UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
July 16, 1976
William J. HARDY et al.
H. K. PORTER COMPANY, INC.
The opinion of the court was delivered by: HANNUM
FINDINGS OF FACT, DISCUSSION, CONCLUSIONS OF LAW AND ORDER
HANNUM, District Judge.
Plaintiffs are former employees of defendant who were discharged when defendant closed one of its plant facilities. They have instituted this lawsuit to recover pension benefits under a non-contributory, salaried employees pension plan maintained by defendant. Plaintiffs premise their right to recovery on a four count complaint, the essential allegations of which are summarized as follows: (1) defendant was unjustly enriched by the discharge of plaintiffs and the resulting forfeiture of plaintiffs' pension benefits; (2) the discharge of plaintiffs was a "mass separation" governed by the express terms of the pension plan; (3) the discharge of plaintiffs was a "partial termination" of the pension plan in accordance with the Internal Revenue Code; and (4) defendant administered the terms of the pension plan in a discriminatory manner.
Having heard the testimony of the witnesses for the plaintiffs and for the defendants during a three day trial before the Court without a jury, and on the basis of the pleadings, the stipulations and exhibits of the parties, the Court enters the following Findings of Fact, Discussion, and Conclusions of Law:
FINDINGS OF FACT
1(a). Defendant, H. K. Porter Company, Inc., ("Porter" herein), is a corporation incorporated under the laws of the State of Delaware, doing business in the Commonwealth of Pennsylvania, with its principal place of business in Pittsburgh, Pennsylvania.
1(b). William J. Hardy, John W. Mathieson, Arthur H. Naylor, George Pierson and Frank H. Schreiber, Jr., are citizens of the State of New Jersey. Harry Edward Fritz is a citizen of the State of Ohio. Earle Freeman Webster is a citizen of the State of Georgia.
2. On or about January 1, 1950, Porter acquired, by purchase, the Quaker Rubber Corporation, which owned and operated a manufacturing plant and offices at Comly and Milner Streets, Philadelphia, Pennsylvania.
3. The Quaker Rubber Works ("Quaker" herein), was operated as one of Porter's multiple divisions from 1950 through May, 1972.
4. Sometime prior to 1950 Porter established a pension plan for its salaried employees, described as the "Salaried Employees' Pension Plan of H. K. Porter Company, Inc., and Subsidiaries" ("Plan" herein). The Plan has been amended from time to time since its inception, the most recent amendment having become effective May 1, 1969.
5. The Plan provides that the Board of Directors of Porter shall appoint a Pension Committee, whose duties consist of the general responsibility for the administration and supervision of the Plan.
6. The members of the Porter Pension Committee consisted of the following officials of the Porter Company:
(a) William Hartzell -- Treasurer of Porter
(b) J. N. Yorke -- Vice President of Porter
(c) Robert F. Rainey -- Supervisor of Pensions for Porter.
7. For three years prior to its being closed, the Quaker Plant suffered substantial losses.
8. In September, 1971, Porter decided to shut down the Quaker Plant.
9. The shutdown began in October, 1971, and the plant was finally closed in January, 1972.
10. All employees of Porter employed at the Quaker Plant were discharged when Porter closed the plant.
11. Plaintiffs, all former salaried employees of Porter, were employed by Porter at it's Quaker Plant.
12. When Porter terminated the employment of plaintiffs, as a result of the closing of the Quaker Plant, all of the plaintiffs' rights to a pension under the Plan were terminated.
13. Porter has made and makes contributions to the H. K. Porter Company, Inc., Common Pension Trust ("Trust" herein) in respect of the Plan.
14. Under the Plan salaried employees made no contributions to the Trust.
15. The purpose of the contributions made by Porter to the Trust is to fund in advance, pension liabilities under the Plan.
16. The pension liabilities of the Plan, and the amount of annual contributions necessary to fund these liabilities properly, are determined annually by independent consulting actuaries engaged by Porter.
17. The amount of such annual contributions as ultimately calculated by the consulting actuary are not specifically allocable to individual participants in the Plan, as such, for the reason that contributions are not made to provide pension benefits for any specific individual participant prior to the time that benefits are payable.
18. A participating employee is one who satisfies the eligibility requirements for participation.
19. Employees become eligible to participate if they have been employed full-time by Porter as a salaried employee for three years, and are at least 30 and not more than 55 1/2 years of age.
20. The expert actuary employed by Porter to determine the amount which Porter should contribute to the Trust to adequately provide for future pensions for Porter's employees uses certain factors and assumptions in making such determination, including the rate of employee turnover.
21. The expert actuary did not change the factor for employee turnover for the years 1970, 1971, and 1972.
22. The accrued pension liability of Porter for the salaried employees of Porter employed at the Quaker Plant on December 31, 1971, was $270,523.00.
23. On December 31, 1971, the total accrued liability for all salaried employees' pensions was $9,572,646.00.
24. The net assets in the Trust at this time was $12,250,177.00.
25. On December 31, 1971, the assets in the Trust exceeded the total liability for salaried employees' pensions by $2,677,531.00.
26. Porter distributed to its salaried employees various booklets and other documents for the purpose of explaining to the employees the provisions of the Plan. (Plaintiffs' exhibits P-7 through P-14).
27. All of the plaintiffs received these Plan booklets while in the employ of Porter.
28. The booklets describing the Plan have always contained language similar to that of the most recent booklet published after the Plan was amended in 1969, which includes the following provisions:
(a) The material contained in these booklets briefly explains and illustrates the Pension Plan for salaried employees. The full terms and conditions of the Pension Plan are set forth in the full text of the Plan, and the text thereof will be controlling as to any questions which may arise concerning the Pension Plan. The Plan text is available for inspection at the office of the Secretary of the Pension Plan Committee, Pittsburgh, Pennsylvania.
(b) In the event your employment terminates before your 60th birthday, you will not be entitled to any benefits under the Plan.
29. The Plan document contains the following provisions which are relevant to the present controversy:
(a) "Active Service" or "service" shall mean all service as an employee during which the employee actually performs services for the Company, the period of any vacation or leave of absence with or without pay (including a disability leave of absence) which shall be approved by the Company; and that period during which an employee who is transferred to consultant status at a fixed or predetermined compensation serves in such consultant status and receives such compensation, whether or not he performs any services for the Company. [Section II(K) of the Plan].
(b) No person prior to his retirement from the Company . . . shall have any right . . . to any portion of any funds which may be paid into any pension trust . . . [Section VIII of the Plan].
(c) Participation in the Plan shall not give any right to any employee to be retained in the employ of the Company nor shall it interfere with the right of the Company to discharge any employee and to deal with him without regard to the existence of the Plan and without regard to the effect such treatment might have upon him as a participating employee under the Plan. [Section IX(1) of the Plan].
(d) Any discretionary acts which may be taken pursuant to this Plan by the Pension Committee with respect to employees, pensioners and other persons entitled to a pension under the Plan shall be uniform in their nature, and applicable to all employees, pensioners and other persons entitled to a pension under the Plan in substantially identical situations. [Section X(8) of the Plan].
(e) "Company" shall mean H. K. Porter Company, Inc. and such divisions and such subsidiaries and affiliated corporations which may adopt the Plan as may be designated by the Board of Directors of H. K. Porter Company, Inc. The Board of Directors reserves the right from time to time to include in or withdraw from the Plan any division, subsidiary or affiliate. [Section II(a) of the Plan].
(f) In the event the corporate entity of the Company shall be lost as the result of any liquidation, merger, consolidation or other reorganization or in the event any petition in bankruptcy or insolvency shall be filed by or against the Company, this Plan shall thereupon ipso facto terminate . . . [Section XI(3) of the Plan].
(g) In the event of the termination of the Plan by the Company or upon complete discontinuance by the Company of contributions under the Plan, the rights of each employee and pensioner to benefits accrued to the date of such termination or discontinuance shall thereupon become non-forfeitable . . . [Section XII(1) of the Plan].
(h) This Plan shall be construed, regulated and administered under and in accordance with the laws of the Commonwealth of Pennsylvania. [Section XIII of the Plan].
30. Normal retirement under the Plan is age 65 and early retirement may occur at any time within the five (5) year period prior to age 65.
31. Pursuant to the terms of the Plan, an employee who has been employed by Porter for more than three years and who meets other eligibility requirements and who reaches age 60 in company approved leave of absence status is entitled to receive a pension.
32. As many as 2200 salaried employees participated in the Plan in 1960 and as few as 264 in 1952.
33. During 1971, approximately 1290 individuals participated in the Plan.
34. Forty-eight (48) of the 1290 participants worked at the Quaker Plant during 1971.
35. As of December, 1971, there were more than 1250 individuals participating in the Plan.
36. The Plan continued to function after the closing of the Quaker Plant for more than 1200 participating employees still covered by it.
37. The participating salaried employees of Porter working at the Quaker Plant at the time it ceased operations constituted less than four percent of the total salaried employees then participating in the Plan.
38. Plaintiffs here constitute less than one percent of the participants in the Plan during 1971.
39. When Porter closed the Quaker Plant in the latter part of the year 1971, Mr. Bellew, the General Manager of the Quaker Plant, with the approval of Mr. Davison, Executive Vice President of Porter, and Mr. Morrow, President of Porter, adopted a policy of granting leaves of absence to certain salaried employees who had not yet reached age 60 until the time they reached age 60 when a pension was granted to them.
40. The following salaried employees at the Quaker Plant were granted leaves of absence from the date of termination until they reached age 60 and were then qualified for a pension:
(a) Joseph J. Roche terminated when age 59 years and 11 months with 36 years and 1 month service for purposes of seniority.
(b) Charles Boley terminated when age 59 years and 9 months with 31 years service for purposes of seniority.
(c) Edward J. Wright terminated when age 59 years and 6 months with 26 years and 1 month service for purposes of seniority.
(d) Alexander J. Molnar terminated when age 59 years and 1 month with 35 years and 6 months service for purposes of seniority.
41. The Ambridge Works, another division of Porter, was shut down in November, 1970; the salaried employees at this plant were also covered by the Plan.
42. When Porter closed the Ambridge Works, a number of salaried employees were granted leaves of absence until they reached age 60 at which time pensions were granted to them.
43. The following employees, whose employments were terminated upon the closing of the Ambridge Works were placed on leaves of absence until they became qualified to receive a pension at age 60:
(a) Harvey D. Brady terminated when age 59 years and 4 months with 33 years and 10 months service for purposes of seniority.
(b) Roy L. Cornell terminated when age 59 years and 2 months with 22 years and 7 months service for purposes of seniority.
(c) George Duffner terminated when age 58 years and 11 months with 42 years and 7 months service for purposes of seniority.
(d) Fred W. Sainer terminated when age 58 years and 2 months with 30 years service for purposes of seniority.
(e) Frank E. Johnson terminated when age 57 years and 11 months with 34 years and 11 months service for purposes of seniority.
(f) Michael B. Kaleugher terminated when age 58 years and 1 month with 41 years and 3 months service for purposes of seniority.
(g) Jack C. Maeder terminated when age 58 years and 5 months with 39 years and 6 months service for purposes of seniority.
44. With respect to the plaintiffs in this case, who were discharged as a result of the Quaker shutdown and were denied pension benefits, the Court finds the following relevant facts:
(a) Harry Edward Fritz terminated when age 57 years and 2 months with 17 years service for purposes of seniority.
(b) William J. Hardy terminated when age 55 years and 7 months with 34 years and 10 months service for purposes of seniority.
(c) John W. Mathieson terminated when age 57 years and 10 months with 23 years and 9 months service for purposes of seniority.
(d) Arthur H. Naylor terminated when age 58 years and 6 months with 29 years and 3 months service for purposes of seniority.
(e) George Pierson terminated when age 55 years and 2 months with 35 years and 6 months service for purposes of seniority.
(f) Frank R. Schreiber, Jr., terminated when age 54 years and 6 months with 36 years and 5 months service for purposes of seniority.
(g) Earle Freeman Webster terminated when age 53 years and 7 months with 14 years and 7 months service for purposes of seniority.
45. Tsu-yi Loo is a qualified consulting actuary competent to ascertain the cost of an annuity contract from a commercial insurance company, which annuity would provide benefits equivalent to the benefits that each plaintiff would receive if he were granted a pension at age 60.
46. Based on the pertinent data respecting each plaintiff and the procedure for calculating the benefit in accordance with the Plan, the present value of the cost of a commercial annuity which would provide benefits equivalent to those each plaintiff would have received at age 60 are as follows for each plaintiff:
(a) Harry E. Fritz $29,807.00
(b) William J. Hardy 20,322.00
(c) John W. Mathieson 11,420.00
(d) Arthur H. Naylor 9,963.00
(e) George Pierson 13,169.00
(f) Frank M. Schreiber, Jr. 14,512.00
(g) Earle F. Webster 23,185.00
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