## Facts

- A Chicago law firm adopted a noncontributory retirement plan for partners in 1985, tying benefits to pre-retirement earnings and limiting total payouts to 5% of the prior year’s net income.
- The plan expressly stated that the plan and all payments would terminate if the firm dissolved without a successor entity.
- Charles A. Bane retired shortly after the plan was adopted and began receiving annual pension payments payable for his life and, if applicable, his spouse’s life.
- After Bane’s retirement, the firm merged with another firm; the merger failed, and the merged firm dissolved in 1988 without a successor entity.
- Bane’s pension payments stopped upon dissolution pursuant to the plan’s termination clause.
- Bane sued members of the firm’s managing council, alleging negligent and grossly negligent management (including the merger decision) caused dissolution and the loss of his pension.
- The case proceeded in federal court on diversity jurisdiction and Illinois law; ERISA did not apply because partners are excluded from ERISA coverage.

## Issues

1. Whether, under Illinois law, managing partners owe a retired partner continuing fiduciary or negligence-based duties in managing the firm after the retired partner’s departure.
2. Whether a retirement plan’s express dissolution-termination clause permits an implied contractual duty to manage the firm to avoid dissolution that would end retiree benefits.
3. Whether a retired partner may recover purely economic loss in tort for alleged negligent business management that results in termination of pension payments.

## Decision

- The Seventh Circuit affirmed dismissal for failure to state a claim.
- The court held that Illinois law did not impose a general fiduciary or negligence-based duty running from current managing partners to a retired partner regarding post-retirement management decisions.
- The court held the retirement plan’s express term terminating benefits upon dissolution without a successor controlled and could not be overridden by an implied promise to preserve benefits.
- The court rejected tort recovery for purely economic loss based on negligent mismanagement and found strong policy reasons against recognizing such a duty.
- The court noted that management decisions such as mergers are generally insulated from liability absent allegations such as fraud, self-dealing, or intentional misconduct.

## Legal Principles

- A retired partner generally cannot invoke ongoing partnership fiduciary or negligence duties to challenge post-retirement management decisions by remaining partners.
- Express contractual terms governing retirement benefits—including termination on dissolution without a successor—control and are not displaced by implied duties that would contradict those terms.
- Illinois’ economic loss rule bars negligence recovery for purely economic damages arising from disappointed contractual expectations absent personal injury or property damage.
- Illinois law does not recognize a broad tort claim for negligent business mismanagement owed to persons suffering only economic loss; open-ended liability concerns weigh against creating such duties.
- Absent allegations of intentional wrongdoing, fraud, or self-dealing, courts are reluctant to impose liability for good-faith business judgments in managing an enterprise.

## Conclusion

The court held that, where a retirement plan expressly ends benefits upon dissolution without a successor, a retired law-firm partner cannot state Illinois-law claims against managing partners for negligent management decisions that allegedly caused dissolution and the resulting loss of pension payments.


Bane v. Ferguson, 890 F.2d 11 (7th Cir. 1989)