Kotrosits v. GATX Corp. Non-Contributory Pen. Plan
| Decision Date | 25 February 1991 |
| Docket Number | Civ. A. No. 88-1835. |
| Citation | 757 F. Supp. 1434 |
| Parties | Edwin KOTROSITS, Julius Ruggeri, and Marvyn Souders, on their own behalf and on behalf of all others similarly situated v. GATX CORPORATION NON-CONTRIBUTORY PENSION PLAN FOR SALARIED EMPLOYEES. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
COPYRIGHT MATERIAL OMITTED
Kevin T. Fogerty, Jeffrey B. Albert, Traub, Butz & Fogerty, P.C., Allentown, Pa. (Fox, Rothschild, O'Brien & Frankel, Philadelphia, Pa., of counsel), for plaintiffs.
Herbert L. Zarov, Kenneth E. Wile, Mayer, Brown & Platt, Chicago, Ill., Robert L. Hickok, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for defendant.
In this dispute over the extent to which the defendant owes the plaintiffs pension benefits, the parties have filed extensive pre-trial and post-trial briefs, stipulations of facts, and exhibits. After a non-jury trial, I make the following:
I. FINDINGS OF FACT1
1. The representative plaintiffs are:
a. Edwin Kotrosits, a resident of Coplay, Pennsylvania for more than 30 years. S.1.
b. Julius Ruggeri, a resident of Bethlehem, Pennsylvania for more than 30 years. S.19.
c. Marvyn Souders, a resident of Orefield, Pennsylvania for more than 30 years. S.29.
2. The defendant is the GATX Corporation Non-Contributory Pension Plan for Salaried Employees ("the Plan"), a defined benefit, non-contributory pension plan, qualified under ERISA, covering salaried employees of GATX Corporation and other participating employers. Exh. 3. No amendments were made in 1986 to any provisions of the Plan at issue in this lawsuit. S.35.
3. The Plan is administered from and is amenable to service at 120 South Riverside Plaza, Chicago, Illinois, 60606. S.36.
4. From January 1, 1986 to the present, James A. Herbert has been Plan Administrator. S.37.
5. From May, 1980 to January, 1986, Samuel E. Kohler was Plan Administrator. S.38.
6. On or about August 17, 1954 GATX Corporation ("GATX"), then called General American Transportation Corporation, purchased all of the outstanding shares of Fuller Company, a Delaware corporation. S.35.
7. In 1975 General American Transportation Corporation ("GATC") was formed as a GATX subsidiary. From 1975 to December 31, 1986, Fuller Company ("Fuller") was a subsidiary of GATC and a second-tier subsidiary of GATX. S.41. Between 1954 and December 31, 1986, Fuller was a wholly-owned direct or indirect subsidiary of GATX. S.40.
8. On December 31, 1986 pursuant to a Stock Purchase Agreement, GATX Corporation caused GATC to sell all of its shares of Fuller Company stock to F A Holding Corporation ("F A Holding"). I shall refer to this transaction as the "Fuller sale." S.68 and Exh.13.
9. As of the morning of December 31, 1986, Fuller owned and operated facilities in Allentown, Bethlehem, Catasauqua, and Mannheim, Pennsylvania, as well as certain subsidiaries and foreign operations. S.44.
10. As of December 31, 1986, there were approximately 664 Fuller salaried employees who were participants in the Plan. Of these, sixty-six were at Fuller's Compton facility, which was not included in the Fuller sale. S.45.
11. From 1954 to the present, Fuller Company has had its world headquarters in Bethlehem, Pennsylvania. S.43.
12. GATX and GATC have had their corporate headquarters in Chicago, Illinois at all times relevant to this litigation. S.42.
13. GATX first adopted its separate pension plan for salaried employees of GATX and participating subsidiaries on January 1, 1965. S.64.
14. Effective January 1, 1965, upon receiving authorization to do so, Fuller Company adopted the Plan and became an "Affiliated Company." S.65.
15. The GATX Board of Directors appoints the members of the Benefits Committee for the Plan. S.66.
16. Before the Fuller sale, Fuller (not GATX) made contributions to the Plan on behalf of Fuller employees. S.S.15.
17. GATC, a GATX subsidiary and Fuller's parent, provides limited health care and life insurance benefits for retired employees who meet established criteria. Most domestic employees are eligible for the insurance benefits as they retire under the GATX plan. GATX pays the premium for this coverage provided by an insurance company. The premiums are allocated to GATC based on benefits paid during a particular year. S.6.
18. The GATX Plan offers the following retirement options: (1) normal retirement (age 65); (2) 62/15 (unreduced benefit at age sixty-two provided that the employee has fifteen years of service); (3) 90 points (unreduced benefit available provided that the employee's age and years of service add up to ninety); (4) 75/80 points (unreduced benefit available in the event of plant shutdown, layoff, extenuating circumstances or disability available (i) when the employee is at least fifty-five and the employee's age and years of service add up to seventy-five or (ii) when the employee's age and years of service add up to eighty); and (5) 55/15 (retirement with an actuarially reduced benefit for employees who are at least fifty-five with fifteen years of service). Exh. 3, Article 4.
19. In May, 1985 Elmer Gates, then President and Chief Operating Officer of Fuller Company, learned from Ken Krick that Fuller was for sale. Ken Krick was, at that time, Chairman of Fuller and a Senior Vice President at GATX. S.S.1.
20. Elmer Gates and five other members of Fuller's senior management (John Leidner, John Alogna, Erwin Decker, Gopal Kapoor, and Gerald Labelle) formed F A Holding to purchase the shares of Fuller from GATC through a management leveraged buyout. S.69.
21. During 1986 several entities, including Ecolaire, Peter Robbins, and Polysius (a German company), discussed with GATX the possibility of acquiring Fuller.
22. Shortly before October 12, 1986, GATX decided to sell Fuller to F A Holding. The parties agreed to structure the transaction as a sale of stock rather than a sale of assets. S.71.
23. The members of Fuller senior management effectuating the buyout retained their job titles following consummation of the sale on December 31, 1986, although Elmer Gates also became Chairman of the Board of Fuller Company at that time. S.70.
24. The draft stock purchase agreement prepared by GATX and/or its legal counsel contained the following clause:
GATX Salaried Pension Plan. Certain salaried employees of Fuller participate in the GATX Salaried Pension Plan. Effective as of the first day of the calendar month in which the Closing Date occurs (the "Spinoff Date"), GATX shall spinoff the portion of the GATX Salaried Pension Plan attributable to current and former Fuller employees, which spunoff portion shall be known as the Fuller Salaried Pension Plan. The amount of assets transferred to the Fuller Salaried Pension Plan shall be equal to the sum of (i) the present value of all accrued benefits of current and former Fuller employees determined as of the Spinoff Date on the basis of the actuarial assumptions used by the actuary for the GATX Salaried Pension Plan to determine the present value of accrued benefits under that plan as of January 1, 1986, plus (ii) interest at the rate of 8½% per annum on such present value from the Spinoff Date to the date of transfer. On and after the Spinoff Date the Fuller Salaried Pension Plan shall be responsible for all pension and ancillary benefits attributable to current and former Fuller employees. Prior to the Closing Date, Fuller shall have contributed its allocable portion of the minimum funding amount required under section 412 of the Code for the GATX Salaried Pension Plan with respect to that portion of the 1986 plan year which precedes the Spinoff Date and shall have taken all steps necessary to adopt the Fuller Salaried Pension Plan.
25. The final agreement did not contain the above-quoted language. Section 5.10(b) of the final agreement provided:
GATX Salaried Pension Plan. Certain salaried employees of Fuller participate in the GATX Salaried Pension Plan and shall be referred to as "Fuller Participants" for purposes of this subsection 5.10(b). It is understood that the Closing Date hereunder is a Termination of Employment under the terms of the GATX Salaried Pension Plan for all Fuller Participants, and that Fuller will cease to be an Employer under the GATX Salaried Pension Plan as of the Closing Date. Effective as of the Closing Date GATX shall cause the GATX Salaried Pension Plan to be amended to provide that Fuller Participants employed by Fuller on the Closing Date will be fully vested in their normal retirement benefit accrued as of the Closing Date under the GATX Salaried Pension Plan. GATX shall indemnify and defend, at its own expense, Fuller and Purchaser and any pension plan for salaried employees maintained by Fuller or Purchaser against any and all claims, liabilities, losses, damages, costs and expenses relating to or arising directly or indirectly out of a claim that GATX Salaried Pension Plan is required, under its terms as in effect on or before the Closing Date, to provide subsidized early retirement benefits to Fuller Participants, or out of a claim that Fuller or Purchaser or any salaried pension plan maintained by Fuller or Purchaser is required by law to provide subsidized early retirement benefits to Fuller Participants because of the provisions of the GATX Salaried pension Plan as in effect on or before the Closing Date.
S.94 & Exhs.13 & 15.
26. The phrase "subsidized early retirement benefits" in Section 5.10(b) of the Stock Purchase Agreement between GATX, GATC and FA Holding referred to the 62/15, the 75/80, and the 90 point pensions. S.109; see Finding of Fact 18 27. Section 5.10(i) of the Stock Purchase Agreement states, in relevant part:
Retiree Benefits. Effective as of the Closing Date, the Purchaser shall cause Fuller to reimburse GATX without any...
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