United States District Court, E.D. Michigan, Southern Division
JOHN B. DAVIDSON, et al. Plaintiffs,
HENKEL CORPORATION, HENKEL OF AMERICA, INC., et al., Defendants.
OPINION AND ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [#103] AND GRANTING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT [#105]
GERSHWIN A. DRAIN, District Judge.
On September 14, 2012, Plaintiff, John B. Davidson ("Davidson"), filed the instant class action Complaint, pursuant to the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"). See Dkt. No. 1. In the Complaint, Davidson alleged that Henkel Corporation, Henkel of America, Inc., and Henkel Corporation Deferred Compensation and Supplemental Retirement Plan (collectively "Defendants") failed to follow the Internal Revenue Code's ("IRC") Special Timing Rule for the withholding of Federal Income Contributions Act ("FICA") taxes on vested deferred compensation. Id.
On September 29, 2014, this Court granted Davidson's Motion for Class Certification. See Davidson v. Henkel Corp., No. 12-cv-14103, 2014 WL 4851759, at *22 (E.D. Mich. Sept. 29, 2014). The Court appointed Davidson as the Class Representative and the Miller Law Firm P.C. as Class Counsel. Id. Presently before the Court are Defendants' Motion for Summary
Judgment and Plaintiffs' Motion for Partial Summary Judgment. See Dkt. Nos. 103, 105. For the reasons discussed herein, the Court will DENY Defendants' Motion and GRANT Plaintiffs' Motion for Partial Summary Judgment regarding the liability of the Defendants.
II. FACTUAL BACKGROUND
John Davidson began working for Henkel Corporation in 1972. During their employment, Davidson and the Class Members (collectively "Plaintiffs") participated in Defendants' available retirement programs. One such program was the Henkel Corporation Deferred Compensation and Supplemental Retirement and Investment Plan (the "Plan"); a nonqualified retirement plan maintained pursuant to the IRC. The Plan is known as a "Top Hat" plan within the meaning of ERISA.
The Plan was designed to provide a supplemental retirement benefit for a select group of management or highly compensated employees. This was to be accomplished by permitting the Participants to defer a portion of their compensation, which was not taken into account under the normal Henkel Corporation Retirement Plan. Under the Plan, the Participants would defer their compensation until the time of their retirement. Presumptively, at retirement, the Participants would be taxed in a lower tax bracket, thereby decreasing their overall tax liability.
Davidson retired on August 1, 2003, and began receiving his monthly supplemental benefit under the Plan. Eight years later, on September 15, 2011, a letter was sent from the Director of Benefits at Henkel Corporation to all Plaintiffs. The letter informed Plaintiffs that:
During recent compliance reviews performed by an independent consulting firm, it was determined that Social Security FICA payroll taxes associated with your nonqualified retirement benefits have not been properly withheld....
At the time of your retirement, FICA taxes were payable on the present value of all future non-qualified retirement payments. Therefore, you are subject to FICA Taxes on your non-qualified retirement payments on a "pay as you go" basis for 2008 and beyond, which are the tax years that are still considered "open" for retroactive payment purposes.
Dkt. No. 106-2 at 2. In the letter, Defendants also informed Plaintiffs that Defendants: (1) consulted with the IRS Chief Counsel's office to determine the best approach to rectify the Defendants' failure to properly withhold Plaintiffs' FICA taxes; (2) remitted the full payment of FICA tax owed to the IRS on behalf of Plaintiffs; (3) did not deduct the entire amount owed for FICA taxes from the Plaintiffs' accounts, and instead reimbursed themselves by reducing the Plaintiffs' monthly benefit payments for a 12 to 18 month period; and (4) planned to adjust Plaintiffs' monthly payments under the Plan, effective January of 2012. Id.
Davidson contacted Defendants to challenge the change to his benefits. He received the following response on October 14, 2011:
Yes, at the time you commenced receipt of this benefit, Henkel should have applied FICA tax to the present value of your nonqualified pension benefit....
Yes, this applies to the non-qualified benefit only....
No, this benefit comes from the Henkel Corporation Supplement Retirement Plan payment. This is the restoration plan which provides benefits similar to the qualified plan, but on compensation that exceed IRS limits for qualified plans.
Dkt. No. 106-3 at 2. As a result of the Defendants' response, Davidson commenced this action on September 14, 2012. See Dkt. No. 1. On November 16, 2012, Defendants moved to dismiss Plaintiff's Complaint. See Dkt. No. 10. On July 24, 2013, this Court denied Defendants' Motion to Dismiss in part. Two of Plaintiff's claims remain: (1) a civil enforcement action brought pursuant to Section 502(a) of ERISA ("Count I"), and (2) an equitable estoppel claim brought pursuant to Section 502(a) of ERISA ("Count III"). See Davidson v. Henkel Corp., No. 12-cv-14103, 2013 WL 3863981, at *9 (E.D. Mich. July 24, 2013).
III. LAW & ANALYSIS
A. Standard of Review
Federal Rule of Civil Procedure 56(a) empowers the court to render summary judgment "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir. 2001). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored ...