INTERNATIONAL ASS'N OF M. & AW v. Garwood Indus., Inc.

• Decision Date: 13 December 1973
• Docket Number: No. C 71-260.,C 71-260.
• Citation: 368 F. Supp. 357
• Parties: The INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, LODGE NO. 1194, et al., Plaintiffs, v. GARWOOD INDUSTRIES, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

368 F. Supp. 357

The INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, LODGE NO. 1194, et al., Plaintiffs, v. GARWOOD INDUSTRIES, INC., et al., Defendants.

No. C 71-260.

United States District Court, N. D. Ohio, W. D.

December 13, 1973.

Richard D. Betts, Robert D. Walker and John Thomas Patterson, Findlay, Ohio, Thomas Maguire, Robison, Curphey & O'Connell, Toledo, Ohio, for plaintiffs.

Charles W. Peckinpaugh, Jr. and Robert G. Clayton, Jr., Shumaker, Loop & Kendrick, Toledo, Ohio, for defendants.

OPINION AND MEMORANDUM INCLUDING FINDINGS OF FACT AND CONCLUSIONS OF LAW

WALINSKI, District Judge.

JURISDICTION

This cause came to be heard on a complaint filed pursuant to 28 U.S.C. § 1332. Jurisdiction is further grounded in 29 U.S.C. § 185(a) and (b), which provides in part:

"(a) Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties."

"(b) Any labor organization which represents employees in an industry affecting commerce as defined in this chapter and any employer whose activities affect commerce as defined in this chapter shall be bound by the acts of its agents. Any such labor organization may sue or be sued as an entity and in behalf of the employees who it represents * * *."

The Court finds jurisdiction proper herein on each of the asserted grounds. See, e. g., International Union v. Textron, Inc., 312 F.2d 688 (6th Cir. 1963); Knoll v. Phoenix Steel Corp., 325 F. Supp. 666 (E.D.Pa.1971), aff'd, 465 F.2d 1128 (3rd Cir. 1972), cert. denied, 409 U.S. 1126, 93 S.Ct. 941, 35 L.Ed.2d 257 (1973); Local No. 90 v. Welbilt Corp., 178 F.Supp. 408 (E.D.Mich.1959), aff'd, 283 F.2d 868 (6th Cir. 1960).

FINDINGS OF FACT

1) This class action is brought on behalf of various classes of former employees of the Findlay Plant of Sargent Industries, Inc., asserting alleged rights to pension payments pursuant to a pension agreement entered into between the plaintiff union and Sargent's predecessor, GarWood Industries, Inc. The parties have stipulated to the propriety of this class action.

2) Proper notice has been made to members of the various classes bringing this action.

3) The plaintiff union represents those active employee/union members with at least ten (10) years of credited service prior to the closing of the plant and the termination of the pension plan.

4) The plaintiff, C. E. Reis, represents all those former employees of the defendant who were in a retirement status at the time the plant was closed and the plan terminated.

5) GarWood Industries, Inc. became a wholly-owned subsidiary of Sargent Industries, Inc., a Delaware corporation (hereinafter Sargent (Del.)), in an exchange of common stock.

6) Sargent (Del.) assumed the operation of the GarWood Findlay Plant on January 1, 1970.

7) A subsequent name change resulted in GarWood Industries, Inc., a Michigan corporation becoming Sargent Industries, Inc., a Michigan corporation (hereinafter Sargent (Mich.)).

8) There has been no evidence produced which would cause this Court to disregard the corporate structure of Sargent (Mich.) placing its liabilities directly upon its sole stockholder, Sargent (Del.).

9) The original pension agreement herein became effective October 31, 1955, between the plaintiff union and the defendant, Sargent (Mich.)'s predecessor in interest, GarWood Industries, Inc.

10) The final amendment of that plan was effective as of June 2, 1968, to run until June 1, 1971.

11) This action revolves primarily around an interpretation of certain contractual terms and their conjunctive relationship as contained within the pension agreement. Those portions of the plan relevant to this action are set out as follows:

a) Art. I, § 2: "The company agrees that, during the term of this Agreement, it will make payments into the Pension Fund in amounts which shall be sufficient to fund the benefits on a sound actuarial basis." (Emphasis added.) (Pltf's Ex. 2-A, p. 3.)

b) Art. I, § 3: "* * * The benefits of the Plan shall be only such as can be provided by the assets of the Pension Fund and there shall be no liability or obligations on the part of the Company to make any further contributions to the Trustee in the event of termination of the Plan. No liability for the payment of benefits under the Plan shall be imposed upon the Company, the officers, Directors, or stockholders of the Company." (Pltf's Ex. 2-A, p. 3.)

c) Art. I, § 4: "Upon termination or discontinuance of the Plan, the assets then remaining in the Pension Fund, after payment or provision for payment of all expenses properly chargeable thereto, shall be allocated for the purpose of paying the pension and death benefits provided by the Plan (based on credited service to date of such termination or discontinuance), to employees who have retired or who would qualify to retire or for other benefits in the following order of precedence: First, to employees who shall have retired prior to such termination or discontinuance and their beneficiaries, without reference to the order of their retirement; Second, to employees who shall have become qualified to retire (but who have not retired) with benefits under the Plan prior to such termination or discontinuance and their beneficiaries, without reference to the order in which they shall have become so qualified to retire; Third, to employees with 10 or more years of credited service and former employees with vested deferred retirement benefits (provided such former employees respond within one year following the date of discontinuance to a written enquiry by the Company at the last known address shown in the records of the Company); and Fourth, to all other employees with a pension interest at date of termination of the Plan, but not beyond the value of such interest." (Pltf's Ex. 2-A, p. 3.)

d) Art. IV, § 1: "Any modification or amendment of the Plan may be made retroactively with the consent of the Union, if necessary or appropriate, to establish the deductibility of the Company's contributions under the Internal Revenue Code as now in effect or hereafter amended or any other applicable provisions of the Federal Tax Laws, as now in effect or hereafter amended or adopted and the regulations issued thereunder." (Pltf's Ex. 2-A, p. 18.) e) Art. V: "The Company reserves the right to amend, modify or terminate the Plan by action of its Board of Directors, provided, however, that no such action shall alter the Plan or its operation (except as may be required by the Internal Revenue Service for the purpose of meeting the conditions required to establish the deductibility for income tax purposes of all payments made by the Company thereunder) in respect of employees covered by this Agreement in contravention of the provisions of this Agreement." (Emphasis added.) (Pltf's Ex. 2-A, p. 21.)

12) The plan in question allowed for the vesting of benefits for those employees with ten (10) years of service.

13) Full pension benefits were payable to retired employees upon reaching age sixty-five (65), along with a provision for an accelerated retirement at age sixty (60).

14) The pension plan contained a provision allowing for the payment of a death benefit of $500. Said payment to be made to the beneficiary of any deceased retiree.

15) The company terminated the plan on October 31, 1971, the date that Sargent (Mich.) closed its facility at Findlay, Ohio.

16) Certain functions of the Findlay facility were moved to the Sargent (Mich.), Wayne Plant in the State of Michigan; the balance of the product lines were discontinued.

17) The amount of the trust corpus at the time of termination was approximately $250,000.

18) In order to guarantee full pension benefits to each of those individuals who have vested rights by virtue of tenure, the corpus would necessarily require an additional funding in the amount of $1,030,000, approximately.

19) A: As of December 1, 1971, there were 116 retirees of Sargent (Mich.) who were receiving full or partial pension benefits. B: As of December 1, 1971, there were 121 employees of Sargent (Mich.) who had sufficient tenure to vest their benefits under the provisions of the plan. C: From (A) and (B) above, on December 1, 1971, there were 237 employees and retirees with vested status.

20) On October 31, 1970, there were sixty (60) former employees of GarWood — Sargent who were on retirement status.

21) At the time that Sargent (Mich.) announced that the Findlay, Ohio, plant was to be abandoned, an actuarial aberration occurred. Many of those eligible for retirement but still working, retired. During the year October 31, 1970, to October 30, 1971, some 53 employees retired.

22) The Court finds that throughout the continuing process of collective bargaining, agents of the defendant and its predecessor in interest repeatedly assured the plaintiffs that the admittedly ambiguous language in the plan (i. e., sound actuarial basis, fully funded, vested, etc.) were in reference to a program that allowed for maximum deductible (26 U.S.C., § 401, et seq.) contributions. It was in reliance on those assurances that the plaintiffs predicated their economic package acceptance.

CONCLUSIONS OF LAW

The courts have moved far afield from their early view of pension plans as mere gratuities, whose modification or termination was generally at the whim and caprice of the employer. The employer need only style the plan "non-contributory" and add the power of unilateral termination to make a pension:

"* * * a gratuitous arrangement by the company for the payment, at its option, of pensions to old employees. Any such mere gift, by plain and unambiguous language which is not susceptible of

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