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CHICAGO BD. OPTIONS EXCH. v. CONN. GEN. LIFE INS.

November 17, 1982

CHICAGO BOARD OPTIONS EXCHANGE, INC., ET AL., PLAINTIFFS,
v.
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 granted.

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 its product:

  Funds may be transferred to a new carrier if
  Connecticut General's performance is not entirely
  satisfactory.

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 Administrator designated:

    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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