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Kotrosits v. GATX Corp. Non-Contributory Pension Plan for Salaried Employees

filed: July 6, 1992.


On Appeal From the United States District Court For the Eastern District of Pennsylvania. (D.C. Civil Action No. 88-01835)

Before: Stapleton, Scirica, and Roth, Circuit Judges

Author: Stapleton


STAPLETON, Circuit Judge:


At the end of 1986, the GATX Corporation and its subsidiary, General American Transportation Company (GATC), sold all of the stock of GATC's subsidiary, Fuller Company, to FA Holding Company, an entity owned by Fuller management and a private investor. Plaintiffs are Fuller employees who claim they were entitled to enhanced early retirement benefits under the GATX Pension Plan as a result of the sale. The district court agreed and reversed the decision of the Plan Administrator to deny these benefits. We will reverse the judgment of the district court.


The parties have stipulated to most of the relevant facts. At the time of the sale of the Fuller Company stock, approximately 600 Fuller employees were participants in the GATX Corporation Non-Contributory Pension Plan for Salaried Employees ("the Plan"). This Plan was a funded, defined benefit, non-contributory pension plan covering the employees of GATX Corporation and a number of its affiliated corporations. As the district court noted:

The GATX Plan offers the following retirement options: (1) normal retirement (age 65); (2) 62/15 (unreduced benefit at age sixty-two provided that the employee has fifteen years of service); (3) 90 points (unreduced benefit available provided that the employee's age and years of service add up to ninety); (4) 75/80 points (unreduced benefit available in the event of plant shutdown, layoff, extenuating circumstances or disability available (i) when the employee is at least fifty-five and the employee's age and years of service add up to seventy-five or (ii) when the employee's age and years of service add up to eighty); and (5) 55/15 (retirement with an actuarially reduced benefit for employees who are at least fifty-five with fifteen years of service).

Kotrosits v. GATX Corp. Non-Contributory Pension Plan, 757 F. Supp. 1434, 1437 (E.D. Pa. 1991).

Here at issue is the 75/80 early retirement pension. For those who have not attained the age of 62 or an age and service time totaling 90, the 75/80 early retirement pension offers the only opportunity of receiving enhanced, early retirement benefits -- that is, benefits that are not determined by actuarially reducing full pension benefits available at 65. The Plan provision governing the 75/80 pension stipulates:

4.5 75-80 Points Retirement. An Employee with at least 15 years of Service Credit who has not attained age 62, who either (i) has attained age 55 and whose age and Service Credit total at least 75, or (ii) whose age and Service Credit total at least 80, and


who has a Termination of Employment due to permanent shutdown of a plant, department or subdivision thereof, or due to layoff or disability, or


whose retirement is granted by and at the sole discretion of the Company, based on health impairment or other extenuating circumstances, may retire on the first day of the calendar month following the calendar month in which the applicable requirements of this Section 4.5 have been met.

Joint Appendix (hereinafter "J.A.") at 367-68.

Under the Plan, the Plan Benefits Committee is given the responsibility of making authoritative determinations concerning the meaning of the Plan and the scope of its benefits. That Committee is authorized:

(b) To construe the Plan and Trust Agreement;

(c) To determine all questions arising in its administration, including those relating to the eligibility of persons to become Participants; the rights of Participants and their beneficiaries; and its decisions thereon shall be final and binding upon all persons hereunder.

J.A. at 382.

Under the Fuller Company Stock Purchase Agreement, the closing date of December 31, 1986, effected "a termination of employment under the terms of [the Plan] for all Fuller Participants." J.A. at 497. While the Plan remained responsible for all pension benefits accrued under the Plan as of that date, including those of shorter-term employees whose benefits had not yet vested, the Fuller Participants could accrue no additional benefits after that date.*fn1 Before the closing date, Fuller management announced its intention to sponsor a new Fuller Pension Plan, but such a plan was not in place at the time of closing. Under the new Fuller Plan as later established, pension benefits accrued for the Fuller Participants but at a slightly less favorable rate and did not vest for five years. Fuller was not contractually bound to GATX to sponsor its own Plan.

Prior to the closing, GATX had a medical and life insurance program that included its retirees. This was an unfunded program having no connection with the Plan other than their common sponsorship. GATX management made a decision to provide lifetime medical and life insurance to those Fuller employees who were in the employ of its subsidiary at the time of their retirement, but not to provide such coverage for Fuller employees who retired after Fuller had severed its connection with GATX. Thus, a Fuller employee who was entitled to retire as of the closing date but who had not filed an application for pension benefits would receive no medical or life insurance from GATX's program when he or she retired from Fuller.

In the months preceding the closing date, Fuller management discussed the possibility of reducing the number of Fuller employees after the sale. No list of job positions that might be eliminated was ever shown to anyone at GATX, however; indeed, GATX executives were told by Elmer Gates, the President, Chief Operating Officer, and soon-to-be Chairman of the Board of Fuller that "we're going to hit the ground running. We look to continue the Fuller operation." 757 F. Supp. at 1439. On the first business day after January 1, 1987, all Fuller Company facilities in existence prior to the sale ...

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