Altarum Inst. v. Maloney

1

ALTARUM INSTITUTE, Plaintiff, Counterclaim Defendant, v. ELIZABETH MALONEY, Defendant, Counterclaim Plaintiff.

No. 22-cv-2574 (CRC)

United States District Court, District of Columbia

April 23, 2024

MEMORANDUM OPINION AND ORDER

CHRISTOPHER R. COOPER UNITED STATES DISTRICT JUDGE

Plaintiff/Counterclaim Defendant Altarum Institute, a Michigan-based non-profit sued Defendant/Counterclaim Plaintiff Elizabeth Maloney for breach of contract. Until her resignation in January 2022 Maloney served as president of an Altarum subsidiary in Maryland, Palladian Partners, Inc., which provides communications services to clients in the healthcare industry. Altarum's complaint alleges that when Maloney left Palladian, she reneged on her obligation to return an accelerated bonus payment of $206,885.30 which she had received two months earlier. Maloney filed an answer to the complaint along with numerous counterclaims.

The Court bifurcated discovery and directed the parties to address Altarum's breach-of-contract claim before turning to Maloney's counterclaims. After completing this first phase of discovery, both sides have moved for summary judgment on Altarum's contract claim. Their disputes center on whether the pay-schedule provisions in Altarum's bonus contracts are enforceable and whether Maloney breached those provisions by failing to repay her accelerated bonus. Finding that the provisions are enforceable and Maloney breached them, the Court will grant Altarum's motion for summary judgment and deny Maloney's.

I. Background

Altarum is a healthcare nonprofit with headquarters in Ann Arbor, Michigan. Pl.'s Mot. Summ. J. [ECF No. 47], Ex. A ¶ 5. Maloney served as the president of Altarum's subsidiary Palladian from February 1, 2011 until January 31, 2022. Def.'s Resp. to Pl.'s Statement of Undisputed Material Facts (“Def.'s Resp.”) [ECF No. 49-1] ¶¶ 3-6. She worked out of Palladian's offices in Silver Spring, Maryland until the beginning of the COVID-19 pandemic, at which point she primarily worked from her home in Washington, D.C. Id. ¶¶ 6-10.

A. Executive Management Incentive and Retention Plan

Prior to the events at issue, Altarum established an Executive Management Incentive and Retention Plan (the “Executive Plan”) to “provide[] annual and long-term performance-based incentives to Executive Managers,” including Palladian executives. Def.'s Resp. ¶¶ 11-14; Def.'s Mot. Summ. J., Ex. 3 (“Executive Plan”) § 1. The Executive Plan's stated purpose was “to attract and retain key talent, motivate the organization's leaders, and enhance Altarum's ability to accomplish its mission - by providing meaningful rewards for the achievement of significant results aligning with the primary corporate goals.” Executive Plan § 1.

Under the terms of the plan, executives were awarded an incentive bonus each year based on a range of performance measures. Id. §§ 5, 7. But payment of that bonus was deferred. Altarum disbursed the award over a three-year period following “the Plan Year” (i.e., the year for which the executive received the award) with “50% being paid the first following year and 25% on April 1^st of each of the two subsequent years.” Id. § 4. The Executive Plan also divided the first-year disbursement (the 50% sum) into two payments. That disbursement was initially calculated “based on pre-audit financial results of the Plan Year,” and 80% (or 40% of the total award) was paid around “April 1^st of the calendar year following the Plan Year.” Id. § 7. Any remaining balance of the 50% (roughly 10% of the total award) was paid after Altarum's external accounting firm audited its financial statements, generally “on or about May 15^th of the calendar year following the Plan Year.” Id.^[1]The following table summarizes the payment schedule.

Percentage Paid

Date

40%

Around April 1 of Plan Year + 1

10%

Around May 15 of Plan Year + 1

25%

April 1 of Plan Year + 2

25%

April 1 of Plan Year + 3

For executives who earned bonuses each year, their deferred payments stacked, such that in any given year, they would recoup bonus amounts from each of the previous three years. So, for example, under the framework of the plan, an executive who earned bonuses in 2019, 2020, and 2021 would receive the following on April 1, 2022: 25% of the 2019 bonus, 25% of the 2020 bonus, and 40% of the 2021 bonus. Then, following Altarum's external audit, the executive would receive an additional 10% of the 2021 bonus on May 15, 2022.

These deferred payments constituted the “Participant's Account Balance,” and the Executive Plan provided that “[e]xcept for instances involving a Participant's Retirement, Death, Disability, or authorized leave of absence, a scheduled payment is payable only if the Participant continues to be an active Altarum employee on April 1^st of such payment year.” Id. § 4. The plan further provided that “[t]he severing of employment with Altarum, voluntary or involuntary, for any reason other than Retirement, Death, Disability, or an authorized leave of absence shall cause the Participant to forfeit his or her Account Balance.” Id.; see also Id. § 10 (“Generally a Participant forfeits any current Plan Year incentive award and the Participant's Account Balance if employment is terminated for any reason other than Retirement, Death, or Disability.”).

B. Accelerated Payment Election Policy and Election Form

The pay schedule in the Executive Plan was not the end of the story. Altarum permitted executives to “accelerate” bonus payments by opting into an “Accelerated Payment Election Policy.” See Pl.'s Mot. Summ. J., Ex. B(5)(F) (“Accelerated Payment Policy”). Under the policy, executives could “elect accelerated payment of a whole percentage of each regularly scheduled payment of the applicable incentive award.” Id. §§ 1-2. The terms and conditions of the Accelerated Payment Policy were further governed by an Accelerated Payment Election Form that executives completed in advance of each fiscal year. See Def.'s Resp. ¶ 22. Per the terms of the form, instead of receiving payments on April 1 or May 15 of the following year, executives could elect to receive payments in the “first payroll” of either December of that year or January of the next year. Pl.'s Mot. Summ. J., Ex. B(5)(E); Def.'s Mot. Summ. J., Ex. 6 (“Accelerated Payment Form”) at 1. So, for example, instead of receiving the deferred portions of their 2019, 2020, and 2021 awards in April and May 2022, executives could receive those portions in December 2021 or January 2022. The early payment date was defined as the “Accelerated Payment Date.” Id.

The form included a caveat, however. As part of a section titled “Participant's Acknowledgement and Signature,” executives agreed to the following: “if I receive the Accelerated Payment and I am not employed at Altarum on the regularly scheduled payment date next following the Accelerated Payment Date, [] I must immediately repay to Al[t]arum the full principal amount of the Accelerated Payment.” Id. at 2.

In December 2020, Maloney executed an Accelerated Payment Form, whereby she elected to receive in early December 2021100% of each payment she otherwise would have been owed on April 1 or May 15, 2022. Id. at 1. These payments represented 50% of her 2021 award, 25% of her 2020 award, and 25% of her 2019 award.^[2]

C. Maloney's Accelerated Payment, Resignation, and Failure to Repay the Accelerated Payment

On December 1, 2021, Maloney received the accelerated payment for 2022, which totaled $206,885.30. Def.'s Resp. ¶¶ 49-50; Pl.'s Mot. Summ. J., Ex. B(2). Because of federal and state income taxes and related withholdings, Maloney's netted only $138,240.86. Pl.'s Mot. Summ. J., Ex. B(2) at 1-2.

On January 5, 2022, she announced her intention to resign from Palladian and later decided that January 31 would be her last day. Def.'s Resp. ¶¶ 51, 59. On January 14, Maloney emailed Altarum's general counsel and acknowledged that the company's chief human rights officer had reminded her “that [her] departure before the spring milestones for bonuses would require the repayment of the December accelerated bonus payment.” Pl.'s Mot. Summ. J., Ex. B(11) at 1; see also Def.'s Resp. ¶ 52. Maloney wrote, “I will fully comply with the established executive bonus policy,” and later in the email added “I'll cooperate with HR on the return of the December bonus payment.” Pl.'s Mot. Summ. J., Ex. B(11) at 1. Maloney now claims that, at that time, she “was not sure she owed the Accelerated Payment” but “cooperated with Altarum to ensure that [it] maintained her health insurance and actively helped remediate an issue getting a specialty pharmaceutical processed” for a family member. Def.'s Statement of Undisputed Material Facts [ECF No. 49-1] ¶ 9.

Later that month, Maloney emailed the director of human resources and noted that she had received a letter from Altarum stating it “expect[ed] $203,885.46 by February 15th.” Pl.'s Mot. Summ. J., Ex B(3) at 1; see also Def.'s Resp. ¶ 71. Maloney, however, asked for “clarif[ication]” on two points. She wrote, “I need my W-2 modified to reflect the lower total compensation in 2021” and asked for “advi[c]e on how [to] recoup the withholdings.” Pl.'s Mot. Summ. J., Ex B(3) at 1. She then added, “I would feel better writing a check for $138,240.86 until the other items are clear to me; that I get a refund on the withholdings and a modified W-2.” Id.

On February 28, however, Maloney informed Altarum that she would not return the accelerated payment. Def.'s Resp. ¶ 76. And she has been true to her word: To date, Maloney has not repaid any of her bonus. Id. ¶¶ 77-78. She admits, however, that she is not retired, has not become disabled since January 31, 2022, is not dead, and did not take an authorized leave of...