Communications Workers of America v. American Tel. and Tel. Co.

• Decision Date: 22 November 1994
• Docket Number: No. 93-7060,93-7060
• Parties: 147 L.R.R.M. (BNA) 2903, 309 U.S.App.D.C. 170, 129 Lab.Cas. P 11,228, 18 Employee Benefits Cas. 2545, Pens. Plan Guide P 23903Y COMMUNICATIONS WORKERS OF AMERICA; Lyle Wingate, Appellees, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY; American Telephone and Telegraph Pension Plan, Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 426

40 F.3d 426

147 L.R.R.M. (BNA) 2903, 309 U.S.App.D.C. 170,

129 Lab.Cas. P 11,228,

18 Employee Benefits Cas. 2545,

Pens. Plan Guide P 23903Y

COMMUNICATIONS WORKERS OF AMERICA; Lyle Wingate, Appellees, v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY; American Telephone and Telegraph Pension Plan, Appellants.

No. 93-7060.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 20, 1994.

Decided Nov. 22, 1994.

Appeal from the United States District Court for the District of Columbia (No. 91cv02745).

Marc E. Manly argued the cause, for appellants. With him on the briefs, was John H. Curley. Christopher R. Drahozal entered an appearance.

James B. Coppess argued the cause, for appellees. With him on the brief, was Gerard C. Boyle.

Before: EDWARDS, Chief Judge, GINSBURG and SENTELLE, Circuit Judges.

Opinion for the Court filed by Chief Judge EDWARDS.

HARRY T. EDWARDS, Chief Judge:

In this case, we reaffirm the familiar principle that, barring exceptional circumstances, parties aggrieved by decisions of pension plan administrators must exhaust the administrative remedies available to them under their pension plans before challenging those decisions in court. We also reaffirm the well-established principle of labor law that disputes subject to mandatory arbitration under a collective bargaining agreement may not be brought to court in lieu of contractual arbitration procedures. We consider these principles critical to the orderly administration of our federal pension and labor laws. Because the District Court did not give proper weight to these principles, we reverse in part and remand in part.

This case involves a dispute over whether certain former employees of the American Telephone and Telegraph Company ("AT & T") were improperly denied pension benefits under the AT & T Pension Plan ("Plan"). As a result of a business reorganization precipitated by the 1991 merger of AT & T and NCR Corporation ("NCR"), a number of AT & T employees went to work for NCR. Pursuant to an agreement between AT & T and NCR, appellants AT & T and the Plan determined that certain employees who left AT & T for NCR would be ineligible to receive pension benefits under the Plan until after they ceased working for NCR. When Plan administrators refused to pay pension benefits to several such employees, appellees Communications Workers of America ("CWA"), the employees' collective bargaining representative, and Lyle Wingate ("Wingate"), an affected employee, brought suit in District Court under section 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. Sec. 1132(a) (1988), and section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. Sec. 185 (1988), claiming that the denial of benefits violated the terms of both the Plan and the collective bargaining agreement ("CBA") between CWA and AT & T.

The District Court denied appellants' motion for summary judgment and, sua sponte, granted summary judgment for appellees on both the ERISA and LMRA claims. In so doing, the District Court found, inter alia, that appellees' failure to exhaust administrative remedies under the Plan was not a bar to their ERISA claim because pursuit of such remedies would have been futile. The District Court also ruled that appellees' failure to seek arbitration of this dispute did not bar their LMRA claim because the dispute was not subject to mandatory arbitration under the CBA. CWA v. AT & T, 828 F.Supp. 73, 75-77 (D.D.C.1993).

On appeal, appellants raise a number of challenges to the District Court's judgment. We need not reach most of these issues, however, for we find two to be dispositive. We first hold that the District Court abused its discretion by not requiring appellees to exhaust administrative remedies under the Plan prior to bringing suit under section 502 of ERISA. Contrary to the District Court, we find no basis for concluding that exhaustion would have been futile. We also hold that the District Court erroneously found that it was unnecessary for CWA to pursue grievance and arbitration procedures under the CBA with respect to the employees' breach of contract claim. On this point, we find that the contract claim is subject to mandatory and binding arbitration under the parties' CBA; accordingly, CWA could not pursue this claim under section 301 of the LMRA in lieu of arbitration.

I. BACKGROUND

A. The AT & T Pension Plan and the Collective Bargaining Agreement

At the heart of the parties' dispute in this case is a disagreement over the proper interpretation of both the Plan and the CBA. The Plan is a pension plan for non-management employees of AT & T and is qualified under section 401 of the Internal Revenue Code, 26 U.S.C. Sec. 401 (1988 & Supp. V 1993). In accordance with ERISA, the Plan provides generally that any employee who satisfies certain age and service requirements and who elects to "retire[ ] from active service" with AT & T or its affiliates or subsidiaries shall be eligible to receive a service pension from the Plan. Plan Sec. 4, p 1(a), reprinted in Joint Appendix ("J.A.") 204. Under the Plan, however, a pension-eligible employee who leaves active service with one AT & T company to accept employment with another "Participating Company," or immediate reemployment by a company with which AT & T has an "Interchange Agreement," may not receive pension payments during the period of employment with such company. Id. Sec. 4, p 6(a), reprinted in J.A. 206. The Plan defines "Interchange Agreement" as an agreement "among one or more Participating Companies and one or more Former Associated or Allied Companies or Former Affiliates." Id. Sec. 2, p 10, reprinted in J.A. 189. The terms "Former Associated or Allied Company" and "Former Affiliate" are defined to mean certain former Bell system companies and their subsidiaries, but do not include NCR. Id. Sec. 2, pp 2, 7, reprinted in J.A. 185, 186-87. The term "Participating Company," which means AT & T or any AT & T subsidiary which decides to participate in the Plan, also does not include NCR. See id. Sec. 2, p 16, reprinted in J.A. 191-92.

The CBA between AT & T and CWA contains several provisions relating to the Plan. Article 19.30 of the CBA provides that AT & T cannot make any "change ... in the Plan which would reduce or diminish the benefits or privileges provides ... to employees ... without [CWA's] consent." CBA Art. 19.30, reprinted in J.A. 262. Article 19.40 provides that "[a]ny dispute involving the true intent and meaning of [Article] 19.30 may be presented as a grievance and ... submitted to ... arbitration.... However, nothing herein shall be construed to subject the ... Plans (or their successors) or their administration or the terms of the proposed change(s) in the Plan(s) to arbitration." Id. Art. 19.40, reprinted in J.A. 262.

Both the Plan and the CBA provide extensive administrative remedies for the resolution of disputes arising under their respective provisions. The Plan establishes a clear framework for the determination and appeal of employee benefit claims. See Plan Sec. 3, reprinted in J.A. 194-203. Under the Plan, an employee whose initial application for benefits is denied, in whole or in part, by Plan administrators may appeal that decision within sixty days of its receipt to the Employees' Benefit Committee ("Benefits Committee"), which has "sole and complete discretionary authority" to determine eligibility for benefits. Id. Sec. 3, p 3(a), reprinted in J.A. 199, 214. The Benefits Committee must then notify the aggrieved employee of its decision within a certain time period, specifying in writing the reasons for such decision. See id.

The CBA likewise creates a mandatory, multi-step grievance procedure for the resolution of disputes between AT & T management and employees. See CBA Arts. 9-11, reprinted in J.A. 250-61. Article 10.10 of the CBA provides that "[i]f, at any time, a difference arises between [AT & T] and [CWA] regarding the true intent and meaning of a provision under this Agreement ..., the grievance procedures set forth in Article 9 shall be employed in an effort to settle said differences. If the grievance procedures do not result in settlement of the differences, [CWA] may institute [arbitration] proceedings ... to resolve the dispute in question...." Id. Art. 10.10, reprinted in J.A. 254.

B. The Merger and the AT & T-NCR Interchange Agreement

In 1991, AT & T acquired NCR, which became and continues to be a wholly owned subsidiary of AT & T. As part of the merger agreement between AT & T and NCR, most of the computer-related operations and servicing formerly done at AT & T were shifted to NCR. AT & T employees affected by the merger were given several options by AT & T management, one of which was that AT & T would assist such employees in seeking employment at NCR. While employees choosing this option were not guaranteed employment at NCR, approximately five hundred employees, including appellee Wingate, applied to and were hired by NCR.

In effecting the merger, AT & T and NCR purported to execute an "Interchange Agreement" ("AT & T-NCR Interchange Agreement"), which covers the continued eligibility under the Plan of former AT & T employees hired by NCR. See AT & T-NCR Interchange Agreement, reprinted in J.A. 215-21. This agreement provides for the portability of pension service credit between the two companies, which means that, upon retirement from NCR, a former AT & T employee will be eligible to receive whatever AT & T pension the employee had earned as of the date he or she moved from AT & T to NCR. The agreement treats years of service with NCR as years of service with AT & T for purposes of determining eligibility to receive a pension under the Plan. Under the AT & T-NCR Interchange Agreement, however, former AT & T employees hired by NCR cannot begin to receive any Plan benefits to which they would otherwise be entitled (if they retired or otherwise stopped working for AT...