UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
filed: January 15, 1987.
ROBERT GAVALIK, FRANK GRELO, JOSEPH URBAN, ANTHONY ULYAN, DONALD A. BERGER, RONALD CLARKE, HENRY FOSTER, GEORGE PATTERSON, JOSEPH KELLERMAN, ROBERT PAVLIK, PHILLIP FARLEY, THOMAS RILEY, THOMAS WARREN AND FRANCIS HUMENIK
CONTINENTAL CAN COMPANY; ALBERT J. JAKUB, FRED CIPRIANA, JR., ANTHONY J. BERNARDO, THOMAS A. MULLIGAN, WILLIAM T. TARR, DONALD W. ROBERTS, ERNEST WIRBECKI AND GEORGE W. STEPANIC ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED ALFRED BORRELLI, JR., MICHAEL DI IORIO, ANTHONY FOLINO, THOMAS E. JOHSTON, ROBERT KAPOLKA, JOHN C. KINCEL, PETER A. RUMAIN, HARRY H. SMITH, MELVIN J. SMITH, JACK A. STULL AND ERNEST B. TADDEO, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED V. CONTINENTAL CAN COMPANY, A MEMBER OF CONTINENTAL GROUP, INC.; ROBERT GAVALIK, ET AL. AND ALBERT J. JAKUB, ET AL., APPELLANTS IN NO. 85-3597; CONTINENTAL CAN COMPANY, U.S.A., A MEMBER OF THE CONTINENTAL GROUP, INC., APPELLANT IN NO. 85-3615
On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. Nos. 81-1519; 82-1995).
Opinion OF THE COURT
Before: ADAMS,*fn* WEIS and HIGGINBOTHAM, Circuit Judges.
A. LEON HIGGINBOTHAM, JR., Circuit Judge.
This litigation originated in two separate class action, Gavalik, et al. v. Continental Can Co., C.A. No. 81-1519, filed September 18, 1981, and Jakub, et al. v. Continental Can Co., C.A. No. 82-1995, filed September 27, 1982, alleging that the institution and implementation of a "liability avoidance" scheme by Continental Can ("Continental") operated to prevent employees from attaining eligibility for employee benefits in violation of § 510 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1140 (1982).*fn1 The cases were consolidated on January 17, 1984, and a single class action was certified. The trial of the consolidated action was bifurcated on the issues of liability and damages. The liability phase of the litigation commenced on July 22, 1985, and concluded on August 8, 1985. On September 24, 1985, the district court entered judgment for the defendant, and the plaintiffs appealed to this Court. Continental has cross-appealed asserting that plaintiffs' claim before the district court was barred by the applicable statute of their limitations and/or plaintiffs' failure to exhaust their administrative remedies. We reject the contentions of the cross-appeal, and because we find that the district court misallocated the burdens of proof, we will reverse and remand for proceedings consistent with this opinion.*fn2
Continental Can is a corporation principally engaged in the business of manufacturing cans. Appellants and the class they represent*fn3 are former employees of Continental's Pittsburgh plant, which is the focus of this litigation. During the relevant period, appellants were all members of Local 4337 of the United Steelworkers of America, AFL-CIO ("USW"), which was their recognized collective bargaining agent.
In 1977, Continental and the USW negotiated a collective bargaining agreement under which Continental was to provide a comprehensive employee benefit plan. As part of this benefit package, Continental agreed to provide two pension plans for employees who experience a break in continuous service of at least two years.*fn4 Under the "70/75 pension," an employee could qualify for pension benefits before reaching age sixty-two, if s/he either (a) had at least fifteen years of continuous service,*fn5 was fifty years of age or older and had combined age and service equal to more than seventy years; or (b) had at least fifteen years continuous service and combined age and service equal to or more than seventy-five.*fn6 The "Rule of 65" pension*fn7 was paid to employees with at least twenty years of continuous service on the last day worked, whose combined age and years of service was equal to sixty-five or more but less than seventy-five. Although the 70/75 pension plan had been in effect since 1971, the rule of 65 was first formally proposed by the USW during the 1977 negotiations.*fn8 Continental's obligation to pay 70/75 and Rule of 65 benefits under the agreement arose when employees, after attaining the requisite eligibility, experienced at least a two-year break in service as the result of a plant shutdown, involuntary layoff or absence due to physical disability. For the purposes of entitlement to these benefits, years of service included the first two years following a layoff. This method of calculation was known as the "creep." Under the Creep, recall of a laid off employee for even one day commenced a new two-year continuous service period. See FF 20, 38. Under the 70/75 pension plan, an employee could creep into the necessary age and service requirement. Under the Rule 65 plan, an employee could creep only into the age requirement. See FF 21-22.
In addition to the break-in-service pension benefits, USW and Continental in 1977 negotiated a change in the seniority system. Prior to the negotiations, the Pittsburgh plant had operated under a departmental seniority system.*fn9 In April of 1977, Continental officials had initiated meetings with USW officials to discuss the possibility of implementing plant-wide seniority*fn10 at the Pittsburgh plant. That summer, local union representatives at the Pittsburgh plant met with Continental officials to negotiate the plant-wide seniority for two reasons: the departmental seniority system had elicited charges of discrimination by the Equal Employment Opportunity Commission (EEOC), and the plant-wide seniority system would provide maximum job security for its most senior employees. See FF 73. Continental favored plant-wide seniority because it would enable the company (1) to retain its most senior and skilled employees; (2) to retain employees with vested 70/75 and Rule of 65 pension benefits; and (3) to lay off junior employees whose benefits had not yet vested. See FF 74. Ultimately, on October 28, 1977, Continental and the local union formally agreed to institute a plant-wide seniority system at the Pittsburgh plant effective November 1, 1977. See FF 112-13, 118, 122.
A. The "Liability Avoidance" Program
In the mid 1970s, Continental began experiencing a steady decline in business. This decline was principally a result of new manufacturing processes that required fewer plants, the increasing use by the can industry of composite materials and aluminum instead of steel to produce cans, and a growing trend among Continental's customers to begin to manufacture their own cans. See FF 31-32. Continental, as part of an effort to control and reduce its anticipated costs in light of its declining business,*fn11 in 1976 devised a "liability avoidance" program.*fn12 In order to implement effectively this program, Continental developed an intricate system called the Bell System. The concept component of the Bell System, Bell I, had two complementary objectives: to identify Continental's unfunded pension liabilities so as to avoid triggering future vesting by placing employees who had not yet become eligible for break-in-service on layoff, and to retain those employees whose benefits had already vested. See FF 53, 59, 68.
Under Bell I, Continental developed a "cap and shrink" program. It defined a "cap" as a workforce reduction designed to reduce unfunded liabilities; a "shrink" was a workforce reduction resulting from market or manufacturing conditions. See FF 54. The decision whether to cap a particular plant was made on the basis of a variety of economic factors at the plant, including its potential employee benefits costs. The determination of an actual cap level was based on Continental's assessment of the needed level of production to meet projected sales.*fn13 The cap-line limited employment to a specific name on the seniority roster*fn14 and was effective for five years. Employees below the cap-line, whether then at work or on temporary layoff, were designated as "permanently laid off," and could not be recalled for five years*fn15 except under extreme circumstances, and then only with prior approval from the highest level of Continental's management. See FF 54-57. These employees were not informed by Continental that they would not be recalled.
To further effectuate the goals of the Bell System, Bell II instructed plant managers to adjust their business volume to the desired level of employment. In accordance with this plan, plant managers were authorized to shift business to plants that either had low unfunded pension liability or plants that needed the work in order to retain employees with vested 70/75 benefits. See FF 61, 63; Jt. App. at 1367. In addition, Bell II produced and employed scattergraphs -- computerized charts that listed the age and service of Continental employees at a given time -- to identify the unfunded 70/75 and Rule of 65 liabilities and to ascertain when payments under those plans would be triggered. By looking at a scattergraph, a plant manager could determine the number of USW employees whose rights for 70/75 and Rule of 65 benefits had already vested and those whose rights had not yet vested.*fn16 See FF 64.
Finally, in April of 1977, a "liability avoidance tracing system" -- the "Red Flag" System -- was instituted in order to prevent inadvertent recalls of employees designated as permanently laid off. Red Flag was tied to Continental's payroll system and was designed to generate automatically a red flag report to alert top Continental officials whenever a permanently laid off employee received a pay check either for actual hours worked or vacation. See FF 69-70.
B. The Pittsburgh Plant and the Closing of the Pail Line
Like Continental's overall situation, the Pittsburgh plant experienced a significant decline in business in the mid 1970s. As a result, a number of the plant's production lines were closes, and, in 1975, the Pittsburgh plant became a service center, producing parts for other plants, instead a factory that made and assembled the entire can. Pittsburgh's pail line, which manufactured large gallon steel containers, however, remained in operation. In 1975, the pail line was designated as a separate plant in order to determine its profitability. Despite the separate designation, the Pittsburgh plant and the pail line continued to share a seniority roster. See FF 91-93.
Sometime in 1976, the Pittsburgh plant was selected, in part because of its potentially high unfunded liability costs, as a "concept development" plant for implementing Continental's liability avoidance program. See FF 62; Jt. App. 1385. In June of 1976, Continental's Executive Vice President and General Manager of Continental Can Company, USA, Donald Bainton, approved a cap for the Pittsburgh plant of 574 USW employees, to be achieved by the end of 1976, and a second cap of 417 USW employees, to be achieved by the end of 1977. Subsequently, in January of 1977, a Continental official indicated that the "ideal cap level" for the Pittsburgh plant, "disregarding volume assumptions and other factors except long range people liability costs," i.e., unfunded pension liabilities, was 392 USW employees as opposed to the previous recommendation of 417 USW employees. See Jt. App. 1250. A cap was not set for employees represented by the other two unions at the Pittsburgh plant.
In early 1977, the manager of the pail line recommended moving the operation of a new location in order to increase its profitability. By the summer of 1977, Continental officials had decided to close the pail line. See FF 105. This decision was based in part on Continental's desire to prevent employees from attaining eligibility for 70/75 and Rule of 65 benefits. Continental also considered the pail line's unprofitability at the Pittsburgh location in determining that it should be closed. See FF 101-02, 105-07.
In the summer of 1977, Continental informed the USW and the Pittsburgh local union representatives of its decision to close the pail line. During this time Continental was also pursuing an agreement to implement a plant-wide seniority system at the Pittsburgh plant. In exchange for Continental's promise to use its best efforts to retain employees with twenty years or more of service, the local union agreed to plant-wide seniority. Thereafter, a twenty-year cap-line was drawn under the name of Francis Conti. The 417 USW employee cap for 1978 was increased to 472, which included 436 USW employees above Conti or the twenty-year cap-line, and 36 skilled employees below the cap-line. See FF 117-122. The pail line was closed after Continental and the union formally agreed to implement plant-wide seniority, resulting in the elimination of one-hundred and eleven jobs. See FF 132-133.
In the proceedings before the district court, the appellants, all of whom were permanently laid off from the Pittsburgh plant between January 1976 and May 1978,*fn17 challenged both Continental's adoption and implementation of its liability avoidance program at the Pittsburgh plant and its closure of the pail line at the Pittsburgh plant. The Gavalik action alleged, inter alia, that the closure of the pail line was designed to prevent class member form achieving eligibility for 70/75 and Rule of 65 pension benefits in violation of § 510 of ERISA. Discovery in Gavalik brought to light the liability avoidance program, and the subsequent Jakub complaint challenged the adoption and implementation of the overall liability avoidance program as a deliberate effort to manipulate plaintiffs' length of employment in order to deprive them of 70/75 and Rule of 65 pension benefits, all in violation of § 510.
After a bench trial, the district court entered an order granting judgment for Continental. In its accompanying, extensive findings of facts, the court found that Continental's liability avoidance program was adopted and implemented in order to avoid future vesting of break-in-service pension benefits. See FF 53, 68. The court further found that the subsequent decision by Continental to cap the Pittsburgh plant, which resulted in the layoff of individual and class plaintiffs, and its decision to close the pail line, were motivated in part by the desire to prevent employees from attaining eligibility for 70/75 and Rule of 65 benefits and in part by the declining business conditions at the Pittsburgh plant. See FF 106-07, 141-42. The district court concluded, without explanation, that Continental's actions did not violate § 510 of ERISA. See Conclusions of Law ("CL") 4-5.
On appeal, appellants allege that the district court erred in concluding that its own findings of fact did not establish a classwide violation of § 510 of ERISA; that the court erroneously remitted the determination of whether individual class members' layoffs were caused by the liability avoidance program to the liability phase of the bifurcated trial; that, in any event, having found that appellants' layoffs were the consequence of mixed motives, the court erred in its allocation of the "but for" burden of proof; and that the critical findings of the district court were clearly erroneous. Continental has cross-appealed alleging that appellants' action before the district court was barred (1) by a two-year statute of limitations or, alternatively, a six-month limitations period, and (2) for failure to exhaust grievance and arbitration procedures. We shall address the cross-appeal first.
A. Statute of Limitations
Continental advances several arguments that, it maintains, require application of a shorter period of limitations than applied by the district court. First, Continental argues that subsequent judicial developments require that a two-year statute of limitations be applied to appellants' claims. Alternatively, Continental urges the application of a six-month limitation period pursuant to the Supreme Court's decision in DelCostello v. International Bhd. of Teamsters, 462 U.S. 151 (1983).
Section 510 of ERISA, 29 U.S.C. § 1140 (1982), and the applicable enforcement provision, 29 U.S.C. § 1132 (1982), do not provide a specific statute of limitations for actions alleging violations of § 510. Under such circumstances, the appropriate period is determined by reference to the state statute of limitations governing cases most analogous to the cause of action asserted by the plaintiffs. See Wilson v. Garcia, 471 U.S. 261, 266-67 & n.12 (1985). The district court determined that appellants' allegation of a § 510 violation was most analogous to a claim of employment discrimination or breach of fiduciary duty, and that on either theory the six-year residuary period of limitations set forth in 42 Pa. Cons. Stat. Ann. § 5527(6) (Purdon 1982) was applicable. Continental does not challenge on appeal the district court's determination that appellants' § 510 action is analogous to an employment discrimination action.*fn18 Instead, Continental, accepting the district court's determination as correct, argues that the applicable limitation period is nonetheless two years. We reject Continental's contention.
Continental seeks to discredit the district court's determination that a six-year statute of limitations applies to the instant action because it specifically relied on this Court's decision in Knoll v. Springfield Township School District, 699 F.2d 137 (3d Cir. 1983), cert. granted, 468 U.S. 1204 (1984) ("Knoll I"), which was subsequently vacated by the Supreme Court in light of its decision in Wilson v. Garcia, 471 U.S. 261 (1985), see Springfield Township School District v. Knoll, 471 U.S. 288 (1985) (per curiam), and modified by this Court. See Knoll v. Springfield Township School District, 763 F.2d 584 (3d Cir. 1985) ("Knoll II"). This Court's modification in Knoll II, however, did not effect a change in Pennsylvania law, under which state law claims analogous to employment discrimination and wrongful discharge claims are governed by a six-year limitation period. See e.g. Skehan v. Bloomsburg State College, 503 A.2d 1000 (Pa. Commw. 1986) (applying six-year statute of limitations to plaintiff's employment discrimination claim); see also Ulloa v. City of Philadelphia, 95 F.R.D. 109, 114 (E.D. Pa. 1982) (collecting cases).
In Wilson v. Garcia, the Supreme Court considered the question "whether all § 1983 claims should be characterized in the same way for limitations purposes." 471 U.S. at 271. Upon analysis of the legislative history and statutory goals of § 1983, the Court concluded that a uniform time limit for all § 1983 actions -- regardless of the nature of the precise claim -- must be applied in each state. Id. at 275. The Court further concluded that § 1983 actions are best characterized as personal injury actions for limitations purposes. Id. at 276.
Notwithstanding the Garcia Court's repeated references to the particular purposes of § 1983, Continental argues that, in effect, the holding in Garcia established that all claims analogous to a charge of employment discrimination must be governed by the state's statute of limitations period for personal injury. We disagree. Indeed, the facts of Garcia itself simply belie Continental's contention. In the underlying action in Garcia, respondent sought damages for an alleged unlawful arrest and brutality of the arresting officer. In reaching its conclusion that § 1983 actions should be governed by state personal injury limitations periods, the court made no determination that the individual claims themselves were always most closely analogous to personal injury claims. Indeed, the court recognized that "the § 1983 remedy encompasses a broad range of potential tort analogies, from injuries to property to infringements if individual liberty," but concluded that
[t]he unifying theme of the Civil Right Act of 1871 is reflected in the language of the Fourteenth Amendment that unequivocally recognizes the equal status of every "person" subject to the jurisdiction of any of the several States. The Constitution's command is that all "persons" shall be accorded the full privileges of citizenship; no "person" shall be deprived of life, liberty, or property without due process of law of be denied the equal protection of the laws. A violation of that command is an injury to the individual rights of the person.
Garcia, 471 U.S. at 277 (emphasis in original).*fn19
On remand and in accordance with Garcia, we followed the Supreme Court's "bright-line approach to the problem of determining what statute of limitations should be applied in § 1983 actions," Knoll II, 763 F.2d at 585, and held that in Pennsylvania the two-year statute of limitations for personal injury actions must govern all § 1983 actions despite the topical nature of the claim. Id. Neither Garcia nor this Court's decision in Knoll II render the district court's determination that appellants' § 510 action most closely resembles an employment discrimination claim erroneous. Nor do they affect this Court's consistent rulings that employment discrimination or wrongful discharge claims brought under federal law are governed by Pennsylvania's six-year residuary clause. See Fitzgerald v. Larson, 741 F.2d 32, 35 (3d Cir. 1984), vacated, U.S. , 105 S. Ct. 2108 (1985); Perri v. Aytch, 724 F.2d 362, 368 (3d Cir. 1983); Knoll I, 699 F.2d at 145.*fn20 Cf. Al-Khazraji v. Saint Francis College, 784 F.2d 505, 513 (3d Cir.) , cert. granted in part, 107 S. Ct. 62 (1986) (" Davis v. United States Steel Supply, 581 F.2d 335 (3d Cir. 1978), made it absolutely clear that the six-year limitations period for contract actions applied to Section 1981 actions brought redress employment discrimination.") In sum, Garcia and Knoll II apply only to discrimination claims under § 1983.*fn21
Continental argues that even if Garcia is not applicable to appellants' claim, this Court's decision in Mazzanti v. Merck Co., 770 F.2d 34 (3d Cir. 1985) (per curiam) mandates application of a two-year statute of limitations. We find Continental's reasoning flawed and unpersuasive. Mazzanti involved a common law diversity action for tortious interference with an employment contract. As is typical in tortious interference cases, the plaintiff in Mazzanti had filed a complaint against Merck & Company, a third party, alleging tortious interference with her employment contract with PHP Graphic Arts Corporation, which resulted in her termination by Graphic.*fn22 Id. In considering whether to apply Pennsylvania's two-year statute of limitations or its residual six-year statute to Mazzanti's claim, this Court, relying principally on a Pennsylvania Court of Common Pleas decision, HOme for Crippled Children v. Erie Insurance Exchange, 130 P.L.J. 480 (Allegheny Cty., 1982), aff'd mem., 329 Pa. Super. 610, 478 A.2d 84 (1984), predicted that the Supreme Court of Pennsylvania would apply the two-year statute. See Mazzanti, 770 F.2d at 36. Home for Crippled Children, in turn, based its judgment primarily on its determination that the plain language of 42 Pa. Cons. Stat. Ann ) 5524(3) (Purdon 1982) which prescribes at two-year limitation period for "taking, detaining or injuring personal property," encompassed tortious interference, since contract rights -- even if intangible -- are personal property under Pennsylvania law.
In the course of examining appellant's claim, the Mazzanti Court made reference to our prior decisions in Knoll I and Fitzgerald, which applied Pennsylvania's six-year limitations period to plaintiffs' claims of employment discrimination. Noting the effect of Wilson v. Garcia, supra, on those decisions, the Mazzanti Court summarily noted "that Garcia, Knoll [I] and Fitzgerald all confronted the state limitations problem in the context of federal actions with unique federal policy concerns," and concluded that "those cases [are not] controlling in a diversity context." 770 F.2d at 36. Contrary to Continental's contention, we see nothing in Mazzanti to suggest that all federal actions for discrimination are not subject to a two-year statute of limitations under Pennsylvania law. Mazzanti considered our prior decisions inapposite and therefore inapplicable to its facts not because of the substantive analysis employed to resolve the Pennsylvania limitations issue, but rather because of the unique federal context in which the analysis were made.*fn23 Thus, Mazzanti simply does not mandate a two-year limitations period for appellants' claims.
Appellants note that "most of the cases discussed and relied upon by both parties on the merits are employment discrimination cases under Title VII." Second Brief for Appellants Cross-Appellees at 41. In the course of various rulings, the district court repeatedly likened appellants' claims to an action alleging employment discrimination.*fn24 The gravamen of appellants' complaint, to paraphrase the district court, is that they were singled out for adverse treatment on the basis of their unvested pension eligibility. We do not deem the district court's determination to be in error. Accordingly, we find that the six-year limitation period was properly applied in this case.
In DelCostello v. International Bhd. of Teamsters, 462 U.S. 151 (1983), the Supreme Court considered what statute of limitations should apply to suits alleging that the employer breached a provision of a collective bargaining agreement and that the union breached its duty of fair representation by mishandling the ensuing grievance or arbitration proceedings. The Court concluded that the six-month limitations period of § 10(b) of the National Labor Relations Act, 29 U.S.C. § 160(b) (1982), should govern the suit,*fn25 In choosing § 10(b), the Court noted:
In some circumstances . . . state statutes of limitations can be unsatisfactory vehicles for the enforcement of federal law. In those instances, it may be inappropriate to conclude that Congress would choose to adopt state rules at odds with the purpose of operation of federal substantive law.
462 U.S. at 161. Rather, resort to federal law may be appropriate "when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking . . . ." Id. at 172.
Three factors were essential to the Delcostello Court's determination that the six-month limitations period of § 10(b) of the NLRA should apply to a hybrid § 301/fair representation claim.*fn26 First, the Court noted that the hybrid § 301 fair representation claim "ha[d] no close analogy in ordinary state law," 462 U.S. at 165, but rather bore a "family resemblance" to charges of unfair labor practice under the NLRB. Id. at 170. Second, the Court considered the "rapid final resolution of labor disputes," id. at 168, essential to the maintenance of industrial peace. Finally, the Court recognized "'[t]he need for uniformity'" where "'those consensual processes that federal labor law is chiefly designed to promote - the formation of the . . . agreement and the private settlement of disputes under it [-are implicated].'" DelCostello, 462 U.S. at 171 (quoting United Parcel Serv. v. Mitchell, 451 U.S. 56, 70 (1981) (Stewart, J., concurring in judgment)).
We do not think the policy considerations that animated the Court's adoption of the six-month limitations period in DelCostello are present here. Unlike DelCostello, we have held supra that the district court's determination that appellants' claims most closely resemble an employment discrimination claim was not in error. In another context, yet on facts similar to those in the instant appeal, Judge Sarokin noted the similarity between § 510 ERISA actions and employment discrimination claims under Title VII:
Just as Title VII does not guarantee employment, section 510 of ERISA does not guarantee pension benefits; similarly, as Title VII prohibits discrimination on the basis of race with respect to such employment, so does section 510 prohibit discrimination with respect to pension benefits on the basis of one's proximity to such benefits
McLendon v. Continental Group, Inc., 602 F. Supp. 1492, 1503-04 (D.N.J. 1985).*fn27 We think the analogy is appropriate.
Moreover, the DelCostello Court emphasized that "federal courts should [not] eschew use of state limitations periods anytime state law fails to provide a perfect analogy." 462 U.S. at 171 (emphasis added). The Court recognized that "there is not always an obvious state-law choice for application to a given federal cause of action." Id. Nevertheless, the Court concluded that "resort to state law remains the norm for borrowing of limitations periods." Id. Thus, only if "a rule from elsewhere in federal law clearly provides a closer analogy," id. at 172 (emphasis added), may we "turn away from state law." Id.
Continental suggests that § 10(b) of NLRA provides such an analogy. Examination of the remaining two factors considered by the DelCostello Court, however, counsels otherwise. There can be no doubt that the "rapid final resolution of labor disputes [is] favored by federal law." 462 U.S. at 168. This Court has recently observed, however, that such speed and finality are most relevant where the disputed issue "is intertwined with the day-to-day relationship between management and labor." Adams v. Gould Inc., 739 F.2d 858, 867 (3d Cir. 1984), cert. denied, 469 U.S. 1122 (1985). Adams involved an ERISA breach of fiduciary duty claim against trustees of a pension plan. There, we found that the day-to-day working environment was unaffected where the dispute involved pension contributions, and thus the implication of delay in resolving such disputes did not justify application of the shorter limitations period. Similarly, in the instant action, the nature of appellants' claims, albeit serious, is not such that a delay in resolution threatens labor peace. Indeed, although appellants' claims are markedly different from the claim alleged in Adams, see infra, involving as they do pension plans and eligibility, here, as in Adams, "it [is] far more likely that employees will not be aware of their grievance immediately." Id. at 867.
Finally, DelCostello's concern with uniformity was informed both by the "similarity of the rights asserted" and the "similarity of the considerations relevant to the choice of a limitations period." DelCostello, 462 U.S. at 170-71. Continental argues, based on the language of § 8(a)(3) of the NLRA, 29 U.S.C. § 158(a)(3),*fn28 that appellants' ERISA claims bear a "family resemblance" to unfair labor practice claims alleging discrimination on the basis of union membership. Continental has provided this Court with no case law to assist in determining whether there exists a similarity in the rights asserting in § 8(a)(3) NLRB actions and § 510 ERISA actions. Assuming arguendo, however, that such similarity exists, we would nevertheless hold DelCostello's six-month limitations period inapplicable to this action because satisfaction of the second prong of the uniformity concern -- similarity in the policy considerations relevant to the choice of a limitations period -- is lacking.
In that regard, DelCostello held application of § 10(b) appropriate on its facts, finding that both hybrid § 301/fair representation actions and unfair labor practice claims must be considered in light of "'the proper balance between the national interests in stable bargaining relationships and finality of private settlements, and an employee's interest in setting aside what he views as an unjust settlement under the collective bargaining system.'" Id. at 171 (quoting Mitchell, 451 U.S. at 71 (Stewart, J., concurring in judgment)). As we noted above, the instant dispute, unlike that contemplated in DelCostello, does not threaten to destabilize the bargaining relationship in the manner contemplated by DelCostello because here the day-to-day relationship between labor and management is not affected. See supra. Moreover, and more important, the desirability of a uniform national limitations period exists where the claims asserted arise under a collective bargaining agreement. Under these circumstances, uniformity operates to preserve "'the grievance machinery under a collective bargaining agreement [that] is at the very heart of the system of industrial self-government.'" 462 U.S. at 168 (quoting Mitchell, 451 U.S. at 63).
In the instant, Section 7.1(a) of the Pension Agreement between the USW and Continental provides:
If, during the term of this Agreement, any differences shall arise between the Company and any Employee who shall be an applicant for a lump sum retirement allowance, pension or deferred benefit as provided in this Agreement, as to whether or not such Employee is entitled to or as to the amount of such lump sum retirement allowance, pension or deferred benefit, such differences . . . may be taken up as a grievance . . .
Jt. App. at 1930. In ruling on Continental's motion to dismiss for failure to exhaust grievance procedures, the district court had occasion to consider the nature of appellants' claim and whether that claim was covered under the Pension Agreement. The court stated: "[W]e do not believe that the plaintiffs' claim falls within the terms of the [Pension Agreement] . . . since they are . . . neither applicants for a pension nor in dispute with the defendant as to whether or not they are entitled to a pension. The plaintiffs' claim is not that they have been denied their pensions, but that they have been denied the opportunity to eventually become entitled to a pension." Jt. App. at 165. We agree with the district court's characterization of appellants' claims and its conclusion that such claims are not encompassed under the terms of the Pension Agreement. Cf. Amaro v. Continental Can Co., 724 F.2d 747, 749 (9th Cir. 1984) ("This statutory claim [under § 510 of ERISA] is not for benefits under a collective bargaining agreement. The employees, in fact, are not yet eligible for those benefits.") Thus, appellants' § 510 discrimination claim does not implicate the concerns that persuaded the DelCostello Court to apply § 10(b) to hybrid - 301/fair representation claims.
In sum, Delcostello does not mandate application of the six-month limitation period of § 10(b) of the NLRB in this case where (1) an adequate state analogy exists and affords a limitations period that does not frustrate national policy, (2) the policies underlying adoption of the six-month limitations period are not present, and (3) no alternative federal limitations period has been suggested to this Court. Accordingly, DelCostello is inapplicable and Pennsylvania law governs.
B. Exhaustion of Remedies
Subsequent to oral argument in this case, another panel of this Court held that "an employee with a claim under Section 510 of ERISA need not submit that claim to the plan before seeking relief in a federal district court." Zipf v. American Telephone and Telegraph Co. ("AT&T"), 799 F.2d 889, 93 (3d Cir. 1986). Zipf clearly controls the resolution of Continental's exhaustion claim.
In Zipf, appellant suffered from rheumatoid arthritis which caused her to take a disability leave of absence from her employment. After Zipf returned to full-time status, she continued occasionally to miss work due to her illness. Eventually, her condition worsened and she began another period of disability leave. On the seventh day of absence Zipf was informed by her supervisor of the company's decision to terminate her because of her "'excessive absenteeism.'" Zipf, 799 F.2d at 890. Zipf filed suit alleging that the decision to terminate was made in violation of § 510 of ERISA to prevent her from potentially qualifying for substantial benefits for which she would have become eligible on her eighth day of absence from work. Summary judgment was entered for AT&T and Zipf's suit was dismissed for failure to exhaust internal administrative remedies.
Upon review, this Court identified two distinct exhaustion issues: (1) whether before seeking judicial relief on a § 510 claim, a claimant is required to submit that claim to the plan and (2) "whether [a § 510 claimant], before seeking judicial relief . . ., must submit to the plan the question of whether [s/he] would have been eligible for benefits had [s/he] not been discharged." 799 F.2d at 891. Proceeding to examine the law of this Circuit, the Zipf Court found our prior decision in Wolf v. National Shopmen, 728 F.2d 182 (3d Cir. 1984), inapplicable to actions "brought not to enforce the terms of a plan, but to assert rights granted by the federal statute." Zipf, 799 F.2d at 891. This Court then rejected the argument, also advanced in the instant appeal, see Reply Brief on Cross-Appellant in 21-24,*fn29 that ERISA contains an implied exhaustion requirement even as to substantive rights conferred under the statute. Examining the legislative history of the Act, we concluded that "the remedy for Section 510 discrimination was intended to be provided by the courts." Zipf, 799 F.2d at 892. Finally, Zipf recognized the strong national policy favoring arbitration and the traditional practice of the courts to defer to administrative expertise. Relying on this Court's decision in Barrowclough v. Kidder, Peabody & Co., Inc., 752 F.2d 923 (3d Cir. 1985), the Zipf Court concluded that these considerations supported the balance struck in Barrowclough,*fn30 to wit:
the most reasonable accommodation is to hold that claims to establish to enforce rights to benefits under 29 U.S.C. § 1132(a) that are independent of claims based on violations of the substantive provisions of ERISA are subject to arbitration, . . . while claims of statutory violations can be brought in federal court notwithstanding an agreement to arbitrate.
Zipf, 752 F.2d at 939 (quoting Barrowclough) (citations omitted).
Standing alone, Zipf ineluctably leads to the conclusion that appellants' were not required to exhaust arbitral remedies. Continental argues, however, that Zipf must read in light of our prior decision in Jacobson v. Merrill Lynch, Pierce, Fenner & Smith, INc., 797 F.2d 1197 (3d Cir. 1986). Indeed, Continental contends that "attempted application of the principles articulated in Zipf, " would put this Court at odds with recent Supreme Court precedent and create a direct conflict with Jacobson. Letter of Eugene L. Stewart, Attorney for Continental Can at 3 (Sept. 10, 1986). Rather than apply Zipf, Continental urges that "[t]he correct approach to the exhaustion issue has been articulated by the . . . Supreme Court in Mitsubishi [Motors Corp. v. Soler Chrysler-Plymouth, Inc., U.S. , 105 S. Ct. 3346 (1985),] and followed by this court in Jacobson." Id. at 5. Continental's argument does not alter the result.
In Mitsubishi, the Supreme Court rejected the claim that an "arbitration clause must specifically mention the statute giving rise to the claims that a party to the clause seeks to arbitrate." 105 S. Ct. at 3353. Thus, no presumption against arbitrability arises when the right involved is statutory as opposed to contractual. The proper approach in considering issues of arbitrability, the Court instructed, is two-fold: First, the court must determine whether the parties' agreement to arbitrate encompasses the statutory issues and second, if so, "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims." Id. at 3355.
In Zipf the approach approved in Mitsubishi was not contravened. The Zipf Court did not resort to a presumption of unarbitrability, but rather sought to ascertain Congressional intent on the question of the arbitrability of substantive discrimination claims under § 510 of ERISA. Its examination of the legislative intent of § 510 revealed an express desire that claims brought thereunder be submitted to the courts. "Indeed, an amendment that would have created an administrative remedy for Section 510 claims, to be established by the Department of Labor, was defeated." Zipf, 799 F.2d at 892. Jacobson, which held that determining arbitrability of federal statutory claims is, after Mitsubishi, "a matter of statutory interpretation" and may not be determined "on the basis of some judicially recognized public policy," Jacobson, 797 F.2d at 1202, is thus fully consistent with the reasoning and holding in Zipf.
We now proceed to the merits of appellants' claims. Our standard of review of issues involving the interpretation and application of legal precepts is plenary. United States v. Adams, 759 F.2d 1099, 1106 (3d Cir.), cert. denied, U.S. , 106 S. Ct. 275, 336 (1985). The trial court's findings of fact are governed by the clearly erroneous standard of review, Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985), "but as to the legal component of its conclusion, this court has plenary review." United States v. Felton, 753 F.2d 276, 278 (3d Cir. 1985).
Appellants' contentions may be summarized as follows: (1) the district court erred in its conclusion that a classwide violation of ERISA had not been established; (2) the district court erred in requiring appellants to prove during the liability proceedings that their layoffs were caused by Continental's liability avoidance program, and by depriving appellants of a rebuttable presumption on causation; (3) assuming arguendo that causation was properly at issue during the liability phase and that the burden of proof on that issue lay with appellant, they carried their burden by establishing that Continental's critical decisions were motivated both by permissible and impermissible factors, and the district court erred thereafter in placing the additional burden on the appellants to prove that, "but for" Continental's consideration of impermissible factors, they would have retained their jobs; and (4) finally appellants independently argue that the critical factual findings of the district court were clearly erroneous.
These claims require us to consider complex questions concerning both the elements of proof of a § 510 ERISA discrimination claim and the allocation of the burden of proof on trial of such claim. Any analysis of these issues must begin with an understanding of the nature of the claims asserted by the appellant class and the purposes of the statute under which these claims are brought.
Section 510 of ERISA prohibits employer conduct taken against an employee who participates in a pension benefit plan for "the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan." 29 U.S.C. § 1140 (1982). Congress enacted § 510 primarily to prevent "unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights."*fn31 West v. Butler, 621 F.2d 240, 245 (6th Cir. 1980); see also Zipf v. American Telephone & Telegraph Co., 799 F.2d at 889, 891 (1986) (citing Butler); Donahue v. Custom Management Corp., 634 F. Supp. 1190, 1197 (W.D. Pa. 1986) (quoting Butler). To recover under § 510, a plaintiff need not prove that "the sole reason for his [or her] termination was to interfere with pension rights." Titsch v. REliance Group, Inc., 548 F. Supp. 983, 985 (S.D.N.Y. 1982), aff'd, 742 F.2d 1441 (2d Cir. 1983) (emphasis in original). A plaintiff must, however, demonstrate that the defendant had the "'specific intent' to violate ERISA." Watkinson v. Great Atlantic & Pacific Tea Co., Inc., 585 F. Supp. 879, 883 (E.D. Pa. 1984) (quoting Titsch, supra). Proof of incidental loss of benefits as a result of a termination will not constitute a violation of § 510. See Titsch, 548 F. Supp. at 985 ("No ERISA cause of action [under § 510] lies where the loss of . . . benefits [i]s a mere consequence of, but not a motivating factor behind, a termination of employment.").
Under the prevailing case law, and in accordance with the statutory language, the essential element of proof under § 510 is specific intent to engage in proscribed activity. Proof of specific intent to interfere with the attainment of pension eligibility, then, "regardless of whether the interference is successful and regardless of whether the interference is successful and regardless of whether the participant would actually have received the benefits absent the interference," Zipf, 799, F.2d at 893, will ordinarily constitute a violation of § 510 of ERISA.*fn32 In most cases, however, specific intent to discriminate will not be demonstrated by "smoking gun" evidence. As a result, the evidentiary burden in discrimination cases may also be satisfied by the introduction of circumstantial evidence. See Maxfield v. Sinclair Int'l, 766 F.2d 788, 791 (3d Cir. 1985) cert. denied, U.S. , 106 S. Ct. 796 (1986) (age discrimination). In the latter circumstance courts have developed "formula[s] . . . that enable the trial judge to sift through the evidence in an orderly fashion to determine the ultimate question in the case - did the defendant intentionally discriminate against the plaintiff[s]." Dillon v. Coles, 746 F.2d 998, 1003 (3d Cir. 1984).
As in the context of employment discrimination claims under Title VII, employees alleging discrimination under ERISA bear the burden of making out a prima facie case of discrimination. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973); See also Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 253-54 (1981) (refining McDonnell Douglas). To establish a prima facie case under ERISA § 510, an employee must demonstrate (1) prohibited employer conduct (2) taken for the purpose of interfering (3) with the attainment of any right to which the employee may become entitled. 29 U.S.C. § 1140 (1982). In a class action context, it is not enough for the class representative to prove the validity only of his or her own claim. See General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 158 (1982). Rather, the class representative "must establish that discrimination was the employer's standard practice." Dillon, 746 F.2d at 1004; see also Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 876 (1984) (class representative must establish that 'discrimination was the company's standard operating procedure') (quoting International Bhd. of Teamsters v. United States, 431 U.S. 324, 336 (1977)). The burden of persuasion on the ultimate issue of intentional discrimination "remains at all times with the plaintiff." Burdine, 450 U.S. at 253.*fn33
If the class establishes prima facie case by a preponderance of the evidence, the burden of production shifts to the employer to introduce admissible evidence of a legitimate, nondiscriminatory reason for its challenged actions. See Burdine, 450 U.S. at 254 International Bhd. of Teamsters v. United States, 431 U.S. 324, 360 & n.46 (1977); Dillon, 746 F.2d at 1004. If the employer fails to rebut the presumption of discrimination that arises from the class's prima facie case, the district court must enter judgment for the class. See Teamsters, 431 U.S. at 361. If, however, the employer carries its burden of production, the presumption drops from the case and the class representative is afforded the opportunity to demonstrate that the employer's articulated reason is pretextual "either directly by persuading the court that a discriminatory reason more likely motivated the employer of directly by showing that the employer's proffered explanation is unworthy of credence." Burdine, 450 U.S. at 256; Bellissimo v. Westinghouse Elec. Corp., 764 F.2d 175, 179-80 (3d Cir. 1985), cert. denied, U.S. , 106 S. Ct. 1244 (1986); Dillon, 746 F.2d at 1003-04; see also Ursic v. Bethlehem Mines, 556 F. Supp. 571 (W.D. Pa.), aff'd in part, 719 F.2d 670 (3d Cir. 1983) (employing a Burdine- like analysis to an ERISA § 510 claim).
Where the plaintiffs' case does consist of direct "smoking gun" evidence that the employer acted with discriminatory motivation, however, the Supreme Court has indicated that the McDonnell Douglas-Burdine shifting burdens mechanism in inapplicable. Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 121 (1985); see also Goodman v. Lukens Steel Co., 777 F.2d 113, 130 (3d Cir. 1985) ("The presumptions and shifting burdens are merely an aid - not ends in themselves. when direct evidence is available, problems of proof are no different than in other civil cases.") (citing Trans World Airlines, supra; United States Postal Serv. Bd. of Governors v. Aikens, 460 U.S. 711 (1983); Furnco Constr. Corp. v. Waters. 438 U.S. 567, 577 (1978)), cert. granted, 55 U.S.L.W. 3391 (U.S. Dec. 2, 1986); Dillon, 746 F.2d at 1005 ("Once the plaintiff establishes liability the sine qua non for the [ McDonnell Douglas ] formula no longer exist."); Bell v. Birmingham Linen Serv., 715 F.2d 1552, 1556 (11th Cir. 1983), cert. denied, 467 U.S. 1204 (1984) (" McDonnell Douglas . . . pertains primarily . . . to situations where direct evidence of discrimination is lacking") cf. Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702 (1978) (policy requiring larger contribution to pension fund from women than from men was discriminatory on its face); EEOC v. Wyoming Retirement System, 771 F.2d 1425, 1430 (10th Cir. 1985) (direct evidence of discrimination codified in retirement statute). Guided by these general principles, we turn to appellants' class claims of discrimination under ERISA.
In the proceedings before the district court, "[p]laintiffs . . . assert[ed] that . . . [Continental] deliberately followed a plan for avoiding pension liability as a means of increasing its profits, not that it deliberately increased plant profitability by a means that happened to effect [sic] employees' eligibility for pension benefits." Jt. App. 170. The appellants thus raised a cognizable claim under § 510 which requires that loss of benefits be more than a "mere consequence" of employer conduct. Titsh, 548 F. Supp. at 985. Appellants maintained that Continental, in accordance with the alleged discriminatory plan, improperly (1) "capped" the Pittsburgh plant, (2) closed the pail line and (3) laid off member of the employee class, all in violation of § 510 of ERISA. See Jt. App. at 31-36. The district court found that the liability avoidance plan was designed to "avoid triggering future vesting." FF 53. Moreover, the court found that all three actions allegedly taken pursuant to that plan were motivated in part by Continental's desire to prevent appellants from attaining pension eligibility. Nevertheless, the court concluded that none of the challenged actions established a classwide violation of § 510 and, accordingly, entered judgment for Continental. See CL 4-5.
Appellants argues that both the evidence adduced at trial and the findings of the district court establish that Continental violated § 510 by engaging in the challenged conduct for the purpose of interfering with appellants' attainment of pension eligibility for 70/75 and rule of 65 benefits. Each of the acts that appellants claim was undertaken for proscribed purposes may independently make out a claim of discrimination under § 510. We shall first consider the liability avoidance program. Because the question whether the individually challenged actions of Continental -- the layoffs, the capping of the Pittsburgh plant, and the closure of the pail line -- constitute violations of the ERISA present similar procedural issues, those claims will be considered together in a separate section infra.
1. Liability Avoidance Program
Appellants first maintain that the overall adoption and implementation of the "Bell System" in itself establishes a classwide violation of § 510 of ERISA. Although the district court made extensive findings of fact with regard to the elements of and the intent underlying the liability avoidance plan, it did not reach a conclusion as to whether these findings constituted a violation of ERISA. Our review of appellants' claim requires us to consider the proof requirements under the ACT and to determine whether the evidence adduced at trial satisfies the elements of a § 510 claim.
The central features of Continental's Bell System, as established by the district court's findings, are as follows: (1) to identify Continental's "unfunded pension liabilities," i.e. employees who have not yet attained the required age and service to qualify to 70/75 and Rule of 65 benefits, see FF 53, 64; (2) to designate those employees as "permanently laid off," ineligible for recall absent exigent circumstances, and then only with prior approval of top Continental management, see FF 54-57; (3) to alert Continental management through a computerized "red flag" system whenever an employee designated as "permanently laid off" receives a pay check, FF 69-70; and (4) to adjust the level of production to a predetermined level of employment. See FF 61, 63. In addition, the district court found that "Continental often referred to the goals outlined in the Bell System as 'liability avoidance.' It had two aspects: (a) sheltering or keeping employed 70/75 qualified employees so that their employment was assured throughout their normal careers; and (b) preventing further employees from qualifying for 70/75 pensions." See FF 68.
At the outset, Continental disputes that the liability avoidance plan was implemented at the Pittsburgh plant, and it argues that adoption of the plan, without more, cannot support a finding of liability.*fn34 See Brief of Appellee-Cross Appellant at 14. We reject both claims, First, Continental's contention that its liability avoidance plan was not implemented at Pittsburgh disregards the evidence and the findings of the district court. The district court found that such a plan -- the Bell System -- was indeed created by Continental, see FF 51-54, 68, the Pittsburgh was selected as one of the three 'concept development plants' for the implementation of the plan, see FF 62; Jt. App. at 1385, and that Continental was motivated in part by the stated objectives of the liability avoidance plan in making each of the challenged decisions that resulted in the layoffs of individual class members. See FF 106, 141.*fn35 Second, as to the claim that adoption alone is insufficient conduct to constitute a violation of ERISA, both Continental and the district court misperceive the breadth of § 510.*fn36 The following colloquy illustrates the point:
APPELLANTS: "[T]he definition of the class says clearly people who were designated for layoff; and the fact that they were designated for layoff then doesn't mean they had to be laid off and then --"
THE COURT: "Yes, but the act of designation doesn't deprive them of any ERISA rights."
APPELLANTS: "No, Your Honor. It does not."
THE COURT: "And the only --"
APPELLANTS: " Well, it does discriminate against them. I think labeling them --"
THE COURT: "but this is not a discrimination case. This is an ERISA case, and no rights have been taken away from them until they are laid off; and so the designation really had no significance as far as a violation of ERISA is concerned."
Jt. App. at 473-74 (emphasis added).
Section 510, however, unlike other anti-discrimination provisions, is designated to prevent injury to employees' protected rights, not simply to redress the injury after the goals of a discriminatory plan have been effectuated. See Zipf, 799 F.2d at 891. To be certain, the broad, remedial objectives of § 510 do not authorize sanctions merely for an employer's state of mind. There must be some act in furtherance of an employer's desire to interfere with an employee's rights to pension benefits. That act, however, need not achieve the employer's illicit goals. To keep the effects of discriminatory intent "in the air", so to speak, is part of § 510's raison d'etre. The statute prohibits specified conduct "for the purpose of interfering with the attainment of any right. . . ." 29 U.S.C. § 1140 (1982). thus, actual deprivation is not a prerequisite to class liability under § 510, ergo the challenged act need not have caused actual deprivation or have actually interfered with the attainment of pension eligibility.
Because the district court construed § 510 as requiring actual deprivation of rights, it failed to consider properly the inchoate components of the liability avoidance scheme that, though producing no immediate or tangible effects on appellants' rights, nevertheless constituted deliberate steps undertaken for the purpose of interfering with appellants' attainment of pension eligibility. When so understood, it is clear that the district court's own findings are evincive of appellants' satisfaction of their burden to establish by a preponderance of the evidence that the plan was infested with discriminatory intent sufficient to constitute a violation of ERISA. Indeed, if Continental's liability avoidance scheme does not constitute direct proof of discrimination under § 510, we are hard pressed to imagine a set of facts that would.
In Lee v. Russell County Bd. of Educ., 684 F.2d 769 (11th Cir. 1982), the Eleventh circuit observed:
Where the evidence for a prima facie case consists, as it does here, of direct testimony that defendants acted with a discriminatory motivation, if the trier of fact believes the prima facie evidence the ultimate issue of discrimination is proved; no inference is required. Defendant cannot rebut this type of showing of discrimination simply by articulating or producing evidence of legitimate, nondiscriminatory reasons.
Id. at 774. We think that this standard applies with equal force to this case, where appellants presented direct documentary proof of Continental's intent to discriminate against non-vested employees in the adoption and implementation of its liability avoidance plan. See also Bell v. Birmingham Linen Serv., 715 F.2d 1552, 1556-57 (11th Cir. 1983), cert. denied, 467 U.S. 1204 (1984) ("It would be illogical, indeed ironic, to hold a . . . plaintiff presenting direct evidence of a defendant's intent to discriminate to a more stringent burden of proof, or to allow a defendant to meet that direct proof by merely articulating, but not proving, legitimate, nondiscriminatory reasons for its actions.")
Moreover, the district court's findings of fact indicate that it credited appellants' case on the ultimate issue of discrimination.*fn37 The district court found that "Bell I was aimed at managing Continental's unfunded pension liabilities, by enabling it to describe its unfunded pension liabilities and to avoid triggering future vesting, while securing the employment of those employees whose benefits had already vested." See FF 53 (emphasis added).*fn38 We read the court's finding as establishing that Continental devised its liability avoidance scheme for the sole purpose of preventing employees from attaining eligibility for the break-in-service pensions.*fn39
In sum, appellants contend, and we agree, that the maintenance of the program with the specific intent to interfere with class members' pension eligibility was in itself of a classwide violation of ERISA entitling them to injunctive relief. See International Bhd. of Teamsters v. United States, 431 U.S. 324, 360-61 (1977) (proof of a discriminatory policy may justify injunctive relief); cf. Cooper v. Federal Reserve Bank of Richmond, 467 U.S. at 876 (proof of pattern and practice of discrimination entitles class to prospective relief).*fn40 In light of the uncontested findings of the district court that establish the requisite discriminatory intent of the liability avoidance plan, see FF 53, 68, and in the absence of any rebuttal evidence from Continental that the plan was not so designed -- wholly apart from the determination whether individual class members were actually laid off in accordance with the plan -- appellants were entitled to an injunction on their claim that the liability avoidance plan, as implemented, violated § 510 of ERISA. See Dillon, 746 F.2d at 1004.
2. The Layoffs, the Cap and the Closure of the Pail Line
Appellants' remaining claims charge that Continental took specific actions, pursuant to its intentionally discriminatory liability avoidance scheme that resulted in their loss of employment. As to these claims, appellants assert that in light of the unrebutted evidence that Continental's liability avoidance program was adopted and implemented with discriminatory animus toward non-vested employees, they should have been accorded a presumption that each class member's job loss as a result of those actions was caused by the discriminatory policy. In this regard, appellants argue that the district court erred "in resolving the question whether the liability avoidance program caused the class members' loss of work in the liability trial, and imposing the burden on plaintiffs to prove that causation, when that question should have been remitted to the remedy trial with the plaintiffs enjoying a rebuttable presumption that their lost work was caused by the unlawful program and with the burden of proof on Continental to prove otherwise." Brief for Appellants at 22-23 (emphasis in original). In any event, appellants continue, "having fund that the loss of work was the consequence of mixed motives, [the district court erred] in not imposing the burden on Continental to prove that the loss of work would have occurred in the absence of ("but for") the illegal motivation." Id. at 23.
At the conclusion of the "liability" trial the district court found that a motivating factor in Continental's decisions to close the pail line, to cap the Pittsburgh plant and lay off individual and class plaintiffs was to prevent employees from attaining eligibility for 70/75 and Rule of 65 benefits. See FF 106, 141. The court also found that Continental was also motivated by legitimate business considerations. See FF 107, 142. Continental does not dispute the findings of impermissible motivation; rather, it relies on the findings of the district court that hold that the results of the challenged actions would have occurred in any event, see FF 107, 142, as precluding liability.
Our considerations centers around whether the various burdens of proof in a class action where both permissible and impermissible factors are involved were appropriately allocated. In essence, appellants' contention is that in a class action context, the determination whether injury to individual class members was caused by a proved discriminatory policy is properly assigned to the "remedy" phase of the trial with the burden of proving that the injury was not so caused resting with the defendant. Although we agree with appellants' ultimate contention that in this case the "but for" burden of proof was misapplied, we shall take this opportunity to clarify various procedural misconceptions implicit in their argument. In order to assess properly the various elements of appellants' claim, then, it is appropriate to categorize those elements and to treat them separately.
Appellants point to three Supreme Court decisions for the proposition that "questions whether individual job loss was caused by [a proved] violation . . . are to be addressed in the remedial phase of the litigation." Brief of Appellant at 33. In Franks v. Bowman Transp. Co., supra, a class action challenging the seniority and hiring practices of Bowman Transportation was resolved favorably for the plaintiffs. Certain seniority relief, however, was denied and plaintiffs appealed. Upon review, the Supreme Court held that the district court had improperly withheld seniority relief from unnamed members of the class on the basis that there was no evidence presented during the liability proceedings regarding vacancies, qualifications and performance for each member of the class. Franks, 424 U.S. at 772. The Court rejected the implication that such evidence was a prerequisite to classwide relief and further explained that where "petitioners . . . have carried their burden of demonstrating the existence of a discriminatory . . . pattern and practice by the respondents . . . the burden will be upon respondents to prove that individuals . . . were not in fact victims of . . . discrimination." Id.
International Bhd. of Teamsters v. United States, supra, echoed and elaborated upon the Franks methodology. In Teamsters the Supreme Court considered charges that both the employer and the union had engaged in a pattern and practice of discriminatory conduct. The Court again recognized two distinct stages in class action proceedings and articulated the requisite proof to be adduced at each state. At the initial 'liability' stage, proof that the discriminatory policy actually existed is all that is required. See 431 U.S. at 360. "[T]he question of individual relief does not arise until [the 'remedial' stage, after] it has been proved that the employer has followed an employment policy of unlawful discrimination." Id. at 361.
Finally, in Cooper v. Federal Reserve Bank of Richmond, supra, the Supreme Court again gave recognition to the two-stage methodology. The Court noted that in a class context "[w]hile a finding of a pattern or practice of discrimination itself justifies an award of prospective relief to the class, additional proceedings are ordinarily required to determine the scope of individual relief for the members of the class." Cooper, 467 U.S. at 876.
In the instant appeal, the proceedings before the district court concluded after the "liability" stage of the litigation with judgment entered for the defendants. Appellants maintain that on the basis of Franks, Teamsters and Cooper the liability phase of this litigation ended upon their showing that Continental's liability avoidance program constituted a classwide violation of § 510 and that all questions of causation should have been remitted to the remedial phase of the litigation with the "but for" burden of proof resting with Continental. Appellants' argument is flawed in two respects.
First, this Court recently questioned the utility of approaching the burdens issue according to the label affixed to the particular state of the litigation. Rather, in Dillon v. Coles, supra, we determine that the more helpful approach is to "review the proof requirements in each instance." 746 F.2d at 1004. Thus, determining whether the burden of proving causation is properly allocated depends not so much on the particular state of the proceedings as on the actual evidentiary proofs in the record at the time of the allocation.
The Supreme Court's decision in Burdine makes clear that the plaintiff bears the burden of persuasion by a preponderance of the evidence to establish a prima facie case of discrimination. See Burdine, 439 U.S. at 252-53. The Court's decisions in Franks, Teamsters and Cooper require no less: The class representative bears the initial burden to make out the prima facie case, see Teamsters, 431 U.S. at 360 (interpreting Franks), and must "ultimately . . . prove . . . that . . . discrimination was the company's standard operating procedure - the regular rather than the unusual practice." Id. at 336 (emphasis added); see also Cooper, 467 U.S. at 876 (same). Where the ultimate factual determination is still at issue, the "but for" burden of proof is properly assigned to the plaintiff and may operate to discharge the plaintiff's burden of persuasion and entitle him or her to relief.
In the instant appeal, the district court erroneously construed this "but for" burden as requiring appellants to prove that "but for" Continental's consideration of their impending pension eligibility, appellants would have remained at work; instead, that burden only requires proof that "but for" the impermissible consideration, appellants' would not have lost work. The distinction is significant. As this Court explained in Bellissimo v. Westinghouse Elec. Corp., 764 F.2d 175 (3d Cir. 1985), cert. denied, U.S. , 106 S. Ct. 1244 (1986):
The "but for" test does not require a plaintiff to prove that the discriminatory reason was the determinative factor, but only that it was a determinative factor. Interpreting Title VII to require proof of "the determinative factor" is inconsistent with the "but for" causation test, insofar as plaintiff would require to show that the discriminatory motive was the sole reason for the action taken. More than one "but for" cause can contribute to an employment decision, and if any one of those determinative factors is discriminatory, Title VII has been violated.
Id. at 179 n.1 (citations omitted).
Similarly, § 510 of ERISA requires no more than proof that the desire to defeat pension eligibility is "a determinative factor" in the challenged conduct. From our review of the record, it is manifest that the district court considered the appellants' burden of proof on causation to be significantly heavier than that required by our precedent. See , e.g. Bellissimo, 764 F.2d at 179 n.1 (but for causation requires proof that "the discriminatory reason was . . . a determinative factor") (emphasis in original); Lewis v. University of Pittsburgh, 725 F.2d 910, 915-16 (3d Cir. 1983), cert. denied, 469 U.S. 892 (1984) (but for causation requires more than proof that discriminatory reason was 'a substantial' or 'a motivating factor' in challenged decision); Smithers v. Bailar, 629 F.2d 892, 898 (3d Cir. 1980) (plaintiff need only prove that the discriminatory reason "made a difference" in the challenged decision). Accord Dillon, supra; Duffy v. Wheeling Pittsburgh Steel Corp., 738 F.2d 1393 (3d Cir.), cert. denied, 469 U.S. 1087 (1984). The district court repeatedly indicated that appellants' must prove not only that their impending pension eligibility made a difference in Continental's decisions that resulted in their layoffs, but also that those decisions and, consequently, their layoffs would not have occurred for any other reason.*fn41 See Jt. App. at 480, 628-33, 637-39, 676-77.
Under this Court's formulation of the "but for" test of causation, appellants' properly challenged the district court's application of a markedly different standard of proof. We stress, however, that out determination that the district court erred in its application of the "but for" causation test is based upon the particular test applied, not on the propriety of requiring proof of causation as a prerequisite to a finding of liability. As to the latter issue, we think it clear that "but for" causation, properly construed, is an element of plaintiff's ultimate burden of persuasion. Appellants' broader contention, that their demonstration of a classwide violation in the adoption and implementation of the liability avoidance plan relieved them of the burden of proving that their job loss due to the cap of the Pittsburgh plant and the closure of the pail line was a result of the plan, however, requires further analysis. In this regard, it is necessary to determine the scope of the presumption that arises from proof of the discriminatory policy.
b. Presumption Of Individual Discrimination
There can be little doubt that upon proof of an intentionally discriminatory plan or policy, a presumption that they were actual victims of the discriminatory policy inures to the benefit of the individual class members.*fn42 See Franks, 424 U.S. at 772. In Teamsters, the Supreme Court stated that "[t]he proof of the pattern or practice supports an inference that any particular employment decision, during the period in which the discriminatory policy was in force, was made in pursuit of that policy." 431 U.S. AT 362. Here, appellants urge that they were deprived of the Teamsters-Franks rebuttable presumption that each individual class member's job loss occurring during the period in which the liability avoidance program was in effect was caused by that discriminatory program. Before addressing appellants' contention we think it necessary to clarify the nature and scope of the Teamsters-Franks presumption.
The presumption that arises upon proof of a discriminatory policy attaches to all employer actions that may reasonably be considered as within the ambit of that policy. In other words, the Teamsters-Franks presumption presupposes a vertical nexus between the proved discriminatory policy and the employer conduct for which individual relief is sought. Thus, proof that an employer's standard operating procedure with respect to its hiring policies is intentionally discriminatory may not necessarily support a class member's individual challenge of the employer's promotion practices. Cf. General Tel. Co. of Southwest v. Falcon, 457 U.S. 147 (1982) (individual's challenge of employer's promotion practices did not necessarily render him an adequate representative for class challenging hiring practices). Similarly, the determination that an employer engages in classwide discrimination on one level is not tantamount to a conclusion that it does so on all levels. Thus, while proof of a discriminatory policy in one area of employment practice may be probative of the employer's intent in another area, it will not necessarily establish a presumption that the second area is similarly infested with the illegal intent.
At trial of this action, Continental specifically maintained that each of its challenged employment decisions were taken for legitimate purposes and not pursuant to the liability avoidance program.*fn43 Under these circumstances, Continental would have the Burdine burden shifting mechanisms apply at the threshold to each challenged act with the initial burden of persuasion on the plaintiff to prove a prima facie case by a preponderance of the evidence that each act was a result of discriminatory intent. Continental suggests that to require otherwise would be to fasten liability onto Continental for "discrimination in the air." Brief for Appellee-Cross Appellant at 27 (paraphrasing Dillon, 746 F.2d at 1004). Continental misreads both our opinion in Dillon and the Supreme Court's decisions in Franks and Teamsters.
In Dillon this Court noted that in a class action context "the liability phase of the case is not concluded until [the individual class member] . . . demonstrates his own basis for an award." 746 F.2d at 1004. The court continued:
It is misleading to speak of the additional proof required by an individual class member for relief as being part of the damage phase; that evidence is actually an element of the liability portion of the case. Until the individual has demonstrated actual injury to himself, the court may not direct individual relief. Just as in the tort field, where "negligence in the air" is not enough to fasten liability on a defendant, so in a Title VII case discrimination in general does not entitle an individual to specific relief.
Continental maintains that it "met its burden of proving that no one in Pittsburgh was affected by any alleged discriminatory policy . . . . [and t]hus, any presumption as to each Plaintiff and each class member disappeared and there was no basis for any remedy for anyone." Brief of Appellee-Cross Appellant at 26. Continental moves to far too fast.*fn45 While the "discrimination in the air" concept is relevant to an individual's entitlement to relief, it does not affect the presumption that arises upon proof of a discriminatory policy. Indeed, as recognized by this Court in Dillon, "[i]n a class action setting, an individual member may build on the discrimination established by the class." 746 F.2d at 1004. Thus, before reaching the question of individual entitlement, the preliminary issue concerns the nature and scope of the presumption arising from appellants' proof of a discriminatory policy.
In the instant appeal, Continental attempts to capitalize on the independent nature of appellants' § 510 claims. Because each challenged act may itself constitute a classwide violation of ERISA, Continental essentially argues that each claim must satisfy the Burdine burden shifting mechanism. Appellants would therefore bear the initial burden to prove by a preponderance of the evidence that Continental engaged in each act with the illegal intent to discriminate. Continental could then meet appellants' prima facie case by articulating a nondiscriminatory reason for its actions which raises a genuine issue of fact as to whether it discriminated. The effect of this approach, however, is to discount appellants' direct documentary proof of the discriminatory liability avoidance program, and consequently, to reduce Continental's burden on rebuttal. Such an approach is contrary to Franks and Teamsters.
Having established the Continental adopted and implemented a program premised on impermissible considerations and designed to achieve a discriminatory result, appellants were entitled to "an inference that any particular employment decision, during the period in which the discriminatory policy was in force, was made in pursuit of that policy." Teamsters, 431 U.S. at 362. We hold that the scope of the presumption arising from the discriminatory liability avoidance plan extends to those discrete acts which, as found by the district court, were specifically contemplated to implement the plan -- namely, the designation of class members as permanently laid off, see FF 57, the institution of the red flag system see FF 69-70; and the capping of the Pittsburgh plant, see FF 54.
We are satisfied that as to these particular acts the vertical nexus contemplated by Franks and Teamsters inheres in the various components of the plan. While we recognize that the plan also specifically contemplated shifting business volume so as to avoid incurring additional pension liability, see FF 63, we are not convinced that the closure of pail line alone establishes the requisite nexus with the plan. Thus, the presumption arising from appellants' proof of the discriminatory liability avoidance program does not automatically extend to Continental's decision to close the pail line. That the presumption does not so extend, however, does not alter the ultimate outcome of this appeal.
3. The Teamsters-Franks Presumption and the "But For" Burden in Mixed Motive Cases.
In Franks, Teamsters, and Cooper, supra, the Supreme Court acknowledged the propriety of shifting the burden of persuasion onto the defendant if it sought to avoid liability after proof of a discriminatory policy had been adduced. Thus, if after sifting through the evidence, a district court determines that the defendant has failed to introduce admissible or credible evidence sufficient to rebut the plaintiff's case, then, in accordance with Franks, Teamsters and Cooper, the "but for" burden of persuation rests properly with the defendant. This "but for" burden requires proof from the defendant that it would have reached the same decision or engaged in the same conduct in any event, i.e., in the absence of the impermissible consideration, and operates to limit the scope of the relief available to individual class members. This Court has recognized that "placing the burden on the employer 'to demonstrate that the individual [class] applicant was denied an employment opportunity for lawful reasons,' is entirely consistent with the Burdine allocation of burdens in a suit brought by an individual plaintiff." Dillon, 746 F.2d at 1004 (quoting Teamsters) (citation omitted). This is so because at this stage the ultimate burden of persuading the court that the employer intentionally discriminated against the class has been carried. Thus, "[n]o reason appears. . . why the victim rather than the perpetrator of the illegal act should bear the [but for] burden of proof . . . ." Franks, 424 U.S. at 773 n.32. In sum, placing the "but for" burden of proof on the employer at this juncture honors the presumption that arises upon proof of a discriminatory policy that the individual class members were discriminated against in accordance with that policy, while affording the employer the opportunity to limit its liability upon proof that, as to certain class members, it would have reached the same decisions in the absence of the illegal motivation. See Mt. Healthy City School District Bd. of Ed. v. Doyle, 429 U.S. 274, 287 (1977); cf. East Texas Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 n.9 (1977) (citing Mt. Healthy in Title VII context); Bibbs v. Block, 778 F.2d 1318 (8th Cir. 1985) (in banc) (applying Mt. Healthy to Title VII action); Blalock v. Metals Trades, Inc., 775 F.2d 703 (6th Cir. 1985) (same)
At the outset, we recognize that this Court has held that proof that an impermissible consideration was a "'substantial' or 'motivating' factor" in an employer's challenged conduct is insufficient to carry the plaintiff's burden of persuasion on the ultimate issue of discrimination. Lewis v. University of Pittsburgh, 725 F.2d 910, 915 (3d Cir. 1983), cert. denied, 469 U.S. 892 (1984). In the instant litigation, although the district court found that the desire to prevent pension eligibility was "a motivating factor" in each of Continental's challenged decisions, we do not read the court's findings and ultimate conclusion that liability was not established in this case as resting on the determination that appellants had failed to prove the requisite degree of motivation, but rather, that appellants had failed to prove that "but for" that motivation they would have remained at work. Thus, we find it unnecessary to review the various versions of the facts urged by the parties before this Court. Nor do we deem it in the interest of justice to remand for clarification of the district court's findings. Indeed, to construe the district court's findings otherwise would render them clearly erroneous. As the Supreme Court explained in Anderson v. City of Bessemer City, 470 U.S. 564 (1985), "'a finding is "clearly erroneous" when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Id. at 573 (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). From our review of the entire record, we are convinced that the desire to defeat pension eligibility was a "determinative" factor in each of Continental's challenged actions. Bellissimo, 764 F.2d at 179 n.1. A finding to the contrary would be clearly erroneous.
We now turn to the final issue in this case: the effect of the Teamsters-Franks presumption on the defendant's burden on rebuttal where discriminatory intent is established by proof that both permissible and impermissible factors motivated the challenged conduct. We conclude that whether the class representative discharges his or her burden of persuation by offering direct proof of discrimination, circumstantial proof of discrimination or proof of mixed motivation, the Teamsters-Franks presumption attaches to each individual class member's claim that s/he was a victim of the discriminatory policy.
The class met its burden of proving that Continental's liability avoidance plan was discriminatory and the class members were therefore entitled to a presumption that their layoffs, as a result of the capping of the Pittsburgh plant, were in pursuit of that plan. See discussion, supra. Moreover, the district court's findings establish that appellants independently carried their burden of persuation that Continental closed the pail line, capped the Pittsburgh plant and laid off individual members of the class for discriminatory purposes. Thus, as to each of the actions challenged by appellants, liability was established. Continental thereafter bore the burden of persuation to prove by a preponderance of the evidence that it would have made the same decisions in any event.
On the facts of this case, however, the district court required the appellants to bear the burden that properly rests with the defendant. Thus, the district court erred by misallocating the "but for" burden of proof that arises after appellants have carried their burden of persuasion on the ultimate issue of discrimination. That the court required appellants to prove that "but for" Continental's decision to abort their pension eligibility they would have remained at work is manifest. We need only recite a few colloquies from the record:
THE COURT: "But if the defendants came in here and admitted that i order to avoid pension liability they laid these people off and they refused to recall them and that their sole reason was to avoid pension liabilities, --"
THE COURT: "--but then went on to say, 'But it doesn't make any difference, because we didn't have enough work to keep these people busy anyhow - so they would have been laid off even if that wasn't the case, and they wouldn't have been recalled even though that wasn't the case, because we didn't have any business,'--"
THE COURT: "--you could not succeed."
APPELLANTS: "Well, unless I persuaded you-- First of all, that would be an item of damage. But if they did that, if they sustained their burden, then I agree that I would then have to show you that that was a ruse or not true. They would have the burden of proving that to you if they were able to present such testimony, but that would be an item of damages."
THE COURT: "Yes, but you first have the burden."
APPELLANTS: "That's true. We have the burden of showing by a preponderance--"
THE COURT: "You have the overall burden."
APPELLANTS: "Of showing by a preponderance of the evidence in accordance with the standards that this made a difference."
THE COURT: "And because as to the recalls a directed verdict was issued because you presented no evidence, it requires you to present in evidence that these people would have been recalled--"
APPELLANTS: "If the Court--"
THE COURT: "-- except for the fact of their evil intent."
Jt. App. at 630-31.
THE COURT: "[J]ust assuming, not that they are admitting, but assuming that [Continental] would admit they didn't want to pay pensions and they would do anything they could to avoid paying pensions, unless you can prove these people would have worked if they didn't have that attitude about pensions, you can't win."
APPELLANTS: "It is true that on damages--I think, Your Honor, that has to do with damages. If they came in and said, 'Yes, we laid them off to avoid pension liability, we discriminated against them, we--'"
THE COURT: "'But it doesn't make any difference because we didn't need them anyhow.'"
APPELLANTS: "But if they say, 'We violated the statute, we discriminated against them, we laid them off, we discriminated, we called them-- that's why we laid them off, to avoid pension eligibility,' then on liability they have violated the statute. As to damages--"
THE COURT: " I'm saying no, they haven't, unless you show that but for that, [appellants] would have worked."
Jt. App. at 632-33. Finally, the court summarized its view of the allocation of the burden of proof in the following passage:
THE COURT: "The problem I am having, Mrs. Litman, very truthfully is, even if you prove that they did this deliberately with the intent to deprive these people of their pension rights, unless you are able to show that they would have been called back but for that, you haven't proved your case."
Jt. App. at 637 (emphasis added).
We think it clear that the district court required appellants to prove more than that Continental's desire to prevent pension eligibility was a determinative factor in their layoffs. Because we find that the district court misallocated the burden of proof on this issue we do not reach appellants' contentions that the court's findings in this regard were clearly erroneous.
In sum, we find that the district court erred in failing to conclude that Continental's liability avoidance plan constituted a classwide violation of ERISA. The district court properly determined that the causation was an element of liability and that the burden of proof on that issue lay with the appellants. The district court erred, however, in not recognizing that appellants carried their burden of proof on causation by establishing that Continental's challenged decisions were motivated by both permissible and impermissible factors. Finally, the district court erred in allocating the "but for" burden of proof on appellants as to their challenges to their layoffs, the capping of the Pittsburgh plant and the closure of the pail line, requiring them to prove that "but for" Continental's consideration of impermissible factors they would have retained their jobs.
Accordingly, we will reverse the judgment of the district court and remand for proceedings to determine the appropriate relief. In those proceedings, individual class members must first establish that they were (1) non-vested employees eligible for 70/75 and Rule of 65 benefits, (2) available for work, (3) labeled as permanently laid off by Continental, and (4) laid off prior to attaining eligibility for those benefits. Continental must then be afforded the opportunity to present evidence that as to any particular individual class member's request for relief, that individual is not so entitled because in the absence of Continental's illegal plan that individual would have been laid off at the same time in any event. We do not foreclose an opportunity for Continental to submit its proofs collectively as to all of the plaintiffs. That is, if the proof as to each individual is the same, there is no requirement that Continental repeat the same evidence for each claimant. Continental must establish either collectively or individually that class members would have been laid off even in the absence of the illegal plan. Continental's burden on this issue will be one of persuasion.