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ROCHESTER RADIOLOGY ASSOCS., P.C. v. AETNA LIFE IN

May 14, 1985

ROCHESTER RADIOLOGY ASSOCIATES, P.C., CONTRACTHOLDER, and ARTHUR J. SEGAL, M.D., ROBERT M. SPITZER, M.D., and KENNETH E. BORINSON, M.D., Trustee of and Participants in the Rochester Radiology Associates, P.C. Profit-Sharing Plan, Plaintiffs,
v.
AETNA LIFE INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: TELESCA

DECISION and ORDER

MICHAEL A. TELESCA, United States District Judge

INTRODUCTION

 This action is before me by way of defendant Aetna's motion for judgment on pleadings. Plaintiffs have brought three causes of action, sounding in breach of contract, breach of fiduciary duty, and violation of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Chapter 18, subchapter 1. Defendant has moved to dismiss the action, claiming that it did not breach the contract, there was no common-law fiduciary duty, and the ERISA cause of action is barred by the ERISA statute of limitations. Plaintiffs have cross-moved for summary judgment, although oral argument was heard only on defendant's motion to dismiss. I hold that defendant's motion to dismiss should be granted.

 FACTS

 On November 21, 1979, plaintiffs entered into a Group Annuity Contract with Aetna for purposes of funding plaintiffs' retirement income plan. Under Contract Section 4A-1, plaintiffs as contractholders had the right at any time to withdraw funds from Aetna's general asset account to make member withdrawals, transfers, etc. Under Contract Section 9, plaintiffs had the right to discontinue the Contract and receive their account balance. If plaintiffs elected to receive this balance in a lump sum, a Market Value Adjustment was applied to the balance, under Contract Sections 9D-2 and 4B-2(a).

 The Market Value Adjustment operated to increase or reduce, depending on prevailing interest rates at the time of a withdrawal, a payment from the Contract so as to approximate the effect of the withdrawal upon Aetna's general asset account's earnings. Section 1A-6 of the Contract provided that that Market Value Adjustment:

 
shall be computed by Aetna according to rules and formulas which Aetna shall have established from time to time and which will be furnished to the Contractholder.

 Attached to the Contract was a letter with three exhibits. Exhibit 3 contained the then-current Market Value Adjustment formula. The letter itself stated that any change to the formula would become effective no earlier than ninety days following the date Aetna notified a Contractholder, and then only with respect to withdrawal requests made subsequent to that effective date.

 Additionally, Section 8 of the Contract set forth the procedures for amending the Contract. Under Section 8A-3, upon advance notice of not less than 60 days to the Contractholder, Aetna could initiate an amendment to any provision of the Contract for which unilateral amendment procedures were not specifically set forth in Section 8A-2. Any amendment proposed by Aetna under Section 8A-3 would not become effective, however, if the Contractholder notified Aetna in writing, prior to the expiration of the sixty-day notice period, that the amendment was not acceptable to the Contractholder.

 In September of 1980, Aetna sent the plaintiffs a letter announcing a change in the Market Value Adjustment formula because of prevailing high interest rates. This change, effective in December, 1980, made the value of any money withdrawn from the contract less, at least during times of high or volatile interest rates.

 On June 9, 1983, plaintiffs notified Aetna of their desire to terminate the contract. The new Market Value Adjustment formula was applied to the funds withdrawn upon termination. Plaintiffs subsequently determined that they had received $85,173,37 less than they would have received had the old Market Value Adjustment formula been applied.

 On June 19, 1984 plaintiffs filed their complaint in ...


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