Opinion
Civil Action No. 1:97CV-153-R
January 20, 1999.
MEMORANDUM OPINION JUDGMENT
The parties agreed for this suit to be submitted to the Court for decision on the record (dkt. # 56). The parties have fully briefed the relevant issues and entered the supporting evidence into the record. Pursuant to Fed.R.Civ.P. 52(a), the Court makes the following findings of fact and conclusions of law which supports judgment in favor of Defendants.
CLAIMS
This action was brought by the International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge 664, a labor organization representing certain former employees of the Defendant, Eaton Corporation in Bowling Green, Kentucky for purposes of collective-bargaining. Also named as Plaintiffs are three individual former employees of Defendant Eaton in Bowling Green, each of whom has at least twenty-five years of credited service in the Defendant Pension Plan in which they participated while employed by Defendant Eaton.
Plaintiffs filed this suit against Defendants Eaton, the Pension Plan, and the Committee which administered the Pension Plan, asserting several causes of action under § 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(e), alleging that Defendants did not modify the Pension Plan's section covering what age beneficiaries may begin receiving benefits in accordance to an agreement reached during negotiations for a collective bargaining agreement between the parties in 1992.
The suit revolves around the distinction between "retirement pension benefits" and "deferred pension benefits" as described by the Pension Plan's 1989 and 1992 Summary Plan Descriptions ("SPD"). "Retirement pension benefits" is the term used by the SPDs to describe benefits available to beneficiaries who were actively employed with the Defendant Eaton until eligible to retire and receive benefits. "Deferred pension benefits" is the term used by the SPDs to describe benefits due to those who were vested in the Pension Plan but were not actively employed with Defendant Eaton at the time of eligibility to receive benefits under the plan.
Collective bargaining agreements were reached by the parties in 1992 ("1992 CBA") and 1995 ("1995 CBA"). The written description of these agreements do not address the Pension Plan in any way. However, there is no dispute that as part of the negotiations for the 1992 CBA, the parties agreed to modify the pension fund in accordance with the "Final Company Economic Proposal ("1992 Final Proposal").
The 1992 Final Proposal constitutes the sole written manifestation of the parties' agreement on this issue. The section in dispute states, in toto,
Retirement
The basic monthly pension retirement benefit will be increased from the present $17.00 per month per year of credited service to:
$17.50 per month per year of credited service for those employees retiring on or after February 1, 1993.
$18.00 per month per year of credited service for those employees retiring on or after February 1, 1993, but prior to February 1, 1994.
$19.00 per month per year of credited service for those employees retiring on or after February 1, 1994.
On or after February 1, 1992, unreduced pension benefit will be changed to age 62 for employees who have 25 years of service.
The reduction schedule reflecting the improvement for employees who have 25 years of credited service would be:
AGE Reduction
62 0 %
61 4 %
60 8 %
Following Plaintiffs' ratification of the 1992 Final Proposal, the "retirement pension benefits" section of the Pension Plan was modified to reflect the agreement, but the "deferred vested pension benefits" section was not.
The core of Plaintiffs' complaint is that the 1992 Final Proposal was understood to call for a modification that would allow both early retirement beneficiaries and deferred pension beneficiaries to receive reduced benefits prior to age 62, and full benefits at age 62. Defendants assert that the 1992 Final Proposal clearly applies only to beneficiaries meeting the qualification for early retirement, not deferred pension beneficiaries.
In denying Defendants' motion to dismiss on these claims, the Court found that the1992 Final Proposal was ambiguous as to whether it applied to which benefits it was intended to apply. The parties agreed for this suit to be submitted to the Court for decision on the record (dkt. # 56).
FINDINGS OF FACT CONCLUSIONS OF LAW
Administration of the Pension Plan is governed by a plan document, applicable to all plan participants, and by the terms of individual "schedules" which are applicable to different groups of employees working at different plants or facilities operated by Defendant Eaton. The benefits provided by the Pension Plan are explained to beneficiaries in document known as a Summary Plan Description ("SPD").
The 1989 SPD drew a clear distinction between "retirement pension benefits," available to beneficiaries who were actively employed with the Defendant Eaton until eligible to retire and receive benefits, and "deferred pension benefits," due to those who were vested in the Pension Plan but were not actively employed with Defendant Eaton at the time of eligibility to receive benefits under the plan.
However, the benefits described in the 1989 SPD were identical for both retirement pension benefits and deferred pension benefits. Prior to 1992, neither type of beneficiary was eligible to receive an unreduced pension under age 65. Both the section dealing with retirement pensions and the section dealing with deferred vested pensions contained in the 1989 SPD provided that beneficiaries with 25 years of service could receive a pension reduced by four percent a year beginning at age 60. (i.e., An eligible 60 year old participant could receive a pension calculated at 80% of the benefits available for that beneficiary at age 65.) The two sections contained an identical chart for the 4% reduction per year of early retirement ranging from age 65 (0%) to age 60 (20%).
In January of 1992, the parties negotiated a new collective bargaining agreement for the Bowling Green plant, to take effect on February 1, 1992. One of the issues negotiated was a lowering of the age to 62 in which a beneficiary could qualify for full benefits, with a 4% reduction at age 61 and an 8% reduction at age 60. The parties disagree as to whether the agreement was to apply to both retirement pension beneficiaries and deferred pension beneficiaries. This suit is the first time that either party has directly addressed this issue.
As a result of these negotiations, Defendants drafted the 1992 Final Proposal, which was later ratified by Plaintiffs. The 1992 Final Proposal was the sole written manifestation of the parties' agreement on the issue giving rise to this suit. As discussed in this Court's denial of Defendant's motion for summary judgment, the 1992 Final Proposal is ambiguous as to which group of beneficiaries it is to apply. Therefore, the Court next looks to the negotiations leading to the drafting of the 1992 Final Proposal.
There is substantial evidence that negotiators for Plaintiffs were primarily concerned with those beneficiaries who were actively employed by Defendant Eaton at the time they retired in order to allow these workers to retire early. There are a number of statements expressing direct concern with beneficiaries actively employed with Defendant Eaton at the time they would be eligible to retire, but there are no direct statements in the record where negotiators for the Plaintiffs expressed concern for beneficiaries eligible for deferred vested pension benefits. However, this evidence is not dispositive given the historically identical benefits available to the two groups.
Also, negotiators from both parties used the words "retirement" and "pension" interchangeably. Neither party has pointed to statements made during the negotiations that definitively indicates which group was being discussed. It is impossible to determine solely from the negotiators' statements whether the changes to the early benefit eligibility were intended by the parties to be applied to both retirement pension beneficiaries and deferred vested pension beneficiaries. Therefore, the submitted record regarding the 1992 negotiations is ambiguous as to the parties' intent on this issue.
Since the 1992 Final Proposal is ambiguous on its face, and the submitted record regarding the 1992 negotiations is also ambiguous as to the intent of the parties, the Court must look to the actions of the party following Plaintiff's ratification of the 1992 Final Proposal for evidence of the parties' intent.
Six months following Plaintiffs' ratification of the 1992 Final Proposal, Defendants issued to Plaintiffs the 1992 SPD, which clearly contains Defendants' interpretation of the 1992 Final Proposal. Despite this written distinction between the benefits available to the two types of beneficiaries, Plaintiffs waited five years to protest that the 1992 SPD did not represent the 1992 agreement. During this five-year period, the parties negotiated on related issues, yet Plaintiff's claim they never noticed the clear distinction in the SPD until their members began to apply for benefits.
Plaintiffs' argument that its representatives did not bother to examine the entire SPD after finding the negotiated schedule and sliding scale in the "retirement" section is not persuasive. It would have taken a less than "thorough examination" of the deferred vested pension section to notice that it had a clearly different sliding scale for the age of eligibility. Even a cursory glance at the deferred vested benefits section of the 1992 SPD would have revealed significantly different reduction charts, one ranging from ages 60 to 65, and the other ranging from ages 60 to 62.
In 1996, the parties negotiated a plant closing agreement. The agreement included a "bridge agreement" which allowed beneficiaries who were 59 years of age at the time of the closing to receive the same health and retirement benefits as if they were 60 years of age at the closing. This provision would have been unnecessary regarding retirement benefits had the parties not understood that the pension benefits for an active employee retiring at age 60 were different than for a former employee who was eligible for deferred vested pension benefits at age 60.
On the other hand, Defendants modified the Pension Plan to increase the benefits schedule as described by the 1992 Final Proposal for both retirement pension benefits and deferred vested pension benefits. Defendants never address why the1992 agreement would apply to both types of beneficiaries as to the increased schedule but not to the lowered age scale. This is made more troubling by the face of the 1992 Final Proposal, which specifically refers to "pension retirement benefit" for the increased benefit schedule, but refers only to "reduced pension benefit" regarding the age scale.
Had Plaintiffs protested soon after receiving the 1992 SPD, the Court may have been inclined to agree with their interpretation of the 1992 agreement given the historically identical benefit structure and Defendants failure to address their modification of the benefits schedule for both types of beneficiaries following the 1992 negotiations. However, the five year delay following receipt of the 1992 SPD, during which the parties engaged in related negotiations regarding the closing of the plant, and the clear description of the plan in the 1992 SPD, leads the Court, as the finder of fact in this case, to determine that the 1992 SPD represents the agreement reached by the parties in the 1992 negotiations. If the 1992 SPD had not represented the agreement of the parties, the Court believes that Plaintiffs would have complained to Defendant Eaton. The Court cannot accept Plaintiffs' argument that these allegedly unintended changes were simply overlooked. The Court finds that there were no objections to the 1992 SPD because it represented the agreement of the parties.
Based on this finding of fact, the Court finds that there was no breach of the 1992 agreement and judgment must be entered for the Defendants.
In the alternative, even were the Court not to make the factual finding that the terms of the agreement were reflected by the 1992 SPD, the record could also support a finding that there was a mutual mistake as to the terms of the agreement. The Sixth Circuit has held that "the whole burden of proof is on the party alleging breach of a collective bargaining agreement under section 301 of the Labor Management Relations Act, 29 U.S.C. § 185." United Steelworkers of America, AFL-CIO v. North Bend Terminal Co., 752 F.2d 256, 261 (6th Cir. 1985). "[W]here there is a mutual misunderstanding as to a contract term . . . the court will rule against the party bearing the burden of proof." Id.
This Sixth Circuit decision has been criticized by other circuits, reasoning that the rule would always result in a ruling in favor of the Defendant. United Commercial Insurance Service, Inc. v. Paymaster Corp., 962 F.2d 853, 856 (9th Cir. 1991). Regardless of the criticism, North Bend Terminal is still controlling law in the Sixth Circuit.
At best, the record supports a mutual mistake between the parties as to the terms of the agreement. Since Plaintiffs have failed to meet their burden to prove the terms of the contract, judgment is appropriate for Defendants.
However, the Court finds that the 1992 SPD which was received by Plaintiffs and went unchallenged for five years represented the agreement of the parties.
THEREFORE, IT IS ORDERED AND ADJUDGED:
The Court finds for Defendant and this case is DISMISSED.
This is a final and appealable Judgment. There is no just cause for delay.