Craig v. Bemis Co., Inc., 74-2241

Citation517 F.2d 677
Decision Date13 August 1975
Docket NumberNo. 74-2241,74-2241
Parties90 L.R.R.M. (BNA) 2171 Charlie CRAIG et al., Plaintiffs-Appellants, v. BEMIS COMPANY, INC., et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Irvin Grodsky, Mobile, Ala., for plaintiffs-appellants.

Curtis L. Roy, David L. McCuskey, Minneapolis, Minn., Thomas G. Greaves, Jr., Paul W. Brock, Stephen G. Crawford, Mobile, Ala., for Bemis Co.

William E. Mitch, Birmingham, Ala., for United Paperworkers.

Donald Alexander, Com'r, I. R. S., Mobile, Ala., Donald J. Gavin, Tax Div., Scott P. Crampton, Asst. Atty. Gen., Ernest J. Brown, Acting Chief, Appellate Section, Tax Div., Dept. of Justice, Washington, D. C., for I. R. S.

Appeal from the United States District Court for the Southern District of Alabama.

Before BELL and GOLDBERG, Circuit Judges, and GROOMS, District Judge.

GOLDBERG, Circuit Judge:

Plaintiffs are former employees of defendant Bemis Company, Inc. (the Company) who were discharged when the Company closed its Mobile, Alabama, plant in March, 1972. They filed this lawsuit to recover certain pension benefits which they contend are due them either pursuant to the Company's retirement plan or on a theory of quantum meruit-unjust enrichment, as the disputed benefits actually constitute deferred compensation earned by them but now employed by the Company for its own benefit. After plaintiffs and the Company each moved for summary judgment and presented affidavits and other documents in support of their respective motions, the district court entered a summary judgment for the Company on March 7, 1974; plaintiffs appeal. A thorough study of the allegations made and the documents submitted below convinces us that the explicit terms of the collective bargaining agreement between plaintiffs' former union and the Company clearly foreclose plaintiffs' claims. Since there are no material issues of fact to be resolved, we conclude that the district court's order of summary judgment must be affirmed.


At the time of the closing of the Mobile plant, the Company manufactured various paper products at 28 locations across the United States and employed nearly 5,000 persons. On October 24, 1962, the Company adopted a comprehensive, non-contributory pension plan for its hourly employees, the Bemis Hourly Retirement Plan (the Plan), whereby eligible employees were to receive specified benefits based on their age and length of service with the Company. The Company undertook to set up a special pension fund and to "contribute to the Fund annually or otherwise . . . such amounts as . . . will maintain This Plan on a sound actuarial basis and afford participants the benefits specified hereunder." Section 10 of the Plan provided that employees would enjoy vested pension rights only after completing twenty years of credited service and attaining the age of fifty-five. Section 11 stated that "no termination of service benefits with respect to the contributions of the Company are available on termination of a participant's service before such participant is entitled to a vested benefit as provided in Section 10 hereof." Finally, the Plan was not to become effective at any plant where the employees were represented by a union until the union approved the Plan.

On November 1, 1962, the Company concluded a collective bargaining agreement with Locals 480 and 682 of the International Brotherhood of Pulp, Sulphite & Paper Mill Workers (the Union), 1 the certified bargaining representative of the Company's Mobile employees. This agreement incorporated the Plan as set out above, and noted that it was the intention of the parties that the Plan comply with section 401(a) of the Internal Revenue Code, 26 U.S.C. § 401(a), so as to entitle the Company to receive tax deductions for the amount of its contributions under the Plan. The parties also agreed that if the Company was unable to obtain such tax deductions or if the Internal Revenue Service later withdrew its approval of the Plan, "the Company may unilaterally discontinue the Plan." In fact, the Plan immediately attained IRS approval and has retained it ever since. The Company and the Union subsequently concluded collective bargaining agreements relating to the Mobile facility on October 29, 1964, December 3, 1966, and January 20, 1969, each time retaining the Plan as it existed in 1962, except that the 1969 contract required the Company to increase the amount of pension benefits to eligible employees in 1970 and 1971.

The 1969 collective bargaining agreement expired on January 19, 1972, before the Company and the Union could agree on a new contract, and the employees struck the plant on February 4. At this point, the Company apparently decided that the Mobile facility was no longer competitive in its geographic area and resolved to cease operations for economic reasons. When the Union was notified of this decision, it initially attempted to convince the Company to alter its resolution, but then concluded a Plant Closing Agreement with the Company on March 6, 1972. This Agreement provided, among other things, for a cessation of the strike and the allotment of severance pay to all employees. The parties also agreed that "upon the tender by the Company of severance pay . . ., the employee being tendered severance pay shall relinquish all seniority and other employment rights with the Company," that all of the Company's obligations for vacation pay "are fulfilled by the severance pay provisions," and that all employees who were employed at the time of the strike "will receive all benefits for which they are eligible under the current Bemis Hourly Retirement Plan. These benefits, to be determined per the provisions of the plan, will be calculated (at the 1971 base rate)."

The Company closed the plant on March 6 and discharged the 242 hourly employees. Forty-seven of these individuals met the Plan's specific vesting requirements and began to receive pension benefits. A handful of persons transferred to other Company plants. The remaining employees, some with as much as 25 years' service, received no pension benefits; a large number of people from this last group filed this lawsuit in order to obtain such rights. 2


This case presents a variant of the all-too-common situation where employees work faithfully for a single employer for years on end, only to discover, when they are terminated for reasons beyond their control, that they have failed to qualify for any pension benefits because their service, long though it may be, has not been long enough to meet the vesting provisions of the applicable pension plan. 3 Congress has recently acted to minimize the incidence of such situations in the future by providing in the Employment Retirement Income Security Act of 1974, Pub.Law 93-406, 88 Stat. 829, that private pension plans will not ordinarily qualify for favorable tax treatment unless participating employees become entitled to at least some pension rights after five years' continuous service with the employer. 26 U.S.C. § 411. Unfortunately, this legislation does not aid plaintiffs here, so we must decide whether they can recover any pension benefits either under the terms of the Plan itself or on a theory of quasi-contract.

As an initial matter, we note that pension trust funds established for the benefit of union members are established under the laws of the several states, so that we are bound to follow applicable state law in our consideration of the relevant collective bargaining agreements and the Plant Closing Agreement. See Bricklayers, Masons & Plasterers International Union of America, Local No. 15 v. Stuart Plastering Co., Inc., 5 Cir. 1975, 512 F.2d 1017, 1025; Snider v. All State Administrators, Inc., 5 Cir. 1973, 481 F.2d 387, 390; Boase v. Lee Rubber & Tire Corp., 3 Cir. 1970, 437 F.2d 527, 529; but see International Union of United Brewery, Flour, Cereal, Soft Drink & Distillery Workers of America, AFL-CIO v. Duke & Co., W.D.Pa.1974, 373 F.Supp. 778, 780. Although the various contracts in question were made and performed in Alabama, Section 20 of the Plan provides that the terms of the Plan shall be governed by Minnesota law. Alabama recognizes the right of contracting parties to choose the law of another state to govern their contractual rights and duties, so long as the consequences of such a provision are not likely to be contrary to Alabama law or public policy. Connell v. United States Steel Corp., 5 Cir. 1975, 516 F.2d 401, 407; Matthews v. Swift & Co., 5 Cir. 1972, 465 F.2d 814, 818; J. R. Watkins Co. v. Hill, 1926, 214 Ala. 507, 508, 108 So. 244, 245. In the absence of a showing of such a conflict between the laws of Minnesota and those of Alabama, we conclude that Minnesota law controls as provided in the Plan.

Although private, non-contributory pension plans were once viewed as mere gratuities, see, e. g., Menke v. Thompson, 8 Cir. 1944, 140 F.2d 786; Umshler v. Umshler, 1947, 332 Ill.App. 494, 76 N.E.2d 231; Magnolia Petroleum Co. v. Butler, Tex.Civ.App.1935, 86 S.W.2d 258, writ dism'd, it is now generally true that both employers and employees regard pension benefits as a type of deferred compensation, and that an employer who offers a comprehensive retirement program expects the program to be attractive to potential employees and necessarily calculates that "the cost of an employee's service is greater than the amount currently paid him as wages." S.Rep.No.1734, 84th Cong., 2d Sess. 3 (1956). See Inland Steel Co. v. N.L.R.B., 7 Cir. 1948, 170 F.2d 247, cert. denied in part, 1949, 336 U.S. 960, 69 S.Ct. 887, 93 L.Ed. 1112, aff'd on other grounds, 1950 339 U.S. 382, 70 S.Ct 674, 94 L.Ed. 925. Once that is said, it is also true that the courts have almost unanimously held, especially where the pension plan in question has been adopted as part of a collective bargaining agreement between an employer and a union, that only those employees who satisfy the conditions of...

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