The opinion of the court was delivered by: Hellerstein, District Judge.
This putative class action seeks redress for alleged violations
of the Portability Act (Section 559 of the Deficit Reduction Act
of 1984, Public Law 98-369) and ERISA*fn1 caused when NYNEX
Corporation ("NYNEX") transferred employees from its Science and
Technology Division into a newly incorporated subsidiary, NYNEX
Science & Technology, Inc. ("S & T, Inc."). The plaintiffs are
eight individuals, Randall Stewart, Anthony Marinaccio, Patrick
McMahon, Noreen Kiely, Robert Boeckle, Edward Zupan, John Mazur,
and Oral Christie (collectively, the "plaintiffs"), who allege
that NYNEX wrongfully caused them to lose accrued pension and
seniority credits by the transfer; and by failing to inform them
of their lost portability.
Defendants now move this court for summary judgment dismissing
the Complaint. For the reasons stated herein, I grant defendants'
motion in part and deny it in part.
Prior to the breakup of AT & T in January 1984, employees could
transfer employment among the various Bell Companies that made up
the AT & T family and retain, or "port," their accrued pension
and seniority rights. Thus, someone who had worked for the New
York Telephone Company for seven years, could move to Madison,
Wisconsin, become employed by Wisconsin Bell, and port his
employment seniority and accrued service and pension benefits,
rather than be considered a "new hire."
Upon the breakup of AT & T, and the creation of seven
independent regional Bell Operating Companies ("RBOCs"),*fn2
including NYNEX, portability was to be phased out and employees
were allowed to transfer their accrued service credits between
former AT & T affiliates for one year only, until December 31,
1984. (N.Y.NEX 56.1, at ¶ 2). United States District Judge Harold
H. Greene, the judge presiding over the AT & T case, rejected a
request by AT & T's unions that portability continue, holding
that portability was inconsistent with independence of the RBOCs.
United States v. Western Elec. Co., 569 F. Supp. 1057, 1094
(D.D.C.), aff'd sub nom., California v. United States,
464 U.S. 1013, 104 S.Ct. 542, 78 L.Ed.2d 719 (1983). Thus, the Divestiture
Interchange Agreement ("DIA") among the RBOCs provided
continuation of portability for only one year, in order to
facilitate transfers of employees among the newly reorganized and
now independent companies. Id. at 1091-94, n. 158, 104 S.Ct.
The AT & T employees carried their fight for greater
portability to Congress. On July 17, 1984, Congress enacted
Section 559 of the Deficit Reduction Act of 1984 (the
"Portability Act"), which extended portability rights to
employees of the RBOCs who (A) were employed in a non-supervisory
position, or (B) received an annual base pay of not more than
$50,000 as adjusted for changes in the consumer price index.
See, Portability Act § 559(c)(3). The entities covered by the
Portability Act were:
a. any carrier divested as a result of the modified
b. the corporation owning such carrier before
c. any other communications common carrier owned, in
whole or in part, by such corporation on December
31, 1983; or
d. any Interchange Company (as defined in the
divestiture interchange agreement) excluding any
subsidiary of such company other than any such
i. which was established as of December 31, 1983; and
ii. which participates in a defined benefit pension
plan maintained by such Interchange Company.
Portability Act, § 559(c)(5). NYNEX and the other RBOCs entered
into Mandatory Portability Agreements to implement the
Portability Act. (N.Y.NEX 56.1, at ¶ 4).
2. The Creation of Science & Technology Division and the
Incorporation of S & T, Inc.
Upon divestiture, the seven RBOCs formed Bell Communications
Research, Inc., or "Bellcore," an entity equally owned by, and
intended to benefit, each of the RBOCs. Bellcore was to be
"devoted to telephone company-related scientific research and
development." (N.Y.NEX 56.1, at ¶ 5).
In 1986, NYNEX determined to perform its own R & D activities,
and formed a division of NYNEX to do that, the NYNEX Science &
Technology Division (the "S & T Division"). In June 1991, NYNEX
obtained a charter for a corporation, NYNEX Science & Technology,
Inc. ("S & T, Inc.") and, on September 1, 1991, made S & T, Inc.
the employer of NYNEX's S & T employees. There is no evidence
that the employees were advised of the technical change in their
employer's name or legal status, or advised of any consequences
to them of such change. NYNEX claims it incorporated S & T in
order better to implement a directive of the New York Public
Service Commission ("NYPSC") to segregate expenses and profits
between affiliated, and non-affiliated, telephone companies, but
the record is silent as to how accounting classifications differ
between wholly-owned subsidiaries and divisions. (N.Y.NEX 56.1,
at ¶ 9).
NYNEX maintained a separate corporate identity for S & T, Inc.,
with its own employees, officers and board of directors. (N.Y.NEX
56.1, at ¶ 13). S & T, Inc. was the legal owner of its building,
maintained separate bank accounts and books and records, had its
own budget, paid dividends to NYNEX as the owner of all its
stock, and paid taxes separately. (Id.).
The eight named plaintiffs are all former employees of S & T,
Inc. A brief employment history for each plaintiff follows.
Oral Christie worked for S & T Division and, following its
incorporation, for S & T, Inc., reasonably believing that his
portability continued. (Plaintiffs' 56.1, at pp. 25-25b). In July
1995, Christie left S & T, Inc. and was hired by Bell South
Science & Technology, Inc. ("Bell South"). (Id.). Christie then
learned that his seniority benefits did not "port". He did not
get full vacation time, had to wait six months for medical
coverage and could not participate immediately in the Bell South
Savings Plan, nor receive contributions from Bell South
commensurate to his employment history. (Oral Arg., 5/4/99, at p.
4). In January 1998, Christie left Bell South and obtained
employment at a non-portability company. (Id.).
Randall Stewart had been employed by Bell portability companies
from 1979 to 1988. (Am.Compl. ¶ 96, NYNEX 56.1, at ¶ 18). He then
become employed by a non-Bell, non-portability company, Fujitsu
Network Switching (N.Y.NEX 56.1, at ¶ 18). In March 1993, he
joined S & T. He claims that he was advised, upon being hired,
that his 1980-88 service would be counted as accrued net credited
service (Plaintiffs' 56.1, at pp. 18-18b), and that he believed
that he would be eligible to participate immediately in the NYNEX
Management Pension Plan. (Id.) However, Stewart was made to
wait five years before being allowed to participate in the Plan,
and did not receive the benefits accruing from his prior service.
Stewart left S & T, Inc. in February 1997, and obtained a
position with a non-Bell company. (Id.). Stewart complains
that, as a former AT & T employee, he had a "reasonable
expectation of renewing his participation in those NYNEX Plans"
and, because S & T, Inc. was not designated a portability
company, that right of future participation has been lost to him
(Am.Compl. ¶ 127).
John Mazur was employed by the S & T Division and, following
its incorporation, with S & T, Inc. (N.Y.NEX 56.1, at ¶ 24), and
participated throughout in the NYNEX Management Pension Plan.
(Id.). Mazur's employment with S & T, Inc. terminated in 1993,
and he elected on termination to cash out his pension by taking a
lump-sum distribution of $18,745.46. (Id.). Soon after, Mazur
accepted a position with Cincinnati Bell Information Systems, a
portability company. (Id.).
Mazur contends that Cincinnati Bell wrongfully refused to
accept his S & T, Inc. service for establishing his seniority at
Cincinnati Bell on the ground that S & T, Inc. had not been
designated a portability company. (Plaintiffs' 56.1, at p. 24).
Thus, Cincinnati Bell, as part of a downsizing, treated Mazur as
a new hire, rather than an employee with over eight years
seniority, and terminated his employment. Mazur is currently
employed by a non-Bell company. (Id.).
Patrick McMahon was employed by TRG, then in 1992 by S & T
Division (and later transferred to S & T, Inc.), and in June 1998
transferred back to TRG. (Id. at ¶ 20). Like Kiely, McMahon has
participated throughout in the NYNEX Management Pension Plan.
Anthony Marinaccio was employed by NYNEX since 1970 (Am.Compl.
¶ 128), then, as of September, 1994, by S & T, Inc. and, in
November 1998, by TRG. (Id.). Marinaccio, throughout,
participated in the NYNEX Management Pension Plan. (Id.).
Robert Boeckle was employed by the S & T Division, then when S
& T, Inc. was incorporated in 1991, by S & T, Inc. and, in June
1998, by TRG. (N.Y.NEX 56.1, at ¶ 22). (Id.). During his tenure
at S & T, Inc., Boeckle received full pension and seniority
credits accruing from his three employments. (Id.).
Edward Zupan worked for NYNEX, then between 1992 and 1998, for
S & T, Inc., and then for TRG. (N.Y.NEX 56.1, at ¶ 23). Zupan,
also, received full pension and seniority benefits from his three
Thus, five of the eight plaintiffs — Boeckle, Marinaccio,
McMahon, Kiely and Zupan — have enjoyed full pension and
seniority benefits, even though NYNEX did not designate S & T,
Inc. as a portability company. Because S & T, Inc. is part of the
NYNEX family of companies, Boeckle, Marinaccio, McMahon, Kiely
and Zupan's service time with S & T, Inc. was credited by TRG,
the NYNEX-affiliated company to which they transferred, just the