Appendix — Atlas Tack Corp. v. Mahoney

IN THE

Supreme Court of the United States

October Term, 1978

No. 78-936

Atias Tack CoRPORATION,

Petitioner,

v,

RayMonp MAHONEY, ET AL.,

Respondents.

Atias Tack CorpPoraTION,

Petitioner,

v.

RayMonp HoeEret,

Respondent.

APPENDICES TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FIRST CIRCUIT

Epwarp Bropsky

Counsel for Petitioner

280 Park Avenue

New York, New York 10017

Tel. No, (212) 682-4444

INDEX |

PAGE

Appendix A—Opinion of United States District

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Appendix B—Opinion of Court of Appeals dated

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Appendix C—Order of Court of Appeals dated Sep-

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Appendix D—Judgment of United States District

UNITE. <ccieounipsciniiveceieeinianbedisbieshinbepinnemniaanamantecs 26a

Appendix E—Opinion of United States District

Court in /nternational Union, ete. v.

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Appendix F—Constitutional provisions, statutes and

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APPENDIX A

UNITED STATES DISTRICT COURT

District oF MASSACHUSETTS

CIVIL ACTION NO. 73-1088 SECTION “F”

eS

RayMonp MAHONEY, ET AL.,

Vs.

Attias Tack CorroraTION, ET AL.

Eh ee

Awan 8S. Novick, Esa.

Attorney for Plaintiff,

Epwarp Wott, Jr., Esq.

Attorney for Defendants.

_—_—— nh ee

RUBIN, Circuit Judge: °

After former employees of Atlas Tack Corporation

(“Atlas”) had retired and had begun receiving pensions,

the Atlas pension plan was terminated, and payment of

their pensions stopped. These pensioners seek a declara-

tion that Atlas must provide each of them with an amount

sufficient to purchase an annuity insurance contract suffi-

cient to pay him pension benefits for life.'

* Sitting as District Judge by designation of Chief Judge John R.

Brown,

1 The action was begun in state court and was removed to federal

court on the basis that it arose under Section 301, Labor Manage-

ment Relations Act of 1947, 29 U.S.C. § 185. A motion to remand

was previously denied by another judge of this court. When the

matter reached trial, it became apparent that the plaintiffs were not

union members and that, as the court noted sua sponte, this juris-

dictional basis was doubtful. However, the court retained jurisdic-

tion on the basis of the allegations of the complaint.

There are twelve plaintiffs named. One _ plaintiff, William

Poenack, has withdrawn, and another plaintiff, Harold Vokes, is

deceased and will be dismissed by stipulation.

2a

Atlas negotiated a pension plan for members of its col-

lective bargaining unit with the International Union,

United Automobile, Aeropower and Agricultural Imple-

ment Workers of America, UAW and its Local 899 (the

“Union”), on September 9, 1964, to begin as of July

1, 1963. The company voluntarily included non-union

employees in the union-negotiated pension plan; this

included foremen who were not eligible to be members of

the bargaining unit, and plant clerical workers, who were

later the object of a separate union campaign.

A summary of benefits provided under the plan was

distributed to each of the plaintiffs, as well as to all other

workers. The summary recites, inter alia:

The Company fully expects to continue the Plan sub-

ject to the terms of its present Pension Agreement

with its employees. However, since future changes in

conditions cannot be foreseen, the Company neces-

sarily reserves the right to change, suspend or dis-

continue the plan at any time. No change, suspension,

or discontinuance will adversely affect the pensions

already purchased, unless a change is made in the

Plan for the purpose of meeting the requirements of

the Federal Internal Revenue Code or any other appli-

cable lay. (Emphasis supplied). Pension Plan, § 14.

The plan was administered by Aetna Life Insurance

Company (“Aetna”). Under its terms, when an employee

reached retirement age, Atlas contributed a sum sufficient,

which was added to the amount already held in for his

account, to buy a lifetime annuity contract for him from

Aetna. Thus, neither any later amendment to, nor dis-

continuance of, the plan could adversely affect the rights

of an employee after retirement.

On April 15, 1968, the pension plan was changed from an

insurance-funded plan (“insurance plan”) to a trust-funded

3a

plan (“trusteed plan”). Under the trusteed plan, Atlas

contributed annually an amount sufficient, when added to

credits in the plan, to pay the benefits due each retired

employee. The change thus made retirement benefits

depend upon continuance of the plan and on Atlas’ con-

tinued solvency.

None of the plaintiffs received any pension payments

until after April 15, 1968, and, therefore, no pension con-

tract was purchased for any of the plaintiffs. After that

date, the contract between Atlas and Aetna was amended

to terminate the insurance plan. Pensions were paid as a

result of annual contributions by Atlas in addition to the

relatively modest accumulated credits.

The change from an insured plan to a trusteed plan was

necessitated by a change in Atlas’ gross sales, the resultant

reduction of its profitable operations to losses, and by the

high cost of the insured plan compared to the trusteed

plan. Atlas was suffering severe economic losses and felt

that it was essential to reduce the annual amounts it was

required to pay for pension benefits. The facts were put

before the union, and it agreed to the change as to the

union employees. They were not disclosed to the non-

union employees who are plaintiffs in this suit, and none

of the plaintiffs, were consulted about the change or con-

sented to it.

Some or all of the plaintiffs had, however, heard rumors

of the change. It was discussed among the non-union

work force. Atlas’ President became aware of employee

concern about the change, and assured the non-union

employees that this had made the plan stronger, and was

to their benefit. At the time the President of Atlas gave

these assurances, he knew that the trusteed plan was not,

in fact, more reliable, that it was made necessary by eco-

nomic losses, and that it made the fate of retired employees

4a

subject to the vicissitudes of Atlas’ future operations. He

not only willfully withheld these facts; he deliberately mis-

represented the trust.

By September 9, 1964, the date the original pension plan

was instituted, three plaintiffs (Thoits, Fisher and

Mahoney) had completed all of the service required to

obtain maximum benefits under the plan and were given

full credit for such pre-plan service. All but two (Gurney

and Karl) had acquired sufficient work credits to entitle

them to minimum retirement benefits. As a result of this,

and the credit due to other employees, the plan began with

a large unfunded accrued liability. This deficit became

larger when, in 1966, benefits were increased, effective

June 30, 1967, and when changes were made effective April

15, 1968 to enlarge the group eligible for retirement. Atlas’

President knew all of this, and knew the hazard created by

this liability, coupled with the change in Atlas’ profits. He

not only did not disclose the facts; he misled the non-union

employees with respect to them.

All of the documents pertinent to the pension plan,

including the Aetna contract and the pension trust, were

kept in the office at Atlas. The plaintiffs could have asked

to see any or all of the relevant documents. But they did

not, relying instead on the assurances of Atlas’ President.

One plaintiff, Mrs. Orvilla Silva, was involved in pension

plan administration, but at no time was the nature of the

new plan explained to her, and she never read it to deter-

mine how it affected her personal future.

Pension plans presently in force must comply with elabo-

rate federal requirements adopted in part to avoid the pre-

dicament of the present plaintiffs. See, Employment

Retirement Income Security Act of 1974, Pub. L. 93-406, 88

Stat. 829, 29 U.S.C. §§ 1001, et. seg. While pension plans

adopted (and terminated) prior to June 30, 1974 are not

5a

subject to this statute, see 29 U.S.C. §1381(a) (2), they

must meet certain requirements of federal law, for example,

the Welfare and Pension Plan Disclosure Act, 29 U.S.C.

§ § 301-309. But they are nonetheless contractual relation-

shins governed by state law. Craig v. Bemis Co., Inc.,

5 Cir. 1975, 517 F.2d 677, 680; Miller v. Davis, 6 Cir. 1974,

507 F.2d 308, 311; Hurd v. Hutnik, D.N.J. 1976, 419 F. Supp.

636, 653.

The first issue in the case is whether Atlas’ voluntary

establishment of a pension plan for its non-union employees

and the acts of individual employees in qualifying for the

plan constitutes a contract between the company and those

employees whose rights have become vested. Because this

has not been expressly decided under Masachusetts law,

counsel were consulted ahout whether the question should

be certified to the Massachusetts Supreme Judicial Council,

as its rules apparently permit. Rule 3:21, Mass. Supreme

Judicial Court Rules. However, counsel for both parties

have requested the court itself to attempt to decide the

issue.

Absent Massachusetts authority, we must consider the

trend in other jurisdictions for guidance as to how a Massa-

chusetts court would resolve the problem. According to

“Annotation: Pension Plan—Rights of Employee”, 42

A.L.R.2d 462, 463:

The announcement of a pension plan under which most

of the employer’s workers may expect eventually to

become entitled to retirement benefits clearly has some

tendency to induce employees to remain in the employ-

ment and so reduce labor turnover, and the courts have

agreed that the benefits so derived by the employer

constitute a sufficient consideration to support a

reciprocal undertaking by the employer to pay pen-

sions, so that where the employer has not clearly and

unequivocally disclaimed any intention to become

6a

legally bound, it has usually been held that an

employee having satisfied the announced conditions

necessary to render him eligible for benefits acquires

a legally enforceable right, either on the ground that

the employer’s unilateral offer was accepted by com-

pleting performance or under the theory of promis-

sory estoppel.

This editorial comment appears to reflect fairly the sub-

stance of the cases cited. Thus, in Rochester Corporation

v. Rochester, 4th Cir. 1971, 450 F.2d 118, the court held that,

once employees qualify under the pension plan, the

employer’s unilateral offer is deemed accepted and the offer

becomes “irrevocable”, saying:

The pension plan provided that all employees of the

defendant, if they remained in the employ of the

defendant ten or more years, would be entitled, on

attaining retirement age, to certain specified pension

rights. While unilateral, that offer, when acepcted by

an employee as evidenced by rendering services for

ten or more years, became “irrevocable” and such

employee acquired “a right no less contractual than if

the plan were expressly bargained for”. By rendering

service for the period required under the plan, the

employee’s rights to benefits under the plan are

“earned no less than the salary paid to him (the

employee) each pay period” and are “in the nature of

delayed compensation for former years of faithful

service”, Whether the plan be contributory or non-

contributory, the benefits, thus earned, are not gra-

tuities.

450 F.2d at 120-121. See also Hurd v. H utnik, N.J., 1976,

419 F.Supp. 630.

Cases concerning employees who never qualified under

their particular plan, and hence whose rights to benefits had

not vested are inapposite. This was the situation presented

7a

in Sbrogna v. Worcester Stamped Metal Co., Mass., 1968,

354 Mass. 17, 234 N.E. 2d 749; Dwyer v. Climatrol Indus-

tries, Inc., 7th Cir. 1976, 544 F.2d 307; Knoll v. Phoenis

Steel Corporation, 3rd Cir. 1972, 465 F.2d 1128; Finnel v.

Cramet, Inc., 6th Cir. 1961, 289 F.2d 671; and Cf. Boase v.

Lee Rubber and Tire Co., 3rd Cir. 1970, 437 F.1d 671 (sic) .?

Nor are cases involving employees who were divested of

their accrued benefits because they committed acts which

the plan specifically identified as breaches of the agreement

relevant here. See e.g., Askinas v. Westinghouse Electric

Corp., Mass., 1953, 330 Mass. 103, 111 N.E.2d 740;

Rochester Corp. v. Rochester, 4th Cir. 1971, 450 F.2d 118

(covenant not to compete) ; Neuffer v. Bakery and Confec-

tionary Workers Int. U., D.C. Cir. 1962, 307 F.2d 671 (dual

nnionism). See and compare [’laherty v. Gray, Mass., 1956,

334 Mass. 117, 134 N.E.2d 144, where the court held that the

plaintiff, whose rights to benefits had vested, could not

recover from a joint pension fund contributed to by four

employers where plaintiff’s employer had failed to con-

tribute to the fund. The court held that to allow such

recovery would make all of the other employees’ annuity

plans unsound. The court did not decide the plaintiff's

rights against his own employer.

The court believes that, if presented with the problem,

a Massachusetts court would follow the prevailing trend

and enforce the employer’s contractual obligations.’

2 For a non-Massachusetts state case, see Huahes v. Encyclopedia

Britannica, Il., 1954, 1 Ill. App.2d 514, 117 N.E.2d 880. where the

court stated, “Here there is an attempt to require the defendant to

purchase annuities under a noncontributory pension plan which will

only at a later and contingent date give rise to pension payments to

the employees.” (emphasis added).

3 At the time of the trial, and at its conclusion, I thought that there

was no contract, and, if there was a contract, no breach because of

the termination clause. Further study of the jurisprudence, includ-

ing cases and materials not referred to by counsel, have altered my

opinion.

8a

The defendants contend, however, that even if a binding

contractual obligation existed, the terms of the contract

itself reserved the right “to change, suspend or discontinue

the plan at any time.” While at one time voluntary pension

plans were considered to be gratuities conferred by the

employer, the current trend is to view them as constituting

offers of additional compensation and as incentive to con-

tinuing and more dedicated service. Cantor vy. Berkshire

Life Ins. Co., Ohio, 1960, 171 Ohio St. 405, 171 N.E.2d 518;

Tilbert v. Eagle Lock Co., Coun., 1933, 116 Conn. 357, 165

A 205; Delaware Trust Co. v. Delaware Trust Co., Del.,

1966, 43 Del. Ch. 186, 222 A.2d 320; Schofield v. Zion’s

Co-op. Mercantile Inst., Utah, 1934, 85 Utah 281, 39 P.2d

342, 96 A.L.R. 1083, 46 A.L.R.3d 464. See, Finnell v.

Cramet, Inc., 6th Cir. 1961, 289 F.2d 409, where the court,

applying Illinois law, suggested that if employees had

already qualified for pensions at the time of modification

or termination, their rights may not be denied under a pro-

vision reserving the employer’s right to modify or termi-

nate for any reason. However, because the employees’

rights had not fully vested, termination was allowed.

Hence, in Dierks v. Thompson, 1 Cir. 1969, 414 F.2d 453,

457, the court held:

The plan was freely amendable under Article XIII.

8. (8. ‘[T]he Company shall have the right to amend

this Agreement at any time and from time to time, to

any extent that it may deem advisable.’) That meant

that until a heneficiary’s rights became vested by termi-

nation of his employment, he could be deprived of

future increases in benefits by the unilateral act of

Textron. (Kmphasis supplied.)

Similarly, in Briggs v. Michigan Tool Co., E.D. Mich.

1974, 369 F. Supp. 920, 922, the court held that a provision

entitling the employer to terminate the plan and relieve

9a

himself of further liability did not relieve the employer of

his obligation to pay those henefits that had accrued pre-

viously and did not relieve him from liability for his failure

to fully fund the plan while it was in operation.

Employment Retirement Income Security Act of 1974, al-

though not applicable here, goes a step further; it contains

provisions requiring pre-retirement incremental vesting

and funding. These provisions were legislated specifically

because Cnogress wished to eliminate the harsh conse-

quences that resulted from courts’ “reluctan[ee] to apply

concepts of equitable relief or to disregard technical docu-

ment wording.” See e.g., Senate Report 93-127, p. 5.

The rights of the plaintiffs to their benefits had accrued

prior to the termination. Just as it is likely that a Massa-

chusetts court would recognize that retired employees have

a contractual right to their pensions, it is likely that a

Massachusetts court would make the distinction suggested

by the First Cireuit Court of Appeals in Dierks, and re-

strict the employer’s right to terminate so that it applied

only to those beneficiaries whose rights had noi vested.

There is an additional reason to hold the employer to its

promise and its representation of that promise here. One

who promises more than he, in fact, intends to deliver and

thus misleads another to that person’s detriment may be

required to fulfill his promise. This is the doctrine of pro-

missory estoppel. The rule is set forth in the Restatement

of Contracts, §90 as follows:

A promise which the promisor should reasonably ex-

pect to induce action or forbearance of a definite and

substantial character on the part of the promisee and

which does induce such action or forbearance. is binding

if injustice can be avoided only by enforcement of the

promise.

Massachusetts courts recognized and applied this rule

of promissory estoppel before it was thus restated, and have

10a

continued to do so. Thus in McLearn v. Hill, 1931, 276

Mass. 519, 177 N.E. 619, the court said:

It is in the main to accomplish the prevention of results

contrary to good conscience and fair dealing that the

doctrine of estoppel has been formulated and taken its

place as a part of the law. It has been said that, ‘In

order to work an estoppel it must appear that one has

been induced by the conduct of another to do something

different from what otherwise would have been done

and which has resulted to his harm and that the other

knew or had reasonable cause to know that such harm

might follow.’

At least one United States District Court, applying both

federal statute and New Jersey law, has held employers

estopped from terminating benefits promised under a pen-

sion plan after the employees who had relied on the promise

had retired. In Hurd v. Hutnik, D.N.J. 1976, 419 F.Supp.

630, 655, the court stated:

The employers contend that even if a lifetime pen-

sion was promised, it was conditioned on the availabil-

ity of adequate monies in the fund from which it could

be paid .... To give effect to such a limitation now,

however, after fourteen years of consistent representa-

tions to the employees that the pension for which their

union had given up current benefits would be for life,

and after hundreds of workers had elected to retire

and to refrain from further work in the industry in

reliance on this promise, is unconscionable.

In the present case, plaintiffs reasonably relied on the

existence of a pension plan and their receipt of pension

benefits; as a consequence, they refrained from seeking sub-

stitute funds. They continued to place their faith in the

employer. Those eligible to elect a union as bargaining

agent did not do so. The employer misrepresented the vul-

lla

nerable position they would be in, upon retirement, by in-

tentionally concealing the precarious nature of the second

plan. In the absence of such deceit, plaintiffs would have

had the opportunity to arrange for their security in the

later years of their life. To allow the employer to deny the

pension benefits, upon which the plaintiffs relied substanti-

ally in forming their retirement plans, would be uncon-

scionable. Considering the Massachusetts courts’ willing-

ness to invoke principles of estoppel to prevent such mani-

fest injustice, this court concludes that a Massachusetts

court would estop the defendant from denying his obliga-

tions. The court, therefore, holds that plaintiffs are entitled

to those benefits for which they qualified under the original

plan.

Rvusry, C. J.

Fifth Circuit Judge

New Orleans, Louisiana

November 1, 1977

12a

APPENDIX B

United States Court of Appeals

For the First Circuit

No. 77-1517

RAYMOND HOEFEL,

PLAINTIFF, APPELLEE,

v,

ATLAS TACK CORPORATION,

DEFENDANT, APPELLANT.

No. 77-1519

RAYMOND MAHONEY, et al.,

PLAINTIFFS, APPELLEES,

v.

GREAT NORTHERN INDUSTRIES, INC., et al.,

DEFENDANTS, APPELLEES.

ATLAS TACK CORPORATION,

DEFENDANT, APPELLANT.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

(Hon. Atvin B. Ruaiy,* U.S. Circuit Judge]

Before Corrin, Chief Judge,

CaMPBELL AND Bownsgs, Circuit Judges.

Edward R. Lev, with whom Joseph Auerbach, Edward Woll, Jr.

and Paulette Kessler were on brief, for appellant. ‘eis

Alan 8. Novick, with whom Novick & Siegel, was on brief. for

appellees.

August 9, 1978

* Of the Fifth Circuit, sitting by designation.

l3a

HOEFEL UV, ATLAS TACK CORPORATION

Corrin, Chief Judge. Pilaintiff-appellees are ten retired

employees of defendant-appellant, Atlas Tack Corporation

(Atlas). In two separate actions,’ originally commenced

in the Massachusetts Superior Court, they sought to re-

cover certain pension benefits allegedly due them under a

pension plan in effect during the period of their employ-

ment with Atlas. That plan, having been the product of

an agreement between Atlas and one of its collective

bargaining units, the International Union, United Auto-

mobile, Aeropower and Agricultura] Implement Workers

of America, UAW and its Local 899 (UAW), provided the

basis for federal jurisdiction under § 301 of the Labor

Management Relations Act, 29 U.S.C. ¢ 185.2 On Atlas’

motion, the actions were removed to the United States

District Court for the District of Massachusetts. There

they were consolidated for trial. At the close of plaintiffs’

1In the first action, Mahoney v. Atlas Tack Corp., Docket No.

73-1038-F (D. Mass. 1973), nine nonunion employees joined as

plaintiffs. Four were foremen ; the rest were office clerical workers.

The second action, Hoefel v. Atlas Tack Corp., Docket No. 75-4526-F

(D. Mass. 1975), was brought solely by Raymond Hoefel, also a

retiree. Hoefel was a member of the Atlas Tack Mctal Workers’

Union, A.F.L. Federal Labor Union No. 23947 (Tackmakers’

Union).

2The Mahoney plaintiffs claim pension rights under the same

pension plan that is part of a collective bargaining agreement.

Judicial interpretation of their rights therefore could be expected

to influence Atlas’ adininistration of the plan even as to the

bargaining unit employees. Also, defenses raised by Atlas in suits

brought by the Mahoney plaintiffs could be foreclosed by collateral

estoppel in later suits by bargaining unit members. As a result,

the Mahoney plaintiffs’ interest ‘‘are to a large degree inevitably

intertwined with union interests.’’ Smith v. Evening News Ass’n,

371 U.S. 195, 200 (1962). ‘‘To exclude these claims from the ambit

of § 301 would stultify the congressional policy of having the

administration of collective bargaining contracts accomplished

under a uniform body of federal substantive law.’’ Jd. For this

reason, § 301 jurisdiction properly extends to the Mahoncy plain-

tiffs’ claims. This accords with the long-established view that § 301

has substantive content and is ‘‘not to be given a narrow reading.’’

Id. at 199; Textile Workers v. Lincoln Mills, 353 U.S. 448, 457

(1957).

l4a

OPINION OF THE OOUBT

case, the court dismissed their breach of contract claim,

but reserved judgment as to whether they could recover

under the doctrine of promissory estoppel. At the end of

the three day trial, the court held for plaintiffs upon the

latter ground and entered a judgment of $102,791, a sum

reflecting the amount necessary to purchase life annuity

contracts for each of the plaintiffs yielding a monthly pay-

ment equal to the pension each plaintiff had earned.

Subsequently, the court filed a written opinion in which

it reaffirmed its decision as to promissory estoppel and

also held that, upon reconsideration of the applicable law,

plaintiffs had a contractual right to their pensions, Atlas

appeals, contesting both its liability and the measure of

damages. We agree with the district court that plaintiffs

have a contractual right to their pensions and affirm on

that ground.’

In September, 1964, Atlas instituted a pension plan pur-

suant to a collective bargaining agreement between it and

the UAW. Atlas voluntarily extended the plan to cover

non-union employees, including the nine plaintiffs in the

Mahoney action.‘ The plan was also made a part of Atlas’

contract with the Tackmakers’ Union, thus bringing plain-

tiff Hoefel under its provisions.

The plan provided that employces who earned a specified

number of service credits and reached a specified age would

receive upon retirement a monthly pension in an amount

determined by the number of credits earned. As originally

established, the plan was administered by the Aetna Life

Insurance Co. Under its terms, when an employee reached

retirement age, Atlas contributed a sum of money sufficient

to buy a lifetime annuity contract yielding the monthly

pension to which the employee was entitled.

3 Because of our resolution we have no occasion to rule on the

court’s alternative ground of estoppel.

* See note 1, supra.

15a

HOEFEL UV, ATLAS TACK CORPORATION

At the time the plan was adopted, each of the plaintiffs

was an Atlas employee. Each received a summary of the

benefits under the plan. Paragraph 14 of the summary

provided :

‘‘The Company fully expects to continue the Plan sub-

ject to the terms of its present Pension Agreement

with its employees. However, since future changes in

conditions cannot be foreseen, the Company neces-

sarily reserves the right to change, suspend or dis-

continue the Plan at any time. No change, suspension,

or discontinuance will adversely affect the pensions

already purchased, unless a change is made in the

Plan for the purpose of meeting the requirements of

the Federal Internal Revenue Code or any other

applicable law.’’

At its inception, the plan provided that employees re-

ceive credit for pre-plan service. Because of these credits,

the plan began with a large unfunded liability. This deficit

increased when benefits were increased in 1966, and in-

creased again as of April 15, 1968, when the group eligible

for retirement with pension was enlarged. Another change

made in April of 1968 was the conversion of the plan from

the Aetna insurance funded plan to a trust funded plan

(trusteed plan). Under the new arrangement, Atlas an-

nually contributed an amount sufficient to pay the benefits

then due each employee during the year. This change did

not purport to affect any employee’s entitlement to his

pension. It did, however, affect the manner in which Atlas

provided for pension payments. Under the insurance plan,

when an employee retired, a lifetime annuity contract was

purchased for him. Thus, subsequent amendment or dis-

continuance of the plan could not adversely affect a retiree.

Under the trusteed plan, however, benefits came to depend,

as the district court described, upon the continuance of the

plan and on Atlas’ continued solvency.

16a

OPINION OF THE COUBT

The change from an insured plan to a trusteed plan was

motivated by Atlas’ financial difficulties. The costs of the

insured plan were substantially higher than the trusteed

plan, and Atlas, then suffering economic losses, felt it

necessary to reduce the annual amount it was required to

pay in benefits. These facts were disclosed to the UAW

which then agreed to the change in the plan as to its

members. Non-union member employees, such as the plain-

tiffs, were not informed as to the reasons for the change,

nor did they consent to it. In fact, soon thereafter, Atlas

through its president misled the non-union employees as to

the effect of the change. The evidence supported the district

court’s finding that

‘‘Atlas’ President became aware of employee concern

about the change, and assured the non-union employees

that this had made the plan stronger, and was to their

benefit. At the time the President of Atlas gave these

assurances, he knew that the trusteed plan was not, in

fact more reliable, that it was made necessary by eco-

nomic losses, and that it made the fate of retired

employees subject to the vicissitudes of Atlas’ future

operations. He not only willfully withheld these facts;

he deliberately misrepresented the trust.’’

In February of 1973, Atlas terminated the pension plan.

Prior to that time, but after April, 1968, each of the

plaintiffs had retired from Atlas’ employment. Each had

qualified, upon retirement, for a pension and began to

receive monthly payments. In fact ,each plaintiff, save one

had qualified for a pension prior to the April, 1968, amend.

5 While it is true that plaintiff Hoefel, as a member of

makers’ Union, agreed to a collective bargaining aceuar whieh

incorporated the plan as it stood in 1969, there is nothing in the

record which suggests that Atlas revealed these facts to Hoefel.

Thus, it appears that his position w i .

non-union plaintiffs. eri as no differen: from that of the

17a

HOEFEL VU, ATLAS TACK CORPORATION

ments. Because each had retired after the change from

the insurance plan to the trusteed plan, however, no annuity

contract was ever purchased for any of the plaintiffs.

Upon terminating the plan, Atlas ceased to make payments

to the plaintiffs.

The district court credited testimony to the effect that

plaintiffs reasonably believed that under the plan, upon

qualifying, they would receive a pension for life. It also

appears to have credited the testimony from several of

the plaintiffs that they continued to work for Atlas after

1967-68 in reliance upon the promise of pension benefits.

The court held that Atlas’ offer of a pension to its em-

ployees became a binding unilateral contract as an employee

qualified for a pension by rendering the required number of

years of service. Further, it held that the termination

clause in the plan did not permit Atlas to discontinue pay-

ments to the plaintiffs whose rights had already vested.

- Through the enactment of the Employment Retirement

Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829,

29 U.S.C. §§ 1001 et seg., Congress manifested its concern

to safeguard the pension rights of American workers from

the risks similar to those involved here. That statute, while

an expression of national policy, has no direct bearing on

pension plans terminated prior to 1974 as was Atlas’.

Rather, as the parties concede, the nature of the contractual

rights of the parties, if any, is governed by state law.

Craig v. Bemis Co., 517 F.2d 677, 680 (5th Cir. 1975);

Hurd v. Hutnik, 419 F. Supp. 630, 653 (D. N.J. 1976).

The threshold question is whether Atlas’ voluntary estab-

lishment of a pension plan and the acts of employees to

qualify for a pension under the plan constitute a contract

between Atlas and those employees whose rights have

become vested. While noting that the Massachusetts courts

have never squarely faced the question, the district court,

relying on the trend of modern authority, answered in the

1Sa

OPINION OF THE COUBT

affirmative. Since the district court’s opinion, the Supreme

Judicial Court decided the case of Balkin v. Frank M. Kaiz,

Inc., Mass, Adv. Sh. 2036, 367 N.E.2d 638 (1977), which

tends to confirm that answer. There an employee sued to

enforce an oral promise by his employer’s president to

pay him a pension. The Supreme Judicial Court reversed

the dismissal below, which was based upon a finding of lack

of consideration, holding that where a pension is promised

to encourage faithful service, the offer becomes a binding

obligation upon completion of such service if rendered in

reliance upon the promised benefit. 367 N.E.2d at 630.

Balkin reflects the Massachusetts court’s acceptance of

the modern view that the promise of a pension constitutes

an offer which, upon performance of the required service

by the employee becomes a binding obligation. As stated in

Rochester Corp. v. Rochester, 450 F.2d 118, 120-21 (4th

Cir. 1971):

‘‘The pension plan provided that all employees of the

defendant, if they remained in the employ of the

defendant ten or more years would be entitled, on

attaining retirement age, to certain specified pension

rights. While unilateral, that offer, when accepted by

an employee as evidenced by rendering services for

ten or more years, became ‘irrevocable’ and such em-

ployee acquired ‘a right no less contractual than if

the plan were expressly bargained for.’ By rendering

service for the period required under the plan, the

employee’s rights to the benefits under the plan are

‘earned no less than the salary paid to him (the em-

ployee) each pay period’ and are ‘in the nature of

delayed compensation for former years of faithful

service.’ Whether the plan be contributory or non-

contributory, the benefits, thus earned are not gratui-

ties.’’ (Citations omitted.)

19a

HOEFEL UV, ATLAS TACK CORPORATION

Accord, Hurd v. Hutnik, supra, 419 F. Supp. at 653-54

(applying New Jersey law); Hardy v. H. K. Porter, Inc.,

417 F. Supp. 1175 (E.D. Pa. 1976) (applying Pennsylvania

law), aff’d in part, rev’d in part mem., 562 F.2d 42 (3d Cir.

1977); Miller v. Dictaphone Corp., 334 F. Supp. 840, 841-42

(D. Ore. 1971) (applying Oregon law) ; Ehrile v. Bank Bldg.

& Equip. Corp. of America, 530 S.W.2d 482 (Mo. Ct. App.

1975); Stopford v. Boonton Molding Co., 56 N.J. 169, 265

A.2d 657 (1970) ; Delaware Trust Co. v. Delaware Trust Co.,

43 Del. Ch. 186, 222 A.3d 320 (1966); Cantor v. Berkshire

Life Ins. Co., 171 Ohio St. 405, 171 N.E.2d 518 (1960) ;

Schofield v. Zion’s Co-operative Mercantile Inst., 85 Utah

281, 39 P.2d 342, 96 A.L.R. 1083 (1934); Tilbert v. Eagle

Lock Co., 116 Conn. 357, 165 A.2d 205 (1933). But cf. Boase

v. Lee Rubber € Tire Co., 437 F.2d 527 (3d Cir. 1970)

(applying New York law). See generaily Annot. 42 A.L.R.

2d 462, 46 A.L.R.3d 464.

Even if the establishment of a pension plan by an en-

ployer and an employee’s subsequent qualification there-

under gives rise, as a general matter, to a vested, enforce-

able contractual right to the pension earned, Atlas claims

that that right can be defeated here because it reserved

‘*the right to change, suspend or discontinue the plan at

any time.’’ In urging that we construe this language to

permit Atlas to cut off benefits to employees who had

already retired, having qualified for a pension, it cites

several cases in which courts have permitted alteration of

pension plans over the opposition of employees who had

not qualified for a pension.® Concededly there is language

6 See Dwyer v. Climatrol Ind., Inc., 544 F.2d 307 (7th Cir. 1976),

aff’g, 403 F. Supp. 684 (E.D. Wis. 1975), cert. dented, 430 U.S.

932 (1977); Craig v. Bemis Co., supra; Knoll v. Phoeniz Ntecl

Corp., 465 F.2d 1128 (3d Cir. 1972) ; Finnell v. Cramet, Inc., 289

F.2d 409 (6th Cir. 1961) ; Sbrogna v. Worcester Stamped Metal Co.,

354 Mass. 17, 234 N.E.2d 749 (1968); Bono v. Kramer, 346 Mass.

355, 191 N.E.2d 760 (1963).

20a

OPINION OF THE COURT

in some of these cases supporting Atlas’ position. How-

ever, we agree with the district court that they are not ap-

posite since there the employees had not yet qualified for

a pension and thus had not yet acquired any vested con-

tractual rights as have the plaintiffs here.

A number of courts have construed pension plans which

reserve to the employer the right to alter or discontinue,

similar to the one involved here, as limiting the employ-

er’s reserved right to apply only to employees whose pen-

sion rights had not, at the time of the change, already ves-

ted. Instructive is the opinion of the Ohio Supreme Court

in Cantor v. Berkshire Life Ins. Co., supra. There an em-

ployee sued to recover certain additional retirement ben-

efits. The contested amounts were due under a contract

in which the employer had reserved the right to terminate.

Noting the importance which retirement benefits have

come to assume both to the employee as a form of deferred

compensation to provide for old age, and to the employer

as a means of obtaining a more stable and productive work

force, the court first concluded that pension plans give

‘‘rise to contractual rights enforceable by the employee

who has complied with all the conditions of the plan.”

And because, under this contractual theory, an employee

acquired a vested right by providing the required consider-

ation, it follows that

‘*,.. even though the employer has reserved the right

to amend or terminate the plan, once an employee,

who accepted employment under such a plan, has

complied with all the conditions entitling him to par-

ticipate in such plan, his rights become vested and the

employer cannot divest the employee of his rights

thereunder.’’ 171 N.E. 2d at 522.

See Matter of Erie Lackawanna Ry. Co., 548 F.2d 621,

625-27 (6th Cir. 1977) ; Sheehy v. Seilon, Inc., 10 Ohio St. 2d

242, 227 N.E. 2d 229 (1967); Ehrle v. Bank Bldg. &

2la

HOEFEL UV, ATLAS TACK OCOBPOBRATION

Equip. Corp. of America, supra; Stopford v. Boonton

Molding Co., supra; Schofield v. Zion’s Co-operatwe Mer-

cantile Inst., supra.

In the face of these authorities, Atlas relies principally

upon Boase v. Lee Rubber & Tire Corp., 437 F.2d 527 (3d

Cir. 1970). There the Third Circuit was called upon to con-

strue the provisions of a pension plan arising under New

York law. The court first noted that it was unclear whether

or not the New York courts had yet rejected the discredited

‘‘gratituity’’ theory of pensions. It then went on to hold

that where an employer, in ‘‘clear and unambiguous’’

language reserves the right to terminate a pension plan,

it can do so even in a manner which deprives retired em-

ployees of earned pension benefits. In reaching its conclu-

sion, the court purporteed to find no countervailing public

policy which militated for a different result.

While we believe that the employer in Boase brought

home to its employees the tenuous nature of the pension

rights it promised in a far clearer and more forthright man-

ner than did Atlas, we would decline to follow Boase in

any event. We believe that public policy long has required

that pension plans be construed, where possible, to avoid

the forfeiture of rights which an employee, through years

of service, has earned, see, e.g., Neuffer v. Bakery Conf.

Workers Int. Union, 307 F.2d 671, 674-75 (D.C. Cir. 1962)

(Burger, J., dissenting); Ehrle v. Bank Bldg. & Equip.

Corp. of America, supra; Stopford v. Boonton Molding Co.,

supra; Cantor v. Brookshire Life Ins. Co., supra; Scho-

field v. Zion’s Co-operative Mercantile Inst., supra; see

also Fortune v. National Cash Register Co., Mass. Adv.

Sh. 1569, 364 N.E. 2d 1251 (1977) (implied covenant of

good faith and fair dealing in employment contract vio-

lated by employer’s termination of at will contract to avoid

paying employee’s commission); and the concerns moti-

vating Congress to enact ERISA in 1974 confirm our view.

22a

OPINION OF THE COURT

See H. Rep. No. 93-807, 93d Cong., 2d Sess., 3 U.S. Code

Cong. & Ad, News 4670, 4676 (1974); S. Rep. No. 93-127

93d Cong., 2d Sess., 3 U.S. Code Cong. & Ad. News 4841:42

(1974), ie

The district court found that the plaintiffs reasonably

believed that under Atlas’ pension plan they would be en-

titled to a pension for life upon retirement .provided that

they serve Atlas a specified number of years.” While

Atlas reserved the right to discontinue the plan, it never

explicitly told its employees that discontinuance could

cut off payment of pensions already earned. In fact, Atlas

told its employees that ‘‘no change, suspension jan dis-

continuance will adversely affect the pensions already pur-

chased.” That was, of course, true through April, 1968

since up to that time Atlas met its obligation to provide 8

life pension to its qualified employees by purchasing upon

their retirement an annuity contract. Once such a contract

was purchased, nothing Atlas might do or fail to do could

affect payments, In April of 1968, all but one of the plain-

tiffs could have retired with a pension prior to Atlas’

change to the trusteed plan.* The effect of that change

7 Atlas argues that the count ’s i i i

! , grant of its motion t i

i erate claim at the end of plaintiffs’ case conmual page hn

subsequent grant of relief on that claim reversible error. While

—— it is not good practice to grant a defendant’s rale 41 (b)

pent se and later to reverse that ruling because the defendant may

~ ety soon = gpg or incentive to meet plaintiff’s case

@, how » Atlas was not prejudiced, In defendin inst

Sinai emia on aes claim, it thoroughly exp Bo. pew

tiffs ’ e plan. Moreover, the history of Atlas’

negotiations with the UAW would not, we believe wu a

moth of the offer of a pension to these Asengdgp non UAW

Plaintiffs who took no part in the negotiation of the terms of the

® Plaintiff Karl’s eligibilit

y for a pension upon h i

‘Aveit Sit ee upon he hove ey to Pang visggee in

. ‘ » along with changing to the trusteed pl

also decreased the required number of i a tee Seek

does not, we believe, render the pact saahiais tackaduais te

’ leve, act analysis i i

her case. Karl, like each of the other piainti bad aetialieg tee 0

93a

HOEFEL UV, ATLAS TACK COBPORATION

was never explained to the plaintiffs, In fact, as the dis-

trict court found, the evidence supports the conclusion that

the company misled its non-union employees concerning

the change. Where the employer establishes the terms of

a pension plan, those terms should be construed in favor of

the employee. See, e.g., Ehrle v. Bank Bldg. € Equip.

Corp. of America, supra, 530 S.W. 2d at 492; Stopford v.

Boonton Molding Co., supra, 265 A.2d at 665. That rule of

construction seems especially appropriate where the em-

ployer has also been guilty of misrepresentation.

Atlas finally claims that its amendment of the plan from

the insured plan to the trusteed plan, and its later complete

termination of the plan were justified by economic necessity.

We fail to see how Atlas’ financial difficulties can ex-

cuse its performance of its contractual pension obligations

to its former employees. Cf. Matter of Erie Lackawanna

Ry. Co., supra, 548 F.2d at 627.

We conclude that the district court was correct in hold-

ing that the plaintiffs had a contractual right to their pen-

sions and that Atlas breached its duty to pay those pen-

sions when it terminated payments in 1973.

Atlas also challenges the district court’s measure of

damages. Those damages were computed by adding (1) the

value of the pension payments due between the termination

of the plan and the date of the judgment to (2) the amount

needed to purchase for each plaintiff an individual an-

nuity yielding monthly payments in the amount of the

pension to which each plaintiff was entitled, minus (3) a

set off for the lump sum payment made by Atlas upon term-

ination of the plan. Atlas apparently objects to the court’s

use of the cost of an individual annuity in item 2. It would

pension upon retirement. She had in effect acquired a vested right

to benefits and began to receive them. When Atlas sought to

terminate the plan in 1973, and in so doing stop payments to its

retired employees, it breached its obligation to Kar! just as it did

to the other plaintiffs with vested pension rights.

24a

OPINION OF THE COUBT

have had the court use an amount, which, if contributed

to a large trust fund earning eight per cent, would yield

the required monthly sum.

Plaintiffs had a right to their pensions. That right exis-

ted whether Atlas met its obligation through a trust fund

or individual annuity contracts. Having terminated the

trust fund, however, Atlas has left plaintiffs with only the

option of investing as individuals, The record supported

the district court’s skepticism as to the likelihood that

small and unsophisticated investors like the plaintiffs

could obtain an eight per cent return. We agree that the

cost of an individual annuity, competitively priced, is a

fair and reasonable measure of damages. Stopford v. Boon-

ton Molding Co., supra, 265 A.2d at 668; see Minnesota

Amusement Co, v. Larkin, 299 F.2d 142, 153 (8th Cir. 1962),

Affirmed.

Adm. Office, U. 8. Courts — Blanchard Press, Inc., Boston, Mass

25a

APPENDIX C

UNITED STATES COURT OF APPEALS

For THe First Crirecvit

No. 77-1517.

RaymMonp HoerFet,

Plaintiff, Appellee,

Vv.

ATLAs TAcK CORPORATION,

Defendant, Appellant.

No. 77-1519.

RayMonp MAHONEY, ET AL.,

Plaintiffs, Appellees,

Vv.

IDU [C., ET AL.

Great Nortuern Inpvustries, INc., :

Defendants, Appellees.

Atias Tack CorPorRATION,

Defendant, Appellant.

ORDER OF COURT

Entered September 12, 1978

It is ordered that the petition for rehearing herein filed

on August 23, 1978 be, and the same hereby is, denied.

By the Court:

/s/ Dana H. GaLiup

Clerk.

[ec. Messrs. Lev and Novick. ]

27a

26a so

Interest is awarded at the rate of 8% per annum irom Sep

a i | tember 1, 1977.

UNITED STATES DISTRICT COURT | Dated at Boston, Massachusetts, this Ist day of Septem-

For THE District oF MASSACHUSETTS | ber, 1977.

Civil Action File No. 73-1038-F—75-4326-F Cryve B. Ketton Jr.

| Deputy Clerk of Court

JUDGMENT * Sitting by designation

RayMonp MAHONEY, ET AL.,

vs.

Attas Tack Corporation,

This action came on for trial (hearing) before the Court,

Honorable Atvin B. Ruprn*, United States District Judge,

presiding, and the issues having been duly tried (heard)

and a decision having been duly rendered. For oral rea-

sons assigned and for written reasons to be assigned here-

after, judgment is rendered in favor of each of the

following plaintiffs, individually, and against Atlas Tack

Corporation for the amount shown beside the name of each

plaintiff :

Edward Ehrhardt ..0..0.00.00..ccccc000 $ 3,907.92

Blanche King. ......:.«ssssaee $ 6,787.89

JOMCS MONS occccccdicce $14 033.60

Orvilla Sllwa, q..nccncccctensiee $12,114.05

Bilete THONG xsncocsssscctiansaeeee $12,344.28

Miltom Fiahe sosccsssssussamcaie $16,429.05

Marion Gurney .00....eccscceccsccccseee $ 6,668.42

Mildred Karl ...... ; $ 5,695.16

Raymond Mahoney ..0.0..0...-..e....--- $ 7,767.42

Raymond Hoefel .......................... $10,474.80

28a

APPENDIX E

UNITED STATES DISTRICT COURT

District or MassacHusETtTs

Civil Action No, 73-1165—-MA

vd

.

INTERNATIONAL Union, Uniten Avromopine, Arrospacr &

AcricuttunaL ImMpLemMent Workers or AMERICA, AND ITS

Locat 899, UAW,

Plaintiff

v.

Atias Tack Corporation AND M. Leonarp Lewis, Ricwarp

A. Secor anp Wittiam F, MacNamana,

Defendants

MEMORANDUM AND ORDER

Mazzone, D.J. June 2, 1978

The plaintiff, International Union, United Automobile,

Aerospace & Agricultural Implement Workers of America,

and its Local 899 UAW (“Union”), commenced this action

on April 13, 1973 against the defendants, Atlas Tack Corpo-

ration (“Atlas”) and trustees M. Leonard Lewis, Richard

A. Secor and William F. MacNamara. Count 1 alleges that,

under a collective bargaining agreement (“Agreement”)

“effective from July 1, 1969 to July 31, 1972 and...

extended beyond that date”, Atlas was obligated to con-

tinue in effect a pension plan. The unilateral termination

of the pension plan is alleged to be a violation of Atlas’

obligation thereby depriving Union members who are com-

pany employees of retirement benefits. Count IT alleges

a breach of fiduciary duty by the trustees under a trust set

29a

up by Atlas to fund the pension plan. Count IT is brought

“on behalf of the Union and on behalf of the members who

are entitled to pension benefits at Atlas whose names are

too numerous to be mentioned here individually, but who

are joined in the action and on behalf of all others similarly

situated.” Count III alleges a conspiracy between Atlas

and the trustees of the pension plan to deprive the bene-

ficiaries of the pension agreement of the benefits to which

they are entitled. The essence of the plaintiff’s requested

relief is that the Court reinstate the pension plan and order

that the trustees account to the trust for the trust’s alleged

insufficient funding. Count I jurisdiction is based on Sec-

tion 301 of the Labor Management Relations Act of 1947

(“LMRA”), 29 U.S.C. § 185. Jurisdiction for Counts IT and

IIT is based on a theory of pendent jurisdiction.

The defendants move to dismiss this action pursuant to

12(b)(1) F.R. Civ. P. for lack of subject matter jurisdic-

tion. They argue that there is no subject matter jurisdiction

because there is no underlying collective bargaining agree-

ment upon which to base federal jurisdiction under LMRA

§ 301(a), 29 U.S.C. §185(a). That section provides:

“Suits for violation of contracts betwen an employer

and a labor organization representing employees in an

industry affecting commerce as defined in this chapter,

or between any such labor organizations, may be

brought in any district court of the United States hav-

ing jurisdiction of the parties, without respect to the

amount in controversy or without regard to the citizen-

ship of the parties.”

Basically, this is a suit for breach of contract and the

defense is that there is no contract.

After hearing, and consideration of the entire record, the

facts most favorable to the plaintiff are as follows: The

Union is a voluntary unincorporated association with offices

30a

in New Bedford, Massachusetts. It is engaged in collective

bargaining for wages, hours, and other term and conditions

of employment within the meaning of the Labor Manage-

ment Relations Act of 1947. Atlas is a Massachusetts cor-

poration engaged in the manufacture of eyelets, tacks and

other metal products with offices in Fairhaven, Massa-

chusetts. The company employs-members of the Union in

its manufacturing operations. Trustees of the pension plan

at issue here are: M. Leonard Lewis, President of Atlas

and President of Great Northern Industries, Inc., a holding

company which wholly-owns Atlas, Richard Secor, Vice

President and Secretary of Atlas and Great Northern

Industries, and William F. MacNamara, a shareholder.

The facts are as follows: On July 1, 1969 the Union and

Atlas entered into an agreement which contained the fol-

lowing clause:

“This agreement shall become effective as of the first

dav of July, 1969 and shall continue in force and effect

until 11:59 on the 31st day of May 1972. This agree-

ment shall continue from year to year thereafter

unless either party notifies the other in writir not less

than sixty (60) days prior to the first day — June of

any year thereafter that such party elects to terminate,

modify or amend this agreement.”

On March 13, 1972, the Union, by Alfred Olerio, Sub-

regional Director, sent a letter to Atlas advising the cor-

poration of the Union’s intent to “amend and modify said

Agreement and Pension Plan” and stating their “desire to

negotiate with (the) corporation as soon as possible.” The

letter also stated:

“This notice to amend and modify. the current agree-

ment and all memoranda thereto shall have the effect

of terminating the entire agreement on the expiration

dat» in the same manner as a notice of desire to termi-

3la

nate unless before that date all subjects of amendment

proposed by either party have been disposed of by

agreement or withdrawn by the party preparing

amendment.”

On June 2, 1972 the Union and Atlas agreed in writing

to extend the Agreement of July 1, 1969 to June 30, 1972.

Further, they provided that “in the event the parties reach

an agreement on or before June 30, 1972, any general wage

increases or wage adjustment shall become retroactive to

May 31, 1972.” No further written collective bargaining

agreement was adopted and the parties did not execute a

further written extension of the July 1969 agreement.

After June 30, 1972, the parties attempted to negotiate

new contract terms without success. The parties did reach

a tentative agreement on a new contract during the month

of June, 1972, but when that tentative agreement was refer-

red to the union membership for ratification, it was voted

down. The negotiating teams met again in August, 1972,

but were not successful and an impasse was apparently

reached. However, while the negotiations were going on,

the parties continued to operate in a manner consistent with

the terms and conditions of the earlier agreement until

September 26, 1972. On that date the company announced

that it was putting into effect a new rate schedule. On

September 27, 1972, the day after the new rate schedule was

implemented, the Union notified the company that it did

not approve of the company’s action in making the pro-

posed rates effective prior to ratification. However, no new

proposals were made by either party subsequent to August

1972. In November 1972, Atlas announced that it was unl-

laterally terminating the agreement.

The central issue is whether, given the fact that the

written agreement was terminated on June 30, 1972, there

continued to exist an oral agreement or some form of

32a

implied agreement. Where there is no collective bargining

agreement between the defendant and the union establishing

the underlying obligation, this Court does not have juris-

diction under 29 U.S.C. $185. Caporale v. Di-Com Corpo-

ration, 345 F.Supp. 153 (1972). The plaintiff asserts that

because negotiations took place and the parties abided by

the terms and conditions of the contract that the parties

intended that the agreement continue on indefinitely. The

plaintiff does not assert an express oral agreement to con-

tinue; rather they ask this Court to infer that from the

actions of the parties. The evidence does not warrant such

an inference. It appears that there was an initial attempt

to reach a new agreement which failed. Actions such as

that of the Union in voting down the new agreement and of

the company in implementing a new rate schedule and

terminating the pension plan do not indicate that any agree-

ment existed between the parties. This is not a case of an

“oral agreement for purposes of bridging a period of nego-

tiation or renegotiation, whether there be a provision of a

prior written agreement or a formal oral agreement

between the parties.” Food Handlers Local No. 425 v.

Arkansas Poultry Coop., Inc., 199 F.Supp. 895, 901 (W.D.

Ark. 1961). See also Procter & Gamble, Inc. v. Procter and

Gamble Mfg. Co., 312 F.2d 181, 184 (2nd Cir., 1962).

While it is true that the law provides that negotiation

allows for a period of suspending or postponing the normal

effect of the notice of termination sent by the Union on

March 13, 1972, “the end of negotietion, whether success or

failure marks the end of this postponement.” Patterson

Parchment Paper Co. v. International Brotherhood of

Paper Makers, et al., 191 F.2nd 252, 254 (3rd Cir., 1951).

Finally, assuming the plaintiff could prove an oral agree-

ment to continue, the pension plan standing alone cannot

operate to confer jurisdiction on this Court. As the court

33a

stated in O’Rourke v. Breakstone Bros., Inc., 218 F.Supp.

648 (1963) :

“Here, we have no such link with a labor dispute or

labor contract; if the existing collective bargaining

agreement be the underlying ‘labor contract’ essential

for invoking the jurisdiction of Section 301, as we think

it must be, then its absence or termination cuts off an

arguable coverage under Section 301; standing alone,

a welfare and pension plan could hardly qualify as a

‘labor contract’ for purposes of Section 301.” At 651.

Accordingly, the Court finds there is lack of subject

matter jurisdiction as to Count I.

The defendants have argued that Counts IT and IIT also

should be dismissed because they are appended merely to

give the plaintiff capacity to sue and the doctrine of pendent

jurisdiction over state claims does not permit a federal

court to give a party the capacity to bring a state claim in

federal court where that party would not have the capacity

to bring that claim in state court, citing Woods v. Interstate

Realty Co., 337 U.S. 535, 538-9 (1949). Whether pendent

jurisdiction claims are also dismissed when the underlying

federal claim is dismissed is clearly a matter of the Court’s

discretion. Since Counts II and II are predicated solely on

state law, the Court finds no basis to exercise its discretion

to retain jurisdiction over those claims.

ORDER

The Motion to Dismiss the Complaint is ALLOWED.

A. Davip Mazzone

34a

APPENDIX F

Unitep States ConstiTuTIon

AMENDMENT Five

“No person shall be .. . deprived of life, liberty or

property, without due process of law... .”

FeperaL Rues or Crviz Procepure,

Rute 41(b)

“(b) Involuntary Dismissal: Effect Thereof. For

failure of the plaintiff to prosecute or to comply with

these rules or any order of court, a defendant may

move for dismissal of an action or of any claim against

him. After the plaintiff, in an action tried by the court

without a jury, has completed the presentation of his

evidence, the defendant, without waiving his right to

offer evidence in the event the motion is not granted,

may move for a dismissal on the ground that upon the

facts and the law the plaintiff has shown no right to

relief. The court as trier of the facts may then deter-

mine them and render judgment against the plaintiff

or may decline to render any judgment until the close

of all the evidence. If the court renders judgment on

the merits against the plaintiff, the court shall make

findings as provided in Rule 52(a). Unless the court

in its order for dismissal otherwise specifies, a dis-

missal under this subdivision and any dismissal not

provided for in this rule, other than a dismissal for

lack of jurisdiction, for improper venue, or for failure

to join a party under Rule 19, operates as an adjudi-

cation upon the merits.”

ee

<

35a

Lapor-MANAGEMENT Rexations Act,

§ 301(a) (29 U.S.C. § 185(a))

“Suits for violation of contracts between an

employer and a labor organization representing

employees in an industry affecting commerce as defined

in this chapter, or between any such labor organiza-

tions, may be brought in any district court of the

United States having jurisdiction of the parties, with-

out respect to the amount in controversy or without

regard to the citizenship of the parties.”