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KNAUSS v. GORMAN

June 28, 1977

Edmund KNAUSS
v.
Patrick E. GORMAN et al.



The opinion of the court was delivered by: KNOX

 Plaintiff, a retired butcher, has filed suit for pensions allegedly due him from the defendant pension fund. The pension applied for was denied by the trustees by reason of break in service (BIS) provisions of the fund. After the usual pretrial procedures the case was heard before the undersigned non-jury and is now ready for disposition on the merits.

 Plaintiff started work in 1936 for Oswald & Hess Company, a Pittsburgh meatpacker, an employer covered by the fund, in 1936 and worked there as a full-time employee until September 10, 1962 the company went out of business and into bankruptcy. His service 1936-1962 was full-time and continuous except for a three months break in 1961 when the plant was closed. Plaintiff was 54 years of age when the company went out of business having been born May 16, 1908.

 During the interval September 10, 1962 to May 1966, plaintiff did not work in any covered meatpacking plant ("covered" as used herein means an employer covered by the pension fund.) During this period he says he applied to the union hall for work without success and eventually went to California where he worked in a hotel. On September 10, 1965, he began work at the Ohio Valley Meat Packing, not a covered employer, where he continued until March, 1966. In May 1966, he secured work at Northside Packing in Pittsburgh a covered employer where he continued to work until December 1972 when he was laid off. At this time he was 64 years of age.

 Oswald & Hess his then employer on September 1, 1957 joined with other contributing employers to institute a pension plan for its employees. The terms thereof are set forth in Exhibit 1. At this time, plaintiff received credit for 20 years of past service with Oswald & Hess being the maximum past service credit permitted under the plan. (See p. 3 Ex. 1) A pension under this plan commenced at age 65, provided the participant retired, and continued for life.

 A copy of this pension fund was posted on the bulletin board for employees to examine.

 On July 1, 1962, certain amendments and changes in this pension fund generally known as the Local 424 pension fund became effective. This involved a slight change in method of computing future service credit and other changes which are not important at this time.

 The original pension plan and the amended pension plan of Local 424 contained a provision ( P. 8 Ex. 1) providing that if a participant ceased his employment with a contributing employer and later again became a participant "he shall be considered a new participant for all purposes of the plan thus losing any service credit relating to his prior period of employment except for (1) any non-working period not in excess of 12 months." A similar provision was contained in the 1962 amendments. Thus when Knauss lost his job in 1962 and remained without employment by a covered employer until 1966, more than one year, he lost all of his previous service credit. At the time he was separated from his employment involuntarily in 1962, he was eligible for a pension except for the fact that he was then 11 years short of the retirement age of 65 and 6 years short of the early retirement age of 60. Thus, under the plan when he again went to work for a covered employer, Northside Packing, in 1966 he had to start accumulating his service credits over again. When he was laid off again in December 1972 by Northside Packing he was still five months short of his 65th birthday.

 On January 12, 1970, the Local 424 fund was merged into the Amalgamated Meat Cutters and Butcher Workmen Union and Industry Pension Fund, hereinafter referred to as "The National Fund". In the merger agreement it was provided that the trustees of the national fund would assume and agree to pay all the debts, liabilities etc. of the merging fund and that the participants in the national fund and all participants who had attained the age of 50 years on the date of the merger should receive benefits of 75% of the normal or early retirement benefits then in effect. The contributing employers included Northside Packing. Plaintiff Edmund Knauss was one of those listed as a participant.

 Upon being laid off in December 1972, plaintiff filed a pension application on January 2, 1973 which was denied and further denials occurred thereafter (See Stip. Exhibits 7, 8, 9, 10). In the final letter Exhibit 11 it was stated that the Board of Trustees "again have denied you a pension because you do not have the necessary ten years eligible service due to the break in service of two years or more from August 1962 to July 1966." The National Fund Article V, Section 4 stated that if for a period of 24 months an employee fails to accumulate future service pension credits, all past and future service pension credits previously accumulated shall be cancelled. The result was therefore the same under either the 424 Plan or the National Fund, namely that Knauss' credits earned at Oswald & Hess were cancelled. Beginning in 1966 he was unable to accumulate sufficient credits to cover retirement in December, 1972.

 Following the final denial Knauss brought suit in this court naming as defendants the trustees of the national fund and the national fund itself.

 Two questions arise which have to be answered to determine the outcome of this suit as follows:

 (1) Does this court have jurisdiction of this cause of action?

 (2) Are the break in service provisions contained in both the Local 424 plan and the national plan which operate to deprive Knauss of his previously earned pension credits as the result of his involuntary separation from employment for a period of approximately 3 1/2 years so arbitrary and capricious as to constitute structural violations of ...


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