Rosa v. Resolution Trust Corp.

Decision Date05 December 1990
Docket NumberCiv. No. 90-4559 (CSF).
Citation752 F. Supp. 1231
PartiesKenneth J. ROSA, et al., Plaintiffs, v. RESOLUTION TRUST CORPORATION, et al., Defendants.
CourtU.S. District Court — District of New Jersey

Roger B. Kaplan, Laura Studwell, Richard Robins, Wilentz, Goldman & Spitzer, Woodbridge, N.J., for plaintiffs.

Arthur Meisel, Ann. F. Kiernan, on the brief, Jamieson, Moore, Peskin & Spicer, Princeton, N.J., Dennis S. Klein, Robert P. Fletcher, Hopkins & Sutter, Washington, D.C., for defendant Resolution Trust Corp.

Sara L. Reid, Kelley, Drye & Warren, Parsippany, N.J., for Manufacturer's Hanover.

OPINION

CLARKSON S. FISHER, District Judge.

Before the court is a motion for a preliminary injunction under Rule 65 of the Federal Rules of Civil Procedure. A class of employees seeks to enjoin defendants Resolution Trust Corporation ("RTC"), City Federal Savings Bank, City Savings Bank, F.S.B., and City Savings F.S.B. from resolving an employee pension plan in violation of the terms of the Plan and Agreement of Trust, and the applicable sections of the Employee Retirement Income Security Act of 1974 ("ERISA"). In addition, the plaintiffs wish to force defendants to continue funding the Plan as required by the Plan documents. For the following reasons, this preliminary injunction is granted.

FINDINGS OF FACT

The facts below are undisputed. On December 31, 1985, City Federal Savings Bank (then known as "City Federal Savings and Loan Association") adopted the Minimum Benefit Retirement Plan ("Plan"). The express purpose of the Plan was to provide:

retirement benefits and certain other benefits to eligible employees of the Bank and its participating subsidiaries and other participating companies, or to the beneficiaries of such employees, and thereby to encourage employees to make and continue careers with the Bank, all as set forth herein and in the Trust Agreement adopted as part of this Plan.1

Ver. Compl. Exh. A at 2.2

Section 12 of the Plan sets forth the "Minimum Funding and Contribution" requirements, as follows:

The Company shall contribute to the Trust, not less frequently than once a year, in accordance with the Code and Regulations, the amounts recommended by the Actuary to the Committee as necessary to maintain the Plan on a sound actuarial basis, consistent with ERISA, the Code and Regulations after taking into account the retirement benefits to be provided to Participants under the ESOP and retirement benefits previously provided under the Prior Plan. The Committee shall arrange for the establishment and maintenance by the Actuary, or in accordance with his recommendations, of such funding accounts as required by ERISA.

Id. at 62, § 12.1.

On December 7, 1989, the Director of the Office of Thrift Supervision ("OTS"), Department of the Treasury, ordered that City Federal be closed, and the RTC be appointed Receiver and take possession of City Federal. On that same day, OTS created City Savings Bank, F.S.B. ("City Savings Bank") which assumed certain assets and liabilities of City Federal pursuant to a Purchase and Assumption Agreement dated December 8, 1989. In addition, the employees of City Federal became the employees of City Savings Bank.

On December 9, 1989, Jack P. Shinn, RTC's Managing Agent, met with Jeffrey J. Kaplowitz, City Federal's Executive Vice President in charge of Human Resources, to discuss the various plans in effect and the plans RTC would assume. On December 11, 1989, Shinn distributed a Memorandum which stated: "Employees are the essence of our business. We need you to continue our operations. City Savings Bank is maintaining all of City Federal's benefits programs, except for the Employee Stock Ownership Plan." Ver. Compl. Exh. C.

Shortly thereafter, at the behest of Shinn, Kaplowitz distributed a December 21, 1989 Benefits Memorandum to all employees which specifically stated that the Plan at issue would "continue unchanged with service from City Federal bridged to City Savings. The eligibility requirements remain the same." Ver. Compl. Exh. D at 2; Kaplowitz Dep. at 21-24.

In a December 26, 1989 memorandum, Thomas W. Meagher (City Savings Bank's in-house attorney responsible for ERISA matters) advised Kaplowitz that in order to effect the assumption of the Plan, City Savings Bank, F.S.B.'s Board of Directors or the RTC (until a board could be elected), had to expressly amend the plan to provide for its assumption and continuation by City Savings Bank, F.S.B. The memorandum further stated that proposed amendments to the Plan for the assumption would be drafted and forwarded to Kaplowitz's attention for appropriate adoption. Exh. D-1.

After reviewing this Memorandum in detail, on January 8, 1990, Shinn forwarded a "Notice of Reportable Event" (Exh. P-9) to the Pension Benefit Guaranty Corporation ("PBGC") which expressly provided that the Plan had been assumed by City Savings Bank, effective December 8, 1989. In addition, Shinn appointed Kaplowitz as Plan Administrator and told him to take the necessary steps of notification to comply with ERISA. Kaplowitz Dep. at 31-32.

Various memoranda and talks were had as to the funding and contribution requirements for the Plan. The demise of the ESOP plan had provided a need for additional funding obligations for the Plan beyond the $1 million contribution previously scheduled for 1989. Shinn was fully apprised of this fact and of the revised quarterly contributions the actuaries had provided by memorandum of January 26, 1990. Kaplowitz Dep. at 29.

A meeting was held on January 30, 1990, specifically to discuss the new, revised "Expense" and "Funding" Requirements of the Plan. The meeting was attended by Shinn (RTC's Managing Agent), Maron (RTC's Assistant Managing Agent), Robertson (RTC's Pension Expert assigned to City Savings Bank by RTC-Atlanta), Kaplowitz (City Savings Bank's Executive Vice President in charge of Human Resources), O'Connor (City Savings Bank's Vice President in charge of Employee Compensation and Benefits, reporting to Kaplowitz), Elinor Hauer (City Savings Banks's Assistant Vice President, reporting to O'Connor), and David Zulauf (City Savings Bank's Assistant Comptroller). The meeting analyzed and discussed the revised "Expense" number of approximately $2,718,957.00 and the revised "Funding" schedule for the Pension Plan totalling $3,212,678.00 as set forth in the Memorandum of January 22, 1990 (Exh. D-2) and in the actuaries' letter report of January 26, 1990 (Exh. P-2).

The next day, Shinn sent Robertson's memorandum and Kaplowitz's reply about the Plan to Sandra A. Waldrop, RTC-Atlanta. Shinn was then transferred back to Atlanta and was succeeded by Brian H. McClelland as RTC's Managing Agent. McClelland was advised as to the results of the Pension Plan meeting of January 30. Although McClelland denies remembering, Kaplowitz testified in detail that he had met with and apprised McClelland of everything, and although McClelland did not agree with Shinn's actions in every regard, he nonetheless went forward with the assumption of the Plan as evidenced by his request to prepare the necessary IRS documents (Kaplowitz Dep. at 54-58), the execution of a Trust Amendment on February 9, 1990 (Ver. Compl. Exh. F), and the Plan Amendments on February 12, 1990 and March 1, 1990 (Ver. Compl. Exhs. G and H) pursuant to which the Pension Trust and Plan were formally adopted and assumed by RTC for City Savings Bank.

In a March 1990 "Notice To Interested Parties," distributed to all employees of City Savings Bank, the employees were again informed that the Plan was taken over by City Savings Bank, and that City Savings Bank was the Sponsor and Administrator. Ver. Compl. Exh. I.

On March 19, 1990, City Savings Bank sent the revised funding contribution schedule to the PBGC (Exh. P-11) (setting forth the $3.213 million funding schedule). Pursuant to that schedule, in January 1990, City Savings Bank made the Fourth Quarterly Contribution for the 1989 Plan Year; and in April 1990 made the First Quarterly contribution of $271,672 for the 1990 Plan year. However, at the direction of the RTC (Ver. Compl. Exh. J), City Savings Bank has failed to make the Second and Third Quarterly contributions for 1990 (totalling $552,344) and the final payment for 1989 (Kaplowitz Dep. at 111-12). On July 17, 1990, City Savings Bank acknowledged that the failure to submit the Second Quarterly Plan contribution (due on July 15, 1990) was not in compliance with ERISA. Ver. Compl. Exh. K.

On July 19, 1990, the RTC published a "Notice to all Participants and Beneficiaries of the City Federal Savings Bank Minimum Benefit Retirement Plan." Ver. Compl. Exh. L. Through this Notice, the RTC informed the participants and beneficiaries that it was seeking to terminate the Plan. The RTC further stated that it was "aware that the employees were previously informed that the Plan would be assumed by City Savings and that they would continue to accrue benefits under the Plan for their service with City Savings." Id.

Further, the Notice manifested RTC's intent to terminate the Plan retroactively, effective December 7, 1989, despite the express Plan amendments which prohibited such retroactive action. On that same date, July 19, 1990, the RTC issued a "Notice of Intent to Terminate the City Federal Savings Bank Minimum Benefit Retirement Plan." Ver. Compl. Exh. M.

Thereafter, on or about September 11, 1990, the RTC prepared a purported "Second Amendment" to the Plan which contradicted the earlier Plan and Trust Amendments, the earlier memoranda and oral representations, and which contained the following provision: "City Federal has determined that the Plan continues to remain a Plan of City Federal and is not to be treated as assumed by City Savings Bank, F.S.B." Ver. Compl. Exh. O. This Second Amendment designated the Plan as the "City Federal Savings Bank Minimum Benefit Retirement Plan," and referred to City Federal's alleged determination with regard...

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  • Resolution Trust Corp. v. Diamond, 91 Civ. 1361 (RLC)
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    ...itself. This broad interpretation, however, would be unconstitutional and is therefore untenable. As the court in Rosa v. Resolution Trust Corp., 752 F.Supp. 1231 (D.N.J.1990), observed, "`FIRREA did not, and Constitutionally could not, divest an aggrieved plaintiff of the right to seek leg......
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