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PUCKETT v. UNITED AIR LINES

January 4, 1989

GORDON L. PUCKETT, et al., Plaintiffs,
v.
UNITED AIR LINES, INC., et al., Defendants, KENNETH C. KUECKER, et al., Plaintiffs, v. UNITED AIR LINES, INC., et al., Defendants


Prentice H. Marshall, United States District Judge.


The opinion of the court was delivered by: MARSHALL

JUDGE PRENTICE H. MARSHALL, UNITED STATES DISTRICT JUDGE.

 Plaintiffs are 133 current or former employees of United Airlines, Inc. ("United") who have worked past age sixty -- the normal retirement age under United's pension plans. Each plaintiff participates in United's two pension plans: the Fixed Benefit Plan ("Fixed Plan") and the Directed Account Plan ("DAP"). Before us now is plaintiffs' motion for partial summary judgment on the issue of liability on their ADEA and ERISA challenges to the DAP.

 The DAP provides a benefit based on the investment performance of an account funded by United's contribution of 9% of a pilot's annual income. It is undisputed that no contributions are made during employment past age sixty. Plaintiffs' Rule 12(e) Statement at para. 5. It is also undisputed that pilots over the age of sixty are precluded from making voluntary contributions and from participating in the Government Bond Fund investment option. Id. at para. 6. Plaintiffs assert that these features constitute unlawful age discrimination in violation of ADEA § 4 (a)(1), 29 U.S.C. § 623(a), and ERISA § 202(a)(2), 29 U.S.C. § 1052(a)(2), as a matter of law. For the following reasons, we agree and therefore grant plaintiffs' motion.

 ADEA

 § 4(a)(1) of the ADEA provides that "it shall be unlawful for an employer to . . . discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age. . . ." United does not dispute the applicability of this section, but instead asserts what has come to be known as the § 4(f)(2) defense. § 4(f)(2) provides as follows:

 
It shall not be unlawful for an employer . . . to observe the terms of. . . any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of this chapter. . . .

 The employer bears the burden of proving that its age-based actions fall within the terms of this exception. EEOC v. Home Ins. Co., 672 F.2d 252 (2d Cir. 1982).

 Plaintiffs concede that the DAP is a bona fide employee benefit plan and that United observes its terms. The disputed issue is whether the challenged features are a subterfuge to avoid the ADEA's prohibition on age discrimination.

 United offers two arguments in this regard. First, with respect to the denial of United contributions and prohibition on employee contributions after age sixty, United argues that these features pre-dated the passage of the ADEA, and therefore, according to United Air Lines, Inc. v. McMann, 434 U.S. 192, 54 L. Ed. 2d 402, 98 S. Ct. 444 (1977), they cannot be a subterfuge to avoid the purposes of the ADEA. Alternatively, United asserts that regardless of McMann's applicability, valid business purposes exist for all of the challenged features, thereby bringing them within the protection of § 4(f)(2).

 Initially, we reject United's argument that McMann precludes liability in this case. The effect and limitations of the McMann holding were discussed in EEOC v. Home Ins. Co., 672 F.2d 252, 258-59 (2d Cir. 1982):

 
The thrust of McMann is that . . . the employer can meet its burden of proving that the plan is not a subterfuge simply by showing that it was established long before the ADEA was enacted. Where, however, the pertinent terms of the plan were adopted after the ADEA was enacted, this avenue of disproving subterfuge is simply not open. Proof by the employer of non-age-based reasons will then be required.

 See also, EEOC v. Westinghouse Elec. Corp., 632 F. Supp. 343, 368 (E.D.Pa. 1986)(because the plan had "undergone negotiation, adjustment, and consideration many times since the passage of the ADEA," McMann method of proof unavailable); EEOC v. County of Orange, 837 F.2d 420, 423 (9th Cir. 1988)(post-ADEA modifications may convert a benefit plan into a subterfuge if they are "significant or at least relevant" to the challenged practice).

 Here, relevant changes were made to the plan's provision pertaining to United's 9% contribution after enactment of the ADEA. The 1976 version of the plan (then entitled the "Variable Plan") denied eligibility to those over sixty. Plaintiffs' Exhibit 45 at § 2.1. However, no provision addressed whether company contributions continued when an already participating employee worked past sixty. *fn1" This was ...


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