Knauss v. Gorman

• Decision Date: 28 June 1977
• Docket Number: Civ. A. No. 76-456.
• Citation: 433 F. Supp. 1040
• Parties: Edmund KNAUSS v. Patrick E. GORMAN et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

433 F. Supp. 1040

Edmund KNAUSS v. Patrick E. GORMAN et al.

Civ. A. No. 76-456.

United States District Court, W. D. Pennsylvania.

June 28, 1977.

Michael A. Donadee, Pittsburgh, Pa., for plaintiff.

Michael J. Boyle, Pittsburgh, Pa., for defendants.

OPINION

KNOX, District Judge.

Plaintiff, a retired butcher, has filed suit for pensions allegedly due him from the defendant pension fund. The pension applied for was denied by the trustees by reason of break in service (BIS) provisions of the fund. After the usual pretrial procedures the case was heard before the undersigned non-jury and is now ready for disposition on the merits.

Plaintiff started work in 1936 for Oswald & Hess Company, a Pittsburgh meatpacker, an employer covered by the fund, in 1936 and worked there as a full-time employee until September 10, 1962 the company went out of business and into bankruptcy. His service 1936-1962 was full-time and continuous except for a three months break in 1961 when the plant was closed. Plaintiff was 54 years of age when the company went out of business having been born May 16, 1908.

During the interval September 10, 1962 to May 1966, plaintiff did not work in any covered meatpacking plant ("covered" as used herein means an employer covered by the pension fund.) During this period he says he applied to the union hall for work without success and eventually went to California where he worked in a hotel. On September 10, 1965, he began work at the Ohio Valley Meat Packing, not a covered employer, where he continued until March, 1966. In May 1966, he secured work at Northside Packing in Pittsburgh a covered employer where he continued to work until December 1972 when he was laid off. At this time he was 64 years of age.

Oswald & Hess his then employer on September 1, 1957 joined with other contributing employers to institute a pension plan for its employees. The terms thereof are set forth in Exhibit 1. At this time, plaintiff received credit for 20 years of past service with Oswald & Hess being the maximum past service credit permitted under the plan. (See p. 3 Ex. 1) A pension under this plan commenced at age 65, provided the participant retired, and continued for life.

A copy of this pension fund was posted on the bulletin board for employees to examine.

On July 1, 1962, certain amendments and changes in this pension fund generally known as the Local 424 pension fund became effective. This involved a slight change in method of computing future service credit and other changes which are not important at this time.

The original pension plan and the amended pension plan of Local 424 contained a provision (P. 8 Ex. 1) providing that if a participant ceased his employment with a contributing employer and later again became a participant "he shall be considered a new participant for all purposes of the plan thus losing any service credit relating to his prior period of employment except for (1) any non-working period not in excess of 12 months." A similar provision was contained in the 1962 amendments. Thus when Knauss lost his job in 1962 and remained without employment by a covered employer until 1966, more than one year, he lost all of his previous service credit. At the time he was separated from his employment involuntarily in 1962, he was eligible for a pension except for the fact that he was then 11 years short of the retirement age of 65 and 6 years short of the early retirement age of 60. Thus, under the plan when he again went to work for a covered employer, Northside Packing, in 1966 he had to start accumulating his service credits over again. When he was laid off again in December 1972 by Northside Packing he was still five months short of his 65th birthday.

On January 12, 1970, the Local 424 fund was merged into the Amalgamated Meat Cutters and Butcher Workmen Union and Industry Pension Fund, hereinafter referred to as "The National Fund". In the merger agreement it was provided that the trustees of the national fund would assume and agree to pay all the debts, liabilities etc. of the merging fund and that the participants in the national fund and all participants who had attained the age of 50 years on the date of the merger should receive benefits of 75% of the normal or early retirement benefits then in effect. The contributing employers included Northside Packing. Plaintiff Edmund Knauss was one of those listed as a participant.

Upon being laid off in December 1972, plaintiff filed a pension application on January 2, 1973 which was denied and further denials occurred thereafter (See Stip. Exhibits 7, 8, 9, 10). In the final letter Exhibit 11 it was stated that the Board of Trustees "again have denied you a pension because you do not have the necessary ten years eligible service due to the break in service of two years or more from August 1962 to July 1966." The National Fund Article V, Section 4 stated that if for a period of 24 months an employee fails to accumulate future service pension credits, all past and future service pension credits previously accumulated shall be cancelled. The result was therefore the same under either the 424 Plan or the National Fund, namely that Knauss' credits earned at Oswald & Hess were cancelled. Beginning in 1966 he was unable to accumulate sufficient credits to cover retirement in December, 1972.

Following the final denial Knauss brought suit in this court naming as defendants the trustees of the national fund and the national fund itself.

Two questions arise which have to be answered to determine the outcome of this suit as follows:

(1) Does this court have jurisdiction of this cause of action?

(2) Are the break in service provisions contained in both the Local 424 plan and the national plan which operate to deprive Knauss of his previously earned pension credits as the result of his involuntary separation from employment for a period of approximately 3½ years so arbitrary and capricious as to constitute structural violations of the provisions of Section 302 of the Labor Management Relations Act (29 U.S.C. § 186)?

(1) Jurisdiction.

While the brief of defendants does not contain a serious attack upon the jurisdiction of this court nevertheless the court raised this question sua sponte at the trial and argument and plaintiff has furnished a helpful brief with respect to this problem. Since this is a question of jurisdiction over the subject matter, the duty of the court is to determine this before proceeding to examine the merits of the controversy. Historically, it should be noted that jurisdiction of actions involving the management and distribution and claims of beneficiaries in trusts such as the agreements here involved was in the state courts. (In Pennsylvania in the Equity courts or in the Orphans' courts). The question is whether any act of congress operates to divest the state courts of jurisdiction in such matters and to place the responsibility for deciding these questions in the federal courts. See Lieberman v. Cook, 343 F.Supp. 558 (W.D.Pa.1972) where this court held that general supervision of the administration of such retirement plans remains where it always was in the state courts of appropriate jurisdiction. It was in these courts that suits to obtain money due an individual beneficiary should be brought, absent diversity jurisdiction in the federal courts.

In the complaint in this case, jurisdiction was grounded upon section 302(e) of the Labor Management Relations Act (29 U.S.C. § 186(e)) 28 U.S.C. § 1337, diversity jurisdiction under 28 U.S.C. § 1332 and further jurisdiction under the Employee Retirement Income Security Act of 1974 (ERISA) 29 U.S.C. § 1132.

(A) ERISA.

Both parties have admitted in their briefs and at argument that ERISA has no application to this case. ERISA has various effective dates as to various provisions, (see 29 U.S.C. § 1031), the earliest of which is September 2, 1974, the date of passage of the legislation. Knauss' rights if any had accrued on the date of his last termination in December 1972, and there is nothing in ERISA indicating any intent to affect the rights of those persons whose rights were already determined at some previous date. It is noted that if this suit were brought today under a trust instrument wherein rights had accrued since the effective date of ERISA this court would have jurisdiction under 29 U.S.C. § 1132(a)(1)(B) authorizing suits by beneficiaries to recover benefits due them.

(B) Jurisdiction under 28 U.S.C. §§ 1337 and 1331.

The claim that this cause of action is based upon a question arising under the constitution and laws of the United States as well as a claim that it is based upon 1337 conferring jurisdiction on the district courts of civil actions or proceedings arising under any act of Congress regulating commerce begs the question. Unless it is shown the rights are conferred by some piece of federal legislation then these sections do not operate to bring the plaintiff's case within the ambit of the powers of the federal court.

(C) Diversity Jurisdiction 28 U.S.C. § 1332.

The complaint in this case describes the individual defendants as constituting the board of trustees of the defendant pension fund and states that its principal office is located in Chicago, Illinois. The difficulty is that there is no allegation as to the citizenship of the individual defendants nor is it stated whether the pension fund is a corporation of the state of Illinois or not. Plaintiff is a citizen of Pennsylvania. To establish diversity jurisdiction he would have to show that the defendants are citizens of different states, and this does not appear in the pleadings or elsewhere. We will assume arguendo that if plaintiff establishes his right to a pension, his eventual loss establishing the amount in controversy would come to over $10,000. See Chaudoin v. Atkinson, 494 F.2d 1323 (3d Cir. 1974) holding that future salary is to be considered in calculating the $10,000 amount for...