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Browe v. CTC Corp.

United States District Court, D. Vermont

June 22, 2018

DONNA BROWE, TYLER BURGESS, BONNIE JAMIESON, PHILIP JORDAN, LUCILLE LAUNDERVILLE, and THE ESTATE OF BEVERLY BURGESS, Plaintiffs,
v.
CTC CORPORATION and BRUCE LAUMEISTER, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          Christina Reiss, District Judge

         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. §§ 1001-1191c, 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 of limitations 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.

         1. 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]

         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.

         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 this claim beyond Mr. Laumeister's testimony. LWB was not a wholly owned 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.

         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, 1 was the president and chief operating officer of CTC Corporation." (Doc. 195 at 11.) In cross-examination, 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.
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 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, LWB, 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 One-Hour 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]

         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 247.) 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 of CTC during her employment there from 1999 until Ms. Launderville's resignation.

         37. 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, ¶ 10.)

         39. Mr. Massari drafted the 1990 Plan. Although Mr. Laumeister contends that 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 participant's salary at the date of this Plan." (Doc. 29-1 at 2, ¶ 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.

         47. 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 "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. B at 1, ¶¶ 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, ¶ 6.

         51. The 1997 Plan defines the term "retirement" as "withdrawal from full time active employment at or after age 65." Id. at 1, ¶ 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 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 Plaintiff Browe'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, ¶ 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, ¶ 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, ¶ 7.

         55. Pursuant to the 1997 Plan, Plan Administrators were required to "advise the Participants] of the actual cash value of their account annually, and at the time of retirement." Id. at 3, ¶ 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 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, ¶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").

         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)
• 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 Laumeisterf.]" 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 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 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 ...

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