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Sikora v. American Can Co.

decided: March 31, 1980.



Before Adams, Rosenn and Weis, Circuit Judges.

Author: Weis


Plaintiffs filed suit in the district court asserting that their involuntary retirements in 1975 and 1976 before they reached the age of 65 violated the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621-634 (1976)(ADEA). The court entered summary judgment for the defendant on that count but ordered a trial on other allegations of discrimination. In 1978, after entry of the summary judgment, Congress revised the ADEA to prohibit forced retirement under age 70 in most situations. Plaintiffs contend on appeal that the amendments control our disposition of this case. We conclude that the amendments do not apply to a retirement that occurred before the effective date of the enactment, but remand for a determination of whether the defendant's pension plan was bona fide and not a subterfuge.

Plaintiffs Honeiser and Kalmbach were employees of defendant American Can Company until they were involuntarily retired. Honeiser began working for the company on March 16, 1964, and on September 1 of that year he voluntarily joined the company retirement plan for salaried employees. He was 56 years old on January 1, 1976, the date of his retirement, when he became eligible for a pension of $194.92 per month for life. Before retirement he had been earning $1,706.00 per month.

Kalmbach began his employment with the defendant on December 3, 1962, joined the plan on July 1, 1963, and was age 61 in September 1975 when he was retired on a monthly pension of $215.91. His salary in September 1975 amounted to $1,511.00 per month.*fn1

The American Can retirement plan was established on July 1, 1959 and covered, on a voluntary basis, all regularly employed full-time salaried employees except those covered by a collective bargaining agreement. From July 1, 1959 until December 31, 1971, the benefits provided for retirement before the plan's normal age of 65 were computed on the basis of a member's salary and contributions. Employee contributions were eliminated after January 1, 1972 and thereafter early retirement pensions were based on salary and years of service. The plan was amended again on January 1, 1974 to provide a different formula for early retirement benefits. Under this arrangement, unless the employee had reached age 55 and completed 30 years of accredited service, his pension could be reduced by one fourth of 1% for each month by which his early retirement preceded his "normal retirement date" at age 65. Generally the plan allowed for early retirement at any time between ages 55 and 65 at the option of either the company or the employee.

Dissatisfied with their involuntary retirement from the company, the plaintiffs first exhausted administrative remedies and then filed suit on December 21, 1976, alleging that they had been forced into retirement in violation of the ADEA. They sought reinstatement as well as damages. Plaintiffs later amended the complaint to assert that they were also denied merit and other salary increases because of age. The defendant moved for summary judgment on the ground that the plaintiffs had been retired pursuant to a bona fide pension plan and were not, therefore, covered by the ADEA. 29 U.S.C. § 623(f)(2) (1976).*fn2 The parties agreed upon the material facts, although the plaintiff contended that the plan was a subterfuge and was not bona fide.

The district judge distinguished United Air Lines, Inc. v. McMann, 434 U.S. 192, 98 S. Ct. 444, 54 L. Ed. 2d 402 (1977), which upheld certain forced retirements under the 1967 Act, on the ground that they were mandated by a bona fide plan. But he found Zinger v. Blanchette, 549 F.2d 901 (3d Cir. 1977), cert. denied, 434 U.S. 1008, 98 S. Ct. 717, 54 L. Ed. 2d 750 (1978), which allowed retirements on an adequate pension under a discretionary plan, controlling. Thus he granted summary judgment on the retirement claims but left open the claims of discrimination in deprivation of merit raises. Without discussion or findings of fact, the court concluded that the plan was bona fide. Judgment was entered on March 20, 1978.

A few weeks later, on April 6, 1978, the same day that plaintiffs took this appeal,*fn3 Congress revised the ADEA to specifically prohibit involuntary retirement because of age, the amendments to be effective upon enactment.*fn4 On appeal, plaintiffs contend that the 1978 amendments should apply to this case even though the retirements at issue took place before the effective date of the legislation. In this contention, the plaintiffs are joined by the Secretary of Labor, who has filed an amicus brief.

The retroactivity of legislation has been a frequent subject of litigation in the statutory construction field, not only in common law countries but in other civilizations as well. In his frequently cited article, The Rule Against Retroactive Legislation: A Basic Principle of Jurisprudence, 20 Minn.L.Rev. 775 (1936), E. E. Smead observed that the "bias against retroactive laws is an ancient one" and reviewed classical Greek and Roman examples. Id. at 775. The broad generalization, however, has been extensively narrowed over time and may no longer be relied upon in all circumstances. For example, modifications in procedural law are generally given effect in cases where the subject matter is restricted to events that occurred before the statutory enactment. Grummitt v. Sturgeon Bay Winter Sports Club, 354 F.2d 564 (7th Cir. 1965). In some instances, legislation that affected the substantive rights of parties to a prior transaction has been enforced. See Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 54 S. Ct. 231, 78 L. Ed. 413 (1934). See generally Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv.L.Rev. 692 (1960).

The immediate application of substantive legislation to pending cases is a form of retroactivity that at times has been invoked by the courts. Chief Justice Marshall, in United States v. The Schooner Peggy, 5 U.S. (1 Cranch) 103, 2 L. Ed. 49 (1801), wrote that generally if, while an appeal is pending, the governing rule is changed by an intervening law, then the latter must be applied. The Chief Justice, however, was concerned there with a case involving the national interest and not merely with substantive rights previously, as here, established by private parties. In Bradley v. Richmond School Board, 416 U.S. 696, 94 S. Ct. 2006, 40 L. Ed. 2d 476 (1974), the Court noted that the reasoning of Schooner Peggy applies "where the change (is) constitutional, statutory, or judicial." Id. at 715, 94 S. Ct. at 2018. The rule of Schooner Peggy is further subject, however, to exception when application of the modification would result in manifest injustice, or there is statutory direction or legislative history to the contrary. Id. at 711, 94 S. Ct. at 2016.

We turn to the statute under consideration and find its language equivocal. Congress simply provided that the amendment prohibiting involuntary retirement before age 65 "shall take effect on the date of enactment of this Act (April 6, 1978)." This wording is inconclusive. It could mean, as defendant urges, that no such retirements could take place after April 6, 1978. On the other hand, plaintiffs argue that the amendment erased conflicting provisions from existing retirement plans and eliminated defenses based on contractual language. Because both interpretations of the statutory language are plausible, we examine the legislative history.

Congressional efforts to revise § 4(f)(2) of the ADEA, 29 U.S.C. § 623(f)(2) (1976), began in 1977 after the Court of Appeals for the Fifth Circuit in Brennan v. Taft Broadcasting Co., 500 F.2d 212 (5th Cir. 1974), and this court in Zinger v. Blanchette, supra, concluded that the Act permitted involuntary retirements before age 65 under a bona fide employee benefit plan. Legislation was introduced in both the House and Senate to amend § 4(f)(2) by providing that employee benefit plans that permitted or required forced, early retirement solely because of age would not be exempt from the Act's coverage. In addition, the bills proposed raising the upper age limit of the Act incrementally to 70, as in S. 1784,*fn5 or without limit, as in S. 1583.*fn6 As amended and reported from the House Committee on Education and Labor, a third bill, H.R. 5383,*fn7 extended coverage to age 70 after a waiting period of six months.

A study of the House and Senate floor debate reveals only one clear reference to the question of retroactivity. On October 19, 1977, the Senate passed an amended version of H.R. 5383. Most of the floor discussion centered on the exemption of certain occupations from a prohibition against involuntary retirement between ages 65 and 70. At the close of the debate, however, and after the Senate had voted to approve the measure, Senator Jennings Randolph posed the following question:

"Mr. Randolph: I should like to ask the Senator from New Jersey (Mr. Williams) whether this bill retroactively covers a forced retirement at, say, age 60 or 62 prior to the effective date of this bill where the individual so retired is eligible for, and actually receives, a pension under a pension plan which has been qualified with the Internal Revenue Service?

Mr. Williams: The bill is not retroactive. The question of mandatory retirements prior to the effective date of this bill will be determined by the courts' interpretation of existing law."

123 Cong.Rec. S 17304 (daily ed. Oct. 19, 1977).*fn8 The bill then went to a conference committee whose members included both Senators Williams and Randolph. But in the interim, the Supreme Court reversed the court of appeals' decision in McMann v. United Air Lines, Inc., 542 F.2d 217 (4th Cir. 1976), and agreed with the conclusions in Brennan v. Taft Broadcasting Co., supra, and Zinger v. Blanchette, supra, that § 4(f)(2) as originally enacted did not ban pension plan provisions calling for involuntary retirement before age 65. Nevertheless, the conference committee did not change the effective date of the amended § 4(f)(2) to have it apply to former employees who had been retired before they reached the age of 65.

Recognizing, however, that many existing collective bargaining agreements permitted retirement of persons over 65 and under 70 at the option of the employer, the conference committee adopted a Senate provision delaying the impact of the amended § 4(f)(2) on those plans until the expiration date of the agreement or January 1, 1980, whichever occurred first. The net effect, therefore, was to delay the implementation of the substantive amendments except the one pertaining to forced retirements before age 65, which took effect upon enactment.

Further congressional commentary, after the Supreme Court's reversal in McMann, provides indirect support for the view that the amendment was not intended to apply retrospectively. During the Senate debate on the conference report, in commenting on the amendment to § 4(f)(2), Senator Williams, the floor manager, stated:

"The conference agreement also clarifies existing law to insure that pension plans or seniority systems which require mandatory retirement may no longer be ...

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