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LIEBERMAN v. COOK

June 6, 1972

Milton H. Lieberman
v.
Joseph Cook et al.


Knox, D. J.


The opinion of the court was delivered by: KNOX

KNOX, D. J.:

 In this suit to recover amounts allegedly due under an Employees Profit-Sharing Plan, defendants have presented a Motion For Summary Judgment. Defendants present two defenses which are in the opinion of the court valid. First, that plaintiff has failed to state a claim under the Welfare and Pension Plans Disclosure Act 29 U.S.C. 301 et seq. Second, that defendants are entitled to judgment on the merits because plaintiff has already pursued his remedies through common law arbitration and is not entitled to a second bite at the apple. There is no diversity of citizenship.

 Plaintiff sued defendants as trustees of a profit-sharing plan and trust agreement covering the employees of Standard Sportswear, Inc., a Pennsylvania Corporation, and also the corporation itself, viz: Standard Sportswear, Inc. The plan was adopted December 29, 1961, and copies thereof are among the materials now before the court. Plaintiff is a former employee of defendant Standard Sportswear, Inc. and participated in the plan from its inception until May 1971 when he was involuntarily terminated from his employment.

 Plaintiff at once employed counsel who, by letter dated May 11, 1971, requested a copy of the plan. By reply, dated May 18, 1971, a copy of the plan was furnished to plaintiff's counsel.

 Under Article XII of the plan, arbitration was provided with respect to disputes arising thereunder. Plaintiff at once resorted to arbitration on May 27, 1971. Arbitrators were appointed and thereafter on August 30, 1971, rendered their decision that plaintiff's employment with Standard Sportswear, Inc. had been terminated with cause and therefore plaintiff's rights in the fund were terminated under the provisions of Section 9.2(c) of the plan. *fn1"

 Plaintiff, without resorting to any of the narrow Pennsylvania grounds for attacking an arbitrator's award under these circumstances, then commenced two court proceedings: (1) A suit in assumpsit in the Court of Common Pleas of Allegheny County, Pennsylvania at No. 1842 October Term 1971, against the same defendants as named in this action. In this action on May 4, 1972, the Honorable Gwilym A. Price, Jr. ordered summary judgment in favor of the defendants on the grounds that under the clause in the agreement the award of arbitrators "shall be final and binding upon all the parties in interest". *fn2" (2) Plaintiff also brought suit in this court claiming a violation of the Welfare and Pension Plans Disclosure Act of 1958 as amended (29 U.S.C. 301 et seq). Plaintiff also claims a pendent cause of action under state law for breach of contract, although the complaint contains only one count.

 There are presently three questions before this court: (1) Does this court have jurisdiction in view of defendants' claim that less than 25 employees were covered by the plan described within the exemption provided in Section 4(b)(4) (29 U.S.C. 303)? (2) Does a private individual have a cause of action under circumstances of this kind under the provisions of the Welfare and Pensions Plan Disclosure Act? (3) Should Summary Judgment be entered in favor of the defendant by reason of the common law arbitration award in defendant's favor?

 (1) Plan not covered by act. Defendant's first contention is that the plan in question is not covered by the act. 29 U.S.C. 303(b) provides "this chapter shall not apply to an employee welfare or pension benefit plan if -- 4. Such plan does not cover more than 25 participants". (As amended March 20, 1962, 76 Stat. 35).

 We are not impressed with defendant's position that this plan never covered more than 25 participants. The depositions of defendant Hoffman, one of the trustees, at pages 35 and 36 indicates that during the fiscal year beginning February 1, 1970, there were 26 members in the plan. The act is not clear just when the 25 participant test is to be met, whether at the inception of the plan or at any time during its effectiveness. We believe that Congress never intended an absurd result such as would be permitted if a plan were adopted covering 20 members and three days later was expanded to cover 100 members and yet be exempt from the act. It must be that a plan comes under the act as soon as 26 participants are included.

 It will be noted that the Act as originally enacted in 1958 excluded plans covering "not more than 25 employees ". In 1962, Section 4 was amended to change the word "employees" to "participants" so that 29 U.S.C. 303(b) reads as it now stands today. *fn3" Referring back to Section 3, 29 U.S.C. 302(a), the term "participant" is defined as follows:

 It would thus appear that retirees are to be considered in determining whether the plan has more than 25 participants. For the fiscal year ending January 31, 1971, if you include a retiree and a person who died within the fiscal year you have 27 persons involved. (See Tabulation Exhibit C attached to motion.) We ...


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