The opinion of the court was delivered by: HUYETT
The issues raised by the facts in this case focus sharply on one of the most recurring problems facing labor management relations in the United States today -- the loss of pension benefits by hundreds of thousands of American workers after many years of reliance and expectations of security after retirement. Instances of lost pension benefits caused by plant closings, business cessations, lay-offs and other factors beyond the control of the employee are of disturbing proportions. Hardships caused individual employees and the dislocations caused society by loss of pension benefits are severe and are a cause for concern by responsible persons. Methods of avoiding these hardships and dislocations have been the subject of inquiry by Congress during the past three years, and a Bill providing means towards solving and seeking to avoid the problems caused by loss of pension benefits has only recently been introduced in the Ninety-Third Congress. (S4)
In addition, commentators have criticized the courts for being unnecessarily restrictive and unrealistic in the interpretation given pension fund agreements with the result that many employees are left financially insecure in their later years of life. See M. Bernstein, Employee Pension Rights When Plants Shut Down: Problems and Some Proposals, 76 Harv. L. Rev. 952 (1963). And they have exhorted the courts to be more imaginative in dealing with problems raised by lost pension benefits. See N. Levin, Proposals to Eliminate Inequitable Loss of Pension Benefits, 15 Vill. L. Rev. 527 (1970); Note, 70 Col. L. Rev. 909 (1970). One proposal has been that federal courts establish a federal common law pertaining to union-management negotiated pension fund agreements premised jurisdictionally on § 301 of the Labor Management Relations Act, as amended, 29 U.S.C. § 185 (1970) similar to the federal common law over collective bargaining agreements which evolved as a result of the Supreme Court's decision in Textile Workers v. Lincoln Mills, 353 U.S. 448, 77 S. Ct. 912, 1 L. Ed. 2d 972 (1957). See P. Thompson, Mergers, Dissolutions and Transfers, 9 Textbook For Welfare, Pension Trustees and Administrators 440, 443 (1967). This proposal would free federal courts to a far greater degree than is possible at this time from restrictive state court decisions which rely solely on contract principles in interpreting pension fund agreements. See, e.g. Schneider v. McKesson & Robbins, Inc., 254 F.2d 827 (2 Cir. 1958); Knoll v. Phoenix Steel Corp., 325 F. Supp. 666, 669 (E.D. Pa. 1971), aff'd. 465 F.2d 1128 (3 Cir., filed August 25, 1972), cert. denied 409 U.S. 1126, 93 S. Ct. 941, 35 L. Ed. 2d 257 (1973); George v. Haber, 343 Mich. 218, 72 N.W. 2d 121 (1955); Gorr v. Consolidated Foods Corp., 253 Minn. 375, 91 N.W. 2d 772 (1958); Green v. Copco Steel and Engineering Co., 22 Mich. App. 16, 176 N.W. 2d 690 (1970).
Without guidance by the Supreme Court we do not have authority to establish such a federal common law for union-management negotiated pension fund agreements. We are not required, however, to ignore the consequences of pension fund disruptions on federal interests in labor-management relations. As the Supreme Court noted in Lewis v. Benedict Coal Corp., 361 U.S. 459, 468, 80 S. Ct. 489, 495, 4 L. Ed. 2d 442 (1960): "It is a commonplace of modern industrial relations for employers to provide security for employees and their families to enable them to meet problems arising from unemployment, illness, old age or death." And, although pension benefits for already retired employees is not a mandatory subject of collective bargaining as "terms and conditions of employment" within the meaning of §§ 8(a)(5) and 8(d) of the National Labor Relations Act, Allied Chemical and Alkali Workers of America, Local Union No. 1 v. Pittsburgh Plate Glass Co., Chemical Division, 404 U.S. 157, 92 S. Ct. 383, 30 L. Ed. 2d 341 (1971), pension benefits for active employees is a mandatory subject of collective bargaining. Id. 404 U.S. at 159, 92 S. Ct. 383. In the case before us we are not only concerned with the rights of employees who are retired, but also with the apprehensions of active employees in respect to retirement benefits. It is in this light then that we proceed to the facts and issues in the case before us.
Plaintiffs, the Union Members of the Pension Committee of the Philadelphia Bakery Employers and Food Driver Salesmen, Dairy and Ice Cream Workers Union, Local No. 463 and Teamsters' Union Local No. 676 Pension Plan, seek a permanent injunction restraining defendant Jules Junker, Secretary of the Pension Committee, from refusing to approve pension applications and payments pursuant to already approved pension applications for former employees of Louis Burke, Inc. and Wm. Freihofer Baking Company. Plaintiffs contend that the defendant's action violates the terms of the Pension Fund Agreement, and constitutes a breach of defendant's fiduciary duties as a member of the Pension Committee. Plaintiffs assert jurisdiction under § 301(a) of the Labor Management Relations Act as amended 29 U.S.C. § 185(a) (1970) (Act).
Defendants, Employer Committee Members of the Pension Fund Agreement, in an amended answer counterclaim seeking a permanent injunction ordering plaintiffs to join with the defendants in instructing the Administrator of the Pension Fund (Fund) to make no further payments to former employees of employers who have ceased making contributions to the Fund the value of whose past contributions to the Fund have been "exhausted". Defendants contend that making these payments would be: (1) in violation of § 302 of the Labor Management Relations Act, as amended 29 U.S.C. § 186 (1970),
(2) contrary to the provisions of the Pension Fund Agreement
and (3) an improper, unlawful and unfair diversion and dissipation of funds held for the benefit of former employees and employees of employers making contributions to the Fund.
Before a hearing could be held on the requests by the parties for injunctions, the plaintiffs filed a motion for the appointment of an impartial umpire to decide the following issue upon which the Committee Members deadlocked at a meeting held on October 25, 1972:
"MOTION was made and seconded that the Pension Committee Members be instructed that all litigation concerning Section 11 of the Plan, more particularly, the suit presently before the Federal District Court for the Eastern District of Pennsylvania, be stayed for a minimum period of six months to permit a change in investment counselling and to review the Fund financing during the specified period.
During the specified period, all Pension payments due will be paid.
The Committee Members are directed to consult with counsel and immediately enter into a stipulation for presentation to the Court regarding the terms indicated above."
Plaintiffs contend we have jurisdiction under § 302 of the Act to appoint an umpire to resolve the deadlocked issue even though § 9.3 of the Pension Fund Agreement provides that deadlocked issues be decided by an impartial third person appointed by the American Arbitration Association.
We are urged by the plaintiffs not to resolve the issues raised by the complaint and counterclaim until the above deadlocked issue is resolved by an umpire appointed by us.
Thus, we have before us the following three matters: (1) plaintiffs' complaint seeking an injunction restraining defendant Jules Junker from refusing to approve pension applications and payments for pensions already approved by the Committee, (2) defendants' counterclaim seeking an injunction preventing any further payments for pensions, either already approved or that may be approved in the future, to employees of employers who have ceased making contributions to the Fund and the value of whose past contributions have been "exhausted", and (3) plaintiffs' request that the above issues not be determined until an umpire appointed by us resolves the issue over which the parties deadlocked at their October 25, 1972 meeting. Virtually all facts in the case have been stipulated to by the parties; the remaining facts have been adduced at hearings held on the parties' requests for injunctions and for the appointment of an umpire. This opinion serves as our findings of fact and conclusions of law for purposes of Fed. R. Civ. P. 52.
The Pension Fund Agreement, effective August 1, 1955, provides retirement and disability pensions for employees of employers who were parties to the Agreement and whose employees were included in the collective bargaining unit represented by the Unions on the effective date of the Agreement or any time thereafter. The amount of pension or disability benefits available depends, among other factors, on the number of years of continuous employment with an employer ("credited service"), and on whether the employee was in the employ on the effective date of the Agreement or any time thereafter of one of the employers who began to contribute to the Pension Fund prior to January 1, 1960 and who was in one of the Unions' bargaining units. (Class 1 employee). Pensions payable to employees of employers who began contributing to the Fund on or after January 1, 1960 (Class 2 employees) are based on a proportion of the pension payable to a Class 1 employee. Generally an employee is eligible for a pension if (1) he has reached his 62nd birthday (Normal Retirement), with at least 15 years of Credited Service, or (2) he has reached his 59th birthday (Early Retirement), with at least 15 years of Credited Service. "Credited Service" may be lost for a number of reasons including, for example, termination of employment by reason of dismissal for cause, resignation or quit, and termination of employment by reason of reduction in work force, if the employee does not return to work with an employer who is a party to the Agreement within a designated period of time after termination of employment.
The Agreement also provides a Lump Sum payment to an employee who terminates his employment for any reason other than death or retirement. A maximum amount of one thousand dollars ($1,000) can be paid in a Lump Sum benefit depending on the number of years of credited service. An example illustrates this provision: Assume that an Employee's first date of employment was January 1, 1955 and that he leaves employment on January 1, 1965, having accumulated ten years of Credited Service. His Lump Sum Benefit would be $100 multiplied by 5 years (10 years minus 5 years) or $500. In addition, the Agreement provides that an employee's right to a pension becomes "vested" having accumulated thirty (30) years of credited service even though an employee has not met the age requirements for normal or early retirement. An employee who has vested credited service will receive the normal or early retirement benefits upon reaching the age for those benefits even though the employee resigns upon acquiring the "vested" credited service.
Section eleven (11) of the Agreement provides for termination of an employer as a party to the Agreement when the employer (1) ceases for any reason to be engaged in business, (2) ceases to have any employees who are represented by the Unions, or (3) fails to make contributions to the Fund within a period fixed by the Committee. When the employer ceases to do business or the employees are no longer represented by a Union party to the Agreement, an evaluation is made of the portion of the Fund attributable to the contributions made by that employer. An allocation is then made to Pensioners of the employer, to employees who would otherwise be entitled to a pension were they to retire at the date of the employer's cessation of business, and any balance to the employees of the employer according to the costs of benefit credits accrued. When an employer ceases to make contributions to the Fund, an allocation is made from the Fund in an amount to pay pensions to employees who have retired or who would be entitled to a pension were they to retire on the date the employer ceases to be a party to the Agreement. In the latter case the amount allocated to pensioners and employees of employer ceases to be a party to the Agreement is not to be in excess of the portion of the Fund attributable to the contributions made by that employer. And no other employee of that employer has any right to benefits under the Agreement unless he is employed by another employer within three (3) months after the date the employer ceased being a party of the Agreement. If the employee is reemployed within the three-month period, he is deemed an employee with the same total credited service as if his employment had not been terminated. Payments to the Fund are required by Article XXII of the collective bargaining agreement negotiated by the Employer Association and the Unions, and an employer's liability under the Agreement is limited to the extent of his contribution commitment.
Louis Burke, Inc. ceased doing business in 1968; Wm. Friehofer Baking Co. ceased doing business in 1972. At a meeting of the Pension Committee held on September 21, 1972, defendant Jules Junker, Secretary of the Pension Committee and an employer member, indicated he would not on or after October 1, 1972 approve any new applications from or any payments to any person formerly employed by the Wm. Friehofer Baking Co. No applications can be acted upon or checks drawn and delivered unless first approved by the Secretary and a majority of the Committee. As a result of defendant Junker's action, five former employees of the Wm. Friehofer Baking Co. who have retired from gainful employment have not received benefits. Although considered illegal by the defendants, payments continue to be made to former employees of Burke and Friehofer whose pension applications had been approved before the September 21, 1972 Committee meeting. It has been stipulated by the parties that all contributions made by Louis Burke, Inc. and Wm. Friehofer Baking Co. to the Fund together with all interest earned thereon and all sums constituting dividends and realized and unrealized capital gains thereon, after charging of administrative expenses, had been and were "exhausted" as of October 13, 1972.
Plaintiffs contend that defendant Junker's action in refusing to approve the pension applications and maintaining that it is illegal to make payment to retirees of Burke and Friehofer violates the terms of the Pension Fund Agreement because the only qualifications for a pension are those involving years of service, age and other similar factors. In addition, plaintiffs contend that even if § 11 of the Pension Fund Agreement does grant the defendant authority to terminate pensions when the employer of an employee has ceased doing business and the portion of the Fund attributable to that employer has been "exhausted", § 11 should not be enforced because defendants are estopped from asserting it. Failing this, plaintiffs argue that § 11 should be declared unreasonable and arbitrary on its face as a trust provision and as it is applied to those employees who have otherwise met the qualifications for retirement. Jurisdiction to consider these issues is asserted under § 301 of the Act.
Insofar as the complaint raises issues involving a violation of the Pension Fund Agreement we have jurisdiction under § 301. See Smith v. Evening News Association, 371 U.S. 195, 83 S. Ct. 267, 9 L. Ed. 2d 246 (1962); Retail Clerks International Association v. Lion Dry Goods, Inc., 369 U.S. 17, 82 S. Ct. 541, 7 L. Ed. 2d 503 (1962); Local 33, International Hod Carriers Building and Common Laborers' Union of America v. Mason Tenders District Council of Greater New York, 291 F.2d 496 (2 Cir. 1961); Knoll v. Phoenix Steel Corp., supra ; Smith v. DCA Food Industries, 269 F. Supp. 863 (D. Md. 1967); Burlesque Artists Association v. American Guild of Variety Artists, 187 F. Supp. 393 (S.D.N.Y. 1958). This is the case even though suit is not brought by a party to the Pension Fund Agreement, but cf. Bowers v. Ulpiano Casal, Inc., 393 F.2d 421, 423 (1 Cir. 1968). But the plaintiffs do claim rights arising from the Pension Fund Agreement. Smith v. Evening News Association, supra. The plaintiffs as members of the Pension Fund Committee claim the right to continue to receive payments from employers who have not ceased doing business. In effect the Union Committee members are asking for a declaratory judgment, 28 U.S.C. § 2201 (1970), of their rights and duties under the Pension Fund Agreement which they are bound to follow. They claim the defendants are violating the Agreement pursuant to an incorrect interpretation of that Agreement. We do not consider it necessary that we defer resolution of the issue before us until an employee who has been denied his pension benefits because of the defendants' action or until the Unions themselves bring suit. All that is required for jurisdictional purposes under § 301 is that the Pension Fund Agreement be considered a "contract" within the meaning of that section, Retail Clerks v. Lion Dry Goods, Inc., supra, and that the plaintiff, asserting a right under the contract, allege a violation of the Agreement and not simply a breach of fiduciary duties under the Agreement.