United Steelworkers of America v. Crane Co.
| Decision Date | 19 September 1979 |
| Docket Number | No. 78-2541,78-2541 |
| Citation | 605 F.2d 714 |
| Parties | 102 L.R.R.M. (BNA) 2603, 87 Lab.Cas. P 11,574, 1 Employee Benefits Ca 1313 UNITED STEELWORKERS OF AMERICA v. CRANE COMPANY and its subsidiary, Acheson Manufacturing Company, Appellants. |
| Court | U.S. Court of Appeals — Third Circuit |
Louis Emanuel, III, John J. McLean, Jr. (argued), R. A. King, Buchanan, Ingersoll, Rodewald, Kyle & Buerger, Pittsburgh, Pa., for appellants.
William H. Schmelling (argued), Asst. Gen. Counsel, United Steelworkers of America, Chicago, Ill., for appellee; Bernard Kleiman, Gen. Counsel, United Steelworkers of America, Chicago, Ill., of counsel.
Before ADAMS, ROSENN and HIGGINBOTHAM, Circuit Judges.
In this case we must examine, under certain collective bargaining agreements, the extent of an employer's obligations for its employees' pensions, when the employer has closed its plant and terminated the pension plan. The United Steelworkers of America ("Union") brought suit under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185 (1976), upon two claims: (1) that the Crane Company was reneging on its duty to pay for a particular class of pensions; and (2) that the company had paid less than its required contributions to the pension fund. The district court rendered judgment for the Union on both claims. On appeal by the company, we reverse in part and affirm in part.
Commencing sometime prior to 1950, the Union represented certain employees at a Pennsylvania factory of the Acheson Manufacturing Co., which later became a subsidiary of the Crane Company (collectively, the "employer" or "Crane"). 1
In 1950 the employer and Union established a pension plan. Article VII, section 2(B), of this plan limited the employer's liability for pension benefits:
The Pension benefits of the plan shall be only such as can be provided by the assets of the pension fund or by any insured fund, and there shall be no liability or obligation on the part of the Company to make any further contributions to the trustee or insurance company in the event of termination of the Plan. No liability for the payment of pension benefits under the plan shall be imposed upon the Company, the officers, directors or stockholders of the Company.
The 1950 Pension Plan provided for two classes of benefits: payments for former employees reaching 65 years of age and having 15 years of experience, and for incapacitated former employees having 15 years of experience.
A collective bargaining agreement signed in 1957 created the "deferred vested pension," which is at issue in this suit. The following provision for deferred vested pensions was carried forward without change in subsequent collective bargaining agreements, appearing as section 18(B)(4)(a) in the 1959, 1961, 1966, and 1969 contracts.
Notwithstanding any other provision of the Pension Plan, any employee who shall be laid off and not recalled within two years, or whose employment shall be terminated as a result of a permanent shutdown of the plant, department or subdivision thereof, and who at the end of two years or the date of his termination shall have reached his fortieth birthday and at such time shall have 15 or more years of continuous service, shall be eligible, upon making application therefor as specified herein, to receive a deferred vested retirement pension.
This pension was "deferred" in that the former employee with 15 years of continuous service would not be eligible for benefits until age 65, even though he might be discharged as early as age 40.
At the time of the 1957 Collective Bargaining Agreement, the 1950 Pension Plan had not been revised to reflect the creation of deferred vested pensions. Through amendments to the Pension Plan in 1962, the Union and the employer corrected this omission. The amended Pension Plan recognized deferred vested pensions, as well as other types of benefits not included in the 1950 Plan. Listing the priority of claims that might be made against the pension fund upon termination of the plan, the 1962 amendments placed the deferred vested pensions fifth. The amendments also incorporated, as section VII(C), a limitation of the employer's liability:
Neither the Trustee nor the Company nor the Pension Board, either as a board or as individuals, in any manner guarantees the Trustee fund from loss or depreciation. All payments of pensions as provided in this Plan shall be made solely out of the Trust Fund, and there shall be no liability on the part of the Company to make further contributions to the Trustee in event of termination of the Plan. Neither the trustee nor the Company nor the Pension Board, either as a Board or as individuals, shall be in any manner liable for the payment of pension benefits under the Plan.
Treating the employer's obligation to pay into a pension fund established to support all types of pensions, section VII(A) of the amended Pension Plan required the employer to contribute amounts "sufficient on a sound actuarial basis to fund future service costs each year and to fund the lump sum past service cost at a rate not less than one twenty-fifth (1/25Th) annually." "Past service costs" referred to the liability for benefits earned by virtue of employment before the pensions were created. An increase in benefits would also give rise to past service costs based on service rendered after creation of the pensions but before the increase. Another provision pertaining to the employer's contribution appeared as section 18(B)(7)(c) in the 1959, 1961, 1966, and 1969 Collective Bargaining Agreements:
The actuarily (sic) determined past service funding liability applicable to earned prior pension credits determined by application of Article 7, section b. shall be paid at the rate of one-twenty fifth (sic) (1/25) annually or one three hundredths (1/300) each month during the continuation of this Agreement.
In 1972 Crane permanently closed the Acheson plant at Braddock, Pennsylvania, and discharged the employees, who were represented by the Union. The pension plan program was terminated. A "Memorandum of Agreement" between the employer and Union guaranteed that employees who qualified under section 18(B) (4) of the Collective Bargaining Agreement would be "eligible" for deferred vested pensions, according to the terms of that section.
The pension fund, although sufficient for the retirement and disability pensions, did not contain adequate assets to cover the entire amount for the deferred vested pensions. Invoking section VII(C) of the Pension Plan, which concerned the limits of liability, the employer disclaimed any financial responsibility beyond the contributions it had already made to the fund. Approximately 110 employees who would have received deferred vested pensions at age 65 were thus left without full benefits.
After a bench trial, the district court rendered a judgment in favor of the Union. The court held that despite the exculpatory clause of the Pension Plan, the employer's liability was not confined to contributions already made to the pension fund. The court ruled that Crane had independently guaranteed payment of the deferred vested pensions. In reaching this conclusion, the court noted the opening phrase of section 18(B)(4)(a), Supra, at 716, in the Collective Bargaining Agreement: "Notwithstanding any other provision of the Pension Plan . . . ." The district court interpreted this phrase to nullify the exculpatory clause's application to deferred vested pensions. Because the pensions were said to be "vested," the district court decided that Crane had guaranteed payment of all the benefits.
Having sustained the Union's argument about Crane's independent liability, the court turned to the provisions concerning the employer's contributions to the pension fund. The Union and the employer disputed whether the employer had met its obligations for the years 1967 to 1972. As the Union read section VII(A) of the Pension Plan and section 18(B)(7)(c) of the Collective Bargaining Agreement, Crane had been obligated to make contributions sufficient to amortize in 25 years the past service costs of the fund. The employer, on the other hand, urged that its obligation had been to contribute four percent of the past service cost existing each year. Because interest had been accruing on the obligations to employees by virtue of past service, this four percent contribution fell considerably short of the amount that would have been required to amortize the past service costs in 25 years. Accepting the Union's interpretation, the district court reasoned that a greater obligation to make contributions would better accord with the employer's guarantee to pay the deferred vested pensions. The Union and Crane have stipulated that if the company had to pay enough to amortize the past service costs, it would owe the pension fund $199,884, as of January 1, 1978.
This case illustrates one of the problems that led Congress in 1974 to enact the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 Et seq. (1976). To protect employees' expectations of benefits, that statute set up a system of "plan termination insurance." 29 U.S.C. §§ 1301-1381 (1976). congress intended to prevent tHE LOSS OF BEnefits under plans that, upon termination, contained insufficient funds. Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947, 951 (7th Cir. 1979), Cert. granted, --- U.S. ----, 99 S.Ct. 2881, 61 L.Ed.2d 310 (1979). But because this system of insurance does not cover plans that were terminated before September 2, 1974, ERISA does not apply here. We are constrained to look only to the agreements that the Union and the employer concluded, and if these contracts leave the employees unprotected, we are required, reluctant as we may be, to enforce the contractual terms to which the parties have agreed. See, e.g., Dwyer v. Climatrol Industries, Inc., 544...
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