Total amount owed to employees, plus interest, will be determined in future ruling
DANVILLE, Va. — A judge here has issued a summary judgment that says former executives of Stanley Furniture are entitled to receive pay they are owed under a company deferred compensation plan.
But given recent uncertainties, including the financial solvency of Stanley, it is not clear whether the plaintiffs would receive any of the funds. An owner of the company also told Home News Now that Stanley will appeal the ruling.
“We respect the judge’s decision, but are also shocked by the outcome and will seek further review by the court,” Stanley executive and owner Walter Blocker said.
In an Oct. 14 filing with the United States District Court for the Western District of Virginia in Danville, District Judge Thomas T. Cullen said the plaintiffs are entitled to all unpaid and future benefits under the Stanley Interiors Corp. Deferred Capital Enhancement Plan (DCP) and the Supplemental Retirement Plan of Stanley Furniture Company (SERP). The matter has been referred to Robert S. Ballou, the magistrate for the U.S. District Court for the Western District of Virginia, to determine the total amount due.
According to court documents, the DCP amount owed to date to 17 former executives is $603,940.61 plus interest. The amount of SERP funds owed to date to 14 former executives is $82,895.48, plus interest. These amounts represent deferred payments that have accrued up to present. However, they do not represent the amount of pay that would be accrued and need to be paid out in future years, an amount that could far exceed what is owed to date.
Attorneys representing the plaintiffs were not available for immediate comment.
Each plan initially aimed to pay the deferred compensation over years, and perhaps decades. At the time, legal documents noted, this seemed to be a good option for the executives, given that the monies would accrue interest.
However, while the executives have received a small portion of what’s due, the company began to miss payments even before the Covid-19 pandemic, the court noted. For example, it said, Stanley began to miss payments in 2019 and only paid each of the executives $500 in 2020. According to the Oct. 14 filing, the company had yet to make a payment in 2021.
Stone & Leigh, (S&L) which purchased several of Stanley Furniture’s (SFC) assets in 2018, accepted some of SFC’s deferred compensation obligations, the filing noted. While Stanley administers the DCP, Stone & Leigh administers the SERP.
Under the purchase agreement, the two companies agreed that S&L would assume all SFC’s liabilities and obligations under the SERP under the condition that they do not exceed an aggregate of $1,779,939.
According to the court documents, S&L has been responsible for the SERP since September 2018 and is up to date on its obligations, with the SERP plan beneficiaries receiving a total of $13,000 each month. Thus, the court went on to suggest that S&L has paid about $468,000 over the past 36 months.
Yet the court noted, “Whatever the exact number, the important thing to remember is that the S&L plaintiffs are not in danger of hitting the purported cap any time soon. Because the S&L defendants have not reached the cap on their obligations, this argument does not excuse their non-compliance with the terms of the SERP.”
In a footnote, the court added, given the advanced age of many of the beneficiaries, “it is possible that they will never reach the cap.”
Stanley defendants believe the language of the plan allows them to curb benefits during financially stressful times. They also noted that the pandemic has made it impossible for them to perform their contractual obligations under each of the plans.
However, the plaintiffs contested both positions, seeking damages equal to what they are owed, plus prejudgment interest and attorney’s fees, plus declaratory judgments securing their entitlements to future benefits.
While the judgment does not allow for the payment of attorney fees, it does require the defendants to pay all benefits owed under the DCP and SERP.
“The Defendants non-compliance is not excused under the arguments raised in this proceeding,” the court said. In addition the plaintiff would be entitled to receive prejudgment interest at Virginia’s six percent rate, the filing noted.
Blocker, the Stanley owner, disagreed with the findings.
“The former employees have a non-secured liability with no right to collect from a company that has the priority to take care of its existing business before making entitlement payments,” he told Home News Now.
How this plays out for the plaintiffs, a list of which include many well-known figures in the furniture industry, is unknown given both Stanley and Stone & Leigh’s financial situation. During discovery, each company under oath, said it had contemplated bankruptcy, the filing noted.
Prepandemic, Stanley only had $23,009 cash on hand in January 2020, which the court said was 26 times what it currently owes the plaintiffs. “And it’s a whopping 517 times less than SFC’s liabilities at that time. SFC is not in a financial position to make the SFC Plaintiffs whole, much less satisfy an additional award for attorney’s fees.”
The filing said that the plaintiffs pushed back on that argument, noting that the company has been distressed for years, but that wealthy firms have invested in the company to keep it afloat. “Given these apparent lifelines, the argument goes, it is clear that SFC can pay the Plaintiffs.”
The filing went on to say that Stone & Leigh that only had $19,374 in cash on hand at the end of 2021. It also owed its creditors $974,793.
The court has referred the matter to Judge Robert S. Ballou regarding a decision on how much the defendants owe in full, including interest.