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CONN v. UNITED STATES STEEL & CARNEGIE PENSION FUN

May 6, 1987

Eugene S. Conn
v.
United States Steel and Carnegie Pension Fund



The opinion of the court was delivered by: SHAPIRO

 NORMA L. SHAPIRO, J.

 Defendant has moved for summary judgment in this action to vacate or modify an arbitration award. Because there is no genuine issue of material fact and the award draws its essence from the plan documents so that the arbitration award is final and binding with respect to plaintiff's claims, defendant is entitled to judgment as a matter of law and its motion will be granted.

 Plaintiff Eugene S. Conn was employed by United States Steel Corporation at its Philadelphia sales office from April 1963, until December 1983, when the Philadelphia sales office was permanently closed, the inside sales function was transferred to Pittsburgh, and Conn's employment was terminated. When his employment was terminated, Conn held a management position as an inside sales representative; he was forty-seven years old and had completed twenty years and eight months of continuous service. On December 9, 1983, Conn signed the "Election and Acknowledgment of Employee Concerning Severance and Layoff" form, indicating that he elected severance instead of layoff; he received a severance payment of $ 120,750.00. Conn subsequently applied for a special early retirement benefit, a "Rule-of-65 Pension" under the provisions of the United States Steel Corporation Plan for Employee Benefits (Revision of 1950) ("the Plan"), after his immediate supervisor, Peter Hansen, suggested that he might be eligible. The parties disagree about what Conn was then told concerning the possibility of an offer of suitable long-term employment.

 The Plan provides for such arbitration and states, "The arbitrator shall have authority only to decide the question pursuant to the provisions of the pension plan but shall not have the authority in any way to alter, add to or subtract from any of such provisions. The decision of the arbitrator shall be binding on the Employing Company, the Pension Fund and the Claimant." (Exhibit J, p.6.)

 On October 1, 1985, the parties proceeded to arbitration conducted by Professor Walter J. Gershenfeld under the auspices of the American Arbitration Association. On February 28, 1986, Professor Gershenfeld made the following award: "Mr. Eugene S. Conn is not eligible for a Rule of 65 pension." (Exhibit H) Accompanying the award was an opinion in which Professor Gershenfeld made findings of fact and interpreted the terms of the Plan in support of his award.

 After identifying the relevant Plan provisions and rules, the arbitrator articulated the reasons for his award. Professor Gershenfeld found, inter alia, that because Conn met the age and service requirements for a Rule-of-65 pension he would have been eligible for this special early retirement benefit only if his continuous service was broken by layoff and he was not offered suitable long-term employment within two years or told that he would not be offered suitable long-term employment. When the Philadelphia sales office, which the arbitrator found was not a plant, was closed, Conn was not immediately terminated. Rather, he was presented with an election between severance, which would terminate his employment status, or layoff, which would preserve his employment status and thereby his eligibility for a Rule-of-65 pension. Conn's election of severance was a free one; he was not tricked. Although Conn was never offered suitable long-term employment, he was also never told that he would not be offered suitable long-term employment.

 The arbitrator also found that there was nothing unclear or unreasonable about the requirement that an employee remain on layoff status for two years to be eligible for a Rule-of-65 pension. Nor was there any ambiguity in the requirements. (Exhibit H)

 Plaintiff filed a petition to vacate or modify the award of the arbitrator on May 29, 1986; on June 29, 1986, defendant filed a verified petition for removal to this court. Following the court's denial of defendant's motion to dismiss, plaintiff filed a complaint alleging that the arbitration award does not draw its essence from the Plan, violates public policy, and condones fraudulent behavior. In addition, plaintiff contends that, as a management employee he is not bound by the arbitration award. Plaintiff does not allege any violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.A. § 1001 et seq. (West 1985). Defendant answered and subsequently moved for summary judgment.

 The court has subject matter jurisdiction under 29 U.S.C.A. § 1132(e) (West 1985), see United States Steel and Carnegie Pension Fund v. McSkimming, 759 F.2d 269 (3d Cir. 1985), but "the standard of review applied by federal courts to labor arbitration awards is exceedingly narrow." Id. at 270. An arbitrator's award must be upheld,

 
if the interpretation can in any rational way be derived from the agreement, viewed in the light of its language, its context, and any other indicia of the parties' intention; only where there is a manifest disregard of the agreement, totally unsupported by principles of contract construction and the law of the shop, may a reviewing court disturb the award.

 Id. at 270-71 (quoting Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1128 (3d Cir. 1969); cf. Roberts & Schaefer Co. v. Local 1846, United Mine Workers of America, 812 F.2d 883, 885 (3d Cir. March 2, 1987). A federal court may vacate or refuse to enforce an arbitration award that orders illegal conduct or is against an explicit public policy, W.R. Grace & Co. v. Local Union 759, 461 U.S. 757, 766, 76 L. Ed. 2d 298, 103 S. Ct. 2177 (1983); that enforces an illegal contract provision, Telephone Workers Union Local 827 v. New Jersey Bell Telephone Co., 584 F.2d 31 (3d Cir. 1978); that does not draw its essence from the agreement that provided for arbitration, W.R. Grace & Co., 461 U.S. at 766; or that is the product of fraud or prejudice, see Comment, The Employers Dilemma, 34 Syracuse L. Rev. 1067, 1068, 1087-89 (1983).

 Under this exceedingly narrow standard of judicial review, there is no ground for vacating the arbitrator's award. Summary judgment is proper because there is no genuine issue of material fact. Fed.R.Civ.P. 56(c). The arbitrator's award draws its essence from the Plan. It is neither explicitly nor implicitly based on the arbitrator's view of the requirements of ERISA. Rather, the arbitrator made reasonable findings of fact based on the evidence before him and applied traditional principles of contract interpretation in construing the Plan and the rules. None of the arbitrator's findings is irrational.

 Plaintiff argues that the arbitrator erred in considering the employer's intent but ignoring Conn's intent at the time that the pension plan was drafted. Because Conn had no role in drafting the Plan or the rules, this contention is frivolous. It was proper for the arbitrator to consider what he perceived to be the employer's intent when the Plan was drafted. See Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1130 n.31 (3d Cir. 1969).

 The arbitration award does not violate any explicit public policy. A court may vacate an arbitration award only if it violates a "well defined and dominant" public policy that is "ascertained 'by reference to the laws and legal precedents and not from general considerations of supposed public interests."' W.R. Grace & Co., 461 U.S. at 766 (quoting Muschany v. United States, 324 U.S. 49, 66, 89 L. Ed. 744, 65 S. Ct. 442 (1945)). Plaintiff does not allege that the denial of the Rule-of-65 pension, a special early retirement benefit, constitutes a violation of ERISA or of any other statute or legal precedent. It is undisputed that Conn will receive his vested pension benefits at ...


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