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STEWART v. NYNEX CORP.

November 23, 1999

RANDALL STEWART, ANTHONY MARINACCIO, PATRICK MCMAHON, NOREEN KIELY, ROBERT BOECKLE, EDWARD ZUPAN, JOHN MAZUR AND ORAL CHRISTIE, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
NYNEX CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hellerstein, District Judge.

  MEMORANDUM AND ORDER

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.

STATEMENT OF FACTS

1. Background

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. 542.

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
    final judgment;
  b. the corporation owning such carrier before
    divestiture;
  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
    subsidiary —

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 did not designate S & T, Inc. a portability company. NYNEX claims that it was not compelled to do so since neither "[S & T, Inc.] nor [the S & T Division] had been established as of December 31, 1983." (N.Y.NEX 56.1, at ¶¶ 3, 6, 16). However, NYNEX continued to recognize pension and seniority credits for employees of S & T, Inc. who transferred within the NYNEX family of companies that were portability companies. (Id. at ¶ 17).

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.).

3. The Plaintiffs

The eight named plaintiffs are all former employees of S & T, Inc. A brief employment history for each plaintiff follows.

a. Oral Christie

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.).

b. Randall Stewart

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).

c. John Mazur

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.).

d. Noreen Kiely

Noreen Kiely, after employment at NYNEX, joined S & T, Inc. in 1994. (N.Y.NEX 56.1, at ¶ 21). In June 1998, Kiely was transferred to Telesector Resources Group ("TRG"), a wholly-owned subsidiary of NYNEX and a designated portability company. Throughout, Kiely has participated in the NYNEX Management Pension Plan. (Id.).

e. Patrick McMahon

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. (Id.).

f. Anthony Marinaccio

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.).

g. Robert Boeckle

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.).

h. Edward Zupan

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 employments. (Id.).

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 same ...


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