The opinion of the court was delivered by: EDELSTEIN
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is an action for unlawful termination of retirement benefits in violation of the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). The court has jurisdiction pursuant to 29 U.S.C. § 1132(f).
Plaintiff Harris Cohen ("Cohen") was employed by defendant Martin's, a retail department store, from February 1930 until his retirement on March 31, 1973. Plaintiff then began to receive pension benefits pursuant to a Martin's pension plan. On October 14, 1977, Seedman Merchandising Group, Inc. purchased Martin's, and in January, 1978, Martin's terminated Cohen's retirement benefits and ceased thereafter to make payments to him. Cohen then instituted this action to recover payments to which he claims he is entitled, and to require Martin's to continue making payments to him until his death.
Martin's is a New York corporation which operates a chain of retail department stores throughout the New York metropolitan area. Until the Seedman acquisition in 1977, the Zeitz family owned and operated Martin's. Fred Zeitz ("Zeitz") was the Chief Executive Officer and responsible for the day-to-day operations of the company from 1930 until his death on May 25, 1977. Zeitz and his family were the directors and controlling shareholders of the corporation.
Cohen was first employed by Martin's in February, 1930 as an office manager and general ledger bookkeeper. He held these positions until 1934 when he became Controller. In 1942, Cohen was promoted to Treasurer. He continued as Controller and Treasurer until 1967 when he was elected Treasurer and Vice President, and designated the financial assistant to the Chief Executive of Martin's. He served in these capacities until he retired on March 31, 1973.
During his forty-three years at Martin's, Cohen was a trusted adviser and close friend of the Zeitz family. Zeitz regularly sought guidance from Cohen on personal as well as business and financial matters. The relationship between Cohen and Zeitz was one of complete mutual trust and confidence, and it was conceded by defendant that Zeitz held Cohen "in high esteem." As Cohen advanced at Martin's, he was granted greater responsibility in the operations of the company. After his appointment to Treasurer he administered virtually all of the financial operations, including the pension plan which is the subject of this litigation.
Martin's established two pension plans for its employees. In the 1950's, the Board of Directors of Martin's adopted a pension plan for the employees listed on the Martin's Rank and File Payroll. The Rank and File plan was unfunded and subject to termination. This plan did not cover any management or executive-level employees.
On August 29, 1966, the Board of Directors established a second pension plan, entitled "Martin's Executive Pension Plan" (the "Plan"), "for the benefit of the supervisory and executive employees" covering all "full-time executive payroll employees." Executive Payroll Employees, including Cohen, were paid on a bimonthly basis, and at all dates relevant to this proceeding were paid by check. Executive Payroll Employees were generally low-level management personnel.
The Plan, like the pension plan for rank and file employees, was unfunded.
In addition, the Plan expressly limited the vesting of any pension rights:
(T)he Company assumes no contractual obligation as to the Plan's continuance or as to payment of said retirement benefits.... (T)he Company reserves the right, through action of the Board of Directors, to amend, modify or terminate the Plan in whole or in part at any time, or from time to time, in any respect.... No employee shall obtain vested rights to any retirement benefits hereunder prior to or after retirement.
A copy of the Plan was distributed to every employee whose name appeared on the Executive Payroll, together with a cover letter indicating that the Plan would become effective on September 19, 1966. The Plan provided that upon retirement each employee with twenty years continuous service was entitled to a pension of one and one-third percent of their annual salary for the previous five years, times the number of years of service, to a maximum of thirty years. The maximum pension was limited to $ 8,000 per year, less primary social security benefits. Thus, when Cohen retired, the maximum benefits he could receive under the Plan was $ 8,000 per year.
In early 1969, Cohen became aware that Zeitz was contemplating the sale of the Martin's stores. Apprehensive about his job security and pension benefits in the event the business was sold, Cohen discussed these concerns with Zeitz. Additionally, Cohen expressed dissatisfaction with his salary and with his benefits under the Plan, and indicated that they were inadequate in light of his service to the company. Cohen also indicated that he was seriously considering a position with another company.
Zeitz urged Cohen to remain at Martin's to assist Wilbur Levin ("Levin"), Zeitz's nephew and the newly-elected President of Martin's, in managing the business. Cohen testified that in response to his concerns, Zeitz promised to ensure his employment and pension rights, and to provide him with supplemental pension benefits. Cohen further testified that Zeitz specifically assured him that his pension rights would not be subject to termination by Martin's or by a successor company. Subsequently, the following letter agreement, dated April 28, 1969 and signed by Levin as President of Martin's, was sent to Cohen.
In recognition of your 39 years of continuous service, it is agreed that if your employment is terminated by Martin's (or any successor company) prior to your 65th birthday, retirement benefits computed as indicated below, shall immediately be payable to you, in monthly installments.
Payments shall be at the rate of 40% of the average of your annual earnings for the 5 years immediately preceding the year of termination of your employment. From the amount so computed, will be deducted the amount of your primary social security benefits.
The April 28 letter agreement did not expressly state that Cohen's pension rights would not be subject to termination. Cohen testified that when he informed Zeitz of the omission in the agreement of any reference to non-termination, Zeitz replied "I have given you my assurance you have nothing to be concerned about; you will be taken care of after you reach the age of 65. You don't need anything else." Cohen was satisfied by these further assurances from his trusted friend, and remained in Martin's' employ without any documentation of the assurances and without the salary increase he had sought.
On December 15, 1972 Cohen reached his pension retirement age of sixty-five. Although Cohen had previously informed Zeitz and Levin he intended to begin his retirement on that date, they implored him to delay his retirement. Levin, Cohen was told, was leaving Martin's to become president of a bank and Cohen was needed to help train his successor. In addition, Cohen was asked to remain to assist the auditors to complete their annual financial report, and was told by Zeitz that his continued presence was essential. Cohen agreed to defer his retirement until March 31, 1973. Cohen also agreed to make himself available to Martin's whenever his expertise was requested on financial matters.
Before Cohen retired, he and Zeitz computed the pension benefits he would receive in accordance with the formula of the April 28 letter agreement. Cohen testified that these computations were made on the face of the letter agreement, and confirmed by Zeitz as indicated by the notation "As agreed." This agreement provided for annual benefits of $ 13,760, which Zeitz rounded off to $ 1,150 each month. Martin's does not dispute that it paid pension benefits to Cohen on the basis of this formula until the termination of pension benefits in January, 1978.
On March 31, 1973, Cohen retired from Martin's and began receiving pension benefits of $ 575 twice a month. After he retired, Cohen frequently returned to the Martin's stores to visit his former colleagues and to furnish advice on financial matters. From the date of his retirement to September 23, 1977, Cohen consulted with officers and employees of Martin's on fifty-one occasions. Cohen asserts that, in general, after his retirement he continued to advise Martin's on those matters he had been involved with prior to retiring. According to the testimony of Manford Panzer ("Panzer"), who since June, 1968 was Treasurer and Vice President of Martin's, on these occasions Cohen gave advice principally to Zeitz and Rosenthal. The advice related to financial reports, lease and loan negotiations, prospective store sites, cash flow projections, insurance matters, computer conversions, and the establishment of accounting procedures and selection of outside accountants. Ironically, Cohen was also consulted regarding the sale of the company, and it was this sale which led ultimately to the termination of his retirement benefits.
It is unclear whether the visits by Cohen were requested by Martin's. Cohen testified about several reports he prepared at Rosenthal's request, as well as advice furnished upon request on specific problems.
Rosenthal, however, testified that, although on several occasions he sought Cohen's advice, the bulk of these post-retirement conversations were unrelated to the company's business. Rosenthal stated that Cohen returned to the stores on his own initiative and primarily to socialize with his former coworkers. In addition, Panzer ...