Bernatowicz v. Colgate-Palmolive Co.

• Decision Date: 10 March 1992
• Docket Number: Civ. A. No. 90-3001.
• Citation: 785 F. Supp. 488
• Parties: Raymond J. BERNATOWICZ, Marilyn Bernatowicz his wife, and Kenneth Williams v. COLGATE-PALMOLIVE COMPANY.
• Court: U.S. District Court — District of New Jersey

785 F. Supp. 488

Raymond J. BERNATOWICZ, Marilyn Bernatowicz his wife, and Kenneth Williams v. COLGATE-PALMOLIVE COMPANY.

Civ. A. No. 90-3001.

United States District Court, D. New Jersey.

March 10, 1992.

Alfred J. Hill, William E. Milks, Wilentz, Goldman & Spitzer, Woodbridge, N.J., for plaintiffs.

Brian J. Clark, Richard K. Muser, Clifton, Budd & De Maria, New York City, for defendant.

OPINION AND ORDER

POLITAN, District Judge.

Plaintiffs Raymond Bernatowicz and Kenneth Williams worked as hourly employees at the now defunct Jersey City plant of the Colgate-Palmolive Company ("Colgate") for approximately 30 years, progressing from factory work to skilled labor during their employment. Bernatowicz was employed from 1952 until 1956 and from 1960 to 1988, and Kenneth Williams was employed for two brief periods of time between 1955 and 1959 and continuously from 1960 to 1988. Throughout their employment Williams and Bernatowicz were members of the Employees Association of Colgate-Palmolive Company ("Association"), the collective bargaining representative for all of the hourly employees at the Jersey City Plant.

In or about January 1985, Colgate announced its plans to commence the phasing down of operations at the Jersey City Plant. This Plant eventually closed on August 11, 1988, the same day as Bernatowicz' and Williams' last dates of employment. Soon after this announcement, Colgate conducted negotiations with the Association concerning a phase-down agreement. The phase-down agreement reached between the parties provided various forms of retirement benefits for the hourly employees, including plaintiffs. The phase-down agreement provided that employees whose years of age plus years of service totalled at least 85 points at the time the Jersey City Plant was closed were entitled to an undiscounted retirement annuity with payments commencing immediately upon retirement, along with lifetime continuation of medical benefits and life insurance (these benefits are hereinafter referred to as "85 point benefits"). Employees whose years of age plus years of service totalled at least 70 points, but were less than 85 points, could elect to either receive an annuity commencing as of the last date of employment which was reduced by ½ % for each month the employee was under age 55 or receive an undiscounted annuity by deferring the commencement of retirement benefits until reaching age 55 (these benefits are hereinafter referred to as "70 point benefits"). These employees also had their medical and life insurance coverage continued for a period of one year after their termination, as did all other employees.

In April 1987, plaintiff Bernatowicz was 51 years old and had worked for defendant for over 30 years. At that time, the total of his age and years of service was approximately 81 points. By August 1988, his total was approximately 83 points. In April 1987 plaintiff Williams was 51 years old and had worked for defendant for over 27 years. At that time, the total of his age and years of service was approximately 78 and one-half points. By August 1988, his total was approximately 80 and one-half points. Neither plaintiff would have qualified for retirement with 85 point benefits if years of service included only those periods of time in which plaintiffs actually worked for defendant.

In approximately March 1987 Howard Sponseller, Supervisor of Salaried Personnel, informed Bernatowicz that despite the fact that Bernatowicz did not work for defendant between 1956 and 1960, he would be able to "bridge" the time he did not work for defendant and would receive credit for the entire period of his employment from 1952 up to the close of the plant, a period of more than 35 years. This was Sponseller's interpretation of the Company's "break in service" rule—the rule governing how prior, separate periods of Colgate are treated in calculating pension eligibility. Sponseller also told Bernatowicz that since he was 51 years of age, his age and years of service exceeded 85 points and he was eligible to retire with a full pension and other benefits under the "85 point plan." Later in March, Mr. Fred McMenamin, an Association officer told Bernatowicz that he learned from Kevin Paradise, Employee Relations Manager of the plant, that Bernatowicz's retirement with 85 points was "verified."

In April 1987, Sponseller informed Bernatowicz that Mr. John E. Zoog, Director of the Company's Benefits Department,¹ had "overruled" his interpretation of the "break in service" rule upon which he had determined Bernatowicz qualified for 85 point benefits. Sponseller told Bernatowicz that: "Zoog is the big shot in New York that's in charge of all the benefits ... he is the one that makes the final decision." Sponseller nevertheless informed Bernatowicz he still believed his interpretation of the "break in service" rule was correct, and he planned to go to the Corporate Benefits Department in New York City to find a "precedent" for his interpretation. Sponseller went to the Benefits Department where he learned that he had been mistaken as to the operation of the break in service rule. Thereafter, around August, 1987, Sponseller told Bernatowicz that Bernatowicz did not qualify for "85 point" benefits.

In April 1987, Sponseller explained his interpretation of the break in service rule to plaintiff Williams. Williams maintains that Sponseller said you get "all the time between day one and everything in between." Under this interpretation, Williams would have qualified for 85 point benefits. In August 1987, however, Sponseller told Williams that Williams could not retire with 85 point benefits.

Sponseller's earlier statements to plaintiffs regarding the break in service rule were incorrect. Prior to 1986, the Retirement Plan's "Break in Service" rule provided that prior, separate periods of Colgate employment would be included, or "bridged," in calculating pension eligibility, only where (i) the employee's break in service did not exceed five years, and (ii) the period of prior Colgate employment exceeded the length of the "break in service." In or about January 1986, the Employee Relations Committee liberalized the "break in service" rule for hourly employees of the Jersey City Plant by crediting all periods of employment with the Company regardless of the length of the prior period of Colgate employment or the length of the "break." Contrary to Sponseller's assertions, the break in service rule never worked to credit the period of the break as Company service. It only serviced to bridge or connect separate periods of Colgate employment. Therefore, plaintiffs could not bridge time they had not worked for defendant and were not eligible to retire under the 85 point plan.

Plaintiffs contend that they relied on Sponseller's erroneous representations regarding the break in service rule and missed opportunities to transfer to other positions with the company. For example, both plaintiffs maintain that they would have attempted transferring to Colgate's Essential Oils facility in Burlington New Jersey when that plant was accepting applications had they not been mislead about retirement. Also, Bernatowicz asserts that he would have been interested in pursuing a position at Colgate's Instrumentation Shop at its Kansas City plant had he not been told he could retire with 85 point benefits.

Bernatowicz and Williams qualified for 70 point benefits. They elected to commence the receipt of their retirement payments immediately following their last dates of employment, August 11, 1988. Since then, Bernatowicz has been receiving monthly pension payments of $2,091.00 while Williams has been receiving monthly payments of $1,529.00. Bernatowicz received a severance payment in excess of $55,000.00 while Williams received a severance payment of over $30,000.00. Both were provided free medical and life insurance during the year following their layoffs.

On July 30, 1990 plaintiffs filed a complaint in the District Court of New Jersey against Colgate. While the factual allegations made by Bernatowicz and Williams differ somewhat they are similar in nature and their causes of action against Colgate are the same: (1) for breach of fiduciary duty in violation of § 404(a)(1)(B) of the Employee Retirement Income Security Act ("ERISA"), as well as for failure to remedy the breaches of co-fiduciaries in violation of ERISA § 405(a)(2) & (3); and (2) for negligent misrepresentation. Plaintiff Marilyn Bernatowicz's sole claim is for loss of consortium. In their opposition brief for this motion, plaintiffs conceded that their equitable estoppel claim in the Sixth Count of their complaint was preempted by ERISA.

Defendant maintains that it is entitled to summary judgment on plaintiffs' remaining claims. With respect to plaintiffs' claims for negligent misrepresentation, defendant asserts that the claims are preempted by ERISA or, in the alternative, that plaintiffs cannot establish several of the essential elements of the prima facie case. Defendant raises several arguments in support of its contention that summary judgment should be granted dismissing plaintiffs' claims for breach of fiduciary duty under ERISA: 1) plaintiffs are unable to establish a claim for breach of fiduciary duty; 2) plaintiffs failed to exhaust administrative remedies; 3) plaintiff Bernatowicz' claim is barred by the statute of limitations. Defendant's contention that plaintiffs are unable to establish a claim for breach of fiduciary duty is based on three grounds: 1) that a fiduciary was not engaged in a fiduciary duty; 2) that plaintiffs cannot establish the necessary element of bad faith conduct; and 3) that the nature of plaintiffs' claims and the relief sought cannot give rise to an action under ERISA.

The parties conducted discovery which included written interrogatories and document requests. Plaintiffs deposed Colgate's witness Ted Wheeler, while defendant deposed the three plaintiffs....