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United States District Court, Western District of New York

May 29, 1991


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 amendment.

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, each 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.



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 Cir. 1983).

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 dates.

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 the union.*fn4

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 favorable inferences.

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 in management.

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.


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 omitted).


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. Instead,

  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 because

  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.

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. This 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. Id.

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
    Effective Date,

  (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.

So ordered.

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