Khan v. Grotnes Metalforming Systems, Inc.

• Decision Date: 27 January 1988
• Docket Number: No. 84 C 7165.,84 C 7165.
• Parties: Kalim KHAN, Robert Makowski, John Nape, Frank Soesman and Calvin Vernon, individually and on behalf of all those similarly situated, Plaintiffs, v. GROTNES METALFORMING SYSTEMS, INC., Grotnes Metalforming Systems, Inc. Pension Plan, John G. Mack, Jr. and Christian H. Stettler, Defendants.
• Court: U.S. District Court — Northern District of Illinois

679 F. Supp. 751

Kalim KHAN, Robert Makowski, John Nape, Frank Soesman and Calvin Vernon, individually and on behalf of all those similarly situated, Plaintiffs, v. GROTNES METALFORMING SYSTEMS, INC., Grotnes Metalforming Systems, Inc. Pension Plan, John G. Mack, Jr. and Christian H. Stettler, Defendants.

No. 84 C 7165.

United States District Court, N.D. Illinois, E.D.

January 27, 1988.

COPYRIGHT MATERIAL OMITTED

Michael M. Mulder, Lei Ann Marshall-Cohen, Meites & Frackman, Thomas R. Meites, Chicago, Ill., for plaintiffs.

Lee T. Polk, Arthur B. Smith, Jr., David B. Ritter, Murphy, Smith & Polk, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

HOLDERMAN, District Judge:

Plaintiffs filed this employment discrimination suit against defendants on August 17, 1984. Plaintiffs' complaint contains four counts. Count I alleges that defendants discriminated against plaintiffs on the basis of age in violation of the Age Discrimination in Employment Act of 1967, 29 U.S.C. 621 et seq. (hereinafter "ADEA"). Count II alleges that defendants discriminated against plaintiffs on the basis of national origin in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., as amended (hereinafter "Title VII"). Finally, plaintiff Makowski claims in Counts III and IV that defendants violated his rights under the ADEA and the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1001 et seq. (hereinafter "ERISA"), respectively, in the way they calculated his pension benefits.

Pending before this court are two motions. Plaintiffs seek to substitute the Estate of John G. Mack, Jr. with Catherine Mack as executrix, for John G. Mack, Jr. as a defendant in this action. Plaintiffs base this motion on Fed.R.Civ.P. 25(a). Defendants request the court to grant a summary judgment as to all four counts of the complaint. For the reasons set out below, plaintiffs' motion to substitute parties is granted. Defendants' motion for summary judgment is granted as to Counts II, III, and IV and denied as to Count I.

BACKGROUND FACTS

A. The Defendants

Grotnes Manufacturing Systems, Inc. ("Grotnes") manufactures metalforming equipment for sale to manufacturers in the United States and abroad. At the time of the terminations, the company was organized into seven divisions: Engineering, Sales, Accounting, Manufacturing, Data Processing, Personnel, and the Executive Offices.

Defendant John G. Mack, Jr., defendant Heinz Stettler and a corporation, Carl Marks & Co., Inc., which is not a party to this lawsuit, held equity interests in Grotnes at the time it was incorporated on September 30, 1980. Mr. Mack served as Grotnes' Chairman and Chief Executive Officer from the date of incorporation. Mr. Stettler served as President of Grotnes from the date of incorporation until he retired on April 30, 1985.

Beginning in September, 1982 Grotnes experienced financial decline. Grotnes' first financial loss occurred in the first quarter of 1983; these losses continued through the second quarter of 1983. Sales declined steadily from mid-1982 to mid-1983. Similarly, the backlog of orders declined from mid-1981 through the date of plaintiffs' termination. Then, in early 1983 Grotnes failed to obtain three separate orders from Ford Motor Company for rim-forming and rim-welding equipment totaling more than $10 million in sales.

As a result of these developments, Grotnes' management began to implement cost cutting measures, including freezing salaries, curtailing fringe benefits, and terminating the company pension plan. Eventually, the business downturn forced Grotnes to reduce the salaried workforce. Thus, on March 25, 1983 Mack and Stettler terminated eighteen employees effective March 31, 1983. Of these eighteen employees, fifteen were between 40 and 70 years of age, and none were of Swiss origin.

B. The Plaintiffs

Each plaintiff is a former salaried employee of Grotnes, and claims that his termination resulted from Grotnes discriminating against him on the basis of age and national origin.

Grotnes hired plaintiff Kalim Kahn as a draftsman on March 22, 1965. During his tenure at Grotnes, Kahn (who was 41 when terminated) received five promotions. Kahn's last promotion in June, 1979 was to the position of Associate Project Engineer in Grotnes' engineering department. Kahn, during his tenure with Grotnes, received 23 raises. After Mr. Kahn's termination, two employees, Georg Zweifel (27 years old) and Andrew Chapman (24 years old), remained in the engineering department in positions which Kahn had held prior to his promotion to Associate Project Engineer.

Kahn did not have an unblemished personnel record. Kahn received a written warning from his supervisor, Alex Weisheit, for sending a "death wish" note and other harrassing messages to Diane Arnold, a secretary in the engineering department. Moreover Kahn had a history of confrontations with his co-plaintiff Calvin Vernon. These resulted in written complaints.

Grotnes hired plaintiff Calvin Vernon as an accounts payable clerk in October, 1969. By the time of his termination from Grotnes, Vernon (then 56 years old) had been promoted to the position of Supervisor, Accounts Payable and Sales Tax in Grotnes' accounting department. During the 13 years Vernon worked at Grotnes, he had received seventeen pay increases.

Vernon also had some difficulties with fellow employees over the years he worked for Grotnes. In addition to his altercations with Kahn mentioned above, Vernon was involved in an incident with a fellow employee over a parking space. Vernon notes that this incident occurred more than ten years before Vernon's termination.

Plaintiff Frank Soesman began work with Grotnes in May, 1971 as a general accountant. During his eleven years of service for Grotnes, Soesman received two promotions and seventeen salary increases. At the time of his termination, Soesman (who was then 46 years old) held the position of Accountant Analyst — Cost and General Accounting.

Soesman, like Vernon and Kahn, was involved in an incident with a fellow employee over the correct way to perform certain accounting functions. Although Soesman testified in his deposition that this argument nearly led to "physical confrontation," Soesman was not issued a written warning.

Plaintiff Robert Makowski was hired by Grotnes as a material handler in July 1950. In October, 1962 Makowski moved into management as a machine shop foreman. At the time of his termination in 1983, Makowski (then 50 years old) held the position of Foreman-Equipment and Assembly. After Grotnes terminated Makowski, George Koester (then 40 years old) and then Timothy McCarthy (then 34 years old) assumed the position of Foreman for both machine shop and assembly. The evidence reveals that Makowski's supervisor did not believe Makowski's work performance warranted his termination.

Plaintiff John Nape (who was 53 years old when terminated) was hired by Grotnes as a production controller in February, 1969. He remained in that position until he was terminated in 1983. During this time, Nape received eighteen different salary increases. Upon Nape's termination, Dennis Jans (then 34 years old) approached Nape and said that Nape's duties would be his, Jans', responsibility. The evidence shows that Mack believed that Nape was "a good conscientious worker" who "generated a lot of data and a lot of detail." (Mack Dep. at 23.)

At the time of the plaintiffs' terminations, Grotnes had six Swiss employees on the salaried payroll. One of these employees worked in the Executive Offices (where no plaintiff had worked), one worked in Sales (where no plaintiff had worked), and four worked in Engineering (where Kahn had worked). None of these Swiss employees were discharged when Grotnes reduced its workforce on March 31, 1983.

C. The Pension Plan

Grotnes' Pension Plan (the "Plan") is an employee benefit plan within the meaning of Section 3(3) of ERISA, 29 U.S.C. § 1002(3), and thus is governed by the provisions of ERISA (Mack Aff. ¶ 9). The Plan covers salaried employees, and has complied with the requirements of Section 401(a) of the Internal Revenue Code since its establishment.

One provision of the Plan provides an enhanced pension to individuals who have thirty years of credited service to Grotnes. Such eligible employees could receive this 30-year retirement benefit at any age without an actuarial reduction for early commencement of monthly payments. The "30 years" plan provides a lump sum "special payment" for the first three months after termination which is calculated according to the employees' vacation pay entitlement. After this first three months, the employee receives the regular pension payment for life. At age sixty-five, the pension amount is recalculated under a different formula and the employee receives any higher monthly payment which results.

The events which occurred after plaintiff Makowski's termination from Grotnes, taken in the light most favorable to the plaintiff, indicate that shortly after his termination Makowski received a letter from Larry Hamilton, the Grotnes' Manager of Personnel and Safety. This letter outlined Makowski's termination benefits. In addition to giving Makowski this letter, Hamilton assured Makowski (1) that Makowski would receive his severance pay; (2) that Grotnes would continue to pay premiums on Makowski's medical and life insurance for a period of six months; and (3) that these provisions would not affect Makowski's retirement.

Because Grotnes credited Makowski with thirty-two years of service upon his termination, Makowski was eligible for the 30-year enhanced retirement plan. Therefore, on May 20, 1983 Hamilton informed Makowski that Makowski would have to apply for his retirement immediately. On June 1, 1983 Hamilton told Makowski that the severance pay he received upon his termination would be deducted from his pension benefits pursuant to the terms of the Plan. On that date,...