Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. IP 78-644-C -- William E. Steckler, Judge .
Before Fairchild, Chief Judge, Nichols, Judge,*fn* and Cudahy, Circuit Judge.
This appeal involves an action under the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. § 621 et seq. (1976 & Supp. II 1978), brought against Porter Paint Company (the "Company") by its former employee, plaintiff George S. Smart, Jr. The district court granted the Company's motion for summary judgment on the grounds that the Company had a defense to the action under § 4(f)(2) of the ADEA, 29 U.S.C. § 623(f)(2) (1976).*fn1
Smart argues on appeal that § 4(f)(2) of the ADEA does not provide the Company with a complete defense because the Company did not meet the requirements of that section. More specifically, he argues that the Company did not "observe the terms" of its pension plan when it involuntarily terminated him shortly after his 60th birthday. He also argues that the amendment of the Company's plan to provide for a normal retirement age of 60 constitutes a "subterfuge" and that the amended plan is not "bona fide" within the meaning of § 4(f) (2). Smart also contends that the amendments to § 4(f)(2), which became effective in 1978,*fn2 providing, inter alia, that an employee benefit plan shall not require or permit the involuntary retirement of any individual between the ages of 40 and 70, should be given retroactive effect so as to make § 4(f)(2) unavailable as a defense in this case.
The Company filed several affidavits and other documentary evidence setting forth certain facts in support of its motion for summary judgment. Smart filed no affidavits in opposition but relied upon the failure of the Company's affidavits to establish as a matter of law that § 4(f)(2) provided a complete defense. We vacate the district court order granting summary judgment and remand for further proceedings.
Roy D. Krueger, Director of Personnel for the Company, recited the following facts in his affidavit. Smart began his employment with the Company on November 11, 1935, as a salesman. In 1954, he was promoted to the position of district manager of the Company's Indiana district and remained in that position until his involuntary retirement on August 1, 1976.
The Company's retirement plan ("Plan") was created on December 31, 1959, and remained in existence until December 31, 1978. The Plan was amended, effective January 1, 1976, to reduce the normal retirement age from 65 to 60 years, and to further provide that, at the option of the Company, an employee could continue working beyond his normal retirement date. In his affidavit Krueger specifically stated that
The amended (P)lan was drafted and approved by legal counsel as complying with all applicable laws including the Age Discrimination in Employment Act. In amending the Plan, the Company relied in good faith on such approval by legal counsel and his understanding of the Department of Labor's position and interpretation that mandatory retirement irrespective of age pursuant to a bona fide pension plan or retirement plan was lawful under the ADEA.
The Company's Plan has regularly paid substantial benefits to the employee/members who retire under it.
When the Plan was amended, the Company was unaware that Smart was not going to retire voluntarily at age 60 because for some time prior to January 1, 1976, Smart had given every indication that he was going to retire voluntarily at 60. When Smart indicated that he did not want to retire at 60, the Company followed its normal procedure of consulting with his supervisors and accepting their recommendations. On the basis of the recommendation of certain of his supervisors, the Company involuntarily retired Smart on August 1, 1978, his normal retirement date under the Company's amended Plan. Thus, Smart was retired pursuant to the terms of the Company's amended Plan, which, as indicated, provided for retirement at the normal retirement age of 60, unless the Company exercised its option to allow the employee to continue to work beyond his normal retirement date. Pursuant to the retirement income provisions of the Plan, Smart receives $12,219.48 annually as retirement benefits.
For the period from January 1, 1976, until the date of the Plan's termination on December 31, 1978, Smart was the only employee who involuntarily retired on his normal retirement date (at age 60). During this same period 24 employees attained their normal retirement date, and of these 18 were permitted to continue working beyond that date. One, Smart, was involuntarily retired; the remaining 5 employees retired voluntarily on their normal retirement date. One of the 18 employees who continued working beyond their normal retirement date was involuntarily retired six months later.
Arvil L. Short, Vice President of Trade Sales for the Company, indicated in an affidavit that the Company was, and had been for some time, disappointed with Smart's performance as a district manager but that the Company had not terminated Smart because he had been a faithful employee for 30 years and had been an excellent salesman. No representative of the Company had discussed this problem with Smart, and the Company believed that Smart intended to seek early retirement at age 60.
An affidavit of Edwin H. Perry, an attorney with the law firm which represented the Company as its General Counsel, indicated that during the summer and fall of 1975 he had attended a series of meetings with the executives of the Company in connection with certain changes to be made in the Company's retirement Plan. Among the changes proposed was a reduction in the normal retirement age from 65 to 60. Perry was aware that the Department of Labor, through its regulations, had interpreted the ADEA to authorize involuntary retirement prior to age 65 as long as such retirement was pursuant to the terms of a bona fide retirement or pension plan. It was, therefore, Perry's opinion that the reduction of the normal retirement age to age 60 would be lawful under the ADEA, as interpreted by the Department of Labor ("DOL"). Perry stated that he drafted the amendment to the Plan, including the reduction of the retirement age, based upon his understanding of the law, and that to the best of his knowledge the Company relied in good faith upon his approval of the amendment and the restatement of the Plan as complying with all applicable laws.
Shortly after his involuntary retirement Smart complained to the DOL, asserting his allegedly unlawful termination and his intent to file suit. In August 1978, DOL notified Smart of the failure to eliminate the alleged unlawful discriminatory act through informal conciliation and Smart filed his complaint in this proceeding on October 5, 1978.
About six months after the filing of the complaint, Smart served interrogatories which sought information pertaining to Smart's retirement, the Plan, benefits paid under the Plan and the amendment of the Plan in 1976. No further discovery was sought by Smart and on October 3, 1979, the Company filed a motion for summary judgment on the limited issues of (1) the lawfulness of its involuntary retirement of Smart under the terms of § 4(f)(2) of the ADEA and (2) its alleged good faith reliance on the DOL's ...