Amer Flint v. Beaumont Glass

• Court: Court of Appeals for the Third Circuit
• Decided: August 10, 1995
• Docket: 94-3307
• Status: Unknown

Opinion

Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit

8-10-1995

Amer Flint v Beaumont Glass Precedential or Non-Precedential:

Docket 94-3307

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995

Recommended Citation "Amer Flint v Beaumont Glass" (1995). 1995 Decisions. Paper 216. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/216

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ___________

No. 94-3307 ___________

AMERICAN FLINT GLASS WORKERS UNION, AFL-CIO; MICHAEL SINE; ANDY J. HATFIELD, Appellants

v.

BEAUMONT GLASS COMPANY; BEAUMONT COMPANY PENSION PLAN FOR HOURLY EMPLOYEES, Appellees

___________

Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil Action No. 93-cv-01511) ___________

Submitted Under Third Circuit LAR 34.1(a) January 10, 1995

PRESENT: HUTCHINSON, NYGAARD and GARTH, Circuit Judges

(Filed August 10, 1995)

____________

Marianne Oliver, Esquire Gilardi & Cooper, P.A. 808 Grant Building Pittsburgh, PA 15219

and

Edward J. Kabala, Esquire Kabala & Geeseman The Waterfront 200 First Avenue Pittsburgh, PA 15222

Alfred S. Pelaez, Esquire

1 Duquesne University School of Law 900 Locust Street Pittsburgh, PA 15282 Attorneys for Appellants

2 Kathleen A. Gallagher, Esquire Pittsburgh Food & Beverage Company, Inc. 1200 Frick Building 437 Grant Street Pittsburgh, PA 15219 Attorney for Appellees

OPINION OF THE COURT ____________

HUTCHINSON, Circuit Judge.

Appellants, American Flint Glass Workers Union,

AFL-CIO, Michael Sine, and Andy J. Hatfield (collectively the

"Union"), appeal an order of the United States District Court for

the Western District of Pennsylvania denying their motion for

summary judgment and, instead, sua sponte granting summary judgment to the appellees, the Beaumont Glass Company (the

"Company") and the Beaumont Company Pension Plan for Hourly

Employees (the "Plan"). This case arose after the Company

unilaterally adopted a resolution to terminate the Plan,

believing that termination would leave a surplus for

distribution. The Union objected to the Company's unilateral

decision to terminate and filed a charge with the National Labor

Relations Board (the "NLRB"). Subsequently the Company and the

Union agreed in writing to permit the termination process to go

forward and the Union withdrew the charge.

After the Company and the Union had so agreed, the

Company learned that there would be no surplus on termination,

that the Plan was underfunded and that it would have to

3 contribute approximately $300,000 to the Plan before the Internal

Revenue Service (the "IRS") would approve termination.

The Company then decided not to terminate, and the Union filed

this action alleging that the agreement to proceed with

termination precluded the Company from canceling or withdrawing

its decision to terminate because of unanticipated cost. Rather,

the Union contends that the Company must provide the additional

funds needed for IRS approval of the Plan's termination. It

advances, as alternative theories of recovery, the fiduciary

responsibilities of the Employee Retirement Income Security Act

("ERISA") and the common law of contracts.

We reject the Union's theory that the Company had a

fiduciary duty to provide the funds necessary to terminate the

Plan. On the Union's contract theory, however, we conclude that

genuine disputed issues of material fact exist. Accordingly, we

will reverse the district court's sua sponte order granting

summary judgment to the Company and remand this case for further

proceedings consistent with this opinion.

I. Statement of Facts On July 2, 1992, the Company's board of directors

adopted a resolution to terminate the Plan.0 It also amended the

0 The resolution provided:

NOW THEREFORE BE IT RESOLVED, that the attached Amendment to the Plan which, among other things, ceases any future Retirement Benefit accruals under the Plan effective August 31, 1992, be, and the same hereby is, adopted;

4 Plan to provide for an August 31, 1992 termination date.0 The

FURTHER RESOLVED that the Plan shall be terminated as of August 31, 1992;

FURTHER RESOLVED that all liabilities of the Plan to participants, beneficiaries and alternate payees be discharged through the purchase of annuity contracts, or the payment of lump sum distributions to electing participants, for all persons other than those who may receive lump sum cash-outs of $3,500 or less; . . .

FURTHER RESOLVED, that [corporate officers] . . . file with the appropriate federal agencies such notifications and ruling requests as are customary or desirable under the circumstances.

Appendix ("App.") at 22. 0 The following amendments were adopted by the board of directors:

1. The Pension Fund and the Trustee, Article VI is amended by the addition of the following paragraph at the end thereof:

Notwithstanding any other provision of this Plan, contributions under the Plan shall cease as of August 31, 1992.

2. Eligibility Service and Credited Service, Article II, is amended by the addition of the following paragraph at the end thereof:

Notwithstanding any other provision of this Plan, Eligibility Service and Credited Service shall cease to accrue, for any participant, no later than August 31, 1992.

3. Retirement Benefits, Article VI, is amended by the addition of the following paragraph at the end thereof:

Notwithstanding any other provision in the Plan, Retirement Benefits

5 Plan, as so amended, remains in effect. On July 2, 1992, the

Company delivered notice of its intent to terminate the Plan on

August 31, 1992 to each participant, beneficiary, alternate

payee, and the Union pursuant to 29 U.S.C.A. § 1341(a)(2) (West

1985). Based upon its own consultants' reports, the Company then

believed that the Plan's assets exceeded the present value of its

liabilities.

About a week after receiving notice of the Company's

intent to terminate the Plan, the Union filed an unfair labor

practice charge with the NLRB challenging the Company's

unilateral decision to terminate the Plan. The NLRB issued a

complaint and scheduled a hearing before an administrative law

judge. Before the hearing, the Company and the Union met and

entered into an agreement meant to resolve their dispute. In

exchange for the Union's withdrawal of the NLRB charge, the

Company agreed to pay the Plan's participants a lump-sum cash

payment upon "receipt of approval of the Plan termination by the

IRS."0 The parties refer to this agreement as the "Settlement

Agreement," and so will we.

shall cease to accrue, for any participant, no later than August 31, 1992.

App. at 21. 0 In this respect, the Settlement Agreement states:

Upon receipt of the approval of the plan termination by the Internal Revenue Service, the Company will arrange for the distribution of the actuarial equivalent value of the accrued benefits in cash for each plan participant entitled to benefits under the

6 The Company's consultants began preparing the documents

necessary for regulatory permission to terminate the Plan. In

doing so, they discovered that the Plan's assets were

insufficient to satisfy its liabilities on a termination basis,

even though it was adequately funded on an on-going basis.

Instead of the expected surplus, the Company now faced a deficit

of approximately $300,000 if it proceeded to terminate the Plan.0

If termination was abandoned, however, the Plan would remain

adequately funded, so long as the Company continued its customary

required contributions. Knowing these facts, the Company

notified the Union that the assets of the Plan were insufficient

to permit termination and that it no longer intended to terminate

the Plan. The Company also refused to submit a termination plan

terminating plan, unless such participant elects to take their benefits in the form of a monthly benefit.

App. at 24. 0 Apparently, pension funding on a termination basis is subject to actuarial assumptions that differ from those used to calculate funding on an on-going basis. Accordingly, a pension plan that is adequately funded on an on-going basis can be substantially underfunded on a termination basis. The consultants explained the situation with regards to the present plan as follows:

To summarize, the Plan has been caught in something of a squeeze between adverse changes in the annuity market place and adverse asset growth at the same time. The result is that the Plan's assets, which once comfortably covered all termination liabilities, no longer meet that need. The assets are, however, certainly large enough to meet the current annual payout requirements for retired employees. . . .

App. at 201.

7 to the IRS, contending that the Settlement Agreement imposes on

it no legal obligation to terminate.

The Union then filed this action. It alleged that the

Company breached the Settlement Agreement and ERISA by failing to

terminate the Plan and pay its participants the lump sum benefits

that they would be entitled to receive upon termination. When

the facts recited above went undisputed, the Union moved for

summary judgment, contending that the Settlement Agreement

unambiguously required the Company to terminate the Plan and pay

the lump sums due on termination.

On May 13, 1994, the district court held that the

Company and the Plan were not obligated to terminate by contract,

fiduciary duty, or any other legal principle. It reasoned that

ERISA precluded termination of an underfunded plan and therefore

"submission of the Plan termination to the IRS for approval would

have been an exercise in futility." American Flint Glass Workers

Union, AFL-CIO v. Beaumont Glass Co., No. 93-1511, slip op. at 6

(W.D. Pa. May 13, 1994). It also concluded that the Settlement

Agreement did not obligate the Company to make the payment

necessary to fund termination. The district court not only

denied the Union's motion for summary judgment but, on its own

motion, granted summary judgment to the Company. The Union filed

this timely appeal.

II. Jurisdiction & Standard of Review The district court had subject matter jurisdiction over

this case under 28 U.S.C.A. § 1331 (West 1995). We have

8 appellate jurisdiction over the district court's final decision

under 28 U.S.C.A. § 1291 (West 1993).

In this case, the Company did not move for summary

judgment. The district court, on its own motion, granted summary

judgment, stating: Although Fed. R. Civ. P. 56 does not explicitly authorize this Court to grant summary judgment to a non-moving party, the Court concludes that 'where one party has invoked the power of the court to render a summary judgment against [an] adversary, it is reasonable that this invocation gives the court power to render summary judgment for [the] adversary if it is clear that the case warrants that result.' 6 Moore's Federal Practice ¶ 56.12 (1994).

American Flint, No. 93-1511, slip op. at 9. Neither party

challenges the district court's decision to act sua sponte.0 We

will therefore review the merits of the district court's order

granting summary judgment to the Company using the customary

standard of plenary review over district court orders granting

summary judgment. Bixler v. Central Pa. Teamsters Health-Welfare

Fund, 12 F.3d 1292, 1297 (3d Cir. 1993); Wheeler v. Towanda Area School Dist., 950 F.2d 128, 129 (3d Cir. 1991). All reasonable 0 Nevertheless, it is appropriate to remind the district court: "[A] district court may not grant summary judgment sua sponte unless the court gives notice and an opportunity to oppose summary judgment." Otis Elevator Co. v. George Washington Hotel Corp., 27 F.3d 903, 910 (3d Cir. 1994) (citing, among other cases, Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1069-70 (3d Cir. 1990), Davis Elliott International, Inc. v. Pan American Container Corp., 705 F.2d 705, 707-08 (3d Cir. 1983). While these rights can be waived, orders granting summary judgment sua sponte endanger important rights and, unless waived as here, are likely to result in judicial inefficiency and deprivation to the rights of one of the parties.

9 inferences and any ambiguities should be drawn in favor of the

party against whom judgment is sought. Bixler, 12 F.3d at

1297-98. Moreover, summary judgment should be granted only when

there is no genuine issue of material fact and the moving party

is entitled to judgment as a matter of law. Id. at 1297.

III. Discussion

A. ERISA

The Union claims that the Company breached its

fiduciary duties under ERISA by failing to terminate the Plan.

Conceding that the Company had no initial duty to terminate, the

Union claims that once the Company amended the Plan to include a

termination date it had to administer the Plan in accordance with

that amendment. Thus, the Union concludes that the Company

breached its fiduciary duty when it failed to provide the funding

necessary to terminate the Plan and thereafter distribute the

Plan's assets to the employees. On this point we, like the

district court, disagree with the Union.

The Plan is a single-employer defined benefit pension

plan subject to ERISA, and the Company serves as a fiduciary

under ERISA with regard to certain specified plan related

decisions. Although "ERISA creates a fiduciary duty on the part

of an employer administering a plan," the employer does not

always act in a fiduciary capacity. Delgrosso v. Spang and Co.,

769 F.2d 928, 934 (3d Cir. 1985), cert. denied, 476 U.S. 1140

(1986). Under ERISA, "when employers themselves serve as plan

administrators, they assume fiduciary status only when and to the

10 extent that they function in their capacity as plan

administrators, not when they conduct business that is not

regulated by ERISA." Hozier v. Midwest Fasteners, Inc., 908 F.2d

1155, 1158 (3d Cir. 1990) (quotations omitted). An employer's

decision to amend a plan is not the subject of ERISA's fiduciary

duties. Id. at 1161 ("Virtually every circuit has rejected the

proposition that ERISA's fiduciary duties attach to an employer's

decision whether or not to amend an employee benefit plan.")

(collecting cases); see also McGath v. Auto-Body North Shore,

Inc., 7 F.3d 665, 670 (7th Cir. 1993) (quoting Hozier).

A decision to terminate a plan is "unconstrained by the

fiduciary duties that ERISA imposes on plan administration."

Hozier, 908 F.2d at 1162; see also Fischer v. Philadelphia Elec.

Co., 994 F.2d 130, 133 (3d Cir.), cert. denied, 114 S. Ct. 622

(1993). Payonk v. HMW Industries, Inc., 883 F.2d 221, 229 (3d

Cir. 1989). We will, however, assume, once a termination

decision is reached, that ERISA's fiduciary duties control the

termination procedures. See District 65, UAW v. Harper & Row

Publishers, Inc., 670 F. Supp. 550, 556-57 (S.D.N.Y. 1987)

(holding that post-termination decisions are subject to ERISA's

fiduciary duties when they involve discretionary decisions).

Nevertheless, we believe that the Union's fiduciary

claim still fails in this case. The duty here in question is no

more than the duty to administer an ERISA-covered plan in

accordance with the plan's terms. See 29 U.S.C.A. § 1104 (West 1985 and Supp. 1995); Spang, 769 F.2d at 935-36. ERISA

section 1104 states in relevant part:

11 [A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and-- * * * (D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter.

29 U.S.C.A. § 1104(a)(1)(D) (West Supp. 1995) (emphasis added).

The Union's argument ignores the highlighted limiting clause in

this quote from the statute, which limits the Company's fiduciary

duty in effecting termination to compliance with ERISA's

provisions concerning termination. As the United States Court of

Appeals for the Fourth Circuit recently held, "strict compliance

with the statute is the sole means by which a pension plan

subject to the provisions of ERISA may be terminated." Phillips

v. Bebber, 914 F.2d 31, 34 (4th Cir. 1990); see also 29 U.S.C.A.

§ 1341(a)(1) (West Supp. 1995) ("Exclusive means of plan

termination").

With respect to termination, ERISA provides, ". . . a

single-employer plan may be terminated only in a standard

termination under subsection (b) of this section or a distress

termination under subsection (c) of this section." 29 U.S.C.A.

§ 1341(a)(1). The termination at issue in this case can proceed

only as a standard termination. In a standard termination, ERISA

requires, in relevant part, that: the plan administrator shall send a notice to the [Pension Guaranty Corporation] setting forth-- (i) certification by an enrolled actuary--

12 (I) of the projected amount of the assets of the plan (as of the proposed date of the final distribution of assets), (II) of the actuarial present value (as of such date) of the benefit liabilities (determined as of the proposed termination date) under the plan, and (III) that the plan is projected to be sufficient (as of such proposed date of final distribution) for such benefit liabilities.

29 U.S.C.A. § 1341(b)(2) (West Supp. 1995) ("Termination

procedure"). Here, the actuaries were unable to provide the

certification required for termination because of insufficient

assets. Thus, the Company could not terminate the Plan as the

amendment provided in accord with ERISA unless it had some legal

obligation to provide all the funds necessary to meet ERISA's

full funding requirement. We perceive no such obligation in the

statute itself. Indeed the Union's reasoning on this point seems

circular.0

The Pension Guaranty Corporation's regulations on

terminations provide: [F]ailure to distribute assets . . . within the 180-day distribution period . . . shall

0 The Union's reliance on Kinek v. Paramount Communications, 22 F.3d 503 (2d Cir. 1994), and Pension Benefit Guaranty Corp. v. Artra, Group, Inc., 972 F.2d 771, 772 (7th Cir. 1992), is misplaced. In Kinek, the court addressed the contractual responsibilities of an employer that terminated a plan. The contract in question specifically stated that "'the Employer will fully fund'" the plan upon termination. Kinek, 22 F.3d at 506. Although this case may prove relevant on remand to the Union's contract claim, it has no effect on its claim for breach of fiduciary duty. In Artra, the court held an employer liable for terminating an underfunded plan. Artra, 972 F.2d at 771. Furthermore, Artra addressed the company's statutory liability under ERISA's termination provision, 29 U.S.C.A. § 1362, and not its fiduciary duties.

13 nullify the termination. All actions taken to effect the plan's termination shall be null and void, and the plan shall be an ongoing plan. In this event, the plan administrator shall notify the affected parties in writing . . . that the plan is not going to terminate or, if applicable, that the termination was invalid but a new notice of intent to terminate is being issued.

29 C.F.R. § 2617.28 (emphasis added). As stated above, the

Company properly notified the affected parties when it determined

that the Plan's asserts were insufficient to permit the

termination process to go forward. Accordingly, we conclude that

the amendment is null and void and the Company has no continuing

fiduciary duty to act in accordance with it.

The district court's grant of summary judgment in favor

of the Company on the Union's breach of fiduciary duty claim will

be affirmed.

B. Contract

We must still consider, however, what the Settlement

Agreement obligates the Company to do. The Union argues that the

Company promised "to terminate the Plan and, by clear implication

and by law, to provide whatever funding termination required."

Brief of Appellant at 8. The Company responds that ERISA

precludes it from terminating the Plan at its current funding

level and nothing in the Settlement Agreement obligates it to

furnish the additional funding needed to terminate.

The Settlement Agreement, as an agreement between an

employer and a union, is a labor agreement, but its

14 interpretation is nevertheless governed by general principles of

contract law. See 29 U.S.C.A. § 185 (West 1995); Jersey Cent.

Power & Light Co. v. International Brotherhood of Electrical

Workers, 508 F.2d 687, 703 n.45 (3d Cir. 1975) (labor agreements

"are to be interpreted according to principles of general

contract law inasmuch as Congress has not adopted a different

standard by which the . . . agreement is to be interpreted.");

see also Textile Workers Union v. Lincoln Mills of Alabama, 353

U.S. 448 (1957).

The parties frame their dispute around the Settlement

Agreement's provision for distributions to Plan participants upon

the IRS's approval of termination. The Company contends that the

IRS's approval is a condition precedent to termination that it is

unable to satisfy. The Union argues that the lack of the IRS's

approval is immaterial because it was the Company's failure to

submit a termination Plan to the IRS that prevented the

occurrence of the condition. See Davidson & Jones Dev. Co. v.

Elmore Dev. Co., 921 F.2d 1343, 1351 (6th Cir. 1991); Vanadium

Corp. v. Fidelity & Deposit Co., 159 F.2d 105, 108 (2d Cir.

1947); Cauff, Lippman & Co. v. Apogee Finance Group, Inc., 807 F. Supp. 1007, 1024 (S.D.N.Y. 1992).

Both parties seem to miss the point when they cast

their arguments primarily in terms of conditions precedent.0 The

issue, as we see it, is whether the Settlement Agreement imposes

0 In doing so, they run the risk of confusing the condition precedent that the IRS imposes on termination with the provisions of the contract that the Company believes make pre-existing full funding a condition precedent to its obligation to terminate.

15 a duty on the Company to provide the funding needed to obtain IRS

approval of the proposed termination. In this respect, the

district court correctly defined the issue, but incorrectly

resolved it. It held: "[The Union's] breach of contract theory

founders because [it] fail[s] to establish that [the Company and

the Plan] are, or ever were, under a contractual duty to [the

Union] to put sufficient additional assets into the fund to

render the fund susceptible of lawful voluntary termination."

American Flint, No. 93-1511, slip op. at 6. We hold that the

district court erred in resolving this issue as a matter of law.

"'[I]n order for us to affirm the district court with

respect to summary judgment, we must determine that the contract

is so clear that it can be read only one way.'" Tigg Corp. v.

Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987) (quoting

Landtect Corp. v. State Mut. Life Assur. Co., 605 F.2d 75, 79 (3d

Cir. 1979)). Thus, if the union "'presents us with a reasonable

reading of the contract which varies from that adopted by the

district court, then a question of fact as to the meaning of the

contract exists which can only be resolved at trial.'" Id.

In determining the meaning of the contract, the

"initial resort should be to the 'four corners' of the agreement

itself." Washington Hospital v. White, 889 F.2d 1294, 1300 (3d Cir. 1989), cert. denied, 498 U.S. 850 (1990). "To be

unambiguous, an agreement must be reasonably capable of only one

construction." Id. at 1301 (citations omitted). Ambiguity is a

pure question of law for the court. World-Wide Rights Ltd. Partnership v. Combe Inc., 955 F.2d 242, 245 (4th Cir. 1992); see

16 also International Brotherhood of Boilermakers, etc. v. Local

Lodge D504, 866 F.2d 641 (3d Cir.), cert. denied, 493 U.S. 812

(1989); Tigg, 822 F.2d at 362.

In deciding whether a contract is ambiguous, a court

does not just ask whether the language is clear; instead it

"hear[s] the proffer of the parties and determine[s] if there are

objective indicia that, from the linguistic reference point of

the parties, the terms of the contract are susceptible of

different meanings." Teamster Industrial Employees Welfare Fund

v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir. 1993)

(quoting Sheet Metal Workers, Local 19 v. 2300 Group, Inc., 949

F.2d 1274, 1284 (3d Cir. 1991)) (internal brackets and quotation

marks omitted). As we have stated: An ambiguous contract is one capable of being understood in more senses than one; an agreement obscure in meaning through indefiniteness of expression, or having a double meaning. . . . Before it can be said that no ambiguity exists, it must be concluded that the questioned words or language are capable of [only] one interpretation.

Landtect Corp. v. State Mut. Life Assurance, 605 F.2d 75, 80 (3d

Cir. 1979) (internal quotation marks omitted) (quoting Gerhart v.

Henry Disston & Sons, 290 F.2d 778, 784 (3d Cir. 1961)).

If a contract can reasonably be interpreted in two

different ways, neither contracting party is entitled to summary

judgment. Here the parties offer two reasonable interpretations:

(1) the contract requires the Company to terminate the Plan only

if its current funds enable it to do so, or (2) the contract

17 requires the Company to take all necessary steps (including

funding) to effectuate the proposed termination. In this

respect, the Settlement Agreement is ambiguous and extrinsic

evidence is necessary to ascertain the intent of the parties. See

World-Wide Rights, 955 F.2d at 242; Rolls-Royce, 989 F.2d at 135;

Tigg, 822 F.2d at 363; Thompson-Starrett Int'l, Inc. v. Tropic

Plumbing, Inc., 457 F.2d 1349, 1352 (3d Cir. 1972).

Accordingly, we hold that a material issue of fact

remains in dispute concerning the parties' intent to impose on

the Company a duty to provide the funding needed to secure IRS

approval of termination.0 This question cannot be resolved as a

matter of law on the record now before us, and therefore further

proceedings will be needed in the district court.

IV. Conclusion

For the above reasons, we will reverse the district

court's grant of summary judgment in favor of the Company and

remand the case for further proceedings consistent with this

opinion.

0 This issue of fact concerning the intent of the contracting parties should be distinguished from the legal issue of construing the meaning of a contract's terms from their text. See White, 889 F.2d at 1302.

18 19