Angst v. Mack Trucks, Inc.
| Decision Date | 18 December 1989 |
| Parties | 140 L.R.R.M. (BNA) 2835, 122 Lab.Cas. P 10,300, 15 Employee Benefits Cas. 2253 Kermit A. ANGST, Robert M. Cesanek, Sr., Rocco J. Corona, Jr., Chris Donatelli, Dale J. Eisenhauer, Frank W. Hanzl, Dennis R. Helfrich, Robert E. Keck, Daniel D. Kostelnick, Randall S. Lawler, Jr., Gary M. Madaus, James L. Marino, Arthur E. Marshall, James M. Mindock, Thomas C. Shappell v. MACK TRUCKS, INC., William C. Craig, Robert E. Kendall, Individually and as Administrators of the Severance Plan of |
| Court | U.S. Court of Appeals — Third Circuit |
Alan B. Epstein (argued), Jablon, Epstein & Wolf, Philadelphia, Pa., for appellants/cross appellees, Angst, Cesanek, Sr., Corona, Jr., Donatelli, Eisenhauer, Hanzl, Helfrich, Keck, Kostelnick, Lawler, Jr., Madaus, Marino, Marshall, Mindock, and Shappell.
David M. Spitko (argued), Wallace B. Eldridge, III, Duane, Morris & Heckscher, Allentown, Pa., for appellants/cross appellees, Hawk, Stasko and Shearer.
Anthony B. Haller (argued), Susan Katz Hoffman, Susan K. Lessack, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for appellee/cross appellant Mack Trucks, Inc.
Before: BECKER, COWEN, and GARTH, Circuit Judges.
In this appeal, we must determine the law to apply to a suit brought by employees of Mack Trucks, Inc., ("Mack"), who allege that Mack breached its contractual obligation, under a "buyout plan," to pay departing employees a lump sum of $75,000 and a year of continued benefits in exchange for the employees voluntarily leaving Mack's employ.
The district court applied state contract law in holding that Mack's buyout plan constituted a contract with accepting employees, which had been breached. We agree with the district court that the buyout plan, which did not require the creation of a new administrative scheme, did not implicate the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq, ("ERISA"). However, because the buyout plan resulted from negotiations between Mack and the employees' union ("union") over modifications to their collective bargaining agreement, we hold, contrary to the district court, that federal labor law preempts the employees' state law claims. We further hold that, under federal labor law, the employees may not yet bring their grievances to federal court because they have failed to exhaust their collective bargaining agreement's grievance procedures.
We will therefore vacate the district court's order which directed a verdict in favor of the employees with respect to their state law contract claims, and we will vacate the district court's order dated May 28, 1991 which established the employees' damages. We will also affirm the district court's order which directed a verdict in favor of Mack with respect to the employees' ERISA claim, and we will remand this case to the district court with instructions to dismiss the employees' complaint for failure of the employees to exhaust internal grievance procedures required by their collective bargaining agreement and by federal labor law.
In 1989, the management of Mack decided that economic conditions required the dismissal of Engineering Department employees. Mack recognized, however, that such layoffs would violate its collective bargaining agreement ("CBA") with the union. That CBA, negotiated in 1987, guaranteed continued employment for the 388 members of the union's Engineering Bargaining Unit ("EBU") until the CBA's expiration on October 27, 1992.
Acknowledging that the CBA could be modified only through negotiations with the union, Mack arranged a meeting with union representatives. Ensuing discussions resulted in an agreement that satisfied both parties. Under this agreement, the sixty-nine most senior employees to voluntarily leave Mack's employ would receive a lump-sum payment of $75,000 and one year of continued benefits.
On December 18, 1989, the union held a meeting at which it presented the buyout plan to EBU members. Pursuant to an apparent agreement with Mack, the union did not inform its members of the buyout plan's 69-employee limit. Instead, the union implied that the buyout plan was available to all employee applicants. 1 At a second meeting on December 20, 1989, a union representative and a Mack representative answered questions about the buyout. Again, the employees were not told about the buyout plan's numerical limit.
A total of 144 members submitted applications for the buyout before the January 3, 1990 deadline. In light of the unexpectedly large response, the union asked Mack to consider exceeding the agreed-upon 69-employee limit. After some discussion, Mack agreed to permit an additional eight people to participate in the buyout, bringing the total of employees to be bought out to seventy-seven. On January 8, 1990, Mack and the union held a joint meeting at which they notified those applicants who did not meet the seniority qualifications that they could not participate in the buyout.
Although the CBA contained a broad, mandatory grievance and arbitration procedure for the resolution of employer-employee disputes, eighteen applicants whose applications did not meet the seniority cutoff eschewed that procedure and instead brought suit in federal court against Mack, several Mack officials, and the union. The employees contended that Mack had breached its contractual obligation to provide each of them with a lump-sum $75,000 payment and benefits in exchange for their voluntary departure from Mack, and that the union, through its complicity with Mack in the buyout plan, had breached its duty of fair representation. Of the eighteen employees who brought suit, five voluntarily left Mack in 1990 in favor of other employment, two voluntarily retired, and eleven remained at Mack until March of 1991, when they participated in a subsequent negotiated buyout and received lump sum payments of $58,000 each.
The employees' complaint contained several alternate theories of relief, including claims under section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185; ERISA; 29 U.S.C. § 1001 et seq.; state contract law; and state and federal tort law. After considering these various theories, the district court rejected the applicability of labor law, tort law and ERISA. Instead, the court held that Mack had entered into individual contracts with each of the plaintiff employees and that Mack had breached those contracts. The court therefore granted a directed verdict in the employees' favor on their state law breach-of-contract claim and dismissed the employees' claims against the union.
The case was tried before a jury, with the measure of damages as the only unresolved issue. At the close of all evidence, the district court instructed the jury to calculate the value of the buyout plan with respect to each employee by determining the value of the plan's payout (i.e., $75,000 plus some figure for benefits), and then subtracting from that figure the value of the CBA's guarantee of continued employment, which the buyout plan had required the employees to relinquish. The judge emphasized that damages must be assessed as of the date of Mack's breach, January 8, 1990. The judge also told the jury that the $58,000 payment received by eleven of the plaintiffs in a subsequent buyout was a proper setoff from damages.
The jury awarded $4,150 to each of the eleven employees who had stayed at Mack and who had subsequently been bought out for $58,000. Two of the remaining employees received $83,700 each; two received $82,500 each; one received $73,025; one received $78,350; and one received $80,100. 2 Both parties filed post-trial JNOV motions. Mack also filed motions for reconsideration and for a new trial. In their post-trial motion, the employees asked the court to reconsider its holding that the buyout plan had not implicated ERISA. The employees also challenged the court's jury instruction on damages because, in the employees' view, the judge had improperly suggested that post-breach wages earned by the employees who had remained at Mack should be set off from those employees' awards.
In an order and opinion of August 26, 1991, the court rejected the employees' motion for JNOV and reiterated its holding that ERISA only applied to plans which, unlike the buyout plan in the present case, had been created for the purpose of providing ERISA benefits and which had required the establishment of an administrative scheme. The court also declined to reconsider its jury instruction because, in the court's view, the employees had waived that issue by not raising it at the time that the jury was charged.
Mack, in its post-trial motions, argued that the district court had erred in not applying federal law to the employees' complaint and that, accordingly, the district court should have dismissed the employees'...
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