Sexton v. Beatrice Foods Co.
| Decision Date | 07 August 1980 |
| Docket Number | No. 79-1661,79-1661 |
| Citation | 630 F.2d 478 |
| Parties | 23 Fair Empl.Prac.Cas. 717, 23 Empl. Prac. Dec. P 31,178 William C. SEXTON, Plaintiff-Appellant, v. BEATRICE FOODS CO., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
James S. Whitehead, Chicago, Ill., for plaintiff-appellant.
Columbus R. Gangemi, Jr., Winston & Strawn, Chicago, Ill., for defendant-appellee.
Karen MacRae Smith, Washington, D. C., for amicus curiae, Equal Employment Opportunity Commission.
Before SWYGERT, BAUER and CUDAHY, Circuit Judges.
This is an appeal by plaintiff William C. Sexton from a judgment granting the motion of defendant Beatrice Foods Company ("Beatrice") for partial summary judgment Beatrice moved for summary judgment on one count of the complaint on the ground that the termination of Sexton was exempted from the general prohibition against age discrimination by reason of 29 U.S.C. § 623(f)(2) (1976). 1 This subsection provides that:
and dismissing his claim that the termination of his employment by Beatrice violated the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. § 621 et seq. (1976 & Supp. II 1978). In early 1977, Beatrice terminated Sexton, who was then 59 years old. The normal retirement age under Beatrice's retirement plan is 65 and the plan does not expressly provide that Beatrice may involuntarily retire an employee before he reaches 65. However, the plan does provide that an employee will receive benefits if he elects early retirement after he is 55 years old. Upon his discharge Sexton was offered the benefits of Beatrice's retirement plan.
It shall not be unlawful for an employer . . . to observe the terms of a bona fide seniority system or any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of (the ADEA), except that no such employee benefit plan shall excuse the failure to hire any individual . . . .
The district court found that in terminating Sexton, Beatrice had "observe(d) the terms" of a bona fide employee benefit plan and that the plan was not a "subterfuge," so it granted Beatrice's motion. The question presented by this appeal is whether Beatrice observed the terms of its pension plan within the meaning of § 4(f)(2) when it discharged Sexton. Since we conclude that it did not, we reverse the order granting summary judgment and remand for further proceedings consistent with this opinion.
We shall here state the basic facts and inferences drawn from them in a way most favorable to Sexton, as we must in considering this motion for summary judgment. Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
Sexton was born on September 23, 1917. With the exception of military service, he worked continuously for the John Sexton Company, which had been founded by his grandfather, since 1934. In 1968 the John Sexton Company was acquired by, and became a division of, Beatrice. Thus, at the time of his discharge in January 1977, Sexton was a Beatrice employee. From October 1975 to the date of his discharge, Sexton was vice president of marketing of the Sexton Division.
On January 24, 1977, T. M. Sexton, president of the Sexton Division and William Sexton's cousin, called William Sexton into his office and discharged him, indicating that more aggressive "younger blood" was required for management. Sexton was then 591/2 years old. Sexton's position as vice president of marketing was thereafter occupied by a 41-year-old employee.
At no time either before or after his last day of employment on February 16, 1977, was Sexton told that his discharge was related to, or resulted from the provisions of the Beatrice Retirement Income Plan ("BRIP"), Beatrice's pension plan. Upon his discharge Sexton was promised severance pay equal to one year's salary, conditioned solely upon his not going to work for a competing company. Subsequent to his discharge Sexton was informed of Beatrice's official position as to the reasons for his discharge in a letter from Beatrice's attorney:
Please be further advised that Mr. William Sexton's employment with the Company At the time of his termination Sexton was earning a salary of $53,000 per year and was eligible for a substantial yearly bonus. He alleged that the discharge deprived him of his peak earnings years at Beatrice since he had intended to work until well into his 60's. Sexton alleged that, under BRIP, retirement benefits are determined on the basis of the five consecutive highest-paid calendar years of the last fifteen years before retirement. Consequently, although Sexton, having completed ten years of continuous service and being more than 55 years old, was eligible to begin drawing benefits under BRIP at his option following his termination, the discharge prevented him from substantially increasing his ultimate pension benefits by depriving him of what would have been his five highest paid years.
was terminated by reason of his failure to cooperate fully with top management regarding the implementation of the Company's marketing policies and his failure to devote a substantial portion of normal working time to the affairs of the Company.
Under BRIP the "Normal Retirement Date" is prescribed to be the first day of the month coincident with or next following a participant's 65th birthday. A participant who, on his 65th birthday, has, in the aggregate, five or more years of continuous service is entitled to receive a monthly "Normal Retirement Pension." BRIP also provides that a participant who has attained the age of 55 may elect early retirement and receive an "Early Retirement Pension," provided that he has in the aggregate 10 or more years of continuous service. If payment of the Early Retirement Pension commences prior to the participant's 65th birthday, the amount of the Early Retirement Pension is to be actuarially reduced for early payment. BRIP contains no express provision for involuntary retirement at Beatrice's option because of an employee's age before he reaches age 65, the normal retirement age.
On September 22, 1977, after giving the Secretary of Labor notice of his intent to sue and waiting the required deferral period, Sexton brought suit against Beatrice claiming that the cause of his discharge was his age and that his discharge violated § 4(a)(1) of the ADEA, 29 U.S.C. § 623(a)(1) (1976). Beatrice answered, denying the substance of Sexton's allegations. Sexton subsequently filed his first and second amended complaints, further alleging that Beatrice's refusal to make promised severance payments constituted unlawful retaliation, in violation of § 4(d) of the ADEA, 29 U.S.C. § 623(d) (1976).
On February 6, 1978, Beatrice raised for the first time the affirmative defense that, "Plaintiff's employment was terminated pursuant to a bona fide retirement plan as expressly permitted by § 623(f)(2) (sic) of the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 623(f)(2)." On April 19, 1978, Beatrice moved for partial summary judgment with respect to Count I of Sexton's second amended complaint, which alleged his wrongful discharge, claiming that, "Plaintiff was retired pursuant to bona fide retirement plan," and, consequently, that its action in discharging Sexton fell within the exception contained in § 4(f)(2) of the ADEA.
On May 16, 1979, the district court issued its memorandum opinion granting Beatrice's motion for partial summary judgment. The court noted that, for purposes of its motion, Beatrice conceded that Sexton had been discharged because of his age. 2 Nonetheless, the district court concluded that Beatrice could rely on the § 4(f)(2) exception because, having completed more than ten years of continuous service and being more than 55 years of age, Sexton was eligible to receive benefits under BRIP following his discharge. Although the district court agreed with Sexton that BRIP contained no terms expressly providing for involuntary termination of Beatrice employees
because of age prior to age 65 (the "normal" retirement age), the district court held that such terms were not necessary in order to qualify for the exception. Thus the district court concluded that, when Beatrice terminated Sexton and made available to him benefits under the terms of BRIP, Beatrice was "observ(ing) the terms" of the plan.
The question presented by this appeal is whether, in terminating Sexton, Beatrice "observe(d) the terms" of BRIP so as to entitle it to the protection of § 4(f)(2) of the ADEA. To resolve this question we must first determine whether an employer which has forced an employee to retire because of his age before the normal retirement age may avail itself of the § 4(f)(2) defense even though its retirement benefit plan does not provide that the employer has the right to retire an employee before the normal retirement age. Since we conclude that § 4(f)(2) is not available to an employer under these circumstances, we must also make certain whether in the instant case the provisions of BRIP give Beatrice the right to force employees to retire prior to the normal retirement age of 65. These questions will be discussed separately below.
A number of cases have dealt with the question whether a retirement plan was bona fide or a subterfuge to evade the purposes of the ADEA in the context of § 4(f)(2). Comparatively few cases have dealt with the question whether an employer "observe(s) the terms" of a plan within the meaning of § 4(f)(2) when it retires an employee prior to the normal retirement age even though the pension plan does not authorize it to do so. However, the cases dealing with whether a plan is bona fide or a subterfuge are relevant because they consistently stress the importance of examining the terms of the plan to determine whether the § 4(f)(2) exemption is available. We...
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