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March 7, 1991


The opinion of the court was delivered by: Mencer, District Judge.


By an order of February 22, 1991, this court certified this case as a class action, and it is currently before us on crossmotions for summary judgment. In count I, plaintiffs allege breach of contract as a violation of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, while in count II they proceed under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132. On this motion, however, both parties have focused the attention of their briefs exclusively on count II, and this court limits its analysis accordingly. Because plaintiffs succeed under the ERISA claim and relief under the LMRA would be no different, we need not address the merits of the LMRA/contract claim. See Delgrosso v. Spang & Co., 769 F.2d 928, 938 n. 13 (3d Cir. 1985), cert. denied, 476 U.S. 1140, 106 S.Ct. 2246, 90 L.Ed.2d 692 (1986).

On July 30, 1990 this court denied crossmotions for summary judgment, a motion to dismiss and a motion to stay proceedings. The memorandum opinion of that date set out the relevant facts, and we will not repeat them in detail here. Briefly, however, the issue in this case is whether surplus assets of the Erie Technological Products, Inc. Hourly Benefit Plan (the "Erie Plan") and the Fryling Manufacturing, Inc. Hourly Employee Benefit Plan (the "Fryling Plan") may revert to the employer after all the benefits to the employees have been paid.*fn1 Plaintiffs are the class of beneficiaries under the plans who would receive the surplus. Defendant Murata currently controls the surplus assets and seeks to keep them.

Created in 1949 and 1973 respectively, the Erie and Fryling Plans were restated in 1977 and 1978, with union approval, to comply with the provisions of the then recently enacted ERISA statute. In 1981 Murata acquired the assets and liabilities of Erie and Fryling including the plans at issue. On December 12, 1986, Murata closed the Erie operations, and later notified Plaintiffs of its intent to terminate the Restated Plans effective September 30, 1987. Plaintiffs were notified on October 21, 1989, that fixed annuities had been purchased for them by the Plan administrator. On September 5, 1989, the Plan administrator transferred to Murata nearly $7 million in surplus Plan assets. (Defendant's Brief in Opposition to Plaintiff's Motion for Summary Judgment at 15). Plaintiffs argue that by distributing the money to itself, Murata violated its fiduciary duties under 29 U.S.C. § 1104, including the duty to act "in accordance with the documents and instruments governing the plan," and that the distribution violated the specific terms of ERISA § 4044(d)(1).*fn2


Section 4044(d)(1) of ERISA permits distribution of excess assets to the Employer if the following conditions are satisfied:

  (A) all the liabilities of the plan to
      participants and their beneficiaries have been
  (B) the distribution does not contravene any
      provision of law, and
  (C) the plan provides for such a distribution in
      these circumstances.

29 U.S.C. § 1344(d)(1).

Sections (A) and (B) are satisfied, (C) is the more troublesome requirement. It is undisputed that the restated plans did not "provide[ ] for such a distribution" before 1984.*fn3 In 1984 defendant attempted to amend the plan to provide for reversion to the employer in order to comply with subsection (C). However, in our July 30, 1990 opinion we held that the amendment was ineffective. Our conclusion was based, in part, on the plan itself which provided that "n[o] . . . amendment shall vest in the Company any right, title or interest in or to the funds held by the Trustee." (Plan § 14.02). It was also based on the collective bargaining agreement (CBA) between the Union and Murata which stated that "during the period of three (3) years from the effective date of August 13, 1984, neither the Company nor the Union shall demand any change in the Pension and Welfare Plan." It may be that, standing alone, a breach of the CBA external to the plan states only a contract claim and cannot support a breach of fiduciary duty claim under ERISA. In the instant case, however, the CBA was incorporated into the plan itself by § 14.01 which allowed the company to amend the plan "except as otherwise provided by any collective bargaining agreement in effect."

The cases have not all been perfectly consistent regarding plan language prohibiting reversionary amendments. See Delgrosso v. Spang & Co., 769 F.2d 928 (3d Cir. 1985) (in defined contribution plan where employer was without authority to amend the plan, purported amendment authorizing reversion was ineffective and employees were entitled to the surplus), cert. denied, 476 U.S. 1140, 106 S.Ct. 2246, 90 L.Ed.2d 692 (1986); Chait v. Bernstein, 835 F.2d 1017 (3d Cir. 1987) (in defined benefit plan, ERISA "exclusive benefit" `boilerplate' did not prevent an otherwise valid amendment from establishing reversion to the employer); In re CD Moyer Co. Trust Fund, 441 F. Supp. 1128 (E.D.Pa. 1977) (prohibition of reversion of trust assets did not bar reversion of surplus funds because "trust" included only the funds necessary for benefits), aff'd mem., 582 F.2d 1273 (3d Cir. 1978); Wilson v. Bluefield Supply Co., 819 F.2d 457 (4th Cir. 1987). Thus, the most difficult question in this case was whether § 14.02 in conjunction with the collective bargaining agreement successfully thwarted Murata's attempt to make such a reversionary amendment here. Once we decided that in the affirmative, however, there was little left of the case.

By our earlier opinion and order we denied summary judgment based upon what we perceived as a possible material question of fact as to the nature of the fund. However, ERISA makes clear that in order for Murata to have obtained the surplus assets the plan must have affirmatively provided for reversion. 29 U.S.C. § 1344(d)(1). In order to overcome the general posture of ERISA that "the assets of a plan shall never inure to the benefit of any employer," 29 U.S.C. § 1103(c)(1), the clear language of § 4044(d) (29 U.S.C. § 1344(d)) requires employers to insert an affirmative provision if they seek reversion in favor of themselves. Whatever the source of the surplus, since the amendment is ineffective "no rational interpretation of the [Restated Plan] could result in the conclusion that it specifically provides that a surplus is to be distributed to the employer," Albedyll v. Wisconsin Porcelain Co. Revised Retirement Plan, 11 EBC 1072, 1083 (E.D.Wis. 1989), and the plaintiffs are entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986); Chipollini v. Spencer Gifts, 814 F.2d 893, 896 (3d Cir. 1987); Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 2727 (Supp. 1987).*fn4

While we note that the employees may receive a windfall profit if the excess funds were simply the result of the employer's venerable "overabundance of caution," CD Moyer, 441 F. Supp. at 1132-33, and that such a result may create a strong incentive to underfund plans, it is easy enough for companies to protect themselves. Cf. Fechter v. HMW Industries, 879 F.2d 1111, 1120 n. 13 (3d Cir. 1989) (awarding surplus assets to employees does not necessarily give them a "windfall"). They need only properly place the proper provision in the plan. See Chait, supra; Fechter, supra. Politically or economically, that might be a difficult task, see Plaintiff's Brief at 49 ("during collective bargaining in 1984 . . . Murata proposed amendments to the Restated Plans that would have authorized reversion. The union emphatically rejected these amendments, and they were withdrawn"), but we see no reason to relieve employers of necessity of bargaining for what they want. See Plaintiffs' Exhibit 24 (collective bargaining notes show an "objective" to "clarify and amend the plan [to eliminate ambiguities and] clearly state[ ] that any excess funding . . . would be returned to the Co."). Our result is also consistent with ERISA's general solicitude for the rights of employees, see Firestone Tire & Rubber Co. v. Bruch, 489 ...

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