887 F.Supp. 682 (S.D.N.Y. 1995), 93 Civ. 5481, E.E.O.C. v. Johnson & Higgins, Inc.

Docket Nº:93 Civ. 5481 (LBS).
Citation:887 F.Supp. 682
Case Date:June 12, 1995
Court:United States District Courts, 2nd Circuit, Southern District of New York

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887 F.Supp. 682 (S.D.N.Y. 1995)




No. 93 Civ. 5481 (LBS).

United States District Court, S.D. New York.

June 12, 1995

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E.E.O.C., New York City (James L. Lee, Anna M. Stathis, Sonya A. LeCount, of counsel), for plaintiff.

Sullivan & Cromwell, New York City (John F. Cannon, Robin D. Fessel, of counsel), for defendant.


SAND, District Judge.

Plaintiff Equal Employment Opportunity Commission ("EEOC") brings this action against defendant Johnson and Higgins ("J & H") pursuant to the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq. Agreeing with plaintiff's contention that J & H's mandatory retirement policy, which requires those of its employees sitting on the Board of Directors to retire at the earlier of age 62, or age 60 with 15 years of service, violates the ADEA, we grant plaintiff's motion for summary judgment.


Defendant J & H is a global insurance brokerage and employee benefits consulting firm. A privately owned corporation, J & H is organized and existing under the laws of the State of New Jersey with its principal place of business in New York City.

J & H's Charter and By-laws provide that the business and affairs of J & H shall be managed by its Board of Directors, which consists of between 20 and 44 members. Affidavit of Gardner M. Mundy Dated Feb. 1, 1995 ("Mundy Aff.") at ¶ 6. Each Director of J & H must own at least 500 shares of its capital stock, and a Director who ceases to own that number of shares automatically ceases to be a Director. Moreover, when a Director leaves the Board for any reason, he is required to surrender his stock, which is allocated to other Directors. The stock is surrendered pursuant to contracts in which (i) J & H promises to pay during the next ten years the dividends that would have been payable if the Director still held the stock (meaning that the Directors to whom stock is reallocated receive no dividends on it during this ten-year period) and (ii) the outgoing Director promises not to compete with J & H

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and to be available as a consultant. Mundy Aff. pp 15-17.

At all relevant times, no individual has been elected a Director of J & H who was not an officer of J & H, or of one or more of its subsidiaries, and actively engaged in its service at the time of his or her election. Id. pp 9, 12. Candidates for election are nominated by the Chairman of the Board after consultation with the other Directors. According to defendant, qualifications for becoming a Director include "outstanding performance" of one's senior-level duties, as well as an "effectiveness and contribution to the firm in his or her current and possible future roles [that] would be significantly enhanced by the added authority and status that a Directorship at J & H entails." Id. ¶ 9. When an individual is elected a Director of J & H, the requisite 500 shares of common stock are allocated for purchase by that individual at a relatively nominal cost. Id. ¶ 14.

Importantly, directors of J & H retain their prior duties upon becoming Director and remain "employees" of the corporation. See Ex. 13 to Affidavit of Sonya LeCount Dated Dec. 23, 1994 ("LeCount Aff.") at 11; see also Ex. 2 to LeCount Aff. at 5. However, Directors obtain additional duties in conjunction with their appointment, including possible service upon various committees and attendance at Board meetings. Ex. 13 to LeCount Aff. at 16, 43-44. In addition, their prestige and "personal stature and credibility" within the organization, as well as their "ability to get things done within and without one's particular area of responsibility," are "enormously enhanced." Mundy Aff. ¶ 11. Defendant contends that "[i]f status as a Director is accepted, 'employment' continues, but it becomes but an aspect of the fundamentally entrepreneurial relationship that the Directors have among themselves and to the firm as a whole." Id.

At issue in this case is J & H's mandatory retirement policy pertaining to its Directors. Adopted unanimously by the Board of Directors by resolution to the By-laws, this policy states:

RESOLVED, that the normal retirement date for Directors be the earlier of (a) the year in which the age 62 is attained or (b) the end of the year in which age 60 is obtained and 15 years of service on the board is completed. With respect to (b), in cases of corporate need determined by the Chairman and approved by the Executive Committee, a Director may continue on a year-to-year basis up to but not beyond the end of the year in which age 62 is attained.

Ex. B to Mundy Aff. Twenty-two Directors have retired since the adoption of this policy on November 16, 1983. 1 Mundy Aff. ¶ 3.

Although J & H's mandatory retirement policy applies only to Directors, it also affects their status as employees and officers of the Corporation. When a Director retires pursuant to this policy, he not only ceases to be a Director, but also loses his position as a stockholder, officer, and employee of the company. See Ex. 13 to LeCount Aff. at 75-76. Indeed, Directors joining the Board are asked to submit a letter of resignation "as a Director, officer and employee," which becomes effective "at the pleasure" of two-thirds of the Board. Mundy Aff. ¶ 11. In short, a new Director continues in J & H's active service as an officer and employee of the corporation or one of its subsidiaries, "but if status as a Director is accepted, the individual's role as an officer or employee becomes appurtenant to his Directorship and if the one status terminates, so does the other." See Ex. 2 to LeCount Aff. at 5 (letter from defendant's counsel to EEOC).


A. Summary Judgment

Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986);

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp. 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). The burden is upon the moving party to demonstrate that no genuine issue respecting any material fact exists. See Heyman v. Commerce & Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975). All ambiguities must be resolved and all inferences drawn in favor of the party against whom summary judgment is sought. See Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987).

As discussed below, we find that there are no material facts in dispute in this case and that plaintiff is entitled to judgment as a matter of law.


The Age Discrimination in Employment Act ("ADEA" or "the Act") provides that it is "unlawful for an employer ... to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." 29 U.S.C. § 623(a)(1). In order to bring an action under the ADEA, a plaintiff must be an employee suing a former or current employer. See Hyland v. New Haven Radiology Assocs., 794 F.2d 793, 796 (2d Cir. 1986); Caruso v. Peat, Marwick, Mitchell & Co., 664 F.Supp. 144, 146 (S.D.N.Y.1987). The Act defines "employer" in general terms as...

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