The opinion of the court was delivered by: STERN
When employers who have previously entered into a multi-employer pension plan find the plan too expensive to maintain, may they enter into a new agreement with the union extinguishing the pension fund by eliminating further contributions to it, while making no provision for the financial protection of some 1400 former employees who have retired and are currently receiving pension benefits from the fund?
Though there may be circumstances permitting such action, the Court finds on the facts before it that the parties contracted for a lifetime pension, and that the subsequent termination was therefore a breach of contract. In addition, the Court holds that where employers have given other assurances of a lifetime pension and employees elect to retire in reliance thereon, the doctrine of promissory estoppel bars such a later termination of the fund.
I. The Operative Documents
The pension fund in question was created by an Agreement and Declaration of Trust (R-1) adopted pursuant to the governing collective bargaining agreement over a period of years. The original trust agreement was adopted on April 16, 1962 and was successively amended on March 31, 1970, April 30, 1970, and December 1, 1971. R-1 is the trust agreement as amended and as ratified and affirmed on August 25, 1972. The pension plan was adopted pursuant to Article III, Section 4 of the trust agreement. R-2 is the pension plan booklet distributed to the employees. R-2 contains certain questions and answers relating to the pension plan, and the latest text of the plan itself. Changes through the last collective bargaining agreement, which expired on November 30, 1975, are included on a gummed insert attached to the last page of R-2.
It being understood, however, that the agreement is limited to contribution without guarantee of benefits by Union or Employer and without right of refund to Employer.
The quoted language is from Schedule F, para. 3 of R-10, the collective bargaining agreement booklet which expired October 31, 1967. Similar language was continued in the agreement which expired in 1969, as represented by R-11, the settlement agreement for 1967-1969. (Tr. 8/9/76: 117) Since that date the language has not appeared in subsequent collective bargaining agreements with respect to the pension plan, though similar language has uniformly appeared with respect to the welfare plan.
The deletion is immaterial to the Court's resolution of the issues before it. The evidence adduced by the defendant employers on this point demonstrates that the language in question was bargained away by the parties for reasons unrelated to the issue whether the governing documents promise a pension for life or merely for the term of the current collective bargaining agreement.
Defendants called Lawrence W. McGinley, president of the union during the relevant period. It was his testimony that the "no guarantee" provision had been inserted into the contract at the employers' request during negotiations on a contract in which the employers had convinced the union to agree to a level of employer contributions below the level recommended by the fund actuary, the Martin E. Segal Company, as actuarially sound based on its projection of retiree life span, rate of retirement and other relevant factors. (Tr. 8/9/76: 114-115) During the 1969 negotiations, according to McGinley's testimony, the level and timetable of agreed employer contributions was such that the union "felt strongly that it was no longer necessary to have that language in there, that the new benefits, that portion of the new benefits, would have to be guaranteed." (Tr. 8/9/76: 109-110)
Thus if it had any meaning at all the disputed language referred to the agreed level of benefits and not to the agreed duration of benefits, which is the issue before the Court:
THE COURT: Let me see if I understand this whole controversy. Anyway, this "no guarantee" provision was there to guard against the computation error which may have been made [in] providing for increased benefits; is that it?
THE WITNESS: That's my opinion, your Honor.
THE COURT: Was it there to alert people that if they retired after 25 or 30 years of service, that no guarantee provision meant their pension would not outlive the life of the agreement itself unless it was bargained for again?
THE WITNESS: No. That was not the purpose of it.
Thus whether the deletion was merely a "scrivener's error," as defendants claim, or a material term of the contract bargained by the parties, as the receiver and the pensioners contend, is immaterial here. Nevertheless, so that the record shall be complete, the Court finds as a fact that despite some conflict in the testimony the printed booklets R-9, R-10, R-11, R-12, R-13 and R-14 constitute the agreement in effect between the parties for the contract periods covered by each. (Tr. 8/9/76: 274) While there was other testimony from representatives of the milk companies to the contrary, after hearing all of the testimony the Court finds McGinley's testimony to be accurate, and finds as a matter of fact that it is the printed booklets, signed by each of the companies, which are the collective bargaining agreements for each period. The Court further finds that the "without guarantee" language was deliberately deleted after 1969 in the course of collective bargaining.
It was these booklets, and not the rough outline agreements hurriedly produced and signed at the end of a particular bargaining session, which in fact governed the relationship of the parties during their term. McGinley testified that it was not uncommon for additional details to be agreed upon after the negotiations ended, that these additions were written into the text sent to the printer and that the printer's galleys were checked by the employers, each of which signed the resulting printed booklets, R-9 through R-14, which were the actual formal agreements. (Tr. 8/9/76: 267-269) When the employers met to discuss upcoming collective bargaining sessions, according to Milk Industry Association vice-president Dan Wetlin, Jr., it was these booklets upon which they relied for the text of the present contract. (Tr. 8/9/76: 79) It was these booklets, according to McGinley, that were distributed to the employers' supervisory personnel for use in the event of on-the-job disputes. (Tr. 8/9/76: 268) When copies of the collective bargaining agreement were requested by any agency for any purpose, Wetlin testified, it was these booklets which were provided. (Tr. 8/9/76: 77, 80) The testimony of both collective bargaining parties confirms the Court's conclusion, and its consideration of the collective bargaining agreement will be based on the printed agreements for each relevant period. (R-9 through R-14)
The pension program set forth in R-1 remained in effect after November 30, 1973 as modified in Schedule F of R-14. As noted earlier, R-2 contains a gummed insert reflecting these changes. R-1 was entered into by the parties pursuant to Schedule F of the collective bargaining agreement, as reflected in the preamble to R-1. Article III, Section 1 of the trust agreement created the "Milk Industry -- Local 680 Pension Fund." Article III, Section 4 provides in pertinent part as follows:
Section 4. The Milk Industry -- Local 680 Pension Fund is created and established for the purpose of providing and maintaining pension and retirement benefits for Employees.
The Trustees shall promptly agree upon and formulate the provisions, regulations and conditions of the pension program herein contemplated and any appropriate amendments thereto, including those relating to eligibility of Employees, retirement age, and other terms required to carry out the intent and purposes of the pension program required by the Collective Bargaining Agreement, and any and all other matters relating thereto which the Trustees may deem appropriate for the determination of retirement benefits and the administration of the pension program. A copy of such pension plan shall be adopted and filed by the Trustees as part of the records and minutes of the Trustees, and copies of such plan shall be distributed to the Union and to each Employer.
The Trustees may amend such plan from time to time, provided that such amendments comply with the purposes above stated. A copy of each such amendment shall be adopted and filed by the Trustees, and copies thereof shall be distributed to the Union and Employers.
Article III, Section 5 provides in pertinent part as follows:
Section 5. The Trustees shall use and apply the Pension Trust fund for the following purposes.
(a) To pay or provide for the payment of all reasonable and necessary expense of collecting the Employer Contributions and administering the affairs of the Pension Trust Fund . . . .
(b) To pay or provide for the payment of retirement or other benefits to eligible Employees in accordance with the terms, provisions and conditions of the pension plan to be formulated and agreed upon hereunder.
The pension plan at issue in its most recent form (R-2) was promulgated in June, 1971 and continued with amendments to November 30, 1975. At the time of its adoption, the board of trustees of the fund consisted, pursuant to Article IV of the trust agreement, of five "employer trustees" and three "union trustees." Each group had one vote. (Article V, Section 9) The trustees at the time of the adoption of R-2 were Seymour Hayman, Ezra Kotcher, Kelly Marx, Alvin Rockoff and William Tanis, for the employers, and Lawrence McGinley, Anthony Iorio and Edward Hutnick for the union.
R-2 bears the names of the trustees, their legal counsel, the fund's consultant and actuary and the fund manager. The booklet begins with the text of a letter on the letterhead of the fund, which reads in pertinent part as follows:
To All Covered Employees:
We are pleased to present you with this revised and up-dated booklet which describes your benefits and rights thereto under your Pension Plan.
We urge that you read this booklet carefully and keep it in a safe place for future reference. . . .
Immediately after the cover letter appears a question-and-answer section introduced by the following statement:
The following Question and Answer Section is intended to highlight the main provisions of the Plan. For detailed information concerning any specific problem you should contact either the Union or Fund Office.
The question-and-answer section includes the following text, at page 11:
Q. How long will an employee receive his Pension ?
A. Pensions awarded by the Board of Trustees, other than Disability Pensions, are payable for the lifetime of the Pensioner. If you have been awarded benefits and you die before 60 monthly payments have been made, your beneficiary will receive the remainder of the 60 payments. If your beneficiary is your wife she will receive an additional 60 monthly payments after the first 60 have been exhausted. This does not apply to Disability Pensioners.
(emphasis in answer added)
The question-and-answer section also includes the following text, at pages 12 and 13:
Q. Can I work at all while receiving benefits from the Pension Fund ?
A. Yes, you may work at any job other than one in the Milk, Milk By-Products, Ice Cream and Orange Juice Industries, and continue to receive a pension.
If you do work in these Industries, pension payments will immediately cease, all credited service will be cancelled and you will thereafter not be covered by the Pension Plan.
Q. Can I return to work in the Industries after retiring on a Pension ?
A. No. You will lose all rights to your pension if you return to work after retiring. . . .
The following text appears in a box at the end of the question-and-answer section, at page 13:
This section contains a brief and general description of the Plan but it should not be interpreted as the document by which eligibility and benefits are determined. To be fully aware of your rights and obligations under the plan you should read the Pension Plan itself, which appears on the following pages.
The Pension Plan appears on pages 14-35 of R-2. The fund manager, Eleanor Testa Cassie, testified that R-2 was sent to each new covered employee upon notification to the fund office by the employer that the employee had been hired. (Tr. 6/17/76: 15)
Article III of the pension plan (R-2) is entitled "Retirement Ages and Amount of Service." Sections 1, 2, 3, 5, 6 and 6-A describe the conditions under which various types of pensions
are awarded, and the benefits to be paid when those conditions are met. This text remained unaltered after the December 1, 1973 amendments, except for increased benefits as indicated on the gummed insert to R-2.
Each enumerated section of Article III, after describing the age and service conditions under which a particular type of pension would be awarded, concludes with the following language: "shall receive on retirement a pension for his lifetime " or "may voluntarily retire at a pension of ... for his lifetime." (emphasis added) The language of the pension plan itself thus accords with the question-and-answer text at page 11 of R-2.
Similarly, Article III, Section 7 is entitled "Pension Guarantee" and comports with the question-and-answer text at page 11:
If a Pensioner receiving a pension other than a Disability Pension shall die within the five (5) year period beginning with the effective date of his pension benefits, then the monthly pension benefit to which he was entitled shall become payable to his designated beneficiary for the remainder of the said five (5) year period, and shall thereupon cease. . . .
If the Pensioner's spouse has been designated as the beneficiary and if at the end of said five (5) year period the Pensioner's spouse survives, the monthly pension benefit to which the Pensioner was entitled shall be continued for an additional five (5) years to said spouse but not to exceed the lifetime of the spouse.
Article V of R-2 is entitled "Payment of Pension." Section 1 of Article V is entitled "Monthly Installments," and provides as follows:
Each pension shall be paid in monthly installments starting with the effective retirement date and ending with the payment made on the first day of the month in which the death of the pensioner occurs.
This section thus comports with the promised lifetime pension term provided in the question-and-answer text at page 11 of R-2 and the cited sections of Article III.
Section 3 of Article V is entitled "Retirement Defined." It provides as follows:
(a) Retirement under this Plan shall mean complete withdrawal from employment or self-employment in the Milk, Milk By-Products, Ice Cream and Orange Juice Industries in any capacity and anywhere in the United States.
(b) If a Pensioner breaks his retirement by engaging in employment or self-employment of the type described in subsection (a) above, except in accordance with Article IV, Section 4 [permitting return after receipt of disability pension benefits], pension payments shall immediately cease, all credited service shall be cancelled and the Pensioner shall thereafter be not covered by this Pension Plan.
This section thus accords with the question-and-answer text at pages 12 and 13 of R-2.
Article XII of R-2, entitled "Statement of Policy," provides in pertinent part as follows:
It shall be the policy of the Trustees to devote the full amount of contributions to the Pension Fund, less administrative expenses, to the payment of pensions for eligible employees. In determining the amount of pensions to be paid it is, and will continue to be, the policy to make such payments on an actuarially sound basis, as the same may be determined by the Trustees upon the advice of the Trust's actuary, pension consultant, and legal counsel, keeping in reserve adequate funds to meet commitments to employees who retire and to meet payments due in future years to those who may retire subsequently. In no event, however, shall the pension payments to employees who have retired be reduced. . . .
II. The Contentions of the Parties
The receiver contends, therefore, that since the documents by which he claims the corporate defendants are bound clearly state the promise of a lifetime pension for employees who retire under the terms and conditions set forth therein, the employers are liable for such further contributions to the fund as are necessary to continue each pensioner's benefits in accordance with the promises made to him at the time he elected to retire.
b. Plaintiffs Charles W. Silvey, Patrick J. Diegnan, and other individual pensioners.
These plaintiffs, who have filed a separate complaint in this matter, have submitted the following proposed conclusions of law, inter alia :
1. Receiver's Exhibit R-1, the Agreement and Declaration of Trust, is a valid and existing contract.
2. Receiver's Exhibit R-2, Pension Plan-Milk Industry-Local 680, was published with the knowledge and consent of the employers and in accordance with the provisions of Receiver's Exhibit R-1.
3. The employees who are now pensioners had a right to rely upon R-1 and R-2 and other representations made by their employers and the Trustees of the Pension Fund to the same effect.
4. Each of the pensioners' pensions became vested immediately upon his retirement and qualification and his pension was not subject to change thereafter.
5. Pensioners were no longer member [sic] of the Union after retirement and were not represented in any Union negotiations conducted after their retirement.
6. The employers are estopped from denying the representations made to the employees by the Board of Trustees of the Pension Fund by the publication of R-2.
9. As to each pensioner, his right to receive his lifetime pension became vested as of the date of his retirement and qualification.
10. The knowledge of the employer Trustees regarding representations made to the U.S. Government, employees and pensioners regarding the payment of "lifetime" pensions is imputed to the employers represented, and they are estopped from denying said representations and the employee pensioners were entitled to rely thereon.
c. Defendants All Star Dairies, Inc.; Clinton Milk Co.; Fair Lawn Dairies; Farmland Fair Lawn Dairies; Garden State Farms, Inc.; Ideal Dairy Farms; Ideal Farms, Inc.; Lotz Brothers Dairy; Tilton Dairy Farms.
The position of these defendant employers, hereinafter referred to as All-Star, has been set forth in proposed findings of fact and conclusions of law in which defendants Gannon Brothers, Kudile Brothers, Alderney Dairy Co., Inc., Dairylea Cooperative, Inc., and the defendant "employer trustees" join, and in which defendants Tuscan Dairy Farms, Inc. and O'Dowd's Dairy join with additions. The primary conclusions of law asserted by these defendants are as follows:
A. Upon the termination of a collectively bargained pension plan such as the plan before the Court, the vested rights of retirees are limited to the assets in the fund on the date of termination.
B. The defendant employers never expanded the vested rights of the pensioners by expressly guaranteeing in the collective bargaining agreements the payment of full monthly benefit levels for the pensioners' lifetimes.
Proposed findings of fact and conclusions of law, at 24-33.
Defendant O'Dowd's Dairy also contends that it did not divert contributions from the Local 680 fund into any other pension fund, since it negotiated a separate agreement with the union effective November 30, 1975, and that it breached no obligation created by the collective bargaining agreements and the agreement and declaration of trust in effect before November 30, 1975. O'Dowd's further contends that the plaintiff pensioners, and presumably the receiver, have failed to sustain their burden of proof that O'Dowd's received R-2 and other pension plan booklets or that O'Dowd's was aware of the question-and-answer text included in R-2 and other booklets. O'Dowd's further argues that plaintiffs and the receiver have failed to carry their burden of proof that O'Dowd's "in any way made or participated in making a promise or representation to anyone concerning the benefits of the Plan." Finally, O'Dowd's contends that "the pleadings do not encompass the relief sought in this matter." (Proposed conclusions of law, paras. 1-3)
Defendant Tuscan makes the following additional legal contentions, inter alia :
1. That it was permitted by virtue of a proper arbitration award in its favor, based on the "most favored nations" clause of the collective bargaining agreement, to establish its own company pension plan.
2. That the creation of this company pension plan predated the collective bargaining agreement effective November 30, 1975.
3. That its negotiations with the union in November and December, 1975 were held separately from those of the other defendant employers.
4. That it fully contributed all funds required by the collective bargaining agreements to which it was party.
5. That "the Arbitration Award received by Tuscan is a separate and independent basis on which Tuscan was no longer required to contribute to the industry pension fund. As such, Tuscan owes no duty, contractual or otherwise, to contribute to the industry pension fund."
6. That "the pleadings to [sic] not encompass the relief sought in the instant matter."
Proposed additional conclusions of law, paras. 1-3, 5-7.
d. Defendant Johanna Farms, Inc.
Defendant Johanna contends that it was never a party to any collective bargaining agreement or trust agreement pursuant to which the fund was organized or which provided for participation in or contributions to the fund. It further contends that it never made such contributions, and that its employees were and are covered under a separate private pension plan since May, 1962. Its employees, according to Johanna, have never been covered under or received benefits from the fund. It further contends that it has never engaged in a conspiracy with Alderney, as alleged in the complaint, to avoid making required pension contributions to the fund. Accordingly, defendant Johanna renews its motion to dismiss the complaint. (Proposed conclusions of law, paras. 1-5)
e. Defendant Borden, Inc.
The following contentions are distilled from Borden's lengthy proposed conclusions of law:
2. The last collective bargaining agreement executed by Borden as to its Newark operation was the 1965-1967 agreement, and as to its Trenton operation the 1967-1969 agreement. Since its contributions to the fund were based upon hours worked by employees, it had no obligation to make contributions after it no longer had employees working.
3. Borden has no continuing obligation under the trust agreement or under any collective bargaining agreement to make additional payments to the Local 680 fund. Article VII, Section 4 of the trust agreement is not to the contrary.
4. "The extent of Borden's agreement was to make a cents per hour contribution based upon hours work of its employees for the duration of the then current collective bargaining agreement. An employer who makes that kind of an agreement does not agree to contribute sufficient assets to cover the costs of the pension benefits for their [sic] former employees."
5. "Borden by agreeing to make a cents per hour contribution has by that expression alone limited the extent of its obligation to the dollar value of the amount required to be contributed by the terms of the collective bargaining agreement and for the duration of the then current collective bargaining agreement."
6. In addition, various collective bargaining agreements specifically disclaimed any guarantee of benefits.
7. "Borden does not have an obligation under the Trustees' pension plan booklet to pay pension benefits for the lifetime of a pensioner. Borden's obligations to the Local 680 Trust Fund were limited by the instruments, i.e. the 1962 Trust Agreement and the collective bargaining agreements, which created the trust fund and defined Borden's obligation to make contributions to the trust fund."
8. The deficiency in the contention that the pension plan and the question-and-answer text in R-2 provide a basis for the conclusion that the pensioners are entitled to lifetime pensions "is that the pension plan and for that matter the questions and answers set forth in the Pension . . . Plan Booklet [R-2], at best, describe the manner in which the trustees, as fiduciaries, were to expend the funds. . . . The extent of the employer's obligation to make contributions to the trust fund is, however, determined by the collective bargaining agreement not the Pension . . . Plan Booklet."
9. "As previously stated, Borden's obligation was to pay a cents per hour contribution based upon hours worked of its employees during the term of the then current collective bargaining agreement. Borden has discharged all of its obligations as a matter of law."
Proposed findings of fact and conclusions of law, at 7-16.
The Court finds, from careful examination of the many documents and massive testimony in this case, that the only reasonable interpretation of the governing documents of the pension plan -- the collective bargaining agreement, the agreement and declaration of trust, and the pension plan adopted pursuant thereto -- is that each employee was offered a stated pension for life. As the Court will detail in its discussion of the evidence, the very contributions which the defendant employers contend are the limits of their liability were calculated in terms of actuarial assumptions of the projected life spans of the number of employees who could be expected to elect to become pensioners during each collective bargaining period. Furthermore, the board of trustees on which the employers would have the Court place full and exclusive responsibility for the clear and consistent representations in the pension plan that the pension payments would continue for the life of the pensioner was composed, by a substantial majority, of officers of the defendant employers who were often also the employer negotiators of each new collective bargaining agreement. In light of the substantial evidence, presented by the employers themselves, of joint preparation for and participation in the collective bargaining process by all the members of the employer negotiating group, the Court rejects as a matter of credibility all testimony claiming that the employers were unaware of the provisions of the pension plan for which they so actively and carefully negotiated changes in contributions and benefits every two years.
The Court concludes that each two-year collective bargaining agreement, and the pension plan in existence pursuant to each agreement, constituted an offer to any employee who was qualified for retirement under that plan that he could accept by retiring during the term of the agreement. Once an employee took that action, the offer-and-acceptance required to constitute a contractual obligation was complete. The employee-pensioner's rights were fixed according to the terms and conditions of the collective bargaining agreement and pension plan in effect at the time he retired. No pensioner's benefits may be reduced by virtue of the provisions of a collective bargaining agreement executed after his retirement, when he was no longer a union member and therefore unrepresented at the negotiations.
The Court turns first to the testimony of Thomas W. Fitzgerald, vice-president of the Martin E. Segal Company, actuarial consultants to the fund. Mr. Fitzgerald testified that Martin Segal's function was to "analyze the experience of the Fund with respect to income, investment income, as well as contribution income, the changes or the modifications in the composition of the membership, the trends toward retirement, and trends toward increasing the number of participants, the trends in decreasing the numbers. Then we make an actuarial assumption as to what we anticipate will be happening over the future course of this program and then we make determinations as to what the contribution rates must be in order to keep the Fund on a properly-funded basis." (Tr. 5/27/76: 91)
Later in this testimony, Fitzgerald was asked whether he regarded the question-and-answer text in R-2 providing for lifetime pension benefits to be accurate. He testified:
THE WITNESS: Well, I regard them as accurate in this respect, your Honor. I think that the plan says they shall be entitled to a lifetime pension, but I don't read that to be a guarantee that the money will be there. This is the point I'm trying to raise. In other words, they are entitled to a lifetime benefit because all of our calculations are made on the premise that the individual is going to receive it on a lifetime basis.
THE COURT: What do you mean by all your calculations are made on that premise. Is that the calculation which you used for the purpose of ...