Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 76 C 3766 -- John Powers Crowley, Judge .
Before Pell, Circuit Judge, Gewin, Senior Circuit Judge,*fn* and Wood, Circuit Judge.
The three plaintiffs, Robert Fremont, Ronald McCarthy, and Henry Dybal, brought this action against their former employer, the Halo Lighting Division of McGraw-Edison Company (Company), to recover benefits allegedly due them under the Company's Profit Sharing and Retirement Trust (the Plan).*fn1 The Company had denied them the Plan benefits on the ground that their theft of Company property made them ineligible under the Plan for the benefits. The plaintiffs asserted that Section 203 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1053, prohibited forfeiture of their benefits regardless of their thefts. The applicability of § 203 to the plaintiffs was disputed by the Company on various theories. The district court granted summary judgment in favor of McCarthy and against Fremont and Dybal. Both sides appealed.
The facts preceding the dispute in this case are as follows. In June 1959, a profit sharing plan was established for executives and employees of Halo Lighting Products, Inc. In June 1967, Halo was acquired by McGraw-Edison Co. Halo thereafter operated as a division of McGraw-Edison and the Halo profit-sharing plan continued as a separate entity. Halo employed Fremont in 1956, McCarthy in 1961, and Dybal in 1970.
Fremont, who was a Plan trustee for 16 years, left the Company in late 1975 to form his own business. Although the actual date of his resignation is an important issue in this appeal which we will discuss Infra, it is undisputed that during November 1975, he negotiated a voluntary termination of his employment under which the Company paid him $130,000 and agreed to continue to employ him and pay him a salary at least through the end of 1975.
During October and November of 1975, Fremont and McCarthy, unknown to the Company, stole, among other things, computer printouts, microfilm cards, customer lists, and price lists from the Company, some of which included valuable trade secrets and confidential information. Dybal, who sometime in 1976 also stole Company property, resigned on March 19, 1976, and joined Fremont. McCarthy followed on May 3, 1976. The Company was unaware of the thefts until after all three had resigned.
In July 1976, the Company filed suit in Illinois state court against Fremont and his new company to enjoin them, Inter alia, from using trade secrets and from raiding Company employees. During the course of that litigation, Fremont for the first time admitted the thefts. After he made these admissions, the parties settled on August 19, 1976, and Fremont repaid to the Company everything he received under the termination agreement, including the salary he received for the period after November 11, 1975, the date of the termination agreement. The settlement expressly left unresolved the question of the plaintiff's profit-sharing benefits under the Plan.
On September 23, 1976, the plaintiffs made written claims for their benefits. These claims were denied by the Company. This action followed. Because the rights of the three plaintiffs are somewhat different under ERISA as a result of different resignation dates, years of service, etc., we will address their claims separately.
The cornerstone of Fremont's claim for the benefits is § 203(a) of ERISA which provides in relevant part:
(a) Each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection.
(2) A plan satisfies the requirements of this paragraph if it satisfies the requirements of subparagraph (A), (B), or (C).
(A) A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued ...