The opinion of the court was delivered by: BRODERICK
Plaintiff, Rosann S. Berry,
has brought this action alleging in two counts violations by defendants of the Employee Retirement Income Security Act (ERISA), invoking jurisdiction under 29 U.S.C. § 1132(e). Plaintiff alleges first that defendants, in violation of 29 U.S.C. §§ 1021, 1022, 1055, and 1061, failed to disclose to her husband, Robert Earl Berry, now deceased, his opportunity to select an early survivor annuity which, following Mr. Berry's death, would have provided plaintiff with benefits under a pension plan of the defendants. Second, plaintiff alleges a breach of fiduciary responsibility by the defendants, in violation of 29 U.S.C. §§ 1104 and 1105, in their attempt, in July 1970, to terminate a pension plan in which Mr. Berry was a participant and in their diversion during the course of this transaction of a portion of the assets of the pension fund to their own use. Plaintiff also appends a state law claim of breach of fiduciary duty.
Plaintiff claims that as a result of defendants' actions she was deprived of a survivor annuity attributable to her husband's pre-1970 service with defendants, as well as of a pro rata share of the pension funds wrongfully diverted by defendants. Plaintiff seeks payment to her of these funds by defendants, as well as attorney's fees. Plaintiff also asks the Court to order restitution for any unlawful depletion of the pension fund, and to order the Internal Revenue Service to take action to adjust retroactively the tax-exempt status of any trusts administering the plans covering Mr. Berry's years of service, should the Court find these trusts were terminated in a manner which breached defendants' fiduciary responsibilities to Mr. Berry and his beneficiaries.
Defendants have asserted that this Court lacks jurisdiction over this action because the plan under which the plaintiff seeks benefits terminated in July 1970, some four and one-half years before ERISA became effective on January 1, 1975, and because the acts of which plaintiff complains all took place before this effective date as well. Both sides have submitted evidentiary material on this question, including affidavits, depositions, and answers to interrogatories, and the case is now before the Court on cross-motions for summary judgment. Fed.R.Civ. P. 12(c), 56.
Since plaintiff's claims arise under ERISA, and plaintiff's invocation of ERISA jurisdiction is not frivolous or a mere matter of form, this Court has subject matter jurisdiction under 29 U.S.C. § 1132(e). Lentino v. Fringe Employee Plans, Inc., 611 F.2d 474, 479 (3d Cir. 1979); See Hagans v. Lavine, 415 U.S. 528, 537-38, 94 S. Ct. 1372, 1379, 39 L. Ed. 2d 577 (1974); Gagliardi v. Flint, 564 F.2d 112, 114 (3d Cir. 1977), cert. denied, 438 U.S. 904, 57 L. Ed. 2d 1147, 98 S. Ct. 3122 (1978); Valente v. Dennis, 437 F. Supp. 783, 785 (E.D. Pa. 1977); C. Wright, Law of Federal Courts 72 (3d ed. 1976). This jurisdiction "is not defeated . . . by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover." Hagans, 415 U.S. at 542, 94 S. Ct. at 1381, quoting Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1946). While we have determined that plaintiff's claims fail to state a cause of action under ERISA, at the time plaintiff's suit was filed there was a colorable federal claim, and hence this Court properly acquired jurisdiction. Weaver v. Marine Bank, 683 F.2d 744, 747 (3d Cir. 1982). Accordingly, rather than dismiss this action for want of subject matter jurisdiction, we will enter summary judgment for defendants on both counts of plaintiff's amended complaint which allege violations of ERISA.
In deciding defendants' motion for summary judgment, we must determine whether any disputed issues of material fact exist which would preclude entry of judgment in defendants' favor. Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir. 1981). As to issues of fact, all reasonable inferences from the underlying facts contained in the evidential sources submitted to us must be drawn in favor of the plaintiffs. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977). Whenever defendant relies upon affidavits, depositions or answers to interrogatories, plaintiff must come forward with affidavits, depositions, or answers to interrogatories sufficient to contradict defendants' showing. Adickes v. S.H. Kress and Co., 398 U.S. 144, 158-61, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); Fed.R.Civ.P. 56(e).
On the basis of the affidavits, depositions and answers to interrogatories submitted by the parties, the uncontested facts can be summarized as follows:
Mr. Berry worked for the company known at the time relevant here as Curtis Circulation Company (Curtis) for thirty-seven years, until his death in 1978. At the time of his death he was married to the plaintiff, who died in 1979.
In June 1968, defendant Curtis purchased the assets of the former Curtis Circulation Company, then known as C.C. Corporation. Curtis is a subsidiary of defendant Cadence Industries Corporation (Cadence). At the time of this purchase, the employees of C.C. Corporation, including Mr. Berry, were participants in the Curtis Publishing Company Pension Plan and Trust (Publishing pension trust). As a part of the acquisition, Curtis acquired the right to have assets of the Publishing pension trust allocable to Curtis' employees transferred to its own pension trust. This transfer of assets was made on July 6, 1970 to the trustees of the Curtis Circulation Company Pension Plan and Trust (Curtis pension trust), which had been established as of January 1, 1970 as a vehicle to receive the transferred assets. At about the same time, a similar trust (Perfect pension trust) was established for employees of the Perfect Subscription Company (Perfect), like Curtis a subsidiary of Cadence. (Freedman affidavit paras. 3-7). On July 13, 1970, the trustees of Curtis pension trust obtained the opinion of counsel that they had the authority to terminate the Curtis pension trust. At the same time, the Curtis Board of Directors authorized the trustees of the Curtis pension trust to pay to defendant Equitable Life Assurance Society of the United States (Equitable) a sum of money required to fund an insured pension plan agreement between the trustees and Equitable, intended to provide insured pension benefits to Curtis employees. The Board further resolved that "upon execution of the aforementioned insured Pension Plan and funding of said Plan by the Trustees, the Company's existing Pension Plan and Trust shall automatically be terminated 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 ...