Ganton Technologies, Inc. v. National Indus. Group Pension Plan

• Decision Date: 07 February 1996
• Docket Number: No. 292,D,292
• Citation: 76 F.3d 462
• Parties: , 19 Employee Benefits Cas. 2665, Pens. Plan Guide P 23917N GANTON TECHNOLOGIES, INC., and Shirley Klamm, Ronald Brown and Craig Small, as employees of Ganton Technologies, Inc., Plaintiffs-Appellants, v. NATIONAL INDUSTRIAL GROUP PENSION PLAN, a Multi-employer Trust Fund, Stanley L. Eisner, Ronald William Borst, Michael Kelly, A.E. Samson, Richard Shirley, Milford E. Woodbeck, Elmer Chatak, Dominick D'Ambrosio, Edgar Ball, Odessa Komer, and Harvey Martin, as Trustees of the National Industrial Group Pension Plan, Defendants-Appellees. ocket 95-7323.
• Court: U.S. Court of Appeals — Second Circuit

Page 462

76 F.3d 462

64 USLW 2520, 19 Employee Benefits Cas. 2665,

Pens. Plan Guide P 23917N

GANTON TECHNOLOGIES, INC., and Shirley Klamm, Ronald Brown

and Craig Small, as employees of Ganton

Technologies, Inc., Plaintiffs-Appellants, v. NATIONAL INDUSTRIAL GROUP PENSION PLAN, a Multi-employer

Trust Fund, Stanley L. Eisner, Ronald William Borst, Michael

Kelly, A.E. Samson, Richard Shirley, Milford E. Woodbeck,

Elmer Chatak, Dominick D'Ambrosio, Edgar Ball, Odessa Komer,

and Harvey Martin, as Trustees of the National Industrial

Group Pension Plan, Defendants-Appellees.

No. 292, Docket 95-7323.

United States Court of Appeals, Second Circuit.

Argued Oct. 2, 1995.

Decided Feb. 7, 1996.

H. Roderic Heard, Chicago, IL (Cheryl A. Kettler, Kimberly E. Roy, Wildman, Harrold, Allen & Dixon, Chicago, IL, Thomas J. Smith, Mark R. Crosby, Thomas M. Geisler, Wildman, Harrold, Allen, Dixon & Smith, New York City, of counsel), for Appellants.

Linda E. Rosenzweig, New York City (Philip M. Berkowitz, Epstein Becker & Green, New York City, of counsel), for Appellees.

Before: MESKILL, KEARSE and ALTIMARI, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from a judgment of the United States District Court for the Southern District of New York, Stanton, J., granting defendant-appellee National Industrial Group Pension Plan's (NIGPP) motion for summary judgment and dismissing plaintiff-appellant Ganton Technologies, Inc.'s (Ganton) claim that NIGPP violated the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461, and that the trustees of NIGPP violated their fiduciary duties imposed by ERISA. The claims arose out of Ganton's withdrawal from NIGPP and NIGPP's denial of Ganton's request for a transfer of plan assets to Ganton, which desired to start an independent pension plan.

BACKGROUND

From 1967 to 1992, Ganton and its predecessor in interest, Racine Die Cast Company (Racine) contributed to NIGPP on behalf of their employees pursuant to collective bargaining agreements with United Auto Workers Local 627. Racine entered into a participation agreement dated August 14, 1967 by which Racine agreed to be bound by the NIGPP Agreement and Declaration of Trust (the "Plan") and to contribute to NIGPP.

This lawsuit arose because Ganton and its employees believed they could gain more benefits from their contributions if they withdrew from NIGPP, a multiemployer pension plan, and formed their own single-employer pension plan. Contributions to multiemployer pension plans are negotiated by labor Multiemployer plans, as the name indicates, consist of several employers that contribute to one plan. The assets of the plan are not segregated into accounts. ¹ The common assets are invested and used to pay pensions to those employees of the participating employers whose rights vest according to the requirements set out in the plan document.

unions and individual employers, but the size of the pension paid to employees is determined by the plan.

Multiemployer plans like NIGPP have liabilities and assets. The assets consist of the contributions made by participating employers in accordance with agreements made with the union representing its employees. The liabilities consist of the payments the plan must make to employees whose rights vest, generally consisting of a stream of payments beginning when an employee reaches a certain age and has retired.

The amount paid in benefits by the plan will be the same for employees of equal seniority whose employers contribute at the same rate, but there is no guaranteed tie between the amount contributed on behalf of a particular employee and the amount the employee actually will receive. See Caterino v. Barry, 8 F.3d 878, 879-80 (1st Cir.1993) (describing multiemployer Teamsters Pension Fund). In this case, Ganton contends that it could have provided pension benefits for its employees equal to those its employees receive under NIGPP, but for a lesser contribution, had Ganton created a single-employer plan itself. Ganton claimed this to be the case because of the "changed demographics" of its workforce. ² Ganton considers any portion of the contributions it made that would not have been necessary in a single-employer plan to be "surplus" in which it has an interest.

Ganton requested that NIGPP transfer NIGPP's liabilities relating to the pensions of Ganton's employees and that NIGPP concurrently transfer to Ganton's new plan the portion of NIGPP assets attributable to Ganton's past contributions. Ganton then would use the assets to fund its new single-employer plan (the Ganton Plan), and would pay the already vested pensions itself. In this way, Ganton employees would retain their pensions and Ganton could take the "surplus" it would receive back from NIGPP and put it to other uses. NIGPP refused, and this action was commenced.

As we discuss below, nothing prevents Ganton and its employees from leaving NIGPP to start their own plan for hours worked in the future. The question is whether Ganton and its employees can force NIGPP to transfer liabilities accrued in the past and the supporting plan assets to Ganton's plan, so the Ganton Plan can take the place of NIGPP as the provider of Ganton employees' pensions for the already accrued pension benefits.

A. Proceedings Before the District Court

Ganton and three of its employees brought this suit in the Southern District of New York against NIGPP, a multiemployer defined-benefit pension plan, claiming that NIGPP violated ERISA and the Labor Management Relations Act (LMRA), 29 U.S.C. §§ 141-187, by refusing to transfer to the Ganton Plan that portion of NIGPP's assets attributable to Ganton's contributions. ³ Plaintiffs also alleged that the individual trustees violated their fiduciary duties to

                Ganton's employees by failing to conduct an individualized review of Ganton's request and by denying the request in violation of the Plan documents.   Defendants sought summary judgment dismissing Ganton's ERISA claims.   The district court found that there were no material factual disputes and granted summary judgment in favor of defendants.   Ganton brought this appeal
                

B. Standard of Review

We review de novo the district court's grant of summary judgment. Tomka v. Seiler Corp., 66 F.3d 1295, 1304 (2d Cir.1995).

C. Section 1414 Claim

Appellants claim that NIGPP was required under ERISA § 4234(a), 29 U.S.C. § 1414(a), to transfer the plan assets attributable to Ganton's contributions to the Ganton Plan on request. Section 1414(a) states that:

A transfer of assets from a multiemployer plan to another plan shall comply with asset-transfer rules which shall be adopted by the multiemployer plan and which--

(1) do not unreasonably restrict the transfer of plan assets in connection with the transfer of plan liabilities, and

(2) operate and are applied uniformly with respect to each proposed transfer, except that the rules may provide for reasonable variations taking into account the potential financial impact of a proposed transfer on the multiemployer plan.

29 U.S.C. § 1414(a). At issue are two competing interpretations of section 1414(a).

1. The District Court's Construction

The district court reasoned that section 1414(a)(1) requires that if a plan chooses to transfer liabilities to another plan after such a transfer is requested, then the rules for such transfers must not unreasonably restrict the concurrent transfer of the assets that support those liabilities. Section 1414(a)(2) requires that the rules plans promulgate to ensure that assets are transferred along with the liabilities as required by 1414(a)(1) are themselves applied uniformly. In the end, the district court reasoned, the decision whether to transfer liabilities, and thus the assets along with them, is in the discretion of the plan trustees.

2. The Appellant's Construction

Ganton argues that although section 1414(a)(1) explicitly forbids only the "unreasonabl[e] restrict[ion]" of plan asset transfers "in connection with" a transfer of plan liabilities, the section requires plans not to restrict the transfer of assets and liabilities on the request of a participating employer unreasonably. In other words, instead of a rule that requires plans to release assets when they release liabilities, appellant argues that section 1414(a)(1) means that a plan cannot "unreasonably restrict" the transfer of assets and liabilities together when a participating employer requests such a transfer. Under Ganton's construction, a plan can only refuse an asset transfer if it determines that such a transfer would financially threaten the plan.

3. Discussion

We find support for the district court's construction in the opinion of Justice (then-Chief Judge) Breyer, writing for the First Circuit in Caterino, 8 F.3d 878. In Caterino, the First Circuit faced the question of whether section 1414 required the transfer of assets, and held that section 1414 requires the transfer of plan assets only when the plan agrees to transfer liabilities to another plan. Id. at 885; Vornado, Inc. v. Trustees of The Retail Store Employees' Union Local 1262, 829 F.2d 416, 419-21 (3d Cir.1987). We agree with the First and Third Circuits that the purpose of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. §§ 1381-1461, and the workings of multiemployer plans eliminate any ambiguity in section 1414.

The construction of section 1414 advanced by appellant is inconsistent with the policies behind ERISA as it applies to multiemployer plans. In 1980, Congress, through the passage of the MPPAA, addressed a problem that arose because of the manner in which ERISA applied to multiemployer plans. As the Supreme Court recently stated, ERISA, before the passage of the MPPAA encouraged an employer to withdraw from a financially shaky plan and risk paying its share if the plan later became insolvent, rather than to remain and (if others withdrew) risk having to bear alone the entire...