation because she was a reliable and competent employee.
In 1997, her job responsibilities remained essentially unchanged and she accepted
participation in the 1997 Plan. She retired from employment at CTC in 2002,

24

when she reached age sixty-five and was paid deferred compensation under the
1997 Plan.
112.

Ms. Leonard credibly testified that she was never a salaried employee.

113. After her retirement, Ms. Leonard received a December 31, 2007 letter
from Mr. Laumeister stating that he had overpaid her deferred compensation
benefits and would cease doing so. She was angered by the letter because she
believes he underpaid her.

William Elliott.
114. In 1980, prior to becoming employed by CTC, William Elliott was plant
engineer/parts manager at Cap Tan. Mr. Elliott was employed in this same
capacity at CTC until his retirement at age sixty-five in 2000. Mr. Elliott was
responsible for maintaining the film developing and photo processing equipment
at the Bennington facility, including retrofitting or fabricating parts to keep the
outdated equipment operating. Mr. Elliott was available on-call to address
equipment breakdowns. He also trained other CTC employees in maintenance and
repair.
115. In 1990, CTC offered the Plan to Mr. Elliott who accepted participation in
it. In 1997, his core duties remained the same but were on a greater scale in light
of CTC' s growth.
116. During the period between 1990 and his retirement in 2000, Mr. Elliott was
a salaried employee of CTC with a salary ranging between approximately $18,000
to $24,000, with bonuses during the years between 1990 and his retirement
ranging between approximately $2,000 and $4,000.
117. The Plan Administrators approved the decision to allow Mr. Elliott to retire
at age sixty because of his family history of early mortality.

Don Hollner.
118. In 1998, Don Hollner was employed at CTC as the director of marketing, a
position that Mr. Laumeister previously held. Mr. Hollner was employed by CTC
until 2008. Although he participated in the 1997 Plan, due to his departure from
CTC before reaching age sixty-five he received no deferred compensation. There
is no evidence that he claimed any benefits under the 1997 Plan after he left
CTC's employ.
119. During the period between 1990 and his termination of employment with
CTC in around 2008, Mr. Hollner was a salaried employee with annual
compensation of approximately $41,000.

Eileen Bliss.
120. Eileen Bliss was employed as an hourly production worker by Cap Tan. In
1980, CTC employed her in this same capacity. During her employment with
25

CTC, she was promoted in 1990 to production manager for CTC's Bennington
facility's film developing and photo processing operations. In this position, she
scheduled plant production, evaluated job applications, hired new employees,
appointed workers to shifts, and started and tested developing and photo
processing machinery. She worked independently and made production decisions
without direct supervision from senior management.
121. During the period between 1990 and her retirement in around 2005, Ms.
Bliss was a salaried employee of CTC with annual compensation between
approximately $20,000 and $28,000, with bonuses during the years between 1990
and 2001 between approximately $2,000 and 4,000.

Ed Hojnowski.
122. In 1990, Ed Hojnowski was employed by CTC. According to Mr.
Laumeister, he managed one of CTC ' s film developing and photo processing
shifts at its Bennington facility and supervised six to ten employees. Ms. Leonard
credibly testified that he fixed machines, was not a "boss[]," and never gave any
orders. (Doc. 196 at 147.) Plaintiff Browe echoed this testimony. Mr. Hojnowski
chose to leave the employ of CTC in 1998. At the time, he was neither sixty-five
nor disabled. There is no evidence that he made a claim for deferred
compensation benefits thereafter.
123. During his employment at CTC, Mr. Hojnowski was a salaried employee
with annual compensation of approximately $20,000, with bonuses between
approximately $2,000 and $4,000. He never made more than $25 ,000 working for
CTC.

Robin Secord.
124. In 1997, at the recommendation of Ms. Launderville, Robin Secord was
hired as customer service manager. CTC's policy was to require that all telephone
inquiries from customers to be answered by a "live" CTC employee. Ms. Secord
trained night shift personnel to respond to customer calls and to refer more
complicated inquires to her. The 1997 Plan may have been offered to Ms. Secord,
however, no documents confirm her participation. Mr. Laumeister testified that
the proposal to add her as a Plan participant was conditioned upon her continued
employment at CTC.
125. During the period between 1990 and her termination of employment in
2001 , Ms. Secord was a salaried employee with annual compensation of
approximately $25 ,000, with bonuses between approximately $1 ,000 and $2,000.
When Ms. Secord left CTC ' s employment she was neither sixty-five nor disabled.
There is no evidence that she made a claim for deferred compensation benefits
thereafter.

26

Steven Brown.

126. In approximately 1990, Steven Brown was hired by CTC to be its fleet
manager for the vehicles used for delivery of supplies, equipment, and inventory
to the One-Hour Labs and retail stores; delivery of supplies and customer
envelopes to the drug stores, convenience stores, and other retail locations that
offered CTC film processing; pick-ups from the Bennington facility; and similar
services. After CTC moved the Wilson Photo operations to Bennington, Mr.
Brown managed the Wilson Photo plant in Castleton, Vermont, and CTC's
Vermont Color warehouse and retail property in Rutland, Vermont. In 2008, Mr.
Brown left employment at CTC to become a service manager for a Rutland,
Vermont automobile dealer. He was neither sixty-five nor disabled at the time.
127. During his employment at CTC, Mr. Brown was a salaried employee with
annual compensation between approximately $20,000 and $25,000, with bonuses
during the years between 1990 and approximately 2001 between approximately
$2,000 and $4,000.
128. When he left CTC's employ, Mr. Brown made no claim for benefits under
the 1997 Plan.
Garry Pleasant.

129. In 1990, Garry Pleasant was hired by CTC as a shift manager at the
Bennington facility. Due to a personal matter, he left the employ of CTC. He was
neither sixty-five nor disabled at the time. It is not clear whether he was offered
participation in the 1997 Plan. The only documentation of his Plan participation is
Plaintiffs' Ex. 3. He did not receive any deferred compensation benefits from
CTC. There is no evidence that he ever made a claim for such benefits after he
ceased employment at CTC.
130. During his employment at CTC, Mr. Pleasant was a salaried employee with
annual compensation between $23,000 and $25,000, with annual bonuses of
approximately $2,000.
Donald Loseby.

131. From 1990 until his retirement, Donald Loseby fixed CTC 's machines and
was a salaried employee of CTC. His salary ranged between approximately
$22,000 and $27,500, with bonuses during the years between 1990 and his
retirement between approximately $3,000 and $5,000. Upon his retirement at age
sixty-five, Mr. Loseby was paid deferred compensation pursuant to the 1997 Plan.
Ms. Leonard credibly testified that Mr. Loseby did not manage any employees.
Sue Carman or Caraman.

132. According to Mr. Laumeister, Ms. Carman or Caraman was a friend of Ms.
Launderville who worked at CTC and whom Ms. Launderville proposed for
participation in the 1997 Plan. It is unclear whether she accepted participation.
27

Pat DeCoff.
133. Pat DeCoffworked at CTC ' s Bennington plant. In a declaration, Mr.
Laumeister averred that she was offered an opportunity to participate in the Plan in
1990 and 1997 but declined to participate. She was a non-salaried print operator
who had no management responsibilities.

Percentage of CTC Employees Offered Plan Participation.
134. It appears that the 1997 Plan was offered only to CTC's Vermont
employees and primarily those at the Bennington facility.
135. Because there is no evidence that any employee of One-Hour Lab or any
employee ofESS was offered participation in the Plan, the percentage of CTC's
total workforce for purposes of Plan participation appears to be 18 / 60 = 30%. If
all CTC-related entities are considered, 18 / 186 = 9 .6% of the workforce was
offered Plan participation. These percentages likely include part-time employees
in both the numerator and denominator although the parties agree that, other than
Ms. Fish, part-time employees were ineligible for Plan participation.

Mr. Laumeister's Promises.
136. At some point prior to April 4, 2015 , Mr. Laumeister, Ms. Launderville,
and Ms. Browe met at Jensen's Restaurant in Bennington, Vermont. At that
meeting, Mr. Laumeister agreed to include a $90,000 bequest for Ms. Launderville
and a $35 ,000 bequest for Ms. Browe in his will. Mr. Laumeister executed a Last
Will and Testament dated June 17, 2010 which stated in relevant part:
I direct that my stock in CTC Corp be sold or liquidated as soon as
possible after my death, together with the land and buildings known
as 252 Benmont Avenue, Bennington, Vermont. I give, devise and
bequeath the sum of $90,000.00 from the proceeds of that sale to
Lucille Launderville of Shaftsbury, Vermont if she survives me ....
I give, devise and bequeath the sum of $35 ,000.00 to Donna Browe,
of Bennington, Vermont if she survives me.
(Defendants ' Ex. A8 at 3) (emphasis omitted).
137. By email dated April 4, 2015, Ms . Launderville wrote to Mr. Laumeister
that her employer, Plasan, was moving and it "looks like I will be pushed into
retirement about a year or so sooner than anticipated." (Defendants ' Ex. A7 at 2.)
In this email, she inquired about the Plan as follows:
I am wondering about the deferred compensation which I had counted on in
retirement. We can't make any firm plans until I have a complete
understanding of where this issue stands. I understand that you have
bankrupted CTC, but hope that you can find it in your heart to take care of
the commitment which was made so many years ago. I gave my heart and

28

soul to the business and hope that you feel that I impacted the business and
you in a very dedicated and positive way.
Id.

138. Mr. Laumeister responded in an email that was intended only for Ms.
Launderville. Id. ("P.S. This letter is strictly for your eyes. Please do not share it
with anyone else. I've tried to be totally straight with you and only you."). In
relevant part, he responded to her request as follows:
I did not bankrupt CTC. Digital and stupid Kodak torpedoed the industry.
I did fight for more years than I should have to try to save CTC and it cost
me more than $600,000, the loans from me to CTC which will never be
repaid.
I did promise to personally fulfill your deferred comp, though it was a CTC
responsibility. As you should remember, however, the payment is
contingent on 252 Benmont, the store, warehouse and garage on about an
acre, providing either a sale or leasing to provide the funds. That is my
personal property, but I was and still am willing to use it to provide the$$
for you and Donna.
The problem is timing, which does not appear to be soon. The Benmont
bridge reconstruction has killed interest in retail for now, after I spent over
$10,000 to renovate the bldg., plus annual taxes of over $6000 and
insurance of almost $2000/yr. Hoisington believes it is a good buy at my
$190,000 listing or $220,000 with the back bldg.sand land. I have even
said I'd lease it to a good tenant, starting at $1000/month, triple net to get a
long term tenant who could bring the rent up to $2000/month where it
should be in a few years. NO TAKERS SO FAR.
I know that you probably feel that I could afford to pay you out of my own
funds , but sadly, I'm in tough shape now.

***
I'm sorry if all these problems upset your retirement plans. As one who has
worked from age 13 to 80, and can' t slow down now, I would advise you
both to keep working, do not tap soc. sec. until 65 as you ' ll lose thousands
over the next 20 years[.] Both of you have the ability to find compensation
[employment] in Bennington County, and I believe that 252 B will
eventually sell.
Id. at 1.

139. Thereafter, Mr. Laumeister agreed to increase the bequest in his will to Ms.
Browe. His revised Last Will and Testament dated April 25, 2014 remained the
same for Ms. Launderville, but provided the following increase for Ms. Browe:

29

I direct that the land and buildings known as 252 Benmont A venue,
Bennington, Vermont, be sold as soon as possible after my death. From the
net sales proceeds, I direct that the sum of $90,000 be paid to Lucille
Launderville of Shaftsbury, Vermont, if she survives me. If she does not
survive me, I direct that the sum of 90,000 to be paid to her surviving
husband or, if he does not survive her, then to her son. I further direct that
$60,000 from the net proceeds of said sale shall be paid to Donna Browe of
Bennington, Vermont, if she survives me. If she does not survive me, then
I direct that said sum be paid to her husband, Tom, if he survives me. In
the event that the sale of 252 Benmont, Bennington, Vermont does not
generate net proceeds to satisfy these bequests, I direct that such parties'
share be reduced proportionately based on the amount that the net sale
proceeds are less than 150,000.
(Doc. 196 at 65-66.)
140. Mr. Laumeister provided Ms. Launderville and Ms. Browe with copies of
the page in his will where their bequests are mentioned. They raised no objection
in 2010 or 2014.
141. Mr. Laumeister credibly testified that the amount of the bequests were
proposed by Ms. Launderville and Ms. Browe based upon what they believed was
in their deferred compensation accounts and that he thought the amounts were
"reasonable." Id. at 60. He further contends that as any obligation belonged to
CTC, he had no personal obligations to them and he considered his bequests a
"gift[.]" Id.
142. Mr. Laumeister considers this lawsuit a rejection of the offers he made to
Ms. Launderville and Ms. Browe. Neither Ms. Launderville nor Ms. Browe
offered any evidence to the contrary.

Piercing the Corporate Veil.
143. Plaintiffs cite the following evidence in support of their claim that
Defendants engaged in self-dealing and in support of their request that CTC ' s
corporate veil be pierced to hold Mr. Laumeister personally responsible for CTC ' s
obligations:
A.
At Mr. Laumeister' s request, Ms. Launderville arranged for Cody
Laumeister to receive health care benefits from CTC although he provided
no services to CTC.
B.
On a couple of occasions, Ms. Launderville and other CTC
employees worked at the concession stand for a function at the Bennington
Center for the Arts for which they did not receive additional compensation.
C.
Ms. Launderville claims that Eric and Jeff Crawford were builders
on CTC ' s payroll who performed work on the Bennington Center for the
30

Arts. Mr. Laumeister testified that he personally reimbursed CTC for their
work. No records were introduced to support either claim.
D.
Ms. Launderville performed services for Mr. Laumeister' s
residential rental property and that of his wife including soliciting tenants
and collecting and depositing rent checks. On one occasion, she and Ms.
Browe cleaned an apartment and purchased items such as dishes and linens
so that it could be rented as furnished.
E.
While Mr. Laumeister was in Arizona, on occasion, Ms.
Launderville would stop by his house in Vermont and pick up his mail.
She and other CTC employees also helped out on one occasion to clean up
after frozen pipes burst at Mr. Laumeister' s home while he was in Arizona.
They did not receive additional compensation for these services.
F.
CTC ' s payroll was used to pay for maintenance on Mr. Laumeister' s
home on Monument A venue in Bennington and at the Bennington Center
for the Arts which he founded. Mr. Laumeister testified that these amounts
were fully reimbursed but has no records to support that claim.
G.
Mr. Laumeister used his personal credit cards for corporate
purchases so that he would obtain the reward points for his personal use.
H.
A "note" from Mission Management & Trust states: "There are two
accounts: 1) Agent for Bruce' s personal account: 2) agent for his
corporation in VT. They are combined for investment management
purposes." (Plaintiffs' Ex. 27 at MMOl 16.)

II.

Conclusions of Law and Analysis.
Plaintiffs assert six claims against Defendants under ERISA. Four of Plaintiffs'

claims allege that Defendants breached their fiduciary duties: Count I: Wrongful denial of
benefits under the Plan; Count III: Inadequate funding of the Plan and withholding of
Plan assets; Count IV: Failing to ensure that the Plan complies with ERISA; and
Count V: Self-dealing. Count VI alleges that Defendants violated ERISA' s reporting and
disclosure requirements.
Plaintiffs seek to hold Defendants jointly and severally liable for all unpaid Plan
benefits and further request that Defendants disgorge all profits made through the use of
Plan assets. In addition, Plaintiffs seek to pierce the corporate veil and hold Mr.
Laumeister personally and individually liable for all amounts owed to Plaintiffs under the
Plan. Based on Defendants' alleged failure to comply with ERISA' s reporting and
disclosure requirements, Plaintiffs assert that Defendants are personally liable, jointly and
31

severally, for an amount up to $100 per day to each Plaintiff, from the date of each
violation. Finally, based on Mr. Laumeister's disavowal of any obligations to provide
Plan benefits, Plaintiffs request that the court enjoin Defendants from further violating
ERISA, remove Defendants as Administrators of the Plan, appoint an administrator in
their place, and compel them to remit all monies and reports due to Plaintiffs.
Defendants deny liability and assert that the Plan is a top hat plan pursuant to
which they have no further obligations. In the event they are found liable for Plaintiffs'
claims, they have counterclaimed against Plaintiff Launderville, contending that she
should be held jointly and severally liable and indemnify them for any ERISA damages
awarded against them.
A.

Standard of Review.

As the Plaintiffs make no claim under the 1990 Plan, the court confines its
analysis to the 1997 Plan. 5 The court reviews Defendants' denial of benefits de nova
because the 1997 Plan does not grant the plan administrators discretion to make final
benefit determinations. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115
(1989) ("[A] denial of benefits challenged under [an ERISA claim] is to be reviewed
under a de nova standard unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or to construe the terms of the
plan."). The de nova standard "applies to all aspects of the denial of an ERISA claim,
including fact issues, in the absence of a clear reservation of discretion to the plan
administrator." Kinstler v. First Reliance Standard Life Ins. Co. , 181 F.3d 243 , 245 (2d
Cir. 1999).
"[T]he de nova standard of review applies regardless of whether the plan at issue
is funded or unfunded and regardless of whether the administrator or fiduciary is
operating under a possible or actual conflict of interest." Firestone Tire & Rubber Co.,

5

The 1997 Plan was accompanied by an application signed by each participant acknowledging
that it superseded prior plans. See Defendants' Ex. Cat 1 (stating the 1997 Plan "supersedes any
and all deferred compensation plan documents provided by CTC Corporation.") (capitalization
omitted).
32

489 U.S. at 115. It requires "the district court [to not only] find the facts specially and
state separately its conclusions of law thereon," the court must also "judge the credibility
of witnesses[.]" Connors v. Conn. Gen. Life Ins. Co. , 272 F.3d 127, 135 (2d Cir. 2001)
(internal quotation marks omitted).

B.

Whether the 1997 Plan is a Top Hat Plan under ERISA.

The parties agree that the 1997 Plan is generally subject to ERISA which applies
to "any employee benefit plan if it is established or maintained ... by any employer
engaged in commerce or in any industry or activity affecting commerce[.]" 29 U.S.C.
§ 1003(a)(l). ERISA defines an "employee pension benefit plan" to include:
any plan, fund, or program ... established or maintained by an
employer ... to the extent that by its express terms or as a result of
surrounding circumstances such plan, fund, or program[] ... results in a
deferral of income by employees for periods extending to the termination of
covered employment or beyond, regardless of the method of calculating the
contributions made to the plan, the method of calculating the benefits under
the plan or the method of distributing benefits from the plan.
29 U.S.C. § 1002(2)(A)(ii).
"ERISA's coverage provisions, 29 U.S.C. §§ 1003, 1051 , 1081 , and 1101 , state
that ERISA shall apply to any employee benefit plan, other than listed exceptions."

Demery v. Extebank Deferred Comp. Plan (BJ, 216 F.3d 283 , 286 (2d Cir. 2000). At
issue in this case is whether the top hat exception applies. A top hat plan is defined as:
"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. §§ 1051(2),
108l(a)(3), l lOl(a)(l). Top hat plans are exempt from the participation
and vesting provisions ofERISA, 29 U.S.C. §§ 1051-1061 , its funding
provisions, 29 U.S.C. §§ 1081-1086, and its fiduciary responsibility
provisions, 29 U.S.C. §§ 1101-1114, though not from its reporting and
disclosure provisions, 29 U.S.C. §§ 1021-1031, or its administration and
enforcement provisions, 29 U.S.C. §§ 1131 -1145.

Demery, 216 F .3d at 286-87.
Congress created the top hat exception because "Congress deemed top-level
management, unlike most employees, to be capable of protecting their own pension
expectations." Gallione v. Flaherty, 70 F.3d 724, 727 (2d Cir. 1995). A 1990
33

Department of Labor ("DOL'') opinion letter reflects this same interpretation of
•

legislative intent:
It is the view of the Department that in providing relief for "top hat" plans
from the broad remedial provisions of ERISA, Congress recognized that
certain individuals, by virtue of their position or compensation level, have
the ability to affect or substantially influence, through negotiation or
otherwise, the design and operation of their deferred compensation plan,
taking into consideration any risks attendant thereto, and, therefore, would
not need the substantive rights and protections of Title I.

U.S. Dep't of Labor, Pension & Welfare Benefit Programs, Opinion Letter 90-14A, 1990
WL 123933, at *l (May 8, 1990).6
1.

Requirements of a Top Hat Plan.

In the Second Circuit, in order to establish a top hat exception, it must be
established that the 1997 Plan was: "(l) unfunded, and (2) maintained primarily for a
select group of management or highly compensated employees." Demery, 216 F.3d at
287. The Second Circuit joins the Sixth and Ninth Circuits in finding that there is a third
consideration as well because an "[ a]bility to negotiate is an important component of top
hat plans[.]" Demery, 216 F.3d at 289; see also Bakri v. Venture Mfg. Co. , 473 F.3d 677,
678-79 (6th Cir. 2007) (observing that "the 'select group' test is whether the members of
the group have positions with the employer of such influence that they can protect their
retirement and deferred compensation expectations by direct negotiations with the
employer'") (internal quotation marks omitted); Duggan v. Hobbs, 99 F.3d 307, 312-13
(9th Cir. 1996) (citing the DOL opinion letter and concluding that "the top-hat exception
was intended to apply to employees who ' by virtue of their position or compensation

6

The DOL opinion letter "explain[ s] Congress's intent for creating top-hat plans(]" and "is
therefore entitled to persuasive deference under Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct.
161 , 89 L.Ed. 124 (1944)." Sikora v. UPMC, 876 F.3d 110, 116 (3d Cir. 2017); see also
Alexander v. Brigham & Women 's Physicians Org. , Inc., 513 F.3d 37, 47 (1st Cir. 2008) ("We
have no quarrel with the letter' s persuasiveness as a gloss on Congress's intentions in enacting
the top-hat provision.").
34

level, have the ability to affect or substantially influence, through negotiation or
otherwise, the design and operation of their deferred compensation plan[.]"'). 7

2.

The Burden of Proof.

This court has previously held that Defendants bear the burden of proving that the
Plan is a top hat plan. See Doc. 4 7 at 9. The court recognizes that there is a split of
authority on this issue, 8 with the Third Circuit holding that an employee or other
beneficiary must prove his or her employer did not establish a top hat plan. The Second

7

Not all Circuits agree that a court should consider an employee's ability to negotiate. As the
Third Circuit recently observed, it finds the approach of the First Circuit more persuasive:
The First Circuit has expressed a different view, one which is in tension with the
positions taken by the Second, Sixth, and Ninth Circuits. In Alexander v.
Brigham & Women 's Physicians Org. , Inc., that court declined 'the appellant's
invitation to depart from the plain language of the statute and jerry-build onto it a
requirement of individual bargaining power.' Alexander v. Brigham & Women's
Physicians Org., Inc., 513 F.3d 37, 47 (1st Cir. 2008) .... We agree with the
First Circuit' s approach.
Sikora, 876 F.3d at 115. However, even the First Circuit has observed: "The origins of
the top-hat provision lie in Congress's insight that high-echelon employees, unlike their
rank-and-file counterparts, are capable of protecting their own pension interests."
Alexander, 513 F.3d at 43 .
8

Compare Daft v. Advest, Inc., 658 F.3d 583, 596-97 (6th Cir. 2011) (observing that "the
defendant-employer typically advocates for the top-hat status of an ERISA plan in order to avoid
statutory liability, and therefore the defendant-employer typically bears the burden of proof on
this issue in the district court."); MacDonald v. Summit Orthopedics, Ltd., 681 F. Supp. 2d 1019,
1023 (D. Minn. 2010) (concluding that "Defendants bear the burden of showing that the Plan is a
top hat plan"); Deal v. Kegler Brown Hill & Ritter Co. LP.A., 551 F. Supp. 2d 694, 700 (S.D.
Ohio 2008) (observing that "[t]he burden is on Defendant to show that the ... Plan is a top hat
plan."); Alexander v. Brigham & Women 's Physicians Org. , Inc., 467 F. Supp. 2d 136, 142 (D.
Mass. 2006), aff'd, 513 F.3d 37 (1st Cir. 2008) (noting that defendant "has the burden of proving
that [deferred compensation plans] were each top hat plans."); Virta v. DeSantis Enters., Inc.,
1996 WL 663970, at *3 (N.D.N.Y. Nov. 7, 1996) ("Defendants have failed to controvert
plaintiffs' evidence that this Plan was not administered as a Top Hat plan, and they bear the
burden of proof on this affirmative defense"), with Sikora, 876 F.3d at 113 ("[Plaintiff] has the
burden of showing that the Plan is not a top-hat plan to obtain relief under ERIS A") (citing Pane
v. RCA Corp., 868 F.2d 631 , 637 (3d Cir. 1989) (rejecting contention that a plan's status as a tophat plan is an affirmative defense and concluding that§ 1 l0l(a) "does not provide for an
exemption from liability under section 502(a)" but instead "merely provides the legal standard
by which [a defendant's] section 502(a) liability is to be determined.")).
35

Circuit has not squarely addressed the issue. For the following reasons, the court
disagrees with the Third Circuit' s approach and adopts the majority approach.
In general, it is the employer who chooses to offer an employee benefit plan and
on what terms; drafts the plan or causes it to be drafted; determines whether it will seek a
top hat exception from ERISA' s more onerous requirements; and selects the employees
who will be allowed to participate therein. It therefore follows that the employer should
bear the burden of establishing that it has accomplished its intended objectives. 9
Placing the burden of proof on the employer also furthers ERISA' s remedial and
protective purposes. As the Supreme Court has explained:
Congress enacted ERISA to "protect ... the interests of participants in
employee benefit plans and their beneficiaries" by setting out substantive
regulatory requirements for employee benefit plans and to "provid[ e] for
appropriate remedies, sanctions, and ready access to the Federal courts."
29 U.S.C. § l00l(b). The purpose ofERISA is to provide a uniform
regulatory regime over employee benefit plans.
Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (alterations in original).
ERISA was also intended to address concerns about "the mismanagement of funds
accumulated to finance employee benefits and the failure to pay employees benefits from
accumulated funds." Massachusetts v. Marash , 490 U.S. 107, 115 (1989); see also
Firestone Tire & Rubber Co., 489 U.S. at 108 ("ERISA provides a panoply of remedial
devices for participants and beneficiaries of benefit plans.") (internal quotation marks
omitted); Belanger v. Wyman-Gordon Co., 71 F.3d 451 , 454 (1st Cir. 1995) (holding
ERISA' s substantive provisions are designed "to safeguard the financial integrity of
employee benefit funds, to permit employee monitoring of earmarked assets, and to
ensure that employers' promises are kept."). For these reasons, " [t]he elements of [the
statutory] definition make the top hat category a narrow one" and "top hat plans form a
rare sub-species of ERISA plans[.]" In re New Valley Corp. , 89 F.3d 143, 148 (3d Cir.
9

The Third Circuit has described a top hat plan as "having three elements: (1) ' the plan [must]
be unfunded'; (2) it must ' exhibit the required purpose '; and (3) 'it must also cover a 'select
group ' of employees." Sikora, 876 F.3d at 113 (internal quotation marks omitted). Each of these
factors is exclusively within the employer's control.
36

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1996). 10 If the purpose of ERISA is to protect employees and employee benefit plans,
that purpose would be thwarted if an employee was required to bear the burden of
establishing whether an exception to it applies, especially when that exception limits
ERISA's protections.
Only an employer has both the motive and the means of ensuring compliance with
ERISA's top hat exception. Requiring the employer to shoulder the burden of proof thus
furthers congressional intent, places the burden of proof on the party most likely to have
the evidence relevant to establish the exception, and allocates the burden of proof to the
party that controls if, when, and how a top hat plan is offered.

3.

The 1997 Plan's Stated Purpose.

In this case, the 1997 Plan does not indicate it is a top hat plan, does not state it is
a nonqualified plan, contains no reference to ERISA, and expresses no intent to be
exempt from certain ERISA requirements. 11 Although not dispositive, this is evidence of
CTC's intent. See Guiragoss v. Khoury, 444 F. Supp. 2d 649, 659 (E.D. Va. 2006) ("[I]t
is clear that merely inserting the ERISA definition of a top hat plan into a document is
insufficient if the actual plan does not satisfy the top hat requirements, although a plan's
language is indicative of the employer's intent when establishing the plan and may
influence the court's determination") (collecting cases); see also Alexander, 513 F .3d
at 45 (noting "a plan's specific language can aid a court in determining whether that plan
qualifies as a top-hat plan.") ( citation omitted).
The 1997 Plan identifies its purpose as follows: "The primary purpose of the Plan
is to provide designated employees with an employer paid fund, which will provide a

10

See also Alexander, 513 F.3d at 43 ("The top-hat provision cuts a swath through [ERISA's]
regulatory thicket, relieving employers of many of ERISA's more onerous burdens if-and only
if-certain circumstances exist."); Carrabba v. Randa/ls Food Mkts. , Inc., 38 F. Supp. 2d 468,
477 (N.D. Tex. 1999), aff'd, 252 F.3d 721 (5th Cir. 2001) ('"ERISA is a remedial statute to be
liberally construed in favor of employee benefit fund participants,' and ... exemptions from the
ERISA coverage should be confined to their narrow purpose.") (quoting Kross v. W Elec. Co.,
701 F.2d 1238, 1242 (7th Cir. 1983)).
11

Indeed, the Plan states that it "shall be construed under the laws of the state of Vermont."
(Defendants' Ex. B at 5.)
37

survivor benefit to the employee's immediate family as well as a supplemental retirement
income." (Defendants' Ex.Bat 1.) The term "Employees" is defined as "all
d( e]signated eligible employees of this Plan" while "Participant" is defined as "an
Employee who participates in this Plan." Id.
The Plan imposes no qualifications for participation in the Plan other than the
employee' s minimum 3% IRA contribution. See Khoury, 444 F. Supp. 2d at 663
(declining to find a top hat exemption where employer "cannot even rely on the Plan
documents to support their top hat argument because the documents contain no reference
to selective member requirements"). It delegates decisions regarding Plan participation
to the Plan Administrators without guidance regarding how that task is to be performed:
ADMINISTRATION- This Plan shall be administered by the Employer.
The Board of Directors of the Employer shall have full power and authority
to adopt rules and regulations for the administration of the Plan, and to
interpret, alter, amend, and revoke any rules and regulations so adopted.
The Board of Directors of the Employer shall administer the Plan. All
decisions concerning withdrawal, payment, method of payment, investment
of funds, etc, shall be determined by a majority of the Board of Directors.
Employee Board of Director members shall not be entitled to make any
decision of any kind with respect to their own participation.
(Defendants' Ex. B at 1.)
There is thus nothing in the 1997 Plan itself that suggests it was intended to fall
within ERJSA's top hat exception.

4.

Whether the Plan is Unfunded.

Defendants argue that the Plan is unfunded. Plaintiffs counter that there is "strong
evidence that the Plan's actual inception was 1987" and "Defendants presented no Plan
documents from 1987 showing that the Plan was then ' unfunded' so as to meet the
threshold requirement for a top hat plan." (Doc. 213 at 2.) The court disagrees that there
is "strong evidence" of a 1987 plan. No witness claimed to have seen such a plan or
participated therein. The issuance of a life insurance policy in Ms. Launderville' s name
and a reference in Board of Directors minutes to a 1987 plan do not create a plan where
one does not otherwise exist. Plaintiffs effectively concede this point by proposing that

38

the court find that "[t]he Plan (including the versions under the 1990 and 1997
Agreements) was the only retirement plan CTC ever offered to its employees." (Doc.
164 at 4, ,r 10.) The only question is therefore whether the 1997 Plan was unfunded.
[T]he question a court must ask in determining whether a plan is unfunded
is: "can the beneficiary establish, through the plan documents, a legal right
any greater than that of an unsecured creditor to a specific set of funds from
which the employer is, under the terms of the plan, obligated to pay the
deferred compens ati on?"
Demery, 216 F.3d at 287. Put differently, a deferred compensation plan is unfunded
where "benefits thereunder will be paid ... solely from the general assets of the
employer." Id. (citing Gallione, 70 F .3d at 725) (internal quotation marks omitted).
In Demery, the plan' s "express terms" made it clear that the amounts payable
would not be held "in trust or as a segregated fund for the Employee[,]" would be
"payable solely from the general assets of the Employer," and the "Employer's obligation
under the Plan shall be that of an unfunded and unsecured promise of Employer to pay
money in the future ." Id.
The 1997 Plan, in contrast, is less clear:
7. RIGHTS OF THE PARTICIPANT- The rights of the Participant
created by the Plan shall be that of a general creditor of the Employer only,
and then solely to the extent of the net value of the Participant's deferred
compensation account. Prior to the date on which an obligation to pay
Deferred Compensation Payments or Death Benefits commences, the
Participant has no other rights under the Plan or in the salary deferred under
the terms of the Deferred Compensation Payments or to a Death Benefit,
are set forth in Article 6 and Article 8 through 10 hereof [8. Leave of
Absence. 9. Amendment or Termination of Plan. 10. Non-Assignability
Clause]. It is also understood that the Plan in no way affects the
Employer's or the Employee' s rights to terminate employment at any time,
with or without cause.

***

11.
PROHIBITION AGAINST FUNDING - If the Employer acquires a
mutual fund, an annuity contract or life insurance policy, or any other asset
in connection with its liabilities hereunder, neither a Participant nor any
beneficiary of the Participant shall have any right with respect to, or claim
against, such contract, policy or other asset, and the Employer shall be
named the owner and beneficiary of any such contract, policy or other
39

asset. Such contract, policy, or other asset shall not be held under any trust
for the benefit of a Participant or [beneficiaries] of a Participant or held in
any way as collateral security for the performance of any obligation of the
Employer under the Plan. Any such policy or other asset shall be, and
remain, a general, unpledged, unrestricted asset of the Employer.
(Defendants' Ex. B at 3-5.)
Because the 1997 Plan states that the Participants' rights will be that of a general
creditor and that they will have no rights to, or claims against, any specific Plan assets,
under Demery, this supports a claim that the 1997 Plan is unfunded. It is, moreover,
undisputed that CTC treated its deferred compensation accounts as assets it could use to
pay its operating expenses. Plaintiffs Launderville and Browe were aware that CTC was
using its deferred compensation accounts for this purpose. They not only failed to protest
this use; they facilitated it.
However, certain other provisions of the 1997 Plan suggest that it will be
"funded." 12 In addition, CTC placed its deferred compensation contributions in accounts
initially held separately from its general assets. See Khoury, 444 F. Supp. 2d at 659-60
("The first step in the top hat inquiry is determining whether the plan is unfunded. The
analysis is straightforward and depends on whether the plan has a funding source apart
from the general assets of the company .... If there is no separately maintained account
distinct from the company's general assets, then the plan is unfunded."); see also Reliable

Home Health Care, Inc. v. Union Cent. Ins. Co., 295 F.3d 505, 514 (5th Cir. 2002) ("[I]n
determining whether a plan is 'funded' or 'unfunded' under BRISA, ... a court should

12

See, e.g., Defendants' Ex.Bat 1 ("The primary purpose of the Plan is to provide designated
employees with an employer paid fund"); id. at 2 ("In the event that a Participant fails to
continue funding the IRA, pursuant to this agreement, the Employer will terminate funding the
plan on behalf of the Participant and all benefits accrued will be forfeited to the Employer."); id.
("Deferred Compensation Payments[] .. . employer has also funded, group term life insurance
equal to one time participant's annual salary, for which the participant has named a
beneficiary."); id. at 3 ("The balance of the account will be driven only by the economic market
growth of the funds which the Employer has funded. The monthly payout amount will be
reviewed and adjusted annually to reflect the growth of the account and to exhaust the fund
balance over the remainder of the 120 month payout period. The Participant should be aware
that the payout from this fund is taxable and should plan accordingly.").

40

identify whether a policy is funded by a res separate from the general assets of the
company.").
On balance, because the 1997 Plan clearly states that it vests in Plan Participants
no rights in CTC's deferred compensation accounts and no greater status than that of a
general creditor, and because CTC treated the deferred compensation accounts as its
general assets, Defendants have satisfied their burden to establish the 1997 Plan was
unfunded.
5.

Whether the Plan was Offered to a "Select Group."

"To determine whether the participants of an employee benefit plan are 'a select
group of management or highly compensated employees,' [the Second Circuit] require[s]
the district court to conduct a fact-specific inquiry, analyzing quantitative and qualitative
factors in conjunction." Demery, 216 F.3d at 288 (citation omitted). Quantitatively, "the
plan must cover relatively few employees." In re New Valley Corp., 89 F.3d at 148.
Qualitatively, "the plan must cover only high level employees." Id. As the Ninth Circuit
has observed, the "select group" requirement includes "more than a mere statistical
analysis." Duggan, 99 F.3d at 312. While the First Circuit has observed that "[i]t is an
open question whether the statutory phrase 'select group' modifies only the term
'management' or also modifies the term 'highly compensated employees[,]"' the court
need not decide whether "both categories of employees are subject to the 'select group'
requirement" because regardless of whether the "select group" modifies both categories,
Defendants cannot sustain their burden of proof. Alexander, 513 F.3d at 43 n.7.
a.

Quantitative Analysis.

In analyzing whether the 1997 Plan was maintained for relatively few employees,
the court must first determine the number of employees offered participation in the Plan
(the numerator) in comparison to the size of CTC's workforce (the denominator). The
courts have provided ample guidance regarding how to identify the numerator, however,
there is scant guidance on how to select the denominator. 13 If all employees are at least
13

See, e.g., Demery, 216 F.3d at 288 (comparing the number of employees offered participation
in the plan to the size "of an employer's workforce"); Sikora v. UPMC, 876 F.3d 110, 113 (3d

41

"eligible for consideration[,]" "the plan ... is not[] ... a top-hat plan which would be
exempt from any ERISA provisions." Hollingshead v. Burford Equip. Co. , 747 F. Supp.
1421, 1430 (M.D. Ala. 1990).
In this case, for the numerator, Plaintiffs assert that the 1997 Plan was offered to at
least eighteen CTC employees. Defendants appear to concede that the court may rely on
this number. See Doc. 214 at 12 ("assuming that the Plan was offered to a maximum of
18 CTC Corporation employees"). With regard to the denominator, however, the parties
are poles apart.
Plaintiffs argue that CTC ' s total workforce was approximately sixty employees at
the time of the 1997 Plan based upon Ms. Launderville's testimony and Defendants'
inability to corroborate their estimates of total CTC employment with CTC ' s 1997 tax
return. They point out that there is no evidence that the employees of the One-Hour Labs
or ESS had any ability to participate in the 1997 Plan.
Defendants, in contrast, cite the Internal Revenue Code, 26 U.S.C. § 1563, which
defines "controlled group of corporations" and "parent-subsidiary controlled groups," in
support of their contention that the employees of CTC, ESS, VSL, BRL and L WB must
be considered in deciding whether Plan participation was quantitatively select. They
argue that with the exception of L WB, CTC was the sole shareholder of these
corporations and, with regard to L WB, it owned 60% of the shares. The court disagrees
with Defendants ' approach for several reasons.
First, Defendants introduced no evidence beyond Mr. Laumeister' s testimony that
the shares of these corporations were owned in the manner stated by CTC. In several
material respects, Mr. Laumeister testified inconsistently regarding these corporations.
For example, he initially testified that L WB was wholly owned by CTC but when
impeached, he admitted that he owned the shares of L WB with Christopher Belknap.
Similarly, Defendants erroneously characterized ESS as wholly owned by CTC when it
appears that it was owned by Mr. Laumeister and his wife. Accordingly, the court does
Cir. 2017) (estimating that "0.1% of the entire [employer' s] workforce was a participant in the
Plan.").
42

not find Mr. Laumeister' s testimony regarding CTC ' s ownership status with regard to
other related entities wholly reliable.
Second, even if Mr. Laumeister's testimony were fully credited, no court has
relied on 26 U.S.C. § 1563 to determine the size of an employer' s workforce eligibility
for participation in a top hat plan. Although ERISA cross-references this Internal
Revenue Code provision, see 29 U.S.C. § 1060(c), it does so only in the context of a
"plan maintained by more than one employer[]" which neither party contends is at issue
here. 29 U.S .C. § 1060(a). ERISA's top hat provisions do not rely on 26 U.S.C. § 1563
for a definition of "employer" but instead rely on ERISA's definition that an "employer"
is "any person acting directly as an employer, or indirectly in the interest of an employer,
in relation to an employee benefit plan[.]" 29 U.S.C. § 1002(5). CTC did not act as an
employer in relation to an employee benefit plan for any entity or any employee of an
entity other than CTC. It chose to separately incorporate ESS and the One-Hour Labs for
its business purposes and to refrain from offering employees of those entities any
deferred compensation plans. It therefore should not be permitted to artificially inflate
the size of its total workforce by including those employees in the denominator so as to
render the numerator more quantitatively select.
Because Defendants have destroyed their business records, the best evidence
before the court is that in 1997 there were approximately sixty CTC full-time employees.
Any inaccuracies in this number must be borne by Defendants. See Khoury, 444 F. Supp.
2d at 662 ( declining to find a top hat exemption where, among other things, " [t]here is no
clear evidence indicating who was offered enrollment in the Plan"). 14 A deferred
compensation plan offered to eighteen out of sixty employees is offered to 30% of the

14

The Carrabba court was faced with a similar lack of proof. Se e Carrabba, 38 F. Supp. 2d at
475 ("The record does not reflect, on an annual basis or otherwise, the number of employees of
the [parent corporation] who were eligible to participate in the [plan] under the criteria for
participation as they existed from time to time. However, there is indication in the record that
there probably were a significant number of persons eligible to participate who did not actually
participate"). This underscores the appropriateness of allocating to the employer the burden of
proof as the employer is in the best position to provide the required evidence.
43

workforce. No court has found this percentage sufficiently quantitatively "select." In
Demery, the Second Circuit observed that 15.34% of the workforce "is probably at or

near the upper limit of the acceptable size for a 'select group[.]"' Demery, 216 F.3d
at 289; see also Khoury, 444 F. Supp. 2d at 660 ("A review of the published cases reflects
that there is no existing authority that affirms top hat status for a plan representing more
than 16% of the total workforce."). The court thus concludes that, regardless of who is
allocated the burden of proof, the 1997 Plan was not offered to a quantitatively "select
group."
b.

Qualitative Analysis.

Defendants fare no better with establishing that the 1997 Plan was offered to a
qualitatively select group. In Demery, the Second Circuit concluded that a deferred
compensation plan which included "assistant vice presidents and branch managers, and
therefore swept more broadly than a narrow range of top executives," was "nonetheless
limited to highly valued managerial employees." Demery, 216 F.3d at 289. The Demery
court opined that a "'select group of management' could include senior management and
high-level executives[,]" and could include "certain key officers[.]" Id. at 288 (internal
citations and quotation marks omitted).
The Demery court further found it "significant that the statute defines a top hat
plan as 'primarily' designed to provide deferred compensation for certain individuals
who are management or highly compensated" because "[i]t suggests that if a plan were
principally intended for management and highly compensated employees, it would not be
disqualified from top hat status simply because a very small number of the participants
did not meet that criteria, or met one of the criteria but not the other." Demery, 216 F.3d
at 289 (citing Belka v. Rowe Furniture Corp., 571 F. Supp. 1249, 1252 (D. Md. 1983)
(finding participants in valid top hat plan included "salesman and a diverse group of
executives, including vice presidents, sale managers, [and] supervisors")). In so ruling,
the court observed that if a plan is established "as a means to retain valuable employees,"
this factor "must weigh in favor of classifying the [p]lan as a top hat plan." Id. at 287
(internal quotation marks omitted). Other courts have declined to find an employee's

44

-

.

--·

- -- - - -- - - - - - -- - - - -- - -- - - - - - - - - -

status as "valuable" sufficient. See, e.g. , Carrabba v. Randa/ls Food Mias., Inc., 38 F.
Supp. 2d 468, 477 (N.D. Tex. 1999) ("The mere fact that the employer intends the plan to
be a reward to 'key' employees does not satisfy the degree of selectivity contemplated by
the statutes.") (citing Hollingshead, 747 F. Supp. at 1429 (holding "select group"
requirement cannot be based on a '"key" ' person status determined by "time of service,
contribution to the company, loyalty"); Bigda v. Fischbach Corp. , 898 F. Supp. 1004,
1015 (S.D.N.Y. 1995), ajf'd, 101 F.3d 108 (2d Cir. 1996) (holding ERISA contemplates
that a top hat plan will be for the benefit of "high-ranking employees[]").
In this case, Defendants have established that the 1997 Plan was "a means to retain
valuable employees[.]" Demery, 216 FJd at 287 (internal quotation marks omitted).
However, they provided little evidence that the 1997 Plan was otherwise qualitatively
select. Citing Mr. Laumeister' s testimony, Defendants contend that "there is no dispute
that all of the employees who were offered participation in the Plan were employees
whose compensation ranged from two times to more than five times the [compensation
of] employees at large of CTC Corporation and the subsidiary corporations that it
controlled[.] " (Doc. 214 at 11.) However, there is no reliable evidence to support this
assertion which is uncorroborated by CTC's business records. Plaintiffs, in contrast,
have proffered evidence that at least some of the CTC employees to whom the 1997 Plan
was offered were neither highly compensated nor managerial. See Khoury, 444 F. Supp.
2d at 664 ( observing that employer "cannot seriously assert that its Plan, which enrolled
salesclerks whose salaries were roughly in the middle of the pay scale, was primarily for
the benefit of highly compensated employees"). "To come within the compass of the
top-hat provision, the employer must be able to show a substantial disparity between the
compensation paid to members of the top-hat group and the compensation paid to all
other workers." Alexander, 513 F.3d at 46. Here, Defendants fail to make that showing.
Of equal importance is the ample evidence that Defendants generally offered 1997
Plan participation as Mr. Laumeister saw fit, employing an array of criteria including
whether an employee contributed to CTC's success, did not need to be "coddled," knew
his or her job, had a nice home, and had a good reputation in the community. No reliable
45

evidence of any guidelines for Plan participation was introduced. See Khoury, 444 F.
Supp. 2d at 661 ( observing that a top hat plan exemption requires "some well established
basis for designating eligible Plan members as 'high level' employees."). Defendants
have thus failed to establish the 1997 Plan was qualitatively select.

6.

Whether Plan Participants Had the Ability to Negotiate Plan
Terms.

Defendants also proffer no evidence that the 1997 Plan was offered on anything
more than a "take it or leave it" basis. Defendants do not identify a single CTC employee
who negotiated any aspect of his or her Plan participation, nor do they cite any evidence
that CTC employees collectively had the bargaining power to negotiate the terms of the
1997 Plan.
For the foregoing reasons, the court concludes that Defendants have failed to
establish the 1997 Plan was "maintained by [CTC] primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees[.]" 29 U.S.C. § 1051(2). The 1997 Plan is thus not a "top hat" plan and is not
exempt from ERISA's requirements. See Alexander, 513 F.3d at 43 (noting that when
top hat "preconditions are satisfied, the plan is exempted from several of ERISA's
stringencies, including rules governing plan participation, vesting, funding, and fiduciary
duty").

C.

Whether Plaintiffs Are Entitled to Benefits under the Plan.

Having determined that the 1997 Plan is not a top hat plan, the court turns to
whether Plaintiffs are entitled to deferred compensation thereunder. ERISA provides that
"[a] civil action may be brought-- (1) by a participant or beneficiary-- ... (B) to recover
benefits due to him under the terms of his plan, to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under the terms of the plan[.]" 29
U.S.C. § l 132(a)(l)(B). "[T]he validity of a claim to benefits under an ERISA plan is
likely to turn on the interpretation of terms in the plan at issue." Firestone Tire & Rubber
Co., 489 U.S. at 115. Nothing in ERISA confers on Plaintiffs the right to alter the terms

of an ERISA plan, or to waive conditions to vesting that exist thereunder. See

46

Hollingshead, 747 F . Supp. at 1427 ("ERISA assures plan participants that they will
obtain the benefits to which they are entitled and that they will not lose those benefits as a
result of unduly restrictive provisions or lack of sufficient funds").
Under the 1997 Plan, a participant is eligible for deferred compensation payments
upon his or her retirement, death, or in the event of disability. The 1997 Plan defines
"retirement" as "withdrawal from full time active employment at or after age 65."
(Defendants' Ex.Bat 1, ,i 3(c).) Although the 1997 Plan does not state that "full time
active employment" must be at CTC, only Plaintiff Browe testified that she interpreted
the 1997 Plan to cover employment other than CTC. She admitted that she did not leave
CTC ' s employment with this understanding. Plaintiff Launderville, in contrast, conceded
that the 1997 Plan required retirement to occur while in CTC ' s employ. Plaintiffs do not
argue to the contrary in their post-trial memorandum of law.
The 1997 Plan further requires a Plan participant to deposit "a minimum of 3 % of
their salary" into an Individual Retirement Account ("IRA") and requires such
contributions to continue for each year of Plan participation. Id. at 2, ,i 5. "In the event
that a Participant fails to continue funding the IRA, pursuant to this agreement, the
Employer will terminate funding the plan on behalf of the Participant and all benefits
accrued will be forfeited to the Employer." Id. The Plan requires the Employer to
"notify the Participant in writing thirty days prior to termination." Id. No Plaintiff
proffered evidence of compliance with the 1997 Plan' s IRA funding requirement.
Defendants proffered no evidence of compliance with the Plan' s termination requirement.
The 1997 Plan states that " [t]he Employer may at any time terminate this Plan.
Upon such termination, the Participants in the Plan will be deemed to have withdrawn
from the Plan as of the date of such termination." Id. at 4, ,i 9. The Third Circuit has
concluded that such a provision is unenforceable if an employee fully performs by
"continuing in the company' s employment until retirement." In re New Valley Corp. , 89
F.3d at 150.
Under unilateral contract principles, once the employee performs, the offer
becomes irrevocable, the contract is completed, and the employer is

47

required to comply with its side of the bargain. In response to [an
employer's] argument that the contract did not restrict its right to terminate
the plan, we observed[:]
even when a plan reserves to the sponsor an explicit right to terminate the
plan, acceptance by performance closes that door under unilateral contract
principles (unless an explicit right to terminate or amend after the
participants performance is reserved). Any other interpretation ... would
make the Plan's several specific and mandatory provisions ineffective,
rendering the promises embodied therein completely illusory.
In our view, the company's claim to an unfettered right to terminate in the
face of specific grants of benefits had no basis in contract law and was
more than minimally unfair.

Id. at 150-51 (internal citations, quotation marks, and alteration omitted).
Against this backdrop, the issue before the court is whether Plaintiffs have
established their entitlement to deferred compensation under the 1997 Plan regardless of
whether the Plan has been terminated. It is beyond cavil that the 1997 Plan is not a
model of clarity. Any ambiguities in it should therefore be construed against CTC as its
drafter. See Bullwinkel v. New England Mut. Life Ins. Co., 18 F.3d 429,431 (7th Cir.
1994) (stating that, under the federal common law of contract, courts "construe
ambiguities in ERJSA plans against the drafter.") (internal quotation marks omitted); see

also Critchlow v. First UNUM Life Ins. Co. ofAm., 378 F.3d 246,256 (2d Cir. 2004)
(finding that "[i]f there are ambiguities in the language of an insurance policy that is part
of an ERJSA plan, they are to be construed against the insurer[,]" because the federal
common law of contract should not "afford less protection to employees and their
beneficiaries than they enjoyed before ERJSA was enacted[.]") (internal quotation marks
omitted).
At trial, the court permitted the parties to introduce extrinsic evidence of their
understanding of the 1997 Plan requirements. As the Third Circuit explained:
Applying the federal common law of contract, ... in construing the plan
documents[,] [a] court cannot interpret words in a vacuum, but rather must
carefully consider the parties' context and the other provisions in the plan.
Moreover, extrinsic evidence should have been considered to determine
whether an ambiguity existed, especially in the absence of an integration
clause in the plan.
48

Whether a document is ambiguous presents a question of law properly
resolved by this court .... To decide whether a contract is ambiguous, we
do not simply determine whether, from our point of view, the language is
clear. Rather, we hear the proffer of the parties and determine if there [are]
objective indicia that, from the linguistic reference point of the parties, the
terms of the contract are susceptible of different meanings. Before making
a finding concerning the existence or absence of ambiguity, we consider the
contract language, the meanings suggested by counsel, and the extrinsic
evidence offered in support of each interpretation. Extrinsic evidence may
include the structure of the contract, the bargaining history, and the conduct
of the parties that reflects their understanding of the contract's meaning.
And once a contract provision is found to be ambiguous, extrinsic evidence
must be considered to clarify its meaning.

In re New Valley Corp., 89 F.3d at 149-50 (internal citations, quotation marks, and
footnotes omitted).
Defendants proffered evidence that they intended the 1997 Plan to reward valued
and valuable employees and to encourage them to continue to contribute to CTC's
success. From Defendants' perspective, an employee who left CTC's employment prior
to age sixty-five, unless through death or disability, was disqualified from deferred
compensation under the Plan unless the Plan Administrators decided to make an
exception as they did in the case of Sharon Fish and Bill Elliott. There is no evidence
that Defendants ever paid deferred compensation to any Plan Participant who left CTC's
employment prior to sixty-five and retired from employment elsewhere.
Plaintiffs Browe, Launderville, and Jordan all acknowledge that they voluntarily
left CTC's employ prior to age sixty-five, made no claim to deferred compensation at the
time, and made no inquiries that suggested they believed deferred compensation would
be paid to them under the 1997 Plan upon their retirement from an employer other than
CTC. They did not retain Plan documentation or assert any claim until Plaintiff
Launderville encouraged them to participate in this lawsuit. Other Plan Participants who
left CTC's employment prior to reaching sixty-five also made no claims for benefits.
In addition, Plaintiffs Browe and Launderville negotiated to be included in Mr.
Laumeister's Last Will and Testament with the apparent understanding that deferred

49

compensation under the 1997 Plan was otherwise unavailable. Plaintiff Launderville
raised the issue of her deferred compensation in debating whether she should accept
Plasan Industries ' offer of employment, thereby evidencing that she knew her deferred
compensation was at risk if she did not retire in CTC's employ.
The context of the 1997 Plan and the parties ' course of conduct were such that all
parties appeared to clearly understand that the Plan' s reference to "retirement" meant
retirement at CTC. Construing the 1997 Plan against its drafter does not mandate a
different result. Any other interpretation would reward employees who left CTC ' s
employ on the same basis as employees who stayed and contributed to CTC ' s success.
There would thus be little point from the employer' s perspective to offer a plan to reward
performance and incentivize employment longevity. See Mastrovincenzo v. City ofNew
York, 435 F.3d 78, 104 (2d Cir. 2006) (noting that "absurd results should be avoided[]"
when interpreting a contract).
Considering the totality of the circumstances, the only reasonable interpretation of
the 1997 Plan consistent with the parties ' understanding and conduct is that absent death
or disability, the Plan required an employee to reach the age of sixty-five while employed
by CTC in order for deferred compensation to be paid. See In re New Valley Corp. , 89
F.3d at 154 ("Due to the abundance of ERISA plan[s] and the differing benefits these
plans provide, each case must be considered fact specific and the court must make its
determination of the benefits provided based on the language of the particular plan it has
been called upon to review."). Pursuant to this interpretation, Plaintiffs Browe,
Launderville, and Jordan have not established their entitlement to deferred compensation
under the 1997 Plan because none of these Plaintiffs have satisfied the conditions
precedent to payments thereunder. They have not retired at sixty-five, died, or become
disabled while in CTC ' s employment and they have not proffered evidence that they
complied with the 1997 Plan ' s 3% contribution requirement to an IRA.
Plaintiffs Tyler Burgess' s and Bonnie Jamieson' s claim to benefits under the 1997
Plan depends on their mother' s status at the time of her death both in terms of whether
she was a Plan participant and whether she was employed by CTC at the time of her
50

death. They proffer no evidence of their mother's application to participate in the 1997
Plan, no evidence that their mother retained any Plan documents, and no evidence that
she entered into an agreement with CTC regarding how death benefits would be paid.
See Defendants' Ex. B at 2, ,i 6 ("The Employer and each Participant will execute an
agreement in writing, confirming their assumptions of the obligations set forth in this
Plan and the method of Death Benefits payable."). They have not challenged the
credibility of Ms. Launderville's statement in 2004 that Beverly Burgess was not entitled
to anything beyond her own IRA at the time of her death.
Although a closer question, based on the totality of the circumstances, Plaintiffs
Burgess and Jamieson have not established that they have been wrongfully denied
benefits on their mother's behalf under the 1997 Plan. See Ruttenberg v. US. Life Ins.
Co., 413 F.3d 652, 663 (7th Cir. 2005) ("[The plaintiff] bears the burden of proving his
entitlement to contract benefits [under ERISA]."); see also Muniz v. Amee Constr. Mgmt.,
Inc., 623 F.3d 1290, 1294 (9th Cir. 2010) ("As concluded by other circuit courts which
have addressed the question, when the court reviews a plan administrator' s decision
under the de novo standard of review, the burden of proof is placed on the claimant.").
For the foregoing reasons, the court enters judgment in Defendants' favor on
Count I of Plaintiffs' Second Amended Complaint.

D.

Whether Plaintiffs have Established a Breach of Fiduciary Duties.

When an ERISA plan suffers a loss because of a breach of fiduciary duties,
ERISA states that a plan fiduciary is personally liable:
to make good to such plan any losses to the plan resulting from each such
breach, and to restore to such plan any profits of such fiduciary which have
been made through use of assets of the plan by the fiduciary, and shall be
subject to such other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary.

51

29 U.S.C. § l 109(a); see also id. § l 132(a)(2) (providing that a "civil action may be
brought[] ... by the Secretary, or by a participant, beneficiary or fiduciary for appropriate
relief under section 1109"). 15
"(A] person is a fiduciary with respect to a plan to the extent ... he exercises any
discretionary authority or discretionary control respecting management of such plan or
exercises any authority or control respecting management or disposition of its assets" or
"has any discretionary authority or discretionary responsibility in the administration of
such plan." 29 U.S.C. § 1002(2l)(A)(i) and (iii). A plan administrator "engages in a
fiduciary act when making a discretionary determination about whether a claimant is
entitled to benefits under the terms of the plan documents." Varity Corp. v. Howe, 516
U.S. 489, 511 (1996).
"ERISA requires a ' fiduciary' to 'discharge his duties with respect to the plan
solely in the interests of the participants and beneficiaries."' Id. at 506. "To participate
knowingly and significantly in deceiving a plan's beneficiaries in order to save the
employer money at the beneficiaries' expense is not to act ' solely in the interest of the
participants and beneficiaries. "' Id. "As other courts have held, ' [l]ying is inconsistent
with the duty of loyalty owed by all fiduciaries and codified in section 404(a)(l) of
ERISA[.]" Id.
In Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 (1985), the Supreme
Court held that claims for a fiduciary duty breach under§§ 1109 and l 132(a)(2) must be
"brought in a representative capacity on behalf of the plan as a whole." In Varity v.
Howe, however, the Court held that individual relief for a fiduciary breach may be

available pursuant to§ l 132(a)(3) if brought by former employees who, "because they
were no longer members of the ... plan[,] ... had no benefits due [them] under the terms

15

The Supreme Court has held that, "although [29 U.S.C. § 1132(a)(2)] does not provide a
remedy for individual injuries distinct from plan injuries, that provision does authorize recovery
for fiduciary breaches that impair the value of plan assets in a participant' s individual account."
LaRue v. De Wolff, Boberg & Assocs. , Inc., 552 U.S. 248,256 (2008).
52

of [the] plan" and would otherwise "have no remedy at all." Howe, 516 U.S. at 515
(internal quotation marks omitted).
In this case, Plaintiffs make no claims in a representative capacity on behalf of the
1997 Plan. Instead, they make individual claims and seek to reach Mr. Laumeister' s
personal assets by piercing CTC ' s corporate veil. There is no doubt that Mr. Laumeister
is a fiduciary with regard to the 1997 Plan. He determined eligibility for Plan
participation, controlled the investment and disposition of Plan assets, made
determinations with regard to the denial and approval of claims for benefits, administered
the Plan, and managed Plan assets. Plaintiffs claim that Mr. Laumeister violated his
fiduciary duties as Plan Administrator by: wrongfully denying benefits under the Plan;
inadequately funding the Plan; withholding Plan assets; and engaging in self-dealing.
Defendants counter that each of the acts Plaintiffs rely on for their breach of
fiduciary duty claim is beyond the applicable statute of limitations and that Mr.
Laumeister made no representations to Plan Participants inconsistent with the 1997 Plan.
To the extent Beverly Burgess was entitled to benefits under the Plan, Defendants
contend it was Ms. Launderville who made any misrepresentations to Plaintiff Jamieson.
See id. at 512 ("ERISA specifically provides a remedy for breaches of fiduciary duty with

respect to the interpretation of plan documents and the payment of claims, ... one that
runs directly to the injured beneficiary"). Moreover, once Ms. Launderville became a
Director of CTC, Defendants contend that she participated in any act or omission
involving Plan administration and the denial of benefits. They therefore counterclaim
against her for contribution and indemnification.
Faced with an array of issues with regard to Plaintiffs ' breach of fiduciary duty
claims, the court addresses them seriatim with the understanding that Plaintiffs have not
clearly articulated any remedy they seek beyond payment of deferred compensation to
which they are not entitled under the terms of the 1997 Plan.
1.

Ms. Launderville's Status as a Plan Fiduciary.

As a threshold issue, the court agrees with Defendants that Ms. Launderville is a
Plan fiduciary. The court did not find credible her claim that she did not know she was a
53

Plan Administrator. Although she claims she also did not know she was a Director of
CTC, which gave rise to her status as a Plan Administrator, the evidence is to the
contrary.
In her capacity as a Plan Administrator, Ms. Launderville determined eligibility
for Plan participation, determined whether Mr. Massari should receive deferred
compensation, participated in the decision to allow Ms. Fish and Mr. Elliott to retire
early, and determined the denial of benefits for Beverly Burgess which she then
communicated to Ms. Jamieson. She also facilitated the use of Plan assets to pay CTC ' s
operating expenses.
Although some courts have held that "ERlSA does not create a right of
contribution" against another fiduciary, Travelers Cas. & Sur. Co. ofAm. v. JADA Servs.,
Inc., 497 F.3d 862, 867 (8th Cir. 2007), the Second Circuit has "conclude[d] that
incorporating traditional trust law' s doctrine of contribution and indemnity into the law of
ERlSA is appropriate." Chemung Canal Tr. Co. v. Sovran Bank/Maryland, 939 F.2d 12,
18 (2d Cir. 1991). Defendants therefore have a right to seek contribution and
indemnification from Ms. Launderville as a co-fiduciary of the 1997 Plan.

2.

Only Injuries to the 1997 Plan as a Whole are Alleged.

In the absence of evidence that Ms. Launderville erred in her handling of Ms.
Jamieson' s request for deferred compensation on Beverly Burgess' s behalf or any
evidence that any of the other Plaintiffs were wrongfully denied benefits under the 1997
Plan, it is not clear what injury, if any, Plaintiffs suffered or what equitable remedy they
should be allowed to invoke as a result of Mr. Laumeister' s and Ms. Launderville' s
fiduciary breaches. The failure to keep separate accounts for the 1997 Plan, to adhere to
the Plan terms in the Fish and Elliott early retirement decisions, and the use of Plan assets
for CTC's general operating expenses all caused injuries to the Plan as a whole which did
not flow to the individual beneficiaries in the absence of entitlement to benefits. No
Plaintiff was denied deferred compensation as a result of these acts and there is no
evidence that they suffered any other individualized harm because of them. While it is
true that "Congress intended to make fiduciaries culpable for certain ERlSA violations
54

even in the absence of actual injury to a plan or participant[,]" Ziegler v. Conn. Gen. Life
Ins. Co., 916 F.2d 548, 551 (9th Cir. 1990), if Mr. Laumeister and Ms. Launderville are

required to "make good" to the 1997 Plan any losses sustained by the Plan as a result of
their fiduciary breaches, Plaintiffs will not thereby be entitled to any deferred
compensation. Instead, the Plan assets will be restored but no CTC employee will be in a
position to claim them.
3.

The Availability of Corporate Veil Piercing.

Although corporate veil piercing is available under ERISA, 16 it requires a far
greater showing than has been made here. "ERISA does not render corporate officers
personally liable for a company's unpaid benefit-fund contributions unless the officers
and the company are 'alter egos' under traditional common law principles." Leddy v.
Standard Drywall, Inc., 875 F.2d 383, 387 (2d Cir. 1989). "The purpose of the alter ego

doctrine in the ERISA context is to prevent an employer from evading its obligations
under the labor laws through a sham transaction or technical change in operations." Ret.
Plan of UNITE HERE Nat'/ Ret. Fund v. Kombassan Holding A.S., 629 F.3d 282,288 (2d

Cir. 2010) (internal quotation marks omitted). Thus, "[t]o protect employee benefits,
courts observe 'a general federal policy of piercing the corporate veil when necessary.'"
Id. (quoting NY State Teamsters Conference Pension & Ret. Fund v. Express Servs.,
Inc., 426 F.3d 640, 647 (2d Cir. 2005)); see also Lowen v. Tower Asset Mgmt., Inc.,

829 F.2d 1209, 1220 (2d Cir. 1987) ("In determining whether to disregard the corporate
form, we must consider the importance of the use of that form in the federal statutory
scheme, an inquiry that generally gives less deference to the corporate form than does the
strict alter ego doctrine of state law.") (citation omitted).

16

See Peacock v. Thomas, 516 U.S. 349, 354 (1996) ("Piercing the corporate veil is not itself an
independent ERISA cause of action, but rather is a means of imposing liability on an underlying
cause of action.") (internal quotation marks omitted); see also Ret. Plan of UNITE HERE Nat 'l
Ret. Fund v. Kombassan Holding A.S., 629 F.3d 282,288 (2d Cir. 2010) ("Although developed
in the context of the National Labor Relations Act, the alter ego doctrine has relevance in the
ERISA context as well.").

55

The Second Circuit has recognized that the corporate veil may be disregarded in
"special circumstances[.]" See Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir. 1993) ("[W]e
have recognized that special circumstances, beyond an individual's officer status or
corporate duties, might warrant the imposition of personal liability for a corporation's
ERISA obligations."). "The test of alter ego status is flexible, allowing courts to weigh
the circumstances of the individual case[.]" UNITE HERE, 629 F.3d at 288 (internal
alteration and quotation marks omitted).
In this case, all Plan assets were used to pay CTC's corporate obligations
including its payroll obligations. Although Mr. Laumeister on occasion used CTC
resources for his personal benefit, these instances were isolated and relatively trivial, or if
more serious, were unsupported by any evidence that they were not reimbursed.
Plaintiffs assert that "Mr. Laumeister combined his personal investment account at
Mission Management & Trust in Tucson, Arizona, with CTC's corporate account there
for 'investment management purposes[,]"' (Doc. 164 at 9, ,r 29), however, the only record
they rely on for this assertion is a "note" from Mission Management & Trust that states:
"There are two accounts: 1) Agent for Bruce's personal account: 2) agent for his
corporation in VT. They are combined for investment management purposes."
(Plaintiffs' Ex. 27 at MMOl 16.) This cryptic reference of unknown provenance and
reliability is not a smoking gun.
In Lowen v. Tower Asset Management, Inc., the Second Circuit described the type
of conduct that will give rise to alter ego/veil piercing in the context of ERISA:
A failure to disregard the corporate form in the circumstances of the present
case would fatally undermine ERISA. The record demonstrates beyond
dispute extensive intermixing of assets among the corporations, and among
the corporations and individual defendants, without observing the
appropriate formalities, simultaneous sharing of employees and office
space by the corporate and individual defendants, and wholly inadequate
capitalization of the corporations in light of the nature of the businesses in
which they were engaged. The individual defendants were in no way
passive investors in the corporate defendants. They personally and actively
controlled and dominated those firms. The individual defendants caused
Tower Asset to invest in companies in which they, their close relatives,
56

Tower Capital, or Tower Securities had an equity interest. The individual
defendants also arranged that Tower Capital and Tower Securities would be
compensated by particular companies for Tower Asset's investing the
Plans ' assets in those companies. The individual defendants then took
these proceeds themselves in the form of salaries, bonuses and
unsubstantiated travel and expense reimbursements, and left the corporate
defendants with virtually no net worth.

Lowen, 829 F.2d at 1221.
The circumstances in the instant case fall far short of Lowen. Moreover, any use
of CTC assets by Mr. Laumeister must be considered in conjunction with the $600,000 in
personal loans he made to the CTC with little hope of repayment. Plaintiffs have not
established that they are entitled to pierce CTC ' s corporate veil because of Mr.
Laumeister' s mishandling of or self-dealing with regard to Plan assets, abuse or disregard
of corporate formalities, personal profit at the expense of CTC, or wholly inadequate
capitalization. In addition, as Mr. Laumeister is personally liable as a Plan fiduciary, it is
not clear what additional objective corporate veil piercing would accomplish.
For the foregoing reasons, the court enters judgment in Defendants' favor with
regard to Plaintiffs' request for a corporate veil piercing remedy.
4.

Statute of Limitations Defense.

A claim for a breach of a fiduciary duty under ERISA must be brought before "the
earlier of':
(1) six years after (A) the date of the last action which constituted a part of
the breach or violation, or (B) in the case of an omission the latest date on
which the fiduciary could have cured the breach or violation, or (2) three
years after the earliest date on which the plaintiff had actual knowledge of
the breach or violation[.]
29 U.S.C. § 1113.
A "statute of limitations argument is an affirmative defense for which [the
defendant] bears the burden of proof." United States v. Livecchi, 711 F.3d 345, 352
(2d Cir.2013). However, "[t]he party seeking equitable tolling bears the burden of
proving he is entitled to it." Robertson v. Simpson, 624 F.3d 781 , 784 (6th Cir. 2010).
"Generally, a litigant seeking equitable tolling bears the burden of establishing two
57

elements: (1) that he has been pursuing his rights diligently, and (2) that some
extraordinary circumstance stood in his way." Mottahedeh v. United States, 794 F.3d
347, 352 (2d Cir. 2015) (internal quotation marks omitted).
"The statute of limitations itself indicates a two-step analysis of accrual of an
ERlSA action: first, when did the alleged 'breach or violation' occur; and second, when
did [the plaintiff] have ' actual knowledge' of the breach or violation?" Ziegler, 916 F.2d
at 550. "This inquiry into plaintiffs' actual knowledge is entirely factual, requiring
examination of the record." Id. at 552. "[A]n ERlSA plaintiffs cause of action cannot
accrue and the statute of limitations cannot begin to run until the plaintiff has actual
knowledge of the breach, regardless of when the breach actually occurred." Id.
In this case, the only evidence Defendants proffer is that Plaintiffs had some
knowledge that a breach of fiduciary duty may have occurred when they were contacted
by Ms. Launderville in 2015 regarding participation in this lawsuit. They do not establish
that this contact with Ms. Launderville occurred outside the statute of limitations. They
also do not establish the precise date on which Ms. Launderville determined that the 1997
Plan might be covered by ERlSA. There is thus a failure of proof with regard to
Defendants' statute of limitations defense. The court therefore enters judgment in
Plaintiffs' favor on Defendants' statute of limitations defense.
Although Mr. Laumeister and Ms. Launderville breached their fiduciary duties
with regard to certain aspects of Plan administration, Plaintiffs failed to identify these
breaches with any specificity in their presentation of evidence or explain how they may
be asserted by Plaintiffs as individuals as opposed to in a representative capacity on the
1997 Plan' s behalf. Correspondingly, Plaintiffs fail to articulate what remedy or
remedies they seek other than an award of deferred compensation benefits to which they
are not entitled. See King v. Blue Cross & Blue Shield ofIll. , 871 F.3d 730, 747 (9th Cir.
2017) (noting that "it is unclear whether [the plaintiff] seeks relief under [ERlSA] section
[l 132](a)(l)(B), [l 132](a)(3), or both[]" and that therefore, on remand, the plaintiff must
first "specifly] whether he still seeks relief under ERlSA section [1132](a)(l)(B), what

58

type of equitable remedy he seeks under section [1132](a)(3), and why," before "the
district court .. . determine[s] the appropriate remedy.").
Because the court cannot and will not speculate as to the appropriate relief in the
absence of guidance from Plaintiffs, the court grants judgment in Plaintiffs ' favor on
Counts 111-V, finding that Mr. Laumeister and Ms. Launderville breached their fiduciary
duties to the 1997 Plan and to the Plan Participants and beneficiaries, and in Defendants '
favor for their counterclaim for contribution and indemnification. The court declines to
award any specific relief at this time. Plaintiffs shall have thirty (30) days from the date
of this Order to specify their requested relief. Defendants will be entitled to oppose that
relief and propose their own requested relief by filing an opposition within thirty (30)
days of the date of Plaintiffs' request.
E.

Whether Defendants Breached their Reporting and Disclosure
Requirements.

Plaintiffs allege that Defendants failed to comply with ERISA' s reporting and
disclosure provisions under 29 U.S.C . § 1025. ERISA requires the provision of pension
benefit statements as follows:
The administrator of an individual account plan ... shall furnish a pension
benefit statement-(i) at least once each calendar quarter to a participant or beneficiary
who has the right to direct the investment of assets in his or her
account under the plan,
(ii) at least once each calendar year to a participant or beneficiary
who has his or her own account under the plan but does not have the
right to direct the investment of assets in that account, and
(iii) upon written request to a plan beneficiary not described in
clause (i) or (ii).
29 U.S.C . § 1025(a)(l)(A)(i)-(iii). Under ERISA, a pension benefit statement:
(i) shall indicate, on the basis of the latest available information-(!) the total benefits accrued, and

(11) the nonforfeitable pension benefits, if any, which have accrued,
or the earliest date on which benefits will become nonforfeitable,

59

(ii) shall include an explanation of any permitted disparity under section
401(1) of Title 26 or any floor-offset arrangement that may be applied in
determining any accrued benefits described in clause (i),
(iii) shall be written in a manner calculated to be understood by the average
plan participant, and
(iv) may be delivered in written, electronic, or other appropriate form to the
extent such form is reasonably accessible to the participant or beneficiary.
Id. § 1025(a)(2)(A)(i)-(iv). 17

ERISA's disclosure requirements provide in pertinent part:
The administrator shall, upon written request of any participant or
beneficiary, furnish a copy of the latest updated summary, plan description,
and the latest annual report, any terminal report, the bargaining agreement,
trust agreement, contract, or other instruments under which the plan is
established or operated. The administrator may make a reasonable charge
to cover the cost of furnishing such complete copies. The Secretary [of
Labor] may by regulation prescribe the maximum amount which will
constitute a reasonable charge under the preceding sentence.
29 U.S.C. § 1024(b)(4) (internal footnote omitted).
17

For individual account plans, ERISA states that "any pension benefit statement under clause
(i) or (ii) of paragraph (1 )(A) shall include":
(i) the value of each investment to which assets in the individual account have been
allocated, determined as of the most recent valuation date under the plan, including the
value of any assets held in the form of employer securities, without regard to whether
such securities were contributed by the plan sponsor or acquired at the direction of the
plan or of the participant or beneficiary, and
(ii) in the case of a pension benefit statement under paragraph (1 )(A)(i)-(I) an explanation of any limitations or restrictions on any right of the participant
or beneficiary under the plan to direct an investment,
(II) an explanation, written in a manner calculated to be understood by the
average plan participant, of the importance, for the long-term retirement security
of participants and beneficiaries, of a well-balanced and diversified investment
portfolio, including a statement of the risk that holding more than 20 percent of a
portfolio in the security of one entity (such as employer securities) may not be
adequately diversified, and
(III) a notice directing the participant or beneficiary to the Internet website of the
Department of Labor for sources of information on individual investing and
diversification.
29 U.S.C. § 1025(a)(2)(B)(i)-(ii).

60

ERISA provides that:
[a]ny administrator ... who fails or refuses to comply with a request for
any information which such administrator is required by this subchapter to
furnish to a participant or beneficiary ... may in the court' s discretion be
personally liable to such participant or beneficiary in the amount of up to
$100 a day[.]
29 U.S.C. § l 132(c)(l)(B). The statute defines the term "participant" as follows:
The term "participant" means any employee or former employee of an
employer, or any member or former member of an employee organization,
who is or may become eligible to receive a benefit of any type from an
employee benefit plan which covers employees of such employer or
members of such organization, or whose beneficiaries may be eligible to
receive any such benefit.
29 U.S.C. § 1002(7).
The Supreme Court has held that "the term 'participant' is naturally read to mean
either ' employees in, or reasonably expected to be in, currently covered employment, or
former employees who ' have ... a reasonable expectation of returning to covered
employment' or who have a ' colorable claim' to vested benefits[.]" Firestone Tire &
Rubber Co. , 489 U.S. at 117 (citation omitted). "In order to establish that he or she ' may

become eligible' for benefits, a claimant must have a colorable claim that (1) he or she
will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the
future. " Id. at 117-18. "A former employee who has neither a reasonable expectation of
returning to covered employment nor a colorable claim to vested benefits, however,
simply does not fit within the [phrase] ' may become eligible. "' Id. at 118.
There is no evidence that any of the Plaintiffs requested Plan information and were
denied it. There is also no evidence to support the claim that they are former employees
with either a reasonable expectation of returning to CTC or who have a colorable claim to
vested benefits. In such circumstances, they cannot prevail on a claim that Defendants
have violated their disclosure and reporting requirements for purposes of $100 per day
liquidated damages.
On the other hand, the evidence easily establishes that Mr. Laumeister and Ms.
Launderville failed to adhere to ERISA in reporting and disclosing Plan information.
61

Plaintiffs have not articulated any measure of damages other than liquidated damages to
which they are not entitled. Judgment is thus entered in Plaintiffs' favor against
Defendants and Ms. Launderville for violating ERISA's reporting and disclosure
requirements (Count VI).
Plaintiffs shall have thirty (30) days from the date of this Order to specify their
requested relief. Defendants will be entitled to oppose that request and propose their own
requested relief by filing an opposition within thirty (30) days of the date of Plaintiffs'
request.
CONCLUSION

For the foregoing reasons, the court enters judgment as follows: GRANTS
judgment in Defendants ' favor on Count I for the wrongful denial of benefits under the
Plan; DENIES Plaintiffs' request for a declaratory judgment and injunctive relief in
Count II; GRANTS judgment in Plaintiffs' favor on Counts III through V, finding that
Mr. Laumeister and Ms. Launderville breached their fiduciary duties to the 1997 Plan and
to Plan Participants and beneficiaries; GRANTS judgment in Plaintiffs' favor on Count
VI, finding that Mr. Laumeister and Ms. Launderville violated ERISA's reporting and
disclosure requirements; GRANTS judgment in Defendants' favor with regard to their
counterclaim seeking a right of contribution and indemnification from Ms. Launderville.
The court declines to award attorney's fees to either party at this time.
Because the court grants judgment in Plaintiffs' favor as to Counts III through VI
and in Defendants' favor as to their counterclaim, but declines to award any specific
relief at this time, Plaintiffs shall have thirty (30) days from the date of this Order to
specify their requested relief. Defendants will be entitled to oppose that relief and
specify the contribution and indemnification they seek from Ms. Launderville by filing an
opposition within thirty (30) days of Plaintiffs' request.

62

SO ORDERED.

Dated at Burlington, in the District of Vermont, this 22"~ay of June, 2018.

nstina Reiss, District Judge
United States District Court

63