and the Trustees, after satisfaction of all other liabilities, are directed to return to the Company the remaining portion of the funds in the Trust which represent the actuarial surplus in the Trust attributable to the Company . . ." Termination of the Curtis pension trust was to be effective July 1, 1970. (Freedman affidavit para. 7; Board resolution, Defendants' Exhibit E).
Upon passage of this resolution, the trustees paid to Equitable over two million dollars to secure a group annuity contract in order to provide benefits to employees covered by the Curtis pension trust which, according to the Board's resolution, was now terminated. (Dep. of S. Freedman 51, Freedman affidavit para. 7(f)). The payment was made before Equitable had finalized the contract to preliminary estimates. Subsequent payments were also made to Equitable pursuant to this contract. The contract, between Equitable and the "Trustees of the Pension Plan and Trust of Perfect Subscription Co. and Curtis Circulation Co." (trustees) was issued October 19, 1971, retroactively effective as of July 13, 1970, as Group Annuity Contract AC2538 (annuity contract).
In December 1972, participants in the Curtis pension trust, including Mr. Berry, received certificates representing their entitlement to a monthly annuity payment equal to the amount shown on the face of the certificate beginning at their normal retirement dates, which in Mr. Berry's case was January 1, 1981. Payments beginning at optional retirement dates were to be actuarially adjusted downward. The optional retirement date was defined as the first day of any calendar month after July 13, 1970 within 10 years of the participant's normal retirement date. Nothing in the terms of the certificate or in the annuity contract provided for any increase in the stated monthly annuity benefit on account of service beyond June 30, 1970, or on account of any payments made by the employer after that date. Moreover, the contract provided for payment of benefits only to participants in the Curtis pension trust and the Perfect pension trust who were alive on July 13, 1970 and who were reported by the trustees for an annuity benefit before that date (§ 1.02).
On or about December 23, 1970 Curtis employees were notified by letter that the Curtis pension trust had been terminated as of June 30, 1970, and that funds had been deposited with Equitable to cover the "vested pension rights" of employees as of June 30, 1970. Employees were given statements of their "fully vested -- nonforfeitable" benefits under the "terminated plan". Employees were told these amounts were "guaranteed". The statement also showed a calculation of benefits these employees would receive under a "New Plan -- effective July 1, 1970", but indicated that the new plan had not yet been approved by the company. (Defendants Exhibit G). According to the deposition testimony of Mr. Freedman, a trustee of the Perfect and Curtis pension trusts, the "new plan" was an interim plan to assure employees that their service would be credited while a new plan was formulated. The Equitable annuity contract, based on the terminated plan, did not cover post-1970 service. (Freedman Deposition pp. 74, 99-104).
Effective as of January 1, 1975, Cadence established the Cadence Industries Corporation Employees' Retirement Plan (Cadence plan), which covered Curtis employees, who were granted credit for service with the company back to July 1, 1970. Plaintiff, prior to her death, received a joint and survivor annuity of $13.21 per month under the provisions of this plan, covering her husband's service from July 1, 1970 to his death. Plaintiff received no payments from the annuity contract as defendants maintained that she was entitled to none under its terms.
Plaintiff contends that the transactions in 1970 by Curtis and the trustees were not a termination of the pension plan in effect for Curtis employees at the time, but rather a change in the method of payment of benefits under the plan, constituting an amendment to a continuous and integrated plan maintained by the defendants which covered the entire period of Mr. Berry's service with Curtis. Hence, plaintiff contends, the requirements of ERISA apply to Mr. Berry's pre-1970 service as well as his post-1970 service. As a result, Mr. Berry should have been permitted to elect an "early survivor annuity" based on his service prior to 1970, and disclosure should have been made to him of his ability to elect such an annuity and of the consequences of his failure to do so.
Defendants contend that the Curtis plan was terminated as of July 1, 1970, and that it ceased to be maintained by the employer at that time under the meaning of 29 U.S.C. §§ 1002(2), 1003(a).
Administration of the annuity contract by the trustees of the Perfect and Curtis pension trusts as its contract holders does not, defendants contend, constitute maintenance of a plan under these sections. As a result, the plan is not subject to the requirements of ERISA, which became effective four and one-half years later, on January 1, 1975. Further, defendants contend that all of the wrongful acts of which plaintiff complains in connection with the termination of the plan took place prior to January 1, 1975 and hence cannot provide a basis for an ERISA claim. Finally, defendants contend that even if they are held to have maintained the Curtis pension trust as of January 1, 1975, the joint and survivor annuity provision upon which plaintiff relies would not be applicable to the plaintiff, since it would apply only if Mr. Berry were an "active participant" in the plan as of January 1, 1975, that is, one "for whom benefits [were] being accrued under the plan on his behalf." 29 U.S.C. § 1055(i)(2); Treasury Reg. 1.401(a) -- 11(f). We find all of these arguments by defendants to be well taken under the facts of this case.
The ERISA statutory scheme makes clear that the Act is not to apply to acts, omissions or circumstances which arose before ERISA's effective date of January 1, 1975. 29 U.S.C. § 1144 (b)(1); Reuther v. Trustees of the Trucking Employees of Passaic and Bergen County Welfare Fund, 575 F.2d 1074, 1077-78 (3d Cir. 1978). See E.I. Malone v. White Motor Corp., 435 U.S. 497, 499 n. 1, 98 S. Ct. 1185, 1187 n. 1, 55 L. Ed. 2d 443 (1978) ("Because ERISA did not become effective until January 1, 1975, and expressly disclaims any effect with regard to events before that date, it does not apply to the facts of this case.") The fact that Congress expressly did not make ERISA retroactive precludes its applicability if plaintiff's cause of action arose before January 1, 1975 or arises from any act or omission occurring before 1975. Cowan v. Keystone Employee Profit Sharing Fund, 586 F.2d 888, 891 (1st Cir. 1978); Gordon v. ILWU-PMA Benefit Funds, 616 F.2d 433, 437 (9th Cir. 1980); Collins v. Trustees of Local 478, 487 F. Supp. 520 (D. N.J. 1980). Moreover, ERISA is not made applicable by a plaintiff's assertion that a breach of fiduciary duty arising out of acts occurring before the effective date of ERISA constitutes a continuing breach. Martin v. Bankers Trust Company, 565 F.2d 1276, 1278-79 (4th Cir. 1977); Collins, 487 F. Supp. at 525. In expressly refusing to make ERISA non-retroactive, Congress meant to prevent the past conduct of pension plan fiduciaries and contributors from being judged retroactively under the standards established by ERISA simply because the conduct generates consequences subsequent to ERISA's effective date. Quinn v. Country Club Soda, Inc., 639 F.2d 838, 841 (1st Cir. 1981).
It is clear from the above that plaintiff's claim for violation of defendants' fiduciary duties does not state a claim under ERISA. All of the acts which plaintiff alleges constituted such a breach were a part of or immediately subsequent to the Curtis Board's resolution to terminate the Curtis pension trust, and occurred well before January 1, 1975. These include the decision to terminate itself, the return of funds representing "actuarial surplus" from the pension fund to Curtis, and the alleged overvaluing of assets and undervaluing of liabilities in determining the amount of that surplus.
By the same token, plaintiff can maintain no claim for any joint and survivor annuity or "early survivor annuity" under the Curtis pension trust unless she can show that this plan was maintained by Curtis as of January 1, 1975. Trippet v. Smith, 592 F.2d 1112 (10th Cir. 1979). In this case, there is no genuine issue of material fact which prevents us from determining that the Curtis plan was not maintained as of that date. Hence, this plan was not subject to the requirements of ERISA, and plaintiff's claim that a survivor annuity was wrongfully denied her under the pension trust fails to state a claim under ERISA.
The undisputed facts in this case show that the Curtis Board of Directors resolved to terminate the Curtis pension trust, and to purchase an annuity contract from Equitable in order to pay the employees covered by that plan the benefits which they had accrued as of June 30, 1970. This contract was purchased, and each employee covered by the Curtis plan received a certificate stating the fixed amount of benefits to which he was entitled for his service under that plan. The remainder of the trust assets, following the purchase of the contract, were returned to the employer. Following these transactions, no assets remained in the trust. (Freedman Deposition 50-51).
The trustees' duties as contract holders of the group annuity contract with Equitable did not constitute maintenance of a pension plan continuing until January 1, 1975. The annuity contract was merely a method of distributing to the employees covered by the terminated plan the benefits they had accrued under this plan. No credit was given under the contract for service beyond June 30, 1970, and no employees who were not covered by the plan as of the time of its termination were eligible to receive benefits under the contract (annuity contract §§ 1.01, 2.02, 3.01).
The fact that only employees covered by the terminated plan were to receive payments under the annuity contract does not, as plaintiff asserts, indicate that the plan itself continued to be maintained by the employer, but only shows that payments under the contract were to be made only to those who had accrued the benefits it was intended to pay. Neither does the fact that the trustees as contract holders were enabled to deal directly with Equitable under § 4.13 of the annuity contract indicate continued maintenance of the pension plan and trust by Curtis. The purpose of this section is merely to insure that Equitable's rights and duties under the annuity contract are determined by the contract itself, and not by the terminated trust.
The Tenth Circuit, in Trippet, supra, considered a question substantially similar to that in the present case, and held that a terminated plan, the corpus of which is in the process of liquidation and distribution, is not "maintained" by an employer, and hence is not a plan as contemplated by ERISA. The Trippet court stated that the plan at issue did not continue in existence as an operating plan since no employer contributions had been made after the date the company's Board had resolved to terminate the plan, and since persons employed by the company following the termination had no right of participation. See Federal Deposit Ins. Corp. v. Marine Nat'l Exchange Bank, 500 F. Supp. 108, 111-12 (E.D. Wis. 1980) (funds held in trust for the purpose of liquidating the assets of a pension plan do not constitute an employee pension benefit plan under ERISA).
In the present case, as in Trippet, the employer resolved to terminate the pension plan well before the effective date of ERISA, and no persons employed following this termination were eligible to participate in the benefit distribution. Curtis did make certain payments to Equitable with respect to this plan following the termination of the pension trust and the purchase of the annuity contract. Plaintiff contends that these payments, and certain adjustments in the benefit levels and the number of employees covered, indicate that the plan was maintained beyond the date of the termination. Plaintiffs have offered no evidentiary matter, however, to counter the deposition testimony of trustee Freedman that these payments and adjustments were necessary to correct errors in the actuarial assumptions upon which the initial payment to Equitable was made. (Freedman Deposition 53-62). There is no evidence that these adjustments represented contributions by Curtis for service after June 30, 1970, or represented coverage of additional employees who were not merely receiving the benefits to which they were entitled under the terminated plan. Moreover, all of the adjustments to which plaintiff refers occurred well before January 1, 1975.
Plaintiff contends that the disclosure to Curtis' employees of their benefits under the terminated plan and under a new plan on a single statement indicates the existence of one continuous plan covering both pre-1970 and post-1970 service. (Defendants Exhibit G). However, as has been noted, the statement clearly separates benefits under the terminated plan, which are said to be vested, and any benefits which the employee would receive under the new plan, which the statement itself indicates had not yet been approved. Moreover, the deposition testimony of Trustee Freedman that attempts were made to insure that payments under the annuity contract were no less than those to which the participants were entitled under the terminated plan does not indicate that the annuity contract was itself a pension plan which was maintained under the same terms as the terminated plan, but only shows that the annuity contract was designed to pay out all of the benefits to which the Curtis employees were entitled with respect to their service prior to June 30, 1970.
Plaintiff contends that this Court should follow the holding of Estate of Benjamin v. Commissioner of Internal Revenue, 465 F.2d 982 (7th Cir. 1972), in which a divided panel of the Seventh Circuit held that an employer's assignment of trust annuity contracts over which it maintained substantial control to its employees transformed a previously terminated trusteed pension plan into a non-trusteed plan which qualified for favorable tax treatment under the Internal Revenue Code. Even were the Court to determine that the holding in this tax case is relevant to the existence or nonexistence of the substantive rights and duties of ERISA, the Court is more persuaded by the reasoning of the dissent in Benjamin, which would have held that an annuity contract which was merely a funding mechanism for a terminated pension plan, and included no provisions outlining the requirements for eligibility, benefits, and contributions, was not a qualified pension plan within the meaning of the Internal Revenue Code. 465 F.2d at 991. The Equitable annuity contract provides only the most skeletal provisions concerning eligibility for benefits, which are determined by eligibility under the terminated plan, and contains no provision at all for contributions by either the employer or the employees. The terms of the annuity contract indicate clearly that it is simply a vehicle for distributing benefits vested under the terminated plan, and not a plan in itself. For all of the above reasons, we hold that the Curtis pension trust was not "maintained" within the meaning of ERISA as of January 1, 1975 and that the requirements of ERISA were thus not applicable to it.
Finally, this Court notes that it has no jurisdiction under ERISA or otherwise to entertain plaintiff's request for an order that the Internal Revenue Service re-adjust the tax-exempt status of any plan maintained by the defendants. Cowan, 586 F.2d at 890 n. 3.
For all of the above reasons, plaintiff has failed to state a claim under ERISA. Therefore, plaintiff's motion for partial summary judgment is denied and judgment will be entered for defendants on plaintiff's ERISA claims.
There remains the question of the proper disposition of plaintiff's pendent state law claim.
In United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966), the Supreme Court described those situations in which it is proper for a federal court to exercise pendent jurisdiction. Federal courts have the constitutional power to exercise pendent jurisdiction when the state and federal claims derive from a common nucleus of operative fact, such that the plaintiff would ordinarily be expected to try them all in one judicial proceeding, and when the federal claim has sufficient substance to confer subject matter jurisdiction on the court. 383 U.S. at 725, 86 S. Ct. 1130. Even if these constitutional requirements are met, the court has broad discretionary powers to decline pendent jurisdiction after considering judicial economy, convenience, fairness to the parties, and comity. Id. at 726, 86 S. Ct. 1130.