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June 23, 1992

EDWARD B. THOMPSON and DARREL D. FOWLER, for and in behalf of all others similarly situated, Plaintiffs,

The opinion of the court was delivered by: MARYANNE TRUMP BARRY



 This litigation involves two former airline pilots who, after reaching the age of 60, sought both to continue to work as second officers and to receive retirement benefits to which they believed they were entitled. After being informed that they could not receive such benefits until they had, in fact, retired, Edward Thompson and Darrel Fowler ("plaintiffs") filed a complaint against their employer, Northwest Airlines, Inc. ("Northwest"); the insurance company responsible for paying the benefits, The Prudential Insurance Company of America ("Prudential"); and the pilots' union, the Air Line Pilots Association International ("ALPA"). The complaint alleges that the refusal to pay plaintiffs what they believe they are owed - and when - is either a breach of contract under Minnesota law (Count I) *fn1" or, if applicable, a violation of the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. ("ERISA") (Count II). A violation of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. ("ADEA") (Count III) is alleged as well.

 Presently before the Court are the various motions and cross-motions of the parties. *fn2" For the reasons which follow, plaintiffs' motion for partial summary judgment will be denied, and the motions for summary judgment by Prudential and Northwest will be granted.


 Plaintiffs were employed as pilots by Republic Airlines, Inc., ("Republic") which was merged into Northwest in 1986. Upon reaching the age of 60, plaintiffs, by virtue of Federal Aviation Administration regulations, were prohibited from continuing as pilots or first officers (co-pilots) on commercial aircraft. See 14 C.F.R. § 121.383(c)(1991). They therefore advised Northwest that although they could no longer remain employed as pilots, they wished to "bid down" to another position and continue to work for Northwest as second officers (flight engineers). (Thompson Aff., P 5; Carlson Aff., P 3) Plaintiffs claim to have expected that they would begin receiving their retirement benefits at this juncture, regardless of whether they remained in Northwest's employ.

 The annuity plan under which plaintiffs claim immediate entitlement to payment is the direct result of the decision to terminate an earlier benefits plan. Initially, plaintiffs were participants in the Republic Pilots Retirement Income Plan ("Republic Plan"), which provided in Section 5.8 for the nonpayment of benefits in the event of continued employment beyond the usual retirement age of 60. However, in 1984 Republic and ALPA decided to terminate the Republic Plan and annuitize the accrued benefits thereunder. Prudential became the annuity provider with Republic paying Prudential the appropriate premiums until June 28, 1985. Thereafter, on June 29, 1985, Republic gave notice of its intent to terminate the Republic Plan and did so effective July 31, 1985.

 There were continuing negotiations through 1986 between Republic, Prudential, ALPA and, subsequently, Northwest, the successor to Republic. A formal group annuity contract, GA-4921 ("GA-4921"), which funded the benefits under the by then defunct Republic Plan, was executed by Northwest on December 29, 1986 and by Prudential on February 26, 1987. In January, 1987, individual annuity certificates pertaining to GA-4921 were issued by Prudential to the participants of the Republic Plan. Plaintiffs received their annuity certificates from Northwest, although they did not receive a copy of the contract. (Thompson Aff., P 2; Fowler Aff., P 2; 2d Thompson Aff., P 24) The letter written to each participant pointed out that the enclosed annuity certificate was subject to the terms of the contract and plan. (Thompson Aff. Exh. 1)

 The certificate provides that: "Your annuity may be suspended if the Contract-Holder [Northwest] notifies Prudential that the Plan provides for it." (Thompson Aff. Exh. 1) It provides further that "The contract tells what Prudential is obliged to do regarding you and your benefits. . . . Prudential guarantees to make the payments described in this Certificate under the terms of the Plan and the Contract." (Id.)

 Although the annuity contract - GA-4921 - states that the "first monthly payment of any Life form of Annuity is payable to an annuitant on his Annuity Commencement Date if he is then living," it also specifically provides for an exception to this rule, namely, where an employee continues his or her employment. Section 2.10 of GA-4921 states:

Suspension of Annuity Payments (other than for Disability):

 (GA-4921, addendum to Pl. Notice of Motion) (emphasis added).

 Over the years, the various Republic plans and the amendments thereto have consistently provided that employees were entitled to benefits only upon retirement. The 1980 Republic Plan, for example, provided that:

The Termination of Employment of a Participant at or after his normal Retirement Date [defined as the last day of the month in which the Participant attains age 60] for any reason other than his death shall be deemed to be a retirement. Upon such retirement he shall be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month next following his Termination of Employment . . . The monthly amount of the pension shall be equal to his Accrued Monthly Pension.

 (Id. at § 5.2). The 1985 amendments to the Republic Plan remained consistent on this point. See 6/30/85 Republic Plan §§ 5.2(b), (e), 5.8 and 5.13; Merow Aff. P 5 & Exh. E. *fn3"

 In the fall of 1989, plaintiffs informed Northwest that they were about to reach age 60 and wished to continue in Northwest's employ as second officers. Plaintiffs also informed Northwest that they anticipated receiving their annuity benefits under the annuity contract as of their normal retirement date, i.e. age 60. See Carlson Aff. P 3; Pl. Exh. 2-4). To date, plaintiffs have not received the benefits they seek because, although they have passed age 60, they remain in Northwest's employ.


 As noted earlier, the complaint alleges a violation of ERISA if GA-4921 constitutes an ERISA plan, or a breach of contract under Minnesota law if it does not. It alleges, as well, a violation of the ADEA. Prudential and Northwest have moved for summary judgment as to each count of the complaint and plaintiffs have moved for partial summary judgment on their contract claim.


 Preliminarily, the parties disagree as to whether, following the approved termination of the Republic Plan under Title IV of ERISA, there would remain Title I ERISA obligations pertaining to that plan. This court need not resolve this dispute, however, because GA-4921 does not constitute an ERISA plan under 29 C.F.R. § 2510.3-3(b)(1991) and (d)(2)(ii), the regulations which the parties agree control whether the annuity plan constitutes an ERISA plan. See Pl. Br., at 47. *fn4"

 Title I is inapplicable to "any plan, fund or program . . . under which no employees are participants covered under the plan." 29 C.F.R. § 2510.3-3(b). An employee "is not a participant covered under an employee pension plan . . . if --

 (A) the entire benefit rights of the individual --

(1) are fully guaranteed by an insurance company . . . and are legally enforceable by the sole choice of the individual against the insurance company . . .; and
(2) a contract, policy or certificate describing the benefits to which the individual is entitled under the plan has been issued to the individual.

 29 C.F.R. § 2510.3-3(d)(2)(ii).

 Plaintiffs contend that GA-4921 constitutes an ERISA plan because the suspension provision in the agreement "may mean that plaintiffs' 'entire benefits rights' are not guaranteed under GA-4921 and are not legally enforceable by plaintiffs' 'sole choice.'" (Pl. Br. in support, at 7) Furthermore, because § 2.10 states that Northwest must give notice to Prudential in order to suspend payments, plaintiffs argue that this leaves Northwest with "residual discretionary authority" such that the benefits are not fully guaranteed by the insurance company, nor is legal recourse solely against the insurance company. This contention fails for two reasons. First, the Republic Plan specifically provides for the plan sponsor to suspend benefits if the participant continues to be employed beyond age 60, and, thus, GA-4921 continues the benefit obligations "in the form that would be paid under the plan upon retirement." See 29 C.F.R. § 2617. *fn5" This is so regardless of whether the suspension provision can properly be given retroactive effect because the plan has consistently provided for the payment of benefits "upon retirement." *fn6"

 Plaintiffs' contention also fails because a suspension of benefits is consistent with a full "guarantee" by an insurance company with plaintiffs able to legally enforce that guarantee at their "sole choice." What is guaranteed is an individual's "entire benefit rights" and these rights include "the participant's nonforfeitable benefits under the plan." 29 C.F.R. § 2618.15. A "nonforfeitable benefit" is a "benefit for which the participant has satisfied the conditions for entitlement under the plan . . . ...

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