Williams v. WCI Steel Co., Inc.

• Decision Date: 17 March 1999
• Docket Number: AFL-CI,CLC,No. 97-3984,97-3984
• Parties: 160 L.R.R.M. (BNA) 2713, Pens. Plan Guide (CCH) P 23952H Thomas C. WILLIAMS, Plaintiff, Roosevelt Cook, Ray L. Reber, Individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. WCI STEEL COMPANY, INC.; United Steelworkers of America,; Thomas A. Fair; Raymond McDonald, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 598

170 F.3d 598

160 L.R.R.M. (BNA) 2713, Pens. Plan Guide (CCH) P 23952H

Thomas C. WILLIAMS, Plaintiff, Roosevelt Cook, Ray L. Reber, Individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. WCI STEEL COMPANY, INC.; United Steelworkers of America,

AFL-CIO, CLC; Thomas A. Fair; Raymond McDonald,

Defendants-Appellees.

No. 97-3984.

United States Court of Appeals, Sixth Circuit.

Argued July 29, 1998.

Decided March 17, 1999.

Joseph F. Hutchinson, Jr. (briefed), Marc B. Merklin (argued and briefed), Brouse & McDowell, Akron, OH, for Plaintiffs-Appellants.

James L. Blomstrom, Harrington & Mitchell, Youngstown, OH, Jeffrey S. Russell (briefed), Gregory A. Hewett (briefed), Thomas C. Walsh (briefed), Law Office of Bryan Cave, St. Louis, MO, Julia Penny Clark (argued and briefed), Paul M. Zimmerman (briefed), Bredhoff & Kaiser, Washington, D.C., for Defendants-Appellees.

Before: JONES, RYAN, and MOORE, Circuit Judges.

OPINION

PER CURIAM.

Plaintiffs-appellants Roosevelt Cook and Ray L. Reber, on behalf of themselves and a class of persons similarly situated ¹ (collectively "plaintiffs") seek reversal of the district court's dismissal of their lawsuit against WCI Steel Company ("WCI"), the United Steel Workers of America ("USWA"), AFL-CIO, Thomas A. Fair, and Raymond McDonald (collectively "defendants") seeking to restore benefits allegedly promised in a 1988 trust agreement. In the lawsuit, the plaintiffs asserted claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), section 301 of the Labor Management Relations Act of 1947, 29 U.S.C. § 185 ("LMRA"), and state claims for breach of contract and breach of fiduciary duty. For the reasons stated herein, we reverse and remand the district court's dismissal of the LMRA § 301 claim, but otherwise affirm the judgment below.

I.

Defendant-appellee WCI owns and operates a steel manufacturing facility in Warren Ohio, which it purchased from LTV Steel Company ("LTV") in 1988. Defendant-appellee USWA represented employees of the facility both before and after the sale to WCI. Fearful that the change in ownership would adversely affect the workers of the facility, the sale was conditioned upon the entering of an agreement (the "Memorandum Agreement") to provide funding of certain benefits in the event that WCI, a new company with no historic labor record, shut down the facility and was unable to pay liabilities to the union and its members.

The Memorandum Agreement was formulated between LTV and its workers on August 30, 1988. Among other things, the Memorandum Agreement called for the creation of a Security Enhancement Trust ("SET") funded by WCI in the amount of $21 million. The SET was formally created in November 1990 by LTV, USWA, and the Bank One Trust Company. Additionally, the Memorandum Agreement called for the appointment of two trustees. Defendants-appellees McDonald and Fair were the trustees appointed by USWA and WCI, respectively.

Only one of the provisions of the Memorandum Agreement is at issue in this appeal. The Memorandum Agreement stated that, if the facility did not close within seven years, then within 30 days thereafter, the funds specified above would be used to "provide employee and/or retiree benefits for Recipient Employees and the SET shall be dissolved." J.A. at 39. "Recipient Employees" were defined as employees of the facility who were participating in the LTV pension plan at the time of the sale. J.A. at 38. At the close of the seven-year period in 1995, some Recipient Employees remained as active WCI employees and some, including the named plaintiffs in this appeal, had retired.

The facility was not shut down during the seven-year period and, by 1995, the SET assets had grown to $28,400,000. However, a bitter and prolonged strike began at the facility one day after the seven-year period expired. In October 1995, pursuant to a new collective bargaining agreement, USWA and WCI agreed to an allocation of the residue of the SET assets. The assets were used to provide initial funding for a new WCI pension plan, to provide retiree life and health care benefits, and to fund bonuses for Recipient Employees. Plaintiffs allege that the new pension plan diverted approximately half of the trust funds for the benefit of not only the Recipient Employees, but also workers hired by WCI after the 1988 purchase of the facility.

On January 23, 1996, plaintiffs brought suit in the district court. Following two amendments to the complaint, defendants filed a motion to dismiss. ² The defendants argued that (1) the Memorandum Agreement was not an "employee benefit plan" as recognized by ERISA, (2) the plaintiffs did not have a "vested" interest in the claimed benefits under § 301 of the LMRA, and (3) plaintiffs' state law claims were preempted by § 301. On July 31, 1997, the district court granted the motion and dismissed the complaint in its entirety.

This timely appeal followed. This court has jurisdiction pursuant to 28 U.S.C. § 1291.

II.

The three difficult issues present in this case were not adequately addressed by the district court's disposition. Of the three-the construction of ERISA and LMRA, and the preemption of state claims, the district court inexplicably addressed only the ERISA claim. This may, in part, explain the brevity of the Memorandum Order which was a scant six pages in length, and contained no legal reasoning or discussion of the LMRA or state law claims.

On this point, we are instructed by this court's opinion in Terry Barr Sales Agency, Inc. v. All Lock Co., 96 F.3d 174, 178 (6th Cir.1996). Writing for the court, Chief Judge Martin expressed "strong disapproval" at the district court's failing to provide a written explanation of its analysis in dismissing a case. He wrote that such an explanation "would have been extremely helpful for review in this case." We hold the same view with respect to this case. However, rather than remand, which would further delay final disposition to the unfair detriment of the parties, we will proceed to the merits of the issues in this case.

III.

Dismissal of a complaint under Fed.R.Civ.P. 12(b)(6) is a question of law subject to de novo review. Sistrunk v. City of Strongsville, 99 F.3d 194, 197 (6th Cir.1996); Bower v. Federal Express Corp., 96 F.3d 200, 203 (6th Cir.1996). Dismissal may be granted only if "it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Ang v. Procter & Gamble Co., 932 F.2d 540, 544 (6th Cir.1991) (citing Conley v. Gibson, 355 U.S. 41 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). We must construe the complaint in a light most favorable to the plaintiff, and accept all factual allegations as true. Sistrunk, 99 F.3d at 197; Cline v. Rogers, 87 F.3d 176, 179 (6th Cir.), cert. denied, 519 U.S. 1008, 117 S.Ct. 510, 136 L.Ed.2d 400 (1996).

The district court dismissed the plaintiffs' ERISA claim because it found that the Memorandum Agreement did not qualify as an "employee benefit plan," and thus, merited no ERISA protection. Plaintiffs argue on appeal that the Memorandum Agreement provision, directing the SET trustees to allocate the trust residue to "provide employee and/or retiree benefits for Recipient Employees," qualifies as an ERISA plan. Under ERISA, an "employee benefit plan" may be either an "employee welfare benefit plan" and/or an "employee benefit pension plan." 29 U.S.C. § 1002(3); Fugarino v. Hartford Life & Acc. Ins. Co., 969 F.2d 178, 183 (6th Cir.1992). An "employee welfare plan" is defined as

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical or hospital care or benefits, or benefits in the event of sickness, accident, disability, death, or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on the retirement or death, and insurance to provide such pensions).

29 U.S.C. § 1002(1)(West Supp.1998). An "employee pension benefit plan" is

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program (i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the benefits under the plan or the method of distributing the benefits from the plan.

29 U.S.C. § 1002(2)(A) (West Supp.1998).

In determining whether or not a benefit plan exists under ERISA, courts have generally followed the approach as articulated by the Eleventh Circuit in Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.1982)(en banc ). Under the Dillingham test, an ERISA plan exists if a reasonable person can ascertain (1) the intended benefits, (2) the class of beneficiaries, (3) the source of financing, and (4) the procedures for receiving benefits. Id. at 1373. ³ The purported plan need not be formal or written to qualify as an ERISA benefit plan, but rather, the court must look to the "surrounding circumstances" to see if the four factors have been met. Id. at 1372-73; accord Fugarino, 969 F.2d at 185.

Two of the Dillingham factors are not in dispute in this appeal. The class of beneficiaries and source of funding for the residual "employee and/or retiree benefits" promised in the Memorandum Agreement are...