Hall v. Lsref4 Lighthouse Corporate Acquisitions, Llc et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

W.D.N.Y.August 12, 2016

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK KENNETH O. HALL, Plaintiff, vs. LSREF4 LIGHTHOUSE CORPORATE ACQUISITIONS, LLC, 300 Clinton Square, Rochester, NY 14604, LIGHTHOUSE MANAGEMENT SERVICES, LLC, 300 Clinton Square, Rochester, NY 14604, HOME PROPERTIES, L.P., 300 Clinton Square, Rochester, NY 14604, and HOME PROPERTIES, INC., 850 Clinton Square, Rochester, NY 14604 Defendants. Civil Action No.: 6:16-cv-06461-EAW DEFENDANTS’ NOTICE OF MOTION TO DISMISS THE COMPLAINT PLEASE TAKE NOTICE that upon the Declaration of Margaret A. Clemens, Esq., affirmed August 12, 2016, together with its attached exhibit and the accompanying Memorandum of Law, dated August 12, 2016, Defendants LSREF4 Lighthouse Corporate Acquisitions, LLC, Lighthouse Management Services, LLC, Home Properties, L.P., and Home Properties, Inc., (collectively, “Defendants”), by and through its counsel, Littler Mendelson, P.C., will move this Court, at a date and time to be determined by this Court, for an Order, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissing the Complaint in its entirety with prejudice, on the grounds that the state law claims asserted therein fail to state claims for relief that are plausible because they relate to an employee benefit plan, governed by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq., and hence, are expressly preempted by ERISA. Case 6:16-cv-06461-EAW Document 6 Filed 08/12/16 Page 1 of 2 -2- PLEASE TAKE FURTHER NOTICE that Defendant intends to file and serve reply papers, and pursuant to Local Rule 7(b)(2), in the absence of a Court Order regarding the briefing schedule, Plaintiff is required to file and serve responding papers fourteen (14) days after service of this motion. Defendant requests the opportunity to present oral argument at a time convenient for the Court. Date: August 12, 2016 Fairport, New York Respectfully submitted, LITTLER MENDELSON, P.C. /s/ Carey Ann Denefrio Margaret A. Clemens Carey Ann Denefrio LITTLER MENDELSON, P.C. 375 Woodcliff Drive, 2nd Floor Fairport, NY 14450 (585) 203-3400 (t) (585) 203-3414 (f) mclemens@littler.com cdenefrio@littler.com Attorneys for Defendants 142089946 Case 6:16-cv-06461-EAW Document 6 Filed 08/12/16 Page 2 of 2 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK KENNETH O. HALL, Plaintiff, vs. LSREF4 LIGHTHOUSE CORPORATE ACQUISITIONS, LLC, 300 Clinton Square, Rochester, NY 14604, LIGHTHOUSE MANAGEMENT SERVICES, LLC, 300 Clinton Square, Rochester, NY 14604, HOME PROPERTIES, L.P., 300 Clinton Square, Rochester, NY 14604, and HOME PROPERTIES, INC., 850 Clinton Square, Rochester, NY 14604 Defendants. Civil Action No.: 6:16-cv-06461-EAW MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE COMPLAINT LITTLER MENDELSON, P.C. Margaret A. Clemens, Esq. Carey Ann Denefrio, Esq. 375 Woodcliff Drive, 2nd Floor Fairport, NY 14450 585.203.3400 Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 1 of 17 TABLE OF CONTENTS Page(s) i PRELIMINARY STATEMENT .................................................................................................... 1 FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND ....................................... 1 A. The Defendants’ Amended and Restated Executive Retention Plan ............................... 1 B. Plaintiff’s Decision to Terminate His Employment ......................................................... 2 C. Commencement of the Instant Action .............................................................................. 3 ARGUMENT .................................................................................................................................. 4 I. THE APPLICABLE LEGAL STANDARD FOR DETERMINING MOTIONS TO DISMISS UNDER RULE 12(B)(6) OF THE FEDERAL RULES OF CIVIL PROCEDURE . 4 II. THE STATE LAW CLAIMS PLED IN THE COMPLAINT ARE EXPRESSLY PREEMPTED BY ERISA .......................................................................................................... 5 A. ERISA Exclusively Governs Employee Benefits Plans ................................................... 6 B. The Plan at Issue is an ERISA-Governed Welfare Benefit Plan ...................................... 7 C. ERISA Preempts Plaintiff’s State Law Claims .............................................................. 10 D. The Plan is Alternatively a Pension Plan Governed by ERISA ..................................... 12 CONCLUSION ............................................................................................................................. 13 Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 2 of 17 TABLE OF AUTHORITIES Page(s) ii CASES Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) ...................................................................................................................6 Ahuja v. Errisson Inc., 277 F. App’x 300 (4th Cir. 2008) ..............................................................................................7 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................................4 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...................................................................................................................4 Chau v. Hartford Life Ins. Co., No. 1:14-cv-8484-GHW, 2016 WL 844831 (S.D.N.Y. Mar. 1, 2016) ....................................11 Coles v. Erie Cnty., No. 14-3958-CV, 2015 U.S. App. LEXIS 18253 (2d Cir. Oct. 21, 2015) .................................4 Constas v. Highland Hosp., No. 014-CV-06447T, 2015 WL 1432592 (W.D.N.Y. Mar. 27, 2015) ................................4, 11 Edwards v. Lockheed Martin Corp., 617 F. App’x 648 (9th Cir. 2015) ............................................................................................10 EEOC v. Port Authority of N.Y. & N.J., 768 F.3d 247 (2d Cir. 2014).......................................................................................................4 Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) .......................................................................................................................7 Gomez v. Ericsson, Inc., No. 15-41479, 2016 U.S. App. LEXIS 12604 .................................................................7, 9, 10 Holmes v. Poskanzer, 342 F. App’x 651 (2d Cir. 2009) ...............................................................................................5 Kinzie v. Bank of N.Y. Mellon, No. 1:14-cv-1191, 2015 WL 3795793 (N.D.N.Y. June 17, 2015) ..........................................11 Libbett v. Physician Assistant Doody, 686 F. Supp. 2d 271 (W.D.N.Y. 2010) ......................................................................................4 Malcolm v. Honeoye Falls Lima Cent. Sch. Dist., 669 F. Supp. 2d 330 (W.D.N.Y. 2009), vacated in part on other grounds by 399 F. App’x 680 (2d Cir. 2010) ..........................................................................................................5 Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 3 of 17 TABLE OF AUTHORITIES (CONT.) Page(s) iii Okun v. Montefiore Med. Ctr., 793 F.3d 277 (2d Cir. 2015)...............................................................................................7, 8, 9 Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101 (2d Cir.2008)................................................................................................10, 12 Sargent v. Verison Servs. Corp., No. 09-cv-310-SM, 2010 U.S. Dist. LEXIS 15408 (D. N.H. Feb. 22. 2010) ............................7 Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72 (2d Cir. 1996) ..........................................................................................................7 Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ...................................................................................................................11 Silverman v. Unum Grp., No. 14–CV–6439 (DLI)(SMG), 2015 WL 4603345 (E.D.N.Y. July 30, 2015) ......................11 State Univs. Ret. Sys. of Ill. v. Astrazeneca PLC, 334 F. App’x 404 (2d Cir. 2009) ...............................................................................................5 STATUTES 29 C.F.R. § 2510.3-1(a)(3)...............................................................................................................6 29 U.S.C. §§ 1001 et seq..................................................................................................................1 29 U.S.C. §§ 1002(1), (2), (3) ..........................................................................................................6 29 U.S.C. § 1002(2)(A)..................................................................................................................12 29 U.S.C. § 1144 ..........................................................................................................................1, 5 29 U.S.C. § 1144(a) .........................................................................................................................6 Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 4 of 17 PRELIMINARY STATEMENT This Memorandum of Law is submitted by Defendants LSREF4 Lighthouse Corporate Acquisitions, LLC, Lighthouse Management Services, LLC, Home Properties, L.P., and Home Properties, Inc., (collectively, “Defendants”) in support of their motion to dismiss the state law claims in the Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (“Fed. R. Civ. Proc.”), on the grounds that they fail to state claims for relief that are plausible because they relate to an employee benefit plan, governed by the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq., and hence, are expressly preempted by ERISA. See 29 U.S.C. § 1144. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND As alleged in the Complaint, Plaintiff Kenneth O. Hall (“Plaintiff” or “Hall”) was employed by Defendant Home Properties, L.P. from approximately June 27, 2005 through October 7, 2015, and was employed by Defendant Lighthouse Management Services, LLP from approximately October 8, 2015 through January 8, 2016. (Compl. ¶ 8).1 A. The Defendants’ Amended and Restated Executive Retention Plan In approximately 2011, Defendants Home Properties, Inc. and Home Properties, L.P. (collectively, “Home Properties” or “Home Property Defendants”), adopted an “Amended and Restated Executive Retention Plan,” (the “Plan”), “to help retain key executives in anticipation of a potential change of control of Home Properties….” (Compl. ¶¶ 9-10; and its Attachment, Plan § 1).2 The Plan, which was initially effective in 1999, provides “covered personnel” with certain enumerated benefits and “payments” in the event that the employment of a member of the 1 References to the Complaint filed by the Plaintiff in this case are designated “Compl. [paragraph number] and/or Attachment.” 2 A copy of the Plan at issue in this litigation is attached to the Complaint and is referenced as “Compl., Attachment, Plan [section and/or page number].” Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 5 of 17 2 “Corporate Staff is terminated . . . for Good Reason.” (Compl. ¶¶ 15-16; Attachment, Plan § 3(a)). Pursuant to Section 3 of the Plan, “[i]n the event the employment of a member of Corporate Staff is terminated on or after the Effective Date and during the two-year period following such Effective Date by the Company without Cause or by the Corporate Staff member for Good Reason, the Company shall pay” that employee compensation benefits and other payments.3 (Id.). The Plan defines “Good Reason” as including, among other reasons: (i) a material reduction, without the Participant’s written consent, of the Participant’s duties, responsibilities, and authority from the Participant’s duties, responsibilities, and authority as in effect immediately prior to the Change in Control; . . . [or] (iii) a material reduction by the Company of the Participant’s base compensation or incentive compensation opportunity. See Compl., ¶¶ 17-18; Attachment, Plan, § 2, p. 4 (emphasis added). B. Plaintiff’s Decision to Terminate His Employment Plaintiff alleges in his Complaint that, in October 2015, the Home Properties Defendants and the Lighthouse Defendants entered into a Merger Agreement, after which Lighthouse became responsible for the day-to-day operations of Home Properties. (Compl. ¶¶ 19-23). 3 If an employee is determined by Defendants to be eligible for benefits and payments, the benefits and payments consist of: (i) the Corporate Staff member’s Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, (iii) two times the Corporate Staff member’s Base Salary; and (iv) an amount equal to two times the greater of (y) the Corporate Staff member’s target Bonus for services rendered in the year in which the Termination Date occurs; or (z) the average Bonus paid to the Corporate Staff member for services rendered in each of the three years prior to the year in which the Termination Date occurs. (Compl ¶ 16; Attachment, Plan at § 3(a)). Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 6 of 17 3 Plaintiff further alleges that, during his tenure with Home Properties, he served as the Vice President and Controller and was a key member of the “corporate staff.” (Compl. ¶¶ 26-27). Plaintiff alleges that after the merger he was subject to a material reduction in duties, responsibilities and authorities and/or a material reduction in incentive compensation. (Compl. ¶¶ 29, 36). Plaintiff alleges that he informed Lighthouse Management, by letter dated December 9, 2015, that he was terminating his employment, effective January 8, 2016, for “good reason” under the terms of the Plan. (Compl. ¶¶ 38-39). As further alleged in the Complaint, by letter dated December 15, 2015, Lighthouse Management CEO Daniel Earle disagreed with Plaintiff that he had “good reason” to terminate his employment and denied the request for benefits and payments under the Plan. (Compl. ¶ 40). Nevertheless, Plaintiff proceeded with his decision to terminate his employment on January 8, 2016. (Compl. ¶ 41). C. Commencement of the Instant Action On or about June 17, 2016, Plaintiff commenced an action in New York State Supreme Court, Monroe County, for breach of contract as against Defendants. (Clemens Decl. ¶ 2-3).4 In the Complaint, Plaintiff seeks: (i) “termination payment required by the Plan following his termination of his employment for good reason, pursuant to § 3(a) of the Plan” (First Cause of Action); and (ii) “legal fees and expenses pursuant to § 9(b) of the Plan” (Second Cause of Action). (Compl. ¶¶ 43-57). On or about July 7, 2016, Defendants removed the action to the United States District Court for the Western District of New York on the grounds that Plaintiff’s state law contract 4 References to the accompanying Declaration of Margaret A. Clemens, Esq., dated August 12, 2016, are designated “Clemens Decl. [paragraph number].” Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 7 of 17 4 claims are completely preempted by ERISA.5 Defendants now move to dismiss these claims, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the grounds that such state law claims are expressly preempted by ERISA. ARGUMENT I. THE APPLICABLE LEGAL STANDARD FOR DETERMINING MOTIONS TO DISMISS UNDER RULE 12(B)(6) OF THE FEDERAL RULES OF CIVIL PROCEDURE Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the Court to dismiss any pleading, or portion thereof, which fails to state a claim upon which relief can be granted. In other words, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Coles v. Erie Cnty., No. 14-3958-CV, 2015 U.S. App. LEXIS 18253, at *2 (2d Cir. Oct. 21, 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation marks omitted)). Plausibility “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The factual allegations of a complaint must be “enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id.; accord EEOC v. Port Authority of N.Y. & N.J., 768 F.3d 247, 253 (2d Cir. 2014) (“Contrary to Conley’s “no-set-of-facts” standard, which requires only that a complaint not preclude the viability of claims, Twombly and Iqbal require that a complaint support the viability of its claims by pleading sufficient nonconclusory factual matter to set forth a claim that is plausible on its face.”); Libbett v. Physician Assistant Doody, 686 F. Supp. 2d 271, 277 (W.D.N.Y. 2010) (citing Iqbal, 129 S. Ct. at 1949); Constas v. Highland Hosp., No. 014-CV-06447T, 2015 WL 1432592, 5 On August 2, 2016, Plaintiff filed a Motion to Remand, which is currently pending before the Court. See Docket No. 4. Defendants will be submitting a response in opposition to this motion. Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 8 of 17 5 at *1 (W.D.N.Y. Mar. 27, 2015)(citing Ferran v. Town of Nassau, 11 F.3d 21, 22 (2d Cir. 1993)). In reviewing a motion under Rule 12(b)(6), a court may consider documents incorporated into the Complaint by reference, as well as documents of which plaintiff had undisputed notice and which are integral to the plaintiff’s claim. State Univs. Ret. Sys. of Ill. v. Astrazeneca PLC, 334 F. App’x 404, 406 (2d Cir. 2009) (summary order). Indeed, “[t]he complaint includes any statements or documents incorporated in it by reference,” as well as any document not incorporated by reference “where the complaint relies heavily upon its terms and effect, which renders the document integral to the complaint.” Holmes v. Poskanzer, 342 F. App’x 651, 652 (2d Cir. 2009) (summary order) (internal quotation marks and citation omitted); accord Malcolm v. Honeoye Falls Lima Cent. Sch. Dist., 669 F. Supp. 2d 330, 332 (W.D.N.Y. 2009), vacated in part on other grounds by 399 F. App’x 680 (2d Cir. 2010). As discussed below, Plaintiff’s claims must be dismissed because the Complaint, together with the documents incorporated by reference in it, attached to the Complaint as exhibits, and/or of which he had notice and which are integral to his claims, do not set forth sufficient facts to state a claim for relief that is plausible on its face. Thus, this Court should grant the Defendants’ motion to dismiss the state law claims asserted in the Complaint. II. THE STATE LAW CLAIMS PLED IN THE COMPLAINT ARE EXPRESSLY PREEMPTED BY ERISA In this case, Plaintiff seeks to recover benefits under an employee benefit plan governed by ERISA, however, he has interposed only state law breach of contract claims. Such state law claims are expressly preempted by ERISA. See 29 U.S.C. § 1144. Thus, as discussed in detail below, Plaintiff’s Complaint must be dismissed in its entirety on ERISA preemption grounds. Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 9 of 17 6 A. ERISA Exclusively Governs Employee Benefits Plans As long recognized by the Supreme Court, “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.’” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. § 1001(b)). “The purpose of ERISA is to provide a uniform regulatory regime” and, in order to do so, ERISA has “expansive pre-emption provisions, which are intended to ensure that employee benefit plan regulation would be exclusively a federal concern.” Id. (internal quotation marks and citations omitted). Specifically, ERISA expressly provides, in pertinent part, that it “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). ERISA governs “employee benefit plans,” which include both “pension plans” and “welfare benefit plans.” A welfare benefit plan is defined as “any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer . . . to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries . . . medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits . . . .” 29 U.S.C. §§ 1002(1), (2), (3). Further, “the effect of section 3(1)(B) of the Act is to include within the definition of ‘welfare plan’ those plans which provide holiday and severance benefits, and benefits which are similar (for example, benefits which are in substance severance benefits, although not so characterized).” 29 C.F.R. § 2510.3-1(a)(3) (emphasis added). Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 10 of 17 7 B. The Plan at Issue is an ERISA-Governed Welfare Benefit Plan Here, it cannot genuinely be disputed that the Plan provides eligible employees with termination or severance benefits if their employment is terminated for “Good Reason.” (Compl., Attachment, Plan § 3(a)). Courts have recognized that severance plans, such as the one at issue in this case, are employee welfare plans governed by ERISA. See, e.g., Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 7 (1987); (citing 29 U.S.C. § 1002(1)(B)); Okun v. Montefiore Med. Ctr., 793 F.3d 277 (2d Cir. 2015) (severance pay considered an “employee welfare benefit plan” covered by ERISA); Gomez v. Ericsson, Inc., No. 15-41479, 2016 U.S. App. LEXIS 12604, at **5-6 (5th Cir. July 8, 2016)(noting that “[a]lthough retirement and health plans are perhaps the better known examples of ERISA plans, the statute contemplates that some severance plans will fall within its reach”); Ahuja v. Errisson Inc., 277 F. App’x 300 (4th Cir. 2008); Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 75 (2d Cir. 1996); Sargent v. Verison Servs. Corp., No. 09-cv-310-SM, 2010 U.S. Dist. LEXIS 15408 (D. N.H. Feb. 22. 2010). The recent decision of the Second Circuit in Okun v. Montefiore Med. Center, is instructive. In Okun, the Second Circuit explained that “Congress intended the definition of ‘employee welfare benefit plan’ to be broad and independent of the specific form of the plan” and, as a result, concluded that the term “employee welfare benefit plan” applies to most “employer undertakings or obligations to pay severance benefits.” 793 F.3d at 279 (internal quotation marks and citations omitted). The Court identified “three non-exclusive factors to determine whether an employer’s particular undertaking involves the kind of ongoing administrative scheme inherent in a ‘plan, fund, or program,’” including: (1) whether the employer's undertaking or obligation requires Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 11 of 17 8 managerial discretion in its administration; (2) whether a reasonable employee would perceive an ongoing commitment by the employer to provide employee benefits; and (3) whether the employer was required to analyze the circumstances of each employee's termination separately in light of certain criteria. Id. (citations omitted). The Court further noted that “long-term commitments” and “discretionary determinations” are additional factors that are useful to the court. Id. Ultimately, the Court held that the severance plan at issue in that case was a welfare benefit plan governed by ERISA because it represented “a multi-decade commitment to provide severance benefits to a broad class of employees under a wide variety of circumstances and requires an individualized review whenever certain covered employees are terminated.” Id. at 280. Applying these factors here, the Court should find that the Plan at issue is a welfare benefit plan governed by ERISA for precisely the same reasons as set forth in Okun. First, the Plan at issue here “requires discretion and individualized evaluation to administer.” See id. at 279. Pursuant to the terms of the Plan, a request for payment of benefits requires discretion and an individualized evaluation of whether the employee was subjected to a “material reduction” of duties, responsibilities and authority after the merger as compared to the duties, responsibilities and authority he or she held before the merger and/or was subject to a “material reduction” in compensation after the merger as compared to before that event. The Plan provides no fixed criteria for making such a determination nor does it merely provide that any employee whose duties, responsibilities or authority and/or compensation are “reduced” has good reason to terminate their employment. Rather, managerial discretion is required to determine if such reduction rises to the level of a “material” one justifying a good reason to terminate employment. Indeed, as alleged in the Complaint, Lighthouse Management CEO Daniel E. Earle reviewed Plaintiff’s request for payment under the Plan’s “Good Reason” provision and Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 12 of 17 9 determined that he did not agree with Plaintiff’s conclusion that Plaintiff was subject to such material reductions so as to entitle him to payment under the terms of the Plan. (See Compl. ¶ 40). This factor supports a finding of ERISA preemption. See Gomez, 2016 U.S. App. LEXIS 12604, at **2-3 (finding it significant that “[i]n addition to calculating the amount of any payment, the Plan Administrator makes the initial determination of employee eligibility”). Second, as alleged in the Complaint, the Plan went into effect in 1999 and was amended in February 2011, and is still alleged to be in effect in 2016. Such a longstanding policy gives employees the reasonable impression that Defendants have undertaken an ongoing commitment to provide severance or termination benefits to eligible employees in the event that there is a Change of Control and they meet the criteria for such benefits and payments. See Okun, 793 F.3d at 279-80. Third, the employer is required to analyze the circumstances of each employee's termination separately in light of certain enumerated criteria. As set out under the “Good Reason” provision of the Plan, there were four alternative circumstances which, if satisfied, could qualify an employee for the receipt of benefits and payments under the Plan. Plaintiff alleges that he qualified under two of those circumstances only. Even with respect to the two circumstances, which involve the material reduction of his duties, responsibilities and authority and the material reduction of his compensation, the circumstances for determining whether the Plaintiff, (who alleged was employed as the Controller for Home Properties prior to the merger), qualified for benefits and payments under the Plan, would be different than for others employed in a different capacity. Thus, this factor, too, strongly supports the conclusion that the Plan at issue involves the type of on-going administrative scheme that is consistent with a plan or program. Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 13 of 17 10 In sum, the Plan involves an ongoing administrative scheme in which Defendants exercise discretion in determining an employee’s eligibility for benefits and payments under the Plan by having to determine whether there was “Good Reason” for the termination, including whether or not there was a “material reduction” in duties, responsibilities or authority, and/or compensation under the Plan. See Gomez, 2016 U.S. App. LEXIS 12604, at *7 (“It is thus the existence or nonexistence of an ‘ongoing administrative scheme’ that is the key determinant of whether severance plans are governed by ERISA.”). The Plan’s long-term duration and the “individualized, frequently recurring review contemplated by that commitment implicate the type of administrative concerns that are best governed by a single set of regulations rather than a patchwork scheme of regulation.” Id. (internal quotation marks and citation omitted). Absent ERISA preemption of the Plan, the courts in the multiple states that Defendants operate in might define “good reason” differently, or might impose different constraints on the discretion Defendants can exercise in reviewing the amount of termination benefits due to eligible employees. Accordingly, Plaintiff’s state law claims relate to and seek benefits under an employee benefit plan governed by ERISA. C. ERISA Preempts Plaintiff’s State Law Claims Here, Plaintiff has not elected to interpose a specific ERISA claim for benefits in the Complaint and has instead interposed state law breach of contract causes of action, one seeking payment of benefits for himself and other seeking payment of fees for his attorney. (See Compl., FIRST and SECOND Causes of Action). Courts in the Second Circuit and beyond have consistently held that claims for breach of contract and other similar state law claims seeking benefits under an employee benefit plan are expressly preempted by ERISA. See, e.g., Edwards v. Lockheed Martin Corp., 617 F. App’x 648 (9th Cir. 2015) (preempting breach of contract claims arising from alleged failure to pay separation pay); Paneccasio v. Unisource Worldwide, Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 14 of 17 11 Inc., 532 F.3d 101, 114 (2d Cir.2008) (preemption applies to state law contract and other state law claims); Chau v. Hartford Life Ins. Co., No. 1:14-cv-8484-GHW, 2016 WL 844831, at *6 (S.D.N.Y. Mar. 1, 2016) (“These claims all relate to the Plan and are preempted by ERISA, for it has long been established in this Circuit that breach of contract claims arising from failure to pay benefits under an ERISA plan are preempted.”); Silverman v. Unum Grp., No. 14–CV–6439 (DLI)(SMG), 2015 WL 4603345, at *4 (E.D.N.Y. July 30, 2015) (collecting cases) (“[I]t has long been established in this Circuit that breach of contract claims arising from a failure to pay benefits under an ERISA plan are preempted.”) (collecting cases); Kinzie v. Bank of N.Y. Mellon, No. 1:14-cv-1191, 2015 WL 3795793, at *2 (N.D.N.Y. June 17, 2015) (holding that the breach of contract claim was preempted by ERISA and, therefore, dismissed, as it “is precisely the type of state common law claim that is preempted by ERISA” because the plaintiff “seeks only to rectify a wrongful denial of benefits promised under [an] ERISA-regulated plan”) (internal quotation marks and citations omitted); Constas v. Highland Hosp., 2015 WL 1432592, at *2 (holding that “plaintiff’s state law claims of breach of contract, unjust enrichment, and detrimental reliance are preempted by ERISA”); see also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983) (“A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.”). The same rationale applies here. Because ERISA provides the exclusive enforcement mechanism for claims relating to Plaintiff’s participation in the Plan, which is an ERISA- governed plan, Plaintiff’s state common law claims are expressly preempted. As explained by the courts, preemption applies because any adjudication of Plaintiff’s state law contractual claims outside the mechanisms prescribed by ERISA would nonetheless require this Court to Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 15 of 17 12 analyze the parties’ rights and obligations under the terms of the ERISA-governed plan and would subject the parties to ERISA. D. The Plan is Alternatively a Pension Plan Governed by ERISA Even generously assuming for purposes of this motion only, that the underlying Plan does not constitute a severance pay plan that is properly treated as an employee welfare benefit plan under ERISA Section (3)(1), such assumption would be of no benefit to Plaintiff in avoiding dismissal of his state law claims. In the event that the Plan is determined not to be a “welfare benefit plan,” the underlying agreement or contract must be considered as creating an “employee pension benefit plan” under ERISA Section 3(2). ERISA Section 3(2) defines employee pension plan as: “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—(i) provided retirement income to employees, or (ii) 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). Here, to the extent it is not a severance plan, the Plan results in the deferral of income by employees for periods extending beyond the termination of employment, and hence, by definition is an employee pension plan subject to ERISA. Accordingly, any viable claim of Plaintiff would be governed and preempted by ERISA and not state law; his state law claims must still be dismissed. Panecassio v. Unisource Worldwide, Inc., 532 F.3d at 114 (affirming dismissal of employee’s claims of breach of contract, breach of the covenant of good faith and fair dealing, violation of state unfair trade practices statute, reckless misrepresentation, negligent misrepresentation, and tortious interference with contract because they “relate[] to” a covered plan and are preempted by ERISA). Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 16 of 17 13 CONCLUSION For the reasons set forth above, Defendants respectfully request that the Court grant their FRCP Rule 12(b)(6) motion to dismiss the state law claims in the Complaint in their entirety. Date: August 12, 2016 Fairport, New York Respectfully submitted, LITTLER MENDELSON, P.C. /s/ Carey Ann Denefrio Margaret A. Clemens Carey Ann Denefrio LITTLER MENDELSON, P.C. 375 Woodcliff Drive, 2nd Floor Fairport, NY 14450 (585) 203-3400 (t) (585) 203-3414 (f) mclemens@littler.com cdenefrio@littler.com Attorneys for Defendants 141768249 Case 6:16-cv-06461-EAW Document 6-1 Filed 08/12/16 Page 17 of 17 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK KENNETH O. HALL, Plaintiff, vs. LSREF4 LIGHTHOUSE CORPORATE ACQUISITIONS, LLC, 300 Clinton Square, Rochester, NY 14604, LIGHTHOUSE MANAGEMENT SERVICES, LLC, 300 Clinton Square, Rochester, NY 14604, HOME PROPERTIES, L.P., 300 Clinton Square, Rochester, NY 14604, and HOME PROPERTIES, INC., 850 Clinton Square, Rochester, NY 14604 Defendants. Civil Action No.: 6:16-cv-06461-EAW DECLARATION OF MARGARET A. CLEMENS I, Margaret A. Clemens, declare and state as follows: 1. I am a duly licensed attorney with the firm Littler Mendelson, P.C., attorneys for Defendants LSREF4 Lighthouse Corporate Acquisitions, LLC, Lighthouse Management Services, LLC, Home Properties, L.P., and Home Properties, Inc., (collectively, “Defendants”). I make this declaration in support of Defendants’ motion, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for an Order dismissing the Complaint. 2. On or about June 17, 2016, Defendants were served with a Complaint filed by Plaintiff Kenneth O. Hall, a former employee of Defendant Home Properties, L.P. and Defendant Lighthouse Management Services, LLP, which was filed in New York State Supreme Court Monroe County. A copy of the Complaint is attached for the Court’s convenience as Exhibit A. 3. In his Complaint, Plaintiff interposes two breach of contract causes of action under New York State common law seeking: (1) termination payment allegedly required Case 6:16-cv-06461-EAW Document 6-2 Filed 08/12/16 Page 1 of 2 pursuant to Section 3(a) of the Amended and Restated Executive Retention Plan (the “Plan”) (First Cause of Action); and (2) legal fees and expenses allegedly owed, pursuant to Section 9(b) of the Plan (Second Cause of Action). 3. On or about July 7, 2016, Defendants removed the instant Action to the United States District Court for the Western District of New York on the grounds that the Plan at issue was an employee benefit Plan governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., and that ERISA completely preempted any state law claims. (See Docket No. 1). 4. Defendants now move for dismissal of the state law claims contained in the Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for the reasons set forth in the accompanying Memorandum of Law. I verify under penalty of perjury that the foregoing is true and correct. Executed on August 12, 2016 in Fairport, New York. /s/ Margaret A. Clemens Margaret A. Clemens 141967444 Case 6:16-cv-06461-EAW Document 6-2 Filed 08/12/16 Page 2 of 2 EXHIBIT A EXHIBIT A Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 1 of 19 SUPREME COURT STATE OF NEW YORK COUNTY OF MONROE KENNETH 0. HALL, Plaintiff, vs. LSREF4 LIGHTHOUSE CORPORATE ACQUISITIONS, LLC, LIGHTHOUSE MANAGEMENT SERVICES, LLC, HOME PROPERTIES, L.P., and HOME PROPERTIES, INC., Defendants. COMPLAINT Index No. Plaintiff, for his complaint against defendants, alleges as follows: PARTIES 1. Plaintiff, Kenneth 0. Hall ("Hall"), is a residentofthe State ofNew York, residing at 4376 Teall Beach, Geneva, New York 14456. 2. Upon information and belief, Defendant LSREF4 Lighthouse Corporate Acquisitions, LLC ("Lighthouse Corporate Acquisitions") is a Maryland limited liability company that transacts business within the State of New York, and its principal office is at 300 Clinton Square, Rochester, New York 14604. 3. Upon information and belief, defendant Lighthouse Management Services, LLC ("Lighthouse Management") is a Delaware limited liability company that transacts business within the State ofNew York, and its principal office is at 300 Clinton Square, Rochester, New York 14604. 4. Defendant Home Properties, L.P. is aNew York limited partnership, and its principal office is at 300 Clinton Square, Rochester, New York 14604. Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 2 of 19 5. Defendant Home Properties, Inc. is a Maryland corporation, organized and operated as a real estate investment trust ("REIT''),.that transacts business within the State ofNew York, and its principal office is at 850 Clinton Square, Rochester, New York 14604. FACTS 6. Upon information and belief, Home Properties, Inc. was founded in Rochester, New York, and later became publicly traded on the New York Stock Exchange. In 2015, private equity firm Lone Star Funds acquired Home Properties, Inc., taking it private and delisting it from the New York Stock Exchange. 7. Upon information and belief, Home Properties, L.P. is the operating partnership of Home Properties, Inc., and continues to operate under the control of Lone Star Funds, Lighthouse Corporate Acquisitions, and Lighthouse Management. 8. From June 27, 2005 through October 7, 2015, Hall was an employee of Home Properties, L.P., and from October 8, 2015 to January 8, 2016, Hall was an employee of Lighthouse Management. 9. Home Properties, Inc. and Home Properties, L.P. (together "Home Properties") adopted an Amended and Restated Executive Retention Plan dated as of February 12, 2011 (the "Plan"), a copy of which is annexed to this complaint. 10. The Plan was intended to help retain key executives in anticipation of a potential change of control of Home Properties. The Plan sought to "diminish the inevitable distraction" of "personal uncertainties and risks" that a change of control would cause for Home Properties personnel covered by the Plan, to ensure their "full attention and dedication," including "in the event of any threatened or pending Change of Control," and to provide covered personnel "with compensation and benefits arrangements upon a Change of Control which ensure that (a) such 2 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 3 of 19 attention and dedication are likely through protecting the compensation arid benefits expectations of the Participants, and (b) such arrangements are competitive with those of other entities in the REIT industry." Plan§ 1. 11. The Plan's stated purpose was ''to assure that certain of the Company's officers and employees ... will be able to carry out their functions in the best interests of the shareholders of the Company ... notwithstanding the possibility, threat or occurrence of a Change of Control," as defined in the Plan, of Home Properties. Plan § 1. 12. The Plan defines "change of control" to include the acquisition of 25% or more of Home Properties, Inc.'s shares of common stock outstanding at the time of the acquisition. Plan § 2 ("Change of Control" definition (i)). 13. In exchange for the loyalty and dedication of executives like Hall, the Plan promised them certain compensation, in the event a change of control occurred, if Home Properties or its successors terminated them, or if they terminated their employment themselves for good reason after a change of control. 14. Under the Plan, a Home Properties employee who served on the corporate staff, including company officers, could terminate his employment any time in the two years after a change of control with good reason, as defined in the Plan. If an officer so terminated his employment, he was entitled to a payment from Home Properties within 30 days of his termination. 15; The Plan provides that "[i]n the event the employment of a member of Corporate Staff is terminated on or after the Effective Date and during the two-year period following such Effective Date ... by the Corporate Staff member for Good Reason, the Company shall pay to the 3 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 4 of 19 Corporate Staff member in a lump sum in cash within 30 days after the Termination Date" the amounts set forth in the Plan. Plan§ 3(a). 16. The Plan requires payment of the following amounts: (a) the executive's base salary through the date of the termination, if not already paid; (b) the executive's annual bonus ("all other amounts earned, accrued or deferred under the Bonus Plan"); (c) (d) Plan§ 3(a). twice the executive's base salary; and either twice the executive's annual bonus in the year of the termination or twice the executiv~'s average bonus for the three years prior to the year of the termination, whichever is great~r. 17. The Plan defines "good reason" to include "a material reduction, without the Participant's written consent, of the Participant's duties, responsibilities, and authority from the Participant's duties, responsibilities, and authority as in effect immediately prior to the Change in Control." Plan§ 2. 18. The Plan also defines "good reason" to include "a material reduction by the Company of the Participant,~s base compensation or incentive compensation opportunity." Plan§ 2. 19. Home Properties, Inc. and Home Properties, L.P. entered into an Agreement and Plan of Merger with Lighthouse Corporate Acquisitions, LSREF4 Lighthouse Acquisitions, LLC, and LSREF4 Lighthouse Operating Acquisitions, LLC, dated as of June 22, 2015 (the "Merger Agreement"); 20. Upon information and belief, Lighthouse Corporate Acquisitions, LSREF4 Lighthouse Acquisitions, LLC, and LSREF4 Lighthouse Operating Acquisitions, LLC are all affiliates of Lone Star Funds. 4 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 5 of 19 21. Upon information and belief, on October 7, 2015, the Lon~ Star Funds acquisition of Home Properties (the "Merger") was completed, and Home Properties, Inc. was thereafter delisted from the New York Stock Exchange. 22. Upon information and belief, as a result of the Merger, Home Properties, Inc. was merged into Lighthouse Corporate Acquisitions, but Home Properties, Inc. nonetheless continues to exist as a foreign business corporation operating in New York. 23. Upon information and belief, after the Merger, Lighthouse Management became responsible for the day-to-day operation of the Home Properties business. 24. Upon information and belief, after the Merger, Home Properties, L.P. continues to exist and is operated by Lighthouse Management. 25. Pursuant to the Merger Agreement, Lighthouse Corporate Acquisitions is responsible for payments under the Plan. Section 2.03 of the Merger Agreement defines Lighthouse Corporate Acquisitions as the "Surviving Company." Section 8.16(b) of the Merger Agreement provides that "[ u ]pon the Closing, the Surviving Company hereby assumes the obligations under the Amended and Restated Executive Retention Plan adopted by the Company [Home Properties, Inc.] and the Partnership [Home Properties, L.P.], as of February 12, 2011, including but not limited to payment of any accrued bonus under the Company's Incentive Compensation Plan for services rendered during the year in which the Closing occurs." 26. · During his tenure at Home Properties before the Merger, Hall served as Vice President and Controller and was an officer of Home Properties. 27. As an officer, Hall was a key member of the "corporate staff," defmed in the Plan to include ''the officers of the Company," and he was therefore covered by the Plan. Plan§ 2. 5 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 6 of 19 28. Upon information and belief, the Merger constituted a change of control of Home Properties, as defined in the Plan, because Lighthouse Corporate Acquisitions acquired all of the outstanding shares of stock of Home Properties, Inc. 29. After the change of control resulting from the Merger, Hall was subject to a material reduction, without his consent, of his duties, responsibilities, and authority, as compared to his duties, responsibilities, and authority immediately prior to the Merger. 30. Before the Merger, Hall was one of Home Properties, Inc.'s four senior financial officers, including the CEO, CFO, treasurer, and himself, as controller, but after the Merger, Hall was stripped of his vice president title, was no longer an officer of Home Properties, and was not made an officer of Lighthouse Management, Lighthouse Corporate Acquisitions, or any successor entity to Home Properties. 31. · Before the Merger, Hall, as the controller of a public company, had· significant responsibilities for reporting to the U.S. Securities and Exchange Commission pursuant to securities laws and regulations, but after the Merger, he had no such responsibilities. 32. Before the Merger, Hall had responsibilities as secretary of the Audit Committee, as a senior financial officer ofHome Properties, Inc., and in connection with Home Properties' stock- based compensation awards, but after the Merger, he had no such responsibilities. 33. Before the Merger, as an officer of Home Properties, Inc., Hall was responsible for various functions that required officer-level authority, such as opening bank accounts and signing U.S. Securities and Exchange Commission filings and other documents on behalf of Home Properties, Inc. After the Merger, he had no such authority. 34.. Before the Merger, Hall's duties required him to work directly and substantively with the board and top officers of Home Properties, Inc. on a regular basis, but after the Merger, Hall 6 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 7 of 19 had no contact with senior management of Lone Star Funds, and no duties, responsibilities, or authority in the context of the overall Lone Star organization. 35. Prior to the Merger, as a senior financial officer of Home Properties, Inc., Hall regularly attended and was a presenter at conferences of the National Association of Real Estate Investment Trusts ("NAREIT"). Following the Merger, Hall was not permitted to attend or speak at NAREIT events. 36. As a result of the Merger, Hall was also subject to a material reduction in his opportunity for incentive compensation. 37. Before the Merger, Hall had the opportunity to receive $100,000 in equity compensation each year from Home Properties, and each year of his employment at Home Properties, Hall received equity compensation as a performance incentive, including grants of $100,000 per year in stock beginning in approximately 2010. After the Merger, Hall was not granted or told he would be eligible for any equity award as an ongoing incentive compensation opportunity, and there was no such program in place that was applicable to Hall. 38. As a result of the material reductions in his duties, responsibilities, and authority, and in his incentive compensation opportunity following the Merger, Hall terminated his employment with Home Properties' successor entities for "good reason," as defined in the Plan. 39. By letter dated December 9, 2015, Hall informed Lighthouse Management that he would terminate his employment effective January 8, 2016, for good reason pursuant to§ 3(a) of the Plan, and he requested payment under that provision. 40. By letter dated December 15, 2015, Lighthouse Management CEO Daniel E. Earle informed Hall that Lighthouse Management did not agree with his good reason determination and that defendants would not pay Hall the termination payment required by the Plan. 7 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 8 of 19 41. Hall terminated his employment with Home Properties and Lighthouse Management on January 8, 2016. 42. Since January 8, 2016, defendants have repeatedly declined to pay Hall the termination payment. FIRST CAUSE OF ACTION 43. Hall repeats and realleges paragraphs 1 through 42 as if fully set forth. 44. On February 12,2011, defendants Home Properties, Inc. and Home Properties, L.P. adopted the Plan, under which they agreed to pay Hall a termination payment if his employment was terminated following a change of control of the company, in consideration for retaining Hall's services and loyalties in anticipation of a change in control. 45. Defendants are obligated to pay Hall the termination payment required by the Plan following his termination ofhis employment for good reason, pursuant to§ 3(a) of the Plan. 46. Defendants have failed to pay Hall the amount he is due pursuant to the Plan. 47. By failing to pay Hall the amounts he is due under the Plan, defendants breached their obligations to Hall pursuant to the Plan. 48. By reason of the foregoing, Hall has been damaged in the amount of $627,814.80, with interest from February 7, 2016. Specifically, Hall was entitled to payment in a lump sum in cash of the following amounts within 30 days ofhis termination: (a) $403,645.44 as two times Hall's base salary. Plan § 3(a)(iii); (b) $141,275.90 as two times the greater of Hall's three-year average bonus or 2015 target bonus. Plan§ 3(a)(iv); and (c) $82,893.46 as Hall's bonus earned and accrued in 2015. Plan§ 3(a)(ii). 49. Hall has demanded payment, but has not received any payment to date. 8 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 9 of 19 SECOND CAUSE OF ACTION 50. Hall repeats and realleges paragraphs 1 through 42 as if fully set forth. 51. Defendants are obligated to reimburse Hall's legal fees and expenses pursuant to§ 9(b) of the Plan. Specifically, ~e Plan provides that: The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which any Participant may reasonably incur as a result of any contest by the Company, the Participants or others of the validity or enforceability of, or liability under, any provision of this Plan ... whether or not the Participant is successful in asserting such Participant's rights in such contest . . . . Payments for legal fees and expenses shall be made by the Company within ten business days after delivery of the Participant's written request for such payment accompanied by detailed evidence of such fees and expenses .... Plan§ 9(b). 52. Hall has made written request for payment of the ·legal fees and expenses he has reasonably incurred as a result of the contesting of the validity or enforceability of, or liability under, any provision ofthe Plan, accompanied by detailed evidence of such fees and expenses and payments made thereon through June 16, 2016, and he has not received any payment to date. 53. By failing to reimburse Hall for his legal fees and expenses reasonably incurred as a result of the contesting of the validity or enforceability of, or liability under, any provision of the Plan within 10 business days of the foregoing request, defendants will have breached their obligation to Hall pursuant to§ 9(b) of the Plan. 54. Byreasonofthe foregoing, Hall will be damaged in the amount of$13,616.00, which he has paid his counsel to date as "legal fees and expenses which any Participant may reasonably incur as a result of any contest by the Company, the Participants or others of the validity or enforceability of, or liability under, any provision of this Plan." Plan§ 9(b). 55. Hall will reasonably incur additional legal fees and expenses as a result of the contesting of the validity or enforceability of, or liability under, any provision of the Plan until 9 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 10 of 19 this matter is resolved, and as he incurs those expenses, he will continue to make written requests for payment accompanied by detailed evidence of such fees and expenses. 56. Defendants' obligation to reimburse Hall's legal fees and expenses continues each time he reasonably incurs legal fees and expenses as a result of the contesting of the validity or enforceability of, or liability under, any provision of the Plan, and makes written request for reimbursement, accompanied by detailed evidence of such fees and expenses. 57. To the extent that defendants fail to reimburse Hall within 10 business days of each written request for reimbursement for "all legal fees and expenses which any Participant may reasonably incur as a result of any contest by the Company, the Participants or others of the validity or enforceability of, or liability under, any provision ofthis Plan," defendants will be in further breach of their obligations pursuant to § 9(b) of the Plan. WHEREFORE, plaintiff, Kenneth 0. Hall, demands judgment in his favor as against defendants on the first cause of action in the amount of $627,814.80, with applicable interest since February 7, 2016, and on the second cause of action, $13,616.00 as reimbursement for legal fees and expenses incurred through June 16,2016, plus interest, and such amounts as defendants may fail to pay as required by the Plan in the future, plus interest from such dates, together with such· other relief as may be just. Dated: June 17,2016 Harold A. Kurland Brendon S. Fleming WARD GREENBERG HELLER & REIDY LLP Attorneys for Plaintiff 1800 Bausch & Lomb Place Rochester, New York 14604 (585) 454-0700 10 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 11 of 19 HOME PROPERTIES, INC. HOME PROPERTIES, L.P. AMENDED AND RESTATED EXECUTIVE RETENTION PLAN This Amended and Restated Executive Retention Plan (the "Plan") is adopted by Home Properties, Inc. (the "Company"), a Maryland corporation organized and operated as a real estate investment trust ("REIT"), and Home Properties, L.P. (the "Operating Partnership"), a New York limited partnership, as of the 12th day of February, 2011. The Company, the Operating Partnership and any subsidiary entities controlled by the Company or the Operating Partnership are collectively referred to herein as the "Company." This Plan supersedes the Executive Retention Plan adopted by the Company and the Operating Partnership as of February 2, 1999 as such Plan was amended. I. PURPOSES OF THE PLAN. The Board of Directors (the "Board") of the Company, has determined that it continues to be in the best interests of the Company and its shareholders and the Operating Partnership and its partners to assure that certain of the Company's officers and employees (the "Participants") will be able to carry out their functions in the best interests of the shareholders of the Company and the partners of the Operating Partnership not distracted by the ongoing consolidation in the REIT industry and notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board continues to believe that it is in the best interests to diminish the inevitable distraction of the Participants because of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage Participants' full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Participants with compensation and benefits arrangements upon a Change of Control which ensure that (a) such attention and dedication are likely through protecting the compensation and benefits expectations of the Participants, and (b) such arrangements are competitive with those of other entities in the REIT industry. 2. CERTAIN DEFINITIONS. "Base Salary" means the Participant's wage or salary base for federal income tax purposes on the Termination Date without regard to annual or special bonuses or compensation income resulting from employee benefit plans of the Company (e.g., stock grants, options, excess life insurance). "Bonus" means an annual bonus in cash under the Bonus Plan, or any comparable bonus under any predecessor or successor plan or program. "Bonus Plan" means the Company's incentive compensation or bonus plan or program and any successor or replacement plan or program providing for periodic cash bonuses based on various categories or pay grades and related individual and Company performance criteria. P:lcommon\075\ WORD\LEGAL\Amended Restated Executive Retention Plan 2.16.ll.docx Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 12 of 19 "Cause" means: (i) the willful and continued failure of a Participant to perform substantially the Participant's duties with the Company (other than any such failure resulting from the incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to a Participant by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed the Participant's duties, or (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) in lieu of clauses (i) and (ii) such other definition of "cause" or comparable concept set forth in any separate agreement of employment between the Participant and the Company. For purposes of this provision, no act or failure to act, on the part of Participant, shall be considered ''willful" unless it is done, or omitted to be done, by Participant in bad faith or without reasonable belief that Participant's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior offic~ of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. "Change of Control" means: (i) The acquisition by any individual, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either: (y) the then-outstanding shares of common stock of the Company or interests in the Operating Partnership (either such stock or interests the "Outstanding Company Equity"), or (z) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation or the Operating Partnership, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Person controlled by the Company, or (D) the acquisition by any Person pursuant to a transaction which complies with clauses (y) and (z) below; or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date this Plan is adopted whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, provided, however, any individual whose initial assumption of office occurs as a result of an acquisition of any equity interest in the Company or an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board shall not be deemed a member of the Incumbent Board; or 2 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 13 of 19 (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless: (y) following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Equity and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than SO% of, respectively, the then-outstanding shares of common stock or other equity and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, a entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Equity and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding shares of common stock or other equity of the entity or similar voting control of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination, or (z) prior to such Business Combination, the Incumbent Board determines in good faith and in the reasonable exercise of its discretion, by the affirmative vote of at least two-thirds of its members, that the Business Combination is not a transaction which was intended to be a "Change of Control" for purposes of this Plan; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company or by the partners of the Operating Partnership, provided that such liquidation or dissolution is not abandoned by the Board. "Corporate Staff'' means the officers of the Company and other regular full-time Central or Regional employees as defined in the Company's Employee Handbook, who qualify for a bonus under the Bonus Plan at or above a threshold specified from time to time by the Committee. "Effective Date" means the first date on which a Change of Control occurs, provided, however, if a Change of Control occurs and if a Participant's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Participant that such termination of employment: (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Plan, the "Effective Date" as to such Participant means the date immediately prior to the date of such termination of employment. 3 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 14 of 19 "Employee Benefit Plans" any employee benefit plan in which the Participants participate other than Welfare Benefit Plans. "Equity Award Agreement" means any award agreement or certificate issued to a Participant in connection with any equity-based award. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and, where applicable, the rules and regulations promulgated thereunder and judicial interpretations thereof. "Excise Tax" means the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any successor or similar provision. "Good Reason" means: (i) a material reduction, without the Participant's written consent, of the Participant's duties, responsibilities, and authority from the Participant's duties, responsibilities, and authority as in effect immediately prior to the Change in Control; (ii) the Company's requiring Participant to be based at any office or location more than 30 miles from the location at which the Participant was principally employed prior to the Change in Control; (iii) a material reduction by the Company of the Participant's base compensation or incentive compensation opportunity; or (iv) any failure by the Company to require any successor to the Company to expressly assume and agree to perform this Plan as provided in Section 8( c) of this-/Plan. In no event will a Participant have a Good Reason to resign if the Participant resigns more than one year following the initial existence of the Good Reason condition. "Notice of Termination" means a written notice which: (i) indicates the specific basis on which the Participant's employment is being terminated, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Participant's employment under the provision so indicated, and (iii) specifies the Termination Date. "Other Senior Staff" means all· regular full-time Central and Regional employees as defined by the Company's Employee Handbook, other than the Corporate Staff. "Participant" means any of the Corporate Staff or Other Senior Staff. "Section 409A" means Section 409A ofthe Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other authoritative guidance issued thereunder. "Termination Date" means (i) if a Participant's employment is terminated by the Company for Cause, or by a Participant for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, and (ii) if a Participant's employment is terminated by the Company other than for Cause, the Termination Date shall be the date on which the Company notifies Participant of such termination. 4 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 15 of 19 "Welfare Benefit Plan " means welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs). 3. TERMINATION OF EMPLOYMENT; OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) Members of Corporate Staff. In the event the employment of a member of Corporate Staff is terminated on or after the Effective Date and during the two-year period following such Effective Date by the Company without Cause or by the Corporate Staff member for Good Reason, the Company shall pay to the Corporate Staff member in a lump sum in cash within 30 days after the Termination Date the aggregate of the following amounts: (i) the Corporate Staff member's Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, (iii) two times the Corporate Staff member's Base Salary; and (iv) an amount equal to two times the greater of (y) the Corporate Staff member's target Bonus for services rendered in the year in which the Termination Date occurs; or (z) the average Bonus paid to the Corporate Staff member for services rendered in each of the three years prior to the year in which the Termination Date occurs. In the event that the vesting of equity-based awards as described in Section 4 below, together with all other payments and the value of any benefit received or to be received by the Corporate Staff member would result in all or a portion of such payment being subject to Excise Tax, then the Coq)orate Staff member's payment shall be either: (a) the full payment; or (b) such lesser amount that would result in no portion of the payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state, and local employment taxes, incomes taxes, and the Excise Tax, results in the receipt by the Corporate Staff member, on an after-tax basis, of the greatest amount of the payment notwithstanding that all or some portion of the payment may be taxable under Section 4999 of the Code. All determinations required to be made under this Section shall be made by a nationally recognized accounting firm or such other consultant expert in such calculations as the Company may select immediately prior to the event triggering the payments that are subject to the Excise Tax (the "Accounting Firm"). The Company shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Company and the Corporate Staff member. All fees and expenses of the Accounting Firm shall be borne solely by the Company. The Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Code). (b) Other Senior Staff. In the event the employment of an Other Senior Staff member is terminated on or after the Effective Date and during the two-year period following such Effective Date by the Company without Cause or by the Other Senior Staff member for Good Reason, the Company shall pay to the Other Senior Staff member in a lump sum in cash within 30 days after the Termination Date the aggregate of the following amounts: (i) the Other Senior Staff member's Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, and (iii) an amount equal to one month's Base Salary for each year such member of Other Senior Staff was employed by the Company (or a predecessor entity for which such Other Senior Staff member is given service credit for purposes of one or more of the Employee Benefit Plans), with a minimum of two month's Base Salary and a maximum of twenty-four month's Base Salary. 5 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 16 of 19 4. EFFECT OF TERMINATION ON EQUITY GRANTS. In the event of a termination of a Participant's employment as described in Section 3 above, the Company shall take whatever action is necessary (i) to cause the Participant to become fully vested as of the date immediately before the Termination Date in all time-based stock options, restricted stock grants, and all other equity-based awards; and (ii) to be entitled (A) to exercise and continue to exercise all stock options and all other equity-based awards having an exercise schedule and (B) to retain such grants and awards, but in each case under clauses (A) and (B) such right to exercise and retain shall last only for so long as, and shall apply only to the same extent as, if such options, grants and awards had vested prior to termination of employment and their treatment following such termination were determined in accordance with the terms of the applicable Equity Award Agreement and the incentive plan governing such agreement. An Equity Award Agreement issued to a Participant may contain language regarding the effect of a termination of the Participant's employment under certain circumstances. Notwithstanding such language in the Equity Award Agreement, for so long as this Plan is in effect, the Company will be obligated, if the terms of this Plan are more favorable in this regard than the terms of the Equity Award Agreement, to take the actions required above in this Section 4 hereof upon the happening of the termination of a Participant's employment as described in Section 3 above. Notwithstanding the foregoing provisions of this Section 4, if an option is intended to be an Incentive Stock Option, in no event may the time for exercise be later than three (3) months after the Participant's Termination Date. Any performance-based equity awards that have not been earned but may be earned based on the achievement of certain performance criteria shall vest at the greater of: (i) the target amount of the awards (if applicable); or (ii) a pro-rata amount based on the performance from the commencement of the performance period through the Termination Date and shall be deemed earned, issued and vested as of the Termination Date. 5. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Plan shall prevent or limit a Participant's continuing or future participation in any plan, program, policy or practice provided by the Company and for which such Participant may qualify, nor shall anything herein limit or otherwise affect such rights as Participant may have under any contract or plan with the Company. Amounts which are vested benefits or which the Participant is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Plan. 6. NO EMPLOYMENT RIGHTS. Each Participant and the Company acknowledge that, except as may otherwise be provided under any other written agreement between such Participant and the Company, the employment of each Participant by the Company is "at will" and each Participant's employment may be terminated by either the Participant or the Company at any time, subject in each case to any rights which the Participant may have to compensation after the Effective Date. 6 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 17 of 19 7. NO MITIGATION. The Company's obligation to make the payments under this Plan shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Participant or others. In no event shall any Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment. 8. SUCCESSORS AND ASSIGNS. (a) This Plan is personal to each Participant covered by the Plan and without the prior written consent of the Company shall not be assignable by any Participant, directly or indirectly or by operation of law, otherwise than by will or the laws of descent and distribution. The interests of each Participant under this Plan are not subject to the claims of any creditors of such Participant and may not be involuntarily assigned, alienated or encumbered. Any purported assignment in violation of this Plan shall be null and void. This Plan shall inure to the benefit of and be enforceable by Participant's legal representatives. (b) This Plan shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 9. MISCELLANEOUS. (a) This Plan shall be governed by and construed in accordance with the laws of the State of Maryland, without reference to principles of conflict of laws. The captions of this Plan are not part of the provisions hereof and shall have no force or effect. · (b) The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which any Participant may reasonably incur as a result of any contest by the Company, the Participants or others of the validity or enforceability of, or liability under, any provision of this Plan, plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code whether or not the Participant is successful in asserting such Participant's rights in such contest; provided, however, that the Company shall not be obligated to make any such reimbursement, and shall be entitled to repayment of any of Participant's legal fees or expenses previously advanced (i) if the Participant is unsuccessful, and (ii) if independent counsel mutually acceptable to the Company and the Participant determines that the assertion by such Participant of such contested rights under the Plan was in bad faith or frivolous. Payments for legal fees and expenses shall be made by the Company within ten business days after delivery of the Participant's written request for such payment accompanied by detailed evidence of such fees and expenses, provided that the Participant shall have submitted such written request for reimbursement at least 30 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred. 7 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 18 of 19 (c) The provisions of this Plan shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Plan, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision, and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability. (d) The Company may withhold from any amounts payable under this Plan such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Any Participant's or the Company's failure to insist upon strict compliance with any provision of this Plan or the failure to assert any right of such Participant or the Company may have hereunder, including, without limitation, the right of Participants to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Plan. (f) This Plan shall be deemed to constitute a contract between the Company and each Participant who serves as such at any time while this Plan is in effect. No repeal or amendment of this Plan, insofar as it reduces the extent of the benefits due any Participant, shall, without such Participant's express prior written consent be effective as to such Participant with respect to any Effective Date occurring or allegedly occurring prior to such repeal or amendment. (g) Section 409A. The timing of all payments and benefits under this Plan shall be made consistently with the requirements of Section 409A. Therefore, notwithstanding any provision in the Plan to the contrary, in the event that a Participant is a "specified employee" (as defined in Section 409A), any benefit or amount described in the Plan shall be delayed until the date which is the first day of the seventh month after the date of such Participant's termination of employment (or, if earlier, the date of such Participant's death), if paying such amount or benefit prior to that date would violate Section 409A. To the extent that payments under this Plan are subject to Section 409A, this Plan shall be governed by and subject to the requirements of Section 409A and shall be interpreted and administered in accordance with that intent. If any provisions of this Plan would otherwise conflict with or frustrate this intent, that provision will be interpreted and deemed amended so as to avoid the conflict. 8 Case 6:16-cv-06461-EAW Document 6-3 Filed 08/12/16 Page 19 of 19