Rinard v. Eastern Co., C-2-89-1062.

Citation769 F. Supp. 1416
Decision Date20 August 1991
Docket NumberNo. C-2-89-1062.,C-2-89-1062.
PartiesCharles RINARD, et al., Plaintiffs, v. The EASTERN COMPANY, et al., Defendants.
CourtUnited States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio

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Timothy F. Cogan, Patrick S. Cassidy, Wheeling, W.Va., William T. Payne, Pittsburgh, Pa., for plaintiffs.

Richard A. Frye, Schwartz, Kelm, Warren & Rubenstein, Columbus, Ohio (Juan Jose Perez, of counsel), for defendants.

OPINION AND ORDER

GRAHAM, District Judge.

The present action was commenced by plaintiffs, former employees of the Pattin Manufacturing Company Division of defendant Eastern Company, on December 28, 1989. The named defendants are the Eastern Company ("Eastern"), the Eastern Company Pension Plan for Hourly-Rated Employees of the Pattin Manufacturing Company Division (the "Plan") and Colonial Bank, a trustee of the Plan and holder of the funds which are the subject of this action. Counts One, Two and Three of the complaint allege violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq.

On October 22, 1990, this court granted plaintiffs leave to file a first amended complaint, in which plaintiffs assert the additional claims of estoppel (Count Four), a violation of 29 U.S.C. §§ 1021(d) and 1344(d)(1)(B) under ERISA (Counts Five and Seven), and a violation of Section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 (Count Six). This court also certified this action as a class action except in regard to Count Four and the damage claims for emotional distress asserted in paragraph six of the prayer.

This matter is now before the court on defendants' motion for summary judgment and plaintiffs' cross-motion for summary judgment. The procedure for granting summary judgment is found in Fed. R.Civ.P. 56(c), which provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The evidence must be viewed in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Summary judgment will not lie if the dispute about a material fact is genuine, "that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). However, summary judgment is appropriate if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). See also Matsushita Electric Industrial Company, Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The record before the court reveals that the Plan was terminated following the closing of the Pattin Manufacturing Company plant in Marietta, Ohio. The funding of all of the pension benefits specified in the Plan was completely provided for through the purchase of annuities. Defendants estimate that after the purchase of these annuities, approximately $100,000 remained in the Plan's trust fund. The ultimate question presented by plaintiffs' first amended complaint is whether plaintiffs or defendant Eastern are entitled to these surplus funds.

The distribution of residual assets under ERISA is governed by the provisions of 29 U.S.C. § 1344(d)(1), which provides:

(1) Subject to paragraph (3), any residual assets of a single-employer plan may be distributed to the employer if —
(A) all liabilities of the plan to participants and their beneficiaries have been satisfied,
(B) the distribution does not contravene any provision of law, and (C) the plan provides for such a distribution in these circumstances.

Plaintiffs claim in Count One that the requirements of § 1344(d)(1)(C) have not been met, and that therefore distribution of the surplus to Eastern would violate ERISA. They assert in Count Two that the surplus should be paid to them as benefits. Defendants argue that the Plan does provide for distribution of the surplus to Eastern.

The documents before the court reveal that the pension plan for the hourly rated employees of Pattin Manufacturing dates back to 1957. Section 9 of the original version of the Plan (Toth Dep. Ex. 14) provided that

any funds not required to satisfy all liabilities of the Plan for pensions because of erroneous actuarial computations shall be returned to the Company.

The Plan was funded by means of a trust agreement which had been in effect since 1952 between Eastern and Hanover Bank. (Defendants' Mot. Ex. 11). Paragraph 11 of the trust agreement provides that

there may be returned to the Company upon the termination of the Fund, only such amount as may, due to an erroneous actuarial computation, remain in the Fund after the satisfaction of or provision for all liabilities with respect to such employees or their beneficiaries; ...

Section 7 of the original Plan provided that all funds of the Plan would be held by a trustee, and that Eastern would pay contributions to the trustee to fund employee pensions. In Section 8 of the original Plan, Eastern reserved the right to modify the terms of the Plan.

At some point in the 1960's, the United Steelworkers of America became the exclusive bargaining agent for the employees of Pattin Manufacturing.

Following the enactment of ERISA, Andrew Toth, a union representative, worked with Eastern to bring the Plan into compliance with ERISA. During that process, the language in Section 9 referring to reversion of surplus assets to Eastern was dropped from the Plan. Mr. Toth, when questioned about this section during his deposition, could not recall why this change was made. (Toth Dep., pp. 26-28).

In 1975, the 1952 trust agreement was amended to reflect an agreement between Eastern and the Colonial Bank and Trust Company as successor trustee. Section 12.2(d)(i) of the 1975 trust agreement provides in relevant part:

In the case of the termination of the Plan, and if, but only if, the Plan is a defined benefit plan, any residual assets of the Plan may be distributed to the company at the direction of the administrator (or of a trustee appointed upon the application of the Pension Benefit Guaranty Corporation) if all liabilities of the Plan to participants and their beneficiaries have been satisfied and the distribution does not contravene any provision of law.

The post-ERISA version of the plan, effective January 1, 1976, was changed from time to time. It was not until October of 1978 that section 17.1 of the Plan, relating to Eastern's right to change the Plan terms, was amended to provide that the consent of the union was required for plan modifications. (Defendants' Reply Ex. 5).

Defendants argue that although the Plan itself does not provide for reversion of surplus assets to Eastern, the Plan in effect incorporates the trust agreement by reference. Defendants' position is that the trust agreement should be considered a Plan document. Defendants rely on Schuck v. Gilmore Steel Corp., 784 F.2d 947 (9th Cir.1986). In Schuck, the trust agreement provided for a reversion of surplus to the company. The pension agreement authorized the company to establish a trust, but did not specifically identify the trust agreement. The court, Id. at 951, rejected the plaintiffs' argument that only the pension agreement should be referred to in analyzing compliance with § 1344(d)(1)(C), and found that the pension agreement incorporated the provisions of the trust agreement concerning reversion and satisfied the requirements of § 1344(d)(1)(C).

Here, the trust agreement authorizes the return of surplus assets to Eastern, whereas the pension agreement is silent on that point. There is no language in the pension agreement specifically incorporating the terms of the trust agreement. However, there are many references to the trust in the Plan. The terms "trust fund", "trust" and "trustee" are defined in Article 2 of the Plan. "Trust" is defined in Section 2.30 of the Plan as "the legal entity resulting from the Trust Agreement between the Company and the Trustee ...", thereby recognizing the existence of a trust agreement. Under Article 11, Section 11.1 of the Plan, benefits are payable by the trustee directly to the employee. Section 15.9 of the Plan permits Eastern to delegate all or part of its responsibilities in the management, operation and administration of the Plan to the trustee. Under Section 16.1, the trustee, identified in Section 2.31 as the Colonial Bank and Trust Company, is designated a "named fiduciary" with respect to the control, management and disposition of trust assets. Section 16.2 provides for consultation between Eastern and the trustee concerning funding policy and method.

Article 18 of the Plan, Section 18.1, states, "In order to implement the Plan, the Company has entered into an agreement of Trust ... for the exclusive benefit of the Members or their Beneficiaries under the Plan who may, in accordance with the terms of the Plan and such Agreement of Trust, be entitled to participation thereunder." (Emphasis added) Section 19.5 provides that "It is the intention of the Company that the Plan, and the Trust established to implement the Plan, shall comply with the Internal Revenue Code and ERISA and the provisions of the Plan and Trust Agreement shall be construed to effectuate such intention." In light of the many references in the Plan to the trust agreement, including those set forth above, an employee would have ample notice of the existence of the trust agreement and its role in the implementation of the Plan and...

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