Appeal from the United States District Court for the Western District of Pennsylvania - Pittsburgh (Civil Action No. 83-1716)
STAPLETON, Circuit Judge:
This action was brought by former employees of the Mesta Machine Company ("Mesta") against Mesta and certain of its former offices and directors. The plaintiffs seek wages, pension contributions, and fringe benefits allegedly owed to them under the Employee Retirement Income Security Act of 1974 ("ERISA"), Pub. L. 93-406, 88 Stat. 832 (codified as amended in scattered sections of 26 and 29 U.S.C.), the Pennsylvania Wage Payment and Collection Law ("WPCL"), 43 Pa. Cons. Stat. § 260.1 et seq. (Supp. 1985), and state contract law. The suit was initially filed in state court, but defendants removed it to federal court based upon the ERISA claim, 29 U.S.C. § 1132 and 28 U.S.C. § 1441(a).
The parties, after stipulating to certain facts, filed cross-motions for summary judgment. According to these stipulations, the following claims are still at issue in this case:
Claims of salaried workers for unpaid wages under state law Claims of hourly and salaried workers for unpaid fringe benefits under state law.*fn1 Claims of hourly and salaried workers for unpaid pension plan contributions under ERISA and state law.
The defendant officers and directors asserted, inter alia, that ERISA had preempted plaintiffs' state law claims for pension contributions and fringe benefits and that no ERISA violation had been shown. The district court agreed with defendants as to the preemption of state law and the absence of an ERISA violation. The court then exercised its discretion to refrain from hearing plaintiff's remaining pendent state claims and also did not resolve Mesta's claim that its discharge in bankruptcy insulated it from liability. The plaintiffs appealed these rulings.
This Court has plenary review upon the appeal from the grant of summary judgment upon stipulated facts. Solomon v. Klein, 770 F.2d 352, 353 (3d Cir. 1985); Goodman v. Mead Johnson & Company, 534 F.2d 566, 573-74 (3d Cir. 1976), cert. denied 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977).
Mesta maintained separate pension plans for its hourly and salaried workers. These plans were non-contributory, defined-benefit plans, under which the employees were to receive pensions in specified amounts after retirement and upon reaching a certain age. The terms of the hourly workers' plan were reached through collective bargaining while those of the salaried workers' plan were set by Mesta alone. The required level of contribution to both plans was determined by reference to ERISA's funding requirements and the level of benefits promised to the employees. Both pension plans were approved by the Internal Revenue Service ("IRS") as qualified under 26 U.S.C. § 401(a), and were employee pension benefit plans and pension plans within the meaning of those terms as defined by ERISA Section 3(2)(A)(i).
Mesta's annual pension contributions were due by September 15 of the year following the plan year which the contributions applied. Until plan year 1980, Mesta contributed the amounts recommended by the plans' actuaries and was in compliance with the plans and ERISA. However, between 1977 and 1981, Mesta's financial condition took a severe turn for the worse. During that period, its operating results dropped from an $8.8 million profit to a $23.9 million loss. At the same time, the notes payable by Mesta to its banks increased from $1.3 million to $25 million, and Mesta defaulted on several of these notes. As a condition of the banks' waiver of default on notes and the continued extension of credit, in March 1981, Mesta and the banks entered into a revolving credit agreement. Under this agreement, Mesta Pledged all its assets, including real estate, plants, equipment, inventory, accounts receivable, stock in subsidiaries, and most contract rights, to the banks.
As a result of its financial difficulties, in 1981, when the 1980 plan year contributions were due, Mesta "did not have cash sufficient to make [them] and, at the same time, pay all of the other operating expenses of its business and retire its debt to the Banks as required by the Revolving Credit Agreement."
Mesta therefore applied to the IRS for a waiver of the minimum funding standards pursuant to 29 U.S.C. § 1083. The IRS granted this request for plan year 1980. In 1982, pursuant to the agreement with the IRS, Mesta paid the necessary installments of the contributions that had been waived for the 1980 plan year. Mesta later applied to the IRS for a second waiver, this time for the 1981 plan year. This application was still pending when Mesta sought protection in bankruptcy in February 1983. Following Mesta's Chapter Eleven filing, the IRS denied the application, but by that time the automatic stay provisions of the bankruptcy code were in effect. 11 U.S.C. § 362. Mesta has made no further pension plan contributions.
In September 1983, Mesta sought to terminate the pension plans. With the approval of the pension Benefit Guaranty Corporation ("PBGC"), the plans were terminated as of June 16, 1983. When the pension plans were terminated, the plans did not have sufficient assets to pay all beneficiaries their full pension benefits. PBGC, as successor trustee of the plans, took custody of all their assets and filed claims against Mesta to recover contributions owed by Mesta to the plans. In Mesta's bankruptcy reorganization, PBGC acquired various assets of Mesta on behalf of the pension plans.
PBGC continues as successor trustee to the pension plans and is paying the former Mesta employees the portion of their vested benefits that is guaranteed by ERISA and the plans.
B. Preemption of State Law by ERISA
Plaintiffs seek unpaid wages, fringe benefits, and pension plan contributions from the individual defendants pursuant to state common-law and the WPCL, 43 Pa. Cons. Stat. Ann §§ 260.3(a) & (b) (Supp. 1985), quoted in the margin.*fn2 The WPCL imposes liquidated damages and criminal liability for failing to make such payments. 43 Pa. Cons. Stat. Ann. §§ 260.10 & 260.11a(Supp. 1985), and authorizes any employee to sue to recover owed wages and benefits. 43 Pa. S. § 260.9a (Supp. 1985). The plaintiffs argue that their "claims for wages, vacation pay, severance allowance, fringe benefits and pension contributions are damages clearly described by the WPCL, and the directors and officers as senior management corporate employees have the personal statutory responsibility to make such wage, fringe benefit and wage supplement payments." The defendants argued, and the district court agreed, that the plaintiffs' state law claims for pension and fringe benefits, including the WPCL claims for such benefits, were preempted by ERISA.
ERISA contains an explicit and broad preemption provision. ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in § 1003(a) of this title and not exempt under § 1003(b) of this title." Section 514(a), 29 U.S.C. § 1144(a).*fn3 By this language, Congress meant to establish pension plan regulation as an exclusively federal concern. Alessi v. Raybestoes-Manhattan, Inc., 451 U.S. 504, 68 L. Ed. 2d 402, 101 S. Ct. 1895 (1981). It sought to reserve to itself the "sole power to regulate" the field of employee benefit plans, Shaw v. Delta Airlines, Inc., 463 U.S. 85, 99, 77 L. Ed. 2d 490, 103 S. Ct. 2890 (1983). Accordingly, Congress intended the preemption provision to have a scope as broad as its language suggests. Shaw, 463 U.S. at 98. The Supreme Court has recently discussed the proper interpretation of this language:
The phrase "relate to" [is] given its broad common-sense meaning, such that a state law "relate[s] to" a benefit plan "in the normal sense of phrase, if it has a connection with or reference to such a plan." [Shaw, 463 U.S. at 97]. The preemption provision was intended to displace all state laws that fall within its sphere, even including state laws that are consistent with ERISA's substantive requirements. "Even indirect state action bearing on private pensions may encroach upon the area of exclusive federal concern." Metropolitan Life Insurance Co. v. Mass., 471 U.S. 724, 105 S. Ct. 2380, 2389 85 L. Ed. 2d 728 (1985) (emphasis added and some citations omitted). In Shaw, the Supreme Court turned to Black's Law Dictionary 1158 (5th ed. 1979) for its ...