Flinchbaugh v. Chicago Pneumatic Tool Co.

• Decision Date: 28 January 1982
• Docket Number: Civ. A. No. 80-88.
• Citation: 531 F. Supp. 110
• Parties: Walter H. FLINCHBAUGH, Kenneth B. Grove, Frank J. Baker, Kenneth J. Berlin, Glenn R. Wile, Wayne H. McElhaney, Richard F. Hanna, Lawrence B. Young, Raymond W. Johnson, Francis E. Allen, Jr., Paul A. Davis, Andrew B. Petrovich, James A. Cummings, Ernest R. Montgomery, Robert L. Dahlman, Kenneth W. Cumming, John H. Campbell, Robert L. Amsler, Fred Finch, Gail H. Marwood, Clifford L. Smith, Robert E. Brown, Wayne E. Mook, William D. Rice, Jr., Vernon C. Cratty, Boyce E. Lefpley, James E. McCleery, Ellsworth Baker, Robert W. Ditzenberger, and Albert C. McCandless, Plaintiffs, v. CHICAGO PNEUMATIC TOOL COMPANY, a corporation; Dennis Dankesreiter, an individual, Richard Miller, an individual, and Charles Fisher, an individual, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

531 F. Supp. 110

Walter H. FLINCHBAUGH, Kenneth B. Grove, Frank J. Baker, Kenneth J. Berlin, Glenn R. Wile, Wayne H. McElhaney, Richard F. Hanna, Lawrence B. Young, Raymond W. Johnson, Francis E. Allen, Jr., Paul A. Davis, Andrew B. Petrovich, James A. Cummings, Ernest R. Montgomery, Robert L. Dahlman, Kenneth W. Cumming, John H. Campbell, Robert L. Amsler, Fred Finch, Gail H. Marwood, Clifford L. Smith, Robert E. Brown, Wayne E. Mook, William D. Rice, Jr., Vernon C. Cratty, Boyce E. Lefpley, James E. McCleery, Ellsworth Baker, Robert W. Ditzenberger, and Albert C. McCandless, Plaintiffs, v. CHICAGO PNEUMATIC TOOL COMPANY, a corporation; Dennis Dankesreiter, an individual, Richard Miller, an individual, and Charles Fisher, an individual, Defendants.

Civ. A. No. 80-88.

United States District Court, W. D. Pennsylvania.

January 28, 1982.

Stephen Barsotti, Allison Park, Pa., for plaintiffs.

Harry Gent, Franklin and Kenneth Khoury, New York City, for defendants.

OPINION

WEBER, Chief Judge.

This is an action brought under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. In this action the plaintiffs, vested participants in a pension fund managed by the defendants, seek payment of certain funds allegedly owed them under the pension agreement. The parties have agreed to submit this matter for determination by the court on the pleadings, briefs and the evidentiary record developed at a hearing held October 23, 1981.

Upon a review of the entire record we conclude that the plaintiffs' challenges to the decision of the pension trustees in this case are without merit. Accordingly, judgment will be entered for the defendants.

I. FACTS

In August of 1977, Chicago Pneumatic Tool Company (CPT) entered into a Collective Bargaining Agreement with Local 335 of the International Association of Machinists and Aerospace Workers. This agreement was intended to cover employees at CPT's Franklin Machine Shop from August 1977 to August 1978. The plaintiffs are among these employees covered by the 1977 Collective Bargaining Agreement.

Under the terms of this agreement the right of employees to receive severance payments in the event of a partial plant closing was limited by the following provision:

Non-duplication of Allowance: Severance allowance shall not be duplicated for the same severance, whether the other obligation arises by reason of contract, law or otherwise. If an individual is or shall become entitled to any discharge, liquidation, severance or dismissal allowance or payment of similar kind by reason of any law of the United States of America or any of the States, districts, or territories thereof subject to its jurisdiction, the total amount of such payments shall be deducted from the severance allowance to which the individual may be entitled under this Section or any payments made by the Company under this Section may be offset against such payments... Article XXVII, Section VI of the 1977 Collective Bargaining Agreement.

The Collective Bargaining Agreement also provided that the Pension Plan existing between the parties was to be incorporated by reference into the agreement.

A Pension Agreement was executed by CPT and Local 335 in August of 1977. This agreement, which covered the period from January 1, 1976 to August 31, 1978, provided pension benefits for those employees who attained the age of 65. However, the agreement also provided special early retirement benefits to employees under the age of 65. This special early retirement benefit was available to certain long term employees of CPT "whose status as an employee was terminated by reason of a permanent shut down of a plant, department or subdivision...". Pension Agreement Article XXX, Section II.

The right of employees to receive these pension benefits was also limited by Section II, paragraph 6, of the Pension Agreement, which provided that:

Adjustments For Severance Payments, Etc. If any pensioner is or shall become entitled to or shall be paid any discharge, liquidation or dismissal or severance allowance or payment of similar kind by reason of any plan of the Company, or in respect of which the Company shall have directly or indirectly contributed, ... then the total amount paid or payable to him in respect of any such allowance or payment may, in the discretion of the Pension Board, be deducted from the amount of any pension to which such pensioner would otherwise be entitled under this Agreement upon retirement; ....

This section of the Pension Agreement was modeled after pension agreements used by major steel corporations at their operations in the Franklin area.

In the spring of 1978, CPT began to consider termination of its operations at the Franklin machine shop. Although local CPT officers; including defendants Miller, Dankesreiter and Fisher, recommended the closing of this facility, the decision to close was ultimately made by CPT's management in New York. This decision was finally made in May 1978.

Following this decision CPT officers at the Franklin plant began to make plans for the termination of all activities at that facility. An important part of these plans involved determining the rights of CPT employees to severance pay and/or pension benefits. In this connection the Pension Board — consisting of Mr. Miller, Dankesreiter and Fisher — met on several occasions to consider the proper manner in which to disburse pension funds. At this time the Pension Board decided that any individuals who were to be terminated who were eligible for special early retirement pensions should receive those pensions. The Board concluded, however, that termination severance pay should be deducted from this special early retirement benefit in all cases.

The Board members took this action because they believed that the payment of both severance and special early retirement constituted a duplication of benefits. Such duplication, in the Board's view, was prohibited under the Collective Bargaining Agreement. In reaching this conclusion the Board members also examined industry practice in the steel industry, since their Pension Agreement was modeled after the agreement used by "big steel". The Board members were informed that this offset of severance and special early retirement was consistent with the practice of "big steel".

In June of 1978 CPT informed Local 335 and each of the affected employees, including plaintiffs, of its decision to deduct severance pay from special early retirement benefits. As required by ERISA this notice was provided to the employees in writing. Local 335 protested this decision by the Board and requested that the Board reconsider its decision. On June 21, 1978, after reconsideration, the Board declined to alter its position with respect to this deduction. This lawsuit followed.

II. DISCUSSION

It is clear that the members of the Pension Board, as Trustees of the Pension Fund, are obliged to administer the fund solely in the interest of its beneficiaries. 29 U.S.C. § 1104. In fulfilling this obligation, however, the trustees are not constrained from exercising their best independent judgment. Quite the contrary, in this case, both ERISA and the Pension Agreement vest the Trustees of the Pension Fund with broad discretion in determining how monies should be disbursed from that fund. Because the trustees are vested with such broad discretion the role of this court in reviewing a denial of pension benefits is quite limited. We are not free to substitute our own judgment for that of the Pension Board members. Rather we must simply determine whether the decision of the trustees was in any way arbitrary or capricious. If the actions of the trustees in determining pension eligibility are not arbitrary or capricious then we must confirm those actions. See, e.g., Fine v. Semet, 514 F.Supp. 34 (S.D.Fla.1981); Weeks v. Coca-Cola Bottling Co. of Arkansas, 491 F.Supp. 1312 (E.D.Ark.1980); Cawley v. NMU Pension & Welfare Plan, 457 F.Supp. 301, 303 (S.D.N. Y.1978).

Moreover, in reviewing the decisions of Pension Trustees we recognize that the trustees and this court are bound by the language of the pension agreement, unless that language is clearly inconsistent with the policies underlying ERISA. Blackmar v. Lichtenstein, 603 F.2d 1306 (6th Cir. 1980).

In this case the plaintiffs argue that the decision of the trustees to deduct severance pay from pension benefits was improper for three reasons. First, according to the plaintiffs that decision reflects an improper conflict of interest on the part of the pension board members. These board members are all management officials in CPT and had some part in the decision to close the Franklin facility. By deducting severance pay from pension benefits these board members were able to effect a financial saving for CPT. Therefore, plaintiffs argue that the actions of these board members reflect an improper bias in favor of CPT.

Second, plaintiffs contend that the trustees abdicated their fiduciary responsibilities by establishing a per se rule, requiring deduction of severance pay from special early retirement in all cases. To support this argument the plaintiffs point to Section II of the Pension Agreement which provided that the Board may, in its discretion, require such a deduction. According to the plaintiffs this provision contemplated an...