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04/25/89 Steven B. Russ, v. Pension Consultants

April 25, 1989

STEVEN B. RUSS, PLAINTIFF-APPELLANT

v.

PENSION CONSULTANTS COMPANY, INC., DEFENDANT-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

538 N.E.2d 693, 182 Ill. App. 3d 769, 131 Ill. Dec. 318, 181 Ill. Dec. 318 1989.IL.594

Appeal from the Circuit Court of Cook County; the Hon. Odas Nicholson, Judge, presiding.

APPELLATE Judges:

JUSTICE EGAN* delivered the opinion of the court. BILANDIC, P.J., and HARTMAN, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE EGAN

The plaintiff, Steven B. Russ, appeals from orders of the circuit court of Cook County granting the defendant's motion to dismiss the first amended complaint with prejudice and denying the plaintiff leave to file a second amended complaint on the ground that neither stated a cause of action for retaliatory discharge of an at-will employee.

In his first amended complaint the plaintiff alleged that he was an expert in the composition, structuring and interpretation of pension and employee benefit plans and he was hired on or about June 12, 1984, by the defendant Pension Consultants Company, Inc. , as an actuary and vice-president. On or about April 9, 1985, an agent of the defendant asked the plaintiff to create pension plans for two PCC clients and backdate them to an effective date of January 1, 1984, so that the plans could take advantage of the tax deductions for the calendar year 1984. Such deductions would have been illegal under section 401(b) of the Internal Revenue Code (Code) (26 U.S.C. § 401(b) (1985)) and its accompanying regulation, regulation 1.401(b) -- 1 (Treas. Reg. 1.401(b) -- 1, reprinted in 26 C.F.R. § 1 -- 401(b) -- 1 (1988)) and under sections 102, 402(b) and 403(a) *fn1 of the Code (26 U.S.C. §§ 102, 402(b), 403(a) (1985)), since the pension plan was not actually in existence during the tax year for which the deduction was sought.

The amended complaint further alleged that the plaintiff informed the defendant that he would not backdate the plans because, "according to his knowledge and belief," a pension plan must be in existence by the end of the tax year during which any deductions are taken by the holder of the plan. "In retaliation for [the] plaintiff refusing to violate the federal laws," on a date not alleged, the defendant discharged the plaintiff from his employment.

The allegations in the second amended complaint differ somewhat. Rather than alleging that he was asked to "establish" pension plans for two PCC clients and "backdate" those plans to January 1, 1984, the plaintiff avers only that he was asked to perform certain unspecified actuarial calculations which would be used by the defendant to establish the plans. The plaintiff claims that such conduct would violate a different set of statutes and regulations than alleged in the first amended complaint. In the second amended complaint, the plaintiff relies upon 18 U.S.C. § 1027 (18 U.S.C. § 1027 (1982)), and Internal Revenue Service rulings 81 -- 114 (Rev. Rul. 81 -- 114, 1981 -- 1 C.B. 207) and 76 -- 28 (Rev. Rul. 76 -- 28, 1976 -- 1 C.B. 106), which regulate the deductibility of employer contributions to qualified pension plans under section 404(a)(6) of the Internal Revenue Code (26 U.S.C. § 404(a)(6) (1985)).

After the defendant moved to dismiss the original complaint, the parties entered an agreed order granting the defendant's motion and giving the plaintiff leave to file an amended complaint. The defendant then moved to dismiss the amended complaint and filed a memorandum in support. Although neither the motion nor the memorandum indicated under which section of the Code of Civil Procedure the defendant was moving, the parties agree that the defendant was asserting that the plaintiff had not pleaded a cause of action, which would be a section 2-615 motion. Ill. Rev. Stat. 1985, ch. 110, par. 2-615.

After the motion had been briefed and argued and the court took the matter under advisement, the plaintiff filed a motion for leave to file a second amended complaint, which the plaintiff asserted remedied the defendant's objections to the first amended complaint. A copy of the proposed complaint was attached. A few days thereafter, the court granted the defendant's motion to dismiss with prejudice. The order entered by the court was drafted by the defendant's counsel and apparently submitted to the court at an earlier date; it refers only to the amended complaint and makes no mention of the proposed second amended complaint.

Within 30 days of the court's ruling, the plaintiff filed a "Motion to Vacate, to Reconsider and for Leave to File Second Amended Complaint Instanter." The plaintiff asked the court to vacate the order dismissing the first amended complaint and to grant leave to file the second amended complaint or, in the alternative, "[to] grant leave to the plaintiff to file the second amended complaint and making final and appealable the dismissal of the second amended complaint, in lieu of the amended complaint, for whatever reasons the trial court may believe warrant said dismissal." Before the court could rule on this motion, the plaintiff filed a "Motion for Clarification" of the dismissal order, asking the court to state whether it considered the proposed second amended complaint and 18 U.S.C. § 1027 when it ruled that the amended complaint failed to state a cause of action. The trial court denied the motion for clarification on the basis that the order dismissing the amended complaint was clear and also denied the motion to vacate and for leave to file the second amended complaint. The court denied leave to file apparently on the ground that it had previously dismissed the amended complaint with prejudice.

The defendant first argues that the plaintiff's tendering of the second amended complaint estops him from asserting the adequacy of the amended complaint. The defendant's argument would be tenable, if the trial court had allowed the motion for leave to amend and then dismissed the second amended complaint, since, by pleading over, the plaintiff would have waived any objection to the court's dismissal of the amended complaint. (Adamcyzk v. Forest Preserve District (1986), 151 Ill. App. 3d 320, 323, 502 N.E.2d 1197, 1199; Robins v. Lasky (1984), 123 Ill. App. 3d 194, 198, 462 N.E.2d 774, 777.) However, since the court did not grant leave to file the second amended complaint, the plaintiff may properly seek review of the order dismissing the amended complaint as well as the order denying him leave to file the second amended complaint; and the adequacy of both complaints is properly before this court.

In order to maintain an action for retaliatory discharge, the plaintiff must allege: (1) that he was discharged; (2) in retaliation for his activities; and (3) the discharge violates a clear mandate of public policy. Hinthorn v. Roland's of ...


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