Aronson v. Servus Rubber, Div. of Chromalloy, 83-1468

• Decision Date: 21 March 1984
• Docket Number: No. 83-1468,83-1468
• Citation: 730 F.2d 12
• Parties: 5 Employee Benefits Ca 1343 Elliet N. ARONSON, et al., Plaintiffs, Appellees, v. SERVUS RUBBER, DIVISION OF CHROMALLOY, et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 12

730 F.2d 12

5 Employee Benefits Ca 1343

Elliet N. ARONSON, et al., Plaintiffs, Appellees, v. SERVUS RUBBER, DIVISION OF CHROMALLOY, et al., Defendants, Appellants.

No. 83-1468.

United States Court of Appeals First Circuit.

Argued Jan. 5, 1984.

Decided March 21, 1984.

Jeffrey L. McCormick, Springfield, Mass., with whom Law Offices of Robinson Donovan Madden & Barry, P.C., Springfield, Mass., was on brief, for defendants, appellants.

Francis D. Dibble, Jr., Springfield, Mass., with whom Charles W. Danis, Jr., and Bulkley, Richardson & Gelinas, Springfield, Mass., were on brief, for plaintiffs, appellees.

Before COFFIN, ALDRICH and BOWNES, Circuit Judges.

BAILEY ALDRICH, Senior Circuit Judge.

Nine plaintiffs, all former employees of Servus Rubber Division of Chromalloy American Corporation, hereinafter, sometimes, defendant, instituted this action under the Employee Retirement Income Security Act [ERISA], 29 U.S.C. Sec. 1132, to recover benefits allegedly due them under defendant's profit sharing plan. The district court, 566 F.Supp. 1545, granted relief to all plaintiffs, and additional relief to plaintiff Aronson, and all defendants appeal.

Servus Rubber Division of Chromalloy is headquartered in Rock Island, Illinois, and during 1980 operated two plants, one in Chicopee, Massachusetts, known as the Vinyl Division, and one in Rock Island, where the rubber products were made. During 1980, Chromalloy expressed its intent to divest its Consumer Products Group, including Servus, as part of a general scheme of divestiture. On August 28, 1981, Chromalloy The plan at issue is entitled "Servus Rubber Division of Chromalloy American Corporation Employees' Profit Sharing Plan," and originally encompassed employees at both plants. The plan is intended to comply with Internal Revenue Code and ERISA standards governing qualified employee benefit plans. Section 4.1, governing company contributions, states that prior to the end of each year, the company will decide, "in its sole discretion," the appropriate contribution for the year. Its only obligation in this regard is that, "to the extent there are net profits available, the Company shall contribute an amount equal to three per cent (3%) of the compensation of all participants." All qualified participants employed on December 31 are entitled to share in the contribution. However, under section 11.3 the company could amend the plan "at any time," and under section 12.1 terminate the plan and/or discontinue contributions, without limitation--unless effecting a discrimination. 29 U.S.C. Sec. 1140. Upon the occurrence of a partial termination, the plan provided, in accordance with the Tax Code, 26 U.S.C. Sec. 411(d), that all prior contributions to the terminated employees became 100% vested. At issue here are the rights to and in Servus' 1981 contributions.

sold the assets of the Chicopee plant and immediately began laying off employees and winding up the business. Over one half of the 64 plan participants at the Chicopee plant left defendant's employ within a month, and by January 1, 1982, only eleven remained, including the nine plaintiffs. Throughout this time, business at Servus' Rock Island plant continued as usual.

Servus did not show a profit in 1981, and was, accordingly, under no obligation to contribute. It did, however, make a contribution equal to 8% of the yearly salaries of all participating employees at the Rock Island plant. It made none on behalf of the Chicopee employees, although plaintiffs were still in its employ on December 31, nor were they allowed to share in the contributions made, defendant claiming the plan was partially terminated or amended with respect to Chicopee. Plaintiffs disputed both of these contentions, adding that a partial termination as to them would have been discriminatory. The court found for plaintiffs, holding that defendant failed to take the proper action to accomplish either an amendment or a partial termination, and that, in any event, such a termination would have been discriminatory. This we reverse.

The vote on which defendant primarily relies is that of the Pension Committee, on November 25, 1981:

RESOLVED, that the Servus Rubber Division of Chromalloy American Corporation Employees' Profit Sharing Plan be partially terminated with respect to those participants who were employees of the Servus Vinyl Division at the date of the announcement to close down that operation with the date of termination and valuation, as defined in the plan, be established as September 30, 1981, effective September 30, 1981, ... (Emphasis suppl.)

This read "terminated," not "amended." Defendant's problem arises from the fact that, while the Pension Committee had full power to amend the plan, ¹ termination had to be by the company. ²

Defendant contends that, under the Treasury Regulations, a partial termination Plaintiffs concede that defendant intended to partially terminate, but assert, first, that the termination provision, 12.1, ante, does not provide for partial terminations, and second, that defendant failed to comply with 12.1 in any event. As to the first, we note that the plan must be construed as a whole. Although it is true that section 12.1 only reserves the "right to terminate," its companion section, 12.2, requires 100% vesting "[u]pon ... partial or complete termination." Manifestly both are comprehended in section 12.1.

took place by operation of law, see 26 C.F.R. Secs. 1.401-6(b), 1.411(d)-2(b), a matter which could raise considerable difficulties in some cases--but cf. United Steelworkers of America v. Harris & Sons Steel Co., Inc., 3 Cir., 1983, 706 F.2d 1289, 1297-99--but which we need not reach. We hold the plan was adequately complied with.

Second, section 12.1's requirement of "approval of the Pension Committee" was met by the Committee's resolution. This not only contained appropriate language, but it is part of a document whose heading reads, "Unanimous Written Consent of the Pension Committee." Nor, although plaintiffs seek to make much of it, can there be any doubt as to the intended date, in light of the language of this Resolution. Plaintiffs' contentions are reduced to saying that written notice thereof was not given to the trustees, and that, whereas the committee voted to terminate, it does not appear that the "Company" took action.

This last is an unsustained technicality. There is nothing in the plan requiring the Company to manifest its action in any particular manner. In this case the scenario started with a letter to the individual participants, reading in part as follows.

Dear Plan Participant:

The decision has been made to terminate the Servus Rubber Profit Sharing Plan as it relates to those participants at the Chicopee facility and to distribute the funds attributable to those participants.

An application is to be made to the Internal Revenue Service for a determination on this partial plan termination. Normally, the IRS review of a plan termination is completed in 90-120 days. Upon receipt of IRS approval the plan Trustees will take immediate action to distribute the account balances to these Chicopee participants.

Sincerely,

SERVUS RUBBER COMPANY

S/ Don Tobin

President

S/ John L. Caruso

Vice President Finance.

Following this, an application for determination upon termination, executed by John L. Caruso, Vice President Finance, Servus Rubber Co., was filed with the IRS. In the pretrial stipulation plaintiffs agreed,

15. On November 12, 1982, Chromalloy submitted an Application for Determination Upon Termination to the Internal Revenue Service. A copy of this application on Form 5310 along with the documents submitted therewith is contained in the documentary appendix as Exhibit 8. (Emphasis suppl.)

Chromalloy is the Company. We cannot accept plaintiffs' post trial contention that the Company was a stranger to the termination.

It is equally empty to charge that the "Trustee" did not receive written notice. There were, at the time, two trustees, Tobin and Caruso. It should be enough that they signed the original notification of termination as president and vice president of Servus, respectively. Nor could they have been unaware of the subsequent requested consent, and the response of the Pension Committee, ante. And, finally, Caruso signed the Company's notification to the IRS. No greater compilation of documents was required. Cf. Kappel v. United States, W.D.Pa., 1974, 369 F.Supp. 267, 275.

Our dissenting brother complains that we are elevating substance over form, a criticism we reject only because we believe the deficiencies so minor. Form can be important, but we see nothing here that seems of moment. True, it does not appear that both trustees were given the date of partial termination in writing, but this is hardly a case warranting doubts, or requiring speculation as to the trustees' knowledge that partial termination was approved. The precise date was of no significance. Whenever the termination could be said to have occurred, whether in August, September, or when the Pension Committee voted in November, it was before plaintiffs had qualified to share in any contribution.

There remains plaintiffs' allegation that they were discriminated against, in violation of 29 U.S.C. Sec. 1140. ³ This is a misreading of a section which relates to discriminatory conduct directed against individuals, not to actions involving the plan in general. The problem is with the word "discriminate." An overly literal interpretation of this section would make illegal any partial termination, since such terminations obviously interfere with the attainment of benefits by the terminated group, and, indeed, are expressly intended so to interfere. Such cannot be the intent of the section, where the statute expressly recognizes partial terminations. See 29 U.S.C. Sec. 1343(b)(4) (incorporating Tax Code definitions, 26 U.S.C. Sec. 411(d)(3)). This is not to say that a plan could not be...