Shaw v. International Ass'n of Machinists & Aerospace
| Decision Date | 09 May 1983 |
| Docket Number | No. CV 81-6076-AAH.,CV 81-6076-AAH. |
| Citation | 563 F. Supp. 653 |
| Court | U.S. District Court — Central District of California |
| Parties | Edward SHAW, Plaintiff, v. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS PENSION PLAN; Joseph Manners, Eugene Glover, Justin Ostro, William Winpisinger and George Poulin as fiduciaries and trustees of the International Association of Machinists and Aerospace Workers Pension Plan, Defendants. |
Ronald Dean, Los Angeles, Cal., for plaintiff.
Rose, Klein & Marias by Alfred M. Klein, Los Angeles, Cal., and Donaldson & Kiel by Richard P. Donaldson, Seattle, Wash., for defendants.
DECISION GRANTING SUMMARY JUDGMENT FOR PLAINTIFF AND DENYING SUMMARY JUDGMENT FOR DEFENDANT.
These cross motions for summary judgment came on regularly for hearing on April 4, 1983. Plaintiff, by his motion, is seeking to reverse action taken by the defendants in "phasing out" the cost-of-living feature in his pension plan. Defendants seek affirmance of their having amended this cost-of-living feature out of the plan. Stipulated facts form the basis of these motions and both parties concede that the case may be disposed of as a matter of law.
Plaintiff, Edward Shaw, retired as a District Lodge Business Representative of the International Association of Machinists and Aerospace Workers (hereafter IAM) on January 1, 1975, following 10 years of service. At the time of plaintiff's retirement his pension plan included a cost-of-living feature referred to as a "living pension." Under the living pension feature, increases in the retiree's pension were indexed to salary increases in the position the retiree held immediately prior to retirement.
In September, 1976, the delegates to the quadrennial IAM convention voted to amend the pension plan provisions of the constitution so as to phase out the living pension feature. This phase-out provided that the full percentage adjustment would be paid to retirees in 1977 and 1978, but thereafter, the living pensions adjustments would be as follows:
After December 31, 1984 — no further adjustments. The decision to phase the living pension feature out of the plan came after the IAM's actuaries had advised it that, if the pre-phase-out course should continue, the plan would suffer serious financial instability.
Plaintiff bases his motion for summary judgment on the following three theories: (1) that the phasing-out of the living pension feature of the plan violated the proscription in the Employee Retirement Income Security Act, 29 U.S.C. 1001 et seq. (hereafter ERISA) against any amendment which would decrease the accrued benefits of a participant under the plan; (2) that the phase-out constituted a breach of the fiduciary duty which the plan trustees and administrators owed the plaintiff; and (3) that the phase-out violated established principles of contract law.
On the other hand, the basis for defendants' motion is: (1) that the 1976 amendment did not amount to a diminution of an "accrued benefit" under ERISA and, (2) even if the amendment did somehow affect an accrued benefit, it was fully justified under ERISA. In addition, defendants resist plaintiff's contention that the latter's claim properly sounds in an action for breach of a fiduciary duty or breach of contract.
Given the interdependence of the motions before the Court, the various contentions raised by the parties will be considered concurrently.
As previously indicated, the plaintiff alleges that the 1976 amendment violates ERISA, 29 U.S.C. § 1054(g), which provides:
The accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) of this title.
Defendants initially argue that their action does not run afoul of ERISA because the living pension feature of plaintiff's plan does not amount to an "accrued benefit" within the definition of that term in ERISA. As provided in 29 U.S.C. § 1002(23):
Defendants argue that this language embraces only benefits promised upon retirement and does not include post-retirement benefits such as the living pension feature. Plaintiff, on the other hand, contends that an accrued benefit may be expressed in the form of a formula. While relevant authority on this issue is sparse, plaintiff's argument appears to be the more meritorious. For example, section 411(a)(7)(A)(i) of the Internal Revenue Code defines the term "accrued benefit" in precisely the same words as section 1002(23) of ERISA. The Internal Revenue Service through a Technical Information Release has stated:
IRC section 411(a)(7)(A)(i) provides, in part, that in the case of a defined benefit plan, the "accrued benefit" must be expressed in the form of an annual benefit commencing at normal retirement age. The plan must provide a formula under which each participant's actual accrued benefit under the plan can be determined in each plan year.
Internal Revenue Service T.I.R. No. 1403 (Sept. 17, 1975) (emphasis added). In addition, there is case law suggesting that an accrued benefit may be expressed by a formula as opposed to a sum certain that the pensioner will receive upon retirement. Janowski v. International Brotherhood of Teamsters, 500 F.Supp. 21, 23 (N.D.Ill.1980). In Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d 911, at 914 (2d Cir.1982), the Second Circuit held:
... the plan must specify the basis on which payments are to be made to participants and beneficiaries so as to meet the legislative purpose of having each participant know exactly where he stands with respect to the plan.
The IAM's own pension plan booklet states:
IAM Pension Plan (Wash.D.C.1969), p. 10.
In addition, Article XIV, section 7 of the Constitution of the International Association of Machinists and Aerospace Workers provides in pertinent part:
IAM Constitution (Wash.D.C.1974), p. 39.
Applying the above language against the various authorities which permit accrued benefits to be expressed through a formula, the conclusion is inescapable that the living pension feature was an integral part of the formula through which the plaintiff's accrued benefits were expressed. Defendants' attempts to distinguish the living pension from other components of the retirement compensation formula are, accordingly, void of merit.
Having determined that the living pension feature constitutes an accrued benefit, the next matter which must be addressed is whether the act of defendants in decreasing the accrued benefit of plaintiff was justified under ERISA.
As previously pointed out, 29 U.S.C. § 1054(g) forbids any amendment which would decrease the accrued benefit of a plan participant with the exception of an amendment effected pursuant to 29 U.S.C. § 1082(c)(8)(C) which provides:
(8) For purposes of this part, any amendment applying to a plan year which — (C) does not reduce the accrued benefit of any participant determined as of the time of adoption except to the extent required by the circumstances, shall, at the election of the plan administrator, be deemed to have been made on the first day of such plan year. No amendment described in this paragraph which reduces the accrued benefits of any participant shall take effect unless the plan administrator files a notice with the Secretary notifying him of such amendment and the Secretary has approved such amendment or, within 90 days after the date on which such notice was filed, failed to disapprove such amendment. No amendment described in this subsection shall be approved by the Secretary unless he determines that such amendment is necessary because of a substantial business hardship (as determined under section 1083(b) of this title) and that waiver under section 1083(a) of this title is unavailable or inadequate. (emphasis added).
Moreover, Section 1082(c)(8)(C) is found in Part 3 of ERISA which contains the funding provisions. The effective dates for Part 3 are located in section 1086 and subsection (e) of that section provides:
The IAM is a tax exempt labor organization which maintains its...
To continue reading
Request your trial
-
Cipollone v. Liggett Group, Inc.
...Act preempts state common law claims of misappropriation and trade secret violations); Shaw v. International Ass'n of Machinists & Aerospace Workers Pension Fund, 563 F.Supp. 653, 658-59 (C.D.Calif.1983) (ERISA preempts certain state common law claims for breach of contract), citing Laffert......
-
Henne v. Allis-Chalmers Corp.
...85 L.Ed.2d 728 (1985); Ahne v. Allis-Chalmers Corporation, 640 F.Supp. 912, 920 (E.D.Wis.1986); Shaw v. Association of Machinists Pension Plan, 563 F.Supp. 653, 658-59 (C.D. Cal.1983), aff'd, 750 F.2d 1458 (9th Cir.), cert. denied, 471 U.S. 1137, 105 S.Ct. 2678, 86 L.Ed.2d 696 In Shaw v. De......
-
Authier v. Ginsberg
...officer a fiduciary to the extent he controls selection or termination of fiduciaries); Shaw v. International Ass'n of Machinists & Aerospace Worker's Pension Plan, 563 F.Supp. 653, 657 (C.D.Cal.1983) (corporate officials fiduciaries to the extent they hire and fire trustees); Freund v. Mar......
-
Justice v. Bankers Trust Co., Inc., Civ. A. No. CV83-L-5188-NE.
...335 (6th Cir.1984); District 65, UAW v. Harper & Row Publishers, Inc., 576 F.Supp. at 1487. Cf. Shaw v. Association of Machinists & Aerospace Workers Pension Plan, 563 F.Supp. 653 (C.D.Cal.1983) (common law breach of contract claim preempted by ERISA).3 Thus, the liability of Bankers Trust ......