Chicago Pneumatic Tool Co. v. Smith

Decision Date26 June 1995
Docket NumberNo. 91-CV-822.,91-CV-822.
Citation890 F. Supp. 100
PartiesCHICAGO PNEUMATIC TOOL COMPANY; Doris Moore, Edwin Harcourt, and Bruce Daniels, Members of the Retirement Plan Committee of Chicago Pneumatic Tool Company; and Doris Moore, James E. Hoover and Carolyn A. Graham, Members of the Board of the Funded I.A.M. Pension Plan of Chicago Pneumatic Tool Company, Franklin, Pennsylvania, Plaintiffs, v. Melvin SMITH, International Association of Machinists and Aerospace Workers, and International Association of Machinists and Aerospace Workers, Local Lodge No. 2275, Defendants.
CourtU.S. District Court — Northern District of New York

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Bond Schoeneck & King (Thomas G. Eron, of counsel), Syracuse, NY, Matkov Salzman Madoff & Gunn (Allan Gunn, Kirk D. Messmer, of counsel), Chicago, IL, for plaintiffs.

Pinsky & Skandalis (Alan R. Peterman, of counsel), Syracuse, NY, for defendants.

MEMORANDUM — DECISION AND ORDER

McCURN, Senior District Judge.

BACKGROUND

Given the at times complex legal issues raised by these motions, it is easy to forget exactly what is at stake in this litigation, and that is whether defendant Melvin Smith is eligible for a pension; and if so, is he entitled to continue receiving monthly pension benefits in the amount of approximately $188.03,1 or, as Smith maintains, is he entitled to receive pension benefits in an amount greater than that?

At fifty-two years of age and after having been employed by the plaintiff Company, Chicago Pneumatic Tool Company ("Company"), for twenty-three years, defendant Smith, along with others, was terminated as part of a partial shut-down of the Company's operations. During his employment with the Company, Mr. Smith was subject to a collective bargaining agreement ("CBA") between International Association of Machinists and Aerospace Workers Local Lodge No. 335 ("Local 335") and the Company. The CBA provided that bargaining unit employees, such as Smith, were entitled to receive pension benefits pursuant to the terms of a pension agreement between the Company and Local 335,2 which was attached to the CBA. Both the CBA and the Pension Plan were to remain in effect until August 31, 1984. Affidavit of John E. Roberts (June 29, 1992), exh. A thereto at 35.

The CBA contained a four step grievance and arbitration procedure, which was incorporated by reference into the Pension Plan. Id., exh. A thereto at 27-30. Under the terms of the CBA, that procedure was available to resolve "differences" between the Company and the Union "as to the meaning and application" of the CBA provisions. Id., exh. A thereto at 28. The Pension Plan in turn sets forth an "appeals procedure," which provides in salient part:

a. If any difference shall arise between the Company or the Board and any person who shall be an applicant for a pension as to:
1. the number of years of Service and of Credited service of such applicant in the employ of the Company; or
2. an applicant's right to a pension; or
3. the age of the applicant; or
4. whether an applicant, who shall have been determined to be permanently incapacitated and who shall have at least ten years of such Credited Service but shall not have obtained the age of 65 years, shall have become so permanently incapacitated through some unavoidable cause;
such difference may be taken up as a grievance in accordance with the provision of Article XXIII of the CBA, beginning at Step 4 thereof.3

Id., exh. B thereto at 31 (emphasis and footnote added).

According to the Company, approximately one year after the partial shutdown, effective December 31, 1984, inactive participants in the Pension Plan, as well as other Company pension plans were "`spun off or transferred into The Terminated Operations Plan for Certain Employees of Chicago Pneumatic Tool Company ("Terminated Operations Plan")." Affidavit of Doris J. Moore (Aug. 13, 1992) at ¶ 2, and exh. A thereto. On August 16, 1990, the Terminated Operations Plan was amended and reinstated, retroactive to January 1, 1989. Id. at ¶ 9. This amendment and reinstatement "reflected the addition of active employees at the Company's Franklin, Pennsylvania operation to The Terminated Operations Plan."4 Id. Importantly, in contrast to the CBA and the Pension Plan, the Company deliberately chose not to include a grievance and arbitration procedure in the Terminated Operations Plan. See Plaintiffs' Memorandum in Support of Their Motion for Summary Judgment and in Opposition to Defendants' Motion for Summary Judgment ("Plaintiffs' Memorandum") at 22-25.

Slightly more than six years after Smith was terminated from the Company, in January, 1990, he applied for a pension under the Pension Plan. Roberts Aff. at ¶ 10. Before applying for that pension, Mr. Smith had been diagnosed as having several medical conditions, including Parkinson's disease, Bell's Palsy, and degenerative arthritis. Id. Those conditions and ailments rendered him permanently disabled and unable to work, and no one disputes that. Id., exh. J thereto at 8. By letter dated March 21, 1990, the Company denied Mr. Smith's request for a disability pension, explaining that he was not so entitled because he had become disabled after his termination from the Company. Id., exh. C thereto. That letter closed by advising Smith that he would "be entitled to a reduced pension benefit when he reaches age 60 if you so elect." Id.

Another one of the defendants, International Association of Machinists and Aerospace Workers, Local Lodge No. 2275 ("Local 2275"),5 filed a grievance, on behalf of Mr. Smith, challenging the denial of his disability pension. Id., exh. D thereto. Consistent with its initial determination that Mr. Smith was not eligible for a disability pension because he did not become disabled while actively employed with the Company, that grievance was denied. Id., exh. E thereto. Local 2275 immediately appealed indicating its desire "to proceed to the next step of the grievance procedure as soon as possible." Id., exh. F thereto.

Following a meeting between the Company and Local 2275, pursuant to step three of the grievance process, the Company reaffirmed its position that Smith was not eligible for a disability pension because he did not become disabled while actively employed with the Company, and again denied Smith's grievance. Id., exh. G thereto. On May 25, 1990, Local 2275 and the Company then agreed to submit the issue of Mr. Smith's eligibility for a disability pension to an arbitrator. Id., exh. I thereto. On December 13, 1990, a hearing was held before the arbitrator. At the hearing, the Company maintained, as it continues to on these motions, that Mr. Smith was covered by the Terminated Operations Plan, which, unlike the CBA and Pension Plan, did not contain a grievance and arbitration procedure. The Company therefore took the position that Smith's grievance was not arbitrable. The Company took that position despite the fact that it had not raised that issue during the entire course of the pre-arbitration grievance process. Roberts Aff., exh. J thereto at 13.

A full hearing was conducted before the arbitrator in which the parties were given the opportunity to introduce evidence, call witnesses in support of their respective positions, cross-examine the adversary's witnesses, and file post-hearing briefs. On April 23, 1992, the arbitrator issued his opinion and award. After determining that the issue of arbitrability was properly before him, the arbitrator expressly found Smith's pension grievance to be arbitrable. Roberts Aff., exh. J thereto at 13. In reaching that conclusion, the arbitrator disagreed with the Company's assertion that Smith's grievance was not arbitrable because it was governed by the Terminated Operations Plan, which does not provide for arbitration. Instead, the arbitrator found that Smith's grievance had "nothing whatsoever" to do with the Terminated Operations Plan, but rather he was seeking enforcement of a pension benefit under the original Pension Plan, which did allow for arbitration of certain disputes arising thereunder. Id., exh. J thereto at 14-15.

Insofar as the merits of Smith's grievance were concerned, the arbitrator found that he was "entitled to commence his deferred pension benefits at an earlier age than 65 or 60 in accordance with the provisions of Section II 4(c) of the Pension Plan." Id. at 19. In closing, the arbitrator retained jurisdiction "for the purpose of insuring compliance with this Award." Id. at 21.

According to defendant Smith, the Company has disregarded the arbitrator's award by giving him a reduced rather than an unreduced pension. Because the Company believed that Smith was only entitled to an actuarily reduced pension if he elected to commence his pension immediately in accordance with the arbitration award, in July, 1991 it agreed to allow Mr. Smith "to apply for and receive an immediate pension reduced in accordance with the attached Table 1 which is the table of actuarial equivalents attached to The Terminated Operations Plan...." Id., exh. K thereto. Thus, in the intervening years Mr. Smith has been receiving a reduced deferred pension, which the Company agrees it will not upset even if it ultimately prevails in this litigation.6 Id. Conversely, the Company allows that if it is not successful in this action, "Mr. Smith will be reimbursed for the difference of the benefit paid and any higher pension amount." Id.

Despite this temporary conciliation, because it disagreed with the arbitrator's award, the Company commenced this action. In addition to the Company, there are five individual plaintiffs: Edwin Harcourt and Bruce Daniels, members of the Company's Retirement Plan Committee, as well as James E. Hoover and Carolyn A. Graham, members of the Company's Board of the Funded I.A.M. Pension Plan (the Local 335 Pension Plan), and Doris Moore in her capacity as a member of both of those entities.7 In addition to Mr....

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