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HOFFA v. FITZSIMMONS

October 3, 1980

Josephine HOFFA, Plaintiff,
v.
Frank E. FITZSIMMONS et al., Defendants



The opinion of the court was delivered by: GREENE

MEMORANDUM ORDER

This case is centered on the events surrounding the retirement of James R. Hoffa as general president of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (Teamsters) in 1971, at a time when he was serving a federal prison sentence for jury tampering. Pending before the Court are the parties' *fn1" cross-motions for summary judgment.

 I

 On June 19, 1971, after his conviction in federal court, Hoffa resigned his office at the age of 58 after over thirty years of service with the Teamsters. Among the factors which appear to have been responsible for this decision were pressure from the Executive Board of the Teamsters *fn2" for a decision on whether he would seek reelection notwithstanding the service of his sentence; *fn3" his wish to take advantage of a lump sum benefit payment from his pension fund in lieu of a deferred annuity; and the probability that his withdrawal from union activities might improve his chances for an early release from confinement.

 Apparently with these factors in mind, Hoffa and his personal attorney began negotiations with the trustee and the administrators of the Retirement and Family Protection Plan for Officers and Employees of the Teamsters (the Plan), *fn4" an employer-maintained pension plan. These discussions were designed to arrive at an agreed-to sum which would reflect Hoffa's rights to a lump sum payment under the Plan.

 Under the terms of the Plan, a member may qualify for retirement income without reduction in the amount in the accrued annuity balance either by attaining the normal retirement data or by fulfilling the conditions of the so-called twenty-year service retirement benefit. The Plan further provided that upon fulfillment of various conditions a member could draw a cash benefit in lieu of retirement income, *fn5" and Hoffa decided to exercise that option.

  To that end, Hoffa and the Plan executed an Agreement for Deposit (Agreement), which dealt with the lump sum payment to Hoffa and which also provided for escrow obligations on the part of Hoffa to satisfy certain Internal Revenue obligations. These obligations, established by the Internal Revenue Code, 26 U.S.C. § 401(a), and Treasury Regulations § 1.401-4(a)(1) and (c)(1), *fn6" are designed to insure that the integrity of pension plans will not be threatened by a discriminatory payment to union officials at the expense of rank-and-file members. To that end, they impose restrictions on the immediate payment of lump sum termination benefits when the recipient is an officer or one of the twenty-five highest paid employees of a union.

 The Agreement provided that these government regulations would be complied with through an escrow arrangement. *fn7" Under this arrangement, the restricted amounts, as determined by the Plan, were paid to Hoffa on condition that he deposit them with a third-party depositary bank, *fn8" to be held as security for any obligations he might incur if the integrity of the Plan were in jeopardy. The Plan expressly warranted that the lump sum represented the amount to which Hoffa was entitled under the pension terms.

 Prior to the execution of the Agreement, the Plan's Administrative Committee had designated an actuary to whom the Committee delegated the responsibility for calculating Hoffa's actuarial reserve balance. The actuary determined that this balance amounted to $ 1,745,141.21. *fn9" On that basis this amount was included in the Agreement as the sum to which Hoffa was entitled as his lump sum cash termination benefit. As part of the same computation, the Plan concluded that, in order to comply with the applicable regulations regarding monetary restrictions on the part of the lump sum benefit, it would be necessary to restrict $ 650,070.31 of the lump sum, and that the regulations would further be effectuated by a two-time, staggered release of the escrowed accounts, with Hoffa receiving the entire restricted amount over the course of four and one-half years. Hoffa agreed.

 By its own terms, the Agreement was fully integrated, and it specifically provided that the rights and duties of the parties were established as of June 19, 1971. Since Hoffa was unable personally to be present at the June 24, 1971 closing, his son represented him and received a check from the Plan for the full $ 1,745,141.21. In accordance with the security and escrow provisions of the Agreement, he immediately deposited the restricted amount ($ 650,070.31) in the depositary bank. On July 1, 1974, the Plan, through its trustees and its Administrative Committee, determined that the lump sum tendered to Hoffa in June of 1971 conformed with the requirements of the applicable regulations, and it authorized the bank to release the first restricted amount ($ 188,934.14 plus interest). The bank thereupon released the appropriate funds.

 The second escrow account in the amount of $ 461,136.31 was due to be released on January 1, 1976. Two weeks prior to that date, the Plan's Administrative Committee instructed the bank not to release the remaining funds, *fn10" and thereafter, just prior to the date called for in the Agreement for the release of the funds in the remaining escrow account, plaintiff made a demand on the Plan for such release. The Plan refused, and this action followed.

 The complaint asserts three claims. *fn11" The first count seeks specific performance of the provision in the Agreement which requires the Plan, through its Administrative Committee and the trustees, to release the remaining escrow funds (plus interest). The third count, which is closely related to the first, seeks damages for the alleged breach of express warranties made to plaintiff by the Plan in the Agreement. The fourth count is not based on the Agreement, but claims that an improper calculation was made in the computation of the case termination benefit. Defendants have filed a counterclaim in which they seek return of an amount by which Hoffa was allegedly overpaid, *fn12" and plaintiff has responded to the counterclaim with various defenses. Plaintiff seeks summary judgment on the third count of her complaint; defendants request summary judgment in their favor on the first, third, and fourth counts of the complaint and on the counterclaim.

 II

 Defendants have raised a host of issues *fn13" in their answer and their counterclaim, *fn14" but the basic thrust of their argument, though asserted with many different variations is relatively simple. The amount of the lump sum payment, it is argued, was incorrectly calculated when the Agreement was drawn and, for a variety of reasons, Hoffa should not now receive the benefit of that mistake. The response is equally simple: the pertinent calculations were made by an agent of defendants; when defendants entered into the Agreement, they warranted the accuracy of these calculations; and if there are to be any losses, *fn15" they are defendants' responsibility, not Hoffa's.

 While, as noted, defendants assert a great many defenses, only a limited number merit extended discussion: (1) that they are excused from performance of the Agreement on account of mistake made in good faith; (2) that the Agreement is void as against public policy; (3) that the Agreement violates the Employment Retirement and Security Act of 1974 (ERISA); and (4) that the Agreement is not ...


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