Food Fair Stores, Inc. v. Greeley

Finan, J., delivered the opinion of the Court. Carl E. Greeley (Greeley), the appellee, a former employee of Food Fair Stores, Inc. (Food Fair), appellant, and a beneficiary under its corporate Pension Plan (Plan), originated these proceedings. He terminated his employment to accept a position in a competitive field and when the funds which he felt were due him under the Plan were not forthcoming, sued both Food Fair and the Trustee of the pension fund. We must now determine what his rights may be under the Plan which imposes upon former employees certain restrictive conditions, regarding activity in competition with Food Fair or inimical to its interest, the breach of which is to be determined by an Advisory Committee (Committee). ¹⁰⁸ On January 26, 1970, Greeley voluntarily terminated nearly 15 years of employment with Food Fair, a retail grocery store chain based in the State of Pennsylvania, to accept a position of “retail counselor” with the Fox Grocery Company, a wholesale grocery firm.

During the course of his employment with Food Fair, the appellee held the position of manager-trainee and eventually store manager, working in the Baltimore metropolitan area. As a “retail counselor” with the Fox Grocery Company, the appellee's duties included selling a line of groceries similar to that sold by Food Fair to independent retail grocers in the Baltimore area and advising the independent grocers in ways to increase their sales. After 5 years of employment with Food Fair, the appellee became a participant in the company’s noncontributory Incentive Bonus and Retirement Plan (Plan) which is maintained for the executive, administrative, and supervisory personnel of the company and for which the other appellant in this case, The First Pennsylvania Banking and Trust Company (First Pennsylvania), acts as Trustee. The Plan is funded entirely from the profits of Food Fair, and in addition to providing retirement benefits, it supplies insurance protection in the event of the death of an employee.

The Plan provides that upon the voluntary resignation of a participant, distribution is not to be made until the employee reaches the age of 65 or dies, whichever is the first to occur, and it further stipulates that distribution is subject to the conditions imposed upon post-employment conduct which are contained in Section 7.1, which states: “If the Committee [the advisory body established to administer the Plan] determines in its sole and absolute discretion that a Participant has engaged in fraud or dishonesty towards the Company, or has intentionally damaged the Company's property, or has wrongfully disclosed any secret process or imparted any confidential information, or has done any act inimical to the interest of the Company during his ¹⁰⁹ employment or thereafter, such as engaging in a competing business or entering the employ of a competitor of the Company, the Committee shall have the full right and power to suspend, reduce, terminate or forfeit the benefits or interest of such Participant (or his Beneficiary) in the Plan, whether or not vested.” After Greeley left the employ of Food Fair to accept the position with the Fox Company, he made claim for the monies allegedly due him pursuant to the terms of the Plan. The Plan’s Advisory Committee responded to the claim by citing Section 7.1, presumably taking the position that by working for the Fox Company as a “retail counselor,” Greeley had forfeited the Plan’s benefits. Greeley thereafter instituted suit against Food Fair and First Pennsylvania (as Trustee of the Plan’s funds) in the Circuit Court for Prince George’s County seeking the proceeds of the Plan’s benefits and additionally seeking from Food Fair a bonus and accrued vacation pay allegedly due him. First Pennsylvania, which is chartered under the laws of Pennsylvania, filed a motion raising a preliminary objection in the lower court which questioned the presence of jurisdiction over it by the Maryland Courts.

The motion was overruled after a hearing before Judge DeBlasis, and a subsequent demurrer questioning the sufficiency of the allegations made against First Pennsylvania was also overruled by Judge DeBlasis. The case was heard on its merits, Meloy, J. presiding, on April 13, 1971, at which time the appellants strenuously argued that the action of the appellee in working for a “competing business,” combined with the fact that the appellee had played some part in leading another Food Fair employee, Gordon Lee Malone, away from his Food Fair position to one with the Fox Company, constituted a violation of Section 7.1 of the Plan and therefore made Greeley ineligible to receive the Plan’s benefits. At the conclusion of arguments, however, the court ¹¹⁰ awarded a judgment against both Food Fair and First Pennsylvania in the amount of $8,514.10 representing the sum of money to which Greeley was entitled under the Plan. The court found in favor of Food Fair as to Greeley’s claim for a bonus and accrued vacation pay.

Food Fair and First Pennsylvania now appeal the judgment entered against them. In limine, there is the juridictional question which must be disposed of regarding the appellant, First Pennsylvania. It contends that as a foreign corporation it is not amenable to the jurisdiction of the Maryland Courts'.because it is not doing business in Maryland, nor do any of its general activities or those in relation to the plaintiff Greeley constitute a presence within the State or sufficient contacts within this State, to bring it within the purview of Maryland Code (1969 Repl. Vol.), Art. 75, § 96, commonly referred to as our “Long Arm” statute.

While recognizing the liberal construction we have given to this statute in the recent cases of Harris v. Arlen Properties Inc., 256 Md. 185, 195, 196 , 260 A. 2d 22 (1969), and Novack v. National Hot Rod Assn., 247 Md. 350, 354 , 231 A. 2d 22 (1967), we find nothing in the record in the instant case which would bring First Pennsylvania’s activities or its duties as Trustee under the Plan within the scope of the “Long Arm” statute as interpreted by our decisions. The record contains no suggestion that the Plan was negotiated, executed, or implemented within this State. Communications regarding the Plan and the statements of Greeley’s account came through the mail from Food Fair. Upon the termination of his employment Greeley wrote to the “retirement committee” inquiring as to his status under the Plan and in reply he received a letter from the employees’ representative for the Advisory Committee, but there is no evidence that the Trustee was involved in the denial of the claim.

In short, we are unable to find any minimal contacts within the due process requirements, on the part of First Pennsylvania, found to be a requisite for jurisdiction in International Shoe ¹¹¹ Company v. State of Washington, 326 U. S. 310, 316 (1945), or acts of the Trustee of a purposeful nature in this State or a persistent course of business activity in this State. Vitro Electronics v. Milgray, 255 Md. 498, 505 , 258 A. 2d 749 (1969). Were we to hold the Trustee amenable to jurisdiction we think it would violate the “traditional notions of fair play and substantial justice,” articulated in International Shoe, supra, at 316. See also Auerbach, The Long Arm Comes to Maryland, 26 Md. L. Rev. 13 , 25 (1966).

Accordingly, we are of the opinion that the lower court erred in rendering a judgment against First Pennsylvania and reverse the judgment below as to that defendant. We would further add that we do not view the lack of a judgment against First Pennsylvania as any real detriment to Greeley’s obtaining his just rights, as we are of the belief that Food Fair is in a position to legitimately instruct the Advisory Committee to direct the Trustee to comply with any judgment entered against Food Fair, the satisfaction of which lies in a payment from the pension fund. Turning to the judgment against Food Fair we must first examine the structure of the Advisory Committee, and next, its actions in applying the provisions of Section 7.1 of the Plan to the conduct of Greeley. In this latter connection we must also examine the language of Section 7.1 itself.

Section 2.1 provides that the Committee shall be composed of five members, three to be appointed by the board of directors of Food Fair and two to be elected from the participants in the Plan. Section 2.1 further provides that, “No Advisor shall be liable to any person whatsoever by his having acted as Advisor.” Section 2.2 provides that the board of directors of Food Fair, “shall have the right to discharge any Advisor appointed by it, without assigning any reason therefore.” Section 3.9 states that the Committee may discontinue the Plan, should the board of directors of Food Fair deem it advisable. Section 7.6 again reiterates that the board of directors of Food Fair may discontinue the Plan at any time. Section 7.9 provides that Food Fair “may, before making ¹¹² any distributions hereunder to the Participant or his Beneficiaries, set off against such distribution the amount of any indebtedness of the Participant to the Company.” It should be noted at this point, that Greeley did not join the Committee as a party defendant.

What may have been the legal implications of his failure to do this was not argued below nor on appeal. Nor did Food Fair in denying its liability contend that the wrong party had been sued or that it was not a proper party, so in that sense, the question of Food Fair’s insulation from liability is not before us. Maryland Rule 885. In fact, in contesting the validity of the monetary judgment obtained against it, Food Fair’s main argument, over and above its objections to the lower court’s interpretation of the restrictive covenants, was that the judgment of the court accelerated the payment of the employee’s benefits and that such a precedent would create an inducement for other employees to resign their positions with Food Fair and thus obtain immediate lump sum payments.

At this juncture we must assess just what responsibility, if any, evolves on Food Fair in connection with the administration of the Plan. In this connection it should be noted that Section 7.8 of the Plan provides that an “employee shall not subject the Company and/or the Committee and/or the individual Advisor and/or the Trustee to any suit or litigation or any legal liability for any reason or cause or thing whatsoever in connection with the Plan; each such employee, for himself, his heirs, executors and administrators does hereby release the Company and the Committee and the Trustee from any and all such liability and obligations.” Taken literally, the Plan leaves an employee defenseless and without remedy against anyone who might have, by capricious or arbitrary action, or by fraud, deprived him of his just rights under the Plan. For such an interpretation to be given the sanction or approval by any court would be unconscionable, as was stated in Siegel v. First Pennsylvania Banking and Trust Company, 201 F. Supp. 664, 670 (E. ¹¹³ D. Pa. 1961), concerning an almost identical provision in a Food Fair pension plan which was the subject of litigation before that court: “Were we to adopt defendants’ construction * * *, we would, in effect, set at naught our conclusion that the Plan is a contract and not a gratuity. To hold (as we do) that plaintiff has contractual rights but has no means of enforcing them would not only be inconsistent but futile.

A right without a remedy is no right at all: cf. Woods v. Interstate Realty Co., 1949, 337 U. S. 535 , 69 S. Ct. 1235 , 93 L. Ed. 1524 .” It is our opinion that Food Fair, by its right to select a majority of the members of the Committee, by its ability to discharge a member of the Committee appointed by it at any time without assigning a reason, by its ability to terminate the Plan at will and by its right to have any monies owed to it by an employee first deducted before any distribution is made under the Plan to the employee or his beneficiaries, retains sufficient control over the Plan and the Committee to render itself liable to suit for capricious, arbitrary or illegal action on the part of the Committee. The majority of the Committee are representatives of Food Fair and in a practical sense there is a sufficient control over them by Food Fair as to render them its agents. Accordingly, we are of the opinion that Food Fair is in a position to have the Committee direct the Trustee to pay any judgment obtained by an employee against it, resulting from the withholding of funds due an employee under the Plan, and for which funds are available under the Plan. We further believe that the decision in this case will not cause any deluge of resignations by employees seeking to obtain immediate lump sum payments from the pension fund.

In the instant case, had the Committee simply advised Greeley that his benefits would be paid to him when he reached 65 years of age or to his beneficiaries were he to die before that time, he would have had ¹¹⁴ no cause of action and no benefits would have been immediately payable to him. Passing on to the consideration of the actions of the Committee with reference to Section 7.1, as applied to Greeley, we find that in its letter of March 9, 1971, it informed him of the resolution which it has passed denying him any benefits under the Plan. The Committee did not assign any specific reasons for its action but contented itself with a general reference to Section 7.1 of the Plan, which we have heretofore set forth, and which contains the restrictive conditions on employees’ actions, a violation of which may, in the sole discretion of the Advisory Committee, justify a forfeiture of the employee’s pension benefits. From the briefs filed by counsel for Food Fair and from the opinion of the lower court, we can only assume, and we believe reasonably so, that the basis for the Advisory Committee’s action was a finding by it that Greeley’s conduct violated the conditions of Section 7.1 in that his accepting