The opinion of the court was delivered by: POLLAK
POLLAK, UNITED STATES DISTRICT JUDGE.
This case, brought under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C.A. § 1104, and the Labor Management Relations Act ("LMRA"), 29 U.S.C.A. §§ 185, 186(c)(5), is before this court on defendants' motion for summary judgment. The plaintiffs are Wheaton Industries, an ex-member of defendant G.P.P.A.W. - Employers Retiree Trust ("GPPAW Trust" or "Trust"), and Wheaton's own, new employee retirement benefits trust fund, which is alleged in the complaint to be assignee and subrogee of the rights of retirees and spouses to any proceeds from the Trust. Defendants are the GPPAW Trust, a multi-employer, pooled-risk, employee-benefits trust fund, and its six trustees.
Wheaton, a contributor to the Trust from 1968 until 1986, announced its withdrawal from the Trust in late 1983 and early 1984. The parties agree that the Trust agreement calls for the segregation of a fund that will continue to make payments to beneficiaries of withdrawing employers; they disagree about the size of the fund. The plaintiffs claim that the Trust's refusal to pay investment income on Wheaton's contributions to the Trust violated the terms governing employer withdrawal set forth in the Trust Agreement. Defendants contend that the trustees' decision to refund Wheaton's contributions but not the investment income earned thereon was within the broad discretion conferred by law on the trustees. For the reasons set forth in this Memorandum, the defendants' motion for summary judgment is denied. An appropriate order follows the Memorandum.
Under collective bargaining agreements between Wheaton's various plants and the Glass, Pottery, Plastics & Allied Workers International Union (GPPAWIU), Wheaton paid a per-hour contribution into the Trust until it withdrew from the Trust to set up its own benefits plan, the Wheaton Industries Retiree Benefit Plan. Amounts contributed to the Trust by Wheaton were pooled and invested together with amounts contributed by other employers participating in the Plan.
The parties agree that Wheaton's withdrawal from the Trust constituted a "partial termination" within the meaning of the Trust agreement. Section 11.03 of the Trust agreement, entitled " partial termination," provides, in relevant part, that:
Upon . . . partial termination of this Trust Agreement, said . . . employer . . . shall cease its Contributions . . . to this Fund; and, further, upon any such event, the Trustees shall request the Fund Actuary to determine on the basis of actuarial methods, factors and assumptions consistent with those used in the past management of the Fund, the portion of the Fund assets held with respect to such . . . Employer . . . and from such portion of the Fund the Trustees shall pay or provide for the payment of all obligations of the Fund applicable thereto and shall pay or provide for the payment of any remaining balance thereof to or for the benefit of the persons in such group who, had they remained covered by this Trust Agreement, would have qualified as Retired Employees, or the spouses or beneficiaries of such Retirees in such a manner as will, in the opinion of the Trustees, best effectuate the purposes of the fund to provide the benefits called for hereunder for such group of persons . . .
When Wheaton withdrew, the Trust treated Wheaton as six separate employers, based on six segments of the company that withdrew at separate times because of the different expiration dates of their collective bargaining agreements. According to the Trust's calculation of the "assets" attributable to the segments, three of the six segments came out with a negative balance, and three with a positive balance of contributions received over benefits paid out.
Defendants' Memorandum in Support of Their Motion for Summary Judgment, at 2. Aggregating the positive balances (counting contributions only, and not investment income therefrom), the Trust determined that the assets due to Wheaton's retirees amounted to $ 177,000.
Plaintiffs, however, contend that the segmentation of the company is irrelevant. In plaintiffs' view, because they deserve the contributions plus investment income therefrom, they have a positive net balance with respect to all of the six segments to which defendants refer, so that the segmentation turns out to be inconsequential. Plaintiffs contend that as of June 30, 1986, they were entitled to $ 890,000, and are now entitled to even more since the close of the fiscal year, 1987.
The defendants maintain that the Trust's decision concerning the allocation of funds to Wheaton's segregated account was necessitated by the Trust's precarious economic situation. Both in their brief and oral argument, the defendants describe the decline in the glass industry, the subsequent decline in the number of active workers, and the rapid rate of medical inflation. See Defendants' Memorandum in Support of Their Motion for Summary Judgment, at 9-12; Transcript of Oral Argument, Doc. No. 23, at 2-5. Defendants have also submitted the reports of the Trust's actuaries which indicate that substantial cost-cutting and revenue-producing measures were necessary to ensure the continued viability of the Trust.
The defendants offer two central arguments in support of the trustees' action with respect to Wheaton's withdrawal. First, the defendants stress the reasonableness of the Trust's treatment of Wheaton. They characterize the Trust's decision not to credit Wheaton's segregated account with investment income as a "middle of the road" position, arguing that the Trust acted in accordance with its fiduciary duty by rejecting the more "extreme" approaches to partial termination situations, such as immediate cessation of coverage for withdrawing employer's beneficiaries or segregation of investment income with employer contribution, the alternative demanded by the plaintiffs. Defendants' Memorandum in Support of Their Motion for Summary Judgment, at 14. The plaintiffs respond that the plain language of § 11.03 forecloses adoption of the Trust's interpretation.
The defendants' second argument rests on the Trust's past practice with respect to withdrawing employers. They point to the passage in § 11.03 of the Trust agreement that contemplates consideration of "past management" practices in the actuarial calculation of what belongs to the withdrawing employer's beneficiaries. See Defendants' Memorandum in Support of Their Motion for Summary Judgment, at 9. The plaintiffs counter that past interpretation of § 11.03 cannot justify continued adoption of a clearly erroneous interpretation of the Trust agreement. In addition, they maintain that past practice is not relevant because such prior practice ...