Schlansky v. United Merchants & Manufacturers, Inc.

• Decision Date: 07 November 1977
• Docket Number: No. 76 Civ. 5799 (HFW).,76 Civ. 5799 (HFW).
• Parties: Theodore SCHLANSKY on behalf of himself and all others similarly situated, Plaintiff, v. UNITED MERCHANTS AND MANUFACTURERS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

443 F. Supp. 1054

Theodore SCHLANSKY on behalf of himself and all others similarly situated, Plaintiff, v. UNITED MERCHANTS AND MANUFACTURERS, INC., Defendant.

No. 76 Civ. 5799 (HFW).

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

November 7, 1977.

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Eugene Mittelman, New York City, for plaintiff; Eugene Mittelman, Michael S. Gordon, New York City, of counsel.

Stroock, Stroock & Lavan, New York City, for defendant; Gary J. Greenberg, Jay R. Fialkoff, New York City, of counsel.

MEMORANDUM DECISION

WERKER, District Judge.

This action was commenced by Theodore Schlansky on his own behalf and as a class action¹ against his former employer United Merchants and Manufacturers, Inc. to recover pension benefits allegedly due him under both his employment contract and defendant's pension plan.

Jurisdiction is alleged by virtue of diversity of citizenship under 28 U.S.C. § 1332 as to Counts I and II of the complaint; by virtue of section 22(a) of the Securities Act of 1933 (the "1933 Act"), 15 U.S.C. §§ 77a-77aa, and section 27 of the Securities Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. §§ 78a-78jj as to Count III. As to Counts IV and V, jurisdiction is predicated under section 502 of the Employer Retirement Income Security Act of 1974, 29 U.S.C. § 1132.

Defendant has moved pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the first five counts of plaintiff's complaint for failure to state a claim upon which relief may be granted.

COUNT I

Plaintiff Schlansky alleges a breach of contract of employment in Count I. Plaintiff states that he was employed by Arnel-Plastron, Inc. ("Arnel") from 1946 until 1960 when defendant United Merchants and Manufacturers, Inc. ("United") acquired Arnel. From the date of acquisition of Arnel plaintiff was employed by defendant United in various sales and managerial positions until August 31, 1975 at which time he was discharged as a result of the merger of one of defendant's divisions into another. At the date of his discharge, plaintiff was fifty years old and had been employed continuously by defendant United and its predecessor Arnel for a total of twenty nine years, fourteen of which represented employment by Arnel and fifteen of which represented employment by defendant.

Plaintiff further alleges that defendant's non-contributory employee pension plan has been in operation from 1942 to date and that plaintiff became a participant in such plan upon commencing employment with defendant. Additionally, plaintiff contends that the accrual of benefits under the pension plan was a "material part of the consideration which induced plaintiff to agree to render services to defendant and to remain in its employ between 1961 and August 31, 1975" (Complaint ¶ 16). Plaintiff also states that between these dates defendant "made oral and written promises, statements, actions and representations to plaintiff . . . that for purposes of determining plaintiff's eligibility for pension benefits . . . plaintiff's service for Arnel . . . would be considered as service with the defendant" (Id. ¶ 18), that he relied upon such statements, actions and representations and that therefore he is entitled to pension benefits based upon his years of service with both Arnel and defendant United.

Defendant United, upon plaintiff's discharge, informed plaintiff that he was required to forfeit his pension plan benefits for failure to meet age and service requirements incorporated in the pension plan. Because of this forfeiture plaintiff seeks damages for breach of contract.

The motion to dismiss for failure to state a claim as to Count I is granted in part and denied in part.

Plaintiff Schlansky was terminated prior to his Normal Retirement Date as defined in Article II of the Pension Plan and therefore his rights are governed by Article VII of the Plan. Article VII provides as follows:

. . . . .

2. If the date of termination of employment of a Participating Employee shall be prior to his Normal Retirement Date but

(i) after his 50th birthday and if the period of his continuous employment is at such date of termination 25 years or more; or

(ii) after his 55th birthday and if the period of his continuous employment is at such date of termination 15 years or more, such Employee shall be entitled to a Retirement Pension commencing at his Normal Retirement Date, . . (emphasis supplied).

Plaintiff contends that the words "continuous employment" in his situation, encompass his years of employment with his former employer Arnel and that therefore he has accumulated the required twenty-five years of employment to collect his pension as a Participating Employee discharged after his fiftieth birthday. However, when section fourteen of Article II is read in conjunction with Article VII it is clear that plaintiff has no cause of action for breach of contract based on the express language of the pension plan. Section fourteen of Article II states that for computation of credited service years the period of employment by any other employer other than the Corporation² shall be included only to the extent that during such period more than 50% of the stock of that employer was owned by the Corporation. Defendant never owned 50% of Arnel's stock, and Arnel never joined the pension plan in question, and thus could not at any time be considered a participating Corporation in the plan. Therefore plaintiff's years of service with Arnel cannot be deemed years of "continuous employment" with defendant United and for purposes of "continuous employment" plaintiff's service must be computed from 1961 when United acquired Arnel. Plaintiff therefore has failed to state a claim for breach of contract based upon the express language of the pension plan.

Plaintiff further alleges oral and written representations by defendant that his years with Arnel would be credited toward his eligibility determination for pension benefits. Any oral agreement to credit plaintiff upon retirement with his years of service with Arnel is violative of the New York Statute of Frauds since such agreement is not one to be performed within one year from its making. N.Y.Gen.Oblig.Law § 5-701 (McKinney 1964); see also Lee v. Jenkins Bros., 268 F.2d 357, 372-73 (2d Cir.), cert. denied, 361 U.S. 913, 80 S.Ct. 257, 4 L.Ed.2d 183 (1959). Furthermore, between the years 1963 and 1975, plaintiff was employed by defendant pursuant to contracts containing merger clauses whereby the parties agreed that such contracts could not be modified except by an instrument in writing. Therefore, any purported oral modifications are wholly ineffective. N.Y.Gen.Oblig.Law § 15-301 (McKinney 1964); Shoreham Village, Inc. v. Bush Construction Co., 185 F.Supp. 534, 536-37 (E.D. Pa.1960). For these reasons plaintiff has failed to state a claim for breach of contract based upon oral representations.

It is also contended in Count I, paragraph 18, that written promises, statements and representations were made to the effect that plaintiff's service with Arnel would be considered in determining his eligibility for pension benefits. To the extent that plaintiff can actually prove such representations in writing and signed by the defendant United he has stated a claim upon which relief may be granted. In particular, any documents that can be produced surrounding the 1961 acquisition of Arnel by United which possibly contain pension carry-over provisions for Arnel employees continuing employment with United will also be considered under the allegations of Count I.

COUNT II

Count II alleges various willful and negligent misrepresentations concerning material facts related to defendant's pension plan. These misrepresentations and omissions contained in paragraph 22 pertain to factors such as age and service requirements; statements that continuous employment by an employee with a predecessor prior to employment by United would be considered as service with United for purposes of determining pension eligibility and fringe benefits; and misrepresentations as to the value and security of plaintiff's pension rights. Plaintiff also alleges misleading statements that defendant's plan was established for the exclusive benefit of employees when arbitrary and unreasonable age and service requirements were imposed; omissions as to the plan's actuarial basis; omissions to state that due to arbitrary and unreasonable age and service requirements most plan participants would be subjected to forfeiture of benefits (Complaint ¶ 22).

By reason of the above-alleged misrepresentations and omissions plaintiff seeks damages under Count II for breaches of common law and fiduciary duties.

As to the allegations of willful misrepresentations and omissions by defendant, plaintiff has failed to state a claim upon which relief may be granted. Rule 9(b) Fed.R.Civ.P. requires that "in all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with particularity." See Jackson v. Alexander, 465 F.2d 1389, 1390 (10th Cir. 1972); Mooney v. Vitolo, 435 F.2d 838, 839 (2d Cir. 1970). Plaintiff has merely made general allegations of misrepresentations and omissions without revealing the time and place of such misrepresentations or by whom they were made. This is insufficient. See 5 C. Wright & A. Miller, Federal Practice & Procedure § 1297 (1969). As was stated in Lincoln National Bank v. Lampe, 414 F.Supp. 1270, 1279 (N.D.Ill.1976), "a plaintiff alleging fraud must specify the time, place and contents of any alleged false representations, and the full nature of the transaction." Therefore, that part of Count II alleging willful misrepresentations and omissions is dismissed.

As to the allegations of negligent misrepresentations and omissions, this court is well aware that under New York state common law, an employer's obligations under a pension plan are limited to that plan's terms and are solely contractual...