United States District Court, D. Utah
MEMORANDUM DECISION AND ORDER
Benson, United States District Judge
the court is Defendants’ Motion for Summary Judgment.
(Dkt. No. 45.) The Motion has been fully briefed by both
parties, and the court has considered the facts and arguments
set forth in those filings. Pursuant to civil rule 7-1(f) of
the United States District Court for the District of Utah
Rules of Practice, the Court elects to determine the motion
on the basis of the written memoranda and finds that oral
argument would not be helpful or necessary. DUCivR 7-1(f).
court, as it must, “examine[s] the factual record and
reasonable inferences therefrom in the light most favorable
to the party opposing summary judgment.” Applied
Genetics Int’l, Inc. v. First Affiliated Sec.,
Inc., 912 F.2d 1238, 1241 (10th Cir. 1990).
was hired by RxAmerica beginning in 2004 and remained with
the company following a 2008 acquisition by CVS Caremark
Corporation (“CVS”). First Amended Complaint
(“Compl.”) ¶¶8-9. At the time of the
acquisition, CVS retained Plaintiff as Senior Manager over
Software Development. Id. ¶10. A plan was
negotiated to pay severance benefits to former RxAmerica
employees who might be laid off due to the acquisition-the
CVS Health Severance Plan for Non-Store Employees
(“Severance Plan”). Id. ¶11.
Pursuant to the Severance Plan, if a director-level employee
were to be laid off, he or she would receive a severance
payment equivalent to 39 weeks of salary. Id. The
company’s representations regarding severance pay were
one of the major reasons Plaintiff decided to stay with CVS
following the acquisition. Id.
2009, Plaintiff was promoted to Director of IT. Id.
¶ 12. In 2010, Plaintiff received a merit raise and
stock options from the company. Id. ¶13. CVS
later transitioned away from issuing stock options to
employees and began issuing Restricted Stock Units
(“RSUs”) (owned when vested) to employees.
Id. ¶ 14. Thereafter, at the end of each
calendar year, CVS gave Plaintiff a merit increase and
additional stock options or RSUs. Id. ¶ 15.
the language in the various stock option and stock unit
agreements varies slightly, with respect to the issue of
continued vesting of RSUs upon termination of employment
without cause, the agreements all contain similar language.
Each agreement provides that vesting of the RSUs shall
continue through the end of the “severance
period” that is “set forth” or
“specified” in the “agreement providing for
severance pay.” Dkt. No. 46-1-46-5.
September 2, 2015, Plaintiff was notified that he would be
laid off in 60 days. Compl. ¶ 26. Plaintiff was given
the choice of being laid off and taking a severance payout or
seeking further employment opportunities within the company.
Id. At the time of the notice, Plaintiff, as a
Director, was eligible for a severance payout of 39 weeks of
pay, pursuant to the Severance Plan. Dkt. No. 46-6. Plaintiff
also had various RSUs that were scheduled to vest in April
2016. Id. ¶¶ 29-31.
decided to take the severance payout. Plaintiff executed a
Confidential Separation Agreement (“Separation
Agreement”) with the company on November 4, 2015. Dkt.
No. 46-7. The Separation Agreement states that Plaintiff will
be provided with the severance and other benefits set forth
in the “Addendum to Confidential Separation
Agreement.” Id. The Addendum provides that
Plaintiff will receive a specific amount of severance
payment, “representing 39 weeks of base salary subject
to all voluntary and required withholdings.”
Id. The Separation Agreement does not refer to or
provide a definition of any “Severance Period.”
December 11, 2015, CVS paid Plaintiff 39 weeks of severance
pay in a lump sum, pursuant to the Severance Plan. Compl.
¶36. The Severance Plan provides that “[t]he
determination of whether Severance Pay is payable under the
Plan, and the form and amount of such pay, shall be made in
the sole discretion of the Plan Administrator.” Dkt.
No. 46-6. The Severance Plan further provides that
“with respect to RxAmerica Legacy Employees [like
Plaintiff], Severance Pay shall be paid in a single lump
sum.” Id. The Severance Plan defines
“Severance Pay” as “the pay an Eligible
Employee is eligible to receive under Subsection (b) of
Section 2.1 of the Plan upon his or her Involuntary
Termination” (39 weeks of pay in Plaintiff’s
case.) Id. The Severance Plan defines
“Severance Period” as “the period of time
on which the calculation of Severance Pay is based.”
Id. The Severance Plan is the only relevant document
to include a definition for “Severance Period.”
On December 15, 2015, Plaintiff received an email from ETrade
indicating that his interest in the CVS stock options and
RSUs which would have vested in April 2016 had been
cancelled. Compl. ¶39. After contacting the company,
Plaintiff was told to contact the Plan Administrator
regarding the issues of severance period and continued
vesting of options and RSUs after his termination.
Id. ¶47. On January 8, 2016, Plaintiff sent a
letter to the Plan Administrator stating his position that
his RSUs should have continued to vest for 39 weeks following
his separation. Dkt. No. 46-8. On February 4, 2016, the Plan
Administrator issued a response to Plaintiff, stating that
“after reviewing the terms of [his] Confidential
Separation Agreement and the relevant terms and conditions of
the Plan . . . both the amount and form of [his] severance
pay is in complete conformance with the discretion granted to
the Plan Administrator under Section 2.1 (a) of the Plan . .
. .” Dkt. No. 46-9. The letter did not address vesting
of the RSUs. Id.
February 10, 2016, Plaintiff wrote again to the Plan
Administrator. Dkt. No. 46-10. He again stated that he
believed that his RSUs should have continued to vest during
the 39-week period following his separation. Id. The
Plan Administrator responded on March 4, 2016. Dkt. No.
46-11. The Plan Administrator reasoned:
Although the amount of your lump sum severance payment
granted to you under the Plan was determined under a formula
taking into account your weekly base salary rate multiplied
by 39 weeks, you did not have a severance period and no
severance period is specified in the agreement providing for
your severance pay. In other words, you were paid an enhanced
severance amount equal to 39 weeks of salary, plus an
additional amount for your full COBRA cost, in a lump sum up
front rather than in periodic installments over a severance
period of 39 weeks. Accordingly, your awards were properly
cancelled to the extent not vested as of your employment
termination date. Id.
November 7, 2016, Plaintiff filed this action pursuant to the
Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §1001, et
seq., seeking a ruling that his RSUs should have