809 F.2d 1210 (6th Cir. 1987), 85-3782, Apponi v. Sunshine Biscuits, Inc.

Docket Nº:85-3782, 85-3783.
Citation:809 F.2d 1210
Party Name:7 Fed.R.Serv.3d 565, 8 Employee Benefits Ca 1397, Kay APPONI, et al., Class Action, Plaintiffs-Appellees, Cross-Appellants, v. SUNSHINE BISCUITS, INC., Defendant-Appellant, Cross-Appellee.
Case Date:January 15, 1987
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1210

809 F.2d 1210 (6th Cir. 1987)

7 Fed.R.Serv.3d 565, 8 Employee Benefits Ca 1397,

Kay APPONI, et al., Class Action, Plaintiffs-Appellees,



SUNSHINE BISCUITS, INC., Defendant-Appellant, Cross-Appellee.

Nos. 85-3782, 85-3783.

United States Court of Appeals, Sixth Circuit

January 15, 1987

Argued July 22, 1986.

Rehearing and Rehearing En Banc Denied Feb. 18, 1987.

Rehearing Denied Feb. 20, 1987.

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David S. Cupps (argued), Vorys, Sater, Seymour and Pease, Columbus, Ohio, Jonathan R. Vaughn, Thomas E. Bezanson, Audrey Kevy Wilner, Chadbourne, Parke, Whiteside, & Wolff, New York City, for defendant-appellant, cross-appellee.

Asher Bogin (argued), Dayton, Ohio, for plaintiffs-appellees, cross-appellants.

Before WELLFORD and MILBURN, Circuit Judges, and DeMASCIO, District Judge. [*]

MILBURN, Circuit Judge.

Plaintiffs appeal and defendant cross-appeals from the district court's judgment for plaintiffs in this action to recover retirement benefits pursuant to a collectively-bargained pension plan. For the reasons that follow, we reverse in part and remand.


  1. Procedural Facts

    Plaintiffs, former employees of Sunshine Biscuits, Inc. ("Sunshine") who had accumulated at least fifteen years of continuous service but were not fifty-five years of age in 1972 when Sunshine closed its Dayton, Ohio, bakery, brought this action on November 29, 1977, against defendant Sunshine seeking to recover early retirement benefits described in Sunshine's pension plan. Plaintiffs' amended complaint, filed December 16, 1977, alleged breach of contract, common law fraud, and securities fraud.

    The district court dismissed the fraud claims, holding that the relevant statutes of limitations had run. Thereafter, the district court held that the pension plan granted early retirement benefits only to employees who had fifteen years of continuous service at Sunshine and were at least fifty-five years of age when they left Sunshine's employ. Because each plaintiff was under fifty-five years of age when Sunshine's Dayton Bakery closed, the district court granted summary judgment for Sunshine on the contract claim thereby dismissing the case.

    In a prior appeal, this court affirmed the district court's dismissal of the fraud claims, but reversed the district court's grant of summary judgment on the breach of contract claim. Apponi v. Sunshine Biscuits, Inc., 652 F.2d 643, 649-50 (6th Cir.1981) ("Apponi I"). This court, although declining to rule on the proper interpretation of the pension plan, determined that representations regarding plaintiffs' rights to retirement benefits allegedly made by Sunshine's negotiators during negotiations concerning the pension plan gave rise to "triable issues of fact" under the equitable doctrines of estoppel and waiver. 652 F.2d at 649-50. The court reversed and remanded "for a jury trial as to whether the company made the representations alleged." 652 F.2d at 650-51.

    On remand, the district court excluded all evidence not relevant to whether the representations were made and submitted a single

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    factual issue to the jury for its determination: "Do you find that agents of [Sunshine] advised representatives of [plaintiffs' union] that an employee with 15 years of service would receive a pension at age fifty-five whether the Dayton Bakery was open or not?" The jury found that Sunshine's agents had made the representations.

    The district court then referred the matter to a special master for determination of the amount due each plaintiff. Plaintiffs and defendant stipulated that any pension benefits found to be due would be paid as lump sums. The district court adopted the first report of the special master which calculated a monthly pension benefit for each plaintiff, and plaintiffs and Sunshine appealed. This court dismissed the appeals and remanded for a "final decision on the issue of lump sum damage awards." On remand, the district court again referred the action to the special master. The district court then adopted the second report of the special master which determined the lump sum awards and ordered Sunshine to pay $3,032,158.43 into the court.

  2. Historical Facts

    Prior to 1968, Sunshine established an employer-funded pension plan applicable to hourly employees at all of Sunshine's facilities in the United States. For employees who qualified, the pension plan provided full benefits upon retirement at or after age sixty-five, lesser benefits on early retirement at or after age fifty-five, and minimum benefits for retirement caused by disability at or after age forty-five.

    In 1968, representatives of plaintiffs' union, Bakery and Confectionary Workers' International Union of America, Local 310 ("Local 310"), in the course of negotiating a two-year collective bargaining agreement with Sunshine, sought vesting of benefits on the basis of years of service only. Local 310's list of proposals included:

    Pension: The members will receive the following: job vesting regardless of age, for example: a man with twenty-five years of service, age 42, can leave the industry (bakery) forever and at age 55 receive a reduced pension the rest of his life (without ever returning to work).

    For example: a man with fifteen years of service at age 32 or more may leave the industry (bakery) forever and receive a reduced pension at age 55 (without ever returning to work).

    Witnesses for plaintiffs stated in affidavits and testified at the trial that Sunshine's negotiators' response to the proposal was that the pension plan, as it stood in 1968, provided for vesting of benefits after fifteen years of continuous service.

    In the 1970 collective bargaining negotiations, Local 310 again sought vesting of pension benefits on the basis of years of service only. The union's list of proposals included a proposal and an example which were identical to that made in 1968 as quoted above. Witnesses for plaintiffs stated in affidavits and testified at the trial that Sunshine's negotiators again responded that the pension plan, as it stood in 1970, provided for vesting of benefits after fifteen years of continuous service.

    Neither the 1968 negotiations nor the 1970 negotiations resulted in any change in the collective bargaining agreement or the pension plan concerning vesting of pension benefits. The key provision of the pension plan involved is paragraph 23, which provides: "An employee will be eligible to retire early, provided he is at least 55 years of age and has completed 15 or more years of continuous service."

    In June 1972, Sunshine closed the Dayton Bakery because it could not comply with the Food and Drug Administration's requirements. Each union member was notified that the plant was closing and was informed of individual exit interviews at the plant. At those exit interviews, Sunshine gave each departing employee a sheet specifying the amount of pension benefits to which each employee was entitled. The exit interview forms for employees under age fifty-five showed no presently payable pension benefits.

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  3. Pre-emption

    Sunshine argues that because plaintiffs' action arises out of Sunshine's purported obligations under a collectively-bargained pension plan or directly out of the collective bargaining process itself, it necessarily arises under section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185. This argument was not raised in Sunshine's answer nor presented to the prior panel. Ordinarily, "a failure to plead an affirmative defense results in the waiver of that defense and its exclusion from the case." 5 C. Wright & A. Miller, Federal Practice and Procedure Sec. 1278, at 339 (1969). Section 301, however, expresses a compelling policy in favor of uniform application of federal law in actions to enforce labor contracts, and, therefore, we decline to apply the waiver rule. See National Metalcrafters v. McNeil, 784 F.2d 817, 825-26 (7th Cir.1986).

    Section 301 provides that the federal courts have jurisdiction in "[s]uits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ..., or between any such labor organizations." 29 U.S.C. Sec. 185(a). Section 301 not only confers on federal courts jurisdiction in actions involving enforcement of labor contracts but also authorizes the federal courts to fashion the substantive law to be applied in suits under section 301. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456, 77 S.Ct. 912, 917, 1 L.Ed.2d 972 (1957). In fashioning federal substantive law, federal courts may resort to state law if it is compatible with federal labor policy. Id. at 457, 77 S.Ct. at 918. However, inconsistent state law must give way to principles of federal labor law. Local 174, Teamsters v. Lucas Flour Co., 369 U.S. 95, 102, 82 S.Ct. 571, 576, 7 L.Ed.2d 593 (1962).

    The scope of the pre-emptive effect of section 301 was recently clarified by the Supreme Court in Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985). There, an employee brought an action against his employer, who was responsible for administering a non-occupational disability insurance plan under the collective bargaining agreement, alleging bad faith in the handling of his claim. The Court held that "when resolution of a state-law claim is substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract, that claim must either be treated as a Sec. 301 claim, ... or dismissed as pre-empted by federal labor-contract law." Id. at 1916 (citation omitted). The Court reasoned:

    If the policies that animate Sec. 301 are to be given their proper range, however, the pre-emptive effect of Sec. 301 must extend beyond suits alleging contract...

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