APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
Before Seitz, Chief Judge, Adams, Circuit Judge and Stapleton, District Judge.*fn*
Francis Van Orman, on behalf of plaintiff class members, appeals two interlocutory rulings of the district court, certified pursuant to 28 U.S.C. § 1292(b) (1976). Defendants also appeal two rulings certified under section 1292(b) and seek review of another interlocutory order of the district court under 28 U.S.C. § 1292(a)(1) (1976).
These appeals involve a dispute over entitlement to the actuarial surplus in The American Retirement Plan (TARP). TARP was established in 1957 by The American Insurance Company for eligible employees of American and two of its subsidiaries, the American Automobile Company and the Associated Indemnity Corporation (the Affiliated Companies). The plan was funded by contributions from both employees and employers. Participants contributed a fixed percentage of their salaries, and the employer paid the remaining cost of the Plan in such amounts as "necessary on the basis of actuarial calculations to carry out the purposes" of TARP.
Upon electing to participate in TARP, each employee received a certificate which advised that the "(terms) and conditions of payment shall be in accordance with (the TARP document) dated April 1957, which governs the rights, privileges and interests of the participants and named beneficiary." In addition, employees received a booklet that purported to summarize the features of TARP. Two letters also distributed to employees from Robert Z. Alexander, president of The American Insurance Company, described the booklet as a "detailed explanation" and an "outline of the principal provisions" of TARP, but cautioned that "(t)he formal plan is in itself the legal document that sets out in complete text the rights and obligations of the Company and ... Participants and their Beneficiaries." The booklet contained a similar proviso: "Complete details of the Plan are contained only in the Company's Revised Retirement Plan Dated April 1, 1957, which instrument governs the Plan and may be reviewed by eligible employees upon request. All statements in the foregoing outline and explanations are qualified by reference to the Plan itself."
Both the letter and the booklet summarize employees' rights under TARP. Mr. Alexander's letter stated that "(o)ne of the important features of (TARP) is that no employee can lose any part of the funds contributed by him, because all sums he has paid in are held in trust for his sole benefit." The booklet advised employees that, in "the event the Plan is terminated, all funds held in trust will be used for the benefit of retired employees and active Participants and the Beneficiaries of deceased employees."
In 1960, a revised booklet was distributed to employees, noting the employer's increased contributions to the plan and other changes in TARP. The booklet and the accompanying letter contained much of the same language that appeared in the 1957 documents and, in addition, the letter stated: "All sums (the employee) has paid as well as the Company contributions are held in trust in two of the nation's largest banks for the sole benefit of members of the Plan and cannot be used for any other purpose."
The TARP document was not distributed to employees, but was purportedly available for inspection at each branch office. Section 9.3 of the TARP document provides:
Notwithstanding any provisions of this Plan to the contrary, upon termination of the Plan, but only after all liabilities under the Plan shall have been satisfied, the Affiliated Companies shall be entitled to the net assets of the Trust Fund which shall remain by reason of the erroneous actuarial computation during the life of the plan.
Section 11.1 of TARP states, "Participation in this Plan shall not give Employees ... any right or interest in the Plan or Trust Fund other than as herein provided." Finally, section 11.3 provides that New Jersey law is to govern the construction and interpretation of TARP.
In 1963, Fireman's Fund Insurance Co. acquired the Affiliated Companies. To provide a uniform pension plan for all its employees, Fireman's Fund made Affiliated employees eligible to participate in the Fireman's Fund Retirement Plan (FARP), which was funded entirely by employer contributions. Simultaneously, TARP was amended so that no further benefits accrued and that no further contributions were made by either the employer or the employees after May 31, 1964. On the date TARP was "frozen," the market value of the fund's actuarial surplus*fn1 exceeded $3 million.
By 1975, the surplus was estimated to be $12 million. Fireman's Fund notified employees who had participated in TARP that it had tentatively decided to terminate TARP on December 11, 1975 and purchase a group annuity contract to provide for their retirement benefits. Fireman's Fund indicated that, pursuant to section 9.3 of the TARP document, the Affiliated Companies intended to retain the surplus. Several employees objected to the proposed termination, claiming that the booklets and letters distributed between 1957 and 1963 established their right to the TARP surplus upon termination.
Thereafter, defendants sought a declaratory judgment that the proposed termination of TARP was proper. Plaintiff Van Orman successfully moved to intervene, and in January 1976, the class, consisting of retired and former employees of the Affiliated Companies, was certified.
While this action was pending, Fireman's Fund "reactivated" TARP as of January 1, 1979. TARP was amended to provide that all TARP participants would be retransferred into the plan from FARP, that no further FARP benefits would accrue to these employees after December 31, 1978, and that the retransferred participants would accrue benefits under TARP beginning January 1, 1979. Plaintiff class moved to enjoin defendants from reactivating TARP. The district court denied the motion, but required defendants to post a surety bond to cover any funds withdrawn from TARP as a result of the reactivation.
Plaintiffs' amended complaint asserted claims under the Employee Retirement Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1381 (1976 & Supp. II 1978), state contract law, and under federal and state securities laws. Three of plaintiffs' claims are involved in this appeal: 1) the TARP document includes the booklets and letters distributed to employees and therefore establishes the class' entitlement to the surplus (count II); 2) plaintiffs are entitled to the surplus because the booklets and letters fostered "reasonable expectations" that they would receive the surplus (count IV); and 3) the defendants' retention of the TARP surplus, or the use of the surplus in a reactivated TARP, would unjustly enrich defendants (count VI).
Ruling on motions for summary judgment, the district court rejected plaintiffs' argument that the TARP document included the booklets and letters. Nor did the court agree that the statements in the booklets and letters establish plaintiff class' right to the surplus on a theory of reasonable expectations. Relying, however, upon section 4044(d)(2) of ERISA, 29 U.S.C. § 1344(d)(2), and applicable treasury regulations, the court held that upon the termination of TARP, the employer may retain only that portion of the surplus attributable to employer contributions that result from erroneous actuarial computation. The court also ruled that an issue of fact remained as to what portion of the employer-contributed surplus resulted from erroneous actuarial computation.*fn2 As an alternative basis for declaring that plaintiff class was entitled to the surplus upon termination of TARP under the statute, the court found that retention of the surplus funds attributable to employee contributions would unjustly enrich defendants. Further, the court held that the use of surplus attributable to employee contributions to fund newly accruing benefits in the reactivated TARP would also unjustly enrich defendants.
The district court certified these determinations for interlocutory appeal pursuant to 28 U.S.C. § 1292(b), and this court granted leave to appeal. Defendants also filed a notice of appeal from paragraph 21 of the district court's order, which directed them to "exercise their fiduciary discretion within thirty days from the entry of this order and decide whether, by amendment or otherwise, an increase in TARP benefits is appropriate." ...