Berger v. Edgewater Steel Co.

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Citation911 F.2d 911
Docket NumberNos. 89-3501,Nos. 89-3465,3570 and 3596,3501,s. 89-3465,s. 89-3501
Parties12 Employee Benefits Ca 2497 Donald BERGER, Barbara Dallas, William Kier, Jr., Rose Saxman and Robert Wagner v. EDGEWATER STEEL COMPANY, a subsidiary of Edgewater Corporation, Edgewater Corporation, Edgewater Steel Company, as Plan Administrator of the Non-Contributory Pension Plan for Salaried Employees, and John H. Kirkwood, an individual. Appeal of EDGEWATER STEEL COMPANY and Edgewater Corporation, Appellants at& 89-3570. Donald BERGER, Barbara Dallas, William Kier, Jr., Rose Saxman and Robert Wagner, Appellants at& 89-3596 v. EDGEWATER STEEL COMPANY, a subsidiary of Edgewater Corporation, Edgewater Corporation, Edgewater Steel Company, as Plan Administrator of the Non-Contributory Pension Plan for Salaried Employees, and John H. Kirkwood, an individual.
Decision Date24 September 1990

Wm. Alvah Stewart, Ralph A. Finizio (argued), Houston Harbaugh, P.C., Pittsburgh, Pa., for Edgewater Steel Co. and Edgewater Corp.

David F. Weiner (argued), Robert C. Gallo, Gallo Weiner & Associates, Pittsburgh, Pa., for Donald Berger, Barbara Dallas, William Kier, Jr., Rose Saxman and Robert Wagner.

Before SLOVITER, HUTCHINSON and COWEN, Circuit Judges.

OPINION OF THE COURT

HUTCHINSON, Circuit Judge.

Five former employees (collectively "the Employees") of Edgewater Steel Company (Edgewater Steel) appeal an order of the United States District Court for the Western District of Pennsylvania granting summary judgment in favor of Edgewater Steel, Edgewater Corporation and John H. Kirkwood (Kirkwood) 1 on all but one claim in the Employees' complaint brought under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. Secs. 1001-1371 (West 1985 & Supp.1990). The Employees also appeal the district court's dismissal of their state law misrepresentation claims and its denial of their motion for leave to amend the complaint and their motion to compel the production of documents. Edgewater Steel and the other defendants (collectively "Edgewater") have cross-appealed the district court's entry of summary judgment in favor of three of the employees, Donald Berger (Berger), Barbara Dallas (Dallas) and Robert Wagner (Wagner). The district court awarded early retirement benefits to these three employees based on its holding that Edgewater violated ERISA.

For the following reasons, we will reverse the district court's order granting summary judgment in favor of Berger, Dallas and Wagner. We will remand the case to the district court with instructions to enter judgment in favor of Edgewater on all counts of the complaint.

I.

In October, 1986, Kirkwood purchased Edgewater Steel from the Hillman Corporation. At the time, Edgewater Steel was in serious financial difficulty. After his purchase of the company, Kirkwood installed a new management team. The team included George Kutzmark (Kutzmark) and Joseph Rosati (Rosati). Kutzmark was Executive Vice President and Chief Operating Officer; Rosati was Manager of Industrial Relations.

To cut costs, Edgewater Steel decided to eliminate certain benefits under its Noncontributory Pension Plan for Salaried Employees (the Plan). At the same time, Edgewater Steel initiated a reduction in force. None of the Employees who brought this action was to be part of this reduction in force, and none of their positions was to be eliminated.

The Plan is a defined benefit, single employer, qualified plan, subject to the vesting, funding and participation requirements of the Internal Revenue Code and ERISA. Edgewater Steel management decided to eliminate two benefits from the Plan: (1) the "special payment" portion of its pension benefits; and (2) a $330 per month supplement associated with its "70/80 retirement," which was an early retirement benefit.

Prior to these changes, a pension eligible employee who retired from Edgewater Steel had his pension benefits paid out in two forms:

(1) a special payment, which consists of a lump sum equal to thirteen weeks of vacation pay (fourteen weeks of vacation pay for those employees who retire after January 1, 1985, with twenty-five or more years of continuous service), subject to certain restrictions; this special payment is payable at the end of the month in which an employee retires and is considered payment for the first three months of the pension; and

(2) a "regular pension," which is equal to the higher of the "percent pension" or the "minimum pension" as defined in the Plan subject to adjustments and a "pension cap"; the regular pension is paid monthly commencing after the three months for which the special payment is made.

See Appellees'/Cross-Appellants' Supplemental Appendix (Supp.App.) at SA-9-SA-13.

An employee who qualified for 70/80 retirement was eligible for the special payment and regular pension. In addition, the amount of the employee's regular pension was increased by $330 per month. See Supp.App. at SA-13. Section 2.6(c) of the Plan provided that an employee could receive 70/80 retirement if the employee's retirement is in the mutual interest of the employee and the company and is approved by the company under mutually satisfactory conditions. 2 See Supp.App. at SA-8.

The Plan's claims procedure required an employee to make a written claim for benefits to the Pension Board. See Plan Sec. 16.1, Supp.App. at SA-47. If the Pension Board denied the claim, it had to give the claimant written notice of the specific reasons for denying the claim. See id. Sec. 16.2, Supp.App. at SA-47. The claimant could then make a written request to the Pension Board for review of the denial. See id. Sec. 16.3, Supp.App. at SA-47.

Apart from the Plan, Edgewater Steel also had a severance pay policy. See Joint Appendix (App.) at A-31. The terms of the severance policy are not clear from the document that embodies them. The Employees claim there was a clear practice under which employees who were laid off but not eligible for a pension of any sort were granted severance pay pursuant to this separate policy. The Employees contend that anyone who had left the company, regardless of the reason, had been given severance pay as a "separation bonus." Edgewater Steel never described or distributed the terms of the severance pay policy to its employees.

Through Kirkwood, Edgewater Steel notified all salaried employees in a letter dated January 15, 1987, that the special payment and the $330 per month supplement associated with 70/80 retirement, would be eliminated from the Plan. See id. at A-29. Kirkwood's letter informed the employees that this change would be effective February 1, 1987. In the letter, Kirkwood stated that this elimination of benefits was a cost-cutting necessity for Edgewater Steel.

Having received Kirkwood's January 15, 1987, letter, all of the Employees retired before February 1, 1987. All received the special payment that is provided automatically to all eligible retirees. None received the $330 per month supplement associated with 70/80 retirement or severance pay.

There are individual differences in the employment history of the Employees. Rose Saxman (Saxman) was sixty-four years old at the time she left Edgewater Steel. Saxman conceded that she was not entitled to 70/80 retirement, see id. at A-530, and she does not make a claim for this benefit on appeal. The remaining four Employees were eligible for 70/80 retirement only under Sec. 2.6(c) of the Plan. As noted, that subsection allows an eligible employee early retirement only if it is in the mutual interest of the employee and the company.

Before retirement, Dallas was the Director of Employee Benefits and a member of the Pension Board. William Kier, Jr. (Kier) did not apply for 70/80 retirement. Berger, Dallas and Wagner orally requested 70/80 retirement but did not file any written application or seek to appeal Edgewater Steel's informal oral refusal. Edgewater Steel never gave any of the Employees written notice or specific reasons for denying them 70/80 retirement.

When the Employees advised Edgewater Steel they would retire, Kutzmark and Rosati decided that no 70/80 retirements would be approved under the "mutual benefit" provision of Sec. 2.6(c) of the Plan because, in Kutzmark's words, "[t]he company cost structure wouldn't stand it." Id. at A-265. In addition, Kutzmark and Rosati stated that Edgewater Steel wanted all of the Employees to remain employed and therefore the company's interest was not served by their retirements. See id. at A-168-A-172, A-266.

Rosati also stated that none of these Employees' positions was to be eliminated as part of the company's reduction in force. See id. at A-168-A-170. All of the Employees were replaced after they left Edgewater Steel. See id. at A-227-A-228. In effect, the company adopted a blanket policy of denying all requests for 70/80 retirement under Sec. 2.6(c) of the Plan.

On October 22, 1987, the Employees filed a complaint against Edgewater claiming violations of ERISA and misrepresentation under Pennsylvania law. The complaint alleged: (1) the elimination of the special payment violated Sec. 204(g) of ERISA, 29 U.S.C.A. Sec. 1054(g) (West Supp.1990), which prohibits an employer from decreasing an "accrued benefit" by amending a pension plan (Count I); (2) the amendment of the Plan violated Sec. 510 of ERISA, 29 U.S.C.A. Sec. 1140 (West 1985), which proscribes discrimination for the purpose of interfering with the attainment of a plan benefit (Count II, Count III, pp 34, 35); (3) Edgewater wrongfully denied all of the Employees, except Saxman, 70/80 retirements in violation of ERISA (Count III); (4) Edgewater wrongfully denied the Employees severance pay (Count IV); and (5) the Kirkwood letter, announcing the amendments to the Plan, was an intentional or negligent misrepresentation under...

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