Kross v. Western Elec. Co., Inc., No. 82-1391

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore BAUER and COFFEY, Circuit Judges, and BONSAL; COFFEY; BONSAL
Citation701 F.2d 1238
Decision Date09 March 1983
Docket NumberNo. 82-1391
Parties4 Employee Benefits Ca 1265 William J. KROSS, Plaintiff-Appellant, v. WESTERN ELECTRIC COMPANY, INC., Defendant-Appellee.

Page 1238

701 F.2d 1238
4 Employee Benefits Ca 1265
William J. KROSS, Plaintiff-Appellant,
v.
WESTERN ELECTRIC COMPANY, INC., Defendant-Appellee.
No. 82-1391.
United States Court of Appeals,
Seventh Circuit.
Argued Nov. 1, 1982.
Decided March 9, 1983.

Page 1239

Stanley Eisenstein, Katz, Friedman, Schur & Eagle, Chicago, Ill., for plaintiff-appellant.

Charles C. Jackson, Chicago, Ill., for defendant-appellee.

Before BAUER and COFFEY, Circuit Judges, and BONSAL, Senior District Judge. *

COFFEY, Circuit Judge.

The plaintiff William Kross brought this class action against his former employer, Western Electric, alleging that he and the class 1 he seeks to represent were "discharged" 2 in violation of Sec. 510 of the Employee Retirement Income Security Act ["ERISA"], 29 U.S.C. Sec. 1140. The District Court for the Northern District of Illinois granted summary judgment in favor of the defendant Western Electric on the grounds that: (1) the plaintiff, by alleging that Western Electric discharged him to avoid continuing to make payment for his company-provided life and medical insurance, had failed to state a claim under Sec. 510 of ERISA; and (2) Kross was precluded from suing for interference with the vesting of his service pension as he failed to exhaust available administrative remedies prior to bringing suit. We affirm in part and reverse in part.

The plaintiff Kross was employed as an engineer at Western Electric's Hawthorne Works Division in Chicago from 1953 to 1975. As a Western Electric employee, Kross was covered by a company-provided medical and life insurance program. In addition, had Kross not been discharged but had he continued in Western Electric's employ for another two years he would have attained a vested "service pension" in 1977. 3

On September 30, 1975, the plaintiff was "discharged" as part of a substantial reduction of the defendant's Hawthorne Works facility workforce which, Western Electric contends, was brought about by reduced demand for the technologically obsolescent mechanical switching equipment manufactured at the Hawthorne plant. The district court took judicial notice of the substantial reduction in the workforce at the Hawthorne Works facility over the past several years. At the time of his discharge, Western Electric gave Kross: (1) a $17,741 "layoff allowance"; (2) a $1,714 "allowance in lieu of advance notice"; and (3) a $315 "allowance in lieu of vacation."

On September 29, 1980, five years after being discharged, the plaintiff filed a class action suit alleging that Western Electric violated Sec. 510 of ERISA, 29 U.S.C. Sec. 1140. The gravamen of Kross's action is paragraph 5 of the complaint which recites:

"5. As an employee of Western Electric, Kross was a participant in Western Electric's pension, health and welfare, dental, disability and life insurance plans.

Page 1240

At the time of his discharge, Kross had 21 years 8 months of credited service in the pension plan. The discharge of Kross was for the purpose of preventing Kross from, and interfering with, the attainment of rights under the said pension, helath [sic] and welfare, dental, disability, and life insurance plans. For example, by virtue of his discharge, Kross, inter alia, (1) will not be able to apply for early retirement benefits, (2) was forced to self-pay in order to retain continued life insurance coverage, at an annual cost of approximately $600, with his life insurance coverage being reduced from $50,000 to $10,000, (3) forced to pay approximately $100.00 per month for a period of six months following his discharge in order to retain medical and dental insurance coverage, and at the end of said six-month period said medical insurance was cancelled, and (4) has since incurred and paid in excess of $4,000 in uninsured dental bills by reason of the aforesaid cancellation of dental insurance."

The complaint does not allege that Kross ever sought redress for his claims through any administrative procedure established by Western Electric or any of the company's benefit plans. In terms of relief, the complaint sought: (1) an injunction prohibiting the defendant from violating ERISA; (2) reinstatement for the plaintiff and members of the purported class; and (3) that "plaintiff, and the class he represents, be awarded damages equal in an amount to backpay and the other fringe benefits to which they would have been entitled had they not been unlawfully discharged ...."

In response to the complaint, on May 7, 1981, the defendant Western Electric moved for summary judgment asserting that Kross could not maintain this action as he had failed "to exhaust Defendant's benefit fund procedures before filing this action." In support of its motion for summary judgment, the defendant submitted a copy of Western Electric's Employees' Pensions, Disability Benefits, and Death Benefits Plan ["the Plan"], which governed, inter alia, Western Electric's service pension program. The Plan, however, did not pertain to the defendant's life and medical insurance programs, which are also involved in this lawsuit. Western Electric's pension plans were administered by a five-member committee, known as the Employees' Benefit Committee, appointed by Western Electric's Board of Directors. This Employees' Benefit Committee was granted specific powers relating to the administration of the Plan, including the specific power to "determine conclusively ... all questions arising in the administration of the Plan." 4 In further support of its motion for summary judgment, Western Electric submitted affidavits of (1) the Department Chief, Benefit Services, at Western Electric's Hawthorne Works; (2) the Chicago Area Regional Benefit Manager; and (3) the Secretary of the Employees' Benefit Committee. Each of the affiants stated that Kross failed to file a claim with the Employees Benefit Committee alleging unfair interference with attainment of his service pension and further that had Kross filed such a claim, it would have been treated and processed as a claim under the procedure established in the Plan. The affidavits submitted on behalf of Western Electric did not mention, set forth or describe the administrative procedures available to Kross with regard to his claim that Western Electric terminated him to avoid paying further premiums on Kross's company-provided life and health insurance. Our review of the record discloses that the medical and life insurance plans are entirely separate and distinct from the service pension plan contained in the "Employees Pension, Disability Benefits and Death Benefits Plan." Although there may (or may not) in fact be an administrative claims procedure relating to Western Electric's company-provided medical and life insurance plans, the

Page 1241

record contains no evidence of the existence of such a claims procedure. 5

Kross does not seek to refute Western Electric's assertion that he never availed himself of any internal administrative procedures to challenge his discharge. In fact, Kross admits that he neither spoke nor wrote to any Western Electric representative concerning his rights under either Western Electric's pension and/or insurance plans.

The district court granted summary judgment in favor of Western Electric on February 1, 1982. In its accompanying opinion published at 534 F.Supp. 251, the district court summarized the plaintiff's cause of action as follows: "Kross alleged that Western Electric terminated him for two purposes: to avoid paying for his insurance benefits and to prevent his service pension from vesting." Id. at 254. The district court found that Kross failed to state a claim under Sec. 510 of ERISA, 29 U.S.C. Sec. 1140, with respect to his allegation that Western Electric discharged him to avoid paying for his insurance benefits, reasoning that since Kross "was already a participant in the insurance plans, he was not prevented from attaining rights under the plan." Id. Turning to Kross's claim that he had been terminated to prevent his service pension from vesting, the court stated:

"the court concludes that exhaustion is required in this case and grants defendant's motion for summary judgment."

Id. at 256.

On appeal, the plaintiff Kross argues that the district court's summary judgment order should be reversed for three reasons: First, the plaintiff contends that the district court erred in finding that Kross failed to state a claim under Sec. 510 ERISA, 29 U.S.C. Sec. 1140, in alleging that Western Electric discharged Kross to avoid making continued payments for his company-provided life and medical insurance. Second, the plaintiff argues that the district court erred by applying the exhaustion doctrine to his service pension claim because the policies underlying the exhaustion doctrine are not applicable as (1) his claim involves interpretation of the provisions of ERISA and (2) his suit is brought against Western Electric rather than a particular pension fund. Finally, Kross asserts that summary judgment was not proper in this case as there exists a disputed issue of material fact; i.e., the adequacy of relief available to Kross under the relevant administrative procedures.

I.

Kross's complaint alleged that he was discharged in violation of Sec. 510 of ERISA, 29 U.S.C. Sec. 1140, which recites:

"Interference with protected rights

"It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary ... for the purpose of interfering with the attainment of any right to which such participant may become entitled under [an employee benefit] plan, this subchapter, or the Welfare and Pension Plans Disclosure Act. It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this Act or the Welfare and Pension Plans Disclosure Act....

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204 practice notes
  • Taylor v. Bank One, Texas, NA, Civ. A. No. H-90-3815.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 18, 1992
    ...to protect employee benefits, E.R.I.S.A. is to be liberally construed in favor of participants. See, Kross v. Western Electric Co., 701 F.2d 1238 (7th Cir.1983). In light of the statute's remedial purposes, coverage should be extended to provide the maximum degree of protection to employees......
  • Barrowclough v. Kidder, Peabody & Co., Inc., No. 83-5777
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • January 18, 1985
    ...arbitration is required in order to exhaust internal remedies under 29 U.S.C. Sec. 1133. Compare, e.g., Kross v. Western Electric Co., 701 F.2d 1238, 1243-45 (7th Cir.1983) (claimant must exhaust internal remedies of plan before bringing suit for unlawful discharge under 29 U.S.C. Sec. 1140......
  • Browe v. CTC Corp., Case No. 2:15–cv–267
    • United States
    • United States District Courts. 2nd Circuit. District of Vermont
    • June 22, 2018
    ...participants,’ and ... exemptions from the ERISA coverage should be confined to their narrow purpose.") (quoting Kross v. W. Elec. Co. , 701 F.2d 1238, 1242 (7th Cir. 1983) ).11 Indeed, the Plan states that it "shall be construed under the laws of the state of Vermont." (Defendants' Ex. B a......
  • White v. Sun Life Assur. Co. of Canada, No. 06-1285.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • April 26, 2007
    ...Nat'l Bank of Waco, Tex., 765 F.2d 1295, 1297 (5th Cir.1985) (same), reh'g denied, 772 F.2d 904 (5th Cir.1985); Kross v. W. Elec. Co., 701 F.2d 1238, 1244-45 (7th Cir.1983) (holding district court has discretion to require exhaustion and ERISA statute favors doing so); Amato v. Bernard, 618......
  • Request a trial to view additional results
204 cases
  • Taylor v. Bank One, Texas, NA, Civ. A. No. H-90-3815.
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
    • February 18, 1992
    ...to protect employee benefits, E.R.I.S.A. is to be liberally construed in favor of participants. See, Kross v. Western Electric Co., 701 F.2d 1238 (7th Cir.1983). In light of the statute's remedial purposes, coverage should be extended to provide the maximum degree of protection to employees......
  • Barrowclough v. Kidder, Peabody & Co., Inc., No. 83-5777
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • January 18, 1985
    ...arbitration is required in order to exhaust internal remedies under 29 U.S.C. Sec. 1133. Compare, e.g., Kross v. Western Electric Co., 701 F.2d 1238, 1243-45 (7th Cir.1983) (claimant must exhaust internal remedies of plan before bringing suit for unlawful discharge under 29 U.S.C. Sec. 1140......
  • Browe v. CTC Corp., Case No. 2:15–cv–267
    • United States
    • United States District Courts. 2nd Circuit. District of Vermont
    • June 22, 2018
    ...participants,’ and ... exemptions from the ERISA coverage should be confined to their narrow purpose.") (quoting Kross v. W. Elec. Co. , 701 F.2d 1238, 1242 (7th Cir. 1983) ).11 Indeed, the Plan states that it "shall be construed under the laws of the state of Vermont." (Defendants' Ex. B a......
  • White v. Sun Life Assur. Co. of Canada, No. 06-1285.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • April 26, 2007
    ...Nat'l Bank of Waco, Tex., 765 F.2d 1295, 1297 (5th Cir.1985) (same), reh'g denied, 772 F.2d 904 (5th Cir.1985); Kross v. W. Elec. Co., 701 F.2d 1238, 1244-45 (7th Cir.1983) (holding district court has discretion to require exhaustion and ERISA statute favors doing so); Amato v. Bernard, 618......
  • Request a trial to view additional results

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