Gediman v. Anheuser Busch, Inc.

• Decision Date: 30 January 1962
• Docket Number: No. 94,Docket 27075.,94
• Citation: 299 F.2d 537
• Parties: H. James GEDIMAN, as Executor of the Last Will and Testament of James E. Barsi, Deceased, and George A. Barsi, as Administrator with the Will annexed of the Estate of James E. Barsi, Deceased, Plaintiffs-Cross Appellants, v. ANHEUSER BUSCH, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

299 F.2d 537 (1962)

H. James GEDIMAN, as Executor of the Last Will and Testament of James E. Barsi, Deceased, and George A. Barsi, as Administrator with the Will annexed of the Estate of James E. Barsi, Deceased, Plaintiffs-Cross Appellants, v. ANHEUSER BUSCH, INC., Defendant-Appellant.

No. 94, Docket 27075.

United States Court of Appeals Second Circuit.

Argued November 29, 1961.

Decided January 30, 1962.

Thomas Kiernan (White & Case), New York City (Thomas B. Leary, New York City, of counsel), for defendant-appellant.

Allen Moss (Meyer H. Slack), New York City (Herbert B. Rose, Edward Goodell, New York City, of counsel), for plaintiffs-cross appellants.

Before CLARK, FRIENDLY and KAUFMAN, Circuit Judges.

FRIENDLY, Circuit Judge.

This action was brought in the Eastern District of New York by H. James Gediman, a resident of New York and executor under the will of James E. Barsi, admitted to probate in the Surrogate's Court of New York County, and George A. Barsi, administrator c. t. a. in California probate proceedings, against Anheuser-Busch, Inc., a Missouri corporation, 28 U.S.C. § 1332, for amounts allegedly due under the Company's pension plan or for misrepresentation in connection therewith. Judge Byers rendered a judgment in favor of plaintiffs for $73,754.02, which he held to be due under the pension plan, plus interest from November 17, 1957, and costs. Claiming only $32,780.44 to be owing, defendant has appealed; plaintiffs have taken a cross-appeal with respect to the dismissal of their alternative claim for misrepresentation. We hold that the District Court erred in awarding judgment under the pension plan but that plaintiffs were entitled to recover on the basis that defendant negligently, although in good faith, misinformed Barsi as to the consequences of the election that he made upon retirement. Hence we reverse on both appeals, with a direction to enter judgment for plaintiffs as hereafter set forth.

As of November 1, 1947, Anheuser-Busch had entered into a contract with The Prudential Insurance Company of America for the issuance of retirement annuities to employees reaching the age of 65 or, in certain instances of prior retirement, an earlier age. Barsi was a participant in that plan, sometimes hereafter "the Group Annuity Plan." On November 1, 1952, the Group Annuity Plan was superseded by a Salaried Employees' Pension Plan, with St. Louis Union Trust Company as trustee.

The 1952 Plan provides that the Normal Retirement Date of any participant should be the first day of the month coinciding with or next following his 65th birthday; however, a participant, with the consent or at the request of the Company, might be sooner retired, at an Early Retirement Date. The plan defines "Effective Benefit Date" as "the date as of which the payment of his a participant's retirement or other severance benefits hereunder either commenced, or are scheduled to commence * * *" It says further that "The Effective Benefit Date shall be the normal retirement date, although employment was previously terminated, unless an earlier date for the payment of benefits (called `Early Benefit date'), shall have been selected and approved as hereinafter provided * * *" This has the effect, important as we shall see, that, for an employee retiring before normal retirement age, Early Retirement Date and Early Benefit Date are not at all equivalent terms; the former refers to a cessation of employment, the latter to a date, which may be the same or may be later, selected for benefits to begin and therefore in that event the Effective Benefit Date.

In stating the benefits to employees, the Plan begins, Section 7, by a description of "The normal retirement benefit, based on the assumption that employment and participation herein is continued to normal retirement date," and of the "basic method" of payment, to wit, "an annual pension payable in equal monthly installments for the lifetime of the participant." It then describes, Section 8, "Alternate Methods of Distributing Lifetime Benefits," permissible if "on or before the Effective Benefit Date the participant shall have substituted, on the basis of their actuarial equivalent and with the approval of the Committee, one or more of the following `alternate methods' of settlement." One of these is "The payment in one sum of the actuarial value of the benefit as of the Effective Benefit Date," with the Pension Committee having the option to pay this in cash or "by the purchase and transfer by Trustee of a commercial single premium annuity contract endorsed as the Committee may determine." Next the Plan deals, Section 10, with Early Retirement Benefits. This section begins by saying that the normal retirement pension then accrued for an employee should be determined as provided in a formula therein described, and should "become payable at normal retirement date, if he is then living." However, at the employee's request, the Pension Committee may advance the Effective Benefit Date "to the first day of any month occurring after such request and within ten (10) years of his normal retirement date, whereupon the accrued pension shall become payable on such Early Benefit Date, if the participant is then living, based on its actuarial value on such date * * *" Summarily stated, the amount that would have been payable if Barsi had become entitled to a pension would have been the sum of the actuarial values on the Effective Benefit Date of (1) his "accrued past service pension," i. e., for services before November 1, 1947, and (2) his "accrued future service pension," — the latter being the proportion of the pension to which he would have been entitled for services after November 1, 1947, if he had retired at age 65, equal to the ratio which the number of years of his participation "in this Plan and the Group Annuity Plan" bore to the number of years he would have participated had he remained in the Company's employ until that age.¹ Finally, the Plan contains a provision, Section 12, establishing a benefit for males dying "on or before the Effective Benefit Date"; this benefit is defined as "the then actuarial value of the future service pension which * * * shall have accrued during his participation in this Plan." All these provisions and others were set forth, in somewhat — but not much — simplified form, in a booklet distributed to participating employees.

Barsi retired on August 31, 1956, having been on a paid leave of absence for the previous year. On that date he wrote a long letter to August A. Busch, Jr., defendant's president. He requested Mr. Busch's personal "consideration and action" in the direction of some adjustment in the pension plan which, Barsi thought, "does not give proper weight and consideration to employees with my length of service," to wit, 25 years, who had been obliged to retire early, for ill health, after a relatively brief participation. "In case your consideration is not forthcoming," he wrote, "it leaves me no alternative but to make a most serious decision which I am not qualified to make, as I am not fully informed of all the various phases and ramifications contained in the Pension charter." However, if Mr. Busch felt "that work and effort does not warrant your special interest in me, it leaves me no alternative," but to advise that "I would like to receive payment of my pension in the form of a cash lump payment * * * or a single amount premium life annuity contract issued by an insurance company * * *," the portions of the sentence here omitted containing references to the section of the participating employees' booklet summarizing Section 8 of the Plan, described above.

On September 17, 1956, Mr. Busch, signing himself "Gussie," gave his answer in a cordial letter addressed to "Jim." He stated he had "had our Insurance Department follow through on your request and am attaching herewith the information that has been furnished me on the subject of your pension benefits by our pension consultants." This, he felt, "is as far as we can go notwithstanding that all of us and particularly myself were and still are interested in your personal welfare."

The memorandum enclosed with Mr. Busch's letter, prepared by Hayes & Co., the pension consultants, is of such crucial importance that we set it forth in full in the margin.² On October 15, 1956, Barsi replied. First stating his understanding of the illustration to be that "if I elected to postpone a cash distribution, such cash distribution would be taxable as `capital gains' in the year received by me," he continued that "Under the circumstances, it is my desire that the Committee defer the cash distribution to May 1, 1958, so that I may then report the distribution as a capital gain." He asked that the Pension Committee be so informed. On November 19, 1956, the Company advised him the Committee "has approved cash payment, on May 1, 1958, of the funds available to you" under the Plan.

Barsi died, as a result of an automobile accident, on November 17, 1957. Correspondence between his executor and the Company revealed a wide difference of opinion as to the rights of Barsi's estate, resulting ultimately in the bringing of this action. The amended complaint alleged three causes of action: The first set forth the Plan and Barsi's election "to receive payment of $84,582. on May 1, 1958" thereunder; the second also set forth the correspondence and claimed the same amount; the third alleged that Barsi had elected on August 31, 1956, to receive $78,356. in cash or by the application of that sum to the purchase of an annuity and had been dissuaded from adhering to that election by false representations either knowingly or carelessly made, and claimed that amount "reduced by the sum which plaintiffs are entitled to recover upon the prior causes of action herein."

I.

The theory of the first two causes of action as pleaded would seem to have been that Barsi, or rather his estate, became entitled, ex...