The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Bruce D. Ovitz ("Ovitz") has filed a three-count Complaint
against his former employer Jefferies & Company, Inc.
("Jefferies"), Jefferies' Employees' Profit Sharing Plan (the
"Plan") and the Plan's administrators (the "Administrators"),
challenging their refusal to pay Ovitz (1) "earnings" of his
Profit Sharing Account (the "Account") under the Plan from
1981 to the date the Account was paid him*fn1 plus a pro rata
share of Jefferies' 1981 profit sharing contributions to the
Plan or (2) alternatively a share of Jefferies' profits in
some manner other than through the Plan. This controversy
stems from Ovitz having left his job with Jefferies shortly
before the end of the Plan's accounting year (December 31,
1981). Had Ovitz remained with the company through the end of
the year, it is undisputed he would have been entitled to
participate in both the Plan asset revaluation and the 1981
contributions to the Plan. Because he left the Company in
December rather than the following January, Jefferies and
Administrators, allegedly pursuant to the terms of the Plan,
have declined to award Ovitz any of that amount.
Complaint Count I alleges Jefferies' and Administrators'
failure to pay the contested funds to Ovitz constitutes a
violation of the Plan and thus is contrary to both the
Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1101-45,
and the common law. Complaint Count II alleges
Administrators' behavior is a breach of fiduciary duty, again
contrary to both ERISA and the common law. Complaint Count III
alleges a contract between Ovitz and Jefferies apart from the
terms of the Plan, entitling Ovitz to profits of Jefferies
whether or not they would be distributed pursuant to the Plan.
Counts I and II are therefore based on the terms of the Plan,
while Count III is not.
Defendants now move for summary judgment under Fed.R.Civ.P.
("Rule") 56. Whatever the relative plausibility of the
positions respectively advanced by the parties as to the
Plan's meaning, summary disposition of Ovitz' claims is not
available to defendants.
Counts I and II — Common-Law Theories
Defendants' motion for summary judgment attacks the
common-law theories of Counts I and II on the ground ERISA has
preempted them. Defendants contend ERISA § 502(a)(1)(B),
29 U.S.C. § 1132(a)(1)(B), provides a cause of action for breach
of a contractual pension plan agreement while ERISA §§ 401-14,
29 U.S.C. § 1101-14, provide a remedy for breach of fiduciary
duty pursuant to a pension plan. As a result defendants assert
there is no longer any state cause of action for those claims.
Because that argument is sound, this Court dismisses Ovitz'
claims the Plan has been violated to the extent such claims
rest on state common law.
When Congress passed ERISA its intent (with certain
exceptions not relevant here) was to sweep aside all related
state law, whether consistent or inconsistent. ERISA § 514,
29 U.S.C. § 1144, expresses that congressional intent to displace
state law, including common law as well as legislation.
Hewlett-Packard Co. v. Barnes, 425 F. Supp. 1294, 1298-1300
(N.D.Cal. 1977), aff'd per curiam on the District Court's
opinion, 571 F.2d 502, 504 (9th Cir. 1978), exhaustively
reviewed the legislative history of Section 514 and concluded
(id. at 1300) "that Congress carefully considered the question
of preemption, including the feasibility of enacting a more
limited preemption provision, and that Congress ultimately
enacted Section 514(a) with the express purpose of summarily
preempting state regulation of ERISA-covered employee benefit
plans." Thus in enacting ERISA Congress "meant to establish
pension plan regulation as exclusively a federal concern."
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101
S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981) (footnote omitted).
Ovitz poses two counter-arguments. Neither is persuasive
First, Ovitz claims there is no preemption if the cause of
action at issue only
indirectly affects the legislative scheme embodied in ERISA.
In our Circuit, state law that purports to govern the "terms
and conditions" of pension plans generally is preempted by
ERISA unless it "relates to such plans `only in the most
remote and peripheral manner.'" Bucyrus-Erie Co. v. Department
of Industry, Labor & Human Relations, 599 F.2d 205, 209-10 (7th
Cir. 1979), quoting AT & T v. Merry, 592 F.2d 118, 121 (2d Cir.
1979). But Illinois common law, to the extent it would attempt
to remedy breaches of pension plan agreements or breaches of
duty by pension plan administrators, would govern the terms and
conditions of pension plans in more than a remote and
peripheral manner. See Dependahl v. Falstaff Brewing Corp.,
653 F.2d 1208, 1214-16 (8th Cir. 1981).
Second, Ovitz argues there is no preemption if state law
promotes the goals of ERISA rather than hinders them. That
view however has long been discredited. See id. at 1215,
finding that such an argument "misses the point." Congress can
choose to regulate a field by limiting the number of remedies
as well as by expanding them, and that is precisely what it has
Thus it is clear Complaint Counts I and II must be based
entirely on federal law. This opinion turns then to that
Counts I and II — ERISA Theory
In the federal law context, a preliminary question is the
standard of conduct to which ERISA holds Administrators.
Although Ovitz properly points out ERISA requires plan
administrators to act with prudence and care,
29 U.S.C. § 1104(a)(1)(B), federal courts repeatedly have held they will
not reverse a decision of pension plan administrators acting in
good faith unless their decision is "arbitrary and capricious
in light of the language of the Plan." Wardle v. Central
States, Southeast & Southwest Areas Pension Fund, 627 F.2d 820,
824 (7th Cir. 1980).*fn2
Ovitz' principal contention as to the behavior of the
Administrators is that in failing to award him a share of the
Plan asset revaluation and the 1981 contribution, they have
acted contrary to the clear provisions of the Plan. Ovitz must
prove such behavior was "arbitrary and capricious" to be
entitled to relief. Ovitz apparently concedes that had his
departure from Jefferies before year-end been coupled with
segregation of his profit sharing account, he would not be
entitled to a share of either the revaluation or the current
year's contribution. However he contends that because ...