Villasenor v. Community Child Care Council of Santa Clara County, Inc.

Background

Alfredo Villasenor sued Community Child Care Council of Santa Clara County, Inc. (“4Cs”) and other defendants to recover benefits under the 4Cs Employee Profit Sharing Plan and the 4Cs Non-Qualified Pension Plan. In an earlier summary-judgment ruling, the court decided that Villasenor was entitled to benefits under both plans and to past benefits, interest, and reimbursement of penalties assessed because he could not obtain distributions. The court had not determined the amount owed. The parties later stipulated to dismissal of Villasenor’s remaining causes of action.

Villasenor then moved for a determination of the benefits owed, prejudgment interest, IRS penalties, and attorneys’ fees. He sought a monthly Non-Qualified Plan benefit of $11,307.42, past-due benefits, interest at 5%, reimbursement for IRS penalties, and $128,868 in fees and costs.

Monthly and Past-Due Benefits

The Non-Qualified Plan calculated the supplemental monthly benefit by subtracting the participant’s Qualified Plan benefit from a “Measuring Benefit.” The Measuring Benefit was based on the California State Teachers’ Retirement System calculator and the participant’s service credit, age factor, and final monthly compensation.

The parties agreed on the age factor of .024 and final monthly compensation of $15,125, but disputed whether Villasenor was entitled to 45 years or 15.75 years of service credit. The court interpreted the plan document as using all periods of employment, not only employment after the Non-Qualified Plan was created. It therefore used 45 years of service credit. The court also included a $400 longevity bonus because the plan document incorporated the CalSTRS retirement calculator. The court determined that Villasenor’s Measuring Benefit was $16,735 and that, after subtracting his $5,427.58 Qualified Plan benefit, his Non-Qualified Plan benefit was $11,307.42 per month.

The court found that benefits had been owed beginning November 1, 2017. It awarded $440,989.38 for 39 months of past-due benefits and limited Villasenor to 201 subsequent monthly payments from the Non-Qualified Plan.

Prejudgment Interest

The court exercised its discretion to award prejudgment interest on the unpaid benefits. It relied on its earlier finding that 4Cs had delayed authorization of Villasenor’s Qualified Plan claim for more than two years without a written explanation and that Villasenor’s attempts to resolve the issue had been met with silence. The court also considered Villasenor’s evidence that he had taken loans against his life insurance to pay living expenses.

The court rejected Villasenor’s requested 5% rate but awarded interest at the average prime rate of 4.76%, compounded annually. It directed Villasenor to recalculate the interest and submit a supporting declaration with the proposed judgment.

IRS Penalties

Villasenor sought $55,346.38 for penalties he claimed he owed the Internal Revenue Service because he had not taken required minimum distributions from his Qualified Plan in 2017, 2018, and 2019. The parties did not dispute that the IRS had not yet assessed penalties. The court denied this request without prejudice and stated that Villasenor could move for an amended judgment if penalties were later assessed.

Attorneys’ Fees

Villasenor sought attorneys’ fees under the Employee Retirement Income Security Act. Applying the factors used to evaluate such requests, the court found that Villasenor had achieved success on the merits and that 4Cs had been culpable and acted in bad faith by failing to fulfill its duty to pay benefits. The court found that the ability-to-pay factor weighed against a fee award because 4Cs disputed its ability to pay and stated that it was filing for dissolution after California stopped providing funding. The deterrence factor supported fees, while the factor concerning benefits to other plan participants or significant legal questions was neutral at best. The relative-merits factor also supported an award.

The court found Villasenor’s requested hourly rates and the hours worked reasonable under the lodestar method, which generally calculates fees by multiplying reasonable hours by a reasonable hourly rate. It rejected 4Cs’s objection to time spent opposing a third party’s motion to intervene, finding that the work was reasonable and necessary. The court granted the attorneys’ fees motion and awarded Villasenor $128,868.

Disposition

The court granted in part and denied in part Villasenor’s motion. It determined the monthly benefit, awarded past-due benefits and prejudgment interest, denied the IRS-penalty request without prejudice, and granted the attorneys’ fees motion. It directed the parties to submit a proposed judgment consistent with the order by February 1, 2021, with Villasenor also submitting a declaration supporting the interest calculation.