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Hurd v. Illinois Bell Telephone Co.

June 27, 1956


Author: Lindley

Before MAJOR, LINDLEY and SWAIM, Circuit Judges.

LINDLEY, C.J.: These appeals from judgments in favor of defendants present identical questions. At the time of the oral argument we entered an order permitting one Harry C. Bordwell to intervene as a party appellant in No. 11646, subject to the further order of the court. We shall allow that order to stand, despite any doubt pervading its propriety, but feel that our determination in this respect should be clarified.

The original action was brought by plaintiff Hurd, retired employee of defendant Illinois Bell Telephone Company, who asserted a claim predicated upon the Bell retirement pension plan on behalf of himself and as the representative of all other pensioners similarly situated. His efforts in this respect appear to have been financed by funds collected from numerous members of the supposed class. It further appears that certain parties now doubt Hurd's faithfulness in prosecuting the appeal on behalf of the represented class, and petitioner, a member of the class, asserts that he is entitled of right, under the provisions of Rule 24(a)(2) of the Federal Rules of Civil Procedure, 28 U.S.C., to intervene to insure that he and other members of the class will not be injured should Hurd, by his actions, jeopardize the effective prosecution of this appeal.

We think this argument is hardly tenable, inasmuch as it presumes and depends upon the existence of a real class action. Here we are dealing with a spurious class action, containing common elements of fact and law, but based upon separate and individual claims growing out of the same transaction. Hughes v. Encyclopaedia Britannica, 199 F.2d 295 (CA-7); Kainz v. Anheuser-Busch, Inc., 194 F.2d 737 (CA-7). In such an action, separate judgments are entered "and no one is bound unless he is present." Kainz v. Anheuser-Busch, Inc., 194 F.2d at 742. Therefore, petitioner is not bound by the judgment and is not, we believe, entitled to intervene on appeal as a matter of right.

But, although intervention after judgment is not to be lightly permitted, this cause is so fraught with elements of possible prejudice to petitioner and other pensioners similarly situated, that we, in the exercise of a sound discretion conclude that our order permitting petitioner to intervene should be allowed to stand. This view is fortified by the fact that defendants do not loudly contend that this disposition of the question will in any way prejudice their rights. They base their resistance to Bordwell's petition largely upon the asserted lack of merit of petitioner's claim of right. For these reasons, our order will stand and petitioner Bordwell is added as a party plaintiff-appellant in appeal No. 11646.

The plaintiffs in No. 11645 are retired former employees of either defendant Western Electric or defendant American Telephone and Telegraph Company. As we have previously stated, the plaintiffs in No. 11646 are retired former employees of defendant Illinois Bell. These parties are hereinafter referred to as plaintiffs and defendants without distinction between or identification of the parties in the separate appeals.

Each appeal involves the validity of defendants' interpretation and administration of the company sponsored retirement benefits plan commonly known as the Bell System Pension Plan. In 1913, each defendant executed and put into effect a retirement pension plan for its employees. The three plans involved are identical and are hereinafter referred to as the Bell plan or the pension plan, without distinction. This plan is a unilateral arrangement whereby each defendant undertook to provide retirement benefits to its employees, and, for this purpose, to allocate a determinable sum annually to a fund set aside for that purpose. No employee contribution is required. Each defendant has deposited sums allocated to its plan with defendant Bankers Trust Company under separate trust agreements whereby the latter company has undertaken to disburse the funds in accord with the orders of the respective settlors. No question of breach of trust by Bankers is presented; it is a nominal defendant only, and is not included in the generic term defendants when used herein.

The plan provided for the payment of pensions to each employee retiring after specified periods of employment, in an amount to be computed upon the basis of a percentage of such employee's average wage multiplied by the number of the years of his employment. In 1914, in apparent anticipation of public pension or benefits to aged persons, the plan was amended by the addition of a provision in the following language, which now appears as Section 8(27):

"In case any benefit or pension shall become payable under the laws now in force or hereafter enacted of any State or Country to any employee of the Company or his beneficiaries under such laws, the excess only, if any, of the amount prescribed in these Regulations above the amount of such benefit or pension prescribed by law shall be the benefit or pension payable under these Regulations. * * *"

With the advent of the Social Security Act, 42 U.S.C. §§ 301, et seq., defendants amended the plan in 1940 by inserting therein a new paragraph, Section 8(28), which provided that, upon the date when any pensioner becomes "entitled" to receive Old Age and Survivors Insurance benefits under the Act, "the amount of his monthly service pension otherwise payable under this Plan shall be reduced by one-half of said 'primary insurance benefit' (OASI) * * *." This provision was not modified in any material detail until 1952 when the section was amended in certain respects which will be discussed subsequently.

Plaintiffs as retired employees, are beneficiaries under the plan by reason of their employment for the requisite number of years. Each of those who retired within the decade from 1940 to 1950, since retirement, has received monthly pension payments in accord with defendants' interpretation and application of the plan i.e., in an amount computed consistently with the basic arithmetical formula prescribed in the plan, less one-half of the monthly OASI benefit to which the employee was "entitled" at the date when the monthly pension check was payable. In other words, upon retirement, the amount of an employee's monthly gross pension is finally fixed by application of the formula, but the deduction therefrom on account of OASI entitlement is scaled upward as Congress increases the primary OASI benefits and the net pension payment from the fund is commensurately scaled downward. Until 1952, Section 8(28) was amended in form, but not in substance, to comport with amendments of the Social Security Act.

Plaintiffs in each case set out these facts; each asked for judgment in the aggregate amount by which the pension payments received by him since retirement have been reduced by deductions on account of OASI benefits. The theory of each cause rests upon basic contentions, first, that the pension plan, and, specifically, Section 8(27) did not contemplate deduction of OASI benefits from private pension payments, and, second, that interpretation of the plan to permit the deduction of a private industry pension because of the entitlement to, or receipt of, OASI benefits is a violation of the Social Security Act, specifically Section 207 thereof, 42 U.S.C. § 407. A number of contentions are asserted by plaintiffs, but all are parts or variations of those major premises.

Our task is materially aided by the exhaustive opinion written by Judge Hoffman. He examined critically and in detail each contention relied upon by plaintiffs, examining the pertinent provisions of the plan and construing them in the light of the intention of the parties and as affected by the application of numerous legal authorities. He also analyzed the relevant provisions of the Social Security Act and adopted a construction of the statute resting upon an exhaustive analysis and application of many authorities.

We have examined the record, the extensive briefs of the parties and the authorities upon which their reliance is placed and are convinced that the trial court's decision is sound. We have found no authority which impinges upon its reasoning and conclusions. No helpful purpose can be served by repeating what has already been said by the judge in his opinion reported as Hurd v. Illinois Bell Telephone Company, 136 F.Supp. 125. ...

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