Ellison v. Shenango Inc. Pension Bd.

• Citation: 956 F.2d 1268
• Decision Date: 18 February 1992
• Docket Number: Nos. 91-3094,91-3112,No. 91-3094,91-3094,s. 91-3094
• Parties: Charles E. ELLISON v. SHENANGO INCORPORATED PENSION BOARD, Andrew Aloe, individually and in his capacity as administrator of the Shenango Inc. Pension Plan, and Shenango Inc. v. William P. SNYDER, IV, Third Party, v. Jonathan S. SPATZ, Fourth Party, Andrew Aloe, in his capacity as Administrator of the Shenango Incorporated Pension Plan (the "Administrator"), and the Shenango Incorporated Pension Plan (the "Plan"), Appellants atCharles E. ELLISON, Appellant, v. SHENANGO INCORPORATED PENSION BOARD, Andrew Aloe, individually and in his capacity as administrator of the Shenango Inc. Pension Plan and Shenango Inc. v. William P. SNYDER, IV v. Jonathan S. SPATZ.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 1268

956 F.2d 1268

Charles E. ELLISON v. SHENANGO INCORPORATED PENSION BOARD, Andrew Aloe, individually and in his capacity as administrator of the Shenango Inc. Pension Plan, and Shenango Inc. v. William P. SNYDER, IV, Third Party, v. Jonathan S. SPATZ, Fourth Party, Andrew Aloe, in his capacity as Administrator of the

Shenango Incorporated Pension Plan (the

"Administrator"), and the Shenango

Incorporated Pension Plan (the

"Plan"), Appellants

at No. 91-3094.

Charles E. ELLISON, Appellant, v. SHENANGO INCORPORATED PENSION BOARD, Andrew Aloe, individually and in his capacity as administrator of the Shenango Inc. Pension Plan and Shenango Inc. v. William P. SNYDER, IV v. Jonathan S. SPATZ.

Nos. 91-3094, 91-3112.

United States Court of Appeals, Third Circuit.

Argued Sept. 20, 1991.

Decided Feb. 18, 1992.

Timothy P. O'Brien (argued), Sikov & Love, P.A., Pittsburgh, Pa., for Charles E. Ellison.

Michael D. Glass (argued), Anthony J. Polito, Polito & Smock, P.C., Pittsburgh, Pa., for Shenango Inc. Pension Bd., Andrew Aloe, individually and in his capacity as Administrator of the Shenango Inc. Pension Plan, and Shenango Inc.

Anthony J. Basinski (argued), Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for William P. Snyder, IV.

Before BECKER and HUTCHINSON, Circuit Judges, and FULLAM, District Judge. ^*

OPINION OF THE COURT

HUTCHINSON, Circuit Judge.

I.

In these consolidated appeals, at Docket No. 91-3112, Charles E. Ellison (Ellison) appeals an order of the United States District Court for the Western District of Pennsylvania denying his request for an award of attorney's fees against the Shenango Inc. Pension Plan and Andrew Aloe, in his capacity as the Plan Administrator (collectively "the Plan"). Ellison sought fees after successfully recovering pension benefits from the Plan under the Employee Retirement Income and Security Act (ERISA), 29 U.S.C.A. §§ 1001-1461 (West 1985 & Supp.1991). At Docket No. 91-3094, the Plan appeals the district court's award of benefits to Ellison and its entry of judgment against it and in favor of third party defendant William P. Snyder, IV (Snyder). We will affirm the award of benefits to Ellison and the district court's entry of judgment in favor of Snyder. We have concluded that the district court erred, however, in its application of the test that we set forth for awarding attorney's fees in ERISA cases in Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir.1983). We will therefore vacate the district court's order denying Ellison's request for attorney's fees and remand to the district court for further proceedings in accordance with this opinion.

II.

On August 17, 1987, Ellison commenced this action in the United States District Court for the Western District of Pennsylvania against defendants Shenango Inc., the Shenango Inc. Pension Board and Andrew Aloe, individually and in his capacity as Administrator of the Shenango Inc. Pension Plan. Ellison sought to recover pension benefits under ERISA. The Plan defendants joined Snyder, former President of Shenango Inc., as a third party defendant. Snyder in turn joined Jonathan Spatz (Spatz), Vice-President and Chief Executive Officer of Shenango Inc., as a fourth party defendant.

The action proceeded to a bench trial in September 1990. On January 9, 1991 the district court filed Findings of Fact and Conclusions of Law and entered judgment against the Plan, directing it to restore to Ellison 70/80 pension benefits it had revoked, ¹ and in favor of Shenango Inc. on the same claim. Judgment was also entered in favor of third party defendant Snyder and against all defendants on their third party complaint and in favor of Spatz and against Snyder on his fourth party complaint. The district court denied Ellison's request for an award of attorney's fees against the Plan.

The district court denied all motions for post-trial relief in a Memorandum Order dated January 29, 1991. The Plan filed a timely Notice of Appeal concerning the entry of judgment in favor of Ellison and in favor of Snyder. Ellison filed a timely cross-appeal concerning the district court's denial of his request for attorney's fees, and its entry of judgment against him and in favor of Shenango Inc. ²

III.

Ellison began his employment with Shenango Furnace Company (Shenango Furnace), the parent company of Shenango Inc., in 1951. He worked as a laborer there until drafted into the military. At the end of his military duty, he attended college and worked at Shenango Furnace during the summer months. After this break in service, Ellison was continuously employed by either Shenango Furnace or Shenango Inc. from 1959 until March 31, 1986. ³ Ellison held various positions during his tenure at Shenango Inc. in the accounting and data processing departments and became the office manager of Shenango Inc. in September 1979. He was later appointed corporate secretary of both Shenango Inc. and Shenango Furnace. Both corporations shared the same office building and Ellison also supervised employees of Shenango Furnace but received no compensation for this work or for acting as Shenango Furnace's corporate secretary.

Shenango Furnace and Shenango Inc. were closely-held corporations owned by the Snyder family. William P. Snyder, III was President and Chairman of Shenango Furnace and his son, William P. Snyder, IV, was President of Shenango Inc. In 1985, the Boggs Corporation, a corporation controlled by the Aloe family, after negotiations with the Snyder family, agreed to acquire Shenango Inc. in a stock purchase transaction. The Stock Purchase Agreement was executed on February 20, 1986 by Mark Aloe, President of the Boggs Corporation and William P. Snyder, III.

The Stock Purchase Agreement required Shenango Furnace to obtain the resignation of all officers and board members of Shenango Inc. on or before March 24, 1986, the closing date of the sale. Some employees deemed necessary to the continued success of Shenango Inc. were retained. These included Snyder as President, and Frank Leja (Leja) as Director of Employee Benefits. It was decided that Ellison would not be retained and he resigned as secretary of Shenango Inc. on March 20, 1986. Because of the movement of Shenango Inc.'s headquarters, Ellison was also no longer needed as its office manager but he continued his duties as corporate secretary of Shenango Furnace.

Ellison began asking Leja about his pension eligibility in January or February of 1986. Leja advised Ellison to retire under the Shenango Inc. Pension Plan, rather than transfer his benefits to the Shenango Furnace Pension Plan where he intended to continue employment, because of the Shenango Inc. Pension Plan's provision for greater medical benefits. Ellison's final day of employment with Shenango Inc. was on March 31, 1986 and he filed an application for a pension with Leja on April 1, 1986. Leja testified that he initially filled out Ellison's application for a pension on the basis of thirty years of continuous service. Leja did so at Snyder's direction although he felt that Ellison might not be entitled to a pension based on thirty years of continuous service, because it entailed crediting him with service prior to his break in service, and no employee had ever received continuous service credit for non-continuous service. Leja told Snyder he would present the pension to the Pension Board for review. On or about the same day, Leja was informed by Daniel Wehner (Wehner), former Vice-President of Shenango Inc. and member of the Shenango Inc. Pension Board, that Snyder had approved a 70/80 mutual interest pension for Ellison. Leja crossed out the "X" next to the thirty-year pension box on the application and placed an "X" next to the 70/80 pension box. Leja testified that he calculated the amount of the 70/80 pension, $1,158 plus a $400 supplement per month, based upon Ellison's 27 years, 2 months and 25 days of continuous service. The pension was inadvertently processed, however, based on a different computation sheet which credited Ellison with thirty years of continuous service and made the pension worth $1,317 plus a $400 supplement per month. The application to award Ellison a 70/80 mutual interest pension based on thirty years of continuous service was approved by the Shenango Inc. Pension Board in April 1986. The Board consisted of Leja, Wehner and Gloria Christenson (Christenson). ⁴ Ellison was informed of the approval in writing on April 25, 1986 and received a lump sum payment of $12,691.14 in May 1986.

The Stock Purchase Agreement prohibited any officer of Shenango Inc. from granting a pension worth more than $10,000 to any individual prior to the closing date of March 24, 1986. Mark Aloe also directed Snyder, sometime after the closing, to obtain his approval before making any corporate expenditure in excess of $10,000 or before taking any other significant corporate act. This later directive was not reduced to writing and it did not include any express limitation on Snyder's approval of 70/80 pensions. Snyder never told Mark Aloe about his approval of Ellison's 70/80 pension, but he did discuss the possibility of approving Ellison's pension with Andrew Aloe.

The Plan contends that Snyder approved a 70/80 mutual interest pension in excess of $10,000 while the restrictions in the Stock Purchase Agreement against such approval were in effect. Snyder recalled being approached by Wehner concerning a 70/80 pension for Ellison. Snyder said he thought he had approved Ellison's pension before the closing date. Leja testified that he received a communication from Wehner on or about April 1st, after the closing date, that Snyder had approved a 70/80 pension for Ellison. Andrew Aloe testified to a conversation with Snyder around the time of the closing in which Snyder indicated that he was considering awarding Ellison a 70/80 pension. The district court found that Snyder's approval of Ellison's pension was post-closing and thus not prohibited...