Rosenthal v. National Life Ins. Co., 78 Civ. 906 (KTD).

• Decision Date: 07 January 1980
• Docket Number: No. 78 Civ. 906 (KTD).,78 Civ. 906 (KTD).
• Citation: 486 F. Supp. 1018
• Parties: Lawrence H. ROSENTHAL, Plaintiff, v. NATIONAL LIFE INSURANCE COMPANY, Agency Employees Pension Plan, John A. Newman, Elliot J. Hodes, and M. P. Arden Associates, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

486 F. Supp. 1018

Lawrence H. ROSENTHAL, Plaintiff, v. NATIONAL LIFE INSURANCE COMPANY, Agency Employees Pension Plan, John A. Newman, Elliot J. Hodes, and M. P. Arden Associates, Inc., Defendants.

No. 78 Civ. 906 (KTD).

United States District Court, S. D. New York.

January 7, 1980.

Weingold, Berman & Koerner, New York City, for plaintiff; Carl Seldin Koerner, Margaret Bliss Hannigan, New York City, of counsel.

Frederic H. Bertrand, Montpelier, Vt., and LeBoeuf, Lamb, Leiby & MacRae, New York City, for defendants Nat. Life Ins. Co., and Agency Emp. Pension Plan; Grant S. Lewis, William G. Primps, Mary Jo Eyster, New York City, of counsel.

Robert D. Costello, New York City, for defendants John A. Newman, Elliot J. Hodes, and M. P. Arden Associates, Inc.

OPINION

KEVIN THOMAS DUFFY, District Judge:

The plaintiff, Lawrence Rosenthal, has been employed by various general agents of defendant National Life Insurance Company hereinafter referred to as "the Company" for twenty-eight years and is a participant in the Company's "Agency Employees Pension Plan"¹ hereinafter referred to as "the Plan". He instituted the instant action under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. hereinafter referred to as "ERISA" for a declaratory judgment against the Company, the Plan and the three general agents by whom he has been employed during his twenty-eight year tenure. By this, he seeks to resolve his dispute with defendants as to whether or not certain contractual payments made to him, characterized as "commission overrides," are to be included in calculating his pension benefits.

National Life Insurance Company is a large mutual insurance company whose home office is in Vermont. It sells its policies through the use of general agents. These agents, in turn, hire their own personnel. A typical employee executes a "Career Agent's Contract" with the Company and may, in addition, have an employment contract with the general agent for whom he or she works directly. Although Lawrence Rosenthal had been affiliated with the Company since 1951, it was not until 1962 that he executed an employment contract with the Elliot Hodes Agency hereinafter referred to as "the Hodes Agency". This agreement provided for compensation which was calculated on the basis of the Agency's net profits with a $200 per week drawing on the account of these profits. In addition, and pertinent to the instant dispute, the contract provided for a post-termination share of renewal commissions for business originally brought to the Agency during Rosenthal's employment there. Specifically, the contract provided:

5TH: After termination of this agreement, Associate General Agent shall be entitled to receive one-third ( 1/3 ) of all overriding renewal commissions payable to General Agent by the company under General Agent's Contract with respect to business, the applications for which were transmitted to the Home Office of the Company prior to the termination date of this agreement . . ..

After termination of the contract with Elliot Hodes on August 31, 1969, Rosenthal entered into a new agreement and began work for the John Newman Agency hereinafter referred to as "the Newman Agency". Plaintiff's first contract with the Newman Agency provided for a "base salary" and a share of renewal commissions during his employment. The contract also contained a provision for post-termination commissions similar to that in the agreement with the Hodes Agency. This clause read:

4. After termination of this agreement, Associate General Agent shall be entitled to receive 20 per cent of overriding renewal commissions, as defined in paragraph 3 of this agreement, payable to General Agent by Company pursuant to his General Agent's Contract with respect to all business placed in force after the effective date of this agreement and for which applications were transmitted to the Home Office prior to the termination of this agreement . . ..

In 1972, Rosenthal renegotiated his contract with the Newman Agency. This new agreement raised the plaintiff's "base salary" and eliminated reference to a share in commissions during employment or a post-termination commission. Instead, the contract provided for a "growth-bonus", Rosenthal's share in the "Growth Expense Allowance" paid to the Agency by the Company.

In October, 1974, Rosenthal terminated his employment with the Newman Agency and began work for M. P. Arden Associates, Inc., another General Agent of the Company. He continued to be so employed until the commencement of this action.

At issue in the instant case are the post-termination commissions provided for in paragraph 5 of Rosenthal's agreement with the Hodes Agency and paragraph 4 of his earlier agreement with the Newman Agency. More specifically, the issue is whether or not these payments are "compensation" to be considered in calculating plaintiff's pension benefits as defined by the Plan. For the first time in 1970, Rosenthal began to receive substantial post-termination commissions pursuant to his contract with the Hodes Agency. These payments were made while he was employed by the Newman Agency.

Compensation, as defined by § 1.9 of the Agency Employees Pension Plan, is:

The base monthly compensation received by an Employee from his Employer, regardless of the intervals of payment or method of computation. Compensation shall not include overtime and non-contractual bonuses.

Plaintiff contends that "base monthly compensation" is not limited to salary and should include post-termination commissions and growth-bonus payments made by his former employers within the National Life Insurance Company organization. He made this argument with respect to growth-bonuses to the ERISA Committee hereinafter referred to as "the Committee" charged with Administration of the Plan on October 11, 1974. In February, 1976, the Committee agreed that growth-bonuses paid under the Newman contract would be included in compensation. Finally, in September, 1976, Rosenthal requested, for the first time, that his post-termination commissions be included in "compensation" for the purposes of determining his pension benefits. In an April 4, 1977 letter from the Committee to Rosenthal, this request was denied. The letter stated, in pertinent part:

After giving the matter careful thought, the ERISA Administration Committee, of which I am Chairman, has concluded that post-employment receipts would not be includible.

"Compensation" for purposes of the Plan means "base monthly compensation received by an Employee from an Employer". The monies you are concerned with are not received from or on behalf of your employer, but rather from or on behalf of people who were formerly your employers.

In addition, all of these monies in question are commissions and as such cannot be characterized as "base monthly compensation".

Plaintiff's Appendix of Exhibits, Exhibit Q. On Rosenthal's further request, his claim and the Committee's decision were reviewed. Upon reconsideration and after further investigation, Rosenthal's claim was finally rejected.

By this action plaintiff challenges the Committee's determination that post-termination renewal commissions not be included in compensation for the purpose of calculating his pension benefits. Plaintiff makes the instant motion for summary judgment, pursuant to Fed.R.Civ.P. 56(a), claiming that the decision is "contrary to the language of the Respective Employment Agreements and of the Plan itself" and that there is no genuine triable issue of material fact. Defendants have cross-moved under the same rule for summary judgment.

In deciding a motion for summary judgment, I must "resolve all ambiguities and draw all reasonable inferences in favor of the party against whom summary judgment is sought." Schiess-Froriep Corp. v. S.S. Finnsailor, 574 F.2d 123, 126 (2d Cir. 1978) citing Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317 (2d Cir. 1975). Moreover, the burden is on the moving party to "demonstrate the absence of any material fact genuinely in dispute." 574 F.2d at 126.

For the reasons outlined below, I find that plaintiff has failed to demonstrate that he is entitled to summary judgment. His motion is accordingly denied. Moreover, I find that the facts as set forth by both parties to this action warrant the granting of summary judgment to defendants. Consequently, defendants' motion for summary judgment is granted.

In support of their cross-motion and in opposition to plaintiff's motion, defendants argue that the ERISA Administration Committee's determination concerning Rosenthal's "compensation" should be upheld because it is not "arbitrary or capricious." An examination of both ERISA and the case law interpreting the Act, indicates that this standard should be applied to the actions of the Committee. Upon application of this test, it is clear that the Committee's determination must be upheld.

ERISA requires that all assets of an employee benefit plan be held in trust by a trustee who shall be appointed by a "named fiduciary" or by the trust or plan instrument. 29 U.S.C. § 1103. Fiduciary responsibilities and penalties for their violation are outlined in 29 U.S.C. §§ 1101-1114.² In addition, § 9.1 of the Agency Employees Pension Plan here in question provides that

The ERISA Administration Committee is hereby vested with all power and authority necessary to carry out the terms and intentions of the Plan. Its members shall be the Named Fiduciaries within the meaning of the Act.

Recent case law in the Second Circuit makes it clear that the determinations of the "named fiduciary" concerning benefits or eligibility of participants in a pension plan are to be upheld unless they are "arbitrary and capricious." Riley v. MEBA Pension Trust, 570 F.2d 406, 413 (2d Cir. 1977). See also Cawley v. NMU Pension and Welfare Plan, 457 F.Supp. 301, 303 (S.D.N.Y. 1978). Plaintiff contends that these cases are distinguishable and that...