Inter-Modal Rail Employees Ass'n v. Atchinson, Topeka and Santa Fe Ry. Co.

• Decision Date: 27 March 1996
• Docket Number: Nos. 93-56400,94-55188,INTER-MODAL,s. 93-56400
• Citation: 80 F.3d 348
• Parties: 96 Cal. Daily Op. Serv. 2039, 96 Daily Journal D.A.R. 3461, Pens. Plan Guide P 23918X RAIL EMPLOYEES ASSOCIATION; Thomas Franks; Charles Jones; Thomas J. Martin; Hoyt Jarrard; Robert Stein, Plaintiffs-Appellants, v. The ATCHISON, TOPEKA and SANTA FE RAILWAY COMPANY; In-Terminal Services, Division of Mi-Jack Products, Inc., An Illinois Corp., Defendants-Appellees.RAIL EMPLOYEES ASSOCIATION; Thomas Franks; Charles Jones; Thomas J. Martin; Hoyt Jarrard; Robert Stein, Plaintiffs-Appellants, v. The ATCHISON, TOPEKA and SANTA FE RAILWAY COMPANY; Santa Fe Terminal Services, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 348

80 F.3d 348

96 Cal. Daily Op. Serv. 2039, 96 Daily Journal

D.A.R. 3461,

Pens. Plan Guide P 23918X

INTER-MODAL RAIL EMPLOYEES ASSOCIATION; Thomas Franks;

Charles Jones; Thomas J. Martin; Hoyt Jarrard;

Robert Stein, Plaintiffs-Appellants, v. The ATCHISON, TOPEKA and SANTA FE RAILWAY COMPANY;

In-Terminal Services, Division of Mi-Jack

Products, Inc., An Illinois Corp.,

Defendants-Appellees.

INTER-MODAL RAIL EMPLOYEES ASSOCIATION; Thomas Franks;

Charles Jones; Thomas J. Martin; Hoyt Jarrard;

Robert Stein, Plaintiffs-Appellants, v. The ATCHISON, TOPEKA and SANTA FE RAILWAY COMPANY; Santa Fe

Terminal Services, Inc., Defendants-Appellees.

Nos. 93-56400, 94-55188.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 6, 1995.

Decided March 27, 1996.

Richard E. Schwartz and James E. Parrot, Richard Schwartz & Associates Ltd., St. Louis, Missouri, for plaintiffs-appellants.

Ronald W. Novotny, Hill Farrer & Burrill, Los Angeles, California, for defendants-appellees The Atchison, Topeka and Santa Fe Railway Company and Santa Fe Terminal Services, Inc.

Robert L. Zaletel, Keck, Mahin & Cate, San Francisco, California, for defendant-appellee In-Terminal Services.

Appeals from the United States District Court for the Central District of California; William J. Rea, District Judge, Presiding. No. CV-92-06623-WJR.

Before: JAMES R. BROWNING and ROBERT R. BEEZER, Circuit Judges, and ANCER L. HAGGERTY, ^* District Judge.

OPINION

PER CURIAM:

Inter-Modal Rail Employees Association and five of its members, plaintiffs below, appeal the dismissal of their complaint under the Employee Retirement Income Security Act of 1974 ("ERISA") and the Federal Employer's Liability Act ("FELA") for failure to state a claim on which relief could be granted. In a related appeal, plaintiffs challenge an award of attorneys fees based on the premature filing by plaintiffs of an earlier notice of appeal.

I.

Defendant Atchison, Topeka and Santa Fe Railway Company transferred certain cargo handling work from a wholly-owned subsidiary, defendant Santa Fe Terminal Services Inc., to an independent corporation, defendant In-Terminal Services Division of Mi-Jack Products, Inc. ¹ The Association represents former employees of Santa Fe Terminal Services who lost their jobs as a result of the transfer. The complaint alleges (1) defendants violated Section 510 of ERISA by conspiring to transfer the work from Santa Fe Terminal Services to In-Terminal Services for the express purpose of depriving members of the Association of pension and welfare benefits; ² and (2) Santa Fe Railway Company and Santa Fe Terminal Services violated FELA by improperly exposing members of the Association to harmful levels of noise and toxic chemicals. ³

To establish the individualized damages sought in both the ERISA and FELA claims, each employee member would have to participate in the lawsuit. United Union of Roofers, Waterproofers & Allied Trades No. 40 v. Insurance Corp. of America, 919 F.2d 1398, 1400 (9th Cir.1990). The Association therefore lacks standing to bring suit on these claims on the members' behalf. Id. However, plaintiffs requested that if the Association were found not to be a proper party to act on behalf of its members, the named individual members be certified as representatives of a class to proceed with the action on behalf of members of the Association.

II. ERISA ⁴

As employees of Santa Fe Terminal Services, the individual plaintiffs were entitled to retirement benefits under the Railroad Retirement Act of 1974, and to pension, health and welfare benefits under collective bargaining agreements with the Teamsters Union. As a result of their discharge, plaintiffs lost their Railroad Retirement Act benefits and suffered a substantial reduction in Teamster benefits. Plaintiffs allege defendants "entered into a wrongful conspiracy" to transfer the work from Santa Fe Terminal Services to In-Terminal Services "for the express purpose of avoiding" payment of contributions to the Railroad Retirement Fund and minimizing payments for Teamster benefits. ⁵

A. Teamster Benefits

1. Teamster Pension Benefits

Plaintiffs clearly stated a claim under section 510 of ERISA, which "protects plan participants from termination motivated by an employer's desire to prevent a pension from vesting." Ingersoll-Rand v. McClendon, 498 U.S. 133, 143, 111 S.Ct. 478, 485, 112 L.Ed.2d 474 (1990). Defendants contend that an incidental or consequential loss of future, unaccrued pension benefits is not actionable; but, as plaintiffs correctly note, questions of motivation and intent are not to be resolved at the pleading stage.

2. Teamster Welfare Benefits

Plaintiffs' claim of interference with their welfare benefits was properly dismissed. It is the law of this circuit that section 510 "does not prohibit an employer from altering the package of medical benefits that it provides its employees, but only from interfering with an employee's use of the benefits provided." DeVoll v. Burdick Painting, Inc., 35 F.3d 408, 411 (9th Cir.1994). ⁶ Unlike pension benefits, welfare benefits do not vest. See 29 U.S.C. § 1051(1); Joanou v. Coca-Cola Company, 26 F.3d 96, 98 (9th Cir.1994); West v. Greyhound Corp., 813 F.2d 951, 954 (9th Cir.1987). Accordingly, employers "remain free to unilaterally amend or eliminate such plans without considering the employees' interests." DeVoll, 35 F.3d at 411 (quoting Joanou, 26 F.3d at 98); see also Joan Vogel, Containing Medical and Disability Costs by Cutting Unhealthy Employees: Does Section 510 of ERISA Provide a Remedy?, 62 Notre Dame L.Rev. 1024, 1060 (1987) (noting that "[a]n employer can deprive employees of benefits and avoid liability under section 510 simply by terminating the medical and disability benefit plan entirely," rather than selectively terminating the coverage of individual employees). As we held in West v. Greyhound Corp., 813 F.2d at 955, no action lies under section 510 for an employer's refusal to hire employees of its predecessor because the employees insist upon maintenance of previous benefit levels; existence of a present "right" is prerequisite to section 510 relief, and employees have no present "right" to future, anticipated welfare benefits. Id. at 954.

B. Railroad Retirement Act Benefits

Plaintiffs' claim of interference with benefits due them under the Railroad Retirement Act of 1974 was also properly dismissed. Section 1003(b) of ERISA excludes from coverage any "governmental plan," defined as including "any plan to which the Railroad Retirement Act of 1935 or 1937 applies." See 29 U.S.C. § 1002(32). Plaintiffs argue that because Section 1002(32) does not refer to the Railroad Retirement Act of 1974, railroad retirement plans under the 1974 Act are not excluded from coverage by ERISA. ⁷ We conclude that all Railroad Retirement Act plans are exempt from ERISA. This construction is required to accomplish Congress' purpose and is not precluded by the inadvertent failure to specifically identify the 1974 statute in section 1003.

ERISA was adopted to meet a perceived need for minimum federal standards to govern private pension plans. See 29 U.S.C. § 1001(a); H.R.Rep. No. 807, 93rd Cong., 2nd Sess., reprinted in 1974 U.S.C.C.A.N. 4670, 4676-81; H.R.Rep. No. 533, 93rd Cong. 2nd Sess., reprinted in 1974 U.S.C.C.A.N. 4639, 4640-46. It is reasonable to assume plans under the 1935 and 1937 Railroad Retirement Acts were excluded from ERISA because such plans were already subject to independent federally administered statutory controls and were not plagued by the problems affecting private pension plans. This is equally true of plans adopted under the 1974 Railroad Retirement Act.

The benefit and contribution levels in plans under the 1974 Act are prescribed by that Act and regulations issued under it, see 20 C.F.R. § 200.1 et seq., and are administered by the Railroad Retirement Board, an independent executive agency, see 45 U.S.C. § 231 et seq., just as are plans issued under the two earlier revisions. Indeed, the 1974 Act added to the financial stability of Railroad Retirement Act plans and strengthened government controls over such plans, thus further diminishing any need for ERISA coverage. See S.Rep. No. 1163, 93rd Cong., 2nd Sess., reprinted in 1974, U.S.C.C.A.N. 5702, 5702-14; U.S. Railroad Retirement Board v. Fritz, 449 U.S. 166, 169, 101 S.Ct. 453, 456, 66 L.Ed.2d 368 (1980).

Failure to add a specific reference to the 1974 Railroad Retirement Act in section 1003 of ERISA was understandable. ERISA was enacted six weeks before the Railroad Retirement Act of 1974. See P.L. 93-406, 83 Stat. 832 (1974); P.L. 93-445, 88 Stat. 1305 (1974). Section 1002(32) of ERISA listed only the 1935 and 1937 Railroad Retirement Acts because they were the only Railroad Retirement Acts then in existence. Conversely, the 1974 Railroad Retirement Act was omitted not because of a deliberate decision that plans under the 1974 Act were not to be exempt from ERISA, but simply because the 1974 Railroad Retirement Act was not yet law.

Nor is it surprising that the need to anticipate passage of the 1974 Railroad Retirement Act and include a specific reference to that Act in ERISA would be overlooked. As Judge Dorsey pointed out in the only reported decision on the subject, ⁸ the 1974 Railroad Retirement Act "codified and absorbed and superseded the Railroad Retirement Acts of 1935 and 1937." Cornelio v. Consolidated Rail Corp., 585 F.Supp. 490, 491 (D.Conn.1984). Consequently, "[t]he 1935 and 1937 Acts do not now exist as pure and separate legislative acts. They were absorbed into the 1974 enactment and now constitute one statute." Id. at 493; See also Historical Note, Subchapter IV, Railroad Retirement Act of 1974, 45 U.S.C. § 231. In this context, the need to identify the most recent version of what was legislatively regarded as a single railroad retirement program would not have been obvious. Moreover, if the original ...