Coward v. Colgate-Palmolive Co.

Decision Date16 August 1982
Docket NumberNo. 81-1305,COLGATE-PALMOLIVE,81-1305
Citation686 F.2d 1230
PartiesFed. Sec. L. Rep. P 98,784, 3 Employee Benefits Ca 1992 Claude COWARD, et al., Plaintiffs-Appellants, v.CO., et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

John O. Moss, Moss & Walton, Indianapolis, Ind., for plaintiffs-appellants.

Matthew R. Westfall, Louisville, Ky., for defendants-appellees.

Before SWYGERT, Senior Circuit Judge, and CUDAHY and POSNER, Circuit Judges.

SWYGERT, Senior Circuit Judge.

Plaintiffs-appellants challenge the loss of past pension benefit credits claiming violation of the (1) Employees' Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1132, et seq., (2) Securities Act of 1933, § 17(a), 15 U.S.C. § 77q(a), (3) Securities Exchange Act of 1934, § 10(b), 15 U.S.C. § 78j(b), and Rule 10b-5 of the Securities and Exchange Commission, and (4) the Military Selective Service Act, 50 U.S.C.App. § 459(b). Before analyzing the legal issues, we review the salient facts.

I

This suit centers around an employee retirement pension plan. The original plan was funded through an annuity contract with the Equitable Life Assurance Society. Eligibility requirements as to employees' age and years of service were imposed for participation in the plan. These requirements were changed from time to time as a result of collective bargaining negotiations between Colgate-Palmolive Company and Local 15 of the International Chemical Workers Union. In 1971, these requirements were abolished and pension credits were recognized back to the date of hire for employees who had participated in the plan continuously since the time they were first eligible.

From its inception on December 31, 1943 until January 1, 1977, the pension plan was voluntary, requiring contributions from the participating employees and the company. The calculation of pension benefits was based on the amounts of contributions credited to an employee for the time he was a participant in the plan. In 1977, the plan became non-contributory and the company assumed the full financial responsibility for contributions to the plan. Coverage for pension benefits, however, was at all times based upon continuous service, excluding any period of nonparticipation while eligible or any period prior to withdrawal.

This action was instituted by plaintiffs to recover past pension benefit credits they were allegedly entitled to after the pension plan was amended to grant retroactive credits to employees who had participated continuously in the plan. Some of the plaintiffs seek to recover past pension benefit credits which the company contends were waived when the plaintiffs voluntarily withdrew from the plan. Another group of plaintiffs seeks to recover past pension credits which the company asserts were lost, pursuant to the plan's provisions, when each of the plaintiffs lost his or her employee and seniority status as a result of an extended layoff. Plaintiffs appeal from the district court's order granting summary judgment for the company.

II

ERISA was enacted by Congress to protect the pension rights of employees by establishing minimum standards for the regulation of private retirement plans. 29 U.S.C. § 1001 provides in pertinent part:

(c) It is hereby ... declared to be the policy of this Act to protect ... the equitable character and the soundness of such plans by requiring them to vest the accrued benefits of employees with significant periods of service.

To effectuate this policy, Congress prescribed minimum vesting standards and limited the circumstances for which vested rights can be divested to: death of the employee; suspension of benefits upon particular types of reemployment; certain plan amendments approved by the Secretary of Labor; and the withdrawal of benefits derived from employee contributions. 29 U.S.C. § 1053(a)(3). See Winer v. Edison Bros. Stores Pension Plan, 593 F.2d 307, 311 (8th Cir. 1979).

A

We consider first the claims of the thirty-nine plaintiffs who voluntarily withdrew from the plan. None of them had vested rights in the plan before their withdrawals. All withdrew prior to January 1, 1968, years before the enactment of ERISA, by signing waiver cards. 1 They thereupon received refunds equal to the amounts of their contributions to the plan. It is uncontroverted that, in every case, before plaintiffs withdrew from the plan, an official at Colgate-Palmolive read the waiver card to each of them, explained what they were forfeiting before they signed the cards in his presence, and wrote a note describing each withdrawal which was typed on the back of each waiver card. After withdrawal from the plan, plaintiffs at various times reenrolled, but calculation of future pension benefits was based on future service only.

Plaintiffs attempt to bring the issue of the sufficiency and extent of their waivers under the provisions of ERISA by arguing that their cause of action arose in 1976, after ERISA was enacted, when they discovered that the company was denying them their past pension benefit credits. ERISA expressly provides that, as to plaintiffs' claims under 29 U.S.C. § 1132, its preemption of state laws relating to any employee pension benefit plan "shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." 2 29 U.S.C. § 1144(b)(1) (emphasis added). A party cannot rely on pre-ERISA conduct to escape application of ERISA if the critical acts serving as the basis for the claim occurred after ERISA went into effect. Winer, supra. Similarly, plaintiffs cannot rely on the fact that they allegedly discovered the effect of their waivers after ERISA, if the critical acts constituting their effective waivers occurred before ERISA came into effect. We do not need to decide whether plaintiffs' cause of action arose at the time plaintiffs contend they became aware of the effect of their waivers because we find that plaintiffs' actions in signing the waiver cards and accepting amounts equivalent to their contributions to the plan constitute "act(s) ... which occurred, before January 1, 1975" within the meaning of 29 U.S.C. § 1144(b)(1). 3 Bacon v. Wong, 445 F.Supp. 1189, 1192 (N.D.Ca.1978).

The critical question is whether plaintiffs' conduct at the time of the alleged waiver was voluntary, intelligible, and meaningful so as to constitute an effective waiver. 4 If, in fact, the waivers of pension benefit credits were ineffective, then ERISA applies not because plaintiffs became aware of the consequences of their pre-ERISA conduct after ERISA's effective date, but because the pension credits were not effectively waived prior to the time that ERISA came into force.

A careful examination of the record satisfies us that the district court was correct in concluding that plaintiffs' conduct in signing the waiver cards, and accepting amounts equivalent to their contributions to the plan, constituted effective waivers of their pension benefit credits. We reject plaintiffs' contention that the company's continuous act of denying them pension benefit credits is a continuing breach of duty which brings their claim within the ambit of ERISA, since this construction would in effect read the exception of section 1144(b)(1) out of the statute. Martin v. Bankers Trust Co., 565 F.2d 1276, 1278-79 (4th Cir. 1977). We hold that plaintiffs cannot assert jurisdiction under ERISA as to their claim pertaining to pension credits that they waived prior to ERISA's effective date.

Because the district court did not have jurisdiction over the claims of the thirty-nine plaintiffs who withdrew from the plan, the court should not have granted summary judgment for defendants. Although, as the First Circuit has noted, "disposition of cases such as this one fall(s) within a 'gray area' where dismissal might be termed either 'jurisdictional' or 'on the merits,' " Quinn, 639 F.2d at 841 n.3, we believe that it is the better practice to dismiss cases such as this one rather than dispose of them on motions for summary judgment. We therefore vacate the judgment of the district court as to the thirty-nine plaintiffs and remand the case with instructions to dismiss the complaint for lack of jurisdiction.

B

Fourteen plaintiffs contend that they are entitled to pension credits for the periods of time prior to their layoff. Any employee who was laid off for longer than twelve months lost his status as a Colgate-Palmolive employee. A notice of discontinuance from the plan was prepared, and the employee had the option of receiving the amount of his contributions or remaining in the plan and receiving benefits in the form of an annuity based on the employee's contributions. All the plaintiffs in this case who were laid off elected the first alternative.

The company does not contradict plaintiffs' assertion that their application for pension credits was denied in 1976, subsequent to ERISA's effective date. The company contends, however, that this court lacks subject-matter jurisdiction because the events in question occurred prior to ERISA's effective date. We disagree.

The company argues that the critical "act" for purposes of ERISA, 29 U.S.C. § 1144, was the employees' termination from the plan as a result of their extended layoffs. We reject this analysis because it would place too heavy a burden on employees who participated in pension plans by requiring them to know what the plan provided in the event of an extended layoff or risk losing their cause of action. See Winer, 593 F.2d at 312. We believe that such a result is inconsistent with the purposes of ERISA. "Congress could not have meant that if any act or omission relevant to the cause of action occurred prior to January 1, 1975, state law would control. Such an interpretation would be inimical to the Congressional attempt to extend the protections of ERISA as soon as practicable." Id. at 313. We hold...

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