United Steelworkers of America, AFL-CIO v. New Jersey Zinc Co., Inc.

Citation828 F.2d 1001
Decision Date06 October 1987
Docket NumberNo. 86-5756,AFL-CI,A,86-5756
Parties107 Lab.Cas. P 10,217 UNITED STEELWORKERS OF AMERICA,ppellant, v. NEW JERSEY ZINC COMPANY, INC. licensed to do business in the State of New Jersey and as Administrator of the Pension Plan of the New Jersey Zinc Company.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Jeremiah A. Collins (argued), Elliot Bredhoff, Julia Penny Clark, Cynthia L. Estlund, Bredhoff & Kaiser, Washington, D.C., Arnold S. Cohen, Oxfeld, Cohen and Blunda, Newark, N.J., for appellant.

Ronald L. Coleman (argued), Squire, Sanders & Dempsey, Cleveland, Ohio, Vincent M. Maggitti, Archer & Greiner, Haddonfield, N.J., for appellee N.J. Zinc Co., Inc.

Before SLOVITER, BECKER and GARTH, Circuit Judges.

OPINION OF THE COURT

SLOVITER, Circuit Judge.

I. Introduction

The United Steelworkers of America (Steelworkers) filed this action seeking to force the New Jersey Zinc Company (NJ Zinc), to fully fund pension benefits as its predecessor had negotiated to do. Following a bench trial the district court entered judgment against Steelworkers, finding that NJ Zinc had never agreed to be bound by the full funding contract provision relied on by Steelworkers.

Two issues are presented by Steelworkers' appeal. First, has Steelworkers waived its right to contest a magistrate's ruling that it was not entitled to a jury trial because it failed to object to that ruling in the district court? Second, is the district court's finding that NJ Zinc never agreed to be bound by the full funding contract provision clearly erroneous?

II. Facts

Prior to September 30, 1981, Gulf & Western Industries, Inc. (G & W), through one of its divisions, operated three facilities located in Palmerton, Pa., Depue, Ill., and Ogdensburg, N.J., (the three facilities) and seven facilities elsewhere. Steelworkers was the collective bargaining representative of workers at the three facilities and in that capacity had, along with four Locals, negotiated and signed a Basic Labor Agreement (the Labor Agreement) with G & W covering each of four bargaining units at the three facilities.

The Labor Agreement contained the following clause identifying other benefit agreements:

OTHER BENEFIT AGREEMENTS

The agreements of the parties with respect to Pensions, Insurance Program, Cost of Living Provisions, Supplemental Unemployment Benefits and Severance Pay are contained in separate agreements.

App. at 238. The Pension Agreement (the G & W Plan) applicable to the four units covered by the Labor Agreement was entered into by Steelworkers with G & W on behalf of eleven bargaining units at all ten G & W facilities. The G & W Plan applied to active employees, retirees, and former employees with vested benefits.

Two clauses of the G & W Plan are relevant. One, a termination clause, provided that the G & W Plan could "be terminated at any time by the Board of Directors." App. at 189. The other, a funding clause, required:

Upon termination of the Plan or upon termination of all of the Employer's operations, the Employer will fully fund on a sound actuarial basis all vested benefits currently payable or payable in the future under the eligibility provisions of the Plan in effect at the time of termination.

... The Employer reserves the right, subject to the Collective Bargaining Agreement, to reduce, suspend or discontinue its contributions under the Plan for any reason at any time.

App. at 179 (emphasis added). For the purposes of this clause, the term "Employer" was defined to include G & W and "any legal successor thereof." App. at 178.

In September 1981, G & W sold to NJ Zinc the three facilities covered by the Labor Agreement along with other assets. The sale was made pursuant to an Asset Purchase Agreement which provided, with respect to pension benefits, that NJ Zinc would assume responsibility for benefits to active employees of the three facilities while G & W would retain responsibility for benefits to prior employees. App. at 335. NJ Zinc agreed to "establish a qualified pension plan for those employees of [G & W] who are represented by [Steelworkers], which plan ... shall be substantially similar to [the G & W Plan]." App. at 333. G & W agreed to transfer a proportionate amount of the assets from the trust for the G & W Plan to NJ Zinc for use in setting up a trust for any new plan. App. at 335-36.

At the time that G & W and NJ Zinc were negotiating the asset sale, the collective bargaining agreement with Steelworkers was close to expiration. NJ Zinc, which had entered into a letter of intent covering the impending sale, observed at least one day of the 1981 negotiations, which culminated in certain changes memorialized in a Memorandum of Understanding (Memorandum) to be incorporated into the Labor Agreement between G & W and Steelworkers. That Memorandum provided, inter alia, for some increases in benefit levels to the separate G & W Plan, but made no reference to changes in the funding or termination clauses of that Plan. App. at 197-98.

Following its purchase of the three facilities from G & W, NJ Zinc continued operations of those facilities without significant changes. By letter dated October 1, 1981, NJ Zinc informed employees that it expressly assumed the amended Labor Agreement previously agreed to by G & W and Steelworkers:

As an employee of [NJ Zinc], you will maintain your seniority and continue to be provided with your present insurance and benefit coverages. The new Company will succeed to the provisions of the recently negotiated three-year Labor Agreement with [Steelworkers] which will remain in effect.

App. at 264.

Effective October 1, 1981, NJ Zinc implemented a new pension plan (the NJ Zinc Plan) for active employees at the three facilities. The NJ Zinc Plan was "substantially similar" to the G & W Plan in that it maintained benefit levels for active employees at approximately the same level as recently negotiated. The NJ Zinc Plan contained a termination clause identical to that of the G & W Plan in that the NJ Zinc Plan could also "be terminated at any time by the Board of Directors." App. at 313. The NJ Zinc Plan did not retain the "full funding" provision of the G & W Plan. There was testimony at trial that Steelworkers was not informed of the adoption of the NJ Zinc Plan until its termination, approximately one year later.

In October 1982, NJ Zinc informed Steelworkers that it was terminating the NJ Zinc Plan for economic reasons. NJ Zinc filed with the Pension Benefit Guaranty Corporation (PBGC) a notice of intent to terminate. PBGC agreed to termination of the NJ Zinc Plan and assumed responsibility for its subsequent administration. Steelworkers sought to prevent termination by filing unfair labor charges with the National Labor Relations Board, but the Regional Director, in a decision affirmed by the General Counsel, ruled that NJ Zinc had the right to terminate the NJ Zinc Plan unilaterally and declined to file a complaint.

The NJ Zinc Plan was terminated effective January 1, 1983. At that time, fund assets were insufficient to fully fund the actuarial present value of vested benefits owing under the NJ Zinc Plan. PBGC will guarantee some of the shortfall, and, under the Employee Retirement Income Security Act (ERISA), NJ Zinc is liable to PBGC for some or all of the amount paid to fund the NJ Zinc Plan by PBGC. PBGC will not, however, fully fund on an actuarial basis all of the vested benefits owing under the NJ Zinc Plan. The actuarial present value of vested benefits not guaranteed by PBGC is, by NJ Zinc's own estimation, approximately $600,000. Appellee's Brief at 18.

Steelworkers filed a complaint in the district court against NJ Zinc alleging, in Count I, a breach of the terms of the NJ Zinc Plan and a breach of NJ Zinc's fiduciary duty to fairly administer the Plan imposed by sections 404(a) and 409(a) of ERISA, 29 U.S.C. Secs. 1104(a), 1109(a). 1 Steelworkers premised federal jurisdiction on both section 502 of ERISA, 29 U.S.C. Sec. 1132, and section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 185. Steelworkers sought various forms of relief including: 1) an order requiring NJ Zinc to fully fund vested benefits owing at the termination of the NJ Zinc Plan; 2) an order requiring NJ Zinc to rescind termination of the NJ Zinc Plan; 3) an order requiring NJ Zinc to continue funding of the NJ Zinc Plan; 4) an order replacing NJ Zinc's pension committee as trustee of the NJ Zinc Plan with directions to the new trustee to fund that Plan; and 5) an award of compensation to NJ Zinc Plan participants for damages suffered on account of the breach of the terms of that Plan. Steelworkers demanded a jury trial on all issues.

NJ Zinc moved to strike the jury demand, and the motion was referred to a magistrate. The magistrate characterized the relief sought as equitable in nature and entered an order granting the motion. App. at 359-60. The district court then conducted a bench trial at the conclusion of which it found that Steelworkers had failed to prove its claims and entered judgment for NJ Zinc.

III. The Jury Trial Demand: Waiver of Appellate Review

Steelworkers contends that the proceedings below were fatally defective because it was not afforded the jury trial it demanded in its complaint. The jury demand was struck by the magistrate following his analysis of the relief requested on the claim that NJ Zinc breached a contractual obligation to fully fund all vested benefits. He determined that the overwhelming basis of the action was a claim for equitable relief, and reasoned that if the court were to grant the equitable relief sought, which was to compel NJ Zinc to fund the NJ Zinc Plan on a sound actuarial basis, it would render superfluous the only legal relief sought, which was damages to compensate the Plan's participants for whatever losses they may have sustained through NJ Zinc's non-funding....

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