The opinion of the court was delivered by: BLOCH
Plaintiffs were employed at the Ferroslag Division Plant of defendant Spang and Company in Lorain, Ohio, until on or about July 20, 1982, at which time said plant was closed by defendant. This action, brought pursuant to the Employee Retirement Income Security Act (hereinafter referred to as "ERISA"), 29 U.S.C. § 1001, et seq., and the Labor-Management Relations Act (hereinafter referred to as "LMRA"), 29 U.S.C. § 141, et seq., seeks certain pension benefits allegedly due the plaintiffs.
contains four counts.
In Count I, plaintiffs allege that the defendant and the United Steelworkers of America, which represented plaintiffs during their employment for defendant, entered into a collective bargaining agreement that was effective from August 1, 1980, through November 1, 1983. This agreement allegedly covered the terms and conditions of employment. A particular provision of that collective bargaining agreement provided that a previously drafted pension plan would continue in effect until November 1, 1983, as amended by a memorandum of agreement dated August 1, 1980. According to the complaint, the union and the defendant entered into a pension agreement as amended by the memorandum of agreement dated August 1, 1980, with the pension agreement being effective under the new collective bargaining agreement from November 1, 1980, through November 1, 1983. The pension agreement, which is attached to the complaint as an exhibit, provides that contributions made by the defendant to the pension fund may not revert to the defendant under any circumstances. Complaint, Exhibit B, § 12.6, p. 25 (docket entry No. 5). The pension agreement further dictates the manner in which the assets of the pension fund are to be distributed in the event of a plant shutdown. Specifically, the pension agreement sets up a priority of allocations for the distribution of said benefits. See Complaint, Exhibit B, para. 13.3, pp. 27-28 (docket entry No. 5). Count I goes on to assert that when the Lorain plant was closed on or about July 20, 1982, there was an excess of $ 100,000 in the pension fund beyond that needed to cover vested benefits, but defendant has allegedly not allocated the excess benefits for the benefit of the plaintiffs as it is obligated to do under the appropriate section of the pension plan. Based on these assertions, plaintiffs claim that the defendant has breached its fiduciary duty
under ERISA by not complying with the appropriate sections of the pension agreement.
Count II incorporates by reference all of the foregoing allegations and asserts that the defendant intends to hold the surplus money in the trust fund until the collective bargaining agreements expire. The plaintiffs argue that upon the expiration of the agreements, the defendant will argue that the surplus can be kept by the defendant for its own use and benefit. In Count II, plaintiffs aver that this conduct serves to violate the fiduciary mandates of ERISA, which require the fiduciary to discharge its duties solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries.
In Count III, plaintiffs assert that the pension agreement provides that the pension plan shall be amended so as to be consistent with the pension agreement. The plaintiffs then assert that instead of amending the plan to make it consistent with the pension agreement, the defendant published a plan that seeks to retain surplus assets for the defendant's own behalf and avoid other relevant obligations imposed by the collective bargaining agreements. On this basis, the plaintiffs again assert a violation of ERISA's fiduciary responsibilities.
Finally, in Count IV, plaintiffs assert that by drafting the pension plan in a manner inconsistent with the collective bargaining and pension agreements, defendant has violated its contractual obligations under the LMRA.
Defendant has moved to dismiss the action on the following grounds: (1) that plaintiffs have failed to exhaust the agreed upon disputes procedure set forth in the agreements upon which they claim entitlement to relief; (2) that plaintiffs lack standing to assert the claims set forth in Counts I and II; and (3) that Counts I and II do not state a cause of action because ERISA does not provide a pre-termination of pension fund right to surplus pension plan assets. Motion to dismiss (docket entry No. 17). For the reasons set forth below, the Court hereby denies defendant's motion.
In order to facilitate orderly discussion of the motion, the Court discusses each of defendant's arguments separately, and in detail, below.
I. Failure to Exhaust Contractual Remedies
Defendant first argues that the case must be dismissed because plaintiffs have failed to exhaust the grievance and arbitration procedures provided for in the applicable agreements, which are a prerequisite to federal court jurisdiction under ERISA and the LMRA. As to the ERISA claims, defendant relies primarily upon the Third Circuit decision in Adams v. Gould, Inc., 687 F.2d 27 (3d Cir. 1982), cert. denied, 460 U.S. 1085, 103 S. Ct. 1777, 76 L. Ed. 2d 348 (1983). In Adams, the defendant announced that it was terminating operations at one of its plants, and the union, after determining that the pension plan was actuarially insufficient to provide full benefit payments to all claimants and retirees, demanded that the defendant fully fund the plan. The defendant refused, and the union filed a grievance under the grievance procedure of the collective bargaining agreement. The arbitrator rejected the union's demand for full funding, but ordered that defendant recalculate its contributions so that the benefits could be increased. The plaintiffs, active employees whose pension benefits had vested, then brought an action in district court, alleging that the administrator of the plan had breached its fiduciary duty by refusing to pay benefits when due. Defendant moved for summary judgment on the ground that the plaintiffs were bound by the arbitration decision, but the district court held that the arbitration was not binding.
The district court then certified the following question for interlocutory appeal under 28 U.S.C. § 1292(b): "Whether . . . plaintiffs . . . are bound by the results of an arbitration between their employer and their union and thereby barred from bringing their complaint in federal court." Id. at 28. The Third Circuit accepted the issue for appeal and answered the question affirmatively, thereby reversing the district court. Specifically, the Third Circuit found that the defendant and the union had referred the matter to arbitration pursuant to a viable collective bargaining agreement, and, in making its decision, the Third Circuit relied on the national policy favoring arbitration of labor disputes. After finding that the arbitration provision of the applicable agreement covered the dispute in question, the Third Circuit found that "the plaintiffs in the district court were bound by the results of the arbitration . . . and, therefore, barred from bringing the action in district court." Id. at 33.
After a careful reading of the Adams decision, this Court finds that it is distinguishable from the case at hand and, therefore, not controlling. The dispute in Adams arose before the effective date of ERISA,
and there was no question as to whether defendant's conduct violated a federal statutory mandate such as the Court is confronted with in this action; therefore, the Court finds that Adams does not control the case before this Court. But see Wilson v. Fischer and Porter Company Pension Plan, 551 F. Supp. 593 (E.D. Pa. 1982). Alternatively, the Court looks to several other decisions which are dispositive of the issue at hand.
First, the Court looks to the District of Columbia Court of Appeals' opinion in Airline Pilots Association, International v. Northwest Airlines, Inc., 200 U.S. App. D.C. 219, 627 F.2d 272 (1980). In that case, the union brought an action against the defendant airline for declaratory and monetary relief, asserting that the airline violated certain aspects of the collectively bargained pension plan and also violated certain provisions of ERISA. The defendant moved to dismiss for lack of subject matter jurisdiction, claiming that, pursuant to the Railway Labor Act, 45 U.S.C. § 151, et seq., the whole dispute had to be submitted to arbitration because it considered the interpretation and application of the collective bargaining agreement. The defendant also asserted that the compulsory arbitration requirements of the Railway Labor Act took precedence over that section of ERISA, which opens the district court to pension suits. The district court dismissed the entire action, and the Circuit Court affirmed the district court's dismissal of those claims relating to the application and interpretation of the pension plan, but reversed the district court with respect to those claims alleging violations of ERISA that were independent of the coverage and meaning of the pension plan. The District of Columbia Circuit specifically held that if paragraphs of the complaint can be read "as independently charging contravention of the obligatory fiduciary standards of ERISA," then a federal cause of action is stated, and the plaintiff need not exhaust the arbitration requirements. Airline Pilots Association, 627 F.2d at 277. See Lewis v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 431 F. Supp. 271 (E.D. Pa. 1977) (agreements to arbitrate ERISA claims invalid).
Here, plaintiffs' ERISA counts (Counts I through III) allege violations of ERISA's fiduciary standards. Specifically, those counts assert claims under 29 U.S.C. § 1104(a)(1)(A)
(that a fiduciary discharge his duties solely in the interest of the participants and beneficiaries for the purpose of providing benefits to the participants and beneficiaries) and § 1104(a)(1)(D)
(that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries in accordance with the documents and instruments governing the plan). Construing plaintiffs' complaint in a liberal fashion and most favorably to the plaintiffs
(see Airline Pilots Association, 627 F.2d at 277), the Court finds that the first three counts of the complaint should be read as independently charging contravention of the obligatory fiduciary standards of ERISA, and, therefore, those counts are not subject to arbitration.
Moreover, two United States Supreme Court decisions, Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728, 67 L. Ed. 2d 641, 101 S. Ct. 1437 (1981) and Alexander v. Gardner-Denver Co., 415 U.S. 36, 39 L. Ed. 2d 147, 94 S. Ct. 1011 (1973), also support the position that exhaustion of arbitration provisions under a collective bargaining agreement are not a necessary prerequisite to a federal court action when a federal statutory right is involved. See also Gavalik v. Continental Can Co., Civil Action No. 81-1519 (W.D. Pa. March 26, 1982). In Alexander, the Supreme Court held that an individual's right to equal employment opportunity under Title VII was independent of an employee's non-discrimination rights under a collective bargaining agreement and that an employee's initial resort to the grievance procedure did not preclude a later court action.
The Court went on to note the specific problems with submitting a statutory dispute to an arbitrator. Foremost among those problems, according to the Supreme Court, is the fact that "the specialized competence of arbitrators pertains primarily to the law of the shop, not the law of the land."