Viggiano v. Shenango China Div. of Anchor Hocking Corp., s. 84-3059
| Citation | 750 F.2d 276 |
| Decision Date | 19 December 1984 |
| Docket Number | 84-3075,Nos. 84-3059,s. 84-3059 |
| Parties | 118 L.R.R.M. (BNA) 2124, 102 Lab.Cas. P 11,284, 5 Employee Benefits Ca 2481 James VIGGIANO, Anthony Conti, Anthony Smiley, for themselves and all persons similarly situated, Appellants in 84-3075, v. SHENANGO CHINA DIVISION OF ANCHOR HOCKING CORPORATION, Appellant in 84-3059. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Henry J. Wallace, Jr. (argued), Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for appellant Shenango China Div.
William T. Payne, (argued), Daniel P. McIntyre, United Steelworkers of America, Pittsburgh, Pa., for appellees Viggiano, Conti, and Smiley.
Before ALDISERT, Chief Judge, HUNTER and WEIS, Circuit Judges.
The dispute in this case is whether an employer was required to continue payment of premiums for a group hospitalization plan for its employees during a strike. Because the employer's obligation to fund the Plan had its roots in the collective bargaining agreement, we conclude that the parties should resort to its grievance procedures in the first instance rather than ERISA's judicial remedies. For that reason we will vacate the district court's summary judgment on the merits, 574 F.Supp. 861, and remand for the entry of a stay.
Alleging violations of fiduciary duties, plaintiffs brought this suit under Section 502 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1132 (1982), against their employer, Shenango China Division of Anchor Hocking Corporation. The district court granted the plaintiffs' motion for summary judgment and denied the defendant employer's motion for dismissal under Fed.R.Civ.P. 12(b)(1). Both parties have appealed.
The controversy is about the employer's unilateral termination of the hospital and surgical benefits insurance Plan for employees and their dependents. The insurance program, negotiated by the company and the United Steelworkers Union representing the employees, is mentioned in the labor agreement but not in detail. A provision for continuation of the Plan and funding by the employer was included in the collective bargaining agreement effective for a three-year period beginning March 1, 1980. A similar clause had appeared in several earlier contracts.
When the union went on strike at the termination of the contract on February 28, 1983, the company stated it would no longer make payments to Blue Cross/Blue Shield, which had administered the insurance Plan. The company also notified health care providers in the New Castle, Pennsylvania area, where the plant was located, that the insurance program for its employees had been discontinued.
The strike was settled about four weeks later, on March 27, 1983, when the union and the company agreed on a new contract. During the strike, some union members or their dependents had received medical or hospital services. As part of the strike settlement, the company agreed to pay either the premiums for interim coverage for those persons who had been treated, or the actual amount of their bills, whichever was less. 1 Consequently, no employee suffered any financial loss because of the company's short-lived refusal to continue the medical insurance Plan.
This suit was filed about five weeks after the strike was settled. Plaintiffs brought the action on behalf of all employees eligible for coverage under the Plan. They alleged that the company's refusal to continue insurance coverage during the strike caused them to suffer anxiety and hardship, and would do so in the future. The complaint asserted the company had violated provisions in the insurance Plan which stated that if participants "are absent because of a strike or lockout of employees of the company, your coverage ... will continue ... [but] will terminate six months after your last day worked." 2
Plaintiffs contended that the company violated its fiduciary duties under ERISA by terminating the insurance to gain leverage during contract negotiations and limit financial obligations under the Plan. Injunctive relief against future denials of coverage was requested, as were compensatory and punitive damages.
The employer asserted that its obligation to pay premiums was governed by the collective bargaining agreement, which provided that "the agreements of the parties ... including the ... insurance program presently in effect ... shall continue in effect to and including midnight of February 28, 1983." Shenango also pointed out that the Plan booklet contained a provision stating that the insurance coverage ends "when the group contracts are discontinued." The company contended, however, that the suit should be dismissed because plaintiffs had failed to submit the dispute to arbitration as provided in the collective bargaining agreement.
The district court noted that the grievance procedures applied to disputes defined as "points of contention" regarding "wages, working conditions, contract interpretation and application." However, in the court's view, those provisions did not include controversies about employees "denied insurance benefits" under the Plan. The court observed that under the terms in the Plan booklet an employee could submit a claim for denial of benefits to Blue Cross as well as file suit in a state or federal court. Having determined that the employer's action did not come within the scope of the grievance provisions, the court denied the company's motion to dismiss.
The court concluded that "it is clear on the undisputed facts that Shenango violated the specific terms of the collective bargaining agreement when it terminated the employees' insurance premiums in the face of the six-months insurance coverage provision in the Group Insurance Plan." The employer was also found to have violated its fiduciary duty under ERISA because the termination was "not solely in the interest of the plan participants nor for their exclusive benefit, as required by a fiduciary."
The court rejected the plaintiffs' contention that the company had been unjustly enriched and denied the request for punitive damages. The court entered judgment against defendant for nominal damages and attorneys' fees.
On appeal, the employer contends that plaintiffs are required to exhaust the remedies set out in the Plan booklet and the grievance procedures in the collective bargaining agreement. Plaintiffs maintain that Shenango reaped a profit through a breach of fiduciary duty 3 and should be required to restore that amount to the Plan. They also contend that punitive damages should have been awarded as a deterrent.
These appeals raise substantial questions about the relationship between the judicial remedies provided by ERISA and the arbitration favored by general principles of labor law. ERISA provides for immediate access to the federal courts without resort to the labor arbitration forum in proper circumstances. See Schneider Moving & Storage Co. v. Robbins, --- U.S. ----, 104 S.Ct. 1844, 80 L.Ed.2d 366 (1984). But that result does not automatically follow in each instance where there is a controversy over some phase of employee welfare benefit plan as defined by ERISA. Resort to arbitration may still be appropriate where the parties contest the meaning of a term in a collective bargaining agreement.
Whether the resolution of a controversy should proceed under ERISA or under a labor contract is not always clear, and in the nature of things, at times, there is an overlap. It is helpful, therefore, to put the current dispute in context.
As the district court noted, because all medical expenses incurred during the strike were covered by the terms of the settlement, no individual plaintiff or employee suffered any monetary loss. Moreover, although individual employees are named as plaintiffs, it is apparent that the union is the actual party in interest. The district court recognized the realities of the situation and in its opinion on several occasions referred to the "Steelworker Union's motion for summary judgment" and noted what the "Steelworker's Union alleges" or "contends."
Convinced that the company improperly used the hospitalization insurance issue as a bargaining tool during the strike, the union seeks an injunction to avoid a reoccurrence. To solidify its position, the union also wishes to penalize the company through punitive damages and by requiring "disagreement" to the Plan. A substantial part of the union's argument rests on the company's payment of premiums during earlier strikes when the labor contracts contained the same provision in material aspects.
The employer, on the other hand, contends that its obligation to pay for insurance is limited to the duration of the collective bargaining agreement. In support of this contention, the employer refers to clauses in the labor contract and to language in the group insurance Plan booklet.
It is apparent that no controversy exists between the parties about the claim of any specific individual. Nor is there any dispute as to whether certain services are within the scope of the Plan, or whether certain persons are eligible for benefits. The question at issue is a limited one--when must the employer maintain coverage. 4
To resolve the matter, we must decide whether the answer is to be found in the collective bargaining agreement or ERISA's provisions. As a preliminary observation, it is helpful to remember that ERISA's concern is with the elements of a plan and its administration after it has been established rather than to mandate the creation of a program. ERISA does not require an employer to establish a hospitalization plan nor continue it indefinitely.
In Sutton v. Weirton Steel Div. of National Steel Corp., 724 F.2d 406 (4th Cir.1983), cert. denied, --- U.S. ----, 104 S.Ct. 2387, 81 L.Ed.2d 345 (1984), the Court of Appeals held that an employer could terminate ancillary, nonvested benefits without violating ERISA. In refusing to...
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...F.2d 747 (1984). 4 The court believes that the Third Circuit would also reject Kross. Thus, in Viggiano v. Shenango China Division of Anchor Hocking Corp., 750 F.2d 276, 280-281 (3d Cir.1984), the court required arbitration of a dispute concerning employee benefits arising under a collectiv......
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