Richardson v. Pension Plan of Bethlehem Steel Corp.
| Decision Date | 02 May 1997 |
| Docket Number | No. 93-36089,93-36089 |
| Citation | 112 F.3d 982 |
| Parties | 20 Employee Benefits Cas. 2828, 97 Cal. Daily Op. Serv. 3254, 97 Daily Journal D.A.R. 5634, Pens. Plan Guide (CCH) P 23,934 Robert L. RICHARDSON; William Alexander; Larry L. Aman; Kenneth R. Anderson; Jimmie L. Arrington, et al., Plaintiffs-Appellants, v. The PENSION PLAN OF BETHLEHEM STEEL CORPORATION and Subsidiary Companies; The Pension Trust of Bethlehem Steel Corporation and Subsidiary Companies; The General Pension Board; Michael Dopera, Secretary of the General Pension Board; Bethlehem Steel Corp., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Steven Bert Frank, Frank & Rosen, Seattle, WA, for plaintiffs-appellants.
Richard J. Omata, Karr, Tuttle, Campbell, Seattle, WA, for defendants-appellees.
Appeal from the United States District Court for the Western District of Washington, John C. Coughenour, District Judge, Presiding. D.C. No. CV-92-00622-JCC.
Before: JOHN T. NOONAN, Jr., O'SCANNLAIN, and LEAVY, Circuit Judges.
We must delve into complex issues of statutory and contractual interpretation as we determine a company's liability for shutdown pension benefits following sale and eventual closure of a steel plant.
The appellants are former employees of Bethlehem Steel Corporation ("BSC"), who seek various pension benefits from their former employer. While they were employed at BSC, BSC and the United Steel Workers of America entered into a Pension Agreement ("Agreement"), a collectively bargained agreement governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. A different document, the Pension Plan of BSC ("Plan"), implements the terms of the Agreement. The Plan is administered by the General Pension Board.
At issue here are so-called Rule-of-65 and 70/80 benefits provided under sections 2.6 and 2.7 of the Plan, respectively. These benefits are provided to employees who satisfy certain age and service requirements and whose "continuous service is broken by reason of a permanent shutdown of a plant." 1 For this reason, the benefits are termed "shutdown benefits."
The controversy surrounding the shutdown benefits began in 1982 when the BSC Board of Directors decided to divest the company of its West Coast properties. Because it was concerned about its potential liability for shutdown benefits, BSC added a new provision, section 5.3(c), to the Plan; that section authorized the General Pension Board to adopt rules and regulations which would provide that a particular sale would not be a break in service. BSC then began negotiating the sale of its Seattle division to Seattle Steel Inc. ("SSI"). BSC notified the United Steelworkers of America ("Union") that it believed that a sale to SSI would not constitute a shutdown if BSC sold the facility as a going concern. The Union disagreed, however, and filed a grievance, contending that the proposed sale constituted a shutdown under the labor and pension agreements, and that its eligible members were entitled to, among other things, Rule-of-65 and 70/80 benefits.
BSC could not consummate the sale until this issue was resolved; accordingly, BSC and the Union officials agreed to negotiate. As a result of these negotiations, the parties settled the Union's grievance through a Memorandum of Settlement ("MOS"), and on December 27, 1984, the MOS was ratified by a majority of Union members. The MOS states that the sale to SSI would not be considered a break in continuous service. In exchange for that concession, BSC promised to make cash payments to BSC employees. The amount of the payment depended on the employee's length of service. With regard to the employees' entitlement to future shutdown benefits, the MOS provides that "Bethlehem will provide a 48-month safety net if purchaser's business fails and Bethlehem does not cure the failure...."
After the MOS was ratified, the General Pension Board adopted the "Rules and Regulations Governing Continuous Service Under the Bethlehem Steel 1983 Hourly Pension Plan in Connection with the Sale of the Seattle Divisions of Bethlehem Steel Corporation" ("Rules and Regulations"). Like the MOS, these Rules and Regulations determined that the sale to SSI would not constitute a break in service for employees who were hired by SSI. BSC then sold its Seattle plant to SSI effective January 1, 1985.
In October 1990, more than five years after BSC sold the plant to SSI, SSI announced that it was going out of business. SSI sold its assets to Salmon Bay Steel Corporation and ceased operations in May 1991. Salmon Bay did not hire any of the former Seattle division employees, and the parties agree that SSI's sale to Salmon Bay was a shutdown.
After SSI closed, the former employees applied to the General Pension Board for shutdown benefits. The General Pension Board Administrator denied their claims on the ground that the MOS eliminated shutdown benefits after the forty-eight month safety net. The former employees brought this suit against the Pension Plan of BSC and various other defendants (collectively "BSC") to the district court which agreed with the General Pension Board Administrator and granted summary judgment to BSC. This appeal followed.
The former employees first contend that the MOS preserved their entitlement to shutdown benefits. In the alternative, they maintain that if the MOS is interpreted as eliminating their right to shutdown benefits after forty-eight months, then the MOS is an illegal amendment in violation of section 204(g) of ERISA, 29 U.S.C. § 1054(g). Finally, they challenge the district court's Rule 12(b)(6) dismissal of their claim that the General Pension Board breached its fiduciary duties under section 404(a) of ERISA, 29 U.S.C. § 1104(a).
In contrast to the General Pension Board Administrator ("Administrator") and the district court, the former employees interpret the MOS as preserving their right to shutdown benefits. We review the district court's grant of summary judgment de novo. Jones v. Union Pac. R.R., 968 F.2d 937, 940 (9th Cir.1992). However, the parties disagree as to whether we should review the Administrator's decision denying benefits de novo or for an abuse of discretion. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989). The district court declined to rule on the question because it found that the former employees' claims failed even under the more stringent de novo standard. We agree.
In determining that the MOS eliminated rights to shutdown benefits, the district court relied both on the language of the MOS and extrinsic evidence that showed that when the Union entered into the MOS, it understood it to preclude shutdown benefits unless SSI failed within forty-eight months. The former employees object both to the district court's conclusion and the method it used in reaching that conclusion.
ERISA does not contain a body of contract law to govern the interpretation and enforcement of employee benefit plans. Scott v. Gulf Oil Corp., 754 F.2d 1499, 1501 (9th Cir.1985). Rather, Congress intended that courts apply contract principles derived from state law but be guided by the policies expressed in ERISA and other federal labor laws. Id. at 1502.
Accordingly, we have held that terms in an ERISA plan should be interpreted " 'in an ordinary and popular sense as would a [person] of average intelligence and experience.' " Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9th Cir.1990) (quoting Allstate Ins. Co. v. Ellison, 757 F.2d 1042, 1044 (9th Cir.1985)). More specifically, we agree with the Sixth Circuit, which has stated that
[w]hen disputes arise, courts should first look to explicit language of the agreement to determine, if possible, the clear intent of the parties. The intended meaning of even the most explicit language can, of course, only be understood in the light of the context that gave rise to its inclusion.
Armistead v. Vernitron Corp., 944 F.2d 1287, 1293 (6th Cir.1991) (citations omitted). Each provision in an agreement should be construed consistently with the entire document such that no provision is rendered nugatory. Id. Typically, however, when a plan is ambiguous, a court will examine extrinsic evidence to determine the intent of the parties. See Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1232-33, 1236 (3d Cir.1991).
Here, the former employees maintain that the district court should not have considered extrinsic evidence of the parties' intent because the MOS is not ambiguous. They contend that, "read literally," the MOS unambiguously supports their claim for benefits. A review of the relevant provisions of the MOS reveals, however, that such argument is without merit.
Section IV of the MOS established a forty-eight month safety net during which time BSC would pay shutdown benefits if SSI failed and BSC did not cure the failure. Section V.A of the MOS then provides that "[c]essation of Bethlehem employment with commencement of employment by purchaser will not be deemed a break in pension continuous service." Section V.B goes on to say that
Bethlehem will credit employee's continuous service with the purchaser as if it were Bethlehem employment for Bethlehem pension vesting and eligibility purposes. Accordingly, such continuous service will be treated as Bethlehem pension continuous service for eligibility for 65/10, 62/15, 30-year, 60/15 and deferred vested retirement including meeting the various pension age requirements.
Read together, the above-quoted provisions indicate that service with SSI constitutes continuous service for purposes of the named pension plans but that shutdown benefits would be available only if SSI failed during the...
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