Fought v. Evans Products Co. Racine Pension Plan Agreement
| Decision Date | 02 July 1992 |
| Docket Number | No. 91-3538,91-3538 |
| Parties | 15 Employee Benefits Cas. 2046 Richard FOUGHT, et al., Plaintiffs-Appellants, v. EVANS PRODUCTS COMPANY RACINE PENSION PLAN AGREEMENT, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Miriam R. Katzman (argued), Zubrensky, Padden, Graf & Maloney, Milwaukee, Wis., Daniel B. Sherrick, UAW Legal Dept., Detroit, Mich. and George Graf, Gillick, Murphy, Wicht & Prachthauser, Brookfield, Wis., for plaintiffs-appellants.
Kael B. Kennedy, Kirk D. Messmer, Allan Gunn (argued), George J. Matkov, Jr., and Beth E. Koch, Matkov, Salzman, Madoff & Gunn, Chicago, Ill., for defendants-appellees.
Before CUMMINGS, EASTERBROOK, and RIPPLE, Circuit Judges.
Racine Steel Castings Company lost money, and together with its corporate parent Evans Products Company filed for bankruptcy in 1986. Both firms liquidated. Evans Asset Holding Company (EAHC), formed to sell off the corporate family's assets, acquired and quickly sold Racine Steel's plant. The buyer, B & R Holdings, Ltd., assumed none of its predecessor's liabilities but did hire most of its employees. EAHC dismissed its employees in April 1987 and terminated Racine Steel's pension plan at the end of January 1988, distributing to its employees all of their vested benefits. Some of the former employees believe that they received too little credit for service and filed this suit seeking relief under the Employee Retirement Income Security Act (ERISA). EAHC distributed all of the pension plan's assets to Racine Steel's workers, so if the plaintiffs prevail their recovery will come from the Pension Benefit Guaranty Corporation.
Like many other employers, Racine Steel awarded credit toward pensions for time employees were available to work but could not, through no fault of their own. Sick leave, time on layoff and in military service, and the like count as "service" for purposes of vesting--but only to a point. An employee laid off stops accruing credit when he "incurs a break in seniority under the Basic Agreement"--the collective bargaining agreement in force between Racine Steel and its principal union. The collective bargaining agreement allows employees a minimum of two and a maximum of five years on layoff before they lose their seniority. Plaintiffs contend that during the two to five years after EAHC dismissed them, they continued to earn credit--which would permit some to "creep" into vested benefits and others to achieve higher levels of benefits.
Plaintiffs' argument depends on the terms of the pension plan. Although separate provisions define "continuous service" and "credited service" for pension purposes, we need not explore the subtle differences between these terms. Here is the critical language from section III.1(a)(2) of the Plan:
"Continuous Service Termination Date" is ... the earlier of (i) the date the Employee quits, is discharged or terminated for cause or otherwise, dies, or the last day of the calendar month in which he attains age seventy (70), or (ii) the first anniversary of the date the Employee is absent from service for any other reason. Notwithstanding the foregoing, an Employee shall not incur a Continuous Service Termination Date:
(i) Due to an absence caused by entering the military....
(ii) During periods of absence after August 1, 1964, caused by an Employee's (who is a member of the Union) engaging in or preparing for bargaining negotiations with the Company ...; or
(iii) Until such time as he incurs a break in seniority under the Basic Agreement.
We assume for the sake of argument that clause (iii) applies even though the Basic Agreement was rescinded by mutual consent on April 16, 1987, by an instrument releasing all claims by the union and its members other than those under the pension plan. All then turns on the meaning of "the foregoing" in § 1(a)(2): does it mean that the trailing provisos extend credit to employees after they quit, died, turned 70, or were discharged, or is the reference limited to the clause that speaks of employees "absent from service for any other reason"?
When EAHC took over Racine Steel's pension plan, it appointed four persons to serve as the Pension Committee interpreting and administering the Plan. The Plan grants the Committee authority "[t]o construe the Plan" and "[t]o delegate to proper officers or employees of the Company such duties and responsibilities as it shall determine reasonable". The Committee delegated to one of its members, Warren Strong, the authority to make initial decisions on requests for benefits. Strong turned down all requests that depended on credit for service after April 13, 1987, explaining that an employee "discharged or terminated for cause or otherwise" cannot earn additional service credits just because his seniority has not been "broken" under the Basic Agreement. Two former employees asked the full Pension Committee to review Strong's decision. Their attorney promised to "provide a more detailed statement of position soon after the Holidays." The statement never arrived and the Committee never acted; instead plaintiffs filed this suit, which the district court certified as a class action and decided in defendants' favor on motion for summary judgment.
The district judge concluded that the clause authorizing the Committee "[t]o construe the Plan" led to deferential review under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 954, 103 L.Ed.2d 80 (1989). See also, e.g., Foster McGaw Hospital v. Building Material Chauffeurs Welfare Fund, 925 F.2d 1023 (7th Cir.1991); Fuller v. CBT Corp., 905 F.2d 1055, 1058 (7th Cir.1990); Exbom v. Central States Health & Welfare Fund, 900 F.2d 1138, 1141-42 (7th Cir.1990). According to the court, § 1(a)(2)...
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