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CHICAGO BD. OPTIONS EXCH. v. CONN. GEN. LIFE INS.
November 17, 1982
CHICAGO BOARD OPTIONS EXCHANGE, INC., ET AL., PLAINTIFFS,
CONNECTICUT GENERAL LIFE INSURANCE COMPANY, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Chicago Board Options Exchange, Inc. ("CBOE") and the
Trustees of its Retirement Income Plan (the "Plan") sue
Connecticut General Life Insurance Company ("Connecticut
General"), which entered into a group annuity insurance
contract (the "Contract") with CBOE to fund benefits under the
Plan. Plaintiffs' Complaint charges Connecticut General with:
1. breach of contract (Count I);
2. deceptive conduct in violation of the
Illinois Uniform Deceptive Trade Practices Act
(the "Illinois Act," Ill.Rev. Stat. ch. 121 1/2,
§§ 311-17) (Count II); and
3. fiduciary improprieties in violation of the
Employee Retirement Income Security Act ("ERISA,"
29 U.S.C. § 1001-1461) (Count III).
Connecticut General has moved under Fed. R.Civ.P. ("Rule")
12(b)(6) to dismiss the entire Complaint for failure to state
any cognizable claim. For the reasons stated in this
memorandum opinion and order, Connecticut General's motion is
Allegations of the Complaint*fn1
In 1977 CBOE and Connecticut General negotiated the Contract
to fund Plan benefits effective July 1, 1978. In entering into
the Contract CBOE relied on claimed misrepresentations in
Connecticut General's June 1977 proposal (the "Proposal,"
Complaint Ex. C), including the following sentence in its
"highlights" page in which it "summarize[d] the advantages" of
Funds may be transferred to a new carrier if
Connecticut General's performance is not entirely
Under the Contract the Administrator*fn2 was to direct
Connecticut General as to the manner of crediting
contributions made on behalf of the Plan's Participants (CBOE
employees). Credits were to be allocated to either or both of
two types of investment accounts, in such mix as the
1. a "Variable Account," representing an
undivided interest in a group of pooled assets
(the "Separate Account") maintained by
Connecticut General in connection with the
Contract and other group annuity contracts
(understandably, the value of the Variable
Account always reflected the market value of the
underlying assets); and
2. a "Guaranteed Account," providing a yield in
the form of an interest rate periodically set in
advance by Connecticut General (both that
interest rate and the principal of the Guaranteed
Account were guaranteed by Connecticut General).
Contract Parts XII and XIII defined CBOE's right to part
company with Connecticut General by discontinuing further
contributions and causing a transfer of the Participants'
Accounts to a new funding agent (keeping the Plan qualified
under the Internal Revenue Code).
All amounts allocated to Variable Accounts have always been
transferable without limitation upon such discontinuation,
subject only to compliance with appropriate procedures for
valuation and distribution. As for Guaranteed Accounts,
however, Contract § 13.03 has always permitted Connecticut
General to defer full payout under these circumstances:
1. If the aggregate proposed transfers and
withdrawals from Guaranteed Accounts on the
effective date of CBOE's departure, together with
previous transfers and withdrawals during the
same calendar year — taking into account in each
instance not only the Contract itself but all
"contracts in this class of business" — exceed 10%
of the total Guaranteed Contract funds for all
"contracts in this class of business" as of the
beginning of that calendar year, the current
transfers could be deferred.
2. In any event such deferral could not block a
Participant from the transfer of at least 10% of
his or her ...
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