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KNOLL v. PHOENIX STEEL CORP.

April 13, 1971

Joseph F. Knoll, et al., Plaintiffs,
v.
Phoenix Steel Corporation, et al., Defendants


Fullam, D. J.


The opinion of the court was delivered by: FULLAM

FULLAM, D. J.

On December 31, 1960, the Plate Division plant of the Phoenix Steel Corporation at Harrisburg, Pennsylvania, ceased operations. Many men lost their jobs and have had difficulty in finding employment, at least at wages comparable to those paid by Phoenix Steel. Pursuant to an agreement originally entered into in 1950 between Phoenix Steel and the United Steelworkers of America, the collective bargaining agent for the Phoenix Steel employees, a pension plan was established. The plan calls for contributions by Phoenix Steel to a fund which is held by the First Pennsylvania Bank as trustee. The plan is administered by the Retirement Board, consisting of three members designated by the company.

 Section 17 of the basic plan provides for disposition on termination of the plan. Essentially, it provides that those receiving pensions, and those at the retirement age (65) and not yet receiving benefits, are entitled to priority in payment of retirement benefits. Those with 15 or more years of continuous service, but not age 65 by the time of termination, are credited with all the further balance remaining in the fund "in such amount, upon such terms and under such conditions as the Board shall determine to be equitable." The allocations so provided are to be accomplished through either the continuance of the trust or the purchase of annuity contracts; however, the plan also states that: "The Board upon finding that it is not practicable or desirable under the circumstances to do either of the foregoing with respect to any person or all of the persons included in the groups listed . . . may provide for allocation of a part or all of the Fund other than through the above methods . . . ."

 This suit was brought by several of the former employees of Phoenix Steel who lost their jobs when the Plate Division plant closed. They purport to represent the class of all such former employees who were not receiving retirement benefits on December 31, 1960. They have named the Company and the Retirement Board as defendants and claim that section 17 of the pension plan agreement was violated in that the Board should not have continued the trust, but should have paid out the fund in lump sums to the former employees, based on their respective shares in the fund. They request equitable relief mandating that form of termination of the trust. Jurisdiction is based on the Labor Management Relations Act, § 301(a) (29 U.S.C. § 185(a)). Plaintiffs also seek the same relief on a quantum meruit theory, as to which jurisdiction is asserted under 28 U.S.C. § 1332 (diversity of citizenship) and the theory of pendent jurisdiction.

 A claim is asserted against the United Steelworkers of America for the sums that would have been paid out of the fund had the trust principal been paid out as lump sums; the bases for this claim are promissory estoppel and, apparently, breach of the duty of fair representation. Jurisdiction is asserted under the Labor Management Relations Act § 301(a) and pendent jurisdiction.

 All defendants have moved for summary judgment. Plaintiffs have moved for a determination of the class.

 The Class Action

 With respect to the crucial liability issues involved in this case, it is clear that all requirements for a class action have been met. The class is numerous, the issues are common, and, in view of the disposition of the fundamental issues, such differences as might give rise to questions about adequacy of representation as among possible sub-classes need not be faced. The class-action motion will be granted.

 Claim against the Company and Retirement Board

 The initial claim is based on the theory that the Company and the Retirement Board breached the contract by which the pension plan was established. Section 301(a) of the Labor Management Relations Act (29 U.S.C. § 185(a)) provides:

 
"Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties."

 Under this statute, this Court has jurisdiction over the breach of contract claim. Smith v. DCA Food Industries, 269 F. Supp. 863 (D. Md. 1967).

 When a pension plan terminates, the rights of the employees to share in the fund vest. Hauser v. Farwell, Ozmun, Kirk & Co., 299 F. Supp. 387 (D. Minn. 1969). Frequently, when plants close, employees are discharged but the pension plan continues in effect for the remaining employees. The discharged employees, being unable to meet the eligibility criteria (years of service, continuous employment until retirement), receive no benefits. Courts have uniformly held that such plant closings do not terminate the pension plan and do not cause a vesting of rights. See Green v. Copco Steel and Engineering Co., 22 Mich. App. 16, 176 N.W. 2d 690 (1970); Gorr v. Consolidated Foods Corp., 253 Minn. 375, 91 N.W. 2d 772 (1958); Schneider v. McKesson & Robbins, Inc., 254 F.2d 827 (2nd Cir. 1958); George v. Haber, 343 Mich. 218, 72 N.W. 2d 121 (1955). Such employees have urged that, despite the actual ending of their employment, they remain employees for purposes of qualifying under the terms of the pension plan. This approach has also been unsuccessful. Local Lodge 2040, ...


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