Trans World Airlines, Inc. v. Sinicropi

• Decision Date: 30 May 1995
• Docket Number: No. 93 Civ. 3094 (CSH).,93 Civ. 3094 (CSH).
• Parties: TRANS WORLD AIRLINES, INC. and William D. Hart and Gary D. Dilley, as members of the Retirement Board of the Retirement Plan for Pilots of Trans World Airlines, Inc., Plaintiffs, v. Anthony V. SINICROPI, H.O. Van Zandt, and W.A. Murphey, as members of the Retirement Board of the Retirement Plan for Pilots of Trans World Airlines, Inc., William L. Meusel, Jr., and the Air Line Pilots International Association, Defendants.
• Court: U.S. District Court — Southern District of New York

887 F. Supp. 595

TRANS WORLD AIRLINES, INC. and William D. Hart and Gary D. Dilley, as members of the Retirement Board of the Retirement Plan for Pilots of Trans World Airlines, Inc., Plaintiffs, v. Anthony V. SINICROPI, H.O. Van Zandt, and W.A. Murphey, as members of the Retirement Board of the Retirement Plan for Pilots of Trans World Airlines, Inc., William L. Meusel, Jr., and the Air Line Pilots International Association, Defendants.

No. 93 Civ. 3094 (CSH).

United States District Court, S.D. New York.

May 30, 1995.

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Marla S.K. Gale, Jones, Day, Reavis & Pogue, New York City, for Trans World Airlines Inc., William D. Hart, Gary D. Dilley, as members of the Retirement Bd. of Retirement Plan For Pilots of Trans World Airlines, Inc.

Jani R. Rachelson, Cohen, Weiss and Simon, New York City, for Van Zandt, W.A. Murphey, as members of the Retirement Plan For Pilots of Trans World Airlines, Inc., William L. Meusel, Jr., Air Line Pilots Ass'n Intern.

MEMORANDUM OPINION AND ORDER

HAIGHT, District Judge:

This case centers around the applicable standard in determining the propriety of a pension benefit eligibility determination made by an arbitration board established pursuant to a collective bargaining agreement between Trans World Airlines ("TWA") and the Air Line Pilots International Association ("ALPA"). The arbitration board made an award in favor of defendant William Meusel, and plaintiffs now seek to vacate and set aside that award. ALPA and Meusel have counterclaimed to have the arbitration board's award confirmed.

Statement of Facts

Meusel was employed for twenty-four years as a pilot for plaintiff and counterclaim defendant TWA. He left the company on August 1, 1990, when he was fifty-four years of age.

At that time, Meusel was fully vested in the Pilots Plan, a defined benefit pension plan covered by ERISA, 29 U.S.C. § 1001 et seq. (the "Plan"). The Plan pays a fixed retirement annuity to eligible participants (called "Members") computed on the basis of the Member's years of service and earnings at TWA. The Plan was established in 1950 by agreement between TWA and defendant and counterclaim plaintiff ALPA, the collective bargaining representative of TWA's pilots.

Under the Plan, accrued benefits are calculated with reference to a specified normal retirement age. Normal retirement age under the Plan is "the Member's sixtieth birthday." Ex. 1, at 13. Eligible Plan Members, however, may retire prior to age 60, and begin drawing their accrued benefit any time after age 45. When a Member elects early retirement, the amount of his or her monthly benefit is reduced by a specified amount for each month that the early retirement date precedes the normal retirement date. The value of the Member's accrued benefit, however, remains the same in such a situation, since the reduced monthly payments are expected to be made over a longer period of years.

There is one exception to this rule, and the underlying dispute centers around the proper scope of this exception. Under Section 4.4 of the Plan, a Member who retires after reaching age 55 or accumulating 30 years of service may draw his accrued retirement benefit in unreduced monthly payments.¹ Specifically, in the language of the Plan, a Member's monthly payments will not be reduced "upon his retirement ... if the Member has attained age 55 or if the Member has completed 30 years of Continuous Service as a Pilot or Flight Engineer with the Company ...".

In the summer of 1990, Meusel left TWA to take a job with a different airline. He was 54- 1/3 years old at the time. Prior to leaving, however, Meusel asked TWA whether he would qualify for the Disputed Benefit if he left the company before age 55, but postponed receipt of his benefit until after his 55th birthday. TWA responded in the negative. In a letter dated June 18, 1990, TWA informed Meusel that "anytime you retire prior to age 55 your benefit will be reduced 4% for each year from age 60." The letter concluded:

"... Since you will be leaving before age 55 the reduction will apply if you commence your annuity before age 60. If you were to continue working with TWA until age 55 then you would receive an unreduced benefit from the "A" Plan i.e., the Pilots Plan. There has been extensive research done on this subject and if there should be any changes we would notify you but for now this is the interpretation of the plan." Hart, Ex. 3.

Before leaving TWA, Meusel sent TWA a letter in which he stated that his "retirement date is August 1, 1990". He also requested, however, that the Plan defer payment of his retirement annuity until April 1, 1991, a date just after his 55th birthday.

On August 8, 1990 ALPA and Meusel filed an appeal under the claims review procedure set forth in the Plan document, seeking a determination that Meusel's deferral of the receipt of his retirement benefits until he had reached age 55 entitled him to the Disputed Benefit. That procedure establishes a Retirement Board (the "Board") "to settle all disputes under the Plan and to aid the Company in the administration of the Plan." ALPA and TWA each choose two members to serve on the Board. Each Board member has one vote, and any Board decision requires the affirmative vote of three members to render a decision. If the initial four Board members deadlock, a fifth voting member is selected to serve as an impartial referee and Chairman of the Board.

The Plan gives the Board "full power to affirm, reverse or otherwise modify any decision or administrative action or proposed action which gave rise to any dispute." In addition, the Plan specifies that the Board's decision on review is "final and binding upon" TWA, ALPA, and others who deal with the Plan. The only apparent limitation on the Board's review is that it shall have "no power to add to or subtract from or modify any of the terms of the Plan."

ALPA and Meusel asked the Board to decide whether Meusel would be entitled to the Disputed Benefit by terminating service with TWA at age 54, but deferring receipt of his first monthly payment until after age 55. The four-member Board deadlocked, with plaintiffs and counterclaim defendants William Hart and Gary Dilley, the TWA appointees, voting against Meusel, and defendants H.O. Van Zandt and W.A. Murphey, the ALPA appointees, voting for Meusel.

As a result of the deadlock, pursuant to the Plan, a fifth Board member, defendant Anthony Sinicropi, was appointed to serve as impartial referee. On October 24, 1991, Sinicropi convened a hearing to consider Meusel's appeal. Both parties presented testimony and argument concerning their reading of the Plan, and two actuaries testified regarding the impact of each party's reading on the funding of the Plan. Finally, during and after the hearing, TWA presented testimony and documents with regard to the manner in which it had administered this particular provision of the Plan in the past.

The Board's Opinion

Following the completion of the hearing, Sinicropi drafted a ten-page opinion finding that Meusel was entitled to the Disputed Benefit because he had not retired within the meaning of the Plan until age 55, when he received his first payment under the Plan. Sinicropi then circulated the opinion to the other members of the Board. Hart and Dilley voted to deny Meusel the Disputed Benefit and refused to join Sinicropi's opinion. Van Zandt and Murphey, however, concurred in the decision, and thus, Sinicropi's opinion became the final board opinion (hereinafter, the "Board's Opinion" or the "Board's Decision").

Plaintiffs² contend that the Board's Opinion is clearly wrong. First, they argue that Sinicropi improperly framed the issue as "whether William Meusel is entitled to an unreduced benefit under the Retirement Plan for Pilots." In plaintiffs' view, Sinicropi perceived the general rule for actuarially reducing an early retiree's monthly payment as a "penalty", when in fact, the exception to the rule is a subsidy, rather than the norm. Thus, Sinicropi improperly perceived the issue as whether or not Meusel should be penalized, rather than whether or not he should receive an extra benefit.

Plaintiffs next contend that Sinicropi failed to give adequate deference to TWA's interpretation of the Plan. Section 2.1(A) specifies in relevant part that TWA, as Benefits Administrator, "shall make determinations ... as to any question involving interpretation or application of the Plan...." Plaintiffs argue that despite this language, the majority made explicit their belief that TWA's view was entitled to no deference. They also argue that despite noting that the evidence of past practice favored TWA's analysis, the Board's Opinion expressly departs from that practice.

Finally, plaintiffs contend that the Board's Opinion blatantly misconstrues the terms of the Plan by removing the concept of termination from the meaning of "retirement." According to plaintiffs, the Plan clearly states that an employee who elects to retire after the age of 55 is entitled to the Disputed Benefit. The Board's Opinion, however, defines retirement to be the date upon which retirement benefits commence, rather than the date upon which the employee leaves the company. Thus, simply by waiting to receive benefits until the age of 55, every employee will be eligible for the Disputed Benefit.³ In plaintiffs' view, this interpretation is plainly contradicted by the terms of the Plan, nonsensical as a matter of pension policy, and detrimental to the stability of the Plan by rendering it severely underfunded.⁴

In their complaint, plaintiffs argue that the Board's Opinion violates ERISA as well as the Railway Labor Act, 45 U.S.C. § 151 et seq. ("RLA"). Plaintiffs ask the Court to vacate the Board's Opinion, declare that it is not binding precedent, and enjoin the defendants from failing to comply with the Plan and ERISA.

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