Harris Trust and Sav. Bank v. John Hancock Mut. Life Ins. Co.

• Citation: 970 F.2d 1138
• Decision Date: 30 July 1992
• Docket Number: D,No. 979,979
• Parties: 15 Employee Benefits Cas. 1993 HARRIS TRUST AND SAVINGS BANK, as Trustee for the Sperry Master Retirement Trust # 2, Plaintiff-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE CO., Defendant-Appellee. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Third-Party Plaintiff, v. CHASE MANHATTAN BANK, N.A., Counterclaim-Defendant, and Sperry Corporation and The Retirement Committee of Sperry Corporation, Third-Party Defendants. ocket 91-7854.
• Court: U.S. Court of Appeals — Second Circuit

Page 1138

970 F.2d 1138

15 Employee Benefits Cas. 1993

HARRIS TRUST AND SAVINGS BANK, as Trustee for the Sperry

Master Retirement Trust # 2, Plaintiff-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE CO., Defendant-Appellee.

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Third-Party Plaintiff, v. CHASE MANHATTAN BANK, N.A., Counterclaim-Defendant, and Sperry Corporation and The Retirement Committee of Sperry

Corporation, Third-Party Defendants.

No. 979, Docket 91-7854.

United States Court of Appeals Second Circuit.

Argued Feb. 11, 1992.

Decided July 30, 1992.

Lawrence Kill, New York City (John B. Berringer, Ann V. Kramer, Anderson Kill Olick & Oshinsky, P.C., of counsel), for plaintiff-appellant.

Howard G. Kristol, New York City (Robert M. Peak, Richard J.J. Scarola, Reboul, MacMurray, Hewitt, Maynard & Kristol, of counsel), for defendant-appellee.

Richard E. Barnsback, Stephen W. Kraus, Phillip E. Stano, The American Council of Life Insurance, Washington, D.C., James F. Jorden, Stephen H. Goldberg, Waldemar J. Pflepsen, Jr., Perry Ian Cone, Jorden Schulte & Burchette, Washington, D.C., submitted a brief for Amicus Curiae The American Council of Life Ins.

Before: FEINBERG, TIMBERS and MINER, Circuit Judges.

MINER, Circuit Judge:

Plaintiff-appellant Harris Trust and Savings Bank as Trustee for the Sperry Master Retirement Trust No. 2 and its successor, the Unisys Master Trust ("Harris Trust"), appeals from a final judgment entered on August 16, 1991 in the United States District Court for the Southern District of New York (Patterson, J.) in favor of defendant-appellee John Hancock Mutual Life Insurance Company ("Hancock"). The final judgment dismissed in its entirety the amended complaint in this action in accordance with two opinion-orders, the first granting partial summary judgment dismissing Harris Trust's claim for breach of fiduciary duties under the Employee Retirement Income Security Act of 1947 ("ERISA"), 29 U.S.C. § 1001 et seq., and the second granting summary judgment dismissing Harris Trust's contract and common law claims. See Harris Trust & Savings Bank, as Trustee of the Sperry Master Retirement Trust No. 2 v. John Hancock Mutual Life Ins. Co., 722 F.Supp. 998 (S.D.N.Y.1989) ("Harris I ") and Harris Trust & Savings Bank, as Trustee of the Sperry Master Retirement Trust No. 2 v. John Hancock Mutual Life Ins. Co., 767 F.Supp. 1269 (S.D.N.Y.1991) ("Harris II ").

The dispute between the parties centers upon a certain contract known as Group Annuity Contract No. 50 ("GAC 50"), originally entered into in 1941 between Hancock and Sperry Rand Corporation to fund a retirement plan for the benefit of Sperry employees. Sperry has undergone a number of changes in name and corporate form since the execution of GAC 50 but will be referred to herein by its original name. Harris Trust is the present trustee of the retirement plan and the ultimate successor to Sperry's right as contractholder of GAC 50. In Harris I, the district court decided that Hancock was exempt from the fiduciary responsibility provisions of ERISA in connection with the management of GAC 50 for the reason that GAC 50 is a "guaranteed benefit policy." In Harris II, the district court decided that there was no basis for any of the contractual and other common law claims pleaded by Harris Trust against Hancock. The sole challenge to Harris II raised by Harris Trust on this appeal relates to the district court's rejection of the claim that Hancock breached GAC 50 by terminating the payment of non-guaranteed pension benefits. As to the ERISA fiduciary claims disposed of in Harris I, Harris Trust argues here, as it did in the district court, that Hancock is an ERISA fiduciary with respect to the assets it holds under GAC 50; that Hancock is an ERISA fiduciary in respect of the contract itself; and that Hancock is in any event collaterally estopped from re-litigating the fiduciary status issue as the consequence of an order in another case, subsequently vacated, deciding the very question presented here.

To assist us in resolving the issue of fiduciary responsibility, we solicited an amicus brief from the United States Department of Labor, the government agency charged with the enforcement of ERISA. The Department apparently has issued an Interpretive Bulletin, as well as two Advisory Opinions, bearing on the issue. The Bulletin is not entirely clear and appears to be in conflict with the Opinions. Following oral argument, the Clerk of the Court, at our direction, invited the submission of an amicus brief within thirty days of receipt of her letter dated February 12, 1992. By motion dated March 3, 1992, the Department of Labor sought an extension to May 12, 1992, asserting that the additional time (approximately three months) was needed because (1) the Secretary had not formulated a final position on the issue; (2) the case was important and complex; (3) more time was needed for an examination of legislative and regulatory history; (4) a review of the record was required; and (5) approval of the Department of Justice was required. Recognized in the moving papers was the split in circuit court authority on the issue and the Secretary's interest in promoting uniformity. We granted the requested extension.

By letter dated May 11, 1992 from Marshall J. Breger, Solicitor of Labor, we were advised as follows:

During the time allotted by the Court, we have undertaken an extensive review of We do not understand why the Solicitor of Labor is unable to provide an amicus brief "within a foreseeable time frame" and can only deplore his failure to do so in this case. While it is not unusual for a government agency to decline an invitation to file an amicus brief on account of bureaucratic inertia or inability to articulate a coherent policy, see Popkin v. Bishop, 464 F.2d 714, 719 n. 15 (2d Cir.1972); Securities Industry Ass'n v. Connolly, 703 F.Supp. 146, 155 n. 16 (D.Mass.1988), aff'd, 883 F.2d 1114 (1st Cir.1989), cert. denied, 495 U.S. 956, 110 S.Ct. 2559, 109 L.Ed.2d 742 (1990), it is unconscionable for an agency to request a substantial extension of time and then fail to file the promised brief. It is especially egregious to request an extension as long as that requested here and then to advise in effect that no extension would be long enough. Courts do not have the luxury of deferring decisions indefinitely, however, and we proceed to dispose of the matter before us. We reverse in part on the fiduciary duty issue and affirm on the contract termination issue.

                the legal and policy issues involved in this matter.   Regrettably, we have concluded that the need to fully consider all of the implications of these issues within the Department precludes our providing the Court with a brief within a foreseeable time frame.   Accordingly, rather than seek a further extension, I feel constrained to decline the Court's invitation
                

BACKGROUND

As originally constituted on March 1, 1941, GAC 50 provided for the purchase of individual deferred annuities from Hancock for the Sperry Defined Benefit Retirement Plan. These annuities were purchased on an annual basis for each employee with premiums, or contributions, paid to Hancock by Sperry. They provided for regular payments to eligible Sperry employees or their beneficiaries following retirement. The premiums became part of Hancock's general account of corporate funds, and Hancock issued the guaranteed annuities at purchase rates fixed by the contract.

By amendment effective January 1, 1968, GAC 50 was converted from a deferred annuity form of contract to a Retrospective Immediate Participation Guarantee ("Retro-IPG") form of contract. The deferred annuities purchased prior to January 1, 1968 were technically cancelled and the assets supporting them placed in a Pension Administration Fund ("PAF"). However, the cancellation of the pre-1968 annuities did not affect the guarantees of benefits by Hancock to the participants and beneficiaries. With respect to the Retro-IPG, net investment income was directly credited to the PAF on an annual basis. The amount credited depended upon Hancock's general account investment performance and the allocation of that performance to the PAF. Under the 1968 amendment, Hancock guaranteed that once an employee's retirement annuity has been established, Hancock is obligated to make all future payments due under the annuity. Hancock also guaranteed that the PAF on any date would not be less than it otherwise would have been if the sum of the net interest earned and capital gains and losses apportioned to the PAF had always been zero from January 1, 1968. (Hancock in effect guaranteed that the PAF would never fall below its January 1, 1968 level.) As in the case of the deferred annuity form of contract, the premiums paid under the Retro-IPG contract became part of Hancock's general corporate funds.

The 1968 amendment required that the PAF be maintained at a level sufficient to meet the Liabilities of the Fund ("LOF") as computed by Hancock. LOF is the contractual reserve for the possible future purchase of annuities for the benefit obligations guaranteed by Hancock. The specific requirement was that the PAF balance be maintained at a level at least 105 per cent of LOF. The amount in the PAF in excess of this minimum operating level ("MOL") has been referred to by the parties as "free funds." If Sperry failed to maintain Fund balances at or above MOL, termination of the PAF would be triggered. Upon termination, the contract would cease to function in the manner of a Retro-IPG, the cancelled pre-1968 annuities would be On August 1, 1977, GAC 50 again was amended. This amendment involved its conversion to a Retrospective Immediate Participation Guarantee/Prospective Deferred Liability ("Retro-IPG-PDL") form of contract. Under the amendment, the LOF would not automatically be increased upon the retirement of any employee, and new retirement benefits would not be guaranteed by...