773 F.2d 1402 (2nd Cir. 1985), 1000, Amato v. Western Union Intern., Inc.

Docket Nº:1000, Docket 84-7978.
Citation:773 F.2d 1402
Party Name:Frank J. AMATO, Robert J. Andes, Ernest R. Buntin, Raymond V. Carlisle, John J. Cengia, Nicholas Cicero, Joseph Cilenti, Paul L. Coriaty, Robert C. Davis, Ronald D'Ellia, Robert DeForge, Robert DeNunzio, Kevin Dunn, Ernest Ford, Anthony J. Gargiulo, Norman Goldman, Gerald Green, Joseph A. Gregurich, Thomas G. Harrington, Henry Kee Chee, Frank A. La
Case Date:September 12, 1985
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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773 F.2d 1402 (2nd Cir. 1985)

Frank J. AMATO, Robert J. Andes, Ernest R. Buntin, Raymond

V. Carlisle, John J. Cengia, Nicholas Cicero, Joseph

Cilenti, Paul L. Coriaty, Robert C. Davis, Ronald D'Ellia,

Robert DeForge, Robert DeNunzio, Kevin Dunn, Ernest Ford,

Anthony J. Gargiulo, Norman Goldman, Gerald Green, Joseph A.

Gregurich, Thomas G. Harrington, Henry Kee Chee, Frank A.

Larkin, Salvatore Lifari, David Mallon, Frank P. Manzione,

Rudolph Mears, Richard W. Phillips, Nicholas F. Rotolo,

Bruce Rutherford, Robert Scheddin, Thomas W. Smith, Arthur

Tavenor, Eugene T. Tonissen, Felix Vales, Jr., and Leonard

L. Wisniewski, Plaintiffs-Appellants,



Corporation, and Microwave Maintenance

Corporation, Defendants-Appellees.

No. 1000, Docket 84-7978.

United States Court of Appeals, Second Circuit

September 12, 1985

Argued April 8, 1985.

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[Copyrighted Material Omitted]

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Richard A. Levy, New York City (Fanette Pollack, Nancy Goldhill, Eisner & Levy, P.C., New York City, of counsel), for plaintiffs-appellants.

Greg A. Danilow, New York City (Michael J. Nassau, Stuart J. Baskin, Anthony E. Kaplan, Kramer, Levin, Nessen, Kamin & Frankel, New York City, of counsel), for defendants-appellees.

Glenn L. Archer, Jr., Asst. Atty. Gen., Tax Div., Dept. of Justice, Washington, D.C. (Michael L. Paup, Atty., Tax Div., Dept. of Justice, Washington, D.C., of counsel), for amicus curiae U.S.

Before MANSFIELD, KEARSE and PRATT, Circuit Judges.

MANSFIELD, Circuit Judge:

The principal issue on this appeal is whether Western Union International, Inc. ("Western Union") and its corporate parents, Microwave Maintenance Corporation and M.C.I. Communications Corporation (collectively referred to as "MCI"), violated rights of Western Union's long-term non-bargaining unit employees under its Pension Plan ("Plan") by amending that Plan in November 1982 to reduce certain early retirement benefits for which they were or would have become eligible. Plaintiffs, long-term non-bargaining unit employees of Western Union, appeal from a judgment of the Southern District of New York, John E. Sprizzo, Judge, dismissing 12 counts of their complaint, which alleged that Western Union's Amendment of the Plan violated

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their rights under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Secs. 1001-1368 (1982), and under federal and state common law. We affirm in part, reverse in part and remand the case for further proceedings.

In the 1950s and early 1960s, when most of the plaintiffs-appellants were hired by Western Union, its Plan provided for two types of retirement benefits: (1) a "Class A" pension, which provided that a participating employee who had completed 20 or more years of credited service with Western Union would be eligible at age 55 to receive full benefits, and (2) a "Class 80" pension, which entitled an employee whose years of age plus years of service totalled 80 to similar full benefits. In 1972 the Class 80 pension was replaced by a "Class 75" pension under which employees with at least 20 years of service, whose age and service years totalled at least 75, would be eligible for full retirement benefits. In 1975, to meet ERISA's requirements, an "Age 65" pension was added, under which a full retirement benefit would become available to an employee upon his reaching 65 years, with the proviso that an employee might become eligible before reaching 65 for a different retirement benefit known as a Deferred Vested Benefit pension, which could be taken before age 65 on an actuarially-reduced basis.

The formula used by Western Union to calculate the amount of the benefits payable per year to an employee under the Class A, Class 75 and Age 65 pensions was the same: the employee was entitled to one and two-thirds percent (1 2/3%) on the average of his three highest consecutive years salary X his years of service. Since almost all of the plaintiffs-appellants had been employed by Western Union for 20 years prior to the amendment of its Plan they could look forward to receiving upon early retirement benefits under the Class A or Class 75 pensions. This prospect was changed shortly after the January 1982 "Purchase and Sale Agreement" between MCI and Xerox Corporation, by which MCI acquired WUI, Inc., a holding company whose subsidiaries included Western Union. In November 1982, MCI and Western Union adopted an Amendment to the Plan ("Amendment"), under which plaintiffs and all other non-bargaining unit employees would no longer be eligible for Class A or Class 75 pensions but only for Age 65 pensions or a deferred vested pension payable at age 65 or earlier on an actuarially-reduced basis. The effect of the amendment was to deprive plaintiffs of the higher unreduced benefits they would have received under Class A and Class 75 pensions upon early retirement. Instead, they would be forced to wait until age 65 if they wanted full benefits or receive an actuarially-reduced benefit if they retired before 65 years of age. Plaintiffs contend that the difference between the two monthly benefits for an employee retiring before 65 could be substantial, depending on his age and prior years of service, and that the amendment also had the effect of (1) releasing Western Union from its former obligation of contributing large sums to provide Class A and Class 75 pension benefits to the plaintiffs, and (2) freeing up for other purposes funds that had been put aside to provide for payment of the Class A and Class 75 pensions.

On March 10, 1983, plaintiffs-appellants commenced the present action by filing a complaint alleging in 15 Causes of Action that the Amendment violated their rights under (1) ERISA, 29 U.S.C. Secs. 1001-1368 (1982), (2) the Purchase and Sale Agreement between MCI and Xerox, and (3) state and federal common law. The principal ERISA claims are that the defendants' Amendment

(1) decreased plaintiffs' "accrued benefits" in violation of ERISA Sec. 204(g), 29 U.S.C. Sec. 1054(g), and Internal Revenue Code ("IRC") Sec. 411(d)(6) (quoted infra, p. 6042-43),

(2) amounted to unlawful self-inurement by Western Union, which is prohibited by ERISA Sec. 403(c)(1), 29 U.S.C. Sec. 1103(c)(1),

(3) constituted a breach of defendants' fiduciary duties imposed on them by ERISA Secs. 404(a)(1)(A), (B) & (D),

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406(a)(1)(D), and 406(b)(1) & (2), 29 U.S.C. Secs. 1104(a)(1)(A), (B) & (D), 1106(a)(1)(D) and 1106(b)(1) & (2),

(4) unlawfully reduced plaintiffs' vested benefits, ERISA Sec. 404(a)(1)(D), 29 U.S.C. Sec. 1104(a)(1)(D) and ERISA Sec. 203, 29 U.S.C. Sec. 1053,

(5) failed to allocate and distribute assets to plaintiffs as required upon a partial termination of a plan, ERISA Sec. 4044, 29 U.S.C. Sec. 1344, IRC Sec. 411(d)(3), and ERISA Secs. 404(a)(1)(A), (B), and (D), 29 U.S.C. Secs. 1104(a)(1)(A), (B), and (D), and

(6) violated ERISA's notice and reporting requirements, ERISA Secs. 4041 and 4043, 29 U.S.C. Secs. 1341 and 1343.

In addition the complaint alleged that the Amendment

(1) violated specific provisions of the Plan and Trust Agreement documents, amounting to a breach of contractual obligations under state and federal common law,

(2) was a tortious interference with plaintiffs' contractual rights, thus violating both state and federal common law and ERISA Sec. 510, 29 U.S.C. Sec. 1140,

(3) rendered the defendants liable on principles of unjust enrichment,

(4) violated the terms of the defendants' Purchase and Sale Agreement, rendering defendants liable under ERISA Sec. 404(a)(1)(D), 29 U.S.C. Sec. 1104(a)(1)(D) and at common law, and

(5) subjected defendants to being estopped from denying plaintiffs' third party beneficiary rights under the Purchase and Sale Agreement.

Three Causes of Action (Thirteenth, Fourteenth and Fifteenth) allege claims under ERISA Sec. 510, 29 U.S.C. Sec. 1140, that were not dismissed by the district court: discrimination against plaintiffs, retaliation against plaintiffs (for having asserted their pension rights), and unlawful termination of employees to prevent their obtaining pension benefits. The complaint sought (1) appointment of a temporary receiver to take possession of the pension fund assets, (2) a declaration that the Amendment is null and void and that plaintiffs are entitled to the value of their accrued Class A and Class 75 pension benefits, (3) an injunction against further reduction of plaintiffs' benefits and retaliatory conduct and (4) damages and attorney's fees.

Upon defendants' motion to dismiss the first 12 Causes of Action pursuant to Fed.R.Civ.P. 12(b)(1) and (6), Judge Sprizzo in a reasoned opinion dismissed the first 12 claims except for that part of the Sixth Cause of Action which alleged that Western Union violated the notice and reporting requirements of ERISA Sec. 4043(b)(2), 29 U.S.C. Sec. 1343(b)(2), by failing to report a "reportable event," i.e., the Plan's reduction in the amount of benefits payable to employees under Class A and 75 pensions on early retirement. The district court concluded that ERISA's prohibition against any decrease in "accrued benefits", ERISA Sec. 204(g) and IRC Sec. 411(d)(6), applied only to benefits payable at normal retirement age (i.e., age 65), not to unreduced full benefits payable upon early retirement, which the court held not to be "accrued benefits", and that under ERISA Sec. 204(c)(3), 29 U.S.C. Sec. 1054(c)(3), the only accrued early retirement benefit is the actuarially-reduced equivalent of the full benefit payable at age 65.

Since he found that the Amendment did not reduce plaintiffs' "accrued benefits", Judge Sprizzo further...

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