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MUSHALLA v. TEAMSTERS LOCAL NO. 863 PENSION FUND

June 28, 2001

RUSSELL MUSHALLA, EDWARD SZWAST, PAUL FRITZINGER, LUIS GARCIA, CHARLES FRITZ, FRANCISCO CORRAL AND WALTER BORIS, JR., PLAINTIFFS,
v.
TEAMSTERS LOCAL NO. 863 PENSION FUND, DEFENDANT.



The opinion of the court was delivered by: Wolin, District Judge.

  OPINION

This matter is opened to the Court on defendant's motion for summary judgment. The Court has considered the written submissions of the parties as well as the arguments of counsel made in open court on June 14, 2001. For the reasons discussed below, the Court will grant summary judgment in favor of defendant. Plaintiffs' complaint will be dismissed.

BACKGROUND

Plaintiffs are seven former members of Teamsters Local No. 863 ("the Union") and participants in defendant pension fund. Defendant is Teamsters Local No. 863 Pension Fund ("the Fund" or "the Pension Fund"), a multiemployer pension fund governed by the Employee Retirement Income Security Act ("ERISA") and jointly administered by employer and union trustees. Pursuant to the Declaration of Trust Agreement establishing the Fund, the Fund is governed by ten Trustees, five selected by the Union and five selected by the participating employers. Daniher Aff. ¶ 3. Employers contribute to defendant Pension Fund at rates agreed to by employers and the Union and set forth in the collective bargaining agreements.

Plaintiffs were all employees of Wakefern, the warehouse and distribution company servicing Shop-Rite. Plaintiffs all commenced employment with Wakefern in the 1960's and all retired between December 19, 1997 and January 30, 1998. Plaintiffs' retirements entitled them to retirement benefits from the Pension Fund.

The amount of benefits is determined by a formula based on the number of years of service ("creditable service") multiplied by a factor predicated upon the last contribution rate for which contributions were received by the Fund prior to the employee's retirement. It is, therefore, common practice for employees who are at or near retirement age to wait to retire until an increase in the rate occurs. All plaintiffs in this case benefitted from an increase that took effect November 1, 1997; their benefits were based on a contribution rate of $3.17. Dft.'s Undisputed Facts, at II.D, II.E.

1. Changes in the Years of Creditable Service

The dispute at the heart of this case relates to the years of creditable service rather than to the contribution rate applied to the calculation of benefits. Until April 1, 1998, the cap on the maximum number of years of creditable service that the Fund would use in calculating pension benefits was thirty years for all participants, regardless of who their employer or bargaining unit was. Id. at III.A. Effective April 1, 1998, however, the number of years was increased to thirty-five. Id. at III.B. In other words, before April 1, 1998, an employee who worked more than thirty years received no credit for those additional years in the calculation of his pension benefits. After the change was instituted, every year up to thirty-five entitled the participant to additional benefits.

Plaintiffs' lawsuit charges that defendant breached its fiduciary duty to plaintiffs in failing to inform them that the change was being considered and that they might be eligible for increased benefits if they waited to retire.

The process leading to the increase in years of creditable service began in April 1997, when the Fund retained a legal consultant, Thomas J. Hart, of the Washington, DC, law firm of Slevin & Hart, P.C., to prepare a fully restated Pension Fund Plan. Id. at III.C. During the Summer and Fall of 1997, Hart reviewed the Plan and conferred with the Fund's manager, consultant, actuary and attorney regarding the history, interpretation and administration of the Plan. Then, in October and November of 1997, Hart began drafting a new Plan. At that time, he did not consider changing the Plan's maximum of thirty years of creditable service. Id. at III.E.

The first draft of the restated Plan was completed on December 2, 1997, and a second draft was completed two days later. The second draft was distributed to the Plan's advisors — Joseph Tramontana (Union Business Agent and Fund Trustee), Anthony Miranda (Plan Consultant/Administrator), Stanley Weisleder (Fund Actuary) and Andrew Zazzali (Fund Attorney) — upon its completion. Neither the first, nor the second draft changed the years of creditable service. Id. at III.F, III.K.

In November 1997, Tramontana first conceived of the idea of increasing the years of creditable service as a means of stemming a growing tide of retirements among senior members of the Union. Tramontana believed that the growing number of retirements was linked to the fact that once a member reached thirty years of service, there was little incentive to continue working because his/her pension could only grow as a result of contribution rate increases and not for additional years of service. Tramontana, thus, decided to explore increasing the years of creditable service. Id. at III.G.; see also Tramontana Aff. ¶ 8.

Of his own accord and independent of the ongoing review and restatement of the Plan by Hart, Tramontana asked the actuary, Weisleder, to do a preliminary check into whether the Fund could afford to increase the cap on years of creditable service. Dft.'s Undisputed Facts, at III.H.; Tramontana Aff. ¶¶ 6, 7, 9. In response to Tramontana's request Weisleder performed a computer calculation of the impact on the Pension Fund if the number of years of creditable service was increased to forty-two years. In late November 1997, Weisleder reported to Tramontana and Miranda that he had found that the Pension Fund could not increase the cap to forty-two years, but that it might be able to increase it by a somewhat smaller amount, to say thirty-five years. Tramontana Aff. ¶ 9. However, Weisleder made clear that he had not done the analysis for thirty-five years and that, should the Fund consider such a change, he would have to do a flesh analysis. Dft.'s Undisputed Facts, at III.J.; Weisleder Aff. ¶ 6.

After Tramontana reviewed the December 4 draft, which, as previously noted, did not include any change in the years of creditable service, he spoke with Miranda, Zazzali and Hart regarding his idea. Tramontana was advised that an increase to thirty-five years would have to be approved by the actuary and the Trustees. Tramontana Aff. ¶ 12. Tramontana asked that Miranda propose having the draft revised to reflect an increase in the years of creditable service to thirty-five. Dft.'s Undisputed Facts, at III.L.

On December 8, 1997, Hart participated in a conference call with Miranda and Weisleder regarding the December 4 draft. On that call, Hart was asked to increase the maximum years of creditable service to thirty-five for the proposal being submitted to the Trustees at their scheduled December 9, 1997 meeting. Id. at III.M; see also Hart Aff. ¶ 6 ("It is my recollection that I was requested to modify the number of years of service recognized by the plan on or about December 8, 1997. . . . It is further my recollection that I was directed to make the change because the Union Trustees wished to have the matter of recognizing additional years of service discussed, and voted upon, by the Board as a whole."). Hart thus prepared a revised version of the December 4 draft for the Trustees, which included, for the first time, the proposed increase in years of creditable service. Dft.'s Undisputed Facts, at III.N; see also Tramontana Aff. ¶ 13; Hart Aff. ¶¶ 6, 7.

At the December 9, 1997, Trustees meeting, Hart reviewed with the Trustees the various changes that were proposed in his restated Plan. Regarding the increase in years of creditable service, Hart informed the Trustees that no actuarial study had been performed. Hart Aff. ¶ 7. The Trustees requested that the actuary and the Fund's attorney review the Fund's finances to determine whether the Fund had sufficient resources to accommodate this change. Dft.'s Undisputed Facts, at III.P.; Tramontana Aff. ¶ 18; Weisleder Aff. ¶ 10. The two were to report back to the Trustees before the next scheduled Trustees meeting on January 20, 1998. The Trustees did, however, approve the restated pension plan, including the increase in years of creditable service, "contingent upon the reviews of the Fund professionals and Trustees." Exh. E to Dft.'s Brief (Minutes of the December 9, 1997 Meeting of the Trustees); see also Hart Aff. ¶ 6 ("It was my understanding that the restatement was approved on this contingent basis because some Trustees felt that they might need additional time to review the document and because they looked to their advisers to report on any adverse cost implications . . ."); Tramontana Aff. ¶ 18 ("After a discussion of all of the revisions, the Trustees decided that they seemed acceptable, but they wanted the actuary and the Fund's own attorney to review the Fund's finances to see if the increase in years of creditable service from thirty to thirty-five was acceptable to the Plan."); Weisleder Aff. ¶ 10 ("The Trustees voted to approve the revisions, except that as to the proposed increase in years of creditable service, they asked me to do a cost study and to report back to them before the January 20, 1998 meeting as to whether the change was feasible.").

Following the December 9, 1997 meeting, Weisleder reviewed the figures and found the proposal financially acceptable. The Trustees were informed of his findings at their January 20, 1998, meeting. Dft.'s Undisputed Facts, at III.R, S. The Trustees then discussed implementation issues, including when the change should become effective, id., at III.S, how and when notice of the change had to be made, and the procedure for obtaining approval from the Internal Revenue Service. See Exh. F to Dft.'s Brief; see also Daniher Aff. ¶ 17 (At the January 20, 1998 meeting, the Trustees "discussed the issues of implementation: when would [the change] take effect, what type of notice they would have to give of the change, and when they would have to give notice in relation to the change."). Hart advised the Trustees that they had to give at least 60 days' notice. The Trustees, therefore, voted to approve the increase effective April 1, 1998. See Hart Aff. ¶ 8.

2. Plaintiffs' Inquiries and Knowledge Regarding Possible Plan Changes

As will become more clear in the legal analysis below, the success of plaintiffs' complaint turns in large part on the occurrence and timing of inquiries by plaintiffs regarding possible changes to the Plan. Therefore, the Court will lay out the dates and circumstances of each plaintiffs inquiries regarding possible increases in his retirement benefits.

It is worth noting here that each plaintiff has testified that he would have continued to work beyond his actual retirement date had he known that he would be eligible for increased benefits as a result of the change in years of creditable service. Moreover, all plaintiffs were able to withdraw their retirement papers up until the day that they retired. Tscrpt. 18:2-7.*fn1 And, plaintiffs note that at least one member of the Union and beneficiary of the Pension Fund did withdraw his papers in order to take advantage of the increase in years of creditable service. Mushalla Dep. 45:1-18.

A. Russell Mushalla*fn2

During the fall of 1997, Mushalla, a shop steward, periodically asked Mariano whether there was going to be any increase in benefits provided under the Plan. According to Mushalla, the last time he made such an inquiry was on December 20, 1997. See Mushalla Dep. 24:1-6; Appendix to Deft.'s Brief, Exh. Q (Mariano Affidavit). On each occasion, up to and including December 20, 1997, Mariano indicated that no increases were contemplated at that time. Mushalla Dep. 23:20-24:15.

On December 7, 1997, at a meeting of the general membership of the Union, Tramontana announced that an increase in years of creditable service, from thirty to thirty-five, was under consideration. Mushalla was the only plaintiff present at this meeting. Tramontana also informed the membership that a buyout of approximately 200 Pathmark employees was being contemplated. He provided no other information regarding the buyout.

Mushalla personally spoke with Tramontana after the meeting in an effort to clarify certain points. Mushalla came away from the meeting and his conversation with Tramontana with the understanding that the change in years of creditable service was to apply only to Pathmark employees. How Mushalla came to that understanding is not apparent, however, from either his testimony or from the record. Mushalla testified that. after the meeting, he approached Tramontana and asked him if there was "anything in there for Shop-Rite in the near future." Mushalla Dep. 21:19-20. Mushalla testified more than once that, by this, he meant to ask whether there were any anticipated increases in the contribution rate, not whether there would be a change in the years of creditable service. Mushalla Dep. 22:5-7; 26:15-21; 40:1-16. Mushalla moreover testified specifically that he was not asking about the possibility of an increase in the years of creditable service.*fn3 Mushalla Dep. 22:5-13. Tramontana answered in the negative regarding changes in the contribution rate. Mushalla's last conversation with Tramontana regarding possible increases in pension benefits was at the December 7, 1997 meeting. Mushalla Dep. 25:15-24.

It appears that Mushalla was the only one in attendance at the meeting who came away with the understanding that the change in years of creditable service related to the Pathmark buyout and did not apply to all Plan participants. Others at the meeting understood that Tramontana was discussing two separate issues, and that the change in years of creditable service under consideration would affect all Union members. See Dft.'s Uncontested Facts, at IV.F-J; Appendix to Deft's Brief, Exh. R (Rufolo Affidavit); Exh. S (Cascarelli Affidavit); Exh. T (Betza Affidavit); Exh. U (O'Mara Affidavit).

Mushalla also asked Mariano about buy-outs and increases in the contribution rates, but not about changes in the years of creditable service. His last inquiry of Mariano was no later than December 20, 1997. Mariano informed Mushalla that he did not know of any anticipated changes. Mushalla Dep. 24:1-15.

Mushalla submitted his retirement papers on November 11, 1997 and retired on December 26, 1997.

B. Edward Szwast

Szwast testified that, on approximately a dozen different occasions during November and December 1997, he inquired of Daniel Mariano, a Union business agent and Fund Trustee, whether there was any chance that the pension amount would increase in the near future. Mariano replied, on each occasion, either that he did not know or that the pension was not going to go up. Szwast Dep. 41:3-11; 43:18-44:7.

Szwast also testified that he decided to retire in November 1997, effective January 1998, and that on November 19, 1997, he completed the paperwork for his retirement and submitted it to his shop steward, Mushalla.

Szwast retired on January 30, 1998.

C: Paul Fritzinger

Fritzinger asked Mushalla, his shop steward, every week for several months before he decided to retire whether there would be any increase in the pension. Mushalla always answered in the negative, so Fritzinger ultimately decided to retire. He submitted his paperwork on August 12, 1997. After that, Fritzinger did not speak with any union business agents or business delegates regarding his benefits. Fritzinger Dep. 24:15-22. Fritzinger retired on December 19, 1997. There is no indication that Fritzinger made any inquiry of anyone, whether from the Union or the Fund, after his retirement.

D. Luis Garcia

Garcia testified that he never made inquiry of any Fund or Union representative concerning possible changes to the Fund. Garcia Dep. 26:12-17. Before submitting the paperwork regarding his anticipated resignation, Garcia asked Mushalla several times whether there were going to be any increases in pension benefits. Mushalla told him ...


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