Sutton v. Weirton Steel Div. of Nat. Steel Corp.

• Decision Date: 30 December 1983
• Docket Number: 83-1895 and 83-2004,83-2003,83-1569,Nos. 83-1567,s. 83-1567
• Parties: 99 Lab.Cas. P 10,684, 5 Employee Benefits Ca 1033 Eugene R. SUTTON, Raymond Ludewig, Paul D. Alexander, Anthony J. Angelo, John P. Barlas, Thomas V. Barnhouse, William Bell, Walter Birrell, Pete Brier and Camden Bumgarner, et al., Appellants, v. WEIRTON STEEL DIVISION OF NATIONAL STEEL CORPORATION, Independent Steel Workers Union and Pension Agreement between the National Steel Corporation and the Independent Steelworkers Union, Appellees. Gerald W. BRUNNER, Clarence Rifkee, Norman Clark, James Hoge and all others similarly situated, Appellants, v. NATIONAL STEEL CORPORATION, Independent Steelworkers Union, Weirton Joint Study Committee, Inc. and Pension Agreement between the National Steel Corporation and the Independent Steelworkers Union, Appellees. Edward DHAYER, Edward Bittner, Richard Blancato and James H. Browning, et al., Appellants, v. WEIRTON STEEL DIVISION OF NATIONAL STEEL CORPORATION and Independent Steelworking Union, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 406

724 F.2d 406

99 Lab.Cas. P 10,684, 5 Employee Benefits Ca 1033

Eugene R. SUTTON, Raymond Ludewig, Paul D. Alexander,

Anthony J. Angelo, John P. Barlas, Thomas V.

Barnhouse, William Bell, Walter Birrell,

Pete Brier and Camden

Bumgarner, et al., Appellants, v. WEIRTON STEEL DIVISION OF NATIONAL STEEL CORPORATION,

Independent Steel Workers Union and Pension

Agreement between the National Steel

Corporation and the

Independent

Steelworkers

Union, Appellees.

Gerald W. BRUNNER, Clarence Rifkee, Norman Clark, James Hoge and all others similarly situated, Appellants, v. NATIONAL STEEL CORPORATION, Independent Steelworkers Union,

Weirton Joint Study Committee, Inc. and Pension Agreement

between the National Steel Corporation and the Independent

Steelworkers Union, Appellees.

Edward DHAYER, Edward Bittner, Richard Blancato and James H.

Browning, et al., Appellants, v. WEIRTON STEEL DIVISION OF NATIONAL STEEL CORPORATION and Independent Steelworking Union, Appellees.

Nos. 83-1567, 83-2003, 83-1569, 83-1895 and 83-2004.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 7, 1983.

Decided Dec. 30, 1983.

Barry Laine, Youngstown, Ohio (Anthony P. Sgambati, II, David Roloff, Green, Schiavoni, Murphy, Haines & Sgambati Co. L.P.A., Youngstown, Ohio, on brief) and John Randolph Spon, Jr., Steubenville, Ohio (Keith A. Fournier, Spon & Fournier, Steubenville, Ohio, on brief), for appellants.

Carl H. Hellerstedt, Jr., Pittsburgh, Pa. (Joseph Mack, III, Brian J. Dougherty, Thorp, Reed & Armstrong, Pittsburgh, Pa., on brief), David L. Robertson, Weirton, W.Va. (William Kiefer, Peter Rich, Bogarad & Robertson, Weirton, W.Va., on brief), Anthony F. Phillips, New York City (Gerald Kerner, Brian E. O'Connor, Laurence H. Lenz, Jr., Willkie Farr & Gallagher, New York City, on brief), for appellees.

Before PHILLIPS and ERVIN, Circuit Judges, and BUTZNER, Senior Circuit Judge.

BUTZNER, Senior Circuit Judge:

This appeal of consolidated cases arises out of an agreement by National Steel Corp. to sell its Weirton Steel Division to a new company, Weirton Steel Corp., which is owned by the Division's employees. The district court granted partial summary judgments in favor of National, its Retirement Program, and the Independent Steelworkers Union. ^* Finding no just reason for delay, it entered final judgment pursuant to Federal Rule of Civil Procedure 54(b) on the issues that it had considered. The appellants, a minority of the employees at the Division, assert that the district court erred by holding that National did not violate the Employee Retirement Income Security Act (ERISA), that the union did not breach its duty of fair representation, that class certification was inappropriate, and that the appellants were not entitled to injunctive relief.

We find no cause for reversal in these assignments of error and affirm the judgments of the district court.

I

In March 1982, National announced that it would reduce capital expenditures, production capacity, and employment at the Division. It also said it would consider a sale of the Division. The Weirton Joint Study Committee, Inc., was then established to study the possibility of forming a corporation owned by employees to purchase the Division. The committee included five representatives of management, twenty-one representatives of the Independent Steelworkers Union, and three representatives of the Independent Guard Union. The committee retained legal counsel and commissioned consultants to make a feasibility study. It also engaged other firms to assist with aspects of the proposed transaction requiring particular expertise.

The agreement of sale provided for modification of pension and severance benefits contained in the collective bargaining agreements for union employees and in National's retirement program and personnel policies for salaried nonunion employees. These benefits and the amendments are essentially the same for all employees. Union members approved the changes in the bargaining agreements and other terms of sale. National unilaterally changed its program and policies for nonunion members.

The benefits and the amendments affecting them are fully described in the opinions of the district court. For the purposes of this appeal they can be recapitulated as follows. All workers, whether they choose to work for the new company or not, will retain the normal retirement benefits earned through service with National before the sale. National will segregate all assets attributable to the Division and establish a separate trust available to pay normal retirement benefits to past and present Division employees. The new company will be responsible for benefits accrued after the change in ownership. When an employee who has worked at both companies retires, his years of service will be aggregated, and he will receive benefits from National and the new company in proportion to his service for each.

In addition to normal retirement benefits, National provided early retirement benefits and severance pay in the event of shutdown or layoff for employees with the requisite combination of age and years of employment. For convenience, we will refer to these benefits and severance pay collectively as contingent benefits. These benefits were not funded. They were payable, if at all, from National's corporate treasury. The agreement stipulates that the sale of the Division will not trigger payment of the contingent benefits. National, however, will remain liable for the shutdown benefits if within five years of the sale Weirton Steel closes. Contingent benefits similar to those formerly available at National will be provided by the new company.

The appellants protest the agreement to eliminate National's obligation for the contingent benefits upon the sale of the Division. It is their position that, regardless of their immediate employment by the new company, their status as employees of National will be terminated by the sale. In the absence of the agreement, they insist, the sale would entitle them to the contingent benefits. They point out that the shutdown benefits alone, without the severance pay, would aggregate approximately $300,000,000 and that National has avoided this liability.

II

Summary disposition of the issues presented in this appeal was appropriate. All of the material facts, save one, were established by uncontradicted evidence. To fill the hiatus occasioned by the single dispute over a genuine issue of fact, the district court accepted as proved the allegations that National's sole motivation for the sale was avoiding future pension obligations. See Dhayer, 571 F.Supp. at 326; Sutton, 567 F.Supp. at 1198.

Though permitted by 29 U.S.C. Sec. 1108(c)(3) to serve as an administrator of its pension plan, National's fiduciary obligations were not diminished by its dual role. Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.1982). National was required to discharge its fiduciary duties "solely in the interest of the participants and beneficiaries." 29 U.S.C. Sec. 1104(a)(1). ERISA's requirements "insulate the trust from the employer's interest," and, consequently, National was not permitted to assume a position where it had "dual loyalties" in the administration of the plan. NLRB v. Amax Coal Co., 453 U.S. 322, 333-34, 101 S.Ct. 2789, 2796-97, 69 L.Ed.2d 672 (1981).

By retaining liability for all normal retirement benefits and establishing a separate trust for their payment, National did not violate any provision of ERISA or any fiduciary obligation with respect to accrued benefits, which under the plan were payable at age 65. The critical question, therefore, is whether ERISA imposes any fiduciary obligations to maintain the contingent benefits about which the appellants complain. If it does, summary judgment was inappropriate, because in avoiding the payments through sale of the Division, National's self-motivation, which the district court assumed for the purpose of this proceeding, cannot be reconciled with its fiduciary duties. On the other hand, if ERISA does not impose an obligation on National to maintain the contingent benefits, National in its capacity as an employer could undertake to eliminate them.

Under ERISA's vesting rules, only accrued benefits must be nonforfeitable. 29 U.S.C. Sec. 1053(a). With respect to the issues raised by these appeals, ERISA defines an accrued benefit as an "annual benefit commencing at normal retirement age." 29 U.S.C. Sec. 1002(23). The accrued benefits secured by ERISA do not encompass unfunded, contingent early retirement benefits or severance payments. The Act was not designed to prohibit modification of these ancillary benefits. See H.R.Conf.R. No. 1280, 93d Cong., 2d Sess. 273, reprinted in 1974 U.S.Code Cong. & Ad.News 4639, 5038, 5054; H.R.Rep. No. 807, 93d Cong., 2d Sess. 60-61, reprinted in 1974 U.S.Code Cong. & Ad.News 4639, 4670, 4726. Rather, Congress believed that the "vesting of these ancillary benefits would seriously complicate the administration and increase the cost of plans whose primary function is to provide retirement income." H.R.Rep. No. 807, 93d Cong., 2d Sess. 60, reprinted in 1974 U.S.Code Cong. & Ad.News 4890, 4935. An employer may change such benefits without violating ERISA. See Fentron Industries, Inc. v. National Shopmen Pension Fund, 674 F.2d 1300, 1306 (9th Cir.1982). But cf. Dependahl v. Falstaff Brewing Corp., 491 F.Supp. 1188, 1196-97 (E.D.Mo.1980), modified, 653 F.2d 1208 (8th Cir.1981). Any right to payment of benefits before normal retirement age must be found in pertinent employment agreements. Fine v. Semet, 699 F.2d 1091, 1093 (11th Cir.1983). Consequently, National, in its capacity as an employer, did not violate ERISA.

Also, National, in its capacity as a fiduciary, did not violate ERISA. Congress authorized an employer to administer its pension plan, and in the discharge of its duties with respect to the plan, the employer must satisfy the exacting fiduciary...