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STOUT v. BETHLEHEM STEEL CORP.

March 18, 1997

MARY STOUT, KENNETH DEBUS, DANIEL GULINI and LEE HEDDEN, Plaintiffs,
v.
BETHLEHEM STEEL CORPORATION, et al., Defendants.



The opinion of the court was delivered by: VAN ANTWERPEN

 Van Antwerpen, J.

 March 18, 1997

 I. INTRODUCTION

 This case arose originally under Section 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140. We have jurisdiction pursuant to Section 502 of ERISA, 29 U.S.C. § 1132(e) and under 28 U.S.C. § 1331. On January 12, 1995 Plaintiffs Mary Stout, Kenneth Debus, Daniel Gulini and Lee Hedden filed an action against Defendant Bethlehem Steel Corporation alleging unlawful interference with ERISA rights, and breach of the implied covenant of good faith and fair dealing in their employment contracts. Defendants were granted summary judgment on the breach of contract claim per our order of February 26, 1996.

 II. FINDINGS OF FACT

 The Parties and The Plan

 1. Plaintiff Mary Stout was born on September 5, 1951, and started her employment with Bethlehem Steel Corporation on December 22, 1969. In January 1993, she was earning an annual salary of $ 30,396. Stipulation 1. Plaintiff Kenneth Debus was born on April 5, 1945, and started his employment with Bethlehem Steel Corporation on June 3, 1968. In January 1993, he was earning an annual salary of $ 33,456. Stipulation 2. Plaintiff Daniel Gulini was born on April 23, 1945, and started his employment with Bethlehem Steel Corporation on June 21, 1966. In January 1993, he was earning an annual salary of $ 33,540. Stipulation 3. Plaintiff Lee Hedden was born on October 29, 1946, and started his employment with Bethlehem Steel Corporation on May 18, 1970. In January 1993, he was earning an annual salary of $ 30,696. Stipulation 4.

 2. Defendant Bethlehem Steel Corporation ("Bethlehem") is a Delaware corporation with its principal place of business in Bethlehem, Pennsylvania. Bethlehem has historically operated facilities at various locations around the country. Since at least the early 1980's, Bethlehem has been reducing or eliminating facilities and reducing the size of its workforce. In January of 1993, among the facilities that Bethlehem has operated and continues to operate are a steel plant in Burns Harbor, Indiana and a steel plant in Sparrows Point, Maryland, as well as plants in Lackawanna, New York, Steelton, Pennsylvania and Bethlehem, Pennsylvania. Stipulation 114.

 3. Each of the Plaintiffs was a Customer Service Representative in the Tin Mill Products Group, located in Bethlehem, Pennsylvania. Stipulation 39. The Customer Service Representative position held by each Plaintiff was classified as an exempt, non-union, salaried position. Stipulation 40. In June, 1993, the Tin Mill Products Group consisted of: a General Manager; a Technical Service Manager; a Tin Mill Marketing Specialist; a Customer Service Supervisor; 7 Customer Service Representatives; 2 Administrative Clerks; and a Secretary. The positions of Administrative Clerk and Secretary were classified as non-exempt salaried positions. The other positions in the Tin Mill Products Group were exempt salaried positions. Stipulation 41.

 4. Bethlehem is the sponsor of a defined benefit pension plan for its employees. The plan is named the Pension Plan of Bethlehem Steel Corporation and Subsidiary Companies ("Plan"). It is subject to and regulated by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Id. at 63-64 (Dopera). The Plan is also a qualified pension plan under the Internal Revenue Code. Bethlehem funds the Plan. Employees do not make any contributions to the Plan. Stipulation 5. The Plan of Bethlehem and its Subsidiary Companies is an umbrella pension plan that contains subplans that apply to different employee groups. Tr. 11/19/96 at 30 (Dopera).

  5. Michael Dopera has worked in the area of employee benefits at Bethlehem since 1968, and he has had responsibility for pension benefits since 1973. Tr. 11/19/96 at 62-63 (Dopera). Mr. Dopera is currently employed by Bethlehem as its Manager of Pension Plans and Communications in the Compensation and Benefit Services Division; he is the Plan Administrator of the Pension Plan of Bethlehem Steel Corporation and Subsidiary Companies. He also serves as the Secretary of the Employee Benefits Administration Committee. Stipulation 70 ; Tr. 4/16/96 at 17-18 (Dopera). The Plan specifically provides that the Secretary shall also be the Plan Administrator. Defendants' Exhibit 2 at p. 96. In addition, Bethlehem has historically had a policy where the person in charge of pension benefits, now Mr. Dopera, has also been the Secretary of the General Pension Board (now the Employee Benefits Administration Committee). Tr. 11/19/96 at 73 (Dopera). In 1993, Mr. Dopera was Bethlehem's Manager of Employee Benefits and served as the Secretary of the General Pension Board, the Employee Benefits Administration Committee's predecessor, and as such was the Plan Administrator of the Pension Plan. Tr. 4/16/96 at 17-18 (Dopera); See Defendants' Exhibit 1 at p. 97. Mr. Dopera has been an Assistant Secretary or Secretary of the General Pension Board / Employee Benefits Administration Committee since at least the early 1980's. Tr. 4/16/96 at 19-20 (Dopera). In his role as Plan Administrator, Mr. Dopera is and was responsible for the day-to-day administration of the Pension Plan, including granting pensions provided by the Plan and making and enforcing the rules and regulations of the General Pension Board / Employee Benefits Administration Committee. Tr. 4/16/96 at 15-17 (Dopera); Tr. 11/19/96 at 71-72 (Dopera).

 6. Plaintiffs are all participants in the Plan. Their level of benefits thereunder is set forth in the Plan as applicable to non-represented salaried employees (hereinafter the "Salaried Plan"). Defendants' Exhibit 1 is a genuine and authentic copy of the Salaried Plan in effect, and applicable to Plaintiffs, at the time of the Plaintiffs' layoffs in 1993. Defendants' Exhibit 2 is a genuine and authentic copy of the Salaried Plan in effect, and applicable to Plaintiffs, at the time their continuous service broke in October, 1995. Stipulation 6.

 7. The contents of the Salaried Plan, including its eligibility provisions and benefits, are established by Bethlehem Steel Corporation's Board of Directors. Tr. 11/19/96 at 65 (Dopera). In contrast, benefits available to employees represented by the United Steelworkers of America are set forth in a separate sub-plan, and the pension benefits afforded to those employees are determined by collective bargaining that results in a Pension Agreement between Bethlehem and the United Steelworkers. Tr. 11/19/96 at 65, 203 (Dopera, Kesselring). The Plaintiffs are not in any group of employees represented by the United Steelworkers; and no Plaintiff has ever been a participant in or covered by any pension plan or agreement negotiated by the United Steelworkers. Specifically, Plaintiffs are not and never have been covered by the Hourly Pension Plan or the Pension Agreement between Bethlehem and the United Steelworkers. Tr. 11/19/96 at 83 (Dopera).

 8. During the course of their employment, Plaintiffs, and other non-represented salaried employees of Bethlehem, were provided with Summary Plan Descriptions which described the benefits available under the Salaried Plan. Defendants' Exhibit 3 is a genuine and authentic copy of the Summary Plan Description in effect at the time of Plaintiffs' layoffs in October, 1993. Stipulation 7.

 9. Section 9 of the 1994 Salaried Plan (Defendants' Exhibit 2) deals with administration of the Plan. As explained by Mr. Dopera at trial, that Section gives the Employee Benefits Administration Committee the power to interpret the Plan, to administer the Plan and to make various administrative decisions with respect to the operation of the Plan. Tr. 11/19/96 at 69-70 (Dopera). In pertinent part, Section 9 contains the following provisions: the Employee Benefits Administration Committee "shall have the authority and responsibility for the administration of this Plan . . . and shall appoint a Secretary and such Assistant Secretaries as it shall deem necessary or proper." The Secretary of the Employee Benefits Administration Committee "shall be the administrator of this Plan (hereinafter "Plan Administrator") for all purposes of ERISA with the powers and duties provided therein and in this Plan . . . ." The Plan Administrator shall "make and enforce such rules and regulations as the Plan Administrator shall deem necessary or proper for the efficient administration of this Plan, and . . . decide such questions as may arise in connection with the operation of this Plan." Further, "If any difference shall arise . . . with respect to a determination of the Plan Administrator . . . [the affected person] may request a review of the matter by the Committee [Employee Benefits Administration Committee] . . . ." Finally, "The Committee [Employee Benefits Administration Committee] shall have full power and authority to interpret or construe any provision of the Plan which may be ambiguous, or with respect to which there is any disagreement between the Plan Administrator and any Participant . . . ." and "decisions of the Committee [Employee Benefits Administration Committee] shall be final and binding . . . ." Defendants' Exhibit 2 at pp. 96-97. Defendants' Exhibit 1, which is the 1989 Salaried Plan in effect when Plaintiffs were laid off on October 31, 1993, grants the same powers and authority to the General Pension Board and the Plan Administrator under the 1989 Salaried Plan. See Defendants' Exhibit 1 at pp. 97-98. This is no difference between the powers and authority of the General Pension Board and the Employee Benefits Administration Committee under the two Plans. Tr. 11/19/96 at 68-69 (Dopera).

 10. The Salaried Plan provides for a variety of different forms of retirement benefits and each form of retirement benefit has its own eligibility criteria, which are set out in the Salaried Plan. The different forms of retirement benefits provided under the Salaried Plan include the following: 30-Year Retirement; Normal Age (65) Retirement; 62/15 Retirement; 60/15 Retirement; Rule-of-70 Retirement; Rule-of-80 Retirement; Rule-of-65 retirement; 40/15 Deferred Vested Retirement; Deferred Vested Retirement. Stipulation 8.

 11. By memorandum dated September 16, 1982, Clifford W. Ishmael, Manager of Personnel, issued "Guidelines for Reduction of Salary Forces in Home Office Departments." Defendants' Exhibit 43 is a genuine and authentic copy of these Guidelines. Stipulation 112. By memorandum dated March 6, 1992, Leonard Kesselring, whose title was then Director of Personnel and Equal Employment, issued guidelines on "Home Office Non-Represented Salaried Force Reductions." This memorandum supplemented an earlier memorandum, dated December 17, 1990, issued by Mr. Kesselring on "Reduction of Non-Represented Salaried Forces" which was attached to Mr. Kesselring's March 6, 1992 memorandum. Defendants' Exhibit 44 contains genuine and authentic copies of Mr. Kesselring's memoranda. Stipulation 113.

 Rule-of-65

 12. The benefit at issue in this case is the Rule-of-65 Retirement benefit. Stipulation 9. The Rule-of-65 Retirement benefit was added to the Salaried Plan effective January 1, 1978. Stipulation 10. Paragraph 2.7 of the Salaried Plan sets forth the eligibility requirements for a Rule-of-65 Retirement benefit for non-represented salaried employees. Stipulation 12.

 13. The Rule-of-65 Retirement was originally brought into Bethlehem's pension plans as a result of industry-wide collective bargaining. Tr. 11/19/96 at 33-35 (Dopera). Bethlehem extended the general concept of the Rule-of-65 Retirement Benefit to non-represented salaried participants in the Salaried Plan effective January 1, 1978. Id. at 78-80, 122 (Dopera); see also Defendants' Exhibit 4 at p. 93. The Preamble to the Special Rules with Respect to Rule-of-65 Retirement as set out in the Pension agreement states that the intent behind creating the Rule of 65 was "to provide increased economic protection for long-service employees who are involuntarily displaced from their jobs. The parties agree that the method of achieving this objective is to facilitate the placement of such employees in suitable long-term jobs and, when such jobs are not available, to reduce the adverse economic consequences to such employees by providing eligible employees with extended SUB and Rule-of-65 pensions as outlined herein." Def. Exh. 4 at p. 93; Stipulation 11.

 14. The Rule-of-65 Retirement under the Salaried Plan is available to individuals with at least twenty years of continuous service, where the total of his or her age and continuous service equals at least 65 but is less than 80. Def. Exh. 3 at 18. It is triggered by the employee's involuntary break in service at Bethlehem, caused either by a shutdown or by a layoff in excess of 2 years. Tr. 11/19/96 at 84-85 (Dopera). In either event, the employee is not eligible for a Rule-of-65 Retirement if he or she has been offered suitable long-term employment ("SLTE") with the Company. Id. (Dopera); Defendants' Exhibit 3 at 18-19. An offer of SLTE disqualifies the employee from becoming eligible for a Rule-of-65 Retirement, regardless of whether the employee's service is broken by a shutdown or a 2-year layoff. The SLTE provision in Paragraph 2.7 of the Salaried Plan applies to both of the contingent employment events that may trigger a Rule-of-65 Retirement. Tr. 11/19/96 at 85-86 (Dopera).

 15. As of both January and October, 1993, each of the Plaintiffs met the age and service requirements for a Rule-of-65 Retirement benefit. Stipulation 13.

 16. Under the terms of the Salaried Pension Plan, where Bethlehem has offered employment to an employee otherwise eligible for a Rule-of-65 Retirement, whether or not the offered employment constitutes suitable long-term employment "is determined in accordance with rules and regulations adopted by the General Pension Board." Paragraph 2.7 of the 1989 Salaried Pension Plan (Defendants' Exhibit 1 at p. 11) and Paragraph 2.7 of the 1994 Salaried Pension Plan (Defendants' Exhibit 2 at p. 14).

 17. Defendants' Exhibit 5 is a genuine and authentic copy of a memorandum dated December 16, 1981 from C. W. Ishmael, then Bethlehem's Manager of Personnel, setting forth a definition of SLTE. Stipulation 15. Mr. D. W. Kempken, Mr. Dopera's predecessor as Plan Administrator, participated in the preparation of the December 16, 1981 memorandum defining suitable long-term employment. Tr. 11/19/96 at 94-95 (Dopera). At a meeting on February 16, 1984, the General Pension Board adopted "Rules and Regulations Governing SLTE" using Ishmael's memorandum. Tr. 11/19/96 at 93-95 (Dopera). Defendants' Exhibit 6 is a genuine and authentic copy of those Rules and Regulations. Tr. 11/19/96 at 96 (Dopera). Defendants' Exhibit 7 is a genuine and authentic copy of the Minutes of the February 16, 1984. Stipulation 16. At that meeting, the General Pension Board adopted separate rules and regulations on SLTE for the various subplans under the umbrella Pension Plan. Tr. 11/19/96 at 96 (Dopera). The rules and regulations for SLTE in Exhibit 6 are different for the Salaried Plan and for the Steelworkers' Hourly Plan. Id. (Dopera). The rules and regulations for these two Plans are different, because the provisions in the Salaried and Hourly Plans that govern the Rule-of-65 Retirement and how it is defined are different. Id. (Dopera). At a meeting on February 24, 1985, the General Pension Board adopted an amendment to its Rules and Regulations on SLTE for the Salaried Plan. Defendants' Exhibit 8 is a genuine and authentic copy of the amended Rules and Regulations. Defendants' Exhibit 9 is a genuine and authentic copy of the Minutes of the September 24, 1985 meeting. Stipulation 17. ; Tr. 11/19/96 at 97-98 (Dopera).

 18. The amended Rules and Regulations Governing SLTE marked as Defendants' Exhibit 8 were in effect, and applicable to Plaintiffs, at the time of Plaintiffs' layoffs in October, 1993 and at the time their continuous service with Bethlehem broke in October, 1995. Stipulation 18. As defined in the Summary Plan Description for the Salaried Plan, "a job offered by the Company will be considered suitable long-term employment if:

 
. The employee is physically able to perform the job; and
 
. The employee has or can acquire through training the ability and skills needed to perform the job; and
 
. It is not a temporary job; and ...

 Defendants' Exhibit 3 at 19. Bethlehem's practice is to consider any job more than 100 miles away from the employee's previous job location as being in a different geographic area. (Tr. 11/19/96 at 60 (Dopera)).

 19. Pursuant to Federal Rule of Evidence 201, we take judicial notice that Sparrows Point is approximately 160 miles from Bethlehem. See also Tr. 11/20/96 at 211 (Kesselring) ("it takes me two hours and forty-five minutes").

 20. As of November 30, 1995, a total of 3,245 former Bethlehem employees were receiving Rule-of-65 Retirement benefits under the Plan. Stipulation 19.

 The Move to Sparrow's Point

 21. In 1983, Bethlehem established a dedicated sales and marketing force in connection with its Tin Mill products. This group became known as the Tin Mill Products Group, and it was part of the Marketing Division within Bethlehem's Commercial Department. Stipulation 20. Defendants' Exhibit 15 is a genuine and authentic copy of a letter dated March 6, 1992 from Leonard C. Kesselring, Jr., then Bethlehem's Director of Personnel and Equal Employment, to Mr. Edward A. Kloo. Stipulation 21.

 22. During 1992, a special task force was created to study the existing interrelationship between Bethlehem's Operations and Commercial Departments and develop recommendations which could facilitate increased cooperation between the two areas, improve overall efficiency and enhance customer service. Stipulation 22. This task force was referred to as the Com-Ops Team. Stipulation 23.

 23. The Com-Ops Team reported its recommendations to Senior Management in the late Fall of 1992. Stipulation 24. The Com-Ops Team recommended that separate business units be created at Bethlehem's Burns Harbor facility and at its Sparrows Point facility. These business units were named the Burns Harbor Division and the Sparrows Point Division. Each business unit was to be responsible for its own marketing, operations and financial performance. Stipulation 25. The Com-Ops Team's report included a recommendation that the marketing and customer service functions for each product area be consolidated and relocated to the business units which manufactured those products. Stipulation 26.

 24. In 1992, Bethlehem's Senior Management adopted the recommendations of the Com-Ops Team that the Burns Harbor and Sparrows Point Divisions be created as separate business units, and that the marketing and customer service functions for each product area be consolidated and relocated to the business units where the products were manufactured. Stipulation 27. George Silagyi was a Manager in the Tin Mill Products Group and served as a member of the Com-Ops Team. Defendants' Exhibit 50; Silagyi Deposition at 7, 19-36. He testified that as part of the formation of those divisions, the Product Marketing Groups located in Bethlehem, Pennsylvania were to be transferred to the Sparrows Point and Burns Harbor facilities. Tr. 11/19/96 at 204-05 (Kesselring). Bethlehem wanted to have customer service personnel located at the operations where the products were manufactured so they could be directly tied in with the mills and the people who were manufacturing the product. Bethlehem believed that this would provide for better service to its customers and better delivery of its products. Id. at 205-06 (Kesselring). We find this testimony credible. One of the groups that was to be relocated from Bethlehem to the Sparrows Point business unit was the Tin Mill Products Marketing Group. Tr. 11/20/96 at 8 (Kesselring). Sparrows Point is the only place where Bethlehem manufactures tin mill product. Id. (Kesselring).

 26. In 1992, the Tin Mill Product Marketing Group in Bethlehem, Pennsylvania was a unique group within Bethlehem. The Tin Mill Product Customer Service Representatives were the primary contact between Bethlehem and its tin mill product customers. Stipulation 47. They had responsibility for working out the customers' problems and handling their claims and orders. Each Customer Service Representative had customers that were assigned to him or her personally. They were responsible for developing close relationships with their customers in order to learn what their needs were and how Bethlehem could meet those needs. Stipulations 49. Tin Mill Product Customer Service Representatives sometimes visited with their larger customers to work on those relationships. Through those visits, each of the Plaintiffs had gotten to know the needs and requirements of particular customers. Stipulation 50; Stipulation 44 ; Tr. 11/20/96 at 96-98 ...


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