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PIECH v. MIDVALE-HEPPENSTALL CO.

August 22, 1984

Joseph PIECH, et al.
v.
MIDVALE-HEPPENSTALL COMPANY, et al.; Howard R. GATTER, et al. v. MIDVALE-HEPPENSTALL COMPANY, et al.; Francis P. HELLER, et al. v. MIDVALE-HEPPENSTALL COMPANY, et al.



The opinion of the court was delivered by: KATZ

 KATZ, District Judge.

 Defendant Midvale-Heppenstall Company ("Midvale") has moved for summary judgment in these three related cases, asserting that it has no liability as a matter of law to certain former employees who claim pension and insurance benefits following the closing on April 30, 1976 of its Philadelphia plant.

 Plaintiffs in 82-1754 are a class of former Midvale hourly employees who had been represented by the United Steelworkers of America ("the Piech class"). Plaintiffs in 82-1755 are two subclasses of former Midvale salaried employees ("the Gatter and Belz subclasses" or "the Gatter case"). Plaintiffs in 82-1756 are two former Midvale plant guards and the widow of another, who had been represented by the United Plant Guard Workers of America ("the Heller case"). In each case, plaintiffs claim that Midvale is contractually obligated to pay pension and insurance benefits under employee benefit plans in effect when the plant closed. They also contend that Midvale owes these benefits on alternative theories of unjust enrichment and promissory estoppel. *fn1"

 Defendants are Midvale, Heppenstall Company (Midvale's parent), Park Corporation (Midvale's liquidator) and the plans themselves. Midvale was the administrator of the plans until April, 1977, when the Pension Benefit Guaranty Corporation ("PBGC") determined that the plans were unable to pay benefits when due and became the plans' trustee. 29 U.S.C. § 1342. PBGC refused to pay the benefits claimed here. *fn2" The defendants have filed third-party complaints against PBGC for any damages found in favor of plaintiffs.

 I. THE CONTRACT CLAIMS

 A. The Piech Case

 Plaintiffs in Piech seek pension and insurance benefits under a collective bargaining agreement and pension plan, in effect on April 30, 1976, when the plant closed. They concede that their eligibility for insurance benefits is tied to their eligibility for pension benefits. Plaintiffs' Brief at 14. Each plaintiff was at least 62 years old with more than 10 and less than 15 years of service when the plant closed. PBGC denied them benefits under the pension plan because they did not have 15 years of service as required by the plan's criteria for eligibility. See Piech v. PBGC, No. 82-1131 (D.D.C. July 29, 1983). *fn3"

 Article XXIV, § 6 of the collective bargaining agreement provided:

 
The sole and complete obligation of the Company to provide or pay for pensions is limited to the amount in the fund on the date of execution of this Agreement, plus the contributions made during the life of this agreement and shall continue to be so limited.

 Midvale argues that this clause bars any contractual obligation for pensions on its part beyond what it contributed to the pension fund during the life of the collective bargaining agreement.

 The state of the law is that Midvale's obligation to continue contributing to the pension fund after closing its business turns essentially on contract. A clear disclaimer of continuing obligation in the governing agreement can be effective. In United Steelworkers of America v. Crane Co., 605 F.2d 714 (3d Cir.1979), the Court held that an employer who had closed its plant and terminated its pension plan had no obligation independent of the plan's fund to pay "deferred vested pensions" to terminated employees. The plaintiffs there met the plan's eligibility requirements of age 40 with 15 years of service, but had not yet reached the retirement age of 65. The Court relied in part on the fact that "in Section VII(c), the Pension Plan absolves the employer of any liability other than its obligation to contribute to the pension fund." Id. at 719. The disclaimer provision, § VII(c), provided:

 
Neither the Trustee nor the Company nor the Pension Board, either as a board or as individuals, in any manner guarantees the Trustee fund from loss or depreciation. All payments of pensions as provided in this Plan shall be made solely out of the Trust Fund, and there shall be no liability on the part of the Company to make further contributions to the Trustee in event of termination of the Plan. Neither the trustee nor the Company nor the Pension Board, either as a Board or individuals, shall be in any manner liable for the payment of pension benefits under the Plan.

 Id. at 716.

 However, if the attempted contractual disclaimer to continue to fund benefits does not limit the employer's liability to assets in the pension fund, then other language in the agreement obligating the employer to pay pensions can control. In Murphy v. Heppenstall Co., 635 F.2d 233 (3d Cir. 1980), cert. denied, 454 U.S. 1142, 102 S. Ct. 999, 71 L. Ed. 2d 293 (1982), the Court found that a terminated pension plan created an independent, direct obligation of the employer to pay pension benefits. It construed two clauses of the pension plan:

 Section 10.2

 
Any benefit properly payable pursuant to this Agreement shall continue to be payable, notwithstanding the termination or expiration of this Agreement. In the event that this Agreement is terminated, in whole or in part, the rights of any participant with respect to whom such termination shall have occurred shall, from the date of such termination or partial termination, be fully vested and nonforfeitable, subject to divestment by reason of death or operation of law, in the benefits established under the Agreement as of the date of such termination or partial termination is effective to the extent those benefits are funded by the Company in accordance with the provisions of Section 8 of this Agreement [sic]. *fn4"

 Section 8.1 reads:

 
For the purpose of supplying the pension benefits herein provided, the Company may establish or cause to be established, a pension trust or trusts or may utilize any existing trust or trusts heretofore established by or on behalf of the Company. The Company is free to determine the manner and means of making provision for funding and paying the pension benefits set forth in this Agreement.

 Id. at 235. The Court interpreted § 10.2 to mean that when the plan terminated, the participants' rights vest fully to the extent that the employer had an obligation to fund the benefits under § 8. Section 8.1 did not constitute a disclaimer of liability:

 
In fact, however, the employees have rights to benefits under the Collective Bargaining Pension Agreement, not merely under a pension trust. Section 8.1 establishes that the employer may set up a pension trust, and fund it as he wills, but the provision does not confine the employer's liability for pension benefits to a pension trust. Section 8.1, then, does not obligate the employer to fund any trust; the employer could be directly liable for all pension payments due under the Agreement. Read together, Sections 8.2 and 10.2 thus confirm the employer's continuing direct liability for post-termination pension payments.

 Id. at 236. Murphy rests on a contractual interpretation of a plan where the employer did not limit its liability to plan assets, and where employees had rights to pension ...


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