Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee
| Decision Date | 12 February 1992 |
| Docket Number | No. 90-8686,LILY-TULI,INC,90-8686 |
| Citation | 953 F.2d 587 |
| Parties | 121 Lab.Cas. P 10,005, RICO Bus.Disp.Guide 7943, 14 Employee Benefits Cas. 2457 Allan C. ALDRIDGE, Dennis W. Peterson and Henry A. Sieron, Plaintiffs-Appellees, Cross-Appellants, v.SALARY RETIREMENT PLAN BENEFITS COMMITTEE and Fort Howard Cup Corporation, Defendants-Appellants, Cross-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Ted H. Clarkson, Augusta, Ga., Sanford M. Litvack, Dewey & Ballantine, Jack A. Gordon and Karen A. Estilo, New York City, for defendants-appellants, cross-appellees.
David E. Hudson, Hull, Towill, Norman & Barrett, William F. Hammond, Augusta, Ga., for plaintiffs-appellees, cross-appellants.
Appeals from the United States District Court for the Southern District of Georgia.
Before FAY and BIRCH, Circuit Judges, and HOFFMAN *, Senior District Judge.
This is an interlocutory appeal from the United States District Court for the Southern District of Georgia in which pension plan participants ("participants") and the sponsoring company, Lily-Tulip, Inc. ("Lily"), contest the liability of a pension plan sponsor following termination of a plan. The plaintiff-appellants, a class of employees and former employees of the defendant company Lily, appeal the district court's dismissal of their ERISA claim for contingent, subsidized early retirement benefits which they were not paid upon the termination of the Lily pension plan. See Aldridge v. Lily-Tulip Inc., 741 F.Supp. 906, 920 (S.D.Ga.1990). For the reasons that follow, we find that the district court correctly dismissed the participants' ERISA claim and accordingly AFFIRM.
The district court also denied the defendant Lily's motion to dismiss the participants' RICO claim, and Lily cross-appeals. Id. at 914. Lily argues that the district court erred in finding that the RICO statute was constitutional as applied in this situation, that the RICO pattern requirement was met, that the RICO claim was not barred by the applicable statute of limitations, and that fraud was pled with sufficient particularity. Finding that the district court erred in concluding that the complaint alleged a pattern of racketeering activity, we REVERSE the trial court's denial of Lily's motion to dismiss the participants' RICO claim.
Lily was created in September, 1981 by a group of private investors who acquired it as a cup manufacturing division of Owens-Illinois ("Owens"). On approximately September 17, 1981, Lily distributed a memorandum to the employees of the Lily-Tulip cup division of Owens, assuring the employees that there would be no change in retirement benefits upon Lily's acquisition of the division. Lily adopted a defined benefit plan called the Lily-Tulip, Inc. Salary Retirement Plan ("Plan"), which was identical to the plan that had been sponsored by Owens and gave employees credit under the new plan for their accumulated service with Owens.
The Plan provided for normal retirement benefits in the form of a monthly annuity, commencing at age sixty-five. Additionally, the Plan provided for subsidized and unsubsidized early retirement benefits. An unsubsidized early retirement would require the participant's monthly benefit to be reduced to its actuarial equivalent of the normal retirement benefits commencing at age sixty-five. The subsidized early retirement benefits provided that an employee could retire before age sixty-five and receive more than the actuarial equivalent of their normal retirement. Employees with thirty years of service and fifty-five years of age or ten years of service and sixty years of age were entitled to fully subsidized early retirement benefits.
In accordance with the plan's provisions, Lily amended the Plan on October 30, 1986 so as to effect its termination, as well as the cessation of future benefit accruals after December 31, 1986. R5-48 (Ex. 8); see also R5-48 (Ex. 7 at 74) (). At the time of its termination, the Plan was underfunded. Lily distributed the Plan assets in order to satisfy those benefits guaranteed by the Pension Benefit Guaranty Corporation ("PBGC"). See ERISA Section 404, 29 U.S.C. § 1104 (1988).
The district court certified a class of Plan participants as plaintiffs in this ERISA dispute. The named plaintiffs were at varying degrees of satisfying the age and service requirements for subsidized early retirement benefits at the time of the Plan termination. Lily filed a motion to dismiss the ERISA claim, asserting that the law did not require it to fund the Plan in order to pay participants who would meet the conditions for early retirement benefits after the Plan terminated, if these benefits were unvested and contingent at the time of Plan termination. The district court granted Lily's motion and certified its resolution of this issue for immediate appeal to this court.
Lily changed its vacation policy in 1982. In June, Lily reduced by twenty percent the amount of vacation time its employees would earn in the future. In November, Lily drafted a memorandum which stated in pertinent part as follows:
The new policy incorporates the following major changes:
1. The former vacation benefit is substantially restored with regard to service in relation to length of vacation entitlement, except that there is no partial vacation earned until the completion of a full year of service.
2. Vacation is earned during the current year rather than the prior year and must be taken in full within the year earned. There is no provision to carry over vacation periods earned in one year into the following year.
The policy as you will note is implemented January 1, 1983 and will supersede any and all prior policies at that time. Employees who have existing, untaken vacation entitlements under the former policy have until the end of the year to avail themselves of untaken vacation earned under the old policy.
R7-68 (Ex. to McTague Aff.)
This memorandum was not received by Lily employees until December 1982.
Lily's new vacation policy allowed employees to take their vacation only in the year it was earned, essentially wiping off the slate any vacation earned in 1982. For example, an employee who had earned four weeks of vacation in 1980 could take that vacation in 1981. He could then take in 1982 the vacation time he had earned in 1981, while earning four weeks of vacation time in 1982. However, the vacation he took in 1983 could only be charged to that vacation earned in 1983, thus denying the employee the ability to take at any time the vacation earned in 1982.
At the time of the vacation policy change, Lily removed approximately $1.5 million in employees' accrued vacation liability from its record books and financial statements. The employees were not allowed to take their 1982 vacation time in the weeks remaining in the year after they were notified of the restriction. The employees believed that they would be compensated when they terminated employment or retired for the value of their accrued vacation which they had not been able to take. Certain executives at Lily complained to other executives that the memorandum announcing the change in vacation policy was unclear, and that the employees should be informed that Lily's policy of paying terminated employees for accrued vacation had also been changed. R7-68 (Cross and McTague Affs.). The participants claim that they were unaware that they would not get paid for the unused vacation until June 1983 when an employee retired and did not receive payment for his 1982 vacation. R3-22 (Aldridge Aff.).
The district court certified a class of plaintiffs consisting of persons seeking damages under federal RICO and state law for Lily's alleged improper deprivation of vacation benefits for the year 1982. The participants alleged that Lily's change in vacation policy and the manner in which it was communicated were predicate acts of intentional fraud. Lily moved to dismiss both RICO claims, and the district court denied Lily's motions. Although the district court concluded that the Plaintiffs stated a RICO claim, it certified the immediate appeal to this court of its determination of the pattern requirement and the pleading of fraud with particularity issues.
The participants claim that the district court erroneously dismissed their ERISA claim. In reviewing the district court's dismissal, we will read the facts alleged in the complaint in the light most favorable to participants. "A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). The participants' complaint asserts that they were improperly denied the right to satisfy conditions after plan termination in order to earn the right to subsidized early retirement benefits which were provided in the Plan. 1
The Plan was amended and restated effective January 1, 1985 to comply with the Retirement Equity Act of 1984, Pub.L. No. 98-397, 98 Stat. 1426 (1984) ("REA"). The Omnibus Budget Reconciliation Act of 1986, Pub.L. No. 99-509, 100 Stat. 1874 (1986), enacted new ERISA Title IV provisions to govern single-employer plan terminations initiated after January 1, 1986 and before December 17, 1987. These provisions are called the Single-Employer Pension Plan Amendments Act of 1986, Pub.L. No. 99-272, 100 Stat. 237 (1986) ("SEPPAA"), and along with REA are applicable to the December 31, 1986 Plan termination. REA amended 26 U.S.C. § 411(d)(6) of the Internal Revenue Code and its twin ERISA section 204(g), 29 U.S.C. § 1054(g), to provide that subsidized early retirement benefits are protected from...
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