United States District Court, Western District of New York
May 29, 1991
STANLEY J. ZYDEL, HELMUT LEHMANN, ANTHONY HARASIMOWICZ, PATRICK MCDONOUGH, ROBERT L. PAWELSKI, ALLEN NOBLE, RONALD HOIER, JOHN A. FILIPSKI, PATRICIA A. SKRETNY, ANGELO
ROMANO, SOPHIE EATON, AS EXECUTRIX OF THE ESTATE OF GERALD D. EATON, JOHN J. CLOSS, FRANK MACIEJEWSKI, PLAINTIFFS, V. DRESSER INDUSTRIES, INC., INGERSOLL-RAND COMPANY, DRESSER-RAND COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Curtin, District Judge.
This action was brought in March, 1988, by thirteen former
employees of Dresser-Rand Company to collect unpaid pension
benefits allegedly due. Dresser-Rand and its predecessor
companies owned and operated the Worthington Compressor Plant
in Buffalo, New York. Each plaintiff began his or her
employment at the plant as a union member, either with the
United Steel Workers of America ("USWA") or the Office and
Professional Employees International Union ("OPEIU"). Each
plaintiff thereafter transferred to a non-union management
position at the plant and asserts that he or she was led to
believe that if management positions were ever abolished, the
plaintiff could return to his or her union position without
loss of benefits.
In late 1986 and early 1987, defendants notified plaintiffs
that they were terminating plaintiffs' management positions
and closing the plant. The first three plaintiffs to be so
notified were foundry employees Allen Noble, Anthony
Harasimowicz, and Angelo Romano. They claim they were told by
William Netols, Director of Human Services at Worthington,
that they were entitled, because of their seniority, to return
to the union and collect a union pension at their option.
See Item 60 (Noble affidavit). Mr. Netols categorically denies
this. Item 67, ¶ 2 (Netols affidavit). Plaintiffs claim that
after they were so notified, the company changed its position
and refused to allow them to return to the union.
The remaining ten plaintiffs learned in early 1987 they
would be laid off. Although union personnel continued to work
at Worthington until mid-1987, Dresser-Rand refused to permit
any plaintiff to return to his or her union position. Instead,
most of the plaintiffs left on March 31, 1987, receiving a
retirement package less favorable than they would have
received had they been granted a union pension. Plaintiffs
seek to recover retirement benefits equal to those paid to
union members. Item 14 (Amended Complaint).
Plaintiffs have offered five theories to prove their
entitlement to union pensions. First, plaintiffs argue that
defendants' "policy and practice" of returning a management
employee to his or her union position upon abolishment of that
person's management position is an "employee benefit plan"
under the Employee Retirement Income Security Act ("ERISA").
29 U.S.C. § 1002(3). Second, plaintiffs assert they are
entitled to be returned to their positions under the state law
doctrine of promissory estoppel. Third, plaintiffs claim they
were "participants" in the union pension plan and are therefore
entitled to benefits thereunder. Fourth, plaintiffs argue that
defendants violated § 204(g) of ERISA, 29 U.S.C. § 1054(g), by
decreasing or eliminating plaintiffs' accrued pension benefits.
Finally, plaintiffs claim that defendants' attempt to amend the
union plans in February, 1985, to cease crediting plaintiffs'
years of service in the union pension
fund is null and void, as plaintiffs were not notified of any
Defendants argue that plaintiffs were not entitled to return
to their union positions, that the company never promised such
a return, and that plaintiffs ceased to participate in the
union pension plan when they accepted promotions to
management. Defendants have moved for summary judgment on
these, and other, grounds. Plaintiffs oppose the motion.
As noted, the Worthington Compressor Plant was closed by
defendants in 1987. Dresser Industries had purchased the plant
from McGraw-Edison Company in early 1985. Dresser-Rand took
over operation of the plant from January 1, 1987, until the
plant closed later that year. Other corporate entities owned
the plant between the time McGraw-Edison owned it, and the
Worthington Corporation ("Worthington") built the plant.
The thirteen plaintiffs in this case were each hired by
Worthington in the early 1950s or 1960s.*fn1 Each was hired
into either the USWA or OPEIU union and became a participant
in that union's pension plan with the company. Thereafter,
plaintiff transferred into a non-union management position
with the company. The earliest plaintiff to transfer was
Patricia Skretny in 1956. The latest transferee was Allen
Noble, who moved into management on May 29, 1978. Most
transferred in the early 1970s. All except Mr. Noble remained
in management until they were notified in late 1986 or early
1987 that the plant would be closed. All became eligible for,
and have received, pension benefits from the company under the
management pension plans.
I. STANDING: WERE PLAINTIFFS "PARTICIPANTS" IN EITHER UNION
As an initial matter, the court must decide whether
plaintiffs were "participants" in either the USWA or OPEIU
pension plans under ERISA. If not, plaintiffs would lack
standing to sue for benefits under these plans. 29 U.S.C. § 1132(a).
See also Tuvia Convalescent Center, Inc. v. National
Union of Hosp. & Health Care Employees, 717 F.2d 726, 729 (2d
ERISA defines "participant" as "any employee or former
employee of an employer . . . who is or may become eligible to
receive a benefit of any type from an employee benefit plan
which covers employees of such employer. . . ."
29 U.S.C. § 1002(7) (emphasis added). The Supreme Court, in Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d
80 (1989), has recently explained the scope of this definition.
In our view, the term "participant" is
naturally read to mean either "employees in, or
reasonably expected to be in, currently covered
employment," Saladino v. I.L.G.W.U. National
Retirement Fund, 754 F.2d 473, 476 (CA2 1985), or
former employees who "have . . . a reasonable
expectation of returning to covered employment" or
who have a "colorable claim" to vested benefits,
Kuntz v. Reese, 785 F.2d 1410, 1411 (CA9) (per
curiam), cert. denied, 479 U.S. 916 [107 S.Ct. 318,
93 L.Ed.2d 291] (1986).
Bruch, 489 U.S. at 117, 109 S.Ct. at 957-958.
At this point, the court need not decide whether plaintiffs
were "employees in . . . currently covered employment."*fn2
Id. (quoting Saladino, 754 F.2d at 476). For plaintiffs to have
standing as participants, they need only have had a "reasonable
expectation of returning to covered employment." Id. (quoting
Kuntz, 785 F.2d at 1411).
Plaintiffs appear to have had a reasonable expectation of
returning to their union positions. They have asserted an
expectation; the question is whether it was
"reasonable." In support of their contentions, plaintiffs
point to four pieces of evidence: (1) seniority provisions in
the USWA and OPEIU collective bargaining agreements with the
company, (2) the company's actual practice of permitting other
employees to transfer back from management to union positions,
(3) express promises made by the company to these plaintiffs
permitting such transfer, and (4) the language of union
pension plans permitting accumulation of union benefits for
union members transferring to management prior to certain
A. Collective Bargaining Provisions
Plaintiffs first argue that they were entitled to return to
their former union positions because, under language in the
collective bargaining agreements between Dresser Industries
("Dresser") and the two unions, they continued to accumulate
union seniority even after they were promoted to management.
In the USWA contract, union seniority accumulated for
employees upgraded to supervisory positions prior to August
15, 1974, while that employee remained in management. Item 69,
Exh. 22, § 12.12. OPEIU employees upgraded to management prior
to January 12, 1972, also accumulated union seniority. Item 69,
Exh. 23, § 14.14. Most plaintiffs qualified for accumulated
seniority under these provisions.*fn3
The question arises, however, whether these management
employees were entitled to exert this accumulated seniority to
return to union positions. Plaintiffs claim they were, quoting
USWA contract § 12.01, which provided that
Seniority shall determine the right of an
employee to work and shall be based on length of
service as defined herein and shall only be
qualified by the ability of the employee to perform
available work with the Company.
Item 69, Exh. 22, § 12.01 (emphasis added). Defendants claim
that the word "employee" in this phrase excluded plaintiffs,
who were admittedly outside the bargaining unit. See Item 66
(Lardo affidavit). The contract, however, does not define
"employee." Nor does it use the term to refer exclusively to
hourly paid personnel. See, e.g., Item 69, Exh. 22, § 12.12.
Moreover, plaintiffs have filed other evidence to indicate
that, given their seniority, they were entitled to return to
B. Prior Practice
Second, plaintiffs point to the practice of prior owners of
the Worthington plant of
permitting employees transferred from union to management to
transfer back into the union at their request. Plaintiffs list
twenty-four persons permitted to make such a move, including
plaintiff Allen Noble in 1982-83. See Item 59, ¶ 21 (Zydel
affidavit). Defendants argue that this might have been the
practice of prior owners, but was not the practice of Dresser
Industries or Dresser-Rand. Plaintiffs, however, have pointed
out that at least one individual was transferred during
Dresser's tenure. See id., ¶ 23 (naming Christine Skowronski).
Furthermore, defendant has not pointed to anyone other than
plaintiffs who was refused transfer. This evidence, too, tends
to underscore the reasonableness of plaintiffs' expectations.
C. Express Promises
Plaintiffs' third argument is that they were promised the
right to return to the union at their discretion whenever
their management position was abolished. Defendants have filed
extensive deposition excerpts which they argue show that no
such promises were made. Plaintiffs have filed affidavits
directly countering these arguments. See, e.g., Items 59, 60.
We must, of course, grant plaintiffs the benefit of all
D. Pension Plan Provisions
Finally, plaintiffs argue they were "participants" based on
the union pension plans themselves. Item 70, Exhs. 26,
27.*fn5 Both plans define a "Participant" as "any Employee
participating in the Plan in accordance with provisions of
Section 3.01." Item 70, Exh. 26, § 1.24; Item 70, Exh. 27, §
1.30. An "Employee" is defined as a person who, on or after the
Effective Date — February 16, 1985, the day Dresser Industries
officially acquired the plant — has performed an hour of
service for the company and is receiving remuneration for such
service. See Item 70, Exh. 26, §§ 1.16, 1.18; Item 70, Exh. 27,
§§ 1.22, 1.24.*fn6 Section 3.01 provides:
Eligibility for Participation. Any hourly-paid
Employee who is a member of the bargaining unit
represented by the Union and who is employed by the
Employer's Worthington Compressor Division at
Buffalo, New York, shall become a Participant
immediately as of the Effective Date or, if later,
as of his Employment Commencement Date.
Further provided, the term Participant shall
also include persons who, as of the Effective
Date, were participating in the Predecessor Company
Plan and whose seniority rights under the existing
collective bargaining agreement have not terminated
as of such date.
Item 70, Exhs. 26, 27, § 3.01 (emphasis added). Plaintiffs do
not contend they fit under the first category of participation.
The question is whether plaintiffs fit under the second
category. This is a difficult question to sort out, as the
prior union pension plans do not define "participating."
Plaintiffs argue that they were participating in the prior
union plans because they were each at one time hourly
employees covered by a union plan and, under Section V of
those plans, did not incur a break in service in that plan
upon their transfer from a union to management position within
the company. See Item 69, Exhs. 24, 25, § V (Determination of
Continuous Service). Defendants admit this. See Item 59, Exh.
4, at 165, 168 (Netols deposition). With no service break, a
union employee who moved into a management position with the
company would continue to accumulate service credit under the
union plan during his or her time in management. Thus, if the
employee ever returned to the union, his or her entire time
with the company would be credited toward a union pension.
Defendants also admit this, although they contend that this
practice changed when Dresser acquired the plant.
Id. at 65-66.*fn7 Plaintiffs were "participating" in the prior
union pension plans in the sense that they continued to accrue
service time under those plans even while their time was spent
Defendants have countered this argument with the affidavit
of Bernard E. Hartt, a Consulting Actuary for Buck
Consultants, Inc., the company that provided actuarial
analysis of employee pension benefits for the various pension
plans at the Worthington plant. Item 68. In order to perform
the annual actuarial analysis on each plan, Buck Consultants
would request and obtain a census-listing identifying the
participants in each pension plan as of the first of the year.
In the compilation provided January 1, 1985, just before
Dresser acquired the plant, the thirteen plaintiffs are each
listed as participants in the McGraw-Edison Company Buffalo
Salaried Plan. Id., Exh. 1. None of them is listed as a
participant under the union plans. Id., Exhs. 4, 5. It must
also be pointed out that plaintiffs, as management employees,
were not eligible to receive benefits under the McGraw-Edison
union pension plans. All pension benefits, including the 70-80
pension benefits at issue in this case, were restricted in
those plans to "employees." See Item 69, Exhs. 24, 25, § II.
"Employees" were defined as hourly paid persons covered by the
collective bargaining agreement. Id., § I(2).
Based on this evidence, defendants would appear to have the
best argument. However, there is another more compelling
reason that plaintiffs' position has merit. If the second
category of "Participant" in § 3.01 was meant only to include
hourly paid personnel represented by the union, it would be
superfluous. All union members are covered under the first
category of § 3.01. Significantly, whereas the first category
includes "[a]ny hourly-paid Employee," obviously excluding
plaintiffs, the second category uses the encompassing word
"persons." Item 70, Exhs. 26, 27, § 3.01. Moreover, the second
category requires the "person" participating in the prior plans
not to have had his or her seniority terminated under the
existing collective bargaining agreement. Id. This requirement
also appears to be designed to include plaintiffs. In both the
USWA and OPEIU contracts, union seniority continued to
accumulate and/or was frozen for union members who transferred
to management before the early 1970s. See supra note 3 and
accompanying text (discussing contract clauses and identifying
plaintiffs who may not qualify under these clauses). As most
plaintiffs were transferred prior to these cut-off dates, they
would satisfy this criterion. Thus, if the second category of
"Participant" in § 3.01 did not include plaintiffs, it is not
clear whom this category would include.
Based on the collective bargaining agreements, prior
practice, and alleged promises, the court concludes that
plaintiffs' expectations of being returned to the union upon
termination of their management positions were reasonable. The
court finds the current pension plans to be ambiguous as to
whether plaintiffs were "Participants" thereunder. Under the
test set forth in Bruch, 489 U.S. at 117, 109 S.Ct. at 957,
plaintiffs have standing to bring this suit.
II. SUMMARY JUDGMENT
Defendants have moved for summary judgment. In order to
prevail on their
motion, defendants must show "that there is no genuine issue
as to any material fact and that [it] is entitled to a
judgment as a matter of law." Fed.R.Civ.P. 56(c). A material
fact is one "that might affect the outcome of the suit under
the governing law. . . ." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A
dispute is genuine "if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party." Id. The
court "must resolve all ambiguities and draw all reasonable
inferences in favor of the party defending against the motion."
Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249
(2d Cir. 1985), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98
L.Ed.2d 226 (1987). "Uncertainty as to the true state of any
material fact defeats the motion." United States v. One
Tintoretto Painting, 691 F.2d 603, 606 (2d Cir. 1982) (citation
III. ENTITLEMENT TO PENSION BENEFITS
Although this court has held that plaintiffs had a
"reasonable expectation" of returning to the union and
obtaining a union pension, this fact does not entitle them to
such pension benefits.
Plaintiffs have offered five arguments to prove their
entitlement to benefits. Plaintiffs argue first that
defendants' "policy and practice" of guaranteeing to former
union members who accepted promotion to management positions
the greater of union or management pension benefits upon
retirement was an "employee benefit plan" under ERISA,
29 U.S.C. § 1002(3). Item 14, ¶¶ 7-22. Defendants argue that
"policy and practice" cannot create such a plan, because, by
ERISA's own language, an employee benefit plan must be
established in writing. 29 U.S.C. § 1102(a)(1) ("Every employee
benefit plan shall be established and maintained pursuant to a
written instrument."). "[O]ral agreements or modifications to a
pension plan are contrary to the express provisions of ERISA."
Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, 1296 (5th Cir.
1989). See also Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th
Cir. 1989); Lister v. Stark, 890 F.2d 941, 946 (7th Cir. 1989);
Pizlo v. Bethlehem Steel Corp., 884 F.2d 116, 120 (4th Cir.
1989); Musto v. American Gen. Group, 861 F.2d 897, 909-10 (6th
Cir. 1988); Straub v. Western Union Co., 851 F.2d 1262, 1265
(10th Cir. 1988); Nachwalter v. Christie, 805 F.2d 956, 960
(11th Cir. 1986). Plaintiffs counter by citing numerous cases
for the proposition that an employee benefit plan need not be
in writing. See Gilbert v. Burlington Indus., Inc.,
765 F.2d 320, 324-25 (2d Cir. 1985); Scott v. Gulf Oil Corp.,
754 F.2d 1499, 1503 (9th Cir. 1986); Donovan v. Dillingham,
688 F.2d 1367, 1372-73 (11th Cir. 1982); Bausch & Lomb Inc. v.
Smith, 630 F. Supp. 262, 264 (W.D.N.Y. 1986); Molyneux v. Arthur
Guinness & Sons, 616 F. Supp. 240, 243 (S.D.N.Y. 1985).
On first glance, these sets of cases would appear to be
diametrically opposed to one another. The court in
Dillingham, for example, held that "ERISA does not, however,
require a formal, written plan." Dillingham, 688 F.2d at 1372.
a "plan, fund, or program" under ERISA
[29 U.S.C. § 1002(1)] is established if from the surrounding
circumstances a reasonable person can ascertain the
intended benefits, a class of beneficiaries, the
source of financing, and procedures for receiving
Id. at 1373. The court explained the writing requirement.
Once it is determined that ERISA covers a plan,
the Act's fiduciary and reporting provisions do
require the plan to be established pursuant to a
written instrument . . . but clearly these are
only the responsibilities of administrators and
fiduciaries of plans covered by ERISA and are not
prerequisites to coverage under the Act.
Id. at 1372. In Nachwalter, however, the court faced the
question of "whether written employee benefit plans governed by
ERISA may be modified by oral agreements." Nachwalter, 805 F.2d
at 959 (emphasis added). The court concluded they could not be
if we permitted oral modifications of ERISA plans
. . . employees would be unable to rely on these
plans [because] their expected retirement
benefits could be radically affected by funds
dispersed to other employees pursuant to oral
agreements. This problem would be exacerbated by
the fact that these oral agreements often would
be made many years before any attempt to enforce
Id. at 960.
The cases cited by plaintiffs and defendants are
reconcilable because they apply to different situations. The
cases cited by plaintiff, including Dillingham, address whether
an "employee welfare benefit plan" can be created without a
written instrument. 29 U.S.C. § 1002(1) (emphasis added). See
also Dillingham, 688 F.2d at 1370-71. Welfare benefit plans
include benefits for
(A) medical, surgical, or hospital care or
benefits, or benefits in the event of sickness,
accident, disability, death or unemployment, or
vacation benefits . . . or day care centers,
scholarship funds, or prepaid legal services, or
(B) any benefit described in section 186(c) of
this title (other than pensions on retirement or
death, and insurance to provide such pensions).
29 U.S.C. § 1002(1) (emphasis added). Welfare benefits can even
include severance benefits. See, e.g., Gilbert, 765 F.2d at
324-26; Scott, 754 F.2d at 1502-03. But welfare benefit plans
do not include pension benefits, which are covered under a
separate section. 29 U.S.C. § 1002(2). Each case cited by
plaintiffs, with the exception of one unpublished decision,
dealt with a claim for unpaid welfare benefits.*fn8
In this case, plaintiffs clearly are asserting a claim for
unpaid pension benefits, not welfare benefits. See Item 14.
Pension plans covering members of the USWA and OPEIU have been
in existence, in writing, since before each plaintiff joined
the company. Thus, to the extent plaintiffs are unable to show,
in writing, that they are entitled to benefits under these
plans, their claim that the company's "policy and practice"
established an entitlement to pension benefits is an assertion
that these plans were modified orally to bring plaintiffs
within the plans' ambit. Plaintiffs cannot maintain a cause of
action for such an oral modification. Cefalu, 871 F.2d at
1296-97; Nachwalter, 805 F.2d at 960.
Nor can plaintiffs recover under their second theory:
promissory estoppel. ERISA contains a very broad preemption
provision, under which ERISA "supersede[s] any and all State
laws insofar as they may now or hereafter relate to any
employee benefit plan. . . ." 29 U.S.C. § 1144(a) (emphasis
added). This language has been granted broad scope by the
Supreme Court. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
44-48, 107 S.Ct. 1549, 1551-1553, 95 L.Ed.2d 39 (1987); Shaw v.
Delta Air Lines, 463 U.S. 85, 95-99, 103 S.Ct. 2890, 2898-2901,
77 L.Ed.2d 490 (1983). The Court in Shaw held that the phrase
"relate[s] to" must be construed to mean that a state law is
preempted "if it has a connection with or reference to such a
plan." Id. at 97, 103 S.Ct. at 2900. See also Gilbert, 765 F.2d
at 327. Plaintiffs' promissory estoppel claims clearly relate
to the union pension plans in this case because plaintiffs seek
to recover benefits under these plans. Id.; Cefalu, 871 F.2d at
1294. They are therefore preempted by ERISA.
Plaintiffs' third argument is that they were entitled to
benefits under the terms of the union pension plans. Item 14.
argument builds on the discussion under section I(D),
supra. Plaintiffs are seeking 70-80 retirement benefits, which
is a special pension established to cover plant shutdowns.
Eligibility for these benefits is defined in § 4.04 of both the
USWA and OPEIU plans. Item 70, Exhs. 26, 27, § 4.04. To be
eligible, a "Participant" must have had at least ten years of
"Participation Service" ("PS") and (1) have attained age 55 and
whose combined age and years of PS shall equal 70 or more, or
(2) whose combined age and years of PS shall equal 80 or more.
In addition, the Participant must have incurred a "Severance
from Service" by reason of a permanent shutdown of the plant.
Under this definition, at least some plaintiffs would appear
to qualify for benefits. As discussed in section I(D) of this
opinion, it appears that most plaintiffs would fall under the
second category of "Participant," as defined in § 3.01. They
were "persons" who were "participating" in the "Predecessor
Company Plan" at the time Dresser Industries purchased the
plant who had not had their seniority rights terminated under
the collective bargaining agreements then in force.*fn9 Item
70, Exhs. 26, 27, § 3.01. As "Participants," they would be
entitled to 70-80 benefits if they met the requirements for
"Participation Service." Participation Service means:
A. as to periods prior to the Effective Date, an
Employee's accrued years of service and
fractions thereof credited as of the Effective
Date under the Predecessor Company Plan, plus
B. as to periods commencing on or after the
(i) for Participants with Participation Service
credited under A above who have not had a
Severance from Service Date as of the Effective
Date, service measured beginning on the
Effective Date. . . .
Id., § 3.02. As noted above, participation service must combine
with an applicant's age to equal 70 or 80 to be eligible for a
70-80 pension. See id., § 4.04. On the facts currently before
the court, this service requirement does not appear to prevent
at least some plaintiffs from qualifying for 70-80 pensions.
Set against this language, each pension plan states on the
first page that it is being published "for the benefit of
certain employees" of Dresser Industries' Worthington
Compressor Division "who are represented by" one of the two
unions. Id., at 1. Moreover, under the prior pension plans,
there is no question that only hourly paid union personnel (or
their spouses) were eligible for benefits. See supra § I(D).
Nevertheless, the court finds the language in the most
recent union plans to be ambiguous on the question of whether
plaintiffs are entitled to benefits thereunder.*fn10 Thus,
there remains a genuine issue of fact precluding summary
judgment against all but three plaintiffs. See supra note 9
(identifying plaintiffs who do not qualify for pension benefits
under current union pension plans). Given this conclusion, the
court need not address plaintiffs' further arguments against
summary judgment. See supra.
Accordingly, defendants' motion for summary judgment is
denied with respect to ten plaintiffs. Defendants' motion is
granted with respect to plaintiffs Zydel, Hoier, and Closs. To
frame a further order, counsel shall meet with the court on
June 14, 1991, at 9 a.m.