Hackett v. Pension Ben. Guaranty Corp.

• Decision Date: 07 April 1980
• Docket Number: Civ. No. H-77-1564.
• Court: U.S. District Court — District of Maryland
• Parties: Mary HACKETT, Individually and as representative of a class et al., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant.

486 F. Supp. 1357

Mary HACKETT, Individually and as representative of a class et al., Plaintiffs, v. PENSION BENEFIT GUARANTY CORPORATION, Defendant.

Civ. No. H-77-1564.

United States District Court, D. Maryland.

April 7, 1980.

COPYRIGHT MATERIAL OMITTED

Terrence M. Finn, Howard G. Goldberg and Smith, Somerville & Case and Raymond E. Callegary, Baltimore, Md., for plaintiffs.

James N. Dulcan, Asst. Gen. Counsel and Henry Rose, Gen. Counsel, Washington, D. C., for defendant.

ALEXANDER HARVEY, II, District Judge:

In this class action, plaintiffs are seeking a declaratory judgment which would require defendant to pay them pension benefits under the early retirement provisions of their former employer's pension plan. The plaintiffs here are former employees of Albert F. Goetze, Inc. (hereinafter "the Company"), which is now defunct and out of business. The defendant, Pension Benefit Guaranty Corporation (hereinafter "PBGC") is a federally chartered corporation which was introduced into the administration of private pension plans by the Employee Retirement Income Security Act of 1974 (commonly called ERISA).¹

One of the primary purposes of defendant PBGC is to guarantee the timely and uninterrupted payment of pension benefits to employees who are entitled to those benefits from a private pension plan that has been prematurely terminated. 29 U.S.C. § 1302(a)(2). Defendant PBGC receives no appropriations of funds from Congress but is financed entirely by premiums paid by private pension plans, employer liability payments, assets of plans of which defendant is trustee, investment earnings and borrowed funds. 29 U.S.C. § 1305(b). Defendant PBGC has been directed by Congress to prescribe premium rates to be paid from private pension plans at the lowest level consistent with the performance of its obligations under ERISA. 29 U.S.C. § 1302(a)(3).

On March 26, 1979, this Court certified the pending civil action as a class action. The class comprises all former employees of the Company (1) who were participants in the Albert F. Goetze, Inc. Local 117 Pension Plan (hereinafter the "Plan"); (2) who had attained 55 years of age prior to termination of the Plan; and (3) who are not presently receiving early retirement benefits from the defendant PBGC.² Defendant PBGC is the statutory successor to the rights and obligations of the Company under the Plan.

Presently before the Court are cross motions for summary judgment. As the essential facts are not in dispute, these pending motions present questions of law which may properly be decided under Rule 56, F.R. Civ.P.³

I The Facts

The record in this case establishes the following undisputed facts. Prior to 1971, plaintiffs' Union negotiated a collective bargaining agreement with the Company which required the Company to contribute to a Pension Plan established for the benefit of its employees. The Plan later adopted in 1971 was funded by the Company through Aetna Life Insurance Company. This Plan created four different types of pensions: (1) a disability pension; (2) a normal retirement pension for those employees who retired on or after their sixty-fifth birthday; (3) an early retirement pension for those employees who retired with the consent of the Company on or after their fifty-fifth birthday; and (4) a deferred vested pension for those employees who terminated their employment with the Company after twenty years of credited service. Payments under the deferred vested pension would not be made until the employee reached age sixty-five.

The disability and normal retirement pensions provided for the payment to employees of full monthly benefits calculated at the rate of $5.50 multiplied by the number of years of credited service with the Company. The early retirement pension provided for the payment of full monthly benefits minus ½ of 1% times the number of months between the date the pension was to begin and the employee's sixty-fifth birthday. The deferred vested pension provided for the payment of monthly benefits equal to $2.00 multiplied by the number of years of credited service.

As early as 1972, the Company faced severe financial difficulties. Because of these continuing difficulties, the Company was not always able to pay Aetna Life Insurance Company the sums necessary to meet the funding requirements of the Plan. Whenever an employee sought to retire under provisions of the Plan, Aetna would demand that the Company make up any delinquent funding obligations before retirement benefits were paid to that employee. From time to time, between 1972 and 1974, delinquent obligations in amounts ranging from $2,000 to $10,000 were paid by the Company to Aetna, and these payments added to the Company's economic difficulties. In an attempt to relieve this financial burden, the Company and plaintiffs' Union, in May 1974, agreed that the Company might limit the number of early retirements to a reasonable amount.

In spite of continuing efforts to revive itself financially, the Company eventually failed, and in early August 1974, the Company filed a petition for voluntary bankruptcy. The period immediately preceding the filing of this petition was a time of great turmoil and uncertainty. The pressing need to prepare for the commencement of the bankruptcy proceedings took precedence over all other matters, including the processing of numerous applications for early retirement which had been filed by employees in anticipation of the possible discontinuance of the Company's business. On August 8, 1974, the Company ceased its business operations, and no retirement applications were thereafter processed.

On August 23, 1974, Aetna informed the Company that if its delinquent obligations under the Plan were not paid by September 27, 1974, Aetna would terminate the Plan effective September 28, 1974. The payment demanded was never made, and the Plan was terminated on the latter date.

On September 15, 1974, Albert F. Goetze, Jr., the President of the Company, held a meeting with approximately sixty-five employees, including plaintiff Hackett and other members of the class.⁴ At this meeting, Mr. Goetze outlined plans to reorganize the Company and requested the cooperation of the employees. Plaintiffs claim that Mr. Goetze promised that if the employees at the meeting would remain with the Company during its attempt at reorganization, they would receive full pension benefits.

Eventually, the company's attempts to reorganize its business failed, and on June 3, 1975 the Company finally was adjudicated a bankrupt. Subsequently, on April 6, 1976, defendant PBGC and the Company's trustee in bankruptcy agreed to terminate the Plan pursuant to 29 U.S.C. § 1342. The termination date of the Plan was fixed as September 28, 1974.

Between May 1974 and early August 1974, during the period when the Company's financial difficulties were most acute, plaintiff Hackett and a number of other members of the class requested that the Company give its consent for their early retirement under applicable provisions of the Plan. The record in this case does not indicate the exact number of plaintiffs who made such requests.⁵ However, it is undisputed that the Company never acted on any of these requests, apparently because of the crush of other more pressing and more important matters which arose during this period of acute financial crisis immediately before the filing of bankruptcy. Thus, it is clear from the record here that the Company never gave its consent to the request for early retirement made by plaintiff Hackett or by any of the members of the class.

After defendant PBGC had assumed the Company's pension obligations under ERISA, plaintiffs requested that defendant pay them early retirement benefits under the Plan. Defendant refused to pay these benefits to plaintiff Hackett or to any of the members of the class on the ground that they were not qualified to receive any benefits pursuant to regulations duly adopted by defendant.⁶ This civil action was then filed by plaintiffs.

II The Issues

In support of its motion for summary judgment, defendant PBGC relies on 29 C.F.R. § 2605.5(a)(3), which states:

(a) A participant or his surviving beneficiary is entitled to a benefit if under the provisions of a plan:

* * * * * *

(3) Except for a benefit described in paragraph (a)(2) of this section, before the date of plan termination the participant had satisfied the conditions of the plan necessary to establish the right to receive the benefit prior to such date other than application for the benefit, satisfaction of the waiting period described in the plan, or retirement. (Emphasis added)

Defendant contends that plaintiffs have not satisfied the conditions of the Company's Plan which were necessary to establish their right to early retirement benefits because they did not obtain the necessary consent of the Company prior to termination of the Plan.

In support of their motion for summary judgment, plaintiffs contend (1) that the consent of the Company was not a material condition precedent to the obtaining of early retirement benefits by an employee; (2) alternatively, that the Company consented to the early retirement of plaintiffs by virtue of the representations made at the meeting held on September 15, 1974; and (3) that this Court should in any event exercise its equitable powers to reform the Plan by deleting the requirement of Company consent.

For the reasons more fully discussed hereinafter, plaintiffs' motion for summary judgment will be denied, and defendant's motion for summary judgment will be granted.

III Discussion

In 1947, a series of decisions of the National Labor Relations Board and of the courts held that under the National Labor Relations Act pensions and retirement plans were subjects of compulsory collective bargaining. See Inland Steel Co. v. NLRB, 170 F.2d 247 (7th Cir. 1948), cert. denied, 336 U.S. 960, 69 S.Ct. 887, 93 L.Ed.2d 1112 (1949). Since then, there has...