MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP 1300 Mount Kemble Avenue P.O. Box 2075 Morristown, New Jersey 07962-2075 (973) 993-8100 Attorneys for Plaintiff Matthew Stepanski
UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
MATTHEW STEPANSKI,
Plaintiff,
v.
SUN MICROSYSTEMS, INC.; ORACLE CORPORATION; SUN MICROSYSTEMS, INC. DIRECTOR CHANGE OF CONTROL SEVERANCE PLAN; ABC CORPORATIONS NOS. 1-5; AND JOHN DOES NOS. 1-5,
Defendants.
Civil Action No. 10-CV-2700 (JAP) (DEA)
AMENDED COMPLAINT
Plaintiff Matthew Stepanski ( Plaintiff ), through his attorneys, McElroy, Deutsch,
Mulvaney & Carpenter, LLP, by way of this Amended Complaint against Defendants
Sun Microsystems, Inc., Oracle Corporation, Sun Microsystems, Inc. Director Change of
Control Severance Plan, ABC Corporations Nos. 1-5 and John Does Nos. 1-5
(collectively Defendants ) says:
NATURE OF THE CASE
1. This case is brought pursuant to the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. § 1132(a), to redress Defendants failure to provide
Plaintiff with the severance benefits to which he is entitled under the Sun Microsystems,
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Inc. Director Change of Control Severance Plan, amended and restated as of April 28,
2009.
THE PARTIES
2. Plaintiff Matthew Stepanski resides at 19 Conover Lane, Rumson, New
Jersey 07760.
3. Upon information and belief, Defendant Sun Microsystems, Inc. ( Sun ) is
a Delaware corporation with its principal place of business located at 4160 Network
Circle, Santa Clara, California 95054.
4. Upon information and belief, Defendant Oracle Corporation is a Delaware
corporation with its principal place of business located at 500 Oracle Parkway,
Redwood City, CA 94065.
5. Upon information and belief, Defendant Sun Microsystems, Inc. Director
Change of Control Severance Plan (the Plan ) is an ERISA employee benefit plan for
employees and former employees of Sun Microsystems, Inc., including Plaintiff.
6. Upon information and belief, ABC Corporations Nos. 1-5 and John Does
Nos. 1-5 are as yet unidentified entitles and individuals, respectively, who may be
responsible to Plaintiff for the Plan benefits to which he is entitled.
JURISDICTION AND VENUE
7. The Court has jurisdiction over Plaintiff s ERISA claim pursuant to 28
U.S.C. § 1331 and 29 U.S.C. §§ 1132(e) and (f).
8. Venue in this District is proper under 28 U.S.C. 1391(b) because Plaintiff
resides in this District, worked out of Sun s New Jersey offices located at 440 Atrium
Drive, Somerset, New Jersey and a substantial part of the events or omissions giving
rise to the claims occurred in this District.
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BACKGROUND FACTS
9. Plaintiff commenced his employment with Sun on July 28, 1997 as a Sales
Trainee in Sun s Best of the Best Sales Management Development Program.
10. From July 1997 until December 2001, Plaintiff worked for Sun as a Sales
Representative and then as a Senior Sales Representative in the Company s Financial
Services Region, based in New York City.
11. In January 2002, four months after Plaintiff s office at the World Trace
Center was obliterated, Sun s then Executive Vice President for Global Sales (Masood
Jabbar) asked Plaintiff to relocate to Sun s offices in Menlo Park, California and accept
a promotion to Group Manager.
12. In December 2004 Plaintiff was again promoted, this time to Director,
Sales Operations, Industry Sales Organization at the request of Sun s Executive Vice
President for Global Sales (Robert MacRitchie) to support the creation and
institutionalization of eight global industry sales teams.
13. In or around August 2005, Plaintiff was appointed (effectively promoted) to
Director & Executive Assistant to Sun s Executive Vice President of Worldwide Sales &
Services (Donald Grantham) and participated in the integration of Sun s Worldwide
Sales and Support Services organization.
14. In his position as Director & Executive Assistant to Sun s Executive Vice
President of Worldwide Sales & Services, Plaintiff also worked directly with Sun s
Chairman of the Board (Scott McNealy).
15. In or around January 2007, Plaintiff was appointed (effectively promoted)
to Director - US Professional Services Sales ( USPSS ).
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16. In this capacity Plaintiff focused his organization primarily on selling large
high value-added, complex and strategic project work.
17. Within 18 months of Plaintiff s acceptance of the Director position, the
number of sales opportunities in the USPSS pipeline with a value of One Million Dollars
($1,000,000) or more increased from sixteen (16) to over one hundred (100).
18. In or around March 2008, Plaintiff relocated from California back to New
Jersey and began working out of Sun's New Jersey office located at 440 Atrium Drive,
Somerset, New Jersey, where he continued to work until February 5, 2010 (when he
submitted his Notice of Termination for Good Reason and Claim for CIC Severance
Benefits pursuant to the Plan).
19. In or around September 2008, Plaintiff was given the additional
responsibility for Service Delivery and promoted to Senior Director - US Professional
Services - Sales & Delivery ( USPSS&D ) to improve operational efficiency. This new
responsibility also included all Managed Services Sales & Delivery.
20. Plaintiff s management and leadership of the USPSS&D organization
included developing and executing a plan that involved rebuilding the delivery teams,
hiring and appointing 27 new leaders for the organization, designing and implementing
the integration of the Sales and Delivery function, institutionalizing Sun's Partner
Network and restructuring the organization and leadership team, all while continuing to
lead his team in selling high value-added solutions projects.
21. In or around April 2009, Plaintiff was appointed (effectively a promotion) to
Senior Director - North American Professional Services - Sales & Delivery
( NAPSS&D ), which expanded Plaintiff s organization to include Canada.
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22. In that position, Plaintiff led and managed the sale and delivery of Sun s
entire portfolio of professional services to integrate Sun s systems, software and storage
solutions into large end-to-end strategic and complex integrated solutions, throughout
North America, inclusive of the Data Center Efficiency practice and all of Sun s
Cleared Federal PS project work.
23. As the Senior Director of NAPSS&D, Plaintiff led and managed an
organization that numbered, on average, between 380 and 480 employees and through
Sun s Partner Network, he led and managed over 1,500 consultants, all with an annual
business plan revenue target that ranged from $290 million to $320 million over the
twelve month period prior to CIC.
24. For the calendar year 2009, Plaintiff earned total gross compensation of
approximately $420,000, consisting of a Base Salary of $182,000, bonus and
commission payments, supplemental compensation, a car allowance and the value of
vested Sun Restricted Stock Units (RSUs) issued to him as a retention bonus. The
RSUs were valued at $86,820. The various components of his 2009 compensation are
evidenced by a true and complete copy of Plaintiff s Year-End 2009 Sun Earnings
Statement attached hereto as Exhibit A.
SUN ISSUES THE DIRECTOR CHANGE OF CONTROL SEVERANCE PLAN
25. On or around April 28, 2009, coincidental to the sale of its company to
Oracle Corporation, Sun Microsystems, Inc. issued and published the Plan - which
amended and restated an earlier version of Sun s Director Change in Control
Severance Plan ( Plan ). A true and complete copy of the Plan is attached hereto as
Exhibit B.
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26. The INTRODUCTION to the Plan states in pertinent part:
. . . the Board believes that it is in the Company s interest to provide its employees with the right to compensation and assurance of economic security in certain circumstances following an acquisition or other change of control . . . The Plan s assurance of fair treatment will ensure organizational stability during any period of significant uncertainty that is inherent to an acquisition or other change of control. . .
(Emphasis added).
27. Section 1.3 of the Plan states:
Contractual Right to Benefits. This Plan establishes and vests in each Participant a contractual right to the benefits to which he or she is entitled hereunder, enforceable by the Participant against his or her Employer or the Company, or both.
28. Section 2.1(a) of the Plan defines Administrator as the Human
Resources Representative appointed by the Company to administer the Plan.
29. Section 2.1(b) of the Plan defines Annual Compensation as:
The total of (1) one year of base salary, at the highest base salary rate that the Participant was paid by the Employer in the 12-month period prior to the date of the Participant s Separation from service (the Look-Back Period ), (ii) 100% of the greatest On Target annual bonus target for which the Participant was eligible during the Look-Back Period, and (iii) 100% of the greatest On Target Commission for which the Participant was eligible within the Look-Back Period.
30. Section 2.1(e) of the Plan states, Change of Control of the Company
means and includes each and all of the following occurrences:
(i) The closing of a merger or consolidation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent company) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity, or its parent company, outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the
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Company, or the closing of the sale or disposition by the Company of all or substantially all of the Company s assets.
31. Section 2.1(h) of the Plan defines Company as Sun Microsystems, Inc.,
a Delaware Corporation, and any successor
as provided in Section VII [of the Plan].
(Emphasis added).
32. Section 2.1(k) of the Plan defines Good Reason as:
The occurrence of one or more of the following without a Participant s express written consent (i) a significant reduction of the Participant s duties, position or responsibilities, or the Participant s removal from such position and responsibilities, unless the Participant is offered a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation, title and status); (ii) a reduction by the Company in the Participant s base compensation (base salary and target bonus) as in effect immediately prior to such reduction; (iii) a material reduction by the Company in the kind or level of employee benefits to which the Participant is entitled immediately prior to such reduction with the result that the Participant s overall benefits package is significantly reduced; (iv) the Participant is requested to relocate (except for office relocations that would not increase the Participant s one way commute by more than 50 miles); or (v) the failure of the Company to obtain the assumption of the Plan pursuant to Section VII.
33. Section 2.1(m) of the Plan defines Eligible Employee as a common law
employee of an Employer whose official Company title is Director (other than an
employee who is a party to an individual agreement with the Company which provides
severance or severance-type benefits), and whose customary employment as of a
Change in Control is 20 hours or more per week. . . .
34. Section 2.1(q) of the Plan defines a Participant as an Eligible Employee
who meets the eligibility requirements of Section III.
35. Section 4.1 of the Plan states:
Right to Severance Benefits. A Participant shall be entitled to receive from the Company or his or her Employer a Severance Payment and certain benefits in the amount provided in this Section IV if there has been
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a Change of Control of the Company and if, within twelve (12) months thereafter, the Participant Separates from Service with the Employer
(i)
involuntarily for reasons other than Cause, death or Disability or (ii) voluntarily for Good Reason.
(Emphasis added).
36. Section 4.2 of the Plan states:
Amount of Severance Payment.
(a) Subject to Section 4.2(b), each Participant entitled to a Severance Payment under this Plan shall receive from the Company a lump sum cash payment in an amount equal to one and one-half (1-1/2) times Annual Compensation.
. . . (c) A Participant shall not be required to mitigate damages or the amount of his or her Severance payment [sic] by seeking other employment or otherwise, nor shall the amount of such payment be reduced by any compensation earned by the Participant as a result of employment after his or her Separation from Service.
(Emphasis added).
37. Section 7.1 of the Plan states:
The Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation, or otherwise, to all or substantially all the business or assets of the Company, expressly and unconditionally to assume and agree to perform the Company s obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession of assignment had taken place. In such event, the term Company, as used in this Plan, shall mean the Company as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof bound by the terms and provisions of this Plan.
(Emphasis added).
38. Section 9.1 of the Plan states:
Discretionary Authority. Prior to a Change of Control, the Employer shall have discretionary authority to construe and interpret the terms of the Plan, to determine eligibility and to make all other determination under the Plan. On or after the date a [sic] Change of Control, the Employer shall not have discretionary authority to construe and interpret the Plan, and
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any decisions of the Employer with respect to the Plan during such period shall be subject to de novo review if and when such decisions are reviewed by a court or in arbitration. (emphasis added)
(Emphasis added).
39. Section 9.2 of the Plan states:
Claims and Review Procedure. . . .
(b) Formal Benefits Claim Review by Administrator. A Participant or a Beneficiary may make a written request for review of any matter concerning his or her benefits under this Plan. The claim must be addressed to the Director, Executive Compensation, Sun Microsystems, Inc., 4160 Network Circle, M/S USCA16-150, Santa Clara, California 95054. The Administrator shall decide the action to be taken with respect to any such request and may require additional information if necessary to process the request. The Administrator shall review the request and shall issue his or her decision, in writing, no later than 90 days after the date the request is received, unless the circumstances require an extension of time. If such an extension is required, written notice of the extension shall be furnished to the person making the request within the initial 90-day period, and the notice shall state the circumstances requiring the extension and the date by which the Administrator expects to reach a decision on the request. In no event shall the extension exceed a period of 90 days from the end of the initial period.
(c) Notice of Denied Request. If the Administrator denies a request in whole or in part, he or she shall provide the person making the request with written notice of the denial within the period specified in Section (b) above. The notice shall set forth the specific reason for the denial, reference to the specific Plan provisions upon which the denial is based, a description of any additional material or information necessary to perfect the request, an explanation of why such information is required, and an explanation of the Plan s appeal procedures and the time limits applicable to such procedures, including a statement of the claimant s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.
. . .
(e) Exhaustion of Remedies. No legal or equitable action for benefits under the Plan shall be brought unless and until the claimant has submitted a written claim for benefits in accordance with Section 9.2(b) above, has been notified that the claim is denied in accordance with Section 9.2(c) above, has filed a written request for a review of the claim
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in accordance with Section 9.2(d) above, and has been notified in writing that the LDCC has affirmed the denial of the claim in accordance with Section 9.2(b) above; provided, however, that an action for benefits may be brought after the Administrator or the LDC has failed to act on the claim within the time prescribed in Section 9.2(b) and Section 9.2(d), respectively.
. . .
(Emphasis added).
40. Pursuant to Section 9.2(c), among others, the Plan is governed by ERISA.
41. Plaintiff is a Participant in and Beneficiary of the Plan.
42. Section 10.1 of the Plan states:
The Company shall pay all legal fees, costs of litigation and/or arbitration, and other expenses incurred in good faith by each Participant as a result of the Company s refusal to make the Severance Payment to which the Participant becomes entitled under the Plan, or as a result of the Company s contesting the validity, enforceability or interpretation of the Plan.
43. Defendants are obligated by Section 7.1 to perform all the obligations
under the Plan, including to make the payment due Plaintiff under the Plan as well as all
Plaintiff s legal fees, costs of litigation and other expenses.
ORACLE S ACQUISITION OF SUN RESULTING IN A CHANGE IN CONTROL
44. On April 20, 2009, Sun and Oracle announced an agreement under which
Oracle would acquire Sun.
45. Oracle s acquisition of Sun, upon completion, qualified as a Change of
Control under the Plan.
46. On January 27, 2010, Oracle completed its acquisition of Sun and the
provisions of the Plan for the benefit of its Participants (Sun employees like Plaintiff at
the Director level and above) became operative.
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47. Under Section 7.1 of the Plan, Oracle is a successor and is required
expressly and unconditionally to assume and agree to perform the Company s
obligations under [the] Plan.
ORACLE OFFERS PLAINTIFF A POSITION THAT REPRESENTS A SIGNIFICANT DIMINUTION OF RESPONSIBILITY, STATUS AND COMPENSATION POTENTIAL
48. On January 29, 2010, Oracle s Senior Vice President of Human
Resources, Joyce Westerdahl, sent Plaintiff an email with attachments in which Oracle
offered Plaintiff the position of Services Sales Senior Director and stated this offer
remains open until February 5, 2010 (the Offer of Employment ). A true and complete
copy of the Offer of Employment is attached hereto as Exhibit C.
49. Defendants also provided Plaintiff with a copy of the document Oracle and
Sun Frequently Asked Questions Brochure ( FAQs ) dated January 27, 2010. A copy of
the FAQs is attached hereto as Exhibit D.
50. The FAQs states, in pertinent part: When will I become an employee of
Oracle America, Inc? Sun employees in the US who accept offers of employment will
become Oracle America employees on the LEC [Legal Entity Change] date which is
anticipated to be February 15, 2010. Exhibit D, p. 4.
51. The FAQs also states: If you do not timely accept your Oracle offer, you
will be considered to have voluntarily resigned. Exhibit D, p. 9.
52. The position that Oracle offered to Plaintiff in the Offer of Employment
represented a significant reduction in the nature, scope and scale of the duties, position
and responsibilities (as well as compensation and stature) compared to the position that
Plaintiff occupied with Sun at the time of his receipt of the Offer of Employment.
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53. With respect to his scope of responsibility, at Sun Plaintiff had
responsibility for all professional and managed services sales and delivery throughout
North America (United States & Canada) inclusive of high-value added business
services, whereas if Plaintiff had accepted the Oracle Offer of Employment he would
have been responsible for a group that was, in personnel headcount, quantitatively one-
half (1/2) the size of the organization he was leading and managing for Sun at the time
of his receipt of the Offer of Employment. This was because the majority of the high
value added services offerings Plaintiff managed and led at Sun were to be transferred
to Oracle s Consulting Services Division ( OCS ) and Oracle s National Security Group
( NSG ).
54. While in his position at Sun Plaintiff was responsible for achieving an
annual revenue goal that varied between $290 million and $320 million during the
twelve months prior to CIC, and had Plaintiff accepted the Oracle Offer of Employment
his responsibility would have been reduced to achieving an annual revenue goal of only
$130 million.
55. The title Oracle offered Plaintiff (Services Sales Senior Director) was also
a significant reduction in stature as compared to the title he last held at Sun (Senior
Director - North American Professional Services - Sales & Delivery) where he was the
only person at Sun responsible for Sun professional Services sales and delivery in
North America. In the technology business world the management of the service
delivery function is widely viewed to have considerably greater stature than the
management of the sales function only.
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56. Had Plaintiff accepted the position that Oracle offered, he would have
ended up managing only 190 employees, whereas at Sun Plaintiff led and managed on
average between 380 and 480 employees during the twelve months prior to CIC.
57. Many of the changes that Oracle imposed on the Sun Professional
Services organization, which would have resulted in a significant reduction of Plaintiff s
responsibility, status, and compensation are documented in Exhibit E, a true and
complete copy of an email dated January 21, 2010 from a Sun operations manager
regarding how Plaintiff s acceptance of the Oracle offer would have diminished his role,
duties, responsibilities, etc.
58. The Offer of Employment included the representation that the position
would entitle Plaintiff to starting compensation at the annual rate of $182,000
(emphasis added); it did not specify or quantify Base Compensation, Base Salary,
Target Bonus or any other compensation or benefit components except a car
allowance.
59. The Offer of Employment did not include any job description or any
description of the functions Plaintiff was expected to perform in the new position.
60. While the Offer of Employment stated that Plaintiff would be eligible to
participate in the standard compensation plan for your position (¶ 4), Plaintiff was not
provided with specificity or documentation concerning the terms and conditions of any
compensation plan. Despite several requests (both orally and in writing) that Plaintiff
made to designated Sun and Oracle management during the week of February 1, 2010
in an effort to secure that information, no answers were forthcoming. A true and
complete copy of Plaintiff s emails to both the Sun Plan Administrator and Bruce
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Douglas, Plaintiff s immediate supervisor (and the person whom Plaintiff was directed
by Oracle to contact regarding such issues), are attached hereto as Exhibit F.
61. Plaintiff s Offer of Employment from Oracle did not include any details or
assurances regarding base compensation, base salary, target bonuses, supplemental
compensation, or other compensation beyond starting compensation at the annual rate
of $182,000 and Plaintiff s repeated requests for further information prior to the
required acceptance deadline went unanswered.
62. With respect to Plaintiff s bonus eligibility, in order to earn his target bonus
at Sun, Plaintiff was incentivized to achieve an average gross profit margin of twenty
five percent (25%); in contrast, Oracle never provided Plaintiff in the Offer of
Employment or otherwise with a documented bonus plan or an assurance that he would
ever be able to earn a bonus. Oracle and Sun managers at the time of the CIC made
presentations explaining that to earn a bonus (the amount of which was unspecified) in
the new Oracle PS organization, Plaintiff would be required to achieve a gross profit
margin of thirty five percent (35%)
an increase of almost 30% over Plaintiff s bonus
eligibility requirement at Sun.
63. Upon information and belief, it was not until late May, 2010
almost 100
days after Plaintiff was required to respond to the Offer of Employment
that Oracle
eventually published or distributed any standard compensation plan for former Sun
Directors.
64. Upon information and belief, in was not until late May, 2010
more than
100 days since it completed the acquisition of Sun
that Oracle paid a bonus or
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incentive compensation to former Sun Directors who elected to accept Oracle s offers of
employment.
65. The Offer of Employment from Oracle also required Plaintiff to accept
certain adverse conditions of employment, including post-employment restrictive
covenants, which restrictions were not conditions of his employment with Sun.
66. Bruce Douglas, Plaintiff s supervisor at Sun and Plaintiff s intended
supervisor at Oracle, was the company representative that Oracle directed Plaintiff to
contact regarding his Offer of Employment. Mr. Douglas confirmed to Plaintiff during
the period February 1 through February 5, 2010 (and subsequently), that Oracle s Offer
of Employment represented a significantly reduced role compared to the one Plaintiff
held at Sun and, in Douglas opinion, represented Good Reason for Plaintiff to terminate
his employment under the provisions of the Plan.
67. As a result of the foregoing, Plaintiff had Good Reason to resign and to
initiate his Claim for severance benefits under the Plan.
68. Upon information and belief, Larry Abramson, Senior Vice President of
Oracle s Advance Customer Services, has stated his intention that Defendants would
frustrate and endeavor to deny the payment of CIC Severance benefits to Plaintiff and
other Plan Participants who declined Oracle s Offer of Employment, regardless of the
merits of their Claim.
PLAINTIFF FILES A CLAIM FOR BENEFITS THAT WAS
IMPROPERLY AND UNTIMELY DENIED
A. The Plan Receives Plaintiff s Claim for Benefits on February 8, 2010.
69. On February 5, 2010, Plaintiff sent a written claim for benefits, via Federal
Express and facsimile to the Director, Executive Compensation, Sun Microsystems,
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Inc., in accordance with the Plan. A true and complete copy of Plaintiff s Claim letter is
attached hereto as Exhibit G.
70. Sun received Federal Express delivery of Plaintiff s Claim letter at 10:00
AM PST on Monday, February 8, 2010. A true and complete copy of the Federal
Express receipt singed by Bruce Hall is attached hereto as Exhibit H.
71. In his Claim for benefits, Plaintiff stated in pertinent part:
As of 5 P.M. [Pacific Time] today, the termination of my employment for Good Reason pursuant to Section 2.1(k) of the Plan is effective. Specifically, the position Oracle has offered me effects a signification reduction of my position, duties and responsibilities and I cannot consent to these.
In addition to effecting a significant reduction in duties, position and responsibilities, the offer also appears to affect a diminution in my compensation (base salary, target bonus and other cash compensation). In my last full calendar year at Sun, 2009, I earned approximately $420,000 inclusive of the value of restricted shares which vested last year. To induce me to accept its offer of employment, Oracle has offered me starting compensation at the annual rate of $182,000. While the offer letter states that I will be eligible to participate in the standard compensation plan for my position . . . I have not been provided with any specificity concerning the terms and conditions of that compensation plan. Despite several requests that I have made (both orally and in writing) to designated Sun and/or Oracle management in an effort to secure that information, no answers were forthcoming. (Emphasis added).
B. Plaintiff Provides Additional Detail Regarding His Claim for Benefits.
72. On March 12, 2010 Plaintiff received an email, sent from the email
address [email protected], which stated:
Dear Mr. Stepanski,
In order to proceed with the review of your claim for benefits under the Sun Change in Control Severance Plan we need further information.
Please provide the following:
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Details of why you believe your job offer from Oracle represented a significant reduction in your duties and responsibilities.
Regards, Plan Administrator <stepanski.scan.pdf>
(Emphasis in the original). In her August 31, 2010 Declaration Ms. Timi Baxter, Director
of Human Resources at Oracle and the Plan Administrator, acknowledges that she sent
this email. The notation that appears directly under the words Plan Administrator
indicates that Ms. Baxter had attached a document to her email. A true and complete
copy of the aforesaid email and its attachment is attached hereto as Exhibit I. The
attachment is a scanned copy of Plaintiff s February 5, 2010 Claim Letter with one
exception, the copy Ms. Baxter attached contains a date stamp FEB 11 2010 in the
upper right hand portion of the letter. Upon information and belief this date stamp was
affixed by a member of Ms. Baxter s staff who she had authorized to open mail
addressed to the Sun Director, Executive Compensation. A true and complete copy of
the aforesaid email with its attachment is attached hereto as Exhibit I.
73. On March 20, 2010, Plaintiff advised Ms. Baxter that he was on paternity
leave but would submit a response to her request after his paternity leave ended.
74. On April 8, 2010, Plaintiff submitted his substantive response to Ms.
Baxter s March 12, 2010 request by email with an accompanying two-page letter and a
three-page chart, which juxtaposed his position at Sun and the position he was offered
by Oracle and demonstrated the significant reduction in position, duties and
responsibilities associated with the Oracle Offer of Employment. A true and complete
copy of the April 8th email, letter and chart
along with the Certified Mail Receipt for the
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hard copy mailed to the Plan Administrator showing receipt on April 12, 2010
is
attached hereto as Exhibit J.
C. Defendants Untimely and Deficient Notice of Denial of Plaintiff s Claim.
75. Since Plaintiff s CIC Severance Claim was received by Sun s Director of
Executive Compensation (as required under the Plan) on February 8, 2010, Defendants
response was due by May 9, 2010.
76. Defendants never requested an extension of the time to respond to
Plaintiff s Claim. On May 11, 2010 Plaintiff telephoned Ms. Baxter and left her a voice
message inquiring about the status of his Claim because he had been expecting an
answer on his claim by May 9, 2010. A true and complete copy is attached hereto as
Exhibit K.
77. On May 13, 2010, Plaintiff received an email from the email address
[email protected] to which was attached a letter from Timi Baxter ( Baxter )
denying Plaintiff s Claim for severance benefits under the Plan. A true and complete
copy of the May 13th letter is attached hereto as Exhibit L.
78. Section 9.2(c) of the Plan requires that a denial of a claim shall set forth
the specific reason for the denial, reference to the specific Plan provisions upon which
the denial is based, a description of any additional material or information necessary to
perfect the request, an explanation of why such information is required, and an
explanation of the Plan s appeal procedures and the time limits applicable to such
procedures, including a statement of the claimant s right to bring a civil action under
Section 502(a) of ERISA following an adverse benefit determination on review.
(Emphasis added).
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79. Rather than providing the detail required by Section 9.2(c) of the Plan,
Baxter s letter merely states:
In reviewing your claim with your organization, it appears that the position you were offered
at Oracle did not constitute a significant
reduction in your duties, position or responsibilities, nor were you removed from your prior position and responsibilities. I have also determined that at the time of your Separation from Service, you had not suffered a reduction in your base compensation as defined by the Plan.
(Emphasis added).
80. Defendants written denial did not conform to the requirements of Section
9.2(c) of the Plan, and was not delivered to Plaintiff within the timeframe required by
Section 9.2(b) of the Plan.
81. As a result, pursuant to Section 9.2(e) of the Plan, Plaintiff was not
required to exhaust any further administrative remedies and instead was permitted to
institute this suit for Plan benefits.
PLAINTIFF PROPERLY COMMENCES LITIGATION
82. Pursuant to the Plan, Plaintiff commenced this litigation on May 25, 2010,
by filing the Complaint.
83. As set forth in the Complaint, because the Plan Administrator denied
Plaintiff s Claim beyond the time deadline and without the specificity required by the
Plan, Plaintiff was excused from further exhaustion of the administrative remedies, and
was expressly permitted to proceed immediately into court.
84. After filing the Complaint, counsel for Plaintiff wrote to Defendants on June
4, 2010 seeking an immediate and cost-effective resolution of the matter through the
payment of Plaintiff s Claim within ten days. See
June 4, 2010 Correspondence
attached hereto as Exhibit M.
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85. On June 10, 2010, counsel for Defendants wrote to Plaintiff advising that
Defendants would not pay Plaintiff s claim, and demanding that Plaintiff voluntarily
dismiss his Complaint. See
June 10, 2010 Correspondence attached hereto as Exhibit
N.
86. Defendants also stated, If Mr. Stepanski refuses to dismiss his premature
lawsuit, we will ask the Court to do so. Id.
87. Thereafter, counsel for the parties conferred to determine if a resolution
could be reached that would avoid motion practice; however, unfortunately no such
resolution could be reached.
88. On July 2, 2010, Defendants filed an Answer to the Complaint in which
they denied that the Claim denial was procedurally or substantively deficient and set
forth several Affirmative Defenses that are expressly inapplicable under the terms of the
Plan.
89. Specifically, Defendants Second Affirmative Defense states:
Plaintiff failed to exhaust available administrative remedies before filing this action and has not and cannot allege that resort to such administrative remedies would have been futile, that he lacked meaningful access to the Plan s claims review procedure or that the potential remedy would have been inadequate.
90. However, Section 9.2(e) of the Plan states in pertinent part, . . . an action
for benefits may be brought after the Administrator or the LDCC has failed to act on the
claim within the time prescribed in Section 9.2(b) and Section 9.2(d), respectively.
91. Because Defendants denial was untimely in violation of Section 9.2(b)
and lacked the substance required by Section 9.2(c), the Plan expressly excused
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Plaintiff from any further exhaustion of administrative remedies, and permitted him to file
the Complaint; thus, the Second Affirmative Defense was unavailable.
92. Defendants Fourth Affirmative Defense states:
The Complaint is barred in that Defendants actions were a just and proper exercise of ERISA fiduciary discretion. To the extent any Defendant exercised discretion regarding Plaintiff s claim for Plan benefits, such Defendant acted properly and within the scope of his or her discretion.
93. The Fourteenth Affirmative Defense states:
Any fiduciary decisions being challenged by Plaintiff are entitled to deference, and are subject to review only for an abuse of discretion.
94. Contrary to these Affirmative Defenses, Section 9.1 of the Plan states:
Discretionary Authority. Prior to a Change of Control, the Employer shall have discretionary authority to construe and interpret the terms of the Plan, to determine eligibility and to make all other determination under the Plan. On or after the date a [sic] Change of Control, the Employer shall not have discretionary authority to construe and interpret the Plan, and any decisions of the Employer with respect to the Plan during such period shall be subject to de novo review if and when such decisions are reviewed by a court or in arbitration.
(Emphasis added).
95. Thus, as of January 27, 2010, the date of the Change of Control,
Defendants no longer had discretionary authority to construe or interpret the Plan, and
any decisions by Defendants, including the denials of Plaintiff s Claim and Appeal are
subject to de
novo
review by this Court. Accordingly, Defendants Fourth and
Fourteenth Affirmative Defenses are unavailable.
96. Defendants Seventh Affirmative Defense stated:
Plaintiff s claim is barred to the extent he has failed to mitigate his damages, if any.
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97. However, Section 4.2(c) of the Plan states:
A Participant shall not be required to mitigate damages or the amount of his or her Severance payment [sic] by seeking other employment or otherwise, nor shall the amount of such payment be reduced by any compensation earned by the Participant as a result of employment after his or her Separation from Service.
98. Since the Plan expressly excused Plaintiff from any duty to mitigate his
damages, Defendants Seventh Affirmative Defense was unavailable (and subsequently
withdrawn).
99. In light of Defendants stated intention to file a motion to dismiss the
Complaint coupled with their knowingly false allegations that the Claim denial was
timely, on July 9, 2010, Plaintiff filed a motion for partial summary judgment to allow the
Court to decide the issue that would have been the subject of Defendants motion, i.e.
whether Plaintiff was excused from exhaustion of administrative remedies.
100. Plaintiff s motion for partial summary judgment also asked that
Defendants Second, Fourth, Seventh and Fourteenth Affirmative Defenses be stricken.
101. In order to preserve his ability to pursue his claim through the internal
appeal process, as Defendants argued he should be required to do, also on July 9,
2010, Plaintiff filed a timely internal appeal with the LDCC.
102. On July 9, 2010 and again on July 12, 2010, Plaintiff also exercised his
right under Section 9.2(d)(i) of the Plan to request copies of all documents and
information relied upon by the Plan Administrator in denying Plaintiff s Claim.
103. On July 21, 2010, Defendants filed an Amended Answer, removing their
Seventh Affirmative Defense of failure to mitigate damages, implicitly conceding the
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validity of Plaintiff s motion pertaining to that defense, as the Plan itself expressly states
that mitigation is not required.
104. On August 2, 2010 Defendants filed opposition to Plaintiff s motion for
partial summary judgment, and simultaneously filed a cross-motion for summary
judgment, asking, as they had planned to all along, that the Court dismiss the
Complaint, with prejudice.
105. On August 17, 2010, Defendants purported to stay the Internal Appeal,
and informed Plaintiff that the LDCC would not consider his Claim, nor would the Plan
Administrator respond to his document and information requests unless the Court
remanded Plaintiff to the internal appeal process, in which case Defendants advised
that the LDCC planned to issue a decision on the Internal Appeal within 30 days. See
August 17, 2010 Correspondence, attached hereto as Exhibit O.
PLAINTIFF S COURT-ORDERED EXHAUSTION OF THE INTERNAL APPEAL PROCESS
106. On January 18, 2011, without deciding the merits of either motion, the
Court dismissed both motions, without prejudice, and ordered the parties to cooperate
to resume or newly commence the administrative process . . . See
January 18, 2011
Order attached hereto as Exhibit P.
107. On January 20, 2011, Plaintiff informed Defendants that he was prepared
to continue with his Internal Appeal (with a reservation of all his rights), which he would
supplement or amend after receipt of Defendants responses to his July 9 and 12, 2010
document and information requests. See
January 20, 2011 Correspondence, attached
hereto as Exhibit Q.
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108. On January 27, 2011, Defendants informed Plaintiff that they objected to
all but five of Plaintiff s twenty-nine document and information requests, and refused to
provide any documents of information responsive to Plaintiff s other twenty-four
requests. See
January 27, 2011 Correspondence, attached hereto as Exhibit R.
(emphasis added).
109. Defendants also submitted twenty-four pages of documents, which they
represented were the only documents in their possession that fit into one or more of
these three categories: (1) Information that was relied upon in making the benefit
determination ; (2) Information that was submitted, considered, or generated in the
course of making the benefit determination ; or (3) Information that demonstrates
compliance with the administrative processes and safeguards [designed to ensure and
to verify that benefit claim determinations are made in accordance with governing plan
documents and that, where appropriate, the plan provisions have been applied
consistently with respect to similarly situated claimants].
110. The twenty-four pages of documents produced by Defendants consisted
of one email chain that apparently commenced on March 12, 2010 and concluded on
May 5, 2010, including emails by and between Michael Farley, Anna Woods, and Timi
Baxter
and an incomplete email from Larry Abramson, Oracle s Senior Vice President
for ACS.
111. Defendants responses to Plaintiff s document and information requests
indicated that the Plan Administrator had not considered numerous documents and
sources of information readily available to her which, had they been considered, would
have provided compelling evidence that Plaintiff s Claim should have been approved.
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112. On January 31, 2011, Plaintiff requested that Defendants expressly
confirm that the Plan Administrator had not considered any documents consisting,
referring or relating to: (1) Plaintiff s position duties and responsibilities at Sun prior to
the January 29, 2010 Offer of Employment (including, inter
alia, any job description,
organizational chart, etc.); (2) The January 29, 2010 Offer of Employment as well as
any and all documents describing the position, duties and responsibilities offered to
Plaintiff (including, inter
alia, any compensation plan, job description, organizational
chart, etc.); (3) Plaintiff s February 5, 2020 Claim Letter; (4) Plaintiff s April 8, 2010
response to Defendants Request for information (which included a chart detailing the
requisite significant reduction in Plaintiff s duties, position and responsibilities, as well as
the reduction in his compensation); (5) Any communications with Plaintiff s direct
supervisor (Bruce Douglas) regarding the Offer of Employment to Plaintiff and whether it
triggered Plaintiff s entitlement to his severance benefit under the Plan; or (6) Any
review of Plaintiff s compensation at Sun or his proposed compensation at Oracle. See
January 31, 2011 Correspondence, attached hereto as Exhibit S.
113. On February 7, 2011 Defendants responded to Plaintiff s January 31,
2011 correspondence with a Declaration of Timi Baxter. See
February 7, 2011
Correspondence and attached Declaration, attached hereto as Exhibit T (the February
7, 2011 Baxter Declaration ).
114. In the February 7, 2011 Baxter Declaration, Ms. Baxter confirmed that the
only steps she took to investigate and issue a ruling on Plaintiff s Claim consisted of: (1)
asking Plaintiff to provide additional information (Id.
at Paragraph 6); (2) asking Ms.
Anna Woods, a Human Resources employee, to contact Mr. Abramson to obtain his
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opinion about Plaintiff s Claim (Id.
at Paragraph 7) while also instructing Ms. Woods not
to seek an assessment of the merits of Plaintiff s Claim from (Bruce) Douglas; (3)
reviewing information provided by Sun HR and Oracle HR regarding Plaintiff s base
compensation and car allowance (Id.
at Paragraph 10); (4) reviewing Plaintiff s job title
and proposed job title (Id.
at Paragraph 10); and (5) reviewing the FAQs document
regarding the Change of Control (Id. at Paragraph 10).
115. In response to a follow up inquiry from Plaintiff, on February 15, 2011,
Defendants produced a two-page screen shot entitled Oracle Mapping from a
confidential Oracle internal database that purports to show that pursuant to the Offer of
Employment Plaintiff would have received an annual salary of $182,000 and a monthly
car allowance of $600 per month. Defendants represented the foregoing was the only
evidence that the Plan Administrator reviewed with respect to Plaintiff s compensation.
The Plan Administrator, Ms. Timi Baxter, never stated that she carefully read Oracle s
one-page Offer of Employment Letter to Plaintiff
the only document Plaintiff received
and had available for evaluating and comparing both the job responsibilities and
compensation components of the offered job (Plaintiff was never given a copy of the
Oracle Mapping document). Consequently, the Plain Administrator s assertion in her
February 7, 2011 Declaration is misleading and inaccurate because, contrary to Ms.
Baxter s assertions, the Offer of Employment does not state base compensation, base
salary or target bonus for the new Oracle position. See
Exhibit T
Baxter February 7,
2011 Declaration at ¶ 10.
116. Thus, in sum, after forcing Plaintiff, on no fewer than four separate
occasions, to request copies of all relevant documents and information (which the Plan
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expressly authorized Plaintiff to request and obtain), Defendants ultimately confirmed
that the Plan Administrator spoke to only one witness (Mr. Abramson), and reviewed
only three documents or sources of information before she summarily denied the Claim.
117. On February 23, 2011, Plaintiff filed a supplement to his July 9, 2010
Internal Appeal with the LDCC consisting of a ten-page letter and 436 pages of
documents in support of his Claim. See
Supplemental Internal Appeal, attached hereto
as Exhibit U.
118. Included in Plaintiff s Supplemental Internal Appeal is the following chart
that delineates the numerous respects in which the position Plaintiff was offered at
Oracle represented a significant reduction compared to the position Plaintiff held at Sun:
Criterion SUN - Existing Oracle Offer Is Oracle offer equal to or greater than existing Sun position? If not, why?
Position & Title Senior Director, North American Professional Services Sales & Delivery [SD-NA/PS S&D] at Sun Leader and manager for all PS Sales and all PS Delivery functions including select Managed Services and associated staff in the United States and Canada.
Services Sales Senior Director [SS-SD] at Oracle ACS. Mr. Stepanski s immediate supervisor, Bruce Douglas told Mr. Stepanski that at Oracle Mr. Stepanski would likely not retain responsibility for PS Delivery only Sales as evidenced by his title (as well as Bruce s new title). The Offer did not provide a job description. Mr. Douglas also confirmed that the Offer was a significant diminution of Mr. Stepanski s position compared to Sun.
NO- Constitutes a Demotion. The Offer constituted a demotion in position, duties and responsibilities as compared with Mr. Stepanski s position at Sun where he was the sole leader/manager for both PS Sales and PS Delivery, and had complete P&L responsibility for all Professional Services Sales & Delivery
throughout N.A. The Offer removed responsibility for Delivery from Mr. Stepanski s position, effectively resulting in the reversal of the promotions that Mr. Stepanski received in September 2008 and April 2009 when his responsibilities were expanded.
Duties, Scope of Responsibility & Authority
The sole business leader/manager of all PS Sales & Delivery throughout N.A. [USA & Canada] including P&L responsibility for all consulting and high value-added business
Restricted to Systems Services Sales, No P&L or Delivery responsibility - primarily low-end commodity class of implementation and configuration services
NO - Significantly reduced.
The Offer eliminated approximately 50% of the run rate revenues, staff, pipeline and of important note, the very specific architecture led work that defined high value-added solutions from Professional Services at Sun. As documented in presentations and confirmed by Bruce Douglas, all Federal (cleared and non-cleared)
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Criterion SUN - Existing Oracle Offer Is Oracle offer equal to or greater than existing Sun position? If not, why?
including Federal, with responsibility across entire portfolio of Sun professional service offerings including systems software, large integrated solutions, storage, Data Center Efficiency, applications design, implementation and support, etc.
and (here one day gone the next) ROM services. Mr. Douglas, told Mr. Stepanski that he would have no P&L and no Delivery Responsibility in his new Oracle job and that his authority to run the PS business under Oracle would be significantly reduced. In particular he would lose all value-added, architectural led services (which comprised the largest opportunities in his business).
work, SW oriented consulting, 3PP and MySQL business were removed by Oracle from Mr. Stepanski s responsibility. Mr. Stepanski s new title, Services Sales Senior Director, would limit him to Sales responsibility only. [and Delivery responsibility would be transferred to Saleem Haq[ue] a few months after the CIC] Mr. Stepanski s ability to manage the sale and delivery of large, strategic and complex solutions (high value-add) would therefore be eliminated. Mr. Douglas also explained that his own title was being significantly diminished to VP Global Services Sales (he would be losing all Delivery responsibility).
Organization Size
Mr. Stepanski was the leader/manager of 380 employees directly under his management with an additional 2000 employees and contractors under his leadership and indirect management focused on PS Sales, Delivery and Support at Sun for the North America geography (USA & Canada).
Only 190 people would report to Mr. Stepanski at Oracle.
NO - Greatly Reduced. Mr. Stepanski would manage an Oracle ACS Systems staff that was 50% smaller in size than what he led and managed at Sun, because several critical aspects of his business were removed from his control/management/leadership including all Federal (cleared and non-cleared work), all SW oriented Consulting services, all 3PP opportunities, all MySQL opportunities and all architecture led Systems Consulting work (DCE, HPC, etc.), which comprised the majority of the most significant deals in delivery and in pipeline. The resources and opportunities that Mr. Stepanski was responsible for within Sun would move largely to Oracle s OCS and NSG groups. Furthermore, it was clearly stated in January 2010 that Oracle actively discouraged and/or prohibited the use of sub-contractors.
Organizational Level
Mr. Stepanski reported to Sun s worldwide leader of PS, Bruce Douglas - VP Global Services, who was the sole global leader/manager for PS worldwide.
Mr. Stepanski would report to Bruce Douglas who in turn would report to Larry Abramson, Oracle SVP-ACS
largely a Support Services business not consulting.
NO - Diminished. Under the Offer, Mr. Stepanski would report to Mr. Douglas, who was effectively being demoted by Oracle. Instead of being the sole person in charge of all worldwide PS, Mr. Douglas had his organization cut in half (initially, his organization was reduced from 1,800 people to about 750) and Mr. Douglas would no longer be responsible for the management of the PS business. In fact, within four (4) months Mr. Abramson would strip Mr. Douglas of all his professional resources, reallocate all his responsibilities to other veteran Oracle managers and leave Mr. Douglas with only one person to manage, his assistant (secretary). As of today, Mr. Douglas, Mr. Stepanski s successor Jess Moore, and all but one of Mr. Stepanski s former GEO PS
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Criterion SUN - Existing Oracle Offer Is Oracle offer equal to or greater than existing Sun position? If not, why?
leadership peers have all received their Plan benefits or a comparable package.
Compensation, all components
SUN Base Compensation was $260,000 and consisted of Base Salary of $182,000 with Target Bonus of $78,000 per year. For 2009, however, he earned bonuses totaling $145,000 plus an additional $86,820 in Stock RSUs, Stock options etc. Mr. Stepanski s Total 2009 Compensation was $420,000.
Oracle offered Starting
Compensation of $182,000 per Oracle employment offer letter. Neither Base Salary nor Target Bonus was ever disclosed by Oracle despite the fact that these are specified compensation components in the CIC Plan. Oracle offered participation in their standard comp. plan for position but no such Plan existed. Mr. Stepanski s several requests for details of Oracle standard compensation plan were ignored.
NO - Significantly reduced. Despite several requests, Oracle refused to provide details of the Oracle standard compensation plan [per the Offer of Employment] prior to demanding that Mr. Stepanski sign their employment contract before 5 PM on February 5, 2010. As a result, the only Oracle compensation number that Mr. Stepanski could rely upon for comparison to his Sun compensation was Oracle s $182,000 Starting Compensation offer. Considering
that $333,000 of Mr. Stepanski s 2009 compensation was effectively Base Compensation (he also received an additional $86,800 in RSU stock awards), the Offer represented a significant reduction in compensation. Oracle, furthermore, repeatedly refused to provide specificity or assurances on base salary, target bonus, supplemental compensation, stock options, RSUs or total potential compensation. Mr. Stepanski learned that neither Mr. Douglas, nor anyone at Oracle could provide this information because Oracle had not formulated their standard compensation plan by February 5 and, in fact, they did not publish it until June 2010.
Business Plan/ Revenues
Sun Annual Revenue Goal & Budget Responsibility - $275 million
Oracle Annual Revenue Goal for the 190 person group anticipated to be $110 to $130 million, less than ½ of what Mr. Stepanski managed at Sun.
NO- Reduced by more than 50%. Annual Revenue of Oracle group offered to Mr. Stepanski would be ½ that which he was responsible for at Sun.
Employment Contractual Obligations
Sun entitled to Duty of Fidelity but no contractual employment obligations
Oracle demanded contractual obligations that were not applicable to Mr. Stepanski s position at Sun.
NO- Employment Contract Not Required at Sun. Oracle demanded Mr. Stepanski execute a restrictive At-Will Employment Agreement containing many contractual obligations without any extra economic consideration. Mr. Stepanski had no employment contract at Sun.
Post-Employment Contractual Obligations
Sun entitled to Duty of Fidelity, but Mr. Stepanski had No Post-employment Obligations
Oracle demanded Restrictive Post-employment covenants including non-solicitation of their employees & customers.
NO- Position at Sun Did Not Entail Any Post-Employment Restrictive Covenants.
Oracle demanded that Mr. Stepanski, as a condition of employment, be bound by onerous post-employment restrictive covenants without giving Mr. Stepanski any economic consideration for these covenants. Mr. Stepanski had no such post-employment restrictions at Sun.
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119. On March 16, 2011, Defendants informed Plaintiff that they had also
supplemented the Internal Appeal record before the LDCC, and that they planned to
further supplement the record with declarations from certain company employees. See
March 16, Correspondence, attached hereto as Exhibit V.
120. Defendants confirmed that Plaintiff would have an opportunity to respond
to any Declarations and information that Defendants provided to the LDCC. See
id.
121. On March 21, March 24, and March 29 2011, Defendants supplemented
the Internal Appeal with Declarations of Timi Baxter, Larry Abramson and Saleem
Haque. See Declarations, attached hereto collectively as Exhibit W.
122. On April 11, 2011, Plaintiff filed a further supplement to the Internal
Appeal, including a detailed 25-page Declaration in which he responded to and rebutted
the Baxter, Abramson and Haque Declarations, and submitted approximately 75 pages
of additional documents that support Plaintiff s Claim. See
April 11, 2011 Supplement to
Internal Appeal, attached hereto as Exhibit X.
123. Included in Plaintiff s Declaration are rebuttals, supported by documents,
of numerous material misstatements contained in Defendants Declarations, including in
regard to: (1) the number of personnel that Plaintiff supervised at Sun and the
substantially reduced number he would have supervised at Oracle (misstated by Mr.
Abramson, and refuted by Plaintiff in Paragraphs 9-17 of his Declaration); (2) the
percentage of business that Plaintiff would have lost management control over if he
accepted the Oracle position (misstated by Mr. Abramson and refuted by Plaintiff in
Paragraphs 18-23 of his Declaration); (3) the nature of the business unit(s) that Plaintiff
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would have managed at Oracle compared to the units he managed at Sun (misstated by
Mr. Abramson and refuted by Plaintiff in Paragraphs 24-31 of his Declaration); (4)
numerous misstatements of fact set forth in the Baxter Declaration (and refuted by
Plaintiff in Paragraphs 40-45 of his Declaration); (5) Ms. Baxter s reliance on information
regarding Plaintiff s compensation that was inaccurate, incomplete, and/or never
provided to Plaintiff (addressed in Paragraphs 49-62 of his Declaration); and (6) several
mistaken assumptions and/or misunderstandings by Mr. Haque (refuted or clarified by
Plaintiff in Paragraphs 63-72 of his Declaration). See
id.
124. On April 18, 2011, Defendants confirmed receipt of Plaintiff s supplement,
and advised that the LDCC would issue a decision on the Internal Appeal on May 17,
2011. See April 18, 2011 Correspondence, attached hereto as Exhibit Y.
125. Defendants April 18, 2011 correspondence did not advise Plaintiff that
Defendants intended to further supplement the Internal Appeal record in response to
Plaintiff s supplement or otherwise; nor did Defendants provide Plaintiff with a May 10,
2011 Declaration of Ms. Baxter until May 17, 2011 and then only after Plaintiff s appeal
was decided and denied. See
id.
THE BIASED AND CONFLICTED LDCC
DENIES PLAINTIFF S INTERNAL APPEAL
126. Under Sun s ownership, the Sun Leadership Development &
Compensation Committee ( LDCC ) referenced in the Plan as the Appeal Body, and
described in Sun s 2008 Annual Report and 10-K filing with the SEC, was comprised of
three independent non-executive members of the Sun Board of Directors: Stephen M.
Bennett,. Chairperson, M. Kenneth Oshman and P. Anthony Ridder. See
attached
hereto as Exhibit Z.
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127. When Oracle acquired Sun, the composition of the LDCC was changed;
the three independent non-executive board members left, to be replaced solely by Ms.
Dorian Daley who serves as Senior Vice President, General Counsel and Secretary of
Oracle Corporation and is also President and Chief Executive Officer of Sun
Microsystems (post Oracle s acquisition).
128. On May 17, 2011, Defendants informed Plaintiff that the LDCC denied his
Internal Appeal. See
May 17, 2011 LDCC Disposition of Matthew Stepanski s denied
claim, attached hereto as Exhibit AA.
129. The LDCC s Disposition stated that on two occasions, Dorian Daley,
acting as the lone member of the LDCC, met to discuss Plaintiff s Internal Appeal with
Timi Baxter - the Plan Administrator or designee, Sarah Wilson - Managing Counsel for
Oracle, and James P. Baker - outside counsel for Oracle and the attorney who has
been defending Defendants with respect to Plaintiff s lawsuit since May 2010. See
id.
130. The LDCC s Disposition also advised that the LDCC had adopted the Plan
Administrator s Summary, which was apparently submitted to the LDCC on May 10,
2011, and which was, in fact, drafted by defense counsel Mr. James P. Baker, not the
Plan Administrator (the Baker Summary ). See
May 17, 2011 correspondence,
attached hereto as Exhibit BB.
131. Mr. Baker s Summary contains numerous misstatements,
misrepresentations or nuanced interpretations of the record, and omits material facts,
which misstatements and omissions, in their totality, reflect an extraordinary bias in
attempting to justify Defendant s cherry-picked and extraordinarily limited investigation
of Plaintiff s Claim.
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132. Mr. Baker s Summary also accepts
without reservation
as fact, every
statement made by Ms. Baxter and Mr. Abramson irrespective of the almost total
absence of any supporting or corroborating documentation. At the same time Mr. Baker
completely dismisses the very substantive and carefully prepared issue-by-issue
rebuttal submitted by Plaintiff, along with significant support and corroborating
documentation and despite the fact that Plaintiff s submissions effectively discredit the
vast majority of Baxter and Abramson s testimony.
133. In addition, despite their representation that Plaintiff would be afforded the
opportunity to respond to any evidence submitted by Defendants to the LDCC, attached
to the Baker Summary is a May 10, 2011 Declaration of Timi Baxter that was never
provided to Plaintiff.
134. An example of the misleading and mistaken factual allegations contained
in the Baker Summary is the allegation that Plaintiff accepted Oracle s Offer of
Employment and was an employee of Oracle at the time he resigned on February 5,
2010.
135. In fact, Plaintiff declined Oracle s Employment Offer just before the
February 5, 2010 deadline imposed by Oracle and, according to the Oracle s FAQs
document, no Sun employee would become an employee of Oracle America until after
the Legal Entity Change, on or about February 15, 2010: When will I become an
employee of Oracle America, Inc? Sun employees in the US who accept offers of
employment will become Oracle America employees on the LEC [Legal Entity Change]
date which is anticipated to be February 15, 2010. See
FAQs, attached hereto as
Exhibit D at page 4 (emphasis in original and emphasis added).
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136. Further, all of Plaintiff s 2010 payroll earnings statements, and associated
payments came from Sun Microsystems, Inc. These payroll payments were all reflected
in the Sun Microsystems W-2 that Plaintiff received for 2010 and copies of all these
documents are attached hereto as Exhibit CC.
137. Another example of Baker distorting the record evidence in the Baker
Summary in an attempt to support the Plan Administrator s denial of Plaintiff s Claim can
be found in his statement:
He resigned on February 5, 2010 claiming he had "Good Reason" and therefore was eligible for severance benefits under the terms of the Sun Microsystems, Inc. ("Sun") Director Change of Control Severance Plan ("Plan"). Two primary arguments were advanced in support of his assertion that he had "Good Reason" to resign. First, he claims his "base compensation" was reduced because no one ever told him how his Oracle bonus would work. Second, he asserts his undefined new position at Oracle would have resulted in a significant reduction of his duties, position or responsibilities.
138. This is an inaccurate and intentionally misleading statement. Plaintiff s
February 5, 2010 Claim Letter reads:
Despite the fact that Oracle has had many months to prepare an employment offer commensurate with the duties and job that I have been performing at Sun for the past eighteen (18) months - namely as Senior Director, North American Professional Services [Sales & Delivery] - the job that Oracle has offered me [Services Sales Senior Director] represents a significant reduction in the nature, scope and scale of the duties, position and responsibilities as well as compensation and stature compared to that which I have held at Sun. It furthermore represents a significant setback in the thirteen (13) year consistent upward progression of increased responsibilities and authority that Sun has vested in me in recognition of my accomplishments and achievements for the Company, as evidenced by the Sun promoting me or giving me increased responsibilities every
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twelve (12) to eighteen (18) months during the past ten years.
139. The Baker Summary also alleges erroneously that the Plan Administrator
duly investigated Plaintiff s Claim; yet, as set forth herein, the Plan Administrator s
investigation consisted of reviewing information from only one witness, Mr. Abramson,
and reviewing only three source documents or sources of information. The Plan
Administrator and the Plan Administrator s designee, Ms. Anna Woods, failed to review
many of the most relevant documents (see
¶ III, supra) and intentionally chose not to
interview or solicit an assessment from Plaintiff s supervisor, Bruce Douglas, who had
confirmed to Plaintiff during the week of February 1, 2010, that the Offer of Employment
constituted Good Reason for Plaintiff to resign and receive Plan benefits.
140. Importantly, the Plan Administrator intentionally never spoke with Bruce
Douglas, the Oracle Vice President who was the most knowledgeable about Plaintiff s
position, duties, responsibilities and compensation while Plaintiff was employed at Sun
(and reported to Mr. Douglas) and was also the most knowledgeable about significant
deficiencies between Plaintiff s position at Sun and the Offer of Employment at Oracle
because Plaintiff was to continue to report to Mr. Douglas at Oracle had he accepted
the Employment Offer. Mr. Douglas was also the individual whom Defendants directed
Plaintiff to contact to address any questions regarding the Oracle Offer of Employment.
141. The Plan Administrator apparently did not ask Mr. Douglas a single
question regarding Plaintiff s Claim or his (Douglas ) representation to Plaintiff that Good
Reason existed for Plaintiff to reject the Offer of Employment and received Plan
benefits.
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142. In fact, it appears from her April 26, 2010 email, that Ms. Woods, the
Human Resources employee who assisted the Plan Administrator in securing
information from Mr. Abramson, was expressly instructed not to speak with or seek an
assessment from Mr. Douglas. When Ms. Woods writes in her email to Michael Farley.
Ms. Woods makes clear that she has been instructed [by the Plan Administrator] not to
solicit any input from Mr. Douglas, but only Mr. Abramson when she writes On this
particular complaint --- The Plan Administrator needs the assessment directly from
Larry A[bramson]. (not Bruce [Douglas]). See
April 26, 2010 email chain, attached
hereto as Exhibit DD. (Emphasis added.)
143. Contrary to Ms. Baxter s repeated attempts to rationalize and justify her
very specifically excluding Mr. Douglas from providing an assessment on the merits of
Mr. Stepanski s claim, upon information and belief, Baxter excluded Douglas from the
process because she had good reason to believe that Douglas supported Mr.
Stepanski s Claim. In his April 8, 2010 letter and accompanying spreadsheet in which
he provided a detail comparison of his Sun position vs the Oracle offer, Mr. Stepanski
wrote on page 3 - In a telephone conversation Matt had with Bruce Douglas on Friday,
Feb. 5, 2010, prior to submitting his letter of termination for "Good Reason," Bruce
acknowledged that the new position Oracle offered Matt was significantly reduced from
what Matt had managed at Sun. In support of this statement, Bruce even offered "to
stand up in court" on Matt's behalf - and acknowledge that the differences should qualify
Matt for his CIC benefits. This is the true reason Baxter excluded Douglas from the
claim assessment process.
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144. This is a particularly troubling admission considering that in the 5-page
April 8, 2010 detailed supplemental information document Plaintiff provided the Plan
Administrator, Plaintiff cited and or quoted Douglas repeatedly as the source of his
understanding of the deficiencies of Oracle s employment offer and included Douglas s
statement that Plaintiff was entitled to the CIC Severance payment. See
Exhibit J, April
8, 2010 documents at page 5.
145. Baker s Summary also alleges that Plaintiff s supplements to the Internal
Appeal were merely duplicative ( a rehash ) of earlier submissions.
146. In fact, Plaintiff took painstaking care to respond to every piece of
evidence considered by the Plan Administrator, and essentially every material allegation
set forth in the Declarations of Baxter, Abramson and Hague submitted to the LDCC
(which were served on Plaintiff), including, for example nearly ten pages of detailed
rebuttal in Plaintiff s February 23, 2011 Declaration.
147. Similarly, in his 25-page April 11, 2011 Declaration (which included an
additional 70 pages of supporting exhibits), Plaintiff discredited any material statements
contained in the March 23, 2011 Declaration of Abramson, demonstrating how
Abramson was either uninformed or misinformed about Plaintiff s responsibilities at Sun
prior to his resignation for Good Reason and equally uninformed or misinformed about
what Douglas had told Plaintiff about Plaintiff s new position at Oracle would entail and
what his significantly reduced responsibilities would be if he accepted the Oracle Offer
of Employment.
148. Moreover, prior to preparing his 25-page April 11, 2011 Declaration,
Plaintiff again telephoned Moore and Douglas. They once again essentially discredited
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Abramson s representations. It is note worthy that Abramson never provided any
separate documentation to support his assertions (and that the Plan Administrator never
requested any of him) while Plaintiff provided numerous documents of voluminous
pages in support of his rebuttal of Abramson.
149. The Baker Summary also states, albeit without any citation to any
evidence in the administrative record, that:
The primary flaw in Mr. Stepanski's February 2011 Declaration was, according to Mr. Abramson, his failure to accurately consider the faltering financial condition of Sun s Professional Services ("PS") Organization. Mr. Abramson explained that while Oracle's ACS is one of its most profitable service businesses, Sun PS was losing money. Sun PS lost approximately $20 million in its 2010 fiscal year. Oracle s ACS generated $155 million in operating margin during the same period. After the merger, Oracle was able to transform Sun's business so that it generated more than $50 million in operating margin, a $70 million improvement in just one year.
150. First, the North American Professional Services
Sales & Delivery
business that Plaintiff was responsible for leading and managing was profitable. See
Pipeline Review North America PS, attached hereto as Exhibit EE.
151. Moreover, while Plaintiff has never disputed the fact that Oracle and Mr.
Abramson, in particular, could make decisions about reorganizing, downsizing,
restructuring or reallocating portions of the North American business that he led and
managed at Sun, such decisions materially reduced the nature and scope of the
position that Plaintiff would have held at Oracle and thereby triggered Plaintiff s
entitlement to his CIC Severance Benefits under the Plan.
152. The misstatements of fact contained in the Baker Summary also include a
new assertion that, At Sun, Mr. Stepanski s base compensation was $182,000 annually
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and his target bonus was $17,000 monthly, and that, From Oracle Human Resources,
the Plan Administrator learned that his target bonus was to be the same, $17,000 per
month.
153. These new statements (which Plaintiff was never given an opportunity to
respond to) lack any citation to the record, are patently false, and serve only to further
evidence the bias and conflict of interest of the Plan Administrator and LDCC.
154. As set forth in Plaintiff s April 11, 2011 Declaration at Exhibit G
The Sun
Microsystems, Inc. Plan Agreement (Goal/Re-Goal Sheet) FY 2010, Plaintiff s Target
Bonus was $78,000 per year or $6,500 per month, although he actually earned more -
about $14,750 in the 2009 calendar year
not the $17,000 per month asserted
erroneously by Baker.
155. Plaintiff s Sun target bonus compensation had three components (IB, SMI
and SC) during the twelve months preceding February 5, 2010 (the Look-Back Period
February 6, 2009 through February 5, 2010). His IB component was targeted at
$78,000 for the year (~$6,500 per month); his SMI component was targeted at $39,000
for the year (~$3,250 per month) and he also received a SB Bonus component
(supplemental bonus) of $15,000 per quarter (~$5,000 per month) to compensate him
for the promotion freeze imposed during 2009 when his management proposed that he
be promoted to Vice President but it was tabled because Sun was being acquired by
Oracle. He also received a one-time $11,721.60 SPIFF sales bonus during the Look-
Back period.
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156. The IB and SMI components were targeted at $117,000 per year or
$9,750 per month - considerably less than the $17,000 per month contention of Mr.
Baker.
THE INTERNAL APPEAL PROCESS WAS CONDUCTED IN WITH BIAS, BY INDIVIDUALS WITH MATERIAL
CONFLICTS OF INTEREST, AND WAS THEREFORE CONDUCTED IN BAD FAITH, WAS A BREACH OF
FIDUCIARY DUTY AND OTHERWISE FUTILE
157. As detailed in the Complaint and Plaintiff s Declarations, Abramson
exhibited prejudice against Plaintiff as far back as September 2009 and Abramson s
prejudice ultimately manifested itself in his animus towards Plaintiff s Claim.
158. Despite this fact and the fact that Douglas
not Abramson
was
designated by Oracle as the person Plaintiff should consult regarding the Oracle Offer,
Baxter specifically instructed Wood to not solicit an assessment from Abramson and to
specifically exclude Douglas from the assessment process, and ultimately Baxter
apparently relied solely upon Abramson s biased and erroneous input (about the
Plaintiff s prospective duties, authority, title, status, position and responsibilities had he
accepted the Oracle offer) in denying Plaintiff s Claim.
159. Baxter s reliance solely upon Mr. Abramson (and failure to consult
Douglas, the most knowledgeable Oracle representative) allowed Abramson s
expressed bias to infect the process and lead to a wrongful denial of Plaintiff s Claim.
160. Upon information and belief, Baxter intentionally and deliberately excluded
Douglas (a cherry-picked exclusion ) from the assessment process because she
realized (from reading the third page of Plaintiff s April 8, 2010 3-page chart), that
Douglas appeared to fully support Plaintiff s CIC claim and so informed Plaintiff in his
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February 5, 2010 telephone conversation prior to Plaintiff terminating his employment
for Good Reason. See
Exhibit J, page 3 which reads: In a telephone conversation Matt
had with Bruce Douglas on Friday, Feb. 5, 2010, prior to submitting his letter of
termination for "Good Reason," Bruce acknowledged that the new position Oracle
offered Matt was significantly reduced from what Matt had managed at Sun. In support
of this statement, Bruce even offered "to stand up in court" on Matt's behalf - and
acknowledge that the differences should qualify Matt for his CIC benefits.
161. Upon information and belief. the Plan Administrator viewed herself as
responsible for advancing and supporting Defendants interests, first and foremost.
162. The Plan makes clear the Plan Administrator s duty is to apply the Plan for
the benefit of Plaintiff and other Plan beneficiaries. Since the Plan provides that the
Plan Administrator will provide the claimant with a description of any additional material
or information necessary to perfect the request and since Plaintiff requested numerous
documents (during January and February 2011 to facilitate his Appeal) and which could
have readily enabled him to perfect his claim
which requests were repeatedly denied,
it should be obvious to an impartial observer that the Plan Administrator viewed her
responsibilities primarily to her employer Oracle and not a claimant like Plaintiff and that
her ongoing and relentless initiatives and efforts to oppose Plaintiff s claim were
motivated by her bias to her employer, Oracle, which must pay any approved claims out
of its own Treasury (the Plan is not funded).
163. Yet, Baxter clearly failed to do so in breach of her fiduciary duty to Plaintiff,
including by conducting an incomplete, biased and flawed investigation of Plaintiff s
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Claim, and evidencing that she was inclined to place the interests of her employer,
Oracle, ahead of the interests of Plaintiff, a Plan beneficiary.
164. Upon the completion of Oracle s acquisition of Sun Microsystems, Inc. on
January 26, 2010, Dorian Daley, Senior Vice President, General Counsel and Secretary
of Oracle Corporation, and concurrently President & Chief Executive Officer of Sun
(post Oracle), replaced three non-executive and independent directors of Sun who
previously served as the LDCC prior to the CIC.
165. As a result, Daley, as General Counsel of Oracle and the sole member of
the LDCC, has a clear conflict of interest as she oversees the defense of all claims
against Oracle (including Plaintiff s), while simultaneously
serving as the appeal body
obligated to conduct a fair and impartial review of Plaintiff s Claim and Internal Appeal.
166. Additionally, as Sun Microsystems President and CEO, Daley would
appear to have a significant mandate from Oracle s Board of Director s to reduce costs
associated with Sun and, thereby, improve the profitability of Oracle.
167. It was also a conflict of interest for the LDCC to predicate its denial of
Plaintiff s Appeal upon the Baker Summary prepared by defense counsel in this lawsuit.
168. Since the Plan is unfunded, any and all monies paid out to Plan
beneficiaries comes right off the bottom line of Oracle s profitability, creating a further
conflict of interest.
169. All of the foregoing, as well as Oracle s failure and refusal to produce
relevant documents and information requested by Plaintiff, only to then introduce highly
selective and misrepresented information to the LDCC without prior knowledge to
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Plaintiff, confirm the bias, conflict of interest and futility of both the Administrative Claim
and Appeal process under the Plan.
FIRST COUNT
170. Plaintiff repeats and reincorporates the allegations contained in
paragraphs 1 through169 of the Complaint as if fully set forth at length herein.
171. The Plan is governed by ERISA, 29 U.S.C. § 1001 et
seq.
172. At all times, Plaintiff has been a Participant in and Beneficiary of the Plan.
173. Plaintiff exhausted all required internal and administrative remedies under
the Plan.
174. Defendants violated ERISA, 29 U.S.C. § 1132(a)(1)(B), by failing to
provide Plaintiff with the severance and insurance benefits to which he was entitled
under the Plan.
175. Based upon the express language of the Plan (as well as the aforesaid
bias and conflict of interest of Defendants), Defendants decision is subject to de
novo
review by this Court.
176. Pursuant to Sections 4.1 and 4.2 of the Plan, Plaintiff is entitled to
$538,500, which represents one and a half times Plaintiff s Annual Compensation, the
insurance benefits defined in Section 4.4 of the Plan as well as all legal fees, costs of
litigation and other expenses.
WHEREFORE, Plaintiff demands judgment to enforce his rights under the terms
of the Plan against the Defendants, jointly and severally, in the amount of $538,500
representing his unpaid severance benefit under the Plan, together with insurance
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benefits under the Plan, prejudgment interest, attorney s fees and costs of litigation, and
for such other relief as the Court deems equitable and just.
MCELROY, DEUTSCH, MULVANEY & CARPENTER, LLP 1300 Mount Kemble Avenue, P.O. Box 2075 Morristown, NJ 07962-2075 (973) 993-8100 Attorneys for Plaintiff Matthew Stepanski
By: s/ J. Michael Riordan______ J. Michael Riordan
Dated: June 1, 2011
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