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MARSHALL v. ATLANTIC CONTAINER LINE

March 16, 1979

Ray MARSHALL, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
ATLANTIC CONTAINER LINE, G. I. E. and Atlantic Container Line, Inc., Defendants



The opinion of the court was delivered by: SAND

The Secretary of Labor ("Secretary") has alleged in this action that Atlantic Container Line, G. I. E. and Atlantic Container Line, Inc. ("ACL") violated the Age Discrimination in Employment Act, 29 U.S.C. § 623(a) ("ADEA") by involuntarily retiring employees who have reached the age of 62. ACL, on the other hand, contends that these retirements are excluded from the Act by virtue of § 4(f)(2).

Both parties moved for summary judgment. In an opinion dated November 28, 1979, *fn1" this Court denied these motions because a question of fact remained as to whether the 1974 amendment to ACL's plan was a subterfuge to evade the purposes of ADEA and whether ACL relied in good faith upon the administrative regulation. *fn2" The Court set the matter down for an evidentiary hearing unless the parties advised the Court that the stipulation of facts exhausted their submission on these two questions and that they wished this Court to proceed without holding an evidentiary hearing as if this case were before it on an agreed statement of facts from which this Court may draw those inferences which it believed to be appropriate.

By letters dated December 19, 1978 and December 20, 1978, the parties agreed to present the two issues to the Court based upon the stipulation of facts and affidavits previously filed with the Court. The parties requested, however, the opportunity to file briefs on the issues, which they have done.

 SUBTERFUGE

 As this Court noted in its prior opinion, § 4(f)(2) does not contain a blanket exception for all retirements pursuant to a pension plan. In order to qualify for the exemption, an employee must show that it was observing the terms of a bona fide pension plan which was not a subterfuge to evade the purposes of the Act. ACL, this Court found, met the first two requirements. *fn3" The question remains, however, whether the 1974 amendment to the plan which lowered the retirement age to 62 constitutes a subterfuge to evade the purposes of ADEA.

 The fundamental principles governing the subterfuge issue were outlined by this Court in its earlier opinion:

 
"The Supreme Court in McMann (United Airlines v. McMann) defined subterfuge as a 'scheme, plan, stratagem, or artifice of evasion'. Moreover, the Court stated that in terms of § 4(f)(2), the term "must be given its ordinary meaning and we must assume Congress intended it in that sense.' 434 U.S. (192) at 203 (98 S. Ct. 444, 54 L. Ed. 2d 402). Finally, the Supreme Court cautioned against any "Per se rule requiring an employer to show an economic or business purpose in order to satisfy the subterfuge language of the Act.' 434 U.S. at 203 (98 S. Ct. 444)." 18 EPD P 8449 at 5509.

 The Secretary argues that based on the evidence submitted by the parties, this Court must conclude that this amendment was a subterfuge. According to the Secretary, "ACL had one overriding purpose in amending its pension plan: to get rid of its oldest employees so that younger employees would be promoted and younger applicants hired." Plaintiff's Reply Brief at 2.

 ACL, on the other hand, contends that "retirement actions which are taken pursuant to a Bona-fide retirement plan satisfy section 4(f)(2) requirement, and no independent showing need be made concerning subterfuge." Defendant's Brief at 3. In support of their contention that any bona-fide plan is per se not a subterfuge to avoid ADEA, ACL cites four decisions *fn4" where the courts have not imposed a separate subterfuge test and the legislative history of ADEA.

 We conclude that neither position accurately reflects the Supreme Court's reading of the subterfuge requirement in McMann. The Secretary's interpretation requires an employer to show an economic or business purpose in order to satisfy the subterfuge language of the Act. Such a requirement was expressly rejected by the majority in McMann. ACL's interpretation, on the other hand, renders the phrase mere surplusage, ignoring the Court's definition of subterfuge as something other than a bona-fide plan.

 The record before us is limited. When the amendment lowering the age to 62 was adopted, ACL distributed the following explanation of the change to its management personnel:

 
"(w)e must (take this action), if we hope to perpetuate a strong organization plan, through all means at our disposal, to create opportunities which will provide ascension opportunities while also providing proper levels of retirements benefits to those who have served as well.
 
It is proposed that we reduce our normal retirement age from 65 to 62. While the cost is rather steep, it will grow more costly as the age of the group increases. It must be noted that when this step is taken, the benefit formula will reduce from 20% Of the first $ 500 of the monthly benefit earnings and 50% Of the excess to 20% Of the first $ 500 and 48.125% Of the excess. This is to reflect a reduction of ...

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