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International Union of Electronic, Elec., Salaried, Mach. and Furniture Workers, AFL-CIO v. Murata Erie North America

filed: November 30, 1992; As Corrected December 14, 1992. Second Correction April 12, 1993.


On Appeal From the United States District Court for the Western District of Pennsylvania. (D.C. Civil No. 89-00255E).

Before: Becker, Roth and Higginbotham, Circuit Judges.

Author: Becker


BECKER, Circuit Judge.

This appeal by defendant Murata Erie North America, Inc. ("Murata") requires us to decide who is entitled to the excess funds remaining in two pension plans ("the Plans") after their termination. Murata, the Plans' sponsor, terminated the Plans in July 1987 as part of a larger scheme to end operations at its Erie, Pennsylvania plant. To satisfy the Plans' liabilities, the Plan Administrator purchased annuities for all the participants, after which nearly seven million dollars remained. Murata recouped this remaining sum in 1989 pursuant to an amendment to the Plan documents that it had unilaterally adopted in 1985. The amendment allowed the Plans' sponsor to recoup any excess moneys remaining in the Plans upon termination.

Believing that they, instead of Murata, were entitled to the excess money, some of the Plans' participants and their collective bargaining agent, the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers, AFL-CIO ("IUE" or "the union"), brought this suit against Murata, asserting two related claims under section 502(a) of the Employee Retirement Income Security Act (ERISA), 29 USC § 1132(a) (1988). The plaintiffs, appellees herein, allege (1) that Murata breached its fiduciary duty to act in accordance with the documents governing the plan, ERISA § 404(a)(1)(D), 29 USC §§ 1104(a)(1)(D) (1988), by amending the Plans to allow recoupment of excess funds and then actually recouping the funds; and (2) that Murata violated ERISA § 4044(d)(1), 29 USC § 1344(d)(1) (1988), by recouping the excess funds without authorization from the Plan documents.

The district court granted summary judgment for the plaintiffs on their ERISA claims, rejecting Murata's defenses that the suit was untimely under the ERISA statute of limitations, that the 1985 amendment was permissible under the Plan documents, and that even if the amendment was invalid, proper construction of the Plan documents would allow Murata to recoup the excess funds.

For reasons that follow, we find that the statute of limitations does not bar the ERISA claims. We also conclude, however, that there are genuine issues of material fact as to whether the collective bargaining agreement, which is considered part of the Plan documents under ERISA, prohibited the 1985 amendment and whether the Plan documents otherwise prohibited reversion of the excess funds remaining in the Plans upon termination. We will therefore reverse the judgment of the district court and remand for further proceedings.*fn1


In 1949, Murata's predecessor corporation, Erie Technological Products, Inc., created an employee retirement plan, styled the Erie Technological Products, Inc. Hourly Benefit Plan. In 1973, a closely related predecessor corporation adopted a similar, but separate plan, the Fryling Manufacturing, Inc. Hourly Employee Benefit Plan (jointly "the Plans"). Both plans were defined benefit plans, which means that they were "designed and administered to provide fixed -- or 'defined' -- benefits to the participants based on a benefit formula set forth in the Plan." Wilson v. Bluefield Supply Co., 819 F.2d 457, 459 (4th Cir 1987). The Plans' sponsor was obligated to maintain funding for the Plans at whatever level was actuarially required to provide the benefits guaranteed by the Plans.*fn2 Beginning in 1951, the Plans' participants were represented in collective bargaining by the IUE, and the union and the companies negotiated various alterations to the terms of the Plan documents over the years of the Plans' existence.

From their inception until 1977, the two Plans contained specific and identical language regarding the procedure for amendment and termination. Article XIII of the Plans described the manner in which the Plans might be terminated:

Each participating Company must, and hereby does, subject to any collective bargaining agreement then in effect, reserve the right to terminate the Plan on its own behalf, in whole or in part, at any time . . . . Termination of the Plan shall be effective upon the date specified in such instrument, but such termination shall not vest in the terminating Company any right, title or interest in or to the funds held hereunder, except as provided in Section 13.04 D 6. . . .

(emphasis added).

Section 13.04(D), in turn, provided:

The net assets after provision is made for administrative expenses and expenses of liquidation, shall be applied to payment of benefits in the following order:

(6) By distributing to the Company any excess remaining in the Fund due to erroneous actuarial computation as defined in Treasury Regulations.

(emphasis added).

Article XIV described the procedure for amending the Plans:

Article XIV

14.01 Right to Amend Reserved : The Company may, without the assent of any other party, except as otherwise provided by any collective bargaining agreement then in effect, amend the Plan at any time. Any such amendment shall be expressed in an instrument executed by the Company on the order of its Board of Directors and filed with the Trustee, and the Administrator, and shall become effective as of the date specified in such instrument.

14.02 Limitations on Right to Amend : No such amendment shall vest in the Company any right, title or interest in or to the funds held by the Trustee. No such amendment shall, without his consent, deprive, limit, lessen or restrict any vested right or interest to which any member is then entitled hereunder nor shall any amendment be made contrary to the written terms of any written agreement with a bargaining unit, so long as such agreement is in effect. . . .

(emphasis added).

In 1977, pursuant to Congress's enactment of ERISA, the Plans were restated. Although Article XIV remained unchanged, the restatement altered the terms of section 13.04(D)(6)*fn3 so that, instead of providing for the reversion of excess funds due to erroneous actuarial computation to the employer, it stated the following:

The net assets after provision is made for administrative expenses and expenses of liquidation, shall be applied to payment of benefits in the following order:

(6) To the extent not provided for in the foregoing subsections (1), (2), (3), (4), and (5), to provide any other benefits specified in the plan.

Thus, as of 1977, the Plans contained no specific language regarding reversion of excess funds, except for the language in Articles XIII and XIV, which suggested that the funds could not revert to the Company at all.

The parties dispute why the terms of the Plan were altered in this manner in the 1977 restatement of the Plans. Murata argues that the insertion of the new subsection (6) was the result of a scrivener's error, and that the parties never intended to delete the employer's right of reversion for excess funds due to erroneous actuarial computation. To support its claim, Murata submitted the affidavit of one of its officials, Raymond Bertone, who was familiar with the 1977 restatement. Bertone represented in his affidavit that Murata's predecessor corporation did not intend to abandon its right to recoup excess funds upon termination. The plaintiffs, noting that the language of the 1977 Plans fails to mention that excess funds might revert to the employer, contend that the language of the Plans unambiguously prohibits such reversion, and, therefore, that Murata's recoupment was impermissible. Whichever the case, neither party objected to the 1977 Plans at the time they were drafted, and the restated Plans were incorporated into collective bargaining agreements reached between the union and the predecessor corporations in 1978 and 1981.

Late in 1981, Murata bought the predecessor corporations from the previous Plan sponsors, assumed the obligations of the collective bargaining agreements, and became the Plans' sponsor. The issue of ownership of the excess assets in the Plans, the subject matter of the present dispute, first became a source of contention between Murata and the union during collective bargaining sessions in 1984. The parties agree that Murata proposed terminating the Plans and establishing a profit-sharing plan for employees, an arrangement that would have been similar to the profit-sharing arrangements that Murata maintained with its employees at its other plants. The parties dispute, however, precisely what happened during those negotiations.

The plaintiffs contend that Murata proposed an amendment to the Plan documents that would have given it a right of reversion to the excess funds in the documents. The plaintiffs assert that the union vigorously opposed this amendment and that Murata eventually withdrew it. Murata, through the affidavits of its corporate officers, denies that it ever made any such proposal. The parties both concede that no such agreement allowing for reversion was included in the collective bargaining agreement reached between the union and Murata in 1984. That agreement contained a simple clause, section 57, which dealt with the Plans:

The Pension and Welfare Plan for hourly paid employees has been described in the Plan and Trust Agreement and the terms thereof have been agreed to between the Company and the Union . . . .

It is further agreed that during the period of three (3) years from the effective day of August 13, 1984, neither the Company nor the Union shall demand any change in the Pension and Welfare Plan.

In October 1985, Murata unilaterally amended the Plans to include a new section 9.07(f), which presumably displaced the pre-1977 section 13.04(D)(6). Instead of providing for return to the employer of that excess in the funds resulting from erroneous actuarial computation, the new section provided for "return of any excess funds to the Employer or reallocated to the Participants, if authorized by the Employer, only after satisfaction of liabilities, fixed and contingent." (emphasis added). Murata posted notice at its Erie facilities that it had amended the Plans and that employees could obtain copies of the amendments from the company. This notice was also given to the union officers. Murata concedes that the notice provided did not mention the content of the amendment but contends that such details were available from company representatives upon request. During 1986, Murata began to make arrangements to terminate operations at its Erie plant. Discussions between the union and Murata began to focus, at least in part, on what would happen to any excess funds remaining in the Plans if annuities were purchased for all employees and the Plans terminated. During one conversation, between union representative Edward Bordonaro and Murata's vice president, Robert Entrekin, on November 20, 1986, Murata apparently asserted that it had a right to any excess funds remaining in the Plans upon termination. This conversation was confirmed in a letter, dated the following day, from union counsel James Mauro to Entrekin:

As we understand it, there is a potential dispute as to the distribution of excess assets in the Pension Plans which are sponsored by the Company on behalf of the hourly and salaried employees of 'Fryling Manufacturing, Inc.' It is the position of the Union that these assets must be reserved exclusively for the benefit of the members of the Plan and their beneficiaries under ...

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