United Steelworkers of America, Local 2116 v. Cyclops Corp.

• Decision Date: 25 October 1988
• Docket Number: No. 87-3191,87-3191
• Citation: 860 F.2d 189
• Parties: , 10 Employee Benefits Ca 1345 UNITED STEELWORKERS OF AMERICA, LOCAL 2116, Russell Whisman, Darrell Tucker, G.R. Jones, and David Jewell, Plaintiffs-Appellants, v. CYCLOPS CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 189

860 F.2d 189

103 A.L.R.Fed. 361, 10 Employee Benefits Ca 1345

UNITED STEELWORKERS OF AMERICA, LOCAL 2116, Russell Whisman Darrell Tucker, G.R. Jones, and David Jewell Plaintiffs-Appellants, v. CYCLOPS CORPORATION, Defendant-Appellee.

No. 87-3191.

United States Court of Appeals Sixth Circuit.

Argued March 1, 1988.

Decided Oct. 25, 1988.

William K. Shaw, Jr. (argued), Portsmouth, Ohio, for plaintiffs-appellants.

Daniel O. Berger, Cincinnati, Ohio, Stephen C. Kunkle (argued), Pittsburgh, Pa., for defendant-appellee.

Before ENGEL, Chief Judge ^*, and MERRITT and KRUPANSKY, Circuit Judges.

ENGEL, Chief Judge.

Plaintiffs appeal the denial by the United States District Court for the Southern District of Ohio, Western Division, of their motion for summary judgment and the granting of defendant's motion for summary judgment in this action involving a pension plan funding dispute between the parties. Plaintiffs allege that the district court erred in finding that there were no questions of material fact as to plaintiffs' claims under its collective bargaining agreement with the defendant and under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001 et seq. We agree with the district court that summary judgment was appropriate on the ERISA claims and some of the contractual claims. However, we believe that plaintiffs' prospective contractual claims do not present a present, justiciable controversy and therefore we dismiss them as not ripe for adjudication.

FACTS

Defendant Cyclops Corporation, a manufacturer of steel and related products, owned and operated a production facility near Portsmouth, Ohio. Plaintiff United Steelworkers Union local # 2116 has represented the Portsmouth bargaining unit in negotiations with Cyclops and its predecessors since the 1940's. Cyclops and the local last entered into a collective bargaining agreement on July 24, 1980. This pact extended the coverage of existing pension and employment agreements until July 31, 1981.

In early 1980, Cyclops unsuccessfully attempted to sell the entire Portsmouth facility as a going concern. It did, however, succeed in selling the coke plant operation to New Boston Coke Corporation, a wholly owned subsidiary of McLouth Steel Corporation, on November 21, 1980. New Boston, which had decided to hire 227 of Cyclops' former employees, entered into a collective bargaining agreement and a pension agreement with local # 2116 on November 10, 1980. These agreements were virtually identical to the contracts to which Cyclops and the union had previously agreed. As a part of the sale agreement, New Boston agreed to assume all accrued pension liabilities while Cyclops agreed to transfer that portion of its pension fund that was attributable to the Cyclops employees who would continue their employment with New Boston. Pursuant to this agreement, Cyclops transferred $168,380 in pension assets to New Boston's pension plan on February 6, 1981.

Following these transactions, New Boston petitioned the United States Bankruptcy Court for the Eastern District of Michigan for reorganization under Chapter 11 of the Bankruptcy Act. The bankruptcy trustee has continued to operate the Portsmouth coke plant and there has been no default on pension payments by New Boston.

Appellants filed a complaint on July 18, 1983. The complaint alleged that Cyclops had violated its collective bargaining agreement with local # 2116 by underfunding the pension accounts that it transferred to New Boston and by failing to obtain the consent of the court to the pension transfer. They further claim that Cyclops violated its fiduciary duty under 29 U.S.C. Secs. 1103 and 1104 by engaging in a transaction that was not in the best interests of the pension plan and violated 29 U.S.C. Sec. 1106 by conducting a prohibited transaction involving pension fund assets.

The district court, in an order dated January 20, 1987, 653 F.Supp. 574, granted defendant's motion for summary judgment on all of the above claims, stating that:

Justice has been done in this action, as both parties have fulfilled their obligations and received the benefits of the sale of the coke plant. For its part, defendant has sold the coke plant. Plaintiffs retained their jobs as well as their pension rights built over a career of service with Cyclops. Defendant has paid its share of the pension obligations to New Boston, and New Boston has received experienced and valued workers guaranteeing them the same pension as they had with Cyclops. Fairness dictates that plaintiffs not be able to recover twice for the years of service accumulated through employment with Cyclops.

The actions of defendant with regard to plaintiffs and their pension agreement was therefore fair, equitable and just.

Appellant now brings a broad-based appeal, claiming that the district court misperceived both the law and the facts.

I. The Collective Bargaining Agreement

Appellants' first cause of action is based on the 1977 pension agreement that local # 2116 entered into with Cyclops. Both parties have stipulated to the fact that the pension agreement is a part of the collective bargaining agreement between the parties.

Appellants' brief does not specify which provisions of the pension agreement have allegedly been violated. Instead, appellants simply claim that the transfer of pension assets without the consent of local # 2116 violates the pension agreement. The union argues both that pension assets and liabilities could not be transferred without its consent and that the sale of the coke facility, as it affects union employment, could not take place without the union's consent.

The district court, in considering appellants' claim, examined the individual sections of the agreement. The court first noted that Paragraph 1.3 states that "benefits shall be provided by the Company or caused to be provided by the Company for the participants." Paragraph 8.1 echoes this flexibility, stating:

For the purpose of supplying the benefits herein provided, the Company may establish or cause to be established a trust or trusts or may utilize any existing trust or trusts heretofore established by or on behalf of the Company. The Company is free to determine the manner and means of making provision for funding and paying the benefits set forth in this Agreement.

The court then noted that while Cyclops was permitted, under the Agreement, to choose its means of payment, it was still liable for benefits. The court found that under Paragraph 9.2, "[a]ny benefit properly payable pursuant to this Agreement shall continue to be payable, notwithstanding the termination or expiration of this Agreement." The court interpreted this paragraph as meaning that Cyclops retained a duty toward the union, even after selling the coke plant. However, the court found that Cyclops had met this duty, at least for the present, through its transfer of $168,380 of the pension fund:

To fulfill its obligation under the pension plan, Cyclops, through the Trustee of the Cyclops Hourly Plan, transferred assets totalling $168,380, plus interest since October 31, 1980, to a bank designated as the New Boston Plan Trustee. The $168,380 represents the portion of Cyclops Hourly Plan assets which Cyclops actuaries, TPF & C, advised was allocable to the listed employees at the Cyclops Portsmouth facility pursuant to the federal law governing contributions to pension plans. The evidence is undisputed and reasonable minds can only conclude that the $168,380 was Cyclops obligation under its pension plan agreement with plaintiffs to the listed employees at the Cyclops Portsmouth facility for the payment of future pension obligations which had arisen from the employees' years of service with Cyclops. This payment of over $150,000 is the "safety net" requested by plaintiffs and required by federal law.

Thus, the court found that there was no violation of the collective bargaining agreement on this ground. The court further found that the sale of the coke plant itself did not violate any rights protected by the pension plan. We agree, and affirm that part of the district court's opinion which grants summary judgment to Cyclops on plaintiffs' present collective bargaining agreement claims.

However, implicit in the parties arguments is a dispute that is prospective in nature. The union argues essentially that while Cyclops may have fulfilled its obligations to pay into the pension fund at the minimum amount required by the pension agreement and ERISA, this was not Cyclops' only obligation under the collective bargaining agreement and the pension plan established thereby. The union argues that Cyclops remains potentially liable for that portion of the transferred employees' future pension benefits which is attributable to their years of service with Cyclops. While the $168,380 paid by Cyclops represents its funding obligation under ERISA, the payment does not limit Cyclops' ultimate potential liability. ¹ Should the assets held by the New Boston plan prove insufficient to meet that liability, the union claims that Cyclops would remain obligated to make up the difference. That Cyclops may have a hold harmless or other contractual promise from New Boston is a matter of concern for Cyclops, not the union. The union states that it has neither been asked nor has it agreed to release Cyclops from such an obligation, and the provisions of ERISA are not intended to eliminate that deficiency. Thus, if New Boston should be unable, through insolvency or otherwise, to make good on its obligations, the union wishes it established now that Cyclops will not at that time be relieved of its underlying obligation.

A contrary rule, argues the union, would allow the company to avoid its obligation to pay the difference between its funded obligation and its potential liability by the transfer of employees or the sale of a division of its activities to an unsound purchaser. The union argues...