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Mechanics Bank must pay at least $1.3 million in supplemental executive retirement benefits to its former president and chief executive officer ( Buster v. Comp. Comm. of Bd. of Dirs. of Mechs. Bank , 2017 BL 246399, N.D. Cal., No. 3:16-cv-01146-WHA, 7/14/17 ).
The bank and its compensation committee abused their discretion in denying Steven K. Buster’s claim for benefits, Judge William Alsup of the U.S. District Court for the Northern District of California held July 14. Buster never knowingly and voluntarily waived his entitlement to accrued supplemental executive retirement benefits, notwithstanding his signing of the retirement agreement and release in connection with his termination in 2012, Alsup said. Alsup’s ruling comes after a three-day bench trial.
Founded in 1905, Mechanics Bank operates more than 30 banking branches in California, according to company data on the Bloomberg Terminal.
Buster sued the bank under the Employee Retirement Income Security Act to recover more than $8,540 monthly in benefits he was owed under the bank’s supplemental executive retirement plan. The dispute between the parties stems from a $3.8 million release agreement Buster signed in 2012 when he left the bank. By accepting the multimillion-dollar payment, Buster waived all claims he had against Mechanics Bank, according to the bank. Buster, however, alleged that he signed the release after he was told that his supplemental retirement benefits would be unaffected.
Last year, Alsup denied the bank’s request to dismiss the lawsuit, holding that there was a “strong showing” that it “cheated” Buster out of his benefits by telling him the release he signed wouldn’t affect his pension and later reversing its statement. Subsequently, Alsup also denied the parties’ cross motions for summary judgment, holding that there were disputed issues of fact that should be resolved at trial.
In his latest findings, Alsup pointed out that both sides to the dispute understood that the retirement agreement and release preserved Buster’s entitlement to his accrued supplemental benefits once he reached age 65. However, two years after executing the agreement, and to save itself over a million dollars, the bank took the new and opposite position that the retirement agreement and release had extinguished Buster’s entitlement to those benefits, Alsup said.
The evidence showed that Mechanics Bank changed its position in relation to Buster’s benefits right around the time it sought to sell a majority interest to private equity firm Ford Financial Fund II LP.
The bank’s position that it offered Buster $1 million to secure his waiver of approximately $1.3 million in vested and accrued benefits wasn’t credible, Alsup concluded.
Louderback Law Group and David F. Crutcher represented Buster. Trucker Huss APC represented Mechanics Bank.
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