JOHNIE F. WEEMS, III, et al. v. CITIGROUP, INC., et al., SC 17967

United States District Court for the District of Massachusetts


Employment; Wages; Whether Forfeiture Provision of Employer's Stock Incentive Plan Violates Wage Statutes, General Statutes 31-71a et seq. In 1988, Citigroup's predecessor established a stock incentive plan known as the capital accumulation plan (CAP). Under CAP, a portion of an employee's compensation is received in the form of restricted Citigroup stock, which is purchased at a discounted price. CAP consists of three subsidiary programs, one of which is voluntary and is offered primarily to financial consultants, and the other two of which are mandatory for other groups of employees. The stock vests after two or three years, depending on the program. If a plan participant leaves the company voluntarily or for cause, he forfeits any portion of his stock that remains unvested and does not receive cash in the amount of the compensation that was used to purchase such stock. William Lomas, who was an employee of a Citigroup subsidiary, enrolled in CAP in 1994. Upon voluntarily terminating his employment in 1998, his restricted unvested stock was cancelled, and he was not paid the nearly $36,000 in compensation that had been deducted to pay for that stock. Lomas filed a class action complaint on behalf of former employees of Citigroup and its subsidiaries who participated in CAP, who resigned or were terminated for cause on or after March 13, 1994, and whose unvested stock was forfeited upon termination. He alleged, among other things, that the defendants' failure to return the compensation that had been deducted to buy that stock violated Connecticut's wage statutes, General Statutes 31-71a et seq. The case was removed to federal court and thereafter became part of a multidistrict litigation proceeding. Subsequently, the Supreme Court, upon certification of the United States District Court for the District of Massachusetts, accepted the following question of law: "Does the forfeiture provision of the Citigroup Capital Accumulation Plan violate Conn. Gen. Stat. 31-71a et seq.?"