Schneider v. McKesson & Robbins, Incorporated, 218

• Decision Date: 01 May 1958
• Docket Number: No. 218,Docket 24799.,218
• Citation: 254 F.2d 827
• Parties: Walter SCHNEIDER, John J. Vogler and Julian J. Bursten, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. McKESSON & ROBBINS, Incorporated, a corporation and Guaranty Trust Company of New York, a corporation.
• Court: U.S. Court of Appeals — Second Circuit

254 F.2d 827 (1958)

Walter SCHNEIDER, John J. Vogler and Julian J. Bursten, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. McKESSON & ROBBINS, Incorporated, a corporation and Guaranty Trust Company of New York, a corporation.

No. 218, Docket 24799.

United States Court of Appeals Second Circuit.

Argued March 7, 1958.

Decided May 1, 1958.

Baker, Garber & Chazen, Hoboken, N. J. (Nathan Baker, Hoboken, N. J., of counsel; Bernard Chazen, Hoboken, N. J., on the brief), for plaintiff-appellants.

Hodges, Reavis, McGrath & Downey, New York City (C. Frank Reavis, Martin D. Jacobs, Robert Thrun, Frederick R. Adler and Laurence C. Ehrhardt, New York City, of counsel), for defendant-appellee McKesson & Robbins, Inc.

McGuigan & Kilcullen, New York City (E. Gayle McGuigan, New York

City, of counsel), for defendant-appellee Guaranty Trust Co.

Before LUMBARD, WATERMAN and MOORE, Circuit Judges.

WATERMAN, Circuit Judge.

The appellants, suing on behalf of themselves and all others similarly situated, commenced this action in the District Court to establish the extent of their interest in certain funds held by the defendant Guaranty Trust Company under a trust agreement entered into between Guaranty Trust and the defendant McKesson & Robbins, a former employer of the appellants. McKesson & Robbins' defense motion for summary judgment, accompanied by supporting affidavits, was granted by the District Court.

McKesson & Robbins is a Maryland corporation employing approximately 9,000 persons. Its business consists of (1) wholesale distribution of drug products through 75 selling offices and warehouses (sometimes referred to as "divisions") located in 34 states and Hawaii, (2) wholesale distribution of wines and liquors through 42 selling offices in 16 states and Hawaii, (3) distribution of chemicals through 6 district offices, 30 branch sales offices and 37 warehouses, and (4) manufacture of a line of drug products distributed through the company's wholesale offices. In 1944 McKesson & Robbins instituted a pension plan for the benefit of its employees. Under the plan the employees who qualify as "participants" are entitled to retire at age 65 (or, in the discretion of the board of directors, at age 60) with an annual retirement allowance computed in accordance with the terms of the plan. Participation in the plan, which commences as soon as an employee is eligible, is limited to employees who have attained age 30 and completed one year of service, with the added provision that the employee to be a "participant" "shall have at least 15 years of creditable service by the time he attains age 65." The plan further provides that "If a participant ceases to be an employee for any reason whatsoever * * * his participation shall thereupon terminate * * *" In addition, Section 9(5) of the plan specifies that "The establishment of the Plan shall not be construed as conferring any legal rights upon any employee or any person for a continuation of employment, nor shall it interfere with the right of an Employer to discharge any employee or deal with him without regard to the existence of the Plan."

The pensions established by the plan are payable out of a trust fund of which the Guaranty Trust is trustee. All contributions to the fund are made by the employer. The amount of such contributions is determined actuarially in accordance with the projected benefits payable under the plan, but all contributions are voluntary, and the employer retains the right to discontinue its contributions or to reduce them below the amount necessary to provide adequate funds for the payment of pensions. Section 8 of the plan provides that "All assets of the Plan shall be held as a special trust for the benefit of participants and retired participants, and in no event shall it be possible * * * for any part of the assets of the Plan to be used for, or diverted to, purposes other than for the exclusive benefit of such participants or retired participants. No person shall have any interest in or right to any part of the earnings of the trust, or any rights in, or to, or under the trust or any part of the assets thereof, except as and to the extent expressly provided in these Rules." The plan may be terminated at any time by McKesson & Robbins' board of directors. If the plan is terminated, all assets are to be used for the benefit of participants and retired participants, each of whom is entitled to a proportionate share of the net assets of the trust fund.¹

On the date that the complaint herein was filed, the plan had been in effect approximately twelve years. During this time McKesson & Robbins opened 11 new drug divisions and 14 new liquor divisions. In the same period it had discontinued ten liquor divisions and two drug divisions. Each of the three appellants was employed by McKesson & Robbins at its drug division in Newark, New Jersey, one of the two discontinued drug divisions. When the Newark division was closed in 1955, 172 of McKesson & Robbins' 8,500 employees were employed there. Of the 8,500 employees 5,438, including 103 employed at the Newark division, were participants in the pension plan. Fifteen of the Newark participants continued their employment with McKesson & Robbins, so that 88 participants, including the three appellants, were no longer employed. These 88 employees constituted approximately 1.6% of the total number of employees participating in the plan.

The appellant Schneider, at the time the Newark division was closed, was 52 years old and had been employed by McKesson & Robbins for 21 years, all of which constituted "creditable service"² under the pension plan. The appellant Vogler, who was 45 years of age, had been employed by McKesson & Robbins for 25 years, 15 of which constituted "creditable service." The third appellant, Bursten, was 43 years old and had 9 years of "creditable service." There is some dispute in the record before us whether, when the Newark division was closed, the appellants were offered the opportunity of continuing their employment with McKesson & Robbins. For the purpose of this appeal, we accept the appellants' claim that they were not given such an opportunity.

We think it is readily apparent from the facts set forth above that the appellants have no interest in the pension fund. Under the express terms of the plan the fund exists for the sole benefit of participants and retired participants. As the appellants had not attained age 65 at the time they were discharged, or had not reached age 60 so as to be eligible for retirement by special vote of the board of directors, they cannot claim an interest in the fund as if they were "retired participants." Nor will they, upon attaining age 65, be entitled to a pension. Under the plan pensions are payable only to participants. The appellants ceased to be participants when they were discharged.

The interest of participants under the plan in the trust fund is limited to their contingent rights to receive a pension at age 65 and to their rights to share in the trust fund if the plan is terminated. Since the appellants are not entitled to a pension either presently or in the future, they can establish an interest in the pension fund only if the plan has been terminated. In this connection, appellants rely upon Longhine v. Bilson, Sup. Ct. Niagara Co.1936, 159 Misc. 111, 287 N.Y.S. 281, in which the court decreed partial distribution of the assets of an association the by-laws of which were similar to the rules of the pension plan here. Whatever the precedent value of that decision, and we note that it cited no authorities and that it has never been cited in a later decision, it is not controlling here. In that case approximately one-half of the members of the association were...