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VIGGIANO v. SHENANGO CHINA DIV. OF ANCHOR HOCKING

November 1, 1983

JAMES VIGGIANO, ANTHONY CONTI, ANTHONY SMILEY, for themselves and all persons similarly situated, Plaintiffs,
v.
SHENANGO CHINA DIVISION OF ANCHOR HOCKING CORPORATION, Defendant



The opinion of the court was delivered by: SIMMONS

The plaintiffs in this case are employees of Shenango China Division of Anchor Hocking Corporation (Shenango), employed at its New Castle, Pennsylvania facility where dishware is manufactured. The plaintiffs are participants in the Anchor Hocking Corporation Group Insurance Plan for Hourly Employees (Group Insurance Plan) established by an agreement between Shenango and the plaintiffs' collective bargaining representative, the United Steelworkers Union of America (Steelworkers Union). The Steelworkers Union represents approximately 700 employees at the New Castle facility of Shenango.

 The salient facts in this case are undisputed. Since 1940 Shenango has recognized the Steelworkers Union as the exclusive bargaining representative for the company's production and maintenance employees and its group leaders. Over this period of time, Shenango and the Steelworkers Union have negotiated a series of collective bargaining agreements, including pension and insurance plans. On March 1, 1980, Shenango and the Steelworkers Union entered into a collective bargaining agreement which is the subject matter of the instant dispute. The 1980 labor agreement between the Steelworkers Union and Shenango continued in effect an existing pension agreement and insurance program which by its terms expired midnight, February 28, 1983. The existing insurance plan contained a "coverage during-strike" clause which provided that employees' insurance coverage under the plan would continue for six months after the last day worked, if the employees were absent from active work because of a strike. The labor agreement also provided that either party, upon proper notice, had the right to renegotiate the terms and conditions of the insurance and pension agreements. If the parties failed to reach an agreement on these matters by February 28, 1983, the agreement gave the Union the right to strike in support of its position. Otherwise, the 1980 collective bargaining agreement contained a broad "no-strike" clause which prevented strike action by the Union. In essence, the no-strike clause prohibited any form of work stoppage, including strikes, during the life of the agreement. Any employee who engaged in a strike, during the duration of the agreement was subject to being discharged.

 On December 14, 1982, the Steelworkers Union notified Shenango of its desire to terminate the 1980 collective bargaining agreement then in effect and to negotiate a new agreement. Thereafter, Shenango and the Steelworkers Union met and engaged in collective bargaining. After having failed to reach a new agreement on March 1, 1983, the Steelworkers Union exercised its right to strike.

 During a February 28, 1983 negotiation meeting, just one day prior to the strike deadline, Shenango informed the Steelworkers Union that the employees' insurance coverage would cease if the employees went on a lawful strike, and over the Steelworkers Union protest, Shenango asserted that all insurance benefits ceased upon the expiration of the 1980 collective bargaining agreement. Although the Steelworkers Union argued that under the "coverage-during-strike" provision of the Group Insurance Plan, Shenango was required to continue insurance premiums for a period of six months following the date of the lawful strike, Shenango stopped paying the premiums on March 1, 1983. In addition, Shenango informed hospitals and other health care providers that its employees' insurance coverage had been discontinued.

 The lawful strike of the Steelworkers Union at Shenango's New Castle facility ended when Shenango and the Steelworkers Union reached a new collective bargaining agreement on March 27, 1983. The new agreement, by its terms, expires March 26, 1986. During the strike settlement negotiations Shenango refused to pay back-premiums for the 700 employees in the collective bargaining unit, but instead agreed to pay individual conversion rates for employees who actually received medical treatment and incurred medical expenses during the 27-day strike period and could not financially afford to pay the conversion rate themselves. The Group Insurance Plan, under the 1980 collective bargaining agreement, contains a 90-day conversion period during which employees insurance coverage continues in effect if premiums are paid at a higher individual rate at any time within 90 days after Shenango's group policy was discontinued.

 During the strike period approximately 35 employees received medical treatment. Shenango paid each employee an amount equivalent to their individual conversion rate, or if their medical expenses were less than their conversion rate, Shenango paid the actual medical expense.

 After Shenango refused to pay back-premiums for all 700 employees of the collective bargaining unit during the 27-day strike period, the Steelworkers Union brought this action on behalf of all plan participants. The Union alleged that by ceasing to pay premiums for group insurance after the collective bargaining agreement had terminated and the Union went on a lawful strike, Shenango violated specific provisions of the Group Insurance Plan and the Employee Retirement Income Security Act, § 502, 29 U.S.C. § 1132 et seq. (1974) (ERISA). Believing that it is entitled to judgment as a matter of law on the undisputed facts, the Steelworkers Union moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.

 Shenango filed no opposition to the Steelworkers Union's motion for summary judgment. Instead, Shenango filed a cross-motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure. Shenango alleged that the Steelworkers Union had failed to exhaust the mandatory procedure for resolution of disputes as required by the collective bargaining agreement between the parties. Arbitration, Shenango asserted, is a pre-requisite to federal court jurisdiction under section 502 of ERISA. Second, Shenango argued, the dispute is not justiciable because the employees suffered no economic damage and the strike settlement agreement between Shenango and the Steelworkers Union constituted a full accord and satisfaction of the claims herein.

 A. THE PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT IS GRANTED.

 1. THE UNDISPUTED FACTS WARRANT JUDGMENT AS A MATTER OF LAW IN THE PLAINTIFFS' FAVOR REGARDING SHENANGO'S ALLEGED VIOLATION OF THE GROUP INSURANCE PLAN.

 As noted earlier, the plaintiffs in this action are participants in the Group Insurance Plan which provides health insurance benefits to Shenango's employees. The 1980 collective bargaining agreement between Shenango and the Steelworkers Union incorporates, as an employee benefit, the Group Insurance Plan, which contains the following clause:

 
Absence From Active Work
 
If you are on special leave of absence, vacation, sick leave, regular leave of absence or layoff, or if you are absent because of a strike or lockout of employees of the company, your coverage under the Plan and the coverage of your dependants, if any, will continue in accordance with the following:
 
. . .
 
2. If you are on regular leave of absence or layoff, or if you are absent because of a strike or lockout of employees of the company, your coverage will terminate six months after your last day worked.

 See Group Insurance Plan, Complaint Exhibit A, at 8. (emphasis added).

 The Steelworkers Union alleges that Shenango's termination of their insurance coverage on March 1, 1983, violated the specific terms of the Group Insurance Plan and therefore violates the collective bargaining agreement which gives rise to a civil action under ERISA.

 Shenango's obligation to maintain an insurance program, as set forth in Article IX of the 1980 collective bargaining agreement, expires on February 28, 1983 at midnight. Shenango argues that on March 1, 1983, when the parties were unable to reach new agreements and the Union struck in support of its position, the 1980 agreement expired. Simply, Shenango's position is that the Group Insurance Plan also terminated when the parties mutually agreed to terminate the underlying agreement and the Union went on strike. To this end, Shenango notes that the insurance booklet specifically states that insurance coverage ends "when the group contracts are discontinued." Shenango reasons that its obligation to maintain insurance coverage ...


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