Pritchard v. Rainfair, Inc.

• Decision Date: 02 October 1991
• Docket Number: Nos. 90-1431 and 90-1782,s. 90-1431 and 90-1782
• Citation: 945 F.2d 185
• Parties: , 14 Employee Benefits Cas. 1743 Edward PRITCHARD, Plaintiff-Appellant, Cross-Appellee, v. RAINFAIR, INC., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 185

945 F.2d 185

20 Fed.R.Serv.3d 1053, 14 Employee Benefits Cas. 1743

Edward PRITCHARD, Plaintiff-Appellant, Cross-Appellee, v. RAINFAIR, INC., Defendant-Appellee, Cross-Appellant.

Nos. 90-1431 and 90-1782.

United States Court of Appeals Seventh Circuit.

Argued Feb. 11, 1991.

Decided Oct. 2, 1991.

Robert Sutton (argued), Sutton & Kelly, Milwaukee, Wis., for plaintiff-appellant, cross-appellee.

David Lucey, Jon P. Christiansen, Lisa S. Neubauer (argued), Foley & Lardner, Milwaukee, Wis., for defendant-appellee, cross-appellant.

Before CUMMINGS and FLAUM, Circuit Judges, and GRANT, Senior District Judge. ^*

GRANT, Senior District Judge.

Plaintiff, Edward Pritchard, filed a one count complaint against his former employer, defendant Rainfair, Inc. alleging that he had been denied pension benefits in violation of ERISA, specifically 29 U.S.C. § 1140. He subsequently amended his complaint to include among those benefits post-retirement medical insurance. The district court granted Rainfair's motions for summary judgment, but denied its request for attorneys' fees under ERISA, 29 U.S.C. § 1132(g)(1) and Fed.R.Civ.P. 11. This cross-appeal followed.

I. FACTS

In 1956, Rainfair's Board of Directors approved a Discretionary Non-Contributory Retirement Plan (the "Discretionary Plan"), which applied to employees who retired at age 65 with a minimum continuous employment of 15 years. The pension plan established a benefit schedule based on salary with the maximum benefit available set at $225 per month. There were no employee contributions, and benefits were paid out of the general assets of the company. No separate fund was established, and there were no provisions for vesting. Indeed, the Discretionary Plan specifically provided that:

This plan is entirely voluntary and discretionary on the part of the Company, shall impose no contractual obligation or liability whatsoever upon the Company, and no Employee shall have any contractual, vested or enforceable right(s) hereunder. All payment of retirement pay hereunder shall be contingent upon the Company's financial ability from time to time to make and/or continue such payments, as and whenever determined by its Board of Directors, whose decision shall be final. The Company expressly reserves the right at any time or times to increase, reduce, suspend, resume and/or discontinue any and all such payments of retirement pay and/or to modify, suspend or discontinue this entire retirement pay plan, as and whenever determined by its Board of Directors, whose decision shall be final.

In 1970, Rainfair was acquired by Koracorp Industries, Inc., and adopted the Koracorp Profit-Sharing Pension Plan (the "Profit-Sharing Plan") as the source of retirement benefits for its employees. ¹ Although the Discretionary Plan could have been terminated as to all employees at that time, it was retained for the benefit of Rainfair's older employees who would be unable to accumulate any significant benefits under the new plan before they retired. ²

In 1976 ERISA went into effect, and Rainfair adopted a formal policy effectively integrating its two pension plans. The policy established an offset mechanism for reconciling benefits available under the Profit-Sharing Plan with benefits payable under the Discretionary Plan. Pursuant to this new policy, an eligible employee would receive a lump sum distribution under the Profit-Sharing Plan first, and monthly benefits under the Discretionary Plan would be delayed until such time as, if ever, the employee "used up" the lump sum distribution. If the employee was to receive $225 per month under the Discretionary Plan, the lump sum Profit-Sharing distribution, which was deemed to appreciate according to generally accepted accounting principles, would be divided by $225 in order to determine the number of months before the employee would be eligible for payments under the old plan. In some cases, where the lump sum would appreciate at greater than $225 a month, the employee would never be eligible for payments under the Discretionary Plan.

The integrated plan thus provided Rainfair's older employees (hired prior to January 1, 1970) with a retirement benefit equal to, or greater than, that which they would have received under the Discretionary Plan. All affected employees were notified of the policy change in a letter to "Fellow Employees" dated August 13, 1976.

Pritchard was employed by Rainfair from October 1, 1962 until July 28, 1967, and again from July 15, 1969 until his resignation on November 30, 1984. At the time of his resignation, Pritchard was only 61 years old. In March of 1985, Pritchard received a lump sum payment under the Profit-Sharing Plan of $50,133.28. Under the offset system described above, this distribution was deemed to be sufficiently large to allow Pritchard to invest the lump sum payment at an annual rate of return as low as five percent and still earn more in monthly interest income than the $225 he would otherwise have received under the old pension plan. Rainfair thus took the position that Pritchard was not, and would never be, eligible for payments under the Discretionary Plan.

Upon his resignation, Pritchard also received a letter from Rainfair which summarized the benefits he was to receive. This letter, among other things, advised Pritchard that Rainfair would pay for his health insurance through December 31, 1984, and that he would then have the option of continuing his health insurance under the group plan at his own expense. Pritchard elected to pursue this option and extended his coverage by paying the necessary premium.

In March of 1986, more than a year after Pritchard's resignation, Rainfair adopted a new policy of paying post-retirement health insurance premiums for a limited number of its salaried employees. The policy was not retroactive and extended only to the executive assistant to the president and to members of the "president's management staff."

On October 4, 1988, three days before his 65th birthday, Pritchard filed a complaint against Rainfair alleging that its refusal to pay the retirement benefit due under the Discretionary Plan violated ERISA, "particularly 29 U.S.C. § 1140." Rainfair moved for summary judgment under Fed.R.Civ.P. 56, and all briefing had been completed when Pritchard filed an amended complaint, modifying his ERISA claim to include a claim for post-retirement medical insurance. Rainfair supplemented its Rule 56 motion to address the new claim, and the district court granted both the original and supplemental motions. Rainfair thereafter sought its attorneys' fees under ERISA, 29 U.S.C. § 1132(g)(1) and Fed.R.Civ.P. 11. The district court denied the motion for fees by order dated March 23, 1990.

II. DISCUSSION

A. The ERISA Claim

In both his original and amended complaint, Pritchard alleges a violation of 29 U.S.C. § 1140, which prohibits discrimination against plan participants for exercising their rights under the provisions of an employee benefit plan. ³ Neither the facts which he pled, nor those which were presented in response to summary judgment, however, support a claim under that section. There is no evidence whatsoever that Pritchard was discharged, fined, suspended, expelled, disciplined, or discriminated against for exercising a right to which he was entitled under Rainfair's pension plan. The district court, accordingly and appropriately, entered judgment for Rainfair on the § 1140 claim. Pritchard does not contest that disposition.

The district court, however, went on to address the merits of a claim under 29 U.S.C. § 1053(a), ERISA's non-forfeiture provision, noting that it was this section on which the parties had focused in their briefs in support of, and opposition to, summary judgment. It concluded that, like the offsets approved in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981), Holliday v. Xerox Corp., 732 F.2d 548 (6th Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 294, 83 L.Ed.2d 229 (1984), and Vintilla v. U.S. Steel Corp. Plan for Employee Pension Benefits, 606 F.Supp. 640 (W.D.Pa.1985), aff'd, 782 F.2d 1026 (3d Cir.), cert. denied, 475 U.S. 1141, 106 S.Ct. 1791, 90 L.Ed.2d 337 (1986), Rainfair's offset plan did not violate the non-forfeiture provisions of § 1053(a), but was merely "an attempt to change the vehicle by which the company would deliver benefits, while maintaining fairness of treatment between older and younger employees."

On appeal, Pritchard makes no attempt to salvage his § 1140 claim. His arguments focus, as they did at the district court level, on 29 U.S.C. § 1053(a). Pritchard contends in a very cursory fashion that Alessi, Holliday and Vintilla are factually distinguishable, although he cites no contrary authority in support of his position that the offsets were improper. He further contends that a genuine issue of fact existed as to whether he had been promised the retirement and medical benefits to which he claims entitlement, and that the district court was thus precluded from entering summary judgment for Rainfair. We do not agree.

(1) Integration of Multiple Pension Plans

Section 1053(a) provides that an employee's right to his normal retirement benefit vests, and is nonforfeitable, "upon the attainment of normal retirement age." It provides, however, that an employee's right to accrued benefits derived from his or her own contributions to a plan must vest immediately; and that accrued benefits derived from employer contributions must vest according to one of the three minimum vesting schedules set forth in § 1053(a)(2). Under those schedules, an employee's right to an accrued benefit becomes vested to varying degrees upon completing specified years of service. ⁴ The vesting provisions, however, provide no guarantee of the amount of the benefits to be received, or the method of calculating those benefits, Alessi, 451 U.S. at 511-12, 101 S.Ct. at 1900; Nachman Corp. v....