Kotrosits v. GATX Corp. Non-Contributory Pension Plan for Salaried Employees

• Decision Date: 06 July 1992
• Docket Number: NON-CONTRIBUTORY,No. 91-1410,N-CONTRIBUTORY,91-1410
• Citation: 970 F.2d 1165
• Parties: 15 Employee Benefits Cas. 1729 Edwin KOTROSITS, Julius Ruggeri, Marvyn Souders, on their own behalf and on behalf of all others similarly situated, Reuben Aldrich, Alexander Christie, Walter C. Gothe, Paul W. Nielsen, Russell E. Scheirer v. GATX CORPORATIONPENSION PLAN FOR SALARIED EMPLOYEES, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 1165

970 F.2d 1165

15 Employee Benefits Cas. 1729

Edwin KOTROSITS, Julius Ruggeri, Marvyn Souders, on their own behalf and on behalf of all others similarly situated Reuben Aldrich, Alexander Christie, Walter C. Gothe, Paul W Nielsen, Russell E. Scheirer v. GATX CORPORATION NON-CONTRIBUTORY PENSION PLAN FOR SALARIED EMPLOYEES, Appellant.

No. 91-1410.

United States Court of Appeals Third Circuit.

Argued Oct. 16, 1991.

Decided July 6, 1992.

Herbert L. Zarov, Kenneth E. Wile (argued), Mayer, Brown & Platt, Chicago, Ill., Robert L. Hickok, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for appellant.

Kevin T. Fogerty (argued), Traub, Butz & Fogerty, P.C., Allentown, Pa., for appellees.

Before: STAPLETON, SCIRICA, and ROTH, Circuit Judges.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

I.

At the end of 1986, the GATX Corporation and its subsidiary, General American Transportation Company (GATC), sold all of the stock of GATC's subsidiary, Fuller Company, to FA Holding Company, an entity owned by Fuller management and a private investor. Plaintiffs are Fuller employees who claim they were entitled to enhanced early retirement benefits under the GATX Pension Plan as a result of the sale. The district court agreed and reversed the decision of the Plan Administrator to deny these benefits. We will reverse the judgment of the district court.

II.

The parties have stipulated to most of the relevant facts. At the time of the sale of the Fuller Company stock, approximately 600 Fuller employees were participants in the GATX Corporation Non-Contributory Pension Plan for Salaried Employees ("the Plan"). This Plan was a funded, defined benefit, non-contributory pension plan covering the employees of GATX Corporation and a number of its affiliated corporations. As the district court noted:

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).

Kotrosits v. GATX Corp. Non-Contributory Pension Plan, 757 F.Supp. 1434, 1437 (E.D.Pa.1991).

Here at issue is the 75/80 early retirement pension. For those who have not attained the age of 62 or an age and service time totaling 90, the 75/80 early retirement pension offers the only opportunity of receiving enhanced, early retirement benefits--that is, benefits that are not determined by actuarially reducing full pension benefits available at 65. The Plan provision governing the 75/80 pension stipulates:

4.5 75-80 Points Retirement. An Employee with at least 15 years of Service Credit who has not attained age 62, who either (i) has attained age 55 and whose age and Service Credit total at least 75, or (ii) whose age and Service Credit total at least 80, and

(a) who has a Termination of Employment due to permanent shutdown of a plant, department or subdivision thereof, or due to layoff or disability, or

(b) whose retirement is granted by and at the sole discretion of the Company, based on health impairment or other extenuating circumstances,

may retire on the first day of the calendar month following the calendar month in which the applicable requirements of this Section 4.5 have been met.

Joint Appendix (hereinafter "J.A.") at 367-68.

Under the Plan, the Plan Benefits Committee is given the responsibility of making authoritative determinations concerning the meaning of the Plan and the scope of its benefits. That Committee is authorized:

(b) To construe the Plan and Trust Agreement;

(c) To determine all questions arising in its administration, including those relating to the eligibility of persons to become Participants; the rights of Participants and their beneficiaries; and its decisions thereon shall be final and binding upon all persons hereunder.

J.A. at 382.

Under the Fuller Company Stock Purchase Agreement, the closing date of December 31, 1986, effected "a termination of employment under the terms of [the Plan] for all Fuller Participants." J.A. at 497. While the Plan remained responsible for all pension benefits accrued under the Plan as of that date, including those of shorter-term employees whose benefits had not yet vested, the Fuller Participants could accrue no additional benefits after that date. ¹ Before the closing date, Fuller management announced its intention to sponsor a new Fuller Pension Plan, but such a plan was not in place at the time of closing. Under the new Fuller Plan as later established, pension benefits accrued for the Fuller Participants but at a slightly less favorable rate and did not vest for five years. Fuller was not contractually bound to GATX to sponsor its own Plan.

Prior to the closing, GATX had a medical and life insurance program that included its retirees. This was an unfunded program having no connection with the Plan other than their common sponsorship. GATX management made a decision to provide lifetime medical and life insurance to those Fuller employees who were in the employ of its subsidiary at the time of their retirement, but not to provide such coverage for Fuller employees who retired after Fuller had severed its connection with GATX. Thus, a Fuller employee who was entitled to retire as of the closing date but who had not filed an application for pension benefits would receive no medical or life insurance from GATX's program when he or she retired from Fuller.

In the months preceding the closing date, Fuller management discussed the possibility of reducing the number of Fuller employees after the sale. No list of job positions that might be eliminated was ever shown to anyone at GATX, however; indeed, GATX executives were told by Elmer Gates, the President, Chief Operating Officer, and soon-to-be Chairman of the Board of Fuller that "[w]e're going to hit the ground running. We look to continue the Fuller operation." 757 F.Supp. at 1439. On the first business day after January 1, 1987, all Fuller Company facilities in existence prior to the sale were open for business and continued manufacturing and selling the same products that Fuller Company manufactured and sold prior to December 31, 1986.

Plaintiffs are Fuller employees who were Plan participants prior to the sale and who would have been eligible for 75/80 benefits in the event of a plant closing, layoff, disability, or management-recognized extraordinary circumstances. One subclass, represented by plaintiffs Edwin Kotrosits and Julius Ruggeri, consists of employees who were eligible for early retirement under the 55-15 provision as of the closing date of December 31, 1986, but were not yet eligible under any other retirement options in the absence of one of those events. These employees retired before the closing date and retained their lifetime medical and life insurance coverage. The other subclass, represented by plaintiff Marvyn Souders, consists of employees who were not yet 55 years old at the time of the sale and who therefore could take early retirement, if at all, only under the 75/80 provision. Both subclasses insist that they are entitled to 75/80 benefits.

None of the plaintiffs knew for certain whether they would have jobs with Fuller after the closing day, Wednesday, December 31, 1986. Plaintiffs Kotrosits and Ruggeri were told shortly before that date that they would receive a telephone call on the morning of Friday, January 2, 1987, instructing them whether to report to work. Both received a call that morning informing them that they did indeed have a job. Plaintiff Souders was told before the date of the sale to report to work on January 5, at which time he would be told whether his continued services would be needed. ² Like the other plaintiffs, Souders continued to perform the same duties after the sale.

After the Fuller sale, the class representatives pursued their claims for 75/80 benefits under the procedure set out in the Plan. They first presented their claims to the Plan Administrator, who denied them on the grounds that there had been no closing of a plant, department, or division, there had been no layoff, the claimants were not disabled, and a transfer of stock where the business continued was not an exceptional circumstance under 4.5(b) in the judgment of the Company. Kotrosits, Ruggeri, and Souders separately appealed the Administrator's decision to the Plan Benefits Committee, which consisted of the Chief Executive Officer of GATX, the Vice President and General Counsel of GATX, and the Vice President of Human Resources of GATX. The Benefits Committee, after a meeting which was also attended by the Administrator and two other GATX attorneys, approved the Administrator's decision and denied the appeal based on the following factors: (1) GATX sold Fuller as a going concern; (2) Fuller had retained essentially the same employees as had been employed there before the sale; (3) Kotrosits, Ruggeri, and Souders all continued to work at Fuller; and (4) the Fuller sale resembled the prior Marine Transport Lines, Richmond Terminal, and GARD transactions, where no 75/80 benefits had been afforded, and did not resemble the Pollock and GATX Tank Erection Corporation ("TEC") transactions or the GATC Sharon, Pennsylvania, plant shutdown where 75/80 benefits had been applied for and granted.

In the Marine Transport Lines, Richmond Terminal, and GARD transactions, a stock dividend splitoff and two asset sales GATX had sold...