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LYNCH v. J.P. STEVENS & CO.
February 14, 1991
JOSEPH P. LYNCH, PLAINTIFF,
J.P. STEVENS & CO., INC., THOMAS C. DURST AND THE J.P. STEVENS & CO., INC. PENSION COMMITTEE, DEFENDANTS.
The opinion of the court was delivered by: Lechner, District Judge.
TABLE OF CONTENTS
FACTS ................................................... 982
A. The Stevens Salaried Plan ................... 982
B. Salaried Plan Management Prior to the
Restructuring ............................. 983
C. Plan Restructuring and Reversion ............ 984
D. The Window .................................. 987
DISCUSSION .............................................. 990
A. The Restructuring and Reversion ............. 991
1. Basis for Remedy Claimed by Lynch ..... 991
2. The Restructuring and Reversion
— ERISA's Exclusive Benefit
Rule and Provisions on Fiduciary
Duties .............................. 992
a. Benefits Protected Under ERISA .... 992
b. Plan Terminations Under ERISA
and ERISA's Exclusive Benefit
Rule and Fiduciary Duty
Provisions ...................... 993
c. Transfers of Plan Assets Under
ERISA and ERISA's Exclusive
Benefit Rule and Fiduciary Duty
Provisions ...................... 996
3. Funding of Accrued Benefits for
Salaried Plan Participants and the
Implementation of the Restructuring
and Reversion ....................... 999
a. Funding for Benefits for Future
Service ......................... 999
b. Funding of Benefits Accrued
through 26 June 1985 ............ 1001
c. Funding for the Window ............ 1003
d. Funding for the Increase in
Salaried Plan Benefits .......... 1003
e. Funding for Early Retirement
Subsidies ....................... 1004
4. The Management of the Salaried Plan
and ERISA's Exclusive Benefit Rule
and Fiduciary Duty Provisions ....... 1007
a. The Management Practices of
Stevens with Respect to the
Salaried Plan and ERISA's
Exclusive Benefit Rule and
Fiduciary Duty Provisions ....... 1007
b. Management of the Salaried Plan by
Stevens and the Allegation of
Fraud ........................... 1008
c. Use of Investment Managers and
ERISA's Exclusive Benefit Rule .. 1009
d. Increase in the Actuarial
Assumptions and ERISA's
Exclusive Benefit Rule and
Fiduciary Duty Provisions ....... 1009
e. Stevens' Alleged Use of
Salaried Plan Assets for the
Benefit of the Hourly Plan and
ERISA's Exclusive Benefit Rule
and Fiduciary Duty Provisions ... 1010
f. Stevens' Alleged Use of Retiree
Plan Assets for the Benefit of
the Salaried Plan and ERISA's
Exclusive Benefit Rule and
Fiduciary Duty Provisions ....... 1012
g. The Propriety of "Speculative"
Investments and ERISA ........... 1012
h. Segregation of Salaried Plan
Assets and ERISA ................ 1013
5. Notice to Salaried Plan Participants
of the Restructuring of the
Salaried Plan and ERISA ............. 1014
B. The Window .................................. 1016
CONCLUSION .............................................. 1020
Plaintiff Joseph P. Lynch ("Lynch"), a former employee of
defendant J.P. Stevens & Co., Inc. ("Stevens"), brought this
action against defendants Stevens, Thomas C. Durst ("Durst")
and the J.P. Stevens & Co., Inc. Pension Committee (the
"Pension Committee") (Stevens, Durst and the Pension Committee
are collectively referred to as the "Defendants," and Lynch and
the Defendants are collectively referred to as the "Parties").
Jurisdiction is alleged pursuant to the Age Discrimination in
Employment Act of 1967 (the "ADEA"), 29 U.S.C. § 624(a), and
the Employee Retirement Income Security Act of 1974 ("ERISA"),
29 U.S.C. § 1001 et seq.
Lynch filed his complaint (the "Complaint") on 29 June 1988.
While the Complaint states three counts, the actions of the
Defendants alleged therein are described throughout the
Complaint and may be grouped into six categories. First, Lynch
alleges the Defendants violated various provisions of ERISA in
restructuring the Salaried Employees Retirement Salaried Plan
(the "Salaried Plan") of which Lynch was a participant and in
recapturing $112 million in assets deemed surplus. Second,
Lynch alleges the early retirement incentive offered to
corporate area employees (the "Window") who elected to retire
by a designated date violated the ADEA. Third, Lynch alleges he
was improperly denied Window benefits because he was in fact a
corporate area employee. Fourth, Lynch alleges he was
terminated from employment and not offered an alternative
position within Stevens in violation of the ADEA and the
Stevens personnel policy. Fifth, Lynch alleges the current
Salaried Plan (the "On-Going Plan") has been inadequately
funded since the restructuring and recapture. Finally, Lynch
alleges the Defendants failed to provide him with information
regarding the Window in violation of the procedural provisions
Lynch seeks as relief reinstatement to his former position at
Stevens, back pay and benefits, and "compensatory and punitive
damages for emotional stress, humiliation, and breach of
expressed and implied contract." Complaint at 15-16. Lynch also
apparently seeks injunctive relief "[t]hat [Stevens] salaried
employees pension plan be fully funded" and attorneys' fees.
Complaint at 15-16.*fn1
Lynch was employed by Stevens on 1 April 1972 and was
terminated on 15 January 1988 from a position as Administrative
Manager for the International Division. Lynch Cert., ¶ 2. He
was fifty-nine years old at the time of his discharge. Id.
A. The Stevens Salaried Plan
Stevens established the Salaried Plan effective 1 January
1948. Defendants' Memorandum at 9; Opposition at 1. The
Salaried Plan is a defined benefit pension plan for the benefit
of eligible salaried employees. Defendants' Memorandum at 9;
Opposition at 2. As such, the Salaried Plan provides fixed
benefits to participants based on a benefit formula set forth
in the Salaried Plan. See 1983 Plan at 10-25.*fn4 In general,
pension benefits are calculated based on each participant's
compensation and period of covered employment with Stevens. Id.
Pension benefits accrue during each participant's period of
covered employment and become vested, or nonforfeitable, after
ten years of accrual (or after five years of accrual effective
1 January 1989), and are generally paid in monthly installments
upon normal retirement at age 65 or upon early retirement at
age 55. Id.; Anderson Cert., ¶ 14. The Salaried Plan provides
that all accrued benefits become vested upon its termination.
1983 Plan at 44.
Stevens is the sole contributor to the Salaried Plan. 1983
Plan at 34; Retiree Plan at 34; On-Going Plan at 34; Complaint
at 8. Contributions by Stevens are determined based on
actuarial calculations of the amount necessary to fund the
obligations of the Salaried Plan. Id. From 1948 to the present,
actuarial services for the Salaried Plan have been provided by
George B. Buck Consulting Actuaries, Inc. ("Buck"). Anderson
Cert., ¶ 7. As actuary, Buck is responsible for estimating the
present value of future benefits to be paid by the Salaried
Plan and for calculating the yearly contribution by Stevens
based on a funding method which allocates to the current year a
portion of the difference between the present value of future
benefits and the current value of assets. Anderson Cert., ¶ 4.
Because the Salaried Plan provides defined benefits to
participants and because Stevens is its sole contributor,
Stevens bears the risk of the Salaried Plan's actual investment
experience relative to actuarial predictions. Id. at ¶ 16. If
the actuarial predictions for investment returns are lower than
actual experience in a given year, Stevens is then required to
make larger contributions to the Salaried Plan in subsequent
years. Id. If, on the other hand, actuarial predictions prove
too high, Stevens is permitted to decrease its contributions in
subsequent years. Id. The funding method for the Salaried Plan
and its investment earnings affect only the amount Stevens is
required to contribute to the Plan. Id.
The Salaried Plan also provides for the establishment of the
Pension Committee by the Board of Directors to serve as "named
fiduciary." 1983 Plan at 38-41; Retiree Plan at 38-41; On-Going
Plan at 38-41. The Pension Committee has the authority under
the Salaried Plan to administer the Salaried Plan in all
respects with the exception of those functions ascribed to the
Investment Committee, including the setting of interest rates
to be used for actuarial calculations and the determination of
eligibility for participation in the Salaried Plan.
Id. The Salaried Plan provides the Pension Committee shall be
entitled to rely on information furnished by the actuary
(Buck), and states: "[A]ll actions so taken or permitted shall
be conclusive upon all persons having or claiming to have any
interest in or under the [Salaried] Plan." Id.
The Salaried Plan permits its modification or amendment if
such modification or amendment does not deprive a participant
of benefits to which the participant is entitled or make it
possible for Salaried Plan assets to be used for purposes other
than for the exclusive benefit of participants before plan
liabilities have been satisfied. 1983 Plan at 42; Retiree Plan
at 42; On-Going Plan at 42; Complaint at 9. The Salaried Plan
also authorizes its merger and consolidation with other plans
and the transfer of its assets to other plans if the benefits
provided to a participant prior to such merger, consolidation
or transfer are equal to or greater than "the benefit [the
participant] would have been entitled to receive immediately
before the merger, consolidation, or transfer if the Plan had
then terminated." 1983 Plan at 42-43; Retiree Plan at 42-43;
On-Going Plan at 42-43 (emphasis added).
The Salaried Plan contains an "exclusive benefit" provision,
[E]xcept as otherwise hereinafter provided, no
part of the corpus or income of the funds shall be
used for, or diverted to, purposes other than for
the exclusive benefit of Members . . . prior to
the satisfaction of all liabilities. . . .
1983 Plan at 35-36; Retiree Plan at 35-36; On-Going Plan at
35-36. Finally, the Salaried Plan permits its termination and
provides that upon termination, "any funds not required to
satisfy all liabilities of the Plan for benefits because of
erroneous actual computation or otherwise shall be returned to
[Stevens]." 1983 Plan at 44; Retiree Plan at 44; On-Going Plan
at 44 (emphasis added).
B. Salaried Plan Management Prior to the
In order to increase investment returns, the Investment
Committee approved an investment management structure in 1981
whereby all assets of the Salaried Plan and other Stevens
retirement plans were placed in a master trust (the "Master
Trust"). Zerrenner Dep. at 26; Investment Manager Restructure
at 1. The Northern Trust Company ("Northern Trust") was
appointed trustee of the Master Trust effective 1 October 1981.
See Master Trust; Holt Cert., ¶ 1; Opposition at 1.
The Master Trust consisted of a single commingled fund in
which a number of participating retirement plans of Stevens
were deemed to have proportionate interests. Master Trust at
2-1; Holt Cert., ¶ 2. The retirement plans which were included
in the Master Trust were the Salaried Plan, the Hourly
Employees' Salaried Plan of J.P. Stevens & Co., Inc. (the
"Hourly Plan") and other plans for the salaried and hourly
employees of the Stevens subsidiaries Foote & Davies, Inc. and
Ruralist Press, Inc. (the "Subsidiary Plans"). Id.
Under the terms of the Master Trust, responsibility for
day-to-day investment decisions was held by the Operating
Investment Committee, an adjunct to the Investment Committee,
and by investment managers, or outside investment firms with
expertise in various types of investments. See Investment
Manager Restructure; Zerrenner Dep. at 21, 26; Opposition at 2.
In addition, Northern Trust had discretion to invest certain
assets. Master Trust, Arts. VII-VIII. Investments made
following the creation of the Master Trust included the
purchase of Stevens stock. Zerrenner Dep. at 57-58.
C. Plan Restructuring and Reversion
Stevens became aware in 1982 that the Salaried Plan was
substantially overfunded. Zerrenner Dep. at 49-50; 17 August
1982 Zerrenner Memo. to W. Stevens et al. The overfunding was
caused by higher than expected yields on Salaried Plan
investments and by a contribution level by Stevens which had
been based on conservative actuarial methods and assumptions.
Zerrenner Dep. at 86; Restructuring Proposal at 1.
In order to attempt to decrease the amount of the surplus,
the actuarial assumption for interest rates was gradually
increased in 1983 from seven percent to nine percent, with a
corresponding increase in the assumption for future pay
liability. Zerrenner Dep. at 63; Defendants' Memorandum at
16.*fn5 In addition, the funding method was changed from the
aggregate method, the most conservative funding method, to the
projected unit method, the least conservative method. Zerrenner
Dep. at 64-66; 17 August 1982 Zerrenner Memo. to W. Stevens et
al.*fn6 Under the projected unit method, future pay increases
were carried as a liability by Stevens. Zerrenner Dep. at 66.
These changes in actuarial methods decreased contributions by
Stevens to the Salaried Plan for 1983 and 1984. Zerrenner Dep.
at 121. The changes, however, had no effect on the level of
benefits to be distributed under the Salaried Plan as a defined
benefits plan. Anderson Cert., ¶ 16; Zerrenner Dep. at 67.
The 17 April 1984 Board Resolution provided for the division
of the Salaried Plan into two plans, one for active employees
(the On-Going Plan) and one for retired employees (the Retiree
Plan). 17 April 1984 Board Minutes. It also provided for the
allocation of assets needed to fund obligations of the On-Going
Plan to that Plan and for the allocation of all remaining
assets to the Retiree Plan. Id. It then provided for the
termination of the Retiree Plan upon the purchase of lifetime
annuities for Retiree Plan participants. It further stated:
"All active employees shall be fully vested in their benefits
accrued as of June 1, 1984." Id. It provided for the subsequent
recapture of assets remaining in the Retiree Plan after the
purchase of the annuities. Id. Finally, it provided for an
increase in benefits, including a two percent increase in
benefits under the Retiree Plan for each full year of
retirement commencing 1 April 1980 and a special contribution
to the savings plans of On-Going Plan participants of 2% of
gross pay for three years. Id. It conditioned its
implementation on successful accomplishment of the
restructuring of the Salaried Plan and authorized the Executive
Committee of the Board of Directors to set the implementation
The Executive Committee of the Board of Directors adopted a
resolution on 21 May 1984 (the "21 May 1984 Board Resolution")
which made the termination of the Retiree Plan effective 1 July
1984 and which provided: "[A]ll active employees shall be fully
vested in their benefits accrued as of July 1, 1984 under the
[Salaried] Plan as referred to in the Resolutions."
See 21 May 1984 Executive Committee Resolution.
Stevens publicized its plan for the restructuring and
reversion with Salaried Plan participants prior to and upon
completion of its implementation. Stevens issued a press
release on 17 April 1984 announcing its plan to restructure the
Salaried Plan into two plans and to recover more than $50
million in excess assets following the restructuring.
See Press Release. On 18 May 1984, Stevens circulated a letter
to Salaried Plan participants, informing them:
Stevens intends to divide the current plan into
two plans — one for retired employees and one for
our active employees. . . . After the necessary
regulatory agencies are notified . . . and more
than enough money is set aside to meet all of the
current pension commitments, there will be
substantial excess assets that [Stevens] can use to
help achieve its long-range goals.
18 May 1984 Stevens Letters to Participants. Finally, Stevens
printed a Notice to Interested Parties, which counsel for
Stevens states was sent to Salaried Plan participants, stating:
This plan is going to be amended and split into
two plans: One for active employees . . . and one
for retired employees. . . . The plan for retired
employees will then be technically "terminated."
This technical "termination" will have no effect
on the payment of benefits. A Notice of Intent to
Terminate will be filed with the [PBGC] on April
9, 1984 and the proposed date of termination is
May 1, 1984. The Plan Administrator believes that
the plan assets under the retired employees plan
will be adequate to provide for all vested
benefits for participants under the plan.
Notice to Interested Parties; Defendants' Memorandum at 23-24.
Northern Trust purchased annuities to cover the benefit
obligations of the Retiree and On-Going Plans with respect to
benefits accrued as of 1 July 1984 by making a one-time payment
of $124.9 million to the Mutual Life Insurance Company of New
York ("MONY"). Hardy Cert., ¶ 4; Anderson Cert., ¶ 10. The
annuity contracts unconditionally and irrevocably guaranteed
payment by MONY of benefits accrued through 1 July 1984. Hardy
Cert., ¶¶ 2-3; Anderson Cert., ¶ 10. In addition, the annuity
contracts guaranteed payment of early retirement benefits for
employees who met the age (fifty-five years old) and
service requirements for eligibility as of 30 June 1984. Hardy
Cert., ¶ 8; Anderson Cert., ¶ 21.
Participants in the On-Going Plan, including Lynch, were
issued certificates reflecting the amount of benefits accrued
through 30 June 1984 and payable on retirement. Hardy Cert.,
¶ 7. Because Lynch had met the eligibility requirements for
early retirement benefits as of 30 June 1984, the annuity
contract for the On-Going Plan guaranteed him payment of normal
retirement benefits of $412.39 a month or an early retirement
benefit, depending on his date of retirement. Id.; Deferred
Northern Trust purchased "participating" annuity contracts
for both the On-Going and Retiree Plans, whereby it paid to
MONY an additional $8.6 million above a designated "trigger
point" from which it was entitled to withdraw funds. Hardy
Cert., ¶¶ 2-3, 4, 6; Anderson Cert., ¶ 25. The participating
annuity contracts permitted Northern Trust to participate in
investment gains as long as aggregate funds did not decline
below the trigger point. Hardy Cert., ¶ 5. If the value of the
assets fell below the trigger point, the contract automatically
converted to a traditional, nonparticipating annuity. Id.;
Anderson Cert., ¶ 25.
On 1 June 1984, Stevens sought the approval of the IRS for
the division of the Salaried Plan into the Retiree Plan and the
On-Going Plan by filing a Form 5310 Notice of Transfer of
Assets and Liabilities. 1 June 1984 Stevens Letter to IRS.
Stevens advised the IRS the division of the Salaried Plan would
take place on 1 July 1984, and indicated 1 July 1984 where Form
5310 requested the "date of merger, consolidation or transfer."
Stevens also wrote to the PBGC on 19 June 1984 to advise it
Stevens was dividing its Salaried Plan into a plan for active
employees (the On-Going Plan) and a plan for retirees (the
Retiree Plan) effective 1 July 1984. 19 June 1984 Notice to
PBGC. Stevens further advised the PBGC it was dividing up
current Salaried Plan assets between the two plans in
sufficient amounts to cover benefits under the two plans. It
stated that also effective 1 July 1984 it was terminating the
Retiree Plan and recapturing from it excess assets.
Id. It stated benefits accrued as of 1 July 1984 under the
On-Going Plan would become vested, and those benefits as well
as benefits under the Retiree Plan would be annuitized. Id.
Because all assets of the various Stevens retirement plans
were commingled under the Master Trust, Northern Trust
segregated Salaried Plan assets in a separate account within
the Master Trust (the "Salaried Plan Account") in April 1985 to
facilitate the restructuring. Holt Cert., ¶¶ 14, 15.
On 25 April 1985, the PBGC issued a Notice of Sufficiency to
Stevens advising Stevens it had determined Salaried Plan assets
were sufficient "as of [the] proposed date of distribution to
discharge when due all obligations of the [Salaried] Plan with
respect to guaranteed benefits." See Notice of Sufficiency. The
PBGC designated as the date of termination 1 July 1984. Id.
Also on 25 April 1985, the PBGC approved use by Stevens of
participating annuity contracts to cover Retiree and On-Going
Plan liabilities accrued through 30 June 1984. 25 April 1985
PBGC Letter to Stevens.
On 25 June 1985, the IRS notified Stevens it had determined
termination of the Retiree Plan did not adversely affect
qualification of the Retiree Plan for tax-exempt status.
See 25 June 1985 IRS Letter to Stevens. The IRS further advised
Stevens it was required to continue filing the Form 5500 for
the Retiree Plan until all Retiree Plan assets were
On 27 June 1985, Stevens issued letters to Salaried Plan
participants informing them the restructuring and recapture of
assets was approved by the PBGC. See 27 June 1985 Stevens
Letters to Participants. The letters also informed Salaried
Plan participants some recaptured assets would be used to
increase their benefits and the payment of such increases would
commence in August 1985. Id.
Because the spin-off and termination were effective 1 July
1984, "the status of benefits [under the On-Going Plan accrued
through 1 July 1984] was `frozen' as of that date and the
respective rights and obligations determined accordingly."
Anderson Cert., ¶ 18. The annuity contract purchased for the
On-Going Plan satisfied liabilities accrued as of 30 June 1984.
Benefits under the On-Going Plan, including early retirement
benefits for employees who retired after 1 July 1984, began to
accrue only as of 1 July 1984. Anderson Cert., ¶¶ 10, 12,
20-21. The On-Going Plan carried future liability in the amount
of $29 million following the reversion. Zerrenner Dep. at 319.
Because the Retiree Plan was terminated effective 1 July
1984, it did not accrue any benefits or accept any members
after that date. Anderson Cert., ¶ 20. Stevens continues to
file annually a Form 5500 with the IRS for the Retiree Plan
pursuant to IRS instructions because it has not distributed all
benefits payable under the Retiree Plan. Anderson Cert., ¶ 23;
25 June 1985 IRS letter to Stevens.
Stevens issued plan documents for the Retiree Plan and for
the On-Going Plan. Defendants' Memorandum at 18. The plan
documents for the On-Going Plan give its effective date as 1
July 1984 and describe it as "a continuation, revision and
modification of the Plan first effective January 1, 1948."
On-Going Plan at 1. They further state:
As of July 1, 1984, the former Plan was split
into two plans, (1) the Retired Employees
Retirement Salaried Plan of J.P. Stevens & Co.,
Inc. and Subsidiaries, designed to cover all
Members under the former Plan who were retired as
of June 30, 1984, and (2) this Plan, designed to
cover all other Members of the former Plan.
The plan documents for the Retiree Plan also give its
effective date as 1 July 1984. Retiree Plan at 1. The Retiree
As of July 1, 1984, the former Plan was split
into two plans, (1) this Plan, designed to cover
all Members under the former Plan who were retired
as of June 30, 1984, and (2) the Retirement
Salaried Plan of J.P. Stevens & Co., Inc. and
Subsidiaries, designed to cover all other Members
of the former Plan. This Plan shall be frozen and
admit no new members and shall exist only to pay
out benefits to its Members as of July 1, 1984.
Beginning in 1983, Stevens attempted to increase its
profitability by abandoning less profitable areas of its
business. Durst Cert., ¶ 6. Stevens closed several of its
plants in 1984 and 1985. Durst Cert., ¶ 7. With these
divestitures, Stevens decreased in size by approximately forty
percent. Durst Cert., ¶ 8. Corporate staff, i.e., staff who
serviced the company as a whole, were not affected by the
divestitures. Durst Cert., ¶¶ 8, 17. Senior managers therefore
agreed at a February 1986 meeting to make a reduction in
corporate staff proportionate to the non-corporate reductions
resulting from the 1984 and 1985 divestitures by using a
voluntary retirement incentive (the Window). Durst Cert., ¶ 9.
Corporate staff were identified using a functional approach
whereby staff were deemed corporate if they performed services
for Stevens as a whole. Durst Cert., ¶ 17; Zerrenner Dep. at
176. Thus, certain presidents of divisions who were performing
corporate services at the time the Window was offered were
deemed eligible, including Irwin Gusman and W.W. Stasney. Id.
In addition, because it was decided to offer the Window to all
corporate employees who met the age guidelines, offerees
included some corporate employees who were not performing
surplus functions. Zerrenner Dep. at 177-78.
Members of the International Division, of which Lynch was a
member, were not offered the Window. The International Division
was regarded not as a corporate area but as a division, in that
its financial results were reported individually, it submitted
its own profit and loss reports and it had its own division
president. Id. The divisions of Stevens were held individually
accountable for their financial results and division presidents
were responsible for cost-cutting decisions, including the
decision to terminate staff. Durst Cert., ¶ 18; Zerrenner Dep.
at 171. The unprofitability of the divisions or their need to
reduce staff were not considered in devising eligibility
criteria for the Window. Id.
By April 1986, it was determined the Window would be offered
to all staff designated as "corporate" who were eligible for
retirement. Durst Cert., ¶ 21. It was decided that corporate
employees who would be required to retire in 1986 in any event
because of their age, including Paul Nipper, would be included,
and it was decided not to impose a salary limit on eligible
corporate staff. Id. A "five plus five" program with an
eligible age of fifty years old was agreed to, whereby each
participant would receive an additional five years of credited
service and age under the pension benefits formula of the
On-Going Plan. Id. In addition, participants between the ages
of 59 and 62 would receive an additional $500 a month under the
The Stevens Board of Directors gave its authorization for the
Window at a 15 May 1986 meeting. Durst Cert., ¶ 22. The Stevens
Board of Directors ratified the Window as an amendment to the
On-Going Plan by unanimous written consent on 21 January 1987.
Durst Cert., ¶ 24; 21 January 1987 Board Resolution. The 21
January 1987 Board Resolution made the Window amendment
effective 19 May 1986. 21 January 1987 Board Resolution.
On 19 May 1986, after receiving authorization for the Window
by the Board of Directors, Stevens sent a letter announcing the
Window to eligible corporate staff along with an election form.
See 19 May 1986, Stevens Letter to Window Offerees. The letter
stated the Window was available to corporate employees aged 50
by year-end and older with at least one year of service who
decided between 19 May 1986, when the letter was issued, and 30
June 1986 to retire. Id. The letter described the Window
benefits, and stated:
If you elect to take early retirement during the
Window period, your most likely retirement date
will be August 1, 1986. . . . If you elect to
retire as of August 1, 1986, the Company may
request that you stay for a few months to complete
special assignments. However, there will be very
few of these exceptions and only with the approval
of the Chairman's office.
In the end, seventy-seven corporate employees out of
approximately two hundred and twenty offerees elected the
Window. Durst Cert., ¶ 29; Defendants' Memorandum at 28.
Stevens retained fifteen to twenty Window participants beyond
the 1 August 1986 designated retirement date in order to
complete work in progress. Durst Cert., ¶ 31. Given the number
of acceptances, Buck determined the value of benefits under the
Window to be $2,526,603. Durst Cert., ¶ 30.
Lynch was terminated on 15 January 1988 from his position at
Stevens as Administrative Manager for the International
Division. Lynch Cert., ¶ 2. Lynch's supervisor told him on 5
January 1988 that although he received a $10,000 job
performance bonus during 1987, Stevens eliminated his job. Id.
On 11 January 1988, apparently after being notified of his
pension benefits, Lynch wrote to Linda Harris ("Harris"), the
personnel manager of Stevens, to express disappointment at not
receiving Window benefits and to request consideration for the
benefits. 11 January 1988 Lynch Letter to Harris. Harris
responded to Lynch on 27 January 1988 to advise him he would
not be offered the Window because the Window had been offered
to corporate employees only for retirements which occurred
prior to 30 June 1986. 27 January 1988 Harris Letter to Lynch.
In addition, the Pension Committee considered the request of
Lynch and determined on 9 March 1988 to deny him Window
benefits because he was ineligible when the benefits were
originally offered and because he had not elected to retire by
1 July 1986, the date the Window period expired. Durst Cert.,
¶ 32; 9 March 1988 Salaried Committee Minutes.
On 29 January 1988, Lynch filed the Charge of Discrimination
with the EEOC. See Charge of Discrimination. He stated in the
Charge of Discrimination:
I have been denied the opportunity of accepting
[the Stevens] Early Retirement Package extended to
corporate employees, and my position has been
terminated effective January 15, 1988. The
respondent based its denial of early retirement on
my alleged non-corporate status. I believe I have
been discriminated against because of my age (59
1/2) in violation of the Federal Age
Discrimination in Employment Act of 1967, as
Id. Lynch states the "EEOC did not make any findings" with
respect to his Charge of Discrimination. Lynch Answers to
Interrogatories at 2.
In support of their Motion, as it relates to the
restructuring of the Salaried Plan and the recapture of assets
deemed surplus, the Defendants argue the restructuring and
recapture were effected in accordance with the provisions of
the Salaried Plan and of ERISA. They further argue the
recapture was legal because all accrued benefits through the
effective date of the restructuring had been met by the
purchase of the annuities.
In support of their Motion, as it relates to the Window, the
Defendants argue the Window does not violate the ADEA because
while it makes distinctions based on age, it is exempted from
challenge under the ADEA by 29 U.S.C. § 623(f)(2) as a bona
fide benefits plan. The Defendants also assert Lynch was denied
Window benefits because he was not eligible under the terms of
the Window as an employee of the International Division and
because he missed the application deadline for Window benefits.
In opposition to the Motion as it relates to the Window,
Lynch variously argues the Window is not a bona fide pension
plan within the meaning of § 623(f)(2) because it discriminates
against employees who are not senior management employees and
because it was targeted against employees over the age of
fifty, or employees in the class protected by the ADEA. He also
challenges the bona fides of the Window on the ground that
several high level non-corporate area managers were offered the
Window and permitted to work past the retirement date mandated
under the Window as exceptions to its terms. With respect to
the denial to him of Window benefits, Lynch asserts he should
have been offered Window benefits because he was eligible as a
corporate area employee.
To prevail on a motion for summary judgment, the moving party
must establish "there is no genuine issue as to any material
fact and that [it] is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(c). The district court's task is to determine
whether disputed issues of fact exist, but the court cannot
resolve factual disputes in a motion for summary judgment.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106
S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986). All evidence
submitted must be viewed in a light most favorable to the party
opposing the motion. See Matsushita Electric Industrial Co. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89
L.Ed.2d 538 (1986). See also Todaro v. Bowman, 872 F.2d 43, 46
(3d Cir. 1989); Joseph v. Hess Oil, 867 F.2d 179, 182 (3d Cir.
Although the summary judgment hurdle is a difficult one to
overcome, it is by no means insurmountable. As the Supreme
Court has stated, once the party seeking summary judgment has
pointed out to the court the absence of a fact issue,
its opponent must do more than simply show that
there is some metaphysical doubt as to the
material facts. . . . In the language of the Rule,
the non-moving party must come forward with
`specific facts showing that there is a
genuine issue for trial.' . . . Where the record
taken as a whole could not lead a rational trier of
fact to find for the non-moving party, there is no
`genuine issue for trial.'
Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1356 (emphasis in
original, citations and footnotes omitted).
The court elaborated on the standard in Anderson: "If the
evidence [submitted by a party opposing summary judgment] is
merely colorable . . . or is not significantly probative . . .
summary judgment may be granted." 477 U.S. at 249-50, 106 S.Ct.
at 2511 (citations omitted). The Supreme Court went on to note
in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91
L.Ed.2d 265 (1986): "One of the principal purposes of the
summary judgment rule is to isolate and dispose of factually
unsupported claims or defenses, and we think it should be
interpreted in a way that allows it to accomplish this
purpose." Id. at 323-24, 106 S.Ct. at 2553 (footnote omitted).
Thus, once a case has been made in support of summary judgment,
the party opposing the motion has the affirmative burden of
coming forward with specific facts evidencing the need for
trial. See Fed.R.Civ.P. 56(e). See also Aronow Roofing Co. v.
Gilbane Bldg. Co., 902 F.2d 1127, 1128 (3d Cir. 1990) ("summary
judgment will be granted where the non-moving party fails
to `establish the existence' of an element essential to the
A. The Restructuring and Reversion
1. Basis for Remedy Claimed by Lynch
Lynch contends a common law right of action for equitable
restitution exists under ERISA and entitles him to demand
restoration of the reversion to the On-Going Plan. Opposition
at 66-68 (citing, among other cases, Plucinski v. I.A.M. Nat.
Pension Fund, 875 F.2d 1052, 1056-58 (3d Cir. 1989); Carl
Colteryahn Dairy, Inc. v. Western Pennsylvania Teamsters &
Employers Pension Fund, 847 F.2d 113, 120-22 (3d Cir. 1988),
cert. denied, 488 U.S. 1041, 109 S.Ct. 865, 102 L.Ed.2d 989
(1989); Van Orman v. American Ins. Co., 680 F.2d 301, 311-314
(3d Cir. 1982); Murphy v. Heppenstall Co., 635 F.2d 233, 237-39
(3d Cir. 1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71
L.Ed.2d 293 (1982)). Lynch then argues:
Stevens should, therefore be, ordered to restore
its illegal profits plus a 9 percent (9%) assumed
investment rate of return on top of such restored
figure since such figure was used as an actuarial
assumption. This equitable restitution, however,
only provides for restoration of ill-gotten gains
and the disgorgement of such profits. The Court
should also fashion a remedy of punitive damages
in order ...