American Flint Glass Workers Union, AFL-CIO v. Beaumont Glass Co.

• Decision Date: 10 January 1995
• Docket Number: AFL-CIO,No. 94-3307,94-3307
• Citation: 62 F.3d 574
• Parties: 149 L.R.R.M. (BNA) 3104, Pens. Plan Guide P 23911H AMERICAN FLINT GLASS WORKERS UNION,; Michael Sine; Andy J. Hatfield, Appellants, v. BEAUMONT GLASS COMPANY; Beaumont Company Pension Plan for Hourly Employees, Appellees. . Submitted Under Third Circuit LAR 34.1(a)
• Court: U.S. Court of Appeals — Third Circuit

Page 574

62 F.3d 574

149 L.R.R.M. (BNA) 3104, Pens. Plan Guide P 23911H

AMERICAN FLINT GLASS WORKERS UNION, AFL-CIO; Michael Sine Andy J. Hatfield, Appellants, v. BEAUMONT GLASS COMPANY; Beaumont Company Pension Plan for Hourly Employees, Appellees.

No. 94-3307.

United States Court of Appeals Third Circuit.

Submitted Under Third Circuit LAR 34.1(a)

Jan. 10, 1995.

Decided Aug. 10, 1995.

Marianne Oliver, Gilardi & Cooper, P.A., Pittsburgh, PA, and Edward J. Kabala, Kabala & Geeseman, Pittsburgh, PA, and Alfred S. Pelaez, Duquesne University School of Law, Pittsburgh, PA, for appellants.

Kathleen A. Gallagher, Pittsburgh Food & Beverage Co., Inc., Pittsburgh, PA, for appellees.

Before: HUTCHINSON, NYGAARD and GARTH, Circuit Judges.

OPINION OF THE COURT

HUTCHINSON, Circuit Judge.

Appellants, American Flint Glass Workers Union, AFL-CIO, Michael Sine, and Andy J. Hatfield (collectively the "Union"), appeal an order of the United States District Court for the Western District of Pennsylvania denying their motion for summary judgment and, instead, sua sponte granting summary judgment to the appellees, the Beaumont Glass Company (the "Company") and the Beaumont Company Pension Plan for Hourly Employees (the "Plan"). This case arose after the Company unilaterally adopted a resolution to terminate the Plan, believing that termination would leave a surplus for distribution. The Union objected to the Company's unilateral decision to terminate and filed a charge with the National Labor Relations Board (the "NLRB"). Subsequently the Company and the Union agreed in writing to permit the termination process to go forward and the Union withdrew the charge.

After the Company and the Union had so agreed, the Company learned that there would be no surplus on termination, that the Plan was underfunded and that it would have to contribute approximately $300,000 to the Plan before the Internal Revenue Service (the "IRS") would approve termination. The Company then decided not to terminate, and the Union filed this action alleging that the agreement to proceed with termination precluded the Company from canceling or withdrawing its decision to terminate because of unanticipated cost. Rather, the Union contends that the Company must provide the additional funds needed for IRS approval of the Plan's termination. It advances, as alternative theories of recovery, the fiduciary responsibilities of the Employee Retirement Income Security Act ("ERISA") and the common law of contracts.

We reject the Union's theory that the Company had a fiduciary duty to provide the funds necessary to terminate the Plan. On the Union's contract theory, however, we conclude that genuine disputed issues of material fact exist. Accordingly, we will reverse the district court's sua sponte order granting summary judgment to the Company and remand this case for further proceedings consistent with this opinion.

I. Statement of Facts

On July 2, 1992, the Company's board of directors adopted a resolution to terminate the Plan. ¹ It also amended the Plan to provide for an August 31, 1992 termination date. ² The Plan, as so amended, remains in effect. On July 2, 1992, the Company delivered notice of its intent to terminate the Plan on August 31, 1992 to each participant, beneficiary, alternate payee, and the Union pursuant to 29 U.S.C.A. Sec. 1341(a)(2) (West 1985). Based upon its own consultants' reports, the Company then believed that the Plan's assets exceeded the present value of its liabilities.

About a week after receiving notice of the Company's intent to terminate the Plan, the Union filed an unfair labor practice charge with the NLRB challenging the Company's unilateral decision to terminate the Plan. The NLRB issued a complaint and scheduled a hearing before an administrative law judge. Before the hearing, the Company and the Union met and entered into an agreement meant to resolve their dispute. In exchange for the Union's withdrawal of the NLRB charge, the Company agreed to pay the Plan's participants a lump-sum cash payment upon "receipt of approval of the Plan termination by the IRS." ³ The parties refer to this agreement as the "Settlement Agreement," and so will we.

The Company's consultants began preparing the documents necessary for regulatory permission to terminate the Plan. In doing so, they discovered that the Plan's assets were insufficient to satisfy its liabilities on a termination basis, even though it was adequately funded on an on-going basis. Instead of the expected surplus, the Company now faced a deficit of approximately $300,000 if it proceeded to terminate the Plan. ⁴ If termination was abandoned, however, the Plan would remain adequately funded, so long as the Company continued its customary required contributions. Knowing these facts, the Company notified the Union that the assets of the Plan were insufficient to permit termination and that it no longer intended to terminate the Plan. The Company also refused to submit a termination plan to the IRS, contending that the Settlement Agreement imposes on it no legal obligation to terminate.

The Union then filed this action. It alleged that the Company breached the Settlement Agreement and ERISA by failing to terminate the Plan and pay its participants the lump sum benefits that they would be entitled to receive upon termination. When the facts recited above went undisputed, the Union moved for summary judgment, contending that the Settlement Agreement unambiguously required the Company to terminate the Plan and pay the lump sums due on termination.

On May 13, 1994, the district court held that the Company and the Plan were not obligated to terminate by contract, fiduciary duty, or any other legal principle. It reasoned that ERISA precluded termination of an underfunded plan and therefore "submission of the Plan termination to the IRS for approval would have been an exercise in futility." American Flint Glass Workers Union, AFL-CIO v. Beaumont Glass Co., No. 93-1511, slip op. at 6 (W.D.Pa. May 13, 1994). It also concluded that the Settlement Agreement did not obligate the Company to make the payment necessary to fund termination. The district court not only denied the Union's motion for summary judgment but, on its own motion, granted summary judgment to the Company. The Union filed this timely appeal.

II. Jurisdiction & Standard of Review

The district court had subject matter jurisdiction over this case under 28 U.S.C.A. Sec. 1331 (West 1995). We have appellate jurisdiction over the district court's final decision under 28 U.S.C.A. Sec. 1291 (West 1993).

In this case, the Company did not move for summary judgment. The district court, on its own motion, granted summary judgment, stating:

Although Fed.R.Civ.P. 56 does not explicitly authorize this Court to grant summary judgment to a non-moving party, the Court concludes that 'where one party has invoked the power of the court to render a summary judgment against [an] adversary, it is reasonable that this invocation gives the court power to render summary judgment for [the] adversary if it is clear that the case warrants that result.' 6 Moore's Federal Practice p 56.12 (1994).

American Flint, No. 93-1511, slip op. at 9. Neither party challenges the district court's decision to act sua sponte. ⁵ We will therefore review the merits of the district court's order granting summary judgment to the Company using the customary standard of plenary review over district court orders granting summary judgment. Bixler v. Central Pa. Teamsters Health-Welfare Fund, 12 F.3d 1292, 1297 (3d Cir.1993); Wheeler v. Towanda Area School Dist., 950 F.2d 128, 129 (3d Cir.1991). All reasonable inferences and any ambiguities should be drawn in favor of the party against whom judgment is sought. Bixler, 12 F.3d at 1297-98. Moreover, summary judgment should be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. at 1297.

III. Discussion

A. ERISA

The Union claims that the Company breached its fiduciary duties under ERISA by failing to terminate the Plan. Conceding that the Company had no initial duty to terminate, the Union claims that once the Company amended the Plan to include a termination date it had to administer the Plan in accordance with that amendment. Thus, the Union concludes that the Company breached its fiduciary duty when it failed to provide the funding necessary to terminate the Plan and thereafter distribute the Plan's assets to the employees. On this point we, like the district court, disagree with the Union.

The Plan is a single-employer defined benefit pension plan subject to ERISA, and the Company serves as a fiduciary under ERISA with regard to certain specified plan related decisions. Although "ERISA creates a fiduciary duty on the part of an employer administering a plan," the employer does not always act in a fiduciary capacity. Delgrosso v. Spang and Co., 769 F.2d 928, 934 (3d Cir.1985), cert. denied, 476 U.S. 1140, 106 S.Ct. 2246, 90 L.Ed.2d 692 (1986). Under ERISA, "when employers themselves serve as plan administrators, they assume fiduciary status only when and to the extent that they function in their capacity as plan administrators, not when they conduct business that is not regulated by ERISA." Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1158 (3d Cir.1990) (quotations omitted). An employer's decision to amend a plan is not the subject of ERISA's fiduciary duties. Id. at 1161 ("Virtually every circuit has rejected the proposition that ERISA's fiduciary duties attach to an employer's decision whether or not to amend an employee benefit plan.") (collecting cases); see also McGath v. Auto-Body North Shore, Inc., 7 F.3d 665, 670 (7th Cir.1993) (quoting Hozier ).

A decision to terminate a plan is "unconstrained by the fiduciary duties that ERISA imposes on plan administration." Hozier, 908 F.2d at 1162; see also Fischer v....