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January 11, 1952


The opinion of the court was delivered by: Campbell, District Judge.

The complaint in this action alleges that the plaintiffs are former employees of defendant; that, on February 1, 1944, defendant put into effect a certain retirement income plan for its employees; that all contributions were to be made by defendant; that such contributions were to be used to purchase retirement insurance with the Equitable Life Assurance Society of the United States; that said plan was an inducement to the employees to continue in the employ of the defendant; that defendant failed to make the necessary deposits with Equitable for the years 1948 and 1949, thereby depriving plaintiffs of their benefits for said years. Plaintiffs bring suit as a class action seeking, on behalf of themselves and all other employees of defendant, to compel defendant to pay the sums of money necessary to continue in effect the Retirement Plan for the years 1948 and 1949, together with the amounts necessary to purchase retirement income for the years of service prior to the entry into the Plan.

Defendant moves to dismiss the action on the following grounds:

1. The Court is without jurisdiction for the reason that the interest of each of the plaintiffs is less than the jurisdictional amount of $3,000, and this is not a true class action wherein the claims of all the members of the class may be aggregated to reach the jurisdictional amount.

2. The complaint fails to allege facts showing that the plaintiffs are proper representatives of the class which they purport to represent and, on the contrary, they are not such representatives of the class described in the complaint so as to entitle them to maintain this suit.

3. The complaint fails to state a cause of action for the following reasons:

(a) Plaintiffs fail to allege facts necessary to make out an equitable estoppel in their favor and there is, in fact, no basis for an equitable estoppel.

(b) There exists no contract between plaintiffs and defendant upon which to base an action at law; at most, defendant's employee benefit plan constituted an unenforceable gratuity.

(c) Even construing the Plan as a contract between plaintiffs and defendant, plaintiffs are bound by its terms and precluded from maintaining this action.

(d) Even construing the Plan as a contract and refusing to give effect to its express provisions sufficient notice was given plaintiffs by defendant to constitute an effective termination pursuant to the terms thereof.

In disposing of the motion to dismiss, the Court will assume that this is a true class action and will then proceed to consider the question of whether the complaint states a claim upon which relief can be granted. In that regard, an exposition of the Retirement Plan and the defendant's administration of it (as revealed in defendant's affidavits and exhibits submitted in connection with the motion) should be made. In substance, the Plan provided that employees who, on February 1, 1944, had completed two years of continuous service and had attained the age of thirty would become participants under the Plan as of that date, provided that they had not then attained their sixtieth birthday. New employees and employees with less than two years of service would become eligible on the February 1st next preceding their completion of two years continuous service and the attainment of their sixtieth birthday. All contributions to the Plan were to be made by defendant. These contributions were to be paid to Equitable to purchase retirement income for eligible employees according to a formula applied to each employee. The details of this formula are set out in Section 6 of the plan. Briefly, the amount of retirement income purchased for each employee each year was computed on the basis of the employee's monthly average earnings for the preceding calendar year multiplied by a percentage factor determined by his age at the time of his entry into service. A further provision provided for the purchase over a period of years of retirement income based on years of service occurring prior to the adoption of the Plan. When the employee attained the age sixty-five, he would then receive an annuity determined by the amount of contributions that had been made for him. Optional provisions were provided with respect to continuation of payments to beneficiaries designated by the employee and certain death benefits also accrued under certain conditions. Section 10 of the Plan provided that if the service of any employee participating in the plan was terminated prior to the completion of five years of employment, he would receive no benefit under the Plan; it provided that if an employee's service as terminated for any reason after five years of service, but before attainment of age forty-five, he would receive the cash value of all retirement income purchased for him prior to termination of service; it provided that if the employee's service was terminated for any reason after five years of service and attainment of forty-five years, he would receive a paid-up annuity covering all retirement income purchased for him prior to termination of service.

Pursuant to the Plan, defendant entered into a Group Annuity Contract with Equitable to take effect on February 1, 1944. Equitable thereupon issued individual participation certificates to those employees coming under the Plan. Payments were made by defendant to Equitable for all participants on February 1st of the years 1944, 1945, 1946 and 1947. In 1948 defendant purchased the retirement income under the Plan at the end of the year instead of at the beginning and, therefore, the payments for 1948 were made in January of 1949.

Early in 1949 defendant considered a revision of the Plan which would change it to a joint employer-employee contribution plan and increase the retirement benefits provided. (Defendant's exhibits indicate that intermittent notices of the proposed revisions were given to the employees during the ensuing year.) The revised retirement plan, providing greater employee benefits and calling for partial contributions by the participating employees, was placed into effect, dated back to January 1, 1950. Defendant purchased no annuities under the old Plan for the year beginning February 1, 1949. However, defendant asserts that it continued, and is continuing, to purchase remaining unpurchased annuities for past employee service pursuant to Section 6 of the old Plan.

Pertinent sections of the old Plan provided:

"Section 12. Certificates. The Equitable will issue for delivery to each Participant who is covered under the Plan a certificate of his inclusion under the Group Annuity Contract issued to the Company by the Equitable. Benefits under the Plan will be governed in every respect by the Group Annuity Contract. The only rights or benefits that any Participant may have under the Plan shall consist only of those rights and benefits purchased for him ...

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