Deibler v. United Food and Commercial Workers' Local Union 23

Citation973 F.2d 206
Decision Date17 August 1992
Docket NumberNo. 91-3492,91-3492
Parties15 Employee Benefits Cas. 2442 Harold G. DEIBLER v. UNITED FOOD AND COMMERCIAL WORKERS' LOCAL UNION 23, Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Richard D. Gilardi, Gilardi & Cooper, Edward J. Kabala (argued), Kabala & Geeseman, James R. Reehl, Pittsburgh, Pa., for appellant.

Pamela M. Schiller (argued), Blaufeld & Schiller, Pittsburgh, Pa., for appellee.

Before: STAPLETON and MANSMANN, Circuit Judges, and POLLAK, District Judge *.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

I.

Plaintiff-appellee Harold Deibler was employed by the defendant-appellant local union for nineteen years. Some months before he was discharged in 1985, the union terminated its longstanding severance pay policy. Deibler was subsequently denied severance pay. He brought this action under the Employee Retirement Income Security Act of 1974 (ERISA), claiming that the union was legally obligated to pay him these benefits. The district court agreed. Because the severance policy was lawfully terminated before Deibler's discharge, we will reverse.

II.

Unless otherwise noted, the following facts are undisputed. In a meeting held in November 1968, the Executive Board of United Food and Commercial Workers' Local Union No. 590 ("Local 590") instituted a severance pay policy for union officers. The minutes of that meeting reflect the following:

Brother Hormell recommended that any paid officers leaving the union for retirement or any other valid reason shall be paid a severance pay based on one weeks [sic] salary for each year of service with a maximum of 25 years. Motion was made by Brother Hormell and seconded by Brother King. Discussion followed. Motion carried.

Appendix (hereinafter "A.") at 128.

In approximately August 1982, Deibler claims that the Executive Board of Local 590 converted a fund set aside for strike benefits to a fund earmarked for the payment of severance benefits. These funds were placed in an account at Equibank in Pittsburgh, entitled "Amalgamated Food Employees Union Local Number 590 AFL-CIO Organizational and General Trust." A. at 144. The 1983 financial statement for this account bears the notation, "Equibank hereby certifies that the foregoing statement furnished pursuant to 29 C.F.R. 2520.103-5(c) is complete and accurate", followed by the signature of an Equibank accounting section manager. Supplemental Appendix (hereinafter "S.A.") at 18. The federal regulation to which this notation refers sets out reporting requirements for banks holding ERISA plan assets. 1

In December 1982, Local 590 signed a merger agreement with two other Locals, Nos. 1407 and 424, to form Local Union No 23 ("Local 23"). As part of this merger, the severance pay policy was modified to provide a benefit equal to two weeks' pay for each year of service, up to the same 25 year maximum. Otherwise the terms of the policy remained unchanged. 2

In the years following the merger, Local 23 experienced financial difficulties. As a result of these problems, the United Food and Commercial Workers' International Union imposed a trusteeship on the local in order to implement cost-cutting measures. Carl Huber was appointed Deputy Trustee. As part of his effort to reduce the Local's liabilities, Huber issued a "Resolution Concerning Severance Pay" in April 1984, which stated as follows, in pertinent part:

NOW THEREFORE, it is hereby resolved as follows, effective as of the execution of this resolution:

1. The practice by UFCW Local 23 and any predecessor Local Union of paying severance pursuant to any previous action is terminated.

2. In the event any assets of the Local have been set aside for payment of severance pay, such assets shall revert to the general operating funds of UFCW Local 23.

A. at 167.

Deibler was first employed by Local 590 as a Union Business Agent from 1964 to 1966. After spending two years working elsewhere, he returned to work for Local 590 in 1968 as a union organizer. He remained in that job until the 1983 merger, at which time he was promoted to Organizing Director for the new Local 23. In July 1984, Huber reduced Deibler's salary. The next month, Deibler's salary was again reduced and he was demoted to the position of Organizing Representative. Finally, by letter dated January 25, 1985, Huber terminated Deibler as an employee of Local 23.

Two days after his termination, Deibler applied for state unemployment insurance. Local 23 argued before the Unemployment Compensation Referee that Deibler had been fired for "willful misconduct" and that therefore he was not eligible for unemployment insurance under Pennsylvania law. See Pa.Stat.Ann. tit. 43, § 802 (1991). The Referee, however, found no willful misconduct, and as a result Deibler was awarded unemployment benefits. This decision was not appealed.

Sometime in the months preceding his termination, but after Huber's resolution ending the severance policy, Deibler requested a commitment from Local 23 that the union would pay his severance benefits upon his retirement. Huber denied this request. Deibler renewed his request for severance upon his termination in January 1985, and again Huber denied it. Finally, Deibler filed this suit in federal district court, alleging he had been improperly denied severance benefits to which he was entitled. 3

After a bench trial, the district court issued findings of fact and conclusions of law concluding that (1) Local 23's severance pay plan became a funded ERISA plan when the strike fund was converted to a severance pay fund in 1982, and (2) the assets of a funded plan cannot revert to the general operating funds of an employer without violating ERISA. Local 23 filed a motion to amend these findings; subsequently, the district court issued an Order denying this motion and adopting Deibler's Motion in Opposition as the opinion of the court. In this opinion, insofar as is relevant to this appeal, the district court specifically held for the first time that (1) the Local's severance policy constituted a benefit plan within the meaning of ERISA, and (2) the decision of the Unemployment Compensation Referee that Deibler was not terminated for "willful misconduct" estopped Local 23 from arguing that Deibler did not leave Local 23 for a "valid reason" within the meaning of the plan. On the same day, the court entered judgment for Deibler and against Local 23, and awarded $25,492.50 in attorney's fees and $918.38 in costs to Deibler's counsel. In a subsequent order dated July 1, 1991, the district court awarded Deibler $29,400 in severance pay, $2,100 in vacation pay, and $14,300.35 in prejudgment interest.

Local 23 filed a timely notice of appeal. 4

III.

ERISA recognizes two types of employee benefit plans: "employee pension benefit plans," and "employee welfare benefit plans." 29 U.S.C. § 1002(3) (1988). Severance pay plans are classified under the statute as welfare benefit plans. 29 U.S.C. §§ 186(c), 1002(1)(B). While welfare plans are less strictly regulated under ERISA than are pension plans, they are nevertheless subject to ERISA's fiduciary standards as well as its reporting and disclosure requirements. See 29 U.S.C. §§ 1021, 1101; see also Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1160 (3d Cir.1990). Local 23 argues as a preliminary matter that ERISA does not govern this case because its severance policy was not even a "plan" within the meaning of that statute. 5

ERISA applies to "any employee benefit plan if it is established or maintained ... by any employer engaged in commerce ..." 29 U.S.C. § 1003(a) (1988). ERISA itself does not provide a definition of the word "plan". The term is clearly not intended as a requirement of a writing. See Frank v. Colt Indus., Inc., 910 F.2d 90, 97 (3d Cir.1990) (courts will enforce unwritten plans under ERISA so as not to frustrate legitimate expectations of employees); Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir.1982) (while ERISA's fiduciary provisions require the plan to be established pursuant to a written instrument, this is only a responsibility of the administrator and not a prerequisite to ERISA coverage). Rather, "[t]he crucial factor in determining whether a 'plan' has been established is whether [the employer has expressed an intention] to provide benefits on a regular and long-term basis." Wickman v. Northwestern National Ins. Co., 908 F.2d 1077, 1083 (1st Cir.1990). In Donovan, the Eleventh Circuit formulated the prevailing standard for determining whether a "plan" within the meaning of ERISA has been established:

In summary, a "plan, fund or program" under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.

688 F.2d at 1373. This test has since been adopted by other circuits. See Wickman, 908 F.2d at 1082; Brown v. Ampco-Pittsburgh Corp., 876 F.2d 546, 551 (6th Cir.1989); Scott v. Gulf Oil, 754 F.2d 1499, 1504 (9th Cir.1985); see also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12, 107 S.Ct. 2211, 2218, 96 L.Ed.2d 1 (1987) (no "plan" created where employer assumes no responsibility to pay benefits on a regular basis, such that there is no need for financial coordination and control); Frank, 910 F.2d at 97-98 (citing, but not explicitly adopting, Donovan test).

Whether a plan exists within the meaning of ERISA is "a question of fact, to be answered in light of all the surrounding facts and circumstances from the point of view of a reasonable person." Wickman, 908 F.2d at 1082. We will therefore reverse the finding of the district court that there was such a plan only if it is clearly erroneous. See Levendos v. Stern Entertainment, Inc., 909 F.2d 747, 749 (3d Cir.1990).

The minutes of the 1968 meeting in which Local 590 adopted the severance policy reflect an intent to establish a regular and ongoing...

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