Inter-Modal Rail Empl. Ass'n v. Atchison Topeka

• Decision Date: 12 May 1997
• Docket Number: 96491
• Parties: RAIL EMPLOYEES ASSOCIATION, et al., Petitioners v. ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, et al
• Court: U.S. Supreme Court

520 U.S. 510

117 S.Ct. 1513

137 L.Ed.2d 763

INTER-MODAL RAIL EMPLOYEES ASSOCIATION, et al., Petitioners

v ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, et al.

No. 96-491.

Supreme Court of the United States

Argued March 17, 1997.

Decided May 12, 1997.

Syllabus ^*

As employees of respondent Santa Fe Terminal Services, Inc. (SFTS), a wholly owned subsidiary of respondent The Atchison, Topeka and Santa Fe Railway Co. (ATSF), the individual petitioners were entitled, among other things, to pension, health, and welfare benefits under SFTS-Teamsters Union collective bargaining agreements. The resulting benefit plans were subject to the Employee Retirement Income Security Act of 1974 (ERISA). Ultimately ATSF bid the work being done by petitioners to respondent In-Terminal Services (ITS) and terminated SFTS employees who declined to continue employment with ITS. The ITS-Teamsters pension and welfare benefit plans were less generous than the SFTS-Teamsters plans. Petitioners filed suit, alleging that the terminations violated §510 of ERISA, which makes it unlawful to "discharge . . . a [plan] participant . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. '' (Emphasis added.) The District Court granted respondents' motion to dismiss. Concluding that §510 only prohibits interference with the attainment of rights that are capable of "vesting,'' the Court of Appeals reinstated petitioners' claim for interference with pension benefits, but affirmed the dismissal of their claim for interference with welfare benefits, which do not vest.

Held: The Court of Appeals' holding that §510 bars interference only with vested rights is contradicted by §510's plain language, whose use of the word "plan'' all but forecloses that position. ERISA defines "plan'' to include an "employee welfare benefit plan,'' 29 U.S.C. §1002(3), even though welfare plans are exempted from its stringent vesting requirements, see §1051(1). Had Congress intended to confine §510's protection to "vested'' rights, it could have easily substituted "pension plan'' for "plan'' or "nonforfeitable right'' for "any right.'' The flexibility an employer enjoys to unilaterally amend or eliminate its welfare benefit plan, see Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78, 115 S.Ct. 1223, ----, 131 L.Ed.2d 94, does not justify a departure from §510's plain language. Such flexibility helps employers avoid the complicated administration and increased cost of vested plans, and encourages them to offer more generous benefits at the outset, since they can reduce benefits should economic conditions sour. Section 510 counterbalances this flexibility by requiring employers to follow a plan's formal amendment process, thus ensuring that employers do not "circumvent the provision of promised benefits.'' Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143, 111 S.Ct. 478, 485, 112 L.Ed.2d 474. Any tension that might exist between an employer's amendment power and a participant's §510 rights is the product of a careful balance of competing interests, not the type of "absurd or glaringly unjust'' result, Ingalls Shipbuilding, Inc. v. Director, Office of Workers' Compensation Programs, 519 U.S. ----, ----, 117 S.Ct. 796, 804, 136 L.Ed.2d 736, that would warrant departure from §510's plain language. On remand, the Court of Appeals should have the first opportunity to evaluate respondents' remaining arguments, including their argument that petitioners were eligible to receive welfare benefits under the SFTS-Teamsters plan at the time they were discharged and, thus, cannot state a §510 claim. Pp. ____-____.

80 F.3d 348, vacated and remanded.

O'CONNOR, J., delivered the opinion for a unanimous Court.

Richard E. Schwartz, for petitioners.

Cornelia T. L. Pillard, Washington, DC, for U.S. as amicus curiae, by special leave of the Court.

James D. Holzhauer, Chicago, IL, for respondents.

Justice O'CONNOR delivered the opinion of the Court.

Section 510 of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 895, makes it unlawful to "discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary [of an employee benefit plan] . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.'' 29 U.S.C. §1140. The Court of Appeals for the Ninth Circuit held that §510 only prohibits interference with the attainment of rights that are capable of "vesting,'' as that term is defined in ERISA. We disagree.

I

The individual petitioners are former employees of respondent Santa Fe Terminal Services, Inc. (SFTS), a wholly owned subsidiary of respondent The Atchison, Topeka and Santa Fe Railway Co. (ATSF), which was responsible for transferring cargo between railcars and trucks at ATSF's Hobart Yard in Los Angeles, California. While petitioners were employed by SFTS, they were entitled to retirement benefits under the Railroad Retirement Act of 1974, 88 Stat. 1312, as amended, 45 U.S.C. §231 et seq., and to pension, health, and welfare benefits under collective bargaining agreements involving SFTS and the Teamsters Union. SFTS provided its workers with pension, health, and welfare benefits through employee benefit plans subject to ERISA's comprehensive regulations.

In January 1990, ATSF entered into a formal "Service Agreement'' with SFTS to have SFTS do the same "inter-modal'' work it had done at the Hobart Yard for the previous 15 years without a contract. Seven weeks later, ATSF exercised its right to terminate the newly formed Agreement and opened up the Hobart Yard work for competitive bidding. Respondent In-Terminal Services (ITS) was the successful bidder, and SFTS employees who declined to continue employment with ITS were terminated. ITS, unlike SFTS, was not obligated to make contributions to the Railroad Retirement Account under the Railroad Retirement Act. ITS also provided fewer pension and welfare benefits under its collective bargaining agreement with the Teamsters Union than had SFTS. Workers who continued their employment with ITS "lost their Railroad Retirement Act benefits'' and "suffered a substantial reduction in Teamsters benefits.'' 80 F.3d 348, 350 (C.A.9 1996) (per curiam).

Petitioners sued respondents SFTS, ATSF, and ITS in the United States District Court for the Central District of California, alleging that respondents had violated §510 of ERISA by "discharg[ing]'' petitioners "for the purpose of interfering with the attainment of . . . right[s] to which'' they would have "become entitled'' under the ERISA pension and welfare plans adopted pursuant to the SFTS-Teamsters collective bargaining agreement. See App. to Pet. for Cert. 29a, Complaint, ¶33. Had SFTS remained their employer, petitioners contended, they would have been entitled to assert claims for benefits under the SFTS-Teamsters benefits plans, at least until the collective bargaining agreement that gave rise to those plans expired. The substitution of ITS for SFTS, however, precluded them from asserting those claims and relegated them to asserting claims under the less generous ITS-Teamsters benefits plans. According to petitioners, the substitution "interfer[ed] with the attainment'' of their "right'' to assert those claims and violated §510. Respondents moved to dismiss these §510 claims, and the District Court granted the motion.

The Court of Appeals for the Ninth Circuit affirmed in part and reversed in part. 80 F.3d 348 (1996). The court reinstated petitioners' claim under §510 for interference with their pension benefits, concluding that §510 ""protects plan participants from termination motivated by an employer's desire to prevent a pension from vesting.''' Id., at 350-351 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 143, 111 S.Ct. 478, 485, 112 L.Ed.2d 474 (1990)). But the Court of Appeals affirmed the dismissal of petitioners' claim for interference with their welfare benefits. "Unlike pension benefits,'' the Court of Appeals observed, "welfare benefits do not vest.'' 80 F.3d, at 351. As a result, the Court of Appeals noted, "employers remain free to unilaterally amend or eliminate [welfare] plans,'' and "employees have no present "right' to future, anticipated welfare benefits.''' Ibid. (emphasis and internal quotation marks omitted). Because the "existence of a present "right' is [a] prerequisite to section 510 relief,'' the Court of Appeals concluded that §510 did not state a cause of action for interference with welfare benefits. Ibid. We granted certiorari to resolve a conflict among the Courts of Appeals on this issue, ^** 519 U.S. ----, 117 S.Ct. 504, 136 L.Ed.2d 395 (1996), and now vacate the decision below and remand.

II

The Court of Appeals' holding that §510 bars interference only with vested rights is contradicted by the plain language of §510. As noted above, that section makes it unlawful to "discharge . . . a [plan] participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan. '' 29 U.S.C. §1140 (emphasis added). ERISA defines a "plan'' to include both "an employee welfare benefit plan [and] an employee pension benefit plan,'' §1002(3), and specifically exempts "employee welfare benefit plan[s]'' from its stringent vesting requirements, see §1051(1). Because a "plan'' includes an "employee welfare benefit plan,'' and because welfare plans offer benefits that do not "vest'' (at least insofar as ERISA is concerned), Congress' use of the word "plan'' in §510 all but forecloses the argument that §510's interference clause applies only to "vested'' rights. Had Congress intended to confine §510's protection to "vested'' rights, it could have easily substituted the term "pension plan,'' see 29 U.S.C. §1002(2), for "plan,'' or the term "nonforfeitable'' right, see §1002(19), for...