Petition for Writ of Certiorari — Equibank v. Lash

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Supreme Court, U.S,

FILED

JUL 14 1992

No. OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1992

- ee

EQUIBANK AND EQUIMARK CORPORATION,

JAMES W.

do ; saeC

Petitioners,

LASH, individually and on behalf

of other Equibank employees and former

employees similarly situated,

Respondents

Petition For A Writ Of Certiorari

To The Supreme Court Of. Pennsylvania

PETITION FOR WRIT OF CERTIORARI

James R. Manion, III, Esq.

RICHARD J. KLEIN, Esq.

Equibank

Two Oliver Plaza

Pittsburgh, PA 15222-2705

July 14, 1992

at Of Counsel:

seme ?

H. Wooprurr TuRNER, Esq.”

JoserH C. Swaim, Jr., Esq.

CHARLES KeELty, Esq.

Patrick J]. McELHINNy, Esq

KiIRKPATRICK & LOCKHART

1500 Oliver Building

Pittsburgh, PA 15222

(412) 355-6500

Counsel for Petitioners,

Equibank and Equimark

C ( rp oration

*Counsel of Record

COCKLE LAW BRIEF PRINTING LO 800) 225 6964

OR CALL COLLECT (402) 3442-2831

QUESTION PRESENTED

Whether the courts below, extending Fort Halifax

Packing Co. v. Coyne, unduly narrowed the sphere of

preemption imposed by ERISA through the use of the

following devices, as to each of which the lower courts

are in conflict:

a) excluding preemption where “lump-sum”

damage awards are sought;

b) limiting preemption to cases brought

against plan fiduciaries; and

c) limiting preemption to so-called “core”

ERISA concerns or day-to-day plan “admin-

istration”.

PARTIES TO THE PROCEEDINGS

Petitioner Equimark Corporation is a Delaware cor-

poration with its principal place of business in Pennsyl-

vania. Equimark’s subsidiaries are Equibank and

Equimanagement Corporation. Petitioner Equibank is a

commercial bank organized under the laws of Pennsylva-

nia with its principal place of business in Pennsylvania.

Equibank’s subsidiaries are Liberty Business Credit Cor-

poration, American Financial Corporation of Tampa and

First Associates Financial Corp. Respondents, James W.

Lash and other Equibank employees and former

employees similarly situated, are individuals.

ili

TABLE OF CONTENTS

Page

RRP RMGREW FORINT ELD 4. ccc veces encsceses areas i

Pree OO) BORG PROALEGUINGS .. 2. cece ses eens ii

pe es EE ye 66g) re iv

Oe 1

Te the oe 4 aap Sb FS env eh we eee ee eee 1

EE NE oa wc ease saveenccsacsvounsde |

ye) 8 oe aa 2

REASONS FOR GRANTING THE WRIT ........... 7

1. Several Substantial and Direct Conflicts Among

the Courts Exist and Will Be Resolved By a

ES ECE eee eee 7

2. The Pennsylvania Supreme Court Erroneously

Construed an Important Federal Statute and

Disregarded this Court’s Mandate For Broad

Preemption As Intendec By Congress........ 14

3. This Case Presents Important and Recurring

ee a waveeec ys ens ens 18

ee his a asa ka es ued in vase kv ewe es 22

APPENDIX

Order of the Pennsylvania Supreme Court......

Opinion and Order of the Pennsylvania Superior

MPU enn Nay Nigar Ree ee

Opinion and Order of the Court of Common

Pleas of Allegheny County, Pennsylvania. .......

Class Action Complaint filed by James W. Lash

individually and on behalf of other Equibank

employees and former employees similarly situ-

Preliminary Objections filed on behalf of Equi-

bank and Equimark Corporation..............

TABLE OF AUTHORITIES

Page

Cases

Aetna Life Ins. Co. v. Borges, 869 F.2d 142 (2d Cir.),

cert. denied, 493 U.S. 811 (1989)............ 12, 16, 21

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

ty | ee ener emcee OE HE. 17

Andrews v. Louisville & Nashville R.R., 406 U.S. 320

2 ee AR aes en ure: 18

Arkansas Blue Cross and Blue Shield v. St. Mary’s

Hosp. Inc., 947 F.2d 1341 (8th Cir. 1991), cert.

denied, 112 S.Ct. 2305 (1992) .........0.c eee e ee. 11, 21

Belknap, Inc. v. Hale, 463 U.S. 491 (1983).............. 7

Bouchard v. Crystal Coin Shop, Inc., 843 F.2d 10 (1st

| er ers ee OL Es 3

Bricker v. Maytag Co., 450 N.W. 2d 839 (lowa

i) Ee eT eee Pee Tes ofr goto 10, 12

Brotherhood of R.R. Trainmen v. Jacksonville Terminal

Comp... Fi US. SP GRP). 6 osccici cesses 18

Bryant v. International Fruit Prods. Co., 793 F.2d 118

(6th Cir.), cert. denied, 479 U.S. 986 (1986).......... 3

Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th Cir.

ee ee eee py he es 9, 10

Christopher v. Mobil Oil Corp., 950 F.2d 1209 (5th

Cir. 1992) petition for cert. filed (U.S. May 26,

Soap CPO. FEMS So n5ana. ee ee eer en cdedey eee mee 9

Commonwealth v. Gretz, 520 Pa. 324, 554 A.2d 19

(ENP + Ki Wa ea Keene exceed 2ucd CoE eee eee 6

Consolidated Beef Indus., Inc. v. New York Life Ins.

Co., 949 F.2d 960 (8th Cir. 1991), cert. denied, 112

a MA, TE Re nc eect caen ees 10, 12, 17

TABLE OF AUTHORITIES - Continued

Page

Construction and Gen. Laborers Local 438 v, Curry,

ark US. SO TUNORY xtra ee 7

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975) ..... 7

Cummings v. National Ry. Passenger Corp., 514 Pa.

230, 523 A.2d 338, cert. denied, 484 U.S. 852

OBE) oss et snk ten eal ee 18

Delgrosse v. Spang and Co., 769 F.2d 928 (3d Cir.

1985), cert. denied 476 US. BERD ATP eis ies Cah. 3

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.

SPER) Cenk BOR yc, /: yee 14

Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805

F.2d 732 (7th Cir. 1986), cert. denied, 482 U.S. 915

ied Donen veer rai Mahalo yee 14

Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550

pita eT et 8 dey 1]

FMC Corp. », Holliday, 111 S.Ct. 403 to ee ie ti

Fort Halifax Packing Co. v. Coyne, 482 US. 1 (1987) . . passim

Gahn v. Allstate Life Ins. Co., 926 F.2d 1449 (Sth Cir.

ide en 9S yf 14

Gibson v. Prudential Life Ins. Co., 915 F.2d 414 (9th

rea ate Mere erty ye an 10, 16, 17

Gillespie v. St. Joseph’s Univ., 355 Pa. Super. 362,

513 A.2d 471 REY sh sn ain ak as Dee eee eS 2

Goodyear Atomic Corp. v. Miller, 486 U.S. 174 (1988)..... 7

Greenblatt v. Budd Co., 666 F Supp. 735 (E.D. Pa.

deed EEE ry Gi ey PY 10

HealthAmerica v, Menton, 551 So.2d 235 (Ala. 1989),

cert. denied, 493 U.S. 1093 to Peer 13, 20

Vil

TABLE OF AUTHORITIES -— Continued

Hollingshead v. Burford Equip. Co., 747 F. Supp. 1421

(ED. Ale. TONG ons cs ose oe cae 14

Hospice of Metro Denver, Inc. v. Group Health Ins. of

Oklahoma, Inc., 944 F.2d 752 (10th Cir. 1991)..... 9,13

Howard v. Parisian, Inc., 807 F.2d 1560 (11th Cir.

of Se a eae ee ee eee ey ty eee Mae away a? 17

Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478

PRN xcs hen ae cas cae ents 7, 16

Jackson v. Martin Marietta Corp., 805 F.2d 1498

FRAO GUM BPEL) Ga es scan case veleuanecetay el reams 12

Klank v. Sears, Roebuck and Co., 735 F. Supp. 260

Ua: Me BONE FUSS ce yn nba beaeae aaa as 9, 10, 12

eon pi nrienel eae dalmane teeoanay pene ian INL nm 9

Lee v. E. I. DuPont de Nemours and Co., 894 F.2d 755

Eee i RE nee pita a iu Ge oe eee 12, 13

Lister v. Stark, 890 F.2d 941 (7th Cir. 1989), cert.

Pemiem, TEE SAN. SIS CFG) ona ow ss oxcewvnscacss 12, 1S

Martori Bros. Distribs. v. James-Massengale, 781 F.2d

1349, as amended 791 F.2d 799 (9th Cir.), cert.

Wemiek, 479 WS. DED CUGG) a 5 ok ccc ciccices 9, 12

Memorial Hosp. Sys. v. Northbrook, 904 F.2d 236 (5th

Se Pe re err rere * 'O, 1, tz, 13; 2

Morales v. Trans World Airlines, Inc., 112 S.Ct. 2031

eg PEAR Pid es de eC ON ganar eat ee 15

Munoz v. Prudential Ins. Co. of America, 633 F.Supp.

Pee Gre IG BD aon 5 Se UA boss beuadacdes case’ 10

Napier v. Atlantic Coastline R.R., 272 U.S. 605 (1926) .... 18

Vili

TABLE OF AUTHORITIES — Continued

Norfolk & W. Ry. v. Pennsylvania Public Utility Com-

mission, 489 Pa. 109, 413 A.2d 1037 (1980)......... 18

Olson v. General Dynamics Corp., 950 F.2d 1418 (9th

Cir. 1991), cert. denied, (U.S. June 15, 1992)

Pe mtn aura ate ee 13

Perry v. P*I*E Nationwide, Inc., 872 F.2d 157 (6th

Cir. 1989), cert. denied, 493 U.S. 1093 (1990) ....... 13

Pilot Life Ins. Co. v, Dedeaux, 481 U.S. 4] (1987)

OST ENA TEAR CEE SERENE eee daa eee oe 7, 8, 17, 19

Pizlo v. Bethlehem Stee! Corp., 884 F.2d 116 (4th Cir.

RRR oN ekiesten as ater O 9, 12

Quigley v. Unum Life Ins. Co., 887 F.2d 258 (1st Cir.

1989), aff'g, 688 F. Supp. 80 (D. Mass 1988)... 10

Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985) .10, 14

Shaw v. Delta Airlines, Inc., 463 US. 85 (1983)

ii Lene LTT ETT eee 7, 8, 13, 17

Seamon v. Vaughan, 921 F.2d 1217 (11th Cir. bo) 5

Shofer v. Stuart Hack Co., 324 Md. 92, 595 A.2d 1078

(1991), cert. denied, 112 S.Ct. 1174 (1992)... 10

Smith v. Dunham-Bush, Inc., 959 F.2d 6 (2d Cir.

sal uiccgrihe athe Ts ET a mee 13

Southland Corp. v. Keating, 465 US. 1 S| ee 7

Teper v. Park West Galleries, Inc., 431 Mich. 202, 427

N.W. 2d 535 tien GE Te a 9

Union Pacific R.R. v, Price, 360 U.S. 601 1). ) 18

Williams v. Wright, 927 F.2d 1540 (11th Cir. 1991) ....14

Wilson v. Bluefield Supply Co., 819 F.2d 457 (4th Cir.

oh ee 3

TABLE OF AUTHORITIES - Continued

STATUTES

Re I Pei edo

MBL, QUIS aoe a ss

28 U.S.C §1257(a).. 0... cece cece ccc cccccccceeeee.

29 U.S.C. §1002(2) 2... cece cece cece cc eeeeeceeee.

29 U.S.C. §1144(a)........ Sate aeepawes) teehee

29 U.S.C. §1344(d).. 0... eee cece ceececccceceeee:

eee 8

Internal Revenue Code of 1986, as amended .....

Pub. Law 98-397, 98 Stat. 1426 (1984), Retirement

Equity Act of 1984, as amended by Pub. Law

99-514 §1145(f)(1), 100 Stat. 2491 (1986), and

101-239 §7861(d)(1), 103 Stat. 2431 (1989).......

OTHER AUTHORITIES

Tae Comm, Rec. 2995s (IGFE) ooo cc cc ccccscecees

bao Comm, Rac. 29982 C1978) q.. 5 oo ccc cc ccc scce:

1991 Admin. Office of U.S. Courts Annual Report ....

Black’s Law Dictionary (5th ed. 1979)............

E.T. Veal & E.R. Mackiewicz, Pension Plan Termina-

i | Sn

Staff of Senate Comm. on Labor and Public Wel-

fare, 94th Cong. 2d Sess., Legislative History of

ERISA 4670 (Comm. Print 1976) ...............

PETITION FOR WRIT OF CERTIORARI TO

THE PENNSYLVANIA SUPREME COURT

The Petitioners, Equibank (“Equibank”) and Equi-

mark Corporation (“Equimark”), respectfully pray that a

writ of certiorari issue to review the judgment and opin-

ion of the Pennsylvania Supreme Court, entered in the

above-entitled proceeding on April 16, 1992.

* —

OPINIONS BELOW

The per curiam decision of the Pennsylvania Supreme

Court is reported at 604 A.2d 1027 (Pa. 1992). (Al) The

Pennsylvania Superior Court’s opinion (B1) is not offi-

cially reported. The opinion of the Court of Common

Pleas of Allegheny County, Pennsylvania (C1) is not offi-

cially reported

JURISDICTION

The Pennsylvania Supreme Court entered its opinion

and judgment in this case on April 16, 1992. (Al)

The jurisdiction of this Court to review the decision

of the Pennsylvania Supreme Court is invoked under 28

U.S.C §1257(a).

STATUTE INVOLVED

Section 514(a) of the Employee Retirement Income

”

Security Act of 1974, as amended, (“ERISA”), provides:

serena aeaaarieaiinaaiaainamaaiaaiaiaaaaaeie

Except as provided in subsection (b) of this sec-

‘tion, the provisions of this subchapter and sub-

chapter Ill of this chapter shall supersede any

and ail State laws insofar as they may now or

hereafter relate to any employee benefit plan

described in section 1003(a) of this title and not

exempt under section 1003(b) of this title. This

section shall take effect on January 1, 1975.

29 U.S.C. §1144(a).

STATEMENT OF THE CASE

On November 8, 1984, Equibank announced its inten-

tion to terminate the Equimark Corporation Retirement

Plan, a defined pension benefit plan under Section 3(2) of

ERISA, 29 U.S.C. §1002(2) (the “Pension Plan”). (D20)!

Approximately eight million dollars in funds exceeding

those needed to provide full benefits was expected to

revert to Equibank upon the termination. See ERISA

§4044(d), 29 U.S.C. §1344(d). (D20-21, 23-24, 33)?

1 The Court of Common Pleas of Allegheny County, Penn-

sylvania decided the preemption issues presented here on the

basis of preliminary objections to the Complaint, the Pennsyl-

vania equivalent of Fed. R. Civ. P. 12(b)(6). (C1) Accordingly,

the statement of facts is based upon the Complaint and the

inferences reasonably drawn therefrom. Gillespie v. St. Joseph's

Univ., 355 Pa. Super. 362, 364, 513 A.2d 471, 472 (1986).

2 Under ERISA, an employer terminating a plan may use

excess funds only after it has ensured the payment of earned

benefits through the purchase of annuity contracts and other-

wise complied with the act. See 29 U.S.C. §1344(d); see also E.T.

Veal & E.R. Mackiewicz, Pension Plan Termination, (Wiley, 1989).

(Continued on following page)

Equibank also announced plans to enhance the then exis-

ting Employee Savings and Retirement Plan by providing

an annual employer contribution and to create an

Employee Stock Ownership Plan (the “E5OP”). (D20-21)°

Equibank proposed to apply the Pension Plan’s eight

million dollar reversion to its capital and to establish the

ESOP with approximately three million shares of Equi-

mark stock, then worth roughly eight million dollars. In

various communications to its employees, Equibank iden-

tified how it planned to fund the ESOP, the employees

eligible to participate in the ESOP, the manner in which it

would distribute ESOP assets to eligible employees and

when such assets would become payable, i.e., upon each

employee’s retirement or termination. (D22-27, 37-38)

Equibank further informed its employees that establish-

ment of the ESOP was contingent on the appropriate

shareholder and regulatory approvals. (D30-31) The

(Continued from previous page)

A number of courts of appeal have adjudicated disputes under

ERISA about the rights of parties to such reversionary funds.,

See, e.g., Wilson v. Bluefield Supply Co., 819 F.2d 457 (4th Cir.

1987); Bryant v. International Fruit Prods. Co., 793 F.2d 118 (6th. *

Cir.), cert. denied, 479 U.S. 986 (1986); Delgrosse v. Spang and Co.,

769 F.2d 928 (3d Cir. 1985), cert. denied 476 U.S. 1140 (1986);

Bouchard v. Crystal Coin Shop, Inc., 843 F.2d 10 (1st Cir. 1988).

3 An ESOP is an employee retirement plan that acquires

stock of the sponsoring employer and holds it in trust for

employees participating in the ESOP. An ESOP is a “qualified”

retirement plan, designed to satisfy the discrimination, partici-

pation, vesting, distribution and other requirements of the

Internal Revenue Code of 1986, as amended, and ERISA. 26

U.S.C. §§409, 4975.

Complaint alleged that Equibank did not issue the Equi-

mark stock to the ESOP as proposed. (D10)4

Thereafter, Plaintiff James W. Lash (“Lash”), individ-

ually and on behalf of other Equibank employees and

former employees, brought this action, the gravamen of

which is this: Equibank was legally bound by its proposal

to create an ESOP, thus the class should receive a direct

distribution of their respective allotment of the three

million shares of Equimark stock. (D1) Specifically, Lash

asserted state law causes of action for breach of contract,

breach of an implied duty of good faith and fair dealing,

unjust enrichment and constructive trust for Equibank’s

failure to provide “the agreed compensation in the form

of the 3,000,000 Equimark shares of stock.” (D10, 14-19)°

The Complaint does not specify how each individual's

portion is to be calculated, but presumably it would

4 Equibank announced termination of the Pension Plan as

of November 30, 1984. (D20) However, final reversion of excess

Pension Plan assets to Equibank could not occur until June,

1990 in view of the 1984 enactment of the Retirement Equity

Act of 1984 (“REA”), Pub. Law 98-397, 98 Stat. 1426 (1984),

which required terminating defined benefit plans to provide

certain early retirement benefits. Only after Congress passed

special legislation consisting of an amendment in late-1989

providing that REA did not apply to the termination of the

Pension Plan could distribution of all Pension Plan assets

incident to Plan termination become final. See Pub. Law 98-397,

98 Stat. 1426 (1984), as amended by Pub. Law 99-514

§1145(f)(1), 100 Stat. 2491 (1986), and 101-239 §7861(d)(1), 103

Stat. 2431 (1989). Lash commenced this action on November 7,

1988, long before the final action of Congress affecting the

Pension Plan. |

° The Complaint studiously avoids any explicit mention of

ERISA notwithstanding the fact that its averments reflect that

the claims of the class are entangled with no fewer than three

Equibank employee benefit plans.

acim

require reference to service and vesting requirements ol

the proposed ESOP

The Complaint on its face refers to alleged wrongs

involving three benefit plans (the Pension Plan, the Sav

ings and Retirement Plan and the proposed ESOP).® Equi

bank and Equimark filed preliminary objections to the

Complaint, contending, inter ilia, that ERISA preempted

Plaintiffs’ claims. (E1) The trial court dismissed the Com

plaint on grounds that it lacked subject matter jurisdic

tion, finding that a decision as to whether an ESOP was

created was central to the dispute and that determination

of this issue was for a federal court applying federal law

(C11)

The Superior Court of Pennsylvania reversed, hold

ing that ERISA does not preempt Plaintiffs state law

claims. The court first erroneou ncluded that “[b]ot!

parties apree that there was |! pian in existence Ll

(B7).7 lt then stated that “[a} f Lash’s claims surround

the allegation that there wa ntract to forma pian

6 It is not suggested the mplaint that the Employee

Savings and Retirement Plan wa t enhanced as Equibank

announced

The record does not ind ife tnat there Was su nh an

agreement and such a statement ntrary to assertions in the

trial court, where Lash ntended Equibank tailed to pa

benefit prov ided for in an established tn-place employee Dene

fit plan.” (C9-1 Moreover, Petitioners have nsistent

asserted that if Lash prevails, the result w ild be the de fa

establishment and funding of the proposed ESOP. Finally, the

. 4 EnNIC - ~ 4 - - 9 so

parties could not avoid ERISA’s reach Dy agreement. o¢ ea

es Wanocka 5 24% 1939 197 11+ 1< 1 Th

mon c Va iQnan 9?] f 2d Lai ra, i itl \_If i 79 | | tc

(B10) (emphasis added), and held that such claims do not

“relate to” an employee benefit plan within the meaning

of Section 514(a) of ERISA.

Three separate rulings formed the basis of the Supe-

rior Court’s “relate to” holding:

(1) A claim for a one-time lump-sum damage

payment, even though measured by the terms of

the proposed ESOP, did not relate to an

employee benefit plan (B12);

(2) The claims “are not made against Equimark

or Equibank as fiduciaries of any proposed plan,

but rather are made against them as past

employers” (B11); and

(3) The claims did not implicate certain core

concerns of ERISA, i.e., “the operation, estab-

lishment, or administration of an employee ben-

efit plan.” (B11)

Those three rulings were affirmed per curiam by the

Supreme Court of Pennsylvania without opinion (Al),

making it binding precedent on the issue. See Common-

wealth v. Gretz, 520 Pa. 324, 325, 554 A.2d 19, 20 (1989)

(Affirmance of unpublished memorandum decision con-

stitutes “a binding decision of precedential authority on

the question presented to and accepted for review.”). The

three “relate to” rulings bring Petitioners to this Court as

substantial and direct conflicts exist among the courts

with respect to each of them.§

—-— —~~-—¢

5 Although the Supreme Court of Pennsylvania remanded

the case for further proceedings, its decision is final for pur-

‘peses of this Court’s review under the fourth category of

(Continued on following page)

REASONS FOR GRANTING THE WRIT

1. Several Substantial and Direct Conflicts Among the

Courts Exist and Will Be Resolved By a Decision in

This Case.

ERISA’s preemption provision, Section 514(a), is

prominent among the safeguards Congress designed to

preclude abuse and secure the rights brought into being

by this legislation. Ingersoll-Rand Co. v. McClendon, 111

S.Ct. 478, 482 (1990). “The preemption clause is conspi«

uous for its breadth.” FMC Corp. v. Holliday, 111 S.Ct. 403,

407 (1990).2 Its “deliberately expansive” language was

(Continued from previous page)

exceptions to the final judgment rule in Cox Broadcasting Corp. v

Cohn, 420 U.S. 469, 482-83 (1975). The federal issue has been finally

decided. Moreover, this Court's reversal of the decision below will

be preclusive of any further litigation on the state causes of action

and will prevent a serious erosion of the federal policy underlying

ERISA. Preemption cases are paradigmatic examples of the fourth

Cox Broadcasting category. See Goodyear Atomic Corp. v. Miller, 486

US. 174, 178-80 (1988) (whether Supremacy Clause invalidates

Ohio statute); Southland Corp. v. Keating, 465 U.S. 1, 6-7 (1984)

(whether Federal Arbitration Act preempts California statute);

Belknap, Inc. v. Hale, 463 U.S. 491, 497 n.5 (1983) (whether state

causes of action are preempted by National Labor Relations Act);

Construction and Gen. Laborers Local 438 v. Curry, 371 U.S. 542, 550

(1963) (whether National Labor Relations Act preempts state pro-

ceedings). .

° The key to Section 514(a) is found in the words “relate

to.” Ingersoll-Rand, 111 S.Ct. at 482. “A law ‘relates to’ an

employee benefit plan, in the normal sense of the phrase, if it

has a connection with or reference to such a plan.” Shaw ov

Delta Airlines, Inc., 463 U.S. 85, 96-97 (1983). A state law may

“relate to” a benefit plan, and thereby be preempted, even if

the law is not specifically designed to affect such plans, or the

effect is only indirect. Pilot Life Ins. Co. v. Dedeaux, 481 U S. 41,

47 (1987).

“designed to establish pension plan regulation as exclu-

sively a federal concern.” Pilot Life Ins. Co. v. Dedeaux, 481

U.S. 41, 46 (1987).1

Notwithstanding the breadth of Section 514, this

Court held in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

(1987), that ERISA did not preempt a state severance pay

statute because it did not require the establishment or

maintenance of an ongoing plan.'! As the dissent pre-

dicted, however, Fort Halifax “create[d] a loophole in

ERISA’s preemption statute,” allowing lower federal and

state courts to “undermine Congress’ decision to make

employee-benefit plans a matter of exclusive federal reg-

ulation.” Fort Halifax, 482 U.S. at 23 (White, J., dissent-

ing).

The three rulings of the Pennsylvania courts below

are typical of lower court attempts to exploit the

10 Some state actions and laws, however, may affect

employee benefit plans in “too tenuous, remote or peripheral a

manner to warrant a finding that the law ‘related to’ a plan.”

Shaw, 463 U.S. at 100 n.21.

11 In Fort Halifax, the Court considered a Maine statute

requiring employers to provide a one-time severance payment

to-employees in the event of a plant closing. The Court held

that*the “one-time, lump-sum” payment implicated by the

statute did not “relate to” a plan because it “require[d] no

administrative scheme whatsoever.” Fort Halifax, 482 U.S. at 12.

The dissent (Rehnquist, C.J., White, O’Connor and Scalia, JJ.)

warned that “[b]y making pre-emption turn on the existence of

an ‘administrative scheme’ ”, the Court “creates a loophole” in

Section 514(a) destined to undermine Congress’ decision to

make the governance of employee benefit plans a matter of

exclusive federal regulation. Id. at 23.

language of Fort Halifax. Some courts, including those

below, have expanded Fort Halifax and related loopholes

to limit preemption. Other courts, however, have refused

to limit preemption by expansion of Fort Halifax, resulting

in substantial and direct conflicts among the courts of

appeals and highest state courts that will be resolved by a

decision in this case.

First, the courts are divided as to whether claims for

one-time, lump-sum damage payments, including those

measured by reference to a benefit plan, are preempted

by ERISA.!? Courts that encroach on the broad

12 Compare Hospice of Metro Denver, Inc. v. Group Health Ins.

of Oklahoma, Inc., 944 F.2d 752, 755 (10th Cir. 1991) (claim for

damages based upon plan benefits not preempted because

payment of one-time, lump-sum amount not an administrative

burden); Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d

236, 247 (5th Cir. 1990) (claim against plan administrator for

one-time recovery not preempted even though measured by

reference to benefit plan); Pizlo v. Bethlehem Steel Corp., 884 F.2d

116, 120-21 (4th Cir. 1989) (claim against employer for damages

consisting in part of lost pension benefits not preempted);

Martori Bros. Distribs. v. James-Massengale, 781 F.2d 1349,

1358-59, as amended, 791 F.2d 799 (9th Cir.), cert. denied, 479 U.S.

949 (1986) (claim against employer requiring calculation of

damages by reference to fringe benefits not preempted); Klank

v. Sears, Roebuck and Co., 735 F. Supp. 260, 263-64 (N.D. Ill.

1990) (claim against employer for damages consisting in part of

lost pension benefits not preempted); Teper v. Park West Gall-

eries, Inc., 431 Mich. 202, 427 N.W. 2d 535, 540-41 (1988) (dam-

age award calculated on terms of plan not preempted) with

Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1218 (5th Cir. 1992)

petition for cert. filed (U.S. May 26, 1992) (No. 91-1881) (noting

conflict and stating that measurement of damages by reference

to pension plan weighs in favor of preemption); Cefalu v. B.F.

Goodrich Co., 871 F.2d 1290, 1294 (5th Cir. 1989) (contract claim

(Continued on following page)

preemptive scope of ERISA by reference to the one-time,

lump-sum nature of the damages sought invariably rely

on Fort Halifax.5 A decision reversing the Pennsylvania

Supreme Court in the instant case will prevent plaintiffs

and lower courts from expanding upon the one-time,

lump-sum payment language of Fort Halifax to narrow

the broad preemption intended by Congress.

Second, the courts are in conflict as to whether state

law claims avoid preemption merely because a plan

fiduciary is not a defendant.'4 Encroachment in this

(Continued from previous page)

preempted where damages sought were created and measured

by plan); Krause v. Dresser Indus., Inc., 910 F.2d 674, 680 (10th

Cir. 1990) (affirming district court decision that claims for lost

salary are not preempted by ERISA, and noting that district

court had held claims for lost pension benefits are preempted).

13 See, e.g., Memorial Hosp., 904 F.2d at 247; Pizlo, 884 F.2d

at 120-21 (citing cases); Klank, 735 F. Supp. at 264 (citing cases);

Teper, 427 N.W. 2d at 539-40.

14 Compare Quigley v. Unum Life Ins. Co., 887 F.2d 258 (1st

Cir. 1989), aff’g, 688 F. Supp. 80, 83 (D. Mass 1988) (defendant

“not a fiduciary subject to the constraints of ERISA and thus,

the plaintiffs’ claims are not preempted for this reason”); Scott

v. Gulf Oil Corp., 754 F.2d 1499, 1505 (9th Cir. 1985) (allowing

plaintiffs to bring state law claims because they alleged viola-

tion of duties as former employer, not violation of duties

created by plan); Greenblatt v. Budd Co., 666 F. Supp. 735, 742

(E.D. Pa. 1987) (conclusion that plaintiff’s claim does not relate

to plan supported “by the fact that the representations at issue

were made by plaintiff’s supervisors, as his employers, and not

as plan fiduciaries”); Munoz v. Prudential Ins. Co. of America,

633 F.Supp. 564 (D. Colo. 1986) (ERISA does not preempt

claims against non-fiduciary plan administrators); Shofer v.

Stuart Hack Co., 324 Md. 92, 595 A.2d 1078, 1086 (1991), cert.

(Continued on following page)

————

instance is achieved not only through a straightforward

“plan fiduciary” test (supra footnote 14), but through an

analysis of whether state laws or claims impact on the

“primary ERISA entities”, i.e., the employer, the plan, the

plan fiduciaries and the beneficiaries. See, e.g., Arkansas

Blue Cross and Blue Shield v. St. Mary's Hosp. Inc., 947 F.2d

1341, 1344 (8th Cir. 1991), cert. denied, 112 S.Ct. 2305

(1992) (citing cases); Memorial Hospital, 904 F.2d at 245;

Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 556

(6th Cir. 1987).

Third, the courts are divided as to whether Fort Hal-

ifax limits preemption to those cases in which the under-

lying conduct complained of arises from day-to-day

administration of a plan.'° In these cases, courts have

begun excluding preemption notwithstanding the fact

(Continued from previous page)

denied, 112 S. Ct. 1174 (1992) (claim against nonfiduciary not

preempted); Bricker v. Maytag Co., 450 N.W. 2d 839, 842 (lowa

1990) (claim against employer not preempted) with Consolidated

Beef Indus., Inc. v. New York Life Ins. Co., 949 F.2d 960, 964 (8th

Cir. 1991), cert. denied, 112 S. Ct. 1670 (1992) (whether defen-

dant is ERISA fiduciary is irrelevant to preemption analysis);

Gibson v. Prudential Life Ins. Co., 915 F.2d 414 (9th Cir. 1990)

(same); Cefalu, 871 F.2d at 1292, 1295 (holding that ERISA

preempts state law claim regardless whether it is asserted

against plan or employer).

15 The Pennsylvania courts held that Lash’s claims were

not preempted because they did not involve “the operation,

establishment, or administration of an employee benefit plan.”

Lash (B11).

that the state claim in question will have an effect on a

plan by requiring the payment of additional benefits.'©

Moreover, by holding Lash’s claims not preempted

because they purportedly did not relate to the adminis-

tration of a plan, Pennsylvania joined the ranks of courts

following Fort Halifax to narrow preemption to so-called

“core” ERISA concerns.'? This encroachment of ERISA

16 Compare Pizlo, 884 F.2d at 120-21 (state law breach of

contract claim concerning non-administrative employer con-

duct not preempted, relying on Fort Halifax); Martori Bros., 781

F.2d at 1358-59 (state law claim concerning non-administrative

employer conduct not preempted, cited with approval in Fort

Halifax); Klank, 735 F. Supp. at 264 (state law fraud and misrep-

resentation claims concerning non-administrative employer

conduct not preempted, relying on Fort Halifax); Bricker, 450

N.W.2d at 841-42 (state law equitable estoppel claim concern-

ing non-administrative employer conduct not preempted, rely-

ing on Fort Halifax) with Consolidated Beef, 949 F.2d at 964 (state

law misrepresentation claim concerning non-administrative

employer conduct preempted); Lee v. E. 1. DuPont de Nemours

and Co., 894 F.2d 755, 758 (5th Cir. 1990) (state law fraud and

misrepresentation claims concerning non-administrative

employer conduct preempted); Lister v. Stark, 890 F.2d 941, 945

(7th Cir. 1989), cert. denied, 111 S.Ct. 579 (1990) (state law

breach of contract claim concerning non-administrative

employer conduct preempted); Jackson v. Martin Marietta Corp.,

805 F.2d 1498, 1500 (11th Cir. 1986) (claim for breach of contract

concetning non-administrative employer conduct preempted).

17 See, e.g., Memorial Hosp., 904 F.2d at 245 (first part of

two-part preemption test is whether “state law claims address

areas of exclusive federal concern”); Aetna Life Ins. Co. v.

Borges, 869 F.2d 142, 146-47 (2d Cir.), cert. denied, 493 U.S. 811

(1989) (what triggers ERISA preemption is not just any indirect

effect on administrative procedures but rather an effect on the

primary administrative functions of benefit plans); Martori

(Continued on following page)

preemption directly conflicts with this Court’s explicit

recognition in Shaw that ERISA cannot “be interpreted to

pre-empt only state laws dealing with the subject matters

covered by ERISA - reporting, disclosure, fiduciary

responsibility, and the like.” Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 98 (1983).

‘he concern that ERISA preemption will leave plain-

tiffs without a remedy tempts some courts, including

those below, to encroach upon the broad scope of ERISA

preemption using one of the Fort Halifax loopholes, not-

withstanding this Court’s clear direction to give Section

514 the full scope intended by Congress." Accordingly,

this Court should make clear that the possible absence of

a statutory remedy is not grounds to deny preemption,

but is an issue to be determined ina properly framed case

under ERISA.

(Continued from previous page)

Bros., 781 F.2d at 1357-58 (state law is preempted “if conduct

sought to be regulated . . . is ‘part of administration of an

employee benefit plan.’ ”). But see Olson v. General Dynamics

Corp., 950 F.2d 1418, 1421 (9th Cir. 1991), cert. denied, (U.S. June

15, 1992) (91-1698) (state claim may be preempted even if it

does not concern the technical aspects of plan administration).

18 See Memorial Hosp., 904 F.2d at 248 n. 16 (noting con-

flict); HealthAmerica v.,Menton, 551 So.2d 235, 244 (Ala. 1989),

cert. denied, 493 U.S. 1093 (1990) (same). Compare Hospice of

Metro Denver, 944 F.2d at 755 (lack of alternative remedies ‘n

the event of preemption should be considered as part of pre-

emption analysis); Perry v. P*I"E Nationwide, Inc., 872 F.2d 157

(6th Cir. 1989), cert. denied, 493 U.S. 1093 (1990) (no preemption

of state law claims if ERISA provides no remedy), with Smith v.

Dunham-Bush, Inc., 959 F.2d 6, 11 (2d Cir. 1992) (“preclusion of

remedy does not bar the operation of ERISA preemption’); Lee,

894 F.2d at 757 (absence of ERISA remedy is irrelevant to

preemption issue); Lister, 890 F.2d at 946 (same).

—————————eeev—o

The courts of appeals and state courts have spent

significant time and resources considering the “relate to”

standard of Section 514(a) of ERISA, yet confusion and

conflict is prevalent. Because the court below justified its

encroachment on ERISA through the use of devices that

are subject to wide-spread conflicts, this case presents an

excellent opportunity to protect the scope of ERISA pre-

emption on multiple grounds.

2. The Pennsylvania Supreme Court Erroneously Con-

strued an Important Federal Statute and Disre-

garded this Court’s Mandate For Broad Preemption

As Intended By Congress.

Lash’s Complaint alleged: (1) identifiable intended

benefits, $8.1 million worth of stock to be placed in the

ESOP; (2) a class of beneficiaries, “Eligible Employees” as

defined in the Complaint (D10-11); (3) a financing source,

the $8.1 million dollar surplus from the Pension Plan; and

(4) procedures for receiving benefits, a proposed vesting

schedule and payment schedule included as exhibits to

the Complaint. (D37-38) Accerdingly, Lash alleged the

establishment and/or existence of an ERISA benefit plan,

from which Plaintiffs seek benefits. See Donovan v. Dil-

lingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc).!9

19 See also Williams v. Wright, 927 F.2d 1540, 1543 (11th Cir.

1991); Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1452 (5th Cir.

1991); Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d 732,

738 (7th Cir. 1986), cert. denied, 482 U.S. 915 (1987); Scott v. Gulf

Oil Corp., 754 F.2d 1499, 1504 (9th Cir. 1985) (all applying

Donovan); Hollingshead v. Burford Equip. Co., 747 F. Supp. 1421,

1427 n.1 (M.D. Ala. 1990) (applying Donovan analysis to

employee pension benefit plans).

Nevertheless, the Pennsylvania court embraced

Plaintiffs’ mischaracterization of their claim as one for

breach of a “contract to form a plan,” and held it not

preempted by ERISA.?° This result is fundamentally

flawed because it sharply restricts the scope of preemp-

tion intended by Congress. Each of the three devices

employed by the court below improperly allows

encroachment upon the conspicuously broad scope of

ERISA preemption.?!

First, the court below evaded ERISA preemption by

simply allowing Lash to characterize his damages as enti-

tlement to a one-time, lump-sum payment. Lash (B12).

This device is an unwarranted extension of Fort Halifax's

holding that Maine’s severance pay statute was not pre-

empted because it created “the theoretical possibility of a

one-time obligation in the future.” Fort Halifax, 482 U.S. at

12. Moreover, the distinction elevates form over sub-

stance, since “it is no answer to a pre-emption argument

20 The Pennsylvania court also ignored the fact that ERISA

governed the termination of the Pension Plan. The eight mil-

lion dollars which are at issue could not revert to Equibank in

full until 1990, after the adoption by Congress of legislation

making certain provisions of the REA inapplicable to the Pen-

sion Plan. See Pub. Law 98-397, 98 Stat. 1426 (1984), as

amended by Pub. Law 99-514 §1145(f)(1), 100 Stat. 2491 (1986),

and 101-239 §7861(d)(i), 103 Stat. 2431 (1989).

21 In the context of the Airline Deregulation Act, this

Court recently reaffirmed that the ordinary meaning of the

“relate to” language of section 514 of ERISA “is a broad one -

‘to stand in some relation; to have bearing or concern; to

pertain; refer; to bring into association with; a connection

with.’ ” Morales v. Trans World Airlines, Inc., 112 S.Ct. 2031, 2037

(1992) (quoting, Black’s Law Dictionary 1158 (5th ed. 1979)).

———————————————

that a particular plaintiff is not seeking recovery of pen-

sion benefits.” Ingersoli-Rand, 111 S. Ct. at 486. See also

Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2d Cir. 1984)

(Among laws that are preempted are “those that provide

an alternative cause of action to employees to collect

benefits protected by ERISA.”).?? Regardless of the label

attached to the claim, Lash seeks employee benefits and

therefore his state law claims are preempted.

Second, the Pennsylvania court held that ERISA pre-

emption does not apply to a suit against a non-fiduciary.

(B11) Whether a certain state action is preempted is a

question of congressional intent, to be determined by

“the explicit statutory language and the structure and

purpose of the statute.” Ingersoll-Rand, 111 S.Ct. at 482.

There is no basis in ERISA to limit preemption of claims

that “relate to” benefit plans simply because such actions

may have been brought against non-fiduciaries. See Gib-

son v. Prudential Ins. Co. of America, 915 F.2d 414, 418 (9th

Cir. 1990). Indeed, ERISA provides a remedy in Section

902(a)(3) for misconduct by non-fiduciaries as well as

fiduciaries, suggesting that Congress structured ERISA to

regulate non-fiduciary behavior. Gibson, 915 F.2d at 417.

Furthermore, the purpose of Section 514 of ERISA was

22 Lash’s damage claims refer to an employee benefit plan

in at least two ways. First, the amount of the proposed class’

aggregate claims, $8.1 million, is measured by the reversionary

sum remaining after termination of the Pension Plan in accor-

dance with ERISA’s requirements. Second, the amount (and

even existence) of each putative class member’s potential

recovery will be measured by reference to the vesting, stock

allocation and other terms of the proposed ESOP which are

governed by ERISA.

I ———

“to ‘establish pension plan regulation as exclusively a

federal concern,’ ” Pilot Life, 481 U.S. at 45-46 (quoting

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523

(1981)), and thus, it is inconsistent with this purpose to

limit preemption to claims against plan fiduciaries. Con-

trary to the Pennsylvania Supreme Court’s decision,

therefore, ERISA preempts claims that relate to an

employee benefit plan even if the defendant is a non-

fiduciary. Gibson, 915 F.2d at 418. See also Consolidated Beef

Indus., Inc. v. New York Life Ins. Co., 949 F.2d 960, 964 (8th

Cir. 1991); Howard v. Parisian, Inc., 807 F.2d 1560, 1564

(11th Cir. 1987).

Third, the lower court also erred by limiting ERISA

preemption to claims which “concern the operation,

establishment or administration of an employee benefit

plan.” Lash (B11) Despite the suggestion of some federal

courts of appeals to the contrary, preemption is not lim-

ited to the subject matter of ERISA, such as “reporting,

disclosure, fiduciary responsibility and the like.” Shaw,

463 U.S. at 98. In reaching this conclusion, the Court in

Shaw relied upon Congress’ decision to adopt a broad

preemption provision instead of a narrow one limited to

certain ERISA-related matters. Id. A similar attempt to

limit the scope of preemption to “core” ERISA concerns

was also rejected in FMC. FMC Corp., 111 S.Ct. at 410-11

(rejecting attempt to narrow the preemptive effect of the

“deemer” clause to “core ERISA concerns’ ).

The instant case vividly illustrates the outcome-orl-

ented analysis of the preemption issue made possible by

the loopholes created in Fort Halifax. Each of the three

devices employed below impermissibly encroaches upon

the broad scope of preemption intended by Congress, and

sn een

does so in a manner which is contrary to this Court’s

other decisions construing Section 514. By reversing the

Pennsylvania Supreme Court, the limited scope of Fort

Halifax will be clarified and further erosion of the pre-

emptive sweep of Section 514 will be prevented.?5

. 3. ‘This Case Presents Iinportant and Recurring Ques-

tions of Law.

This Court should exercise its jurisdiction to correct

the Pennsylvania Supreme Court’s erroneous decision in

Lash because it and other similar federal and state appel-

late decisions encroach upon the sphere of ERISA pre-

emption, resulting in significant adverse effects for

benefit plans.

First, the various factors applied by the courts of

appeals and the Pennsylvania Supreme Court improperly

restrict the scope of Section 514(a), ERISA’s broad pre-

emption clause, reviving Senator Javits’ concern about

“endless litigation over the validity of State action that

23 The Pennsylvania Supreme Court is generally hostile to

preemption. This is not the first case in which it has ignored or

explained away contrary precedent from this Court. E.g., com-

pare Norfolk & W. Ry. v. Pennsylvania Public Utility Commission,

489 Pa. 109, 413 -A.2d 1037 (1980) with Napier v. Atlantic Coast-

line R.R., 272 U.S. 605 (1926) and compare Cummings v. National

Ry. Passenger Corp., 514 Pa. 230, 523 A.2d 338, cert. denied, 484

U.S. 852 (1987) with Andrews v. Louisville & Nashville R.R., 406

U.S. 320 (1972); Brotherhood of R.R. Trainmen v. Jacksonville Ter-

minal Corp., 394 U.S. 369 (1969); and Union Pacific R.R. v. Price,

360 U.S. 601 (1959).

might impinge on Federal regulation. ** The reluctance of

lower courts to enforce the proper scope of the “relate to”

standard invites precisely the type of endless litigation

that ERISA’s drafters sought to preclude

Second, central to Congress’ efforts in drafting the

broad preemption provision was the goal of achieving

federally uniform regulation of employee benefit plans.?°

Congress believed that by preempting the field, it had

achieved its goals of encouraging employers to establish

benefit plans and of protecting benefit plan participants

and beneficiaries from encroachments on their plans by

eliminating the threat of conflicting and inconsistent state

24 Senator Javits, one of the architects of ERISA, explained

that Congress viewed earlier versions of House and Senate

bills defining the perimeters of preemption in relation to the

areas regulated by ERISA as problematic since “Is]uch a for-

mulation raised the possibility of endless litigation over the

validity of State action that might impinge on Federal regula-

tion, as well as opening the door to multiple and potentially

conflicting State laws hastily contrived to deal with some par-

ticular aspect of private welfare or pension benefit plans not

clearly connected to the Federal regulatory scheme.” 120 Cong.

Rec. 29942 (1974). To prevent this from occurring, Congress

deliberately made the preemption provisions expansive in

scope. Pilot Life, 481 U.S. at 46.

25 See 120 Cong. Rec. 29942 (1974) (statement of Senator

Javits) (“[T]he emergence of a comprehensive and pervasive

Federal interest and the interests of uniformity with respect to

interstate plans required - but for certain exceptions - the

displacement of State action in the field of private employee

benefit programs”) and 120 Cong. Rec. 29933 (1974) (statement

of Sen. Harrison Williams, Jr.) (preemption of the field

intended to apply in its broadest sense with only the excep-

tions specified in the act).

and local regulation. The state and federal courts, using

Fort Halifax as a rationale for narrowing ERISA preemp-

tion, undercut Congress’ goals and require courts to

engage in a case-by-case, outcome-oriented analysis that

results in the application of conflicting and inconsistent

state laws to employee benefit plans.

Third, despite the “considerable guidance” provided

by this Court as to the scope of ERISA preemption, “the

issue of whether a particular state law, applied in a

particular factual situation ‘relates to’ an ERISA plan

continues to plague the lower courts.” Memorial Hosp.

Sys. v. Northbrook Ins. Co., 904 F.2d 236, 244 (Sth Cir. 1990).

See also HealthAmerica v. Menton, 551 So. 2d 235, 241

(1989), cert. denied, 493 U.S. 1093 (1990) (White and

O’Connor, JJ., dissenting) (“Courts nationwide continue

to struggle with ERISA preemption issues occasioned by

the ‘relate to’ language of Section 514(a).”). The decision

of the Pennsylvania Supreme Court reflects the continu-

ing confusion over the appropriate analysis on the “relate

to”-issue and will, in fact, add to that confusion, resulting

in a narrowing of the conspicuously broad preemption

intended by Congress.

26 See Staff of Senate Comm. on Labor and Public Welfare,

94th Cong. 2d Sess., Legislative History of ERISA 4670 (Comm.

Print 1976) (statement of U.S. Rep. John Dent) (“I wish to make

note of what is to many the crowning achievement of this

legislation, the reservation to Federal authority the sole power

to regulate the field of employee benefit plans. With the pre-

emption of the field, we round out the protection afforded

participants by eliminating the threat of conflicting and incon-

sistent state and local regulation.”)

The numerous conflicting decisions by the federal

and state courts considering the “relate to” issue illus-

trate the need for guidance on this critical issue. See, e.g.,

Arkansas Blue Cross and Blue Shield v. St. Mary’s Hosp., Inc.,

947 F.2d 1341, 1344-45 (8th Cir. 1991), cert. denied, 112

S.Ct. 2305 (1992) (collecting factors); Aetna Life Ins. Co. v.

Borges, 869 F.2d 142, 145-46 (2d Cir.); cert. denied, 493 U.S.

811 (1989) (summarizing the status of “relate to” jurispru-

dence). In light of the increasing number of ERISA cases

being filed in the federal courts,” resolution of the scope

of Section 514(a), the threshold issue of preemption, pre-

sents a question ripe for review by this Court.

27 ERISA cases constitute a substantial and increasing por-

tion of the federal dockets. In the 12-month periods ending

June 30, 1990 and 1991, the number of new ERISA actions rose

13.7%, from 8,441 to 9,595. Virtually all of those cases were

private civil actions. ERISA cases accounted for 3.9% and 4.6%

respectively, of all civil actions commenced during those two

periods. 1991 Admin. Office of U.S. Courts Annual Report at

191. No statistics have been located concerning the number of

cases filed in the state courts under the concurrent jurisdiction

provision, nor is it known how many times courts, in cases like

Lash, have improperly rejected ERISA preemption.

—caeeeenne iii.

CONCLUSION

For the foregoing reasons, a writ of certiorari should

issue to the Supreme Court of Pennsylvania.

July 14, 1992

Of Counsel:

James R. Manion, III, Esq.

RICHARD J. KLEIN, Esq.

Equibank

Two Oliver Plaza

Pittsburgh, PA 15222-2705

Respectfully submitted,

H. WooprurrF TURNER

JoserH C. Swain, Jr.

CHARLES KELLY

Patrick J. McELHiNNY

KIRKPATRICK & LOCKHART

1500 Oliver Building

Pittsburgh, PA 15222

(412) 355-6500

Attorneys for Petitioners,

Eguibank and Equimark

Corporation

APPENDIX A

[J-91 OF 1992]

IN THE SUPREME COURT OF PENNSYLVANIA

Western District

JAMES W. LASH,

individually and on

behalf of other

Equibank employees

and former employees

similarly situated

EQUIBANK, a

Pennsylvania Banking

Institution, and

EQUIMARK

CORPORATION, a

Delaware Corporation,

Appellants

PER CURIAM:

Order affirmed.

No. 22 W. D.

Appeal Dkt. 1991

Appeal from Order of

Superior Court entered

September 18, 1989, at No.

128 Pittsburgh 1989,

Reversing Order of Court of

Common Pleas of Allegheny

County, Civil Division,

entered January 12, 1989, at

No. GD 88-19416, and

Remanding Case

Argued: March 11, 1992

ORDER

FILED: APRIL 16, 1992

JUDGMENT ENTERED THIS 16TH DAY OF APRIL, 1992.

/s/ Irma T. Gardner

Irma T. Gardner, Deputy Prothonotary

APPENDIX B

SUPERIOR COURT OF PENNSYLVANIA

PITTSBURGH DISTRICT

James W. Lash etc.,

Appellants

No. 128 Pittsburgh 1989

Equibank, etc.

ORDER

AND NOW, this 18th day of September , 1989, it is

ordered as follows:

Order affirmed.

X Ordered reversed. Case Remanded. Jurisdiction

Relinquished.

Judgment affirmed.

Judgment of Sentence affirmed.

Judgment of Sentence reversed.

Order vacated and lower court directed to pro-

ceed in accordance with opinion filed herewith.

Order modified as set forth in opinion filed

herewith.

Costs to be taxed as provided by Chapter 27 of

the Pa.R.A.P.

Costs to be taxed as provided in opinion filed

herewith.

Appeal quashed.

BY THE COURT

/s/ Eleanor R. Valecko

DEPUTY PROTHONOTARY

JAMES W. LASH, -IN THE SUPERIOR

INDIVIDUALLY AND ON COURT OF

BEHALF OF OTHER EQUIBANK: PENNSYLVANIA

EMPLOYEES AND FORMER

EMPLOYEES SIMILARLY

SITUATED

Appellants

EQUIBANK, A PENNSYLVANIA :

BANKING INSTITUTION, AND :

EQUIMARK CORPORATION, A : No. 00128

DELAWARE CORPORATION : Pittsburgh 1989

Appeal from the Order Dated January 12, 1989

in the Court of Common Pleas of Allegheny

County, Civil No. GD 88-19416.

BEFORE: CIRILLO, PJ., and JOHNSON and HESTER, JJ.

MEMORANDUM: FILED: September 18, 1989

This is an appeal from the order of the Court of

Common Pleas of Allegheny County dismissing appellant

James W. Lash’s complaint following preliminary objec-

tions. We reverse.

Lash was an employee of Equibank, a wholly owned

subsidiary of Equimark Corporation. While employed by

Equibank, Lash was a participant in the Equimark Corpo-

ration Retirement Plan [“the Plan”]. The Plan was termi-

nated at the end of November, 1984. Shortly before the

Plan was to end, Equibank sent a letter to its employees

concerning the Plan’s termination, and announcing its

intention to create an employee stock ownership plan

(ESOP) with some 8.1 million dollars in surplus funds

from the Plan. A second document, entitled, “Equibank

Compensation Program Changes,” was distributed to the

employees before the termination date and gave a general

description of the proposed plan. Two other documents

were sent out, entitled, “Commonly Asked Questions,”

and “Compensation Program Changes At A Glance,”

both of which dealt with the terms and operations of the

proposed plan.

No employee benefit plan ever materialized, how-

ever. Equibank and Equimark Corporation failed to take

any steps to obtain shareholder or regulatory approval,

actions which were necessary to the implementation of

any plan. Lash filed a four count class action complaint

on behalf of himself and other persons similarly situated

against both Equibank and Equimark in the court of

common pleas, contending the following:

COUNT I. STATING A CLAIM AGAINST

EQUIBANK FOR BREACH OF CONTRACT

34. Defendant Equibank contracted with its

Eligible Employees after Defendants withdrew

$8.1 million from the Plan which had previously

been maintained for the benefit of Equibank

employees to set aside approximately 3,000,000

shares of Equimark stock, having a value of

approximately $8.1 million dollars to be

allocated to Eligible Employees who worked at

year end in 1984 and thereafter in 1985 and

1986.

35. Defendant Equibank failed to pay Eligible

Employees approximately 3,000,000 shares of

Equimark common stock, nor did either Defen-

dant make any effort alternately, a good faith

attempt or any reasonable effort to obtain the

necessary approval to provide Eligibie

Employees the ESOP plan.

* * *

COUNT II. STATING A CLAIM AGAINST

DEFENDANT EQUIBANK FOR BREACH OF

THE DUTY OF GOOD FAITH AND FAIR

DEALING IMPLIED IN THE NOVEMBER 8,

1984 CONTRACT WITH THE CLASS MEMBERS

38. The November 8, 1984 contract to pay Eli-

gible Employees approximately 3,000,000 shares

of Equimark common stock contained an

implied duty of good faith and fair dealing.

39. Defendant’s failure to act in good faith or

to take any steps (or alternatively) to obtain

shareholder and regulatory approvals breached

its duty of good faith and fair dealing.

* t *

COUNT Ill. STATING A CLAIM AGAINST

BOTH DEFENDANTS FOR UNJUST ENRICH-

MENT

42. Defendants’ use of some or all of the Equi-

mark stock that was to be distributed to Plain-

tiffs results in the unjust enrichment of

Defendants, including certain of Defendants’

senior management that would not have been

entitled to participate in the ESOP plan.

* + +

COUNT IV. STATING A CLAIM AGAINST

BOTH DEFENDANTS FOR CONSTRUCTIVE

TRUST

45. Defendants are in a fiduciary or other spe-

cial relationship with respect to Eligible

Employees like Plaintiff Lash with whom Equi-

bank and Equimark, through its control of Equi-

bank, made a commitment on November 8, 1984

to set aside and pay 3,000,000 shares of Equi-

mark common stock in exchange for continued

employment. This fiduciary or special relation-

ship existed as a result of Defendants’ taking of

funds from the Eligible Employees’ Pension

funds, and simultaneously promising to use said

funds exclusively for the Eligible Employees’

benefits in exchange for their continued employ-

ment on dates certain at year end 1984, 1985,

and 1986.

46. Defendants, as fiduciaries, are responsible

for paying Plaintiffs the 3,000,000 shares of

Equibank stock in accordance with Equibank’s

November 8, 1984, commitment.

47. Defendants’ failure to pay Plaintiffs

approximately 3,000,000 shares of common stock

is a breach of their-fiduciary duties, which gives

rise to the need for a constructive trust over the

3,000,000 shares of Equimark stock for the bene-

fit of Plaintiffs.

Lash requested damages for those employees who failed

to receive their pro rata share of the stock, along with

retroactive dividends, pre-judgment interest, and the

costs of the suit along with an accounting.

Equibank and Equimark filed preliminary objections,

arguing, among other things, that the complaint should

be stricken because the Employee Retirement Security

Act of 1974 (ERISA), 29 U.S.C. § 1001, et seqg., had pre-

empted state law claims. The trial court granted the pre-

liminary objections, and struck the complaint on the basis

that it did not have subject matter jurisdiction over the

claims at issue. According to the trial court, “The ques-

tion raised is not, as contended for by the plaintiff,

whether the defendants failed to pay a benefit provided

for in the plan, but is whether Equibank had in place an

ESOP employee benefit plan. .. .” The court determined

that this question was one which could only be decided

by the federal courts, and dismissed the complaint for

lack of subject matter jurisdiction.

On appeal, Lash argues the following three issues:

1. Whether state courts have jurisdiction to

determine the existence of an employce benefit

plan for purposes of resolving whether there is

preemption under ERISA?

>? Whether state common law claims based on

promises by an employer to establish an

employee benefit plan, which promise was

never carried out, are pre-empted by ERISA?

3. Whether a state court is obligated, if it finds

that state common law claims are preempted

because they relate to any employee benefit plan

with the meaning of ERISA, to determine

whether benefits are due employees under the

purported employee benefit plan, pursuant to

the state court’s concurrent jurisdiction under 29

U.S.C. § 1132(e)(1)?

We must first consider whether the trial court was

correct in holding that it had no subject matter jurisdic-

tion over the instant claim. In matters involving ERISA,

concurrent jurisdiction is granted to state courts over civil

actions brought by a participant in or a beneficiary of a

plan to recover benefits due him or her under the terms

of the plan, to enforce his or her rights under the plan, or

to clarify his or her rights to future benefits under the

plan. See 29 U.S.C. § 1132(a)(1)(B). Here, Lash argues that

state courts must have concurrent jurisdiction along with

federal courts to determine the existence of employee

benefit plans. Lash contends that to the extent the resolu-

tion of a claim for benefits under a plan necessarily

entails the determination that there is a plan in existence,

state courts must have the ability to determine that there.

is in fact a plan. We need not decide this point, however,

for we find that there is no need to determine whether or

not a plan existed in order to determine whether or not

Lash’s complaints have been pre-empted by ERISA.

Therefore, we find that the trial court erred in determin-

ing that it had no subject matter jurisdiction in this case.

Lash did not bring this action for an enforcement,

clarification, or recovery of benefits under an existing

plan; section 1132 therefore does not apply here. In his

brief, Lash agrees with the trial court’s statement that the

existence of a plan must be determined before resolving

the question of whether or not the issues raised here are

pre-empted by ERISA. This, however, was not the thrust

of his complaint. He argued there, not that the documents

handed out by Equibank were themselves an employee

benefit plan, but rather that they constituted a contract to

provide such a plan, and that Equibank in failing to

create a plan, breached its contract with its employees.

Both parties agree that there was no employee benefit

plan in existence; therefore, there is no need for this or

any other court to determine whether or not a plan exis-

ted. We find, therefore, that the trial court erred in dis-

missing the complaint for lack of subject matter

jurisdiction. See Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th

Cir. 1985) (“a mere allegation that an employer or

employee organization ultimately decided to provide an

employee welfare benefit is not enough to invoke ERISA’s

coverage. .. . Such an allegation fails to allege the “estab-

lishment” of a plan”); cf. Childers v. Northwest Airlines,

Inc., 688 F.Supp. 1357 (D.Minn. 1988) (“Plaintiffs do not

contend that Republic breached its contract with plain-

tiffs, or fraudulently induced them to agree to wage

concessions because it failed to establish ESOPs or

refused to give them the stock to which they were enti-

tled under the terms of the ESOPs. Rather, the essence of

their claim is that Republic breached its contract and

fraudulently induced them to agree to wage concessions

by failing to adopt plan requirements that would ensure

equal participation in the ESOPs by all Republic

employees. Such claims are “related to” a plan regulated

by ERISA ... °).

The question before us, then, is whether or not the

claims presented by Lash are pre-empted by ERISA.

ERISA was enacted to protect the interests of participants

in employee benefit plans. See 29 U.S.C. § 1001. A broad

pre-emption section was included in the statute to pro-

vide employers the advantages of a uniform set of admin-

istrative procedures for these plans governed by a single

set of regulations unaffected by state and local rules. See

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, ___, 96 L.Ed.

2d 1, 11 (1987)! Section 1144 provides that “the provisions

1 It must be stressed that with the narrow exceptions

specified in the bill, the substantive and enforcement

provisions of the conference substitute are intended

to preempt the field for Federal regulations, thus

eliminating the threat of conflicting or inconsistent

State and local regulation of employee benefit plans.

(Continued on following page)

of this subchapter and subchapter III of this chapter shall

supersede any and all State laws insofar as they may now

or hereafter relate to any employee benefit plan described

in section 1003(a) of this title, and not exempt under

section 1003(b). .. . ” 29 U.S.C. § 1144(a). The Supreme

Court has held that the phrase, “relates to,” is to be given

broad*construction; a law relates to an employee benefit

plan, in the normal sense of the phrase, if it has a connec-

tion with or reference to such a plan:

Congress intended pre-emption to afford

employers the advantages of a uniform set of

administrative procedures governed by a single

set of regulations. This concern only arises,

however, with respect to benefits whose provi-

sion by nature requires an ongoing administrative

program to meet the employer's obligation.

Fort Halifax, 482 U.S. at __, 96 L.Ed. 2d at 11 (emphasis

added); see also Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

96-98 (1983). Common law causes of action as well as

statutory law will be preempted under ERISA if they

arise from the administration of such plans. Pre-emption

of state law depends upon the conduct to which state law

is applied. See Scott, 754 F.2d at 1504; see also Jackson v.

Martin Marietta Corp., 805 F.2d 1498, 1499 (11th Cir. 1986)

(Continued from previous page)

Statement by Hon. Harrison A. Williams, Jr., Chairmam of the

Senate Committee on Labor and Public Welfare, upon. introduc-

ing the conference report on H.R. 2, August 22, 1974 in 3

Congressional and Administrative News, 93rd Cong. 2nd Sess., at

5188.

B10

(change in pension service date directly affected adminis-

tration of plan so that action was not too tenuous, remote

or peripheral to warrant pre-emption under ERISA).

In this case, a reading of the complaint leads us to the

conclusion that the claims are not pre-empted by ERISA.

All of Lash’s claims surround the allegation that there

was a contract to set aside stock for eligible employees -

‘n other words, that there was a contract to form a plan.

Lash does not allege that the contract was the plan itself.

This is somewhat similar to Scott v. Gulf Oil Corp., supra.

In Scott, former employees of Gulf Oil Corporation

brought suit against Gulf on state law contract and tort

claims. The employees alleged that Gulf improperly

negotiated with Thrifty Oil Corporation, their current

employer, to hire them on terms of employment less

favorable than they had enjoyed with Gulf. Further, they

alleged that Gulf had promised to pay them severance

pay, and had failed to do so. The district court found that

all claims were pre-empted by ERISA; the Court of

Appeals for the Ninth Circuit reversed in part, finding

that those claims involving prospective benefits were not

preempted:

The claim for prospective benefits does not

allege the denial of benefits under a benefit

plan; rather it alleges that Gulf’s tortious actions

prevented the existence of such a plan in plain-

tiff’s employment with Thrifty. It does not allege

the violation of duties created by any welfare

plan; rather, it alleges the violation of Gulf’s

duties as a past employer. The conduct giving

rise to the claim was the negotiation of an

employment contract which prevented the exis-

tence of an employee benefit plan. The claim

B11

does not raise any issues concerning the matters

regulated by ERISA, namely, the administration,

reporting, disclosure, funding, vesting, and

enforcement of benefit plans.

Scott, 754 F.2d at 1505.

The same holds true for the case before us. Lash does

not allege the violation of duties created by any employee

benefit plan. The conduct which gives rise to his claims

here is Equibank’s broken promise to create a plan. It

cannot be said that Lash’s state law claims “relate to” any

employee benefit plan in the Supreme Court’s interpreta-

tion of that phrase. Disposition of the claims made here

do not in any way concern the operation, establishment,

or administration of an employee benefit plan. “Like

promises for a raise in salary, a promotion, or the use of

tickets to a baseball game, plaintiff’s employer’s promise

to provide plaintiff with certain benefits at some

unknown time in the future, upon which plaintiff could

reasonably rely, is the essence of the [claim] alleged.”

Greenblatt v. The Budd Co., 666 F.Supp. 735 (E.D.Pa. 1987)

(action underlying complaint was that plaintiff had been

deceived by verbal statements and actions of employer;

fact that subject of statements was pension benefits was

only incidental, and not essential to cause of action).

Further, we note that the claims made here are not made

against Equimark or Equibank as fiduciaries of any pro-

posed plan, but rather are made against them as past

employers. See id. at __ (determination that count does

not relate to plan supported by fact that misrepresenta-

tions were made by plaintiff’s superiors as employers in

ordinary course of business, not as plan fiduciaries in

course of administering pension plan).

B12

Equibank and Equimark argue that the causes of

action outlined in Lash’s complaint relate to an employee

benefit plan because if recovery were won, the damages

requested would force the creation of a plan. We disagree.

The complaint does not require the payment of damages

out of an ESOP, or that 3,000,000 shares of stock be

delivered to plaintiffs in the class. The complaint merely

requests that if defendants are found to be liable, the

plaintiff class receives the benefit of its bargain, the

equivalent of 3,000,000 shares of stock. The remedies of

an accounting and a constructive trust are, in Lash’s view,

necessary tools to ensure that result. This does not

require Equibank to set up or administer an ongoing

employee stock ownership plan. See Martori Bros. Distrib-

utors v. James-Massengale, 781 F.2d 1349 (9th Cir. 1986),

amended, 791 F.2d 799, ___ (9th Cir. 1986) (“It is difficult to

see how the making of one-time lump sum payments

could constitute the establishment of a plan. . . . [A]

“make-whole remedy is an award of damages designed to

put workers in the same economic position they would

have been had their employer bargained in good faith”);

cf. Greenblatt, supra (compensatory damages would be

paid directly by the employer, not by pension fund).

Thus, we reverse the trial court’s order granting

appellees’ preliminary objections and dismissing Lash’s

complaint. We conclude that Lash’s claims are not pre-

empted by ERISA, because they do not “relate to” an

employee benefit plan. In addition, because we find that

Lash’s claims are not pre-empted by ERISA, we need not

address Lash’s final claim. We remand this matter for a

determination of whether a contract to form a plan exis-

ted between the parties. Reversed and remanded. Juris-

diction is relinquished.

—————— eevee

APPENDIX C

JIN THE COURT OF COMMON PLEAS OF

ALLEGHENY COUNTY, PENNSYLVANIA

JAMES W. LASH,

Individually

and on behalf of other

Equibank employees and

former employees

similarly situated,

Plaintiff,

EQUIBANK, A Pennsylvania

Banking, Institution, and

EQUIMARK CORPORATION,

a Delaware Corporation,

Defendants.

CIVIL DIVISION

CLASS ACTION

No. GD88-19416

Issue No.

Code

OPINION AND

ORDER

PRELIMINARY

OBJECTION OF

DEFENDANTS

SUSTAINED

AND COMPLAINT

OF PLAINTIFF

DISMISSED WITH

PREJUDICE

Filed by

HONORABLE

SILVESTRI

JUDGE

January 12, 1989

Copies to

Michael P.

Malakoff, Esq.

Edward C.

Schmidt, Esq.

OPINION

SILVESTRI, J.

The plaintiff, James W. Lash, filed this four-count

civil action as a class action against Equibank and Equi-

mark Corporation.

The defendants filed preliminary objections to all

four counts in the nature of a motion to strike by reason

of lack of subject matter jurisdiction. The defendants also

filed a preliminary objection to each of the four counts in

the nature of a demurrer.

When passing upon a preliminary objection which

raises a question of subject matter jurisdiction or the

sufficiency of the facts pleaded to state a cause of action,

we accept all the well-pleaded material facts in the com-

plaint as well as inferences reasonably deducible there-

from as true, but not any conclusions of law. Zartman v.

Lehigh County Humane Soc., 333 Pa. Super. 245, 482 A.2d

266 (1984); Desantis v. Swigart, 296 Pa. Super. 283, 442

A.2d 770 (1982).

With the foregoing standard applied to the complaint

of Lash herein, the following facts are deemed to be

established. Lash is a former Equibank employee having

been employed with Equibank from October 1, 1956

through January 31, 1986. Equibank is a wholly owned

subsidiary of Equimark. Lash was, during the course of

his employment with Equibank, a participant in the Equi-

mark Corporation Retirement Plan. The said Plan was in

effect from 1968 until November 30, 1984 at which time

the said retirement plan was terminated.

By letter, dated November 8, 1984 from Equibank to

all eligible employees (Exhibit A to the complaint), Equi-

bank notified its employees, as herein relevant, as fol-

lows:

(a) ...Wwe’re planning to make several changes

to your benefit program. These changes

will give you part ownership in the bank’s

parent company.

(b) Effective November 30, 1984, the Equimark

Corporation Retirement Plan will be termi-

nated.

will become available and will be used to

increase Our primary capital by approx-

imately $8 million.

(d) Equimark Corporation Common Stock (at

$2.68 per share), with a value identical to

the retirement plan surplus, will be set

aside for employees through an Employee

Stock Ownership Plan (ESOP).

(e) This plan is being created to provide all

full-time and disabled employees and regu-

lar party-tiime [sic] (Code 20) employees

with a windfall benefit equal to approx-

imately 3 million shares of Equimark stock.

(f) Your ESOP benefit will be paid to you in

stock or cash at retirement or termination. !

' The letter stated that the benefits earned through

November 30, 1984 under the present Retirement Plan will be

guaranteed by way of an insurance annuity whether or not

vested under the Plan.

Equibank, at a date not specified in the complaint,

but after its November 8, 1984 letter and before Novem-

ber 30, 1984, distributed to its employees a document

entitled “Equibank Compensation Program Changes”

(Exhibit B to the complaint). This doc ument consists of

six (6) pages and several headings, and, as herein rele-

vant, sets forth the following.

Under the heading “We’re Ending the Present Retire-

ment Plan... But You'll Keep What You’ve Earned and

Get More... ” it is stated:

(a) The present Equimark Corporation Retire

ment Plan is being terminated on Novem

ber 30.

(b) We’ll have a new plan in place on January

1, 1985 through an improvement to the Sav-

ings Plus Plan.

earning retirement benefits in a new plan.

Under the heading “You Get A Stake In Equibank’”, it

is stated:

(a) Surplus finds in the retirement plan

(approximately $8 million) will be returned

to Equibank as primary capital.

(b) The bank will then fund an Employee Stock

Ownership Plan, or ESOP, with approx-

imately 3 million shares of Equimark stock

(at $2.68 per share) equal to the surplus in

the retirement plan.

receive a windfall benefit through the

ESOP.

(d) The ESOP is effective, retroactively, to Janu-

ary 1, 1984.

Under the heading “You’re Eligible for ESOP if... ”,

it is stated:

(a) You’re eligible for an ESOP contribution if

you are a full-time active or disabled

employee or a regular part-time (Code 20)

employee.

(b) You do not have to enroll in the plan.

eligible.

Under the heading “Your ESOP Works Like

This... ”, it is set forth .

(a) The ESOP contributions will be allocated to

eligible employees over a three-year

period: 1984, 1985 and 1986. |

(b) At the end of each calendar year, the bank

will make a contribution to the ESOP

account of each eligible employee.

Equimark stock issued for use only in the

ESOP.

(d) The stock will be held in an account estab-

lished in your name.

(e) Any dividends paid on the stock will be

automatically invested in more stock.

(f) There is then set forth a formula to deter-

mine the amount of stock Equibank will

contribute to each eligible employee each

year.

Under the heading “You Can Get Your Money When

You Retire”, it is set forth,

(a) When you retire, you can take your ESOP

account in the form of Equimark stock or

cash.

Then there follows a continuing heading to the above

Or Even Earlier”, wherein it is stated:

(a) Under the ESOP, if you are vested, you

receive your payout from the plan soon

after you leave the bank.

(b) Upon your death, if vested, your account

will be paid to your beneficiary.

become totally disabled and unable to work

the bank will make contributions to your

ESOP account based on your salary at the

time of disability.

Under the heading “You're Fully Vested In The ESOP

After Five Years”, it is stated:

(a) Your past service as a member of the old

retirement plan will count in determining

when you become vested in the ESOP.

(b) If you’ve already earned 5 years of service

under the retirement plan, you ‘Il be fully

vested in the ESOP.

“———

~~"

40% vesting occurs after 2 years service,

60% after 3 years, 80% after 4 years and

100% after 5 years.

Under the heading “Enroll Later This Month,” which

appears following that part of the “Compensation Pro-

gram Changes” entitled “Your Savings Plus Plan Is Now

the Employee Savings and Retirement Plan”, it is pro-

vided

(a) You will also receive, later on, more

detailed descriptions of all these plans that

you can put in your Equibank Employee

Handbook.

(b) Remember, this information provides high-

lights only.

erned by the official pian documents, which are

available for your inspection in the Human

Resources Department. (emphasis ours)

(d) The ESOP will become effective only if

shareholder and regulatory approvals are

received early next year.

(e) In the event any questions arise about the

plans, the official plan documents will govern.

(emphasis ours).

The ESOP plan, as set forth in Exhibit B to the com-

plaint, is one part of the document entitled “Equibank

Compensation Program Changes”. The document also

detailed an Employee Savings and Retirement Plan.

In addition to the foregoing letter of November 8,

1984 and the “Compensation Program Changes”, Equi-

bank distributed to is employees two (2) other docu-

ments: one entitled “Commonly Asked Questions” and

“Compensation Program Changes At A Glance”, being

Exhibits C and D, respectively, to the complaint. Both

documents relate to the terms and operation of the ESOP

plan and the Employee Savings and Retirement Plan,

summarizing the terms and operation of each.

' '

Neither Equibank nor Equimark attempted to obtain

either shareholder or regulatory approval.

It is alleged that Equibank failed to provide to eligi-

ble employees their shares of Equimark stock as provided

for in the ESOP plan as hereinabove set forth.

Lash in Count I against Equibank predicates his

claim on the theory of a contract between Equibank and

the eligible employees which Equibank breached and

seeks damages sustained by reason of the eligible

employees not having received their pro rata share of

three million shares of Equimark stock.

In Count II Against Equibank the claim is based on

the conclusory assertion that Equibank breached its duty

of good faith and fair dealing by failing “to take any steps

(or alternatively, reasonable steps) to obtain shareholder

and regulatory approvals” and seeks damages sustained

by reason of the eligible employees not having received

their pro rata share of three million shares of Equimark

stock.

In Count III against both Equibank and Equimark,

the claim asserts a conclusion that “Defendants’ use of

some or all of the stock that was to be distributed to

Plaintiffs results in unjust enrichment of Defen-

dants,...” In this Count, the plaintiff seeks an account-

ing and damages sustained by reason of the eligibie

employees not having received their pro rata share of

three million shares of Equimark stock.

Count IV against Equibank and Equimark is

grounded on the claim that defendants made a commit-

ment on November 8, 1984 to set aside and pay three

million shares of Equimark stock in exchange for contin-

ued employment. This created a fiduciary or special rela-

tionship and as fiduciaries defendants are responsible for

paying plaintiffs three million shares of Equimark stock

(erroneously referred to as Equibank in paragraph 46 of

plaintiff's complaint) and the failure of the defendants to

do so is a breach of their fiduciary duty, giving rise to a

need for a constructive trust. Plaintiff seeks an accounting

and damages sustained by reason of the eligible

_employees not having received their pro rata share of

three million shares of Equimark stock.

Stripping the plaintiff's complaint of its convoluted

verbiage, the claim of the plaintiff, individually and as

representative plaintiff, is that there existed a valid bind-

ing contract between Equibank and the eligible

employees, as defined, for Equibank to fund an ESOP

plan as hereinabove set forth, which it and Equimark

failed to do and that Equibank and Equimark are now

liable to pay to each eligible employee their pro rata

share of three million shares of Equimark stock.

In opposition to defendants’ subject matter jurisdic-

tion preliminary objection, the plaintiff claims it is only

seeking a benefit under an established plan over which

concurrent jurisdiction is given to the district courts of

the United States and the State courts.?

The question raised is not, as contended for by the

plaintiff, whether the defendants failed to pay a benefit

provided for in an established in-place employee benefit

2 29 U.S.C. 1132(e)(1)

C10

plan, but is whether Equibank had in-place an ESOP

employee benefit plan as hereinabove set forth

The Employee Retirement Income Security Act

(ERISA)? was enacted after Congress found4, inter alia,

that employee benefit pans had grown in size, scope and

numbers and that the continued well-being and security

of millions of employees and their dependants, are

directly affected by these plans and that they are affected

with a national public interest, and that it is desirable, in

the interest of employees and their beneficiaries and to

provide for the general welfare and the free flow of

commerce, that disclosure by made and safeguards be pro-

vided with respect to the establishment, operation and adminis-

tration of such plans. (emphasis ours)

Congress then declared the policy of ERISA was to,

inter alia, protect the interest of participants in employee

benefit plans and their beneficiaries and by providing for

appropriate remedies, sanctions, and ready access to the

Federal courts.

In Donovan v. Dillingham, 688 F.2d 1367 (1982) the

Secretary of Labor, pursuant to his authority under

ERISA, sued Trustees of an insurance trust on the basis

they were fiduciaries subject to the fiduciary respon-

sibility provisions contained in Part 4 of Title | of ERISA

The court stated, initially:

Fiduciary duties under ERISA, however, arise

only if there are employee benefit plans as

defined by the Act.

3 29 U.S.C. 1001, et seq.

429 U.S.C. 1001(a)

C11

The Court then went on to determine whether or not

there was in existence a plan and set forth criteria for

making the determination which for our purposes are not

herein relevant.

Here, as in Dillingham, in order to determine if Lash, and

those similarly situated, are entitled to the claimed benefit, it

must first be determined whether there was in existence an

employee benefit plan establishing an ESOP. This is not to be

determined by State breach of contract law, nor breaching an

implied duty of good faith and fair dealing between parties

to a contract, nor implying a contract under a theory of

unjust enrichment or constructive trust.

The determination of the existence of an employee bene-

fit plan has been given exclusively to the district courts of

the United States.5 Accordingly, we dismiss the complaint of

the plaintiff for lack of subject matter jurisdiction.

ORDER

SILVESTRI, J.

AND NOW, this 12 day of January, 1989, after argu-

ment, consideration of the briefs of the parties and a

review of the record, the preliminary objection of the

defendants in the nature of a motion to strike for lack of

subject matter jurisdiction is sustained and the complaint

of the plaintiff is dismissed with prejudice.

BY THE COURT,

/s/ Silvestri, J.

5 29 U.S.C. §1132(a) and (e)(1)

APPENDIX D

IN THE COURT OF COMMON PLEAS

OF ALLEGHENY COUNTY, PENNSYLVANIA

CIVIL DIVISION

JAMES W. LASH,

individually and on behalf

of other Equibank

employees and former

employees similarly

situated,

Plaintiffs,

Vv.

EQUIBANK, a

Pennsylvania Banking

Institution, and

EQUIMARK

CORPORATION, a

Delaware Corporation,

Defendants.

(Filed Nov. 7, 1988

Prothonotary

Allegheny County)

NO. GD88 19416

CLASS ACTION

COMPLAINT IN CIVIL

ACTION

CODE NO.: 011

ISSUE NO.: Contract,

Multiple Civil Action

JURY TRIAL DEMANDED

Filed on behalf of Plaintiff

James W. Lash

Counsel of Record for this

Party:

Michael P. Malakoff,

Esquire

Pa. I.D. 11048

Fred S. Longer, Esquire

Pa. 1.D. 46653

BERGER KAPETAN

MALAKOFF & MEYERS,

508 Law and Finance

Building

Pittsburgh, PA 15219

(412) 281-4200

Attorneys for the

Representative Plaintiff

James W. Lash and Class

Plaintiffs

NOTICE TO DEFEND

YOU HAVE BEEN SUED in court. IF YOU WISH TO

DEFEND against the claims set forth in the following

pages, YOU MUST TAKE ACTION WITHIN TWENTY

(20) DAYS after this complaint and notice are served, by

entering a written appearance personally or by attorney

and filing in writing with the court your defenses or

objections to the claims set forth against you. You are

warned that IF YOU FAIL to do so, the case may proceed

without you and A JUDGMENT may be entered against

you by the court without further notice for any money

claimed in the complaint or for any claim or relief

requested by the plaintiff. YOU MAY LOSE MONEY OR

PROPERTY or other rights important to you.

YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER

AT ONCE. IF YOU DO NOT HAVE OR KNOW A LAW-

YER, THEN YOU SHOULD GO TO OR TELEPHONE

THE OFFICE SET FORTH BELOW TO FIND OUT

WHERE YOU CAN GET LEGAL HELP:

LAWYER REFERRAL SERVICE

The Allegheny County Bar Association

920 City-County Building

Pittsburgh, Pennsylvania 15219

Telephone: 412-261-0518

CLASS ACTION COMPLAINT

AND NOW comes the representative Plaintiff, James

W. Lash, individually, and on behalf of all other Equibank

employees and former employees similarly situated

(hereafter the “Eligible Employees”), by and through

their Counsel, Berger Kapetan Malakoff & Meyers, P.C.,

and for their claims against Defendants Equibank and

Equimark Corporation [“Equimark”] allege and state the

following:

PRELIMINARY STATEMENT

1. This is a class action brought by the representa-

tive Plaintiff, James W. Lash, to recover damages against

Defendants, Equibank and Equimark, for breaching and/

or causing the breach of a contract made with Eligible

Employees to pay them 3,000,000 shares of Equimark

common stock through an Employee Stock Ownership

Plan (“ESOP”). In addition, Equibank and Equimark are

sued for unjust enrichment and as constructive trustees

for a constructive trust.

PARTIES

2. Representative Plaintiff, James W. Lash, is a for-

mer Equibank employee who resides at 3496 Frye Ave-

nue, Finleyville, Pennsylvania 15332. Plaintiff Lash was

employed by Equibank (or its predecessor) from October

1, 1956 through his retirement on January 31, 1986. Plain-

tiff Lash is an “Eligible Employee” and was entitled to

participate in the to be established ESOP.

3. Defendant Equimark Corporation is a Delaware

Corporation. Equimark Corporation (Old Equimark) was

incorporated in Pennsylvania in 1968 and was registered

as a bank holding company under the Pennsylvania Bank

Holding Company Act of 1956. On March 23, 1988, the

Old Equimark was merged with and into Equimark (Del-

aware), Inc., accomplishing a reincorporation in Dela-

ware. Subsequently, Equimark (Delaware), Inc. amended

its charter to use the name Equimark Corporation. Equi-

mark has its principal office at Two Oliver Plaza, Pitts-

burgh, Pennsylvania 15222. Defendant Equimark, at all

relevant times, owned and controlled Defendant Equi-

bank.

4. Defendant Equibank is a Pennsylvania banking

institution. Equibank is a wholly owned subsidiary of

Equimark. Equibank has its principal office at Two Oliver

Plaza, Pittsburgh, Pennsylvania 15222.

STATEMENT OF THE CASE

5. Plaintiff Lash is a former Assistant Vice-President

of Equibank and Manager of the Brentwood community

office.

6. During the course of his employment with Equi-

bank, Plaintiff Lash was a participant in the Equimark

Corporation Retirement Plan [the “Plan”]. He had been a

participant in the Plan from its inception in 1968 until

November 30, 1984, at which time the Plan was termi-

nated.

7. By letter dated November 8, 1984, Plaintiff Lash

and other eligible Equibank employees were notified that

Defendants intended to terminate the Plan. This letter, in

relevant part, stated:

Dear Employee:

As you know, we’re planning to make several

changes to your benefits program. These

changes will give you part ownership in the

bank’s parent company. Here are the details:

Effective November 30, 1984, the Equimark

Corporation Retirement Plan will be termi-

nated. Approximately $8 million in surplus

funds will become available and will be

used to increase our primary capital by

approximately $8 million.

A copy of Equibank’s November 8, 1984 letter is attached

hereto as Exhibit “A”.

8. Defendant Equibank, on November 8, 1984, also

contracted with its Eligible Employees, in exchange for

their continued service, to return to all Eligible

Employees the $8.1 million surplus from the terminated

Plan by setting aside approximately 3 million shares of

common stock (the value of the Plan surplus) to fund the

ESOP. In its November letter (Exhibit “A”), Equibank

stated:

Equimark Corporation Common Stock (at

$2.68 per share), with a value identical to

the retirement plan surplus, will be set aside

for employees through an Employee Stock

Ownership Plan (ESOP). This plan will give

you a way to share in the bank’s future

success. As the stock increases in value,

you'll reap the benefits. Your ESOP benefit

will be paid to you in stock or cash at retire-

ment or termination. (Emphasis added)

9. Defendant Equibank also provided its Eligible

Employees details in a document entitled “Equibank:

Compensation Program Changes.” A copy of Defendants’

“Compensation Program” is attached hereto as Exhibit

pa ats

10. In the “Compensation Program”, Defendants

described a program to pay compensation in the form of

the return of the Plan’s surplus by paying Equimark

common stock into an ESOP Plan:

You Get a Stake in Equibank

Surplus funds in the retirement plan (approx-

imately $8 million) will be returned to Equibank

as primary capital. The bank will then fund an

Employee Stock Ownership Plan, or ESOP, with

approximately 3 million shares of Equimark

stock (at $2.68 per share) equal to the surplus in

the retirement plan. Equibank will pay the entire

cost for this. Nothing will come out of your

pocket. The ESOP ts effective, retroactively, to Jan-

uary 1, 1984. (Emphasis added)

11. In Defendants’ “Compensation Program”, Eligi-

ble Employees were defined as certain employees

employed at calendar year end in 1984, and thereafter in

1985 and 1986 as follows:

You're eligible for an ESOP contribution if you

are a full-time active or disabled employee or

regular part-time employee (Code 20) employee

[for years ended 1984, 1985 and 1986].

You do not have to enroll in the plan. You'll be

included automatically if you are eligible.

(Emphasis added)

12. Other documents distributed by Equimark and/

or Equibank or both further explained the Equibank com-

pensation program between Eligible Employees and

Defendants. For example, in a document entitled “Com-

monly Asked Questions”, it was stated:

A. What is this ESOP all about?

Q. The Employee Stock Ownership Plan will pro-

vide all full-time and Code 20 part-time

employees with as much as 3 million shares of

Eguimark stock . . . at no cost! In this way, we

will be returning to employees an amount

of stock equal to the surplus in the Retire-

ment Plan... .

The ESOP will give eligible employees vot-

ing privileges and a way to share in the

bank’s future success. As the stock in the

ESOP increases in value, employees will

reap the benefits by watching their own

accounts grow. The value of our ESOP

accounts will depend on our success on the

job. The opportunity for growth is great!

Employees will become fully vested in the

ESOP after only five years, and any pre-

vious Retirement Plan service counts

toward vesting in the ESOP. (Emphasis

added)

A copy of Defendants’ “Commonly Asked Questions” is

attached hereto as Exhibit “C”.

13. The “Commonly Asked Questions” continued to

explain the Equibank compensation program as follows:

Q. Why not distribute the stock directly to

employees?

A. While possible, immediate distribution of

your benefit would create an immediate tax

liability. The ESOP provides you with a way

to shelter this windfall benefit from imme-

diate taxation and defer taxes.

Q. Why is the ESOP contribution being made

over a 3 year period?

A. Section 415 of the Internal Revenue Code

restricts total contributions an employer can

make to any single employee to the lesser of

$30,000 or 25% of compensation during any

year. If the entire ESOP contribution, valued

at approximately $8 million, was made in

one year, these IRS limitations would be

exceeded.

14. Defendants produced and distributed another

document entitled “Compensation Program Changes at a

Glance” in which they further stated and explained:

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

* Effective retroactive to January 1, 1984.

* Eligible employees include full-time, dis-

abled and regular (Code 20) part-time

employees.

* Funded with Equimark Corporation com-

mon stock ($2.68/share) equal in value to

Retirement Plan surplus.

* Contributions allocated over 3 years (1984 -

1986) to employees on payroll as of Decem-

ber 31.

A copy of Defendants’ “Compensation Program Changes

At A Glance” is attached hereto as Exhibit “D”.

15. Plaintiff Lash, as an Assistant Vice-President

and Manager of the Brentwood community branch office,

received the Defendants’ contract to provide him and

other Eligible Employees approximately 3,000,000 shares

of Equimark stock and continued to work for Equibank

through December 31, 1984 and then thereafter through

year end 1985.

16. Defendant Equibank’s November 8, 1984 con-

tract to set aside approximately 3,000,000 Equimark

shares valued at approximately $8 million was intended

to compensate Eligible Employees who continued their

employment with Equibank through year end in 1984,

1985 and 1986:

The ESOP contribution will be allocated to eligible

employees over a three-year period: 1984, 1985 and

1986. At the end of each calendar year, the bank

will make a contribution to the ESOP account of

each eligible employee. Individuals employed on

the last day of each calendar year will share in the

contribution. The contribution will be in the form of

Eguimark stock issued for use only in the ESOP.

The stock will be held in an account established

in your name. (Emphasis added) See “Compen-

sation Program”, Exhibit “B”.

17. Vesting of rights under the ESOP was repre-

sented to be based upon service credits from the termi-

nated Plan. Rights in the ESOP were described as vesting

with five (5) years of service.

18. The Defendants’ “Compensation Program” fur-

ther stated that a more detailed description of the ESOP

would be provided to employees to be included in the

D10

Equibank Employee Handbook. Additionally, it stated the

following:

And, the ESOP will become effective only if

Shareholder and regulatory approvals are

received early next year.

19. No attempt was made by either Equimark or

Equibank to obtain shareholder approval. No attempt

was made by either Equimark or Equibank to obtain

regulatory approval. Alternately, if any attempt was

made, it was not made in good faith and did not consti-

tute a reasonable attempt.

20. Defendants failed to provide Eligible

Employees, i.e., those employees who continued to work

for Equibank throughout 1984, and thereafter in 1985 or

1986, the agreed compensation in the form of the

3,000,000 Equimark shares of stock.

21. Plaintiff Lash, at all relevant times, was a full

time employee of Equibank, who under the terms of

Defendant Equibank’s November 8, 1984 contract, would

have been entitled to compensation in the form of Equi-

mark stock benefits for the calendar years 1984 and 1985.

22. Plaintiff Lash has suffered a pecuniary loss as a

result of the Defendants’ failure to pay him the Equimark

stock benefits for those two years (1984 and 1985).

CLASS ALLEGATIONS

23. This is a class action brought on behalf of all

current or former Equibank full time active or disabled

employees or regular part-time employees (Code 20) who

D11

were employees on November 8, 1984 and continued to

work through at least year end in calendar year 1984.

24. The class of Plaintiffs is so numerous as to make

it impractical to bring all eligible members of the class

before the Court. It is believed that there are approx-

imately 1,200 to 1,300 employees or former employees in

the proposed Plaintiff class. The exact number of Equi-

bank member employees is unknown to Lash but may be

determined from the records maintained by Defendant

Equibank. In many instances such employees or former

employees are unaware that claims may exist on their

behalf. In other instances, the individual class member's

claims are not large enough to justify the expense and

effort of a separate suit, but as a class those claims do

economically justify legal action.

25. Multiple common questions of law and fact

affect the right of each member of the class and common

relief by way of damages is sought for all class members.

26. The predominating questions of fact and law

a. Whether Defendant Equibank contracted

with its Eligible Employees to provide them

an ESOP plan and/or approximately

3,000,000 shares of Equimark stock;

b. Whether Defendant Equimark caused

Defendant Equibank to breach its contract

with its Eligible Employees to provide them

an ESOP plan and/or approximately

3,000,000 shares of Equimark stock;

D112

Whether Defendants Equimark and/or

Equibank failed to seek or obtain share-

holder and regulatory approval of the pro-

posed ESOP Plan;

d. Whether Equimark and/or Equibank failed

to act in good faith or to take reasonable

steps to obtain shareholder and regulatory

approval of the proposed ESOP Plan;

e. Whether Defendant Equibank breached its

duty of good faith and fair dealing by fail-

ing to establish an ESOP Plan or pay Equi-

bank Eligible Employees approximately

3,000,000 shares of Equimark common

stock;

f. Whether Defendant Equimark and/or Equi-

bank were unjustly enriched by failing to

establish an ESOP Plan or pay Equibank

Eligible Employees approximately 3,000,000

shares of Equimark common stock; and

Whether a constructive trust should be

imposed on Defendant Equimark and/or

Equibank for wrongfully retaining the

approximately 3,000,000 shares of Equimark

stock that they agreed to pay Eligible

Employees.

27. Plaintiff Lash will assure the adequate represen-

a tation of all members of the class, and has no conflict

with class members in the maintenance of this action. His

interests in this action are antagonistic to the interests of

both Defendants Equimark and Equibank. Lash is aware

that he cannot settle this class action without Court

approval and will vigorously pursue the class claims

throughout the course of this litigation.

D13

28. Plaintiff Lash will also assure the fair and ade-

quate representation of the class by his retention of attor-

neys who are experienced in class actions. Lash can

acquire adequate financial resources for the conduct of

this litigation. In addition, Plaintiff’s Counsel have

agreed with the Plaintiff to pay all reasonable costs in this

case contingent upon the outcome of this case.

29. A class action will provide a fair and efficient

method to adjudicate this controversy since the claims of

the class members are virtually identical in that they raise

the same questions of law and require the same kind of

evidentiary proof.

30. Plaintiff Lash believes and therefore avers that

there are no unusual legal or factual issues which would

create manageability problems. Individual factual issues

as to the measure of damages are subject to documentary

proof which in most, if not all, cases is in Defendant

Equibank’s possession.

31. Plaintiff Lash believes and therefore avers that

because many class members are unaware of their claims

and because there claims are small in relation to the costs

of an individual suit, a class action is the only proceeding

in which class members can, as a practical matter,

recover. If pursued as an individual claim, this action

could substantially affect the rights of similarly situated

eligible employees who might pursue their claims. In

addition, Defendants Equimark and Equibank might then

be confronted with inconsistent or varying adjudications.

32. Plaintiff Lash is unaware of any other litigation

challenging Defendants Equimark’s or Equibank’s failure

D14

to provide its employees with the contracted for approx-

imately 3,000,000 shares of Equimark stock.

COUNT ONE

STATING A CLAIM AGAINST DEFENDANT

EQUIBANK FOR BREACH OF CONTRACT

33. The averments of paragraphs 1 through 32,

inclusive, are incorporated.

34. Defendant Equibank contracted with its Eligible

Employees after Defendants withdrew $8.1 million from

the Plan which had previously been maintained for the

benefit of Equibank employees to set aside approximately

3,000,000 shares of Equimark stock, having a value of

approximately $8.1 million dollars to be allocated to Eli-

gible Employees who worked at year end in 1984, and

thereafter in 1985 and 1986.

35. Defendant Equibank failed to pay Eligible

Employees approximately 3,000,000 shares of Equimark

common stock, nor did either Defendant make an effort

or alternately, a good faith attempt or any reasonable

effort to obtain the necessary approval to provide Eligible

Employees the ESOP plan.

36. The amount in controversy includes $20,000

excluding interest and costs.

PRAYER FOR RELIEF (DEFENDANT EQUIBANK’S

BREACH OF CONTRACT)

WHEREFORE, Representative Plaintiff, James W.

Lash, on behalf of himself and all other Eligible

D15

Employees similarly situated, respectfully requests that

this Honorable Court grant the following relief:

a. The damages sustained by the Representa-

tive and Class plaintiffs who, by virtue of

Defendant Equibank’s breach of contract,

have not received their pro rata share of the

approximately 3,000,000 shares of Equimark

common stock; and

b. Appropriate retroactive dividends, pre-judg-

ment interest and costs of this suit.

COUNT TWO

STATING A CLAIM AGAINST DEFENDANT EQUI-

BANK FOR BREACH OF THE DUTY OF GOOD FAITH

AND FAIR DEALING IMPLIED IN THE NOVEMBER 8,

1984 CONTRACT WITH THE CLASS MEMBERS

37. The averments of Representative Plaintiff Lash

in Paragraphs 1 through 36 inclusive of this Complaint

are incorporated.

38. The November 8, 1984 contract to pay Eligible

Employees approximately 3,000,000 shares of Equimark

common stock contained an implied duty of good faith

and fair dealing.

39. Defendant’s failure to act in good faith or to

take any steps (or alternatively, reasonable steps) to

obtain shareholder and regulatory approvals breached its

duty of good faith and fair dealing.

40. The amount in controversy exceeds $20,000

exclusive of interest and costs.

‘D16

PRAYER FOR RELIEF (DEFENDANT EQUIBANK’S

BREACH OF DUTY OF GOOD FAITH AND FAIR DEAL-

ING)

WHEREFORE, Representative Plaintiff, James W.

Lash, on behalf of himself and all other Eligible

Employees, respectfully requests that this Honorable

Court grant the following relief:

a. The damages sustained by the Representa-

tive and Class Plaintiffs who, by virtue of

Defendant Equibank’s breach of the duty of

good faith and fair dealing, have not

received their pro rata share of the approx-

imately 3,000,000 shares of Equimark com-

mon stock; and

b. Appropriate retroactive dividends, pre-judg-

ment interest and costs of this suit.

COUNT THREE

STATING A CLAIM AGAINST BOTH DEFENDANTS

FOR UNJUST ENRICHMENT

41. The averments of Plaintiff Lash in Paragraphs 1

through 40 inclusive of this Complaint are incorporated.

42. Defendants’ use of some or all of the Equimark

stock that was to be distributed to Plaintiffs results in the

unjust enrichment of Defendants, including certain of

Defendants’ senior management that would not have

been entitled to participate in the ESOP Plan.

43. The amount in controversy exceeds $20,000

exclusive of interest and costs.

D17

PRAYER FOR RELIEF (BOTH DEFENDANTS’ UNJUST

ENRICHMENT)

WHEREFORE, Representative Plaintiff, James W.

Lash, on behalf of himself and all other Eligible

Employees, respectfully requests that this Honorable

~ Court grant the following relief:

a. A full and complete accounting;

b. -The damages sustained by the Representa-

tive and Class Plaintiffs who, by virtue of

Defendants’ unjust enrichment, have not

received their pro rata share of the approx-

imately 3,000,000 shares of Equimark com-

mon stock; and

c. Appropriate retroactive dividends, pre-judg-

ment interest and costs of this suit.

COUNT FOUR

STATING A CLAIM AGAINST BOTH DEFENDANTS

FOR CONSTRUCTIVE TRUST

44. The averments of Plaintiff Lash in Paragraphs 1

through 42 inclusive of this Complaint are incorporated.

45. Defendants are in a fiduciary or other special

relationship with respect to Eligible Employees like Plain-

tiff Lash with whom Equibank and Equimark, through its

control of Equibank, made a commitment on November 8,

1984 to set aside and pay 3,000,000 shares of Equimark

common stock in exchange for continued employment.

This fiduciary or special relationship existed as a result of

Defendants’ taking of funds from the Eligible Employees’

Pension Funds, and simultaneously promising to use said

funds exclusively for the Eligible Employees’ benefits in

D18

exchange for their continued employment on dates cer-

tain at year end 1984, 1985 and 1986.

46. Defendants, as fiduciaries, are responsible for

paying Plaintiffs the 3,000,000 shares of Equibank stock in

accordance with Equibank’s November 8, 1984 commit-

ment.

47. Defendants’ failure to pay Plaintiffs approx-

imately 3,000,000 shares of common stock is a breach of

their fiduciary duties, which gives rise to the need for a

constructive trust over the 3,000,000 shares of Equimark

stock for the benefit of Plaintiffs.

48. The amount in controversy exceeds $20,000

exclusive of interest and costs.

PRAYER FOR RELIEF

(BOTH DEFENDANTS’ BREACH OF CONSTRUCTIVE

TRUST)

WHEREFORE, Representative Plaintiff, James W.

Lash, on behalf of himself and all other Eligible

Employees, respectfully requests that this Honorable

Court grant the following relief:

a. A full and complete accounting;

b. The damages sustained by the Representa-

tive and Class Plaintiffs who, by virtue of

Defendants’ breach of fiduciary or special

duties, have not received their pro rata share

of the approximately 3,000,000 shares of

Equimark common stock; and

D19

c. Appropriate retroactive dividends, pre-judg-

ment interest and costs of this suit.

BERGER KAPETAN MALAKOFEF

& MEYERS, P.C.

By /s/ Michael P. Malakoff

Michael P. Malakoff

Fred S. Longer

508 Law & Finance Building

Pittsburgh, PA 15219

(412) 281-4200

Attorneys for the Representative

Plaintiff James W. Lash and Class

Plaintiffs

Dated November 7, 1988

D20

EXHIBIT “A”

Equibank

November 8, 1984

Dear Employee:

As you know, we’re planning to make several changes to

your benefit program. These changes will give you part

ownership in the bank’s parent company. Here are the

details:

Effective November 30, 1984, the Equimark Corpora-

tion Retirement Plan will be terminated. Approx-

imately $8 million in surplus funds will become

available and will be used to increase our primary

capital by approximately $8 million.

Equimark Corporation Common Stock (at $2,68 per

share), with a value identical to the retirement plan

surplus, will be set aside for employees through an

Employee Stock Ownership Plan (ESOP). This plan is

being created to provide all full-time and disabled

employees and regular part-time (Code 20) employees

with a windfall benefit equal to approximately 3 mil-

lion shares of Equimark stock. This plan will give you

a way to share in the bank’s future success. As the

stock increases in value, you'll reap the benefits. Your

ESOP benefit will be paid to you in stock or cash at

retirement or termination.

The benefits you have earned through November 30,

1984 under the present Retirement Plan will be guar-

anteed to you whether or not you are now vested

under the plan. The bank will safeguard these benefits

by purchasing an insurance annuity for you through

the Pacific Mutual Life Insurance Company, a multi-

billion-dollar, “A+” rated insurance company.

Through this annuity, you'll receive guaranteed

monthly payments at retirement, based on benefits

D21

you have earned in the present plan through Novem-

ber 30, 1984. Any payment option available to you

under the Retirement Plan will be available to you

through the annuity. Within several months, you'll

receive an annuity certificate from Pacific Mutual. You

may request your benefit calculation and a sample

copy of the annuity certificate by calling Centrex 5075

after December 17.

¢ A replacement to the Retirement Plan, an enhance-

ment to the present Savings Plus Plan, becomes effec-

tive January 1, 1985. This new feature of the Plan will

be a semi-monthly bank contribution of 2 percent of

your pay — whether or not you are making voluntary

contributions to the Plan. In addition, the Savings

feature of the Plan will continue to match 50 cents on

each dollar you contribute, up to 6% of your pay.

Eligible employees will include all full-time

employees, those on disability and part-time

employees who have worked at least 1,000 hours dur-

ing a service anniversary year.

Additional enhancements are also being made to the Sav-

ings Plus Plan. You'll be receiving additional information

concerning all of these changes from your manager later

in the month.

The changes being made will provide opportunities for

both corporate and personal financial growth and suc-

cess. If you have any questions, call the Compensation

Division, Centrex 5073, 5075 and 5947.

Sincerely,

/s/ JDL

James D. Lowry

Chairman, President and

Chief Executive Officer

D22

EXHIBIT “B”

EQUIBANK

COMPENSATION PROGRAM CHANGES

We’re Ending the Present Retirement Plan... But you'll

Keep What You’ve Earned and Get More...

The present Equimark Corporation Retirement Plan is

being terminated on November 30. We’ll have a new plan

in place on January 1, 1985 through an improvement to

the Savings Plus Plan. You won’t build up any additional

benefits in the old plan after November 30 — but you

won't lose any benefits you have already earned under

the plan. And you'll begin earning retirement benefits in

a new plan.

If you are a participant in the retirement p!an, the bank is

guaranteeing your present benefit by taking money in the

retirement plan fund and by purchasing an annuity in

your name through the Pacific Mutual Life Insurance

Company, and “A+” rated multibillion-dollar insurance

company. This annuity is a contract between you and the

insurance company. Equibank paid an amount of cash to

the insurance company. In turn, the insurance company

has agreed to pay you a certain amount of money each

month beginning at your retirement. Any payment option

now available to you under the retirement plan will be

available to you_through the annuity. Any plan benefit

valued at $1,700 or less will be paid to you directly in the

form of a lump sum payment.

The annuity will be provided for you regardless of

whether you are vested. This is important. Employees

who leave the bank with fewer than 10 years of service

have no right to a benefit under the old retirement plan.

D23

But, because the old retirement plan is being replaced, the

bank is vesting every plan participant in the benefit he or

she earns through November 30. For example, suppose

you only have 6 years with the bank. You are still fully

vested in the retirement plan benefit you have earned,

even though you haven’t met the 10-year vesting require-

ment. Those 6 years of service also count toward vesting

in a new Employee Stock Ownership Plan.

When you retire, that annuity will pay the benefit that

you have earned through November 30. For example,

suppose you would have received $300 a month from the

old retirement plan, based on your service through

November 30. Equibank has paid the insurance company

enough money from the retirement plan fund to buy a

guaranteed $300-a-month annuity contract for you.

Within several months, you'll receive an annuity certifi-

cate from the insurance company that will give you speci-

fic information on the amount of your benefit from the

old retirement plan.

You Get A Stake In Equibank

Surplus funds in the retirement plan (approximately $8

million) will be returned to Equibank as primary capital.

The bank will then fund an Employee Stock Ownership

Plan, or ESOP, with approximately 3 million shares of

Equimark stock (at $2.68 per share) equal to the surplus

in the retirement plan. While other companies have ter-

minated retirement plans and used excess funds to bene-

fit themselves, eligible Equibank employees will receive a

windfall benefit through the ESOP. Equibank will pay the

D24

entire cost for this. Nothing will come out of your pocket.

The ESOP is effective, retroactively, to January 1, 1984.

- You're Eligible for ESOP if...

You’re eligible for an ESOP contribution if you

are a full-time active or disabled employee or a

regular part-time (Code 20) employee.

You do not have to enroll in the plan. You'll be

included automatically if you are eligible.

Your ESOP Works Like This...

The ESOP contribution will be allocated to eligi-

ble employees over a three-year period: 1984,

1985 and 1986. At the end of each calendar year,

the bank will make a contribution to the ESOP

account of each eligible employee. Individuals

employed on the last day of each calendar year

will share in the contribution. The contribution

will be in the form of Equimark stock issued for

use only in the ESOP. The-stock will be held in

an account established in your name. Any divi-

dends paid on the stock will be automaticaily

invested in more stock. Each quarter, you will

receive a personal statement showing the

number of shares in your account. The value of

the stock will always be at least equal to that of

Equimark common stock, which is reported

daily on the New York Stock Exchange.

The amount of stock you receive will be based

on this formula:

e Each year the board decides how much

the bank will contribute — let’s assume it

decides on $3 million.

D25

e Then, let’s total up the salaries paid to all

Equibank employees who are eligible for

the plan for the year — let’s say that

figure is $37.5 million.

e Next, divide the bank contribution by

the total salaries. In your example, that

would be $3 million divided by $37.5

million, which comes to .08 or 8 percent.

e Finally, multiply your salary (say it’s

$15,000 a year) by the percentage figure,

and you have the amount you'll get for

that year. In this example, that would be

$15,000 times 8 percent, or $1,200. That

means Equibank would contribute stock

worth $1,200 to your account in that

year.

You Get A Voice In the Bank

The ESOP gives you rights to stock and voting

privileges. You will be able to vote the shares in

your account. And, you'll have an opportunity

to share in the bank’s future success. The value

of your account will depend on our collective

success on the job. The opportunities for growth

are great.

You Can Get Your Money When You Retire .

When you retire, you can take your ESOP

acccunt in the form of Equimark stock or cash.

. Or Even Earlier

The ESOP offers an advantage that the old

retirement plan didn’t. Under that plan, you

couldn’t receive benefits until you were at least

D26

55 years of age. This rule applied even for

employees who left the bank with a “vested”

benefit many years before reaching early or nor-

mal retirement age. To be “vested” in a plan

means that you have gained a non-forfeitable

right to a benefit under that plan, even if you

leave the bank.

Under the ESOP, if you are vested, you receive

your payout from the plan soon after you leave

the bank. And, if upon your death you're a

vested participant in the plan, your account will

be paid to your beneficiary. The payment in

either case can be in stock or in cash.

If you are presently totally disabled or become

tctally disabled and unable to work while an

ESOP participant, the bank will make contribu-

tions to your ESOP account. The contribution

will be based on your salary at the time you

become disabled.

You're Fully Vested In The ESOP After Five

Years

As noted earlier, to be “vested” in a plan means

that you have gained a non-forfeitable right to a

benefit under that plan, even if you leave the

bank. Under the ESOP, you become fully vested

in the plan after 5 years of “credited” service.

Your past service as a member of the old retire-

ment plan will count in determining when you

become vested in the ESOP. So, if you’ve already

earned 5 years of service under the retirement

plan, you'll be fully vested in the ESOP. If you

leave the bank before you have earned 5 years

of service, you'll have a partial right to your

account as follows:

——

D27

After two years.. 40% vesting

After three years... 60% vesting

After four years 80% vesting

After five years........ ...100% vesting

If you are an eligible part-time employee, you'll

receive vesting credit for any calendar year in

which you work at least 1,000 hours beginning

in 1984.

Your Savings Pius Plan Is Now the Employee

Savings and Retirement Plan

You Get An Automatic 2% Contribution

As a replacement to the old retirement plan, beginning

January 1, 1985, the bank will make a contribution for all

eligible employees to a new retirement feature of the

plan. Thus contribution will be equal to 2 percent of pay

regardless of whether you make voluntary contributions

to the Plan — and it will be made with each pay.

This contribution will be invested in a new Guaranteed

Income Fund which will provide you with a guaranteed

interest rate. You'll be automatically vested and this

account will be payable upon your termination, retire-

ment or death.

You Can Participate, Even If You’re Under Age 25

Next year, all full-time and part-time employees who

have worked at least 1,000 hours in an anniversary year

will be eligible to participate in the Employee Savings

D28

and Retirement Plan. And, we’re dropping the require-

ment that you must be at least age 25 to save in the “Tax-

Saver” part of the plan.

In addition, the savings feature of the plan will continue

to match 50 cents on each dollar you contribute, up to 6%

of your pay. You can contribute a maximum of 6% to the

plan through the Tax-Saver (before-tax) feature of the

plan and up to 10% through the Regular Saver (after-tax)

feature of the Plan. Your total contribution, however,

cannot exceed 10%.

You Can Save On Taxes

The Tax-Saver feature, you may remember, was intro-

duced last year. It provides that your contributions to the

plan are made before federal income tax is calculated,

thereby lowering your income tax. Federal regulations

prohibit withdrawals from the Tax-Saver account until

you reach age 59'/2, unless you have serious financial

needs. However, to help you meet other financial needs, a

new loan provision is being added to the plan.

You Can Borrow From Your Savings And Pay Yourself

Back!

Beginning January 1, you will be able to borrow up to

half of your vested account, including your Tax-Saver

balance. You’d be borrowing from yourself, because all

the principal and interest you repay on the loan will be

placed back in your account - and you may be able to

claim the interest as a deduction when figuring your

income tax. You pay no tax on funds you borrow from the

account, as you would if you withdrew the money.

D29

You'll have up to 59 months to repay your loan. The

interest you pay will be the same rate you’d get on the

new Guaranteed Income Fund.

Your Investment Options Are Streamlined

As of January 1, 1985, the plan will offer four investment

funds:

e Equimark Corporation Stock Fund - Com-

mon stock of the bank’s holding company;

Equimark.

¢ Fixed Income Security Fund - There will be

no change in this fund, which is invested in

long-term, high-grade corporate bonds and

notes selected for quality, income and matu-

rity.

¢ Equity Fund -— This fund is invested in qual-

ws ity common stocks that promise good oppor-

| tunity for capital appreciation. Beginning

next year, it will be a fully invested, sep-

arately managed fund, and will not be com-

ingled [sic] with the funds of other investors.

¢ Guaranteed Income Fund - This fund will

replace the Government Obligations Fund

and the Money Market Fund. Money now

invested in these two funds will be trans-

ferred automatically to the new Guaranteed

Fund, unless you specify otherwise. The

Guaranteed Income Fund will be invested in

a time deposit account with an interest rate

based on negotiable certificates of deposit

(CDs) issued by Equibank. Both principal

and interest will be guaranteed. New interest

rates will be set each January 1 and July 1.

This fund is insured by the Federal Deposit

D30

Insurance Corporation for up to $100,000 per

participant. FDIC rules require that you must

give notice of at least 32 days before the end

of the calendar quarter if you wish to with-

draw money from the Guaranteed Fund.

You can invest in one or more of these funds in incre-

ments of 25 percent — instead of 20 percent as is permitted

now.

Withdrawal Penalties Have Been Reduced!

Beginning January 1, withdrawal penalties have been

reduced to a six month suspension for any regular with-

drawals you make from your Regular Saver account and

vested bank matching contributions and interest. Special

situation withdrawals can continue to be made without

suspension penalties.

Enroll Later This Month

Please review this information carefully, share it with

your family, and, if eligible, be ready to make your

choices concerning the Employee Savings and Retirement

Plan during the enrollment period later this month. You

will also receive, later on, more detailed descriptions of

all these plans that you can put in your Equibank

Employee Handbook. Remember, this information pro-

vides highlights only. Benefits available under the plans

are governed by the official plan documents, which are

available for your inspection in the Human Resources

Department. And, the ESOP will become effective only if

shareholder and regulatory approvals are received early

D31

next year. In the event any questions arise about the

plans, the official plan documents will govern.

Have Questions?

If you have questions about the changes described here,

you can get the answers by calling our special telephone

Hotline between 8 a.m. and 6 p.m. on any business day.

The number: 288-5075.

Changes At A Glance

Concerning your...

Retirement/ESOP

Old Provisions .

Old retirement plan

pays a fixed benefit

based on pay and

service at retiren:ent.

If you are vested and

leave the bank, your

' retirement benefit is

not payable until you

reach early or normal

retirement age.

Covers full-time

employees only.

New Provisions. .

New ESOP will return stock

with a value equal to the

surplus retirement plan funds

to employees thru annual

bank contributions. If you’re

vested, the account is yours if

you leave the bank before

retirement. ESOP also covers

regular part-time (Code 20)

employees. And, you're vested

in your retirement benefit

under the old plan even if

you have fewer than ten, years

of service. Also, a replacement

to the old retirement plan will

be established through an

enhancement to the Savings

Plan.

Employee Savings and

Old Provisions...

Bank matches 50% of

your savings up to

6% of pay.

Full-time and regular

part-time code 20

employees are

eligible.

Must be at least age

25 to invest in Tax-

Saver account.

You're vested in

matching bank

contributions after 4

years in plan.

You can save up to

10% of pay.

There are 5

investment funds.

None are guaranteed

or insured.

Tax-Saver account not

available for

withdrawal until age

59'/2 or special

situation hardship.

D32

Retirement Plan

New Provisions...

Bank contributes 2% of pay

even if you don’t save in the

plan; Ané, bank matches 50% of

your savings up to 6% of pay.

All full-time and part-time

employees who work at least

1,000 hours in a service

anniversary year.

You can participate in Tax

Saver at any age.

You're vested in the 2%

retirement contribution

immediately. You’re vested in

matching bank contributions

after 4 years in plan.

You can save up to 10% of pay.

Tax-Saver maximum of 6%.

There“are 4 investment funds.

One -is guaranteed and insured

‘by F.D.LC.

While Tax-Saver withdrawal

restrictions still apply, a loan

feature will permit you to

borrow up to half of your

account, including your Tax-

Saver balance. The interest

you pay on the loan is placed

back in your account. And,

you pay no tax on loans you

make, as you would if you

withdrew the money.

D33

EXHIBIT “C”

COMMONLY ASKED QUESTIONS

Why is the Retirement Plan being terminated?

The Retirement Plan termination will allow us to

return approximately $8 million in surplus funds

back to the bank as primary capital. These excess

funds are not needed to pay retiree benefits or any

benefits earned to-date through the Plan. Federal

regulations permit the return of these funds only if

the Plan is terminated. This move will assist us in

meeting our goal of increasing primary capital.

What happens to the benefits | have already earned

under the Retirement Pian?

The benefits you have earned under the Plan through

November 30, the Plan termination date, will be

guaranteed to you through an annuity that has

already been purchased for you through the Pacific

Mutual Life Insurance Company. Pacific Mutual, 2

iultibillion-dollar insurance company withan “A+”

rating (the highest rating available) has _guaranteea

to make monthly payments to you at retirement

based on the benefits you earn through November

30. Any payment option available to you under the

Retirement Plan will be available to you through the

annuity. Within several months, you'll receive an

annuity certificate from Pacific Mutual. In the mean-

time, you may request your benefit calculation and a

sample copy of the annuity certificate by calling Cen-

trex 5075 after December 17.

Wiil there be a replacement to the Retirement Plan?

Yes! The new retirement plan will become effective

January 1, 1985 through an enhanced Savings Plan.

This enhanced Plan, called the Employee Savings

D34

and Retirement Plan, will include a Retirement Fea-

ture through which the bank will contribute an addi

fronal 2% of your pay semi-monthly. This

contribution will be made whether or not you are

currently a participant. And, it will be in addition to

the bank’s contribution to the voluntary Savings Fea

ture of the Plan.

The Plan will be open to all full-time and Code 20

part-time employees and any other part-timers who

works 1,000 hours in a service anniversary year. In

addition, employees on long-term disability will

receive the 2% Retirement Feature contribution

What about this new Loan Feature that’s being

added?

The new Loan Feature will become effective January

1, 1985 and can provide you access to Tax-Saver

funds that would otherwise be locked up until you

reached age 59'/2 or qualified for a special situation

hardship. Through this feature, you can actually bor-

row from yourself and repay interest back to your

account. In addition, the interest you repay, which

will be equal to the rate paid on the Guaranteed

Income Fund, may qualify as a tax deductible

expense if you itemize your deductions for federal

income tax purposes.

Loans will be available each quarter following the

Plan’s quarterly valuation. In addition, a special val-

uation and loan offering will be made available for

the proposed employee rights offer which will pro-

vide employees with an opportunity to purchase

additional Equimark stock at $2.68 per share.

Any funds invested in the Tax-Saver, Regular Saver

and Rollover Features and any vested bank matching

contributions qualify. The minimum loan available

will be in the amount of $500; the maximum loan

D35

available will be in the amount of $10,000 or 50% of

the vested account balance, up to $50,000

What is this ESOP all about?

The Employee Stock Ownership Plan will provide all

full-time and Code 20 part-time employees with as

much ag 3 million shares of Equimark stock ... at no

cost! In this way, we will be returning to employees

an amount of stock equal to the surplus in the Retire-

ment Plan. While other companies have terminated

plans and used those funds to benefit only them-

selves, we wanted to give something of value to

employees also.

The ESOP will give eligible employees voting privi

leges and a way to share in the bank’s future success

As the stock in the ESOP increases in value,

employees will reap the benefits by watching their

own accounts grow. The value of our ESOP accounts

will depend on our success on the job. The oppor

tunity for growth is great!

Employees will become fully vested in the ESOP

after only five years, and any previous Retirement

Plan service counts toward vesting in the ESOP

When will | receive the stock in my ESOP account?

The ESOP account will be paid out, in stock or cash,

at vour retirement or termination. In the event of

your death, the account will be paid to your benefici

ary ;

Why not distribute the stock directly to employees?

While possible, immediate distribution of your bene

fit would create an immediate tax liability. The ESOP

provides you with a way to shelter this windfall

benefit from immediate taxation and defer taxes

D36

Why is the ESOP contribution being made over a 3

year period?

Section 415 of the Internal Revenue Code restricts

total contributions an employer can make to any

single employee to the lesser of $30,000 or 25% of

compensation during any year. If the entire ESOP

contribution, valued at approximately $8 million,

was made in one year, these IRS limitations would be

exceeded.

Why are Tax-Saver contributions limited to 6% begin-

ning in 1985?

For the same reason the ESOP contributions are

being made over three years. Tax-Saver contributions

are considered by the IRS to be “employer” contribu-

tions. Once again, the IRS Section 415 limitations

restrict the total an employer can contribute.

D37

EXHIBIT “D”

COMPENSATION PROGRAM CHANGES

AT A GLANCE

RETIREMENT PLAN TERMINATION

e Effective November 30, 1984.

e Plan benefits earned through November 30

guaranteed through an annuity purchased

from Pacific Mutual Life Insurance Company.

e Total benefits valued at $1,700 or less will be

. be be [sic] paid in a lump sum.

¢ Immediate vesting as of November 30.

e Surplus Retirement Plan funds (approx-

imately $8MM) returned to Equimark as pri-

mary capital.

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

e Effective retroactive to January 1, 1984.

e Eligible employees include full-time, dis-

abled and regular (Code 20) part-time

employees.

¢ Funded with Equimark Corporation common

stock ($2.68/share) equal in value to Retire-

ment Plan surplus.

¢ Contributions allocated over 3 years

(1984-1986) to employees on payroll as of

December 31.

e Contributions based on compensation; i.e.:

D38

Estimated Annual

Contribution $3,000,000

+ Total Annual Salaries

of Eligible

Employees -..* 37,500,000

O&8 or 8%

x Employee's Annual

Salary .. ....x $ 15,000 ($41,229,36)

Contribution = § 1,200 ($3,298.32)

447 shares

(1,230.7)

At $2.68/share. .

Vesting:

After 2 years ........ ...... 40% vesting

ae ee eee 60% vesting

Pee ae Lb awiwa ks an kes 80% vesting

NE EE besa ene nn 100% vesting

Previous Retirement Plan service counts

toward ESOP vesting.

Code 20 part-time employees earn vesting

years beginning in 1984 for catendar years in

which 1,000 hours are worked.

ESOP paid in stock or cash at retirement,

death or termination.

EMPLOYEE SAVINGS AND RETIREMENT PLAN

Enhanced Savings Plus Plan.

Eligible employees include full-time, Code 20

part-time employees and other part-time

employees who work 1,000 hours in a service

anniversary year.

D39

Retirement Plan Feature

Bank contribution of 2% of pay, semi-

monthly.

Immediate Vesting.

Invested in new Guaranteed Income Fund.

Payable at retirement, death or termina-

tion.

Disabled employees eligible.

Savings Plan Feature

Employee contribution: 1% to i0% (Tax-

Saver maximum of 6%).

50% bank match up to 6% of pay.

Tax-Saver age requirement eliminated.

Suspension penalties reduced to 6 months.

Loan Feature

Allows you to borrow from your account

and repay interest to your account.

Provides access to Tax-Saver funds.

Fixed interest rate equa! to interest rate

paid on Guaranteed Income Fund.

Payback Period: 12, 24, 36, 48 or 59

months.

Minimum loan: $500

Maximum loan: $10,000 or 50% of vested

account balance up to $50,000.

140

Tax Saver, Regular Saver, Vested bank

match and rollovers available for loan

One loan at any time

Rollover Feature

Permits rollovers from other retirement

plans

Investment Punds

Equimark Corporation Stock Fund

Fixed Income Fund

Equity Fund

No longer a comingled [sic] fund; fully

invested in common stocks and equiva

lents

(,uaranteed Income Fund

Time Deposit Open Account.

Guaranteed fixed interest rate equal to

bank’s quoted rate on 6 month negotia-

ble certificates of deposit.

~ Rate changes January i and July 1.

Government Obligations and Money Mar-

ket Funds eliminated.

~ Unless otherwise specified, these funds

will transfer to the Guaranteed Income

Fund as of January 1.

- Contributions must be invested in 25%

multiples.

Enrollmeiit

— Begins: November 21.

~ Deadline: December 7

D4]

VERIFICATION

|, JAMES W. LASH, hereby verify that the statements

set forth in the foregoing Class Action Complaint in Civil

Action are true and correct to the best of my knowledge,

information and belief

1 understand that false Statements made herein are

subject to the penalties of 18 Pa.C.S. §4904. relating to

unsworn falsification to authorities

/s/ James W Lash

James W. Lash

APPENDIX E

IN THE COURT OF COMMON PLEAS OF

ALLEGHENY COUNTY, PENNSYLVANIA

'AMES W. LASH,

Individually and on

behalf of other Equibank

employees and former

employees similarly

Situated,

Plaintiffs,

Vv.

EQUIBANK, a

Pennsylvania Banking

Institution, and

EQUIMARK

CORPORATION, a

Delaware Corporation,

Defendants.

CIVIL DIVISION

No. GD. 88-19416

Issue No.

Contract, Multiple Civil

Action :

DEFENDANTS’

PRELIMINARY

OBJECTIONS

Code No. 011

JURY TRIAL DEMANDED

Filed on behalf of

Defendants

Equibank and Equimark

Corporation

Counsel of Record for this

Party:

Edward C. Schmidt, Esq.

Pa. 1.D. #16356

Gordon W. Schmidt

Pa. I1.D. #21265

Rose, Schmidt, Hasley &

DiSalle

Firm #043

900 Oliver Building

Pittsburgh, PA 15222-5369

(412) 434-8600

NOTICE TO PLEAD

TO: Michael P. Malakoff, Esquire

Fred S. Longer, Esquire

Berger Kapetan Malakoff & Meyers

508 Law & Finance Building

Pittsburgh, PA 15219

You are hereby notified to file a written response to

the enclosed Preliminary Objections within twenty (20)

days from the date of service hereof or a judgment may he

be entered against you.

Respectfully Submitted,

ROSE, SCHMIDT, HASLEY &

DiSALLE

By /s/ Mary T. DePasquale

Edward C. Schmidt

Gordon W. Schmidt

Mary T DePasquale

900 Oliver Building

Pittsburgh, PA 15222-5369

(412) 434-8600

Attorneys for Equibank and

Equimark ( Orporation

PRELIMINARY OBJECTIONS OF DEFENDANTS’

EQUIBANK AND EQUIMARK CORPORATION

AND NOW COME defendants Equibank and Equi-

mark Corporation (“Equimark”) by their undersigned

counsel and file the following Preliminary Objections to

plaintiffs Complaint under Pennsylvania Rule of Civil

Procedure 1017(b) based upon the following:

I. MOTION TO STRIKE COMPLAINT

1. The instant complaint contains four counts:

Count One - Breach of Contract; Count Two - Breach of

Duty of Good Faith and Fair Dealing; Count Three -

Unjust Enrichment; Count Four - Constructive Trust. The

first two counts are directed solely toward defendant

Equibank. Counts Three and Four are against both Equi-

bank and Equimark.

2. Plaintiff contends that Equibank contracted to

establish an Employee Stock Ownership Plan (“ESOP”) to

be funded with approximately 3,000,000 shares of Equi-

mark common stock valued at approximately $8 million,

and demands the benefits allegedly due him pursuant to

that plan. (Complaint, 11 8, 34).

3. The proposed ESOP is an employee benefit plan

governed by the Employee Retirement Security Act of

1974 (“ERISA”), 29 U.S.C. § 1001 et seq.

4. ERISA creates a federal cause of action for recov-

ery of benefits due under pension and welfare plans, and

for breach of fiduciary duty by benefit plan fiduciaries.

Section 1144(a) of the statute specifically preempts state

laws related to ERISA-governed benefit plans, and fed-

eral courts have extended ERISA preemption to state

common law causes of action as well.

5. Plaintiff has asserted only state common law

claims in his effort to recover benefits allegedly due him

under the ESOP proposal. Such claims are preempted by

ERISA. Accordingly, defendants move that they be

stricken for lack .of conformity to law.

Il. DEMURRER TO COUNT ONE

6. In Count One, plaintiff contends that the Novem-

ber 8, 1984 letter (the “Information Letter”) describing

various proposals which Equibank’s management was

considering with respect to its employees’ benefit pro-

grams constitutes a contract pursuant to which Equibank

promised to create an ESOP to be funded with approx-

imately 3,000,000 shares of Equimark common stock.

(Complaint, {7 8, 34).

7. Plaintiff further contends that Equibank breached

the alleged contract by failing to attempt to obtain neces-

sary approval of the ESOP proposal and by failing to pay

eligible employees approximately 3,000,000 shares of

Equimark common stock. (Complaint, {7 19, 20, 35).

A. Absence of an Offer to Contract

8. Under Pennsylvania law and § 24 of the Restate-

ment (second) of Contracts, the first essential of any

contract is a promise or an offer to enter into a contract. A

mere expression of intention or general willingness to act

on the happening of a particular event or in return for

something does not amount to an offer.

9. The Information Letter and the other documents

referenced by plaintiff clearly state that creation of an

ESOP was merely one of several ideas that Equibank’s

management was considering. Such expressions of the

management’s intentions for the future are insufficient, as

a matter of law, to constitute an offer capab]p of accept-

ance. :

@ -

‘

B. Public Policy

10. Under Pennsylvania law, a court should not

interfere in the internal management of a corporation or

substitute its judgment for that of the corporation’s man-

agement.

11. In the exercise of its sound business judgment,

Equibank’s management decided not to submit the ESOP

proposal for the necessary shareholder and regulatory

approvals, and it would be contrary to public policy and

Pennsylvania corporation law for the Court to interfere

with that decision.

C. Lack of Consideration

12. Consideration is an essential ingredient of a

contract. and a promise unsupported by consideration is

unenforceable.

13. Consideration confers a benefit upon the prom-

isor or Causes a detriment to the promisee and must be an

act, forbearance or return promisee and must be an act,

a a

forbearance orreturn promise bargained for and given in

exchange for the original promise.

14. Plaintiff has not alleged that he conferred a bar-

gained-for benefit on Equibank which was valid consider-

ation for Equibank’s alleged return promise to establish

an ESOP. The mere fact that plaintiff remained in Equi-

bank’s employ and continued to render the services for

which he was hired and compensated is insufficient con-

sideration to support the alleged contract.

D. Lack of Mutuality

15. Obligations under a contract must be mutual

and not merely unilateral. Both parties to the contract

must have the power to compel performance by the other

and must be provided with legal redress in the event

either defaults in his obligations.

16. As an at-will employee, plaintiff had no obliga-

tion to remain in Equibank’s employ; and, even if a

contract was formed pursuant to which plaintiff prom-

ised continued service in exchange for Equibank’s alleged

promise to establish an ESOP, Equibank was powerless to

enforce plaintiff’s promise; therefore, the alleged contract

lacked mutuality of obligation and cannot be enforced.

Ill. DEMURRER TO COUNT TWO

17. In Count Two, plaintiff contends that the alleged

contract contained an implied duty of good faith and fair

dealing and that defendants breached this duty by failing

to seek shareholder and regulatory approvals of the ESOP

proposal. (Complaint {{ 38 and 39.)

— i

18. The allegations contained in the Complaint do

not establish that a contract to seek shareholder and

regulatory approvals of the ESOP proposal was formed;

therefore, there can be no implied duty of good faith and

fair dealing.

19. Additionally, the decision not to seek share-

holder and regulatory approvals of the ESOP proposal

was an exercise of Equibank’s management’s discretion

and should not be scrutinized under the business judg-

ment rule.

IV. DEMURRER TO COUNT THREE

20. In Count Three, plaintiff attempts to state a

claim in unjust enrichment based on the contention that

defendants’ use of all or some of the stock allegedly

designated to fund the proposed ESOP resulted in unjust

enrichment. (Complaint J 42.)

21. To state a claim under the doctrine of unjust

enrichment, plaintiff must show that defendants wrong-

fully secured or passively received a benefit that would

be unjust to retain.

22. Where a party to a contract seeks to enforce that

contract against a third party, Pennsylvania courts refuse

to permit recovery under the doctrine of unjust enrich-

ment simply because one contracting party has failed to

perform.

23. Plaintiff has failed to allege the existence of any

type of relationship between himself and Equimark or

that Equimark had an obligation to provide stock for his

benefit thereby making Equimark’s receipt of benefits

from the continued use of its own stock unconscionable.

24. Plaintiff has not alleged that Equibank received

Or was in possession of any Equimark stock which Equi-

bank could have used to obtain a benefit which would be

unjust to retain.

V. DEMURRER TO COUNT FOUR

25. In Court Four, plaintiff contends that both

defendants are in a special or fiduciary relationship with

plaintiff and that their breach of their fiduciary duties

gives rise to the need for imposition of a constructive

trust over 3,000,000 shares of Equimark common stock for

plaintiff’s benefit. (Complaint {{ 45, 47.)

26. Under Pennsylvania law, a constructive trust

will be imposed only if it is shown that the person hold-

ing property acquired it is some way that creates an

equitable duty in favor of the plaintiff.

27. Plaintiff has failed to plead sufficient facts

against either defendant to justify imposition of a con-

structive trust. Nowhere in the Complaint is it alleged

that Equibank ever received or had possession of any

Equimark common stock which it was obligated to con-

vey to plaintiff nor is it alleged that Equimark had any

legal or equitable duty to distribute its own stock to

plaintiff. Accordingly, defendants demur to Count Four.

WHEREFORE, for the foregoing reasons, defendants

respectfully request that this Honorable Court enter an

Order sustaining defendants’ Preliminary Objections

Respectfully submitted,

ROSE, SCHMIDT, HASLEY &

DiISALLE

By /s/ Edward C. Schmidt

Edward C. Schmidt

Gordon W. Schmidt

Mary T. DePasquale

900 Oliver Building

Pittsburgh, PA 15222-5369

(412) 434-8600

Attorneys for Equibank and

Equimark Corporation

VERIFICATION

The undersigned hereby verifies the averments con-

tained in the foregoing Preliminary Objections are true

and correct to the best of his knowledge, information and

belief. This Verification is made subject to the penalties of

18 Pa. CS. § 4904, relating to unsworn falsifiction to

authorities.

Date: 12/21/88 (Illegible)

E10

IN THE COURT OF COMMON PLEAS OF

ALLEGHENY COUNTY, PENNSYLVANIA

JAMES W. LASH, individually

and on behalf of other Equibank

employees and former employees

similarly situated, No. G.D. 88-19416

Plaintiffs,

EQUIBANK, a Pennsylvania

Banking Institution, and

EQUIMARK CORPORATION,

a Delaware Corporation,

)

Defendants.

ORDER

AND NOW This day of __, 1989, defendants

Equibank and Equimark Corporation having filed prelim-

inary objections to the Complaint,

IT IS HEREBY ORDERED, ADJUDGED AND

DECREED that Count One be dismissed for failure to

state a claim upon which relief can be granted.

BY THE COURT:

Ell

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and cor-

rect copy of the foregoing document, Preliminary Objec-

tions, was sent by first-class mail, postage prepaid to

counsel of record as follows:

Michael P. Malakoff

Fred S. Longer

Berger, Kapetan, Malakoff &

Meyers

508 Law and Finance Building

Pittsburgh, PA 15219

Date: 12-21-88 /s/ Edward C. Schmidt

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.