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In re Erie Forge and Steel

August 9, 2005

IN RE: ERIE FORGE & STEEL, INC., DEBTOR
HOURLY EMPLOYEES/RETIREES OF DEBTOR, APPELLANTS
v.
ERIE FORGE & STEEL INC.; PASCARELLA & WIKER, LLP; THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS; THE UNITED STEEL WORKERS OF AMERICA APPELLEES



On Appeal from the United States District Court for the Western District of Pennsylvania (Civil Action No. 02-cv-00233E). District Judge: Hon. Sean J. McLaughlin.

The opinion of the court was delivered by: McKee, Circuit Judge

PRECEDENTIAL

Argued: January 18, 2005

Before: Alito, McKee, Smith, Circuit Judges.

OPINION

A group of former employees appeal an order of the United States District Court for the Western District of Pennsylvania affirming the Bankruptcy Court's approval of a Stipulation of Erie Forge and Steel, Inc. (the "Debtor" or ""EFS"), the Official Committee of Unsecured Creditors, and the United Steelworkers of America ("USWA"). The Stipulation resolved the pending Application to Modify Retiree Benefits under 11 U.S.C. § 1114. Appellants argue that the district court erred in concluding that they were bound by the Stipulation. For the reasons that follow, we will affirm.

I. FACTS AND PROCEDURAL HISTORY*fn1

EFS is a former steel manufacturing company located in Erie, Pennsylvania. In 1984, its predecessor (National Forge Company) adopted the "Hourly Employees Insurance Plan, National Forge Company, Erie Plant" (hereinafter, the "1984 Benefits Plan"). That Plan was eventually adopted by EFS after it acquired National Forge. The Summary Plan Description of the 1984 Benefits Plan provides that "[t]he Plan may be terminated at any time by the Board of Directors of [EFS]."

On or around October 1, 1998, EFS adopted the "Erie Forge & Steel Company Retiree Medical Benefit Plan--A Defined Dollar Structure" (the "DDS Plan"). It was incorporated by reference into an October 1, 1998 Collective Bargaining Agreement between EFS and Local 1573 of the USWA (the "CBA"). The DDS Plan applied to future retirees and employees who retired before 1998 with 25 years of service and who elected the DDS Plan in lieu of their traditional health insurance premium coverage. The DDS Plan provided that EFS could amend or terminate the DDS Plan at its sole discretion.

On December 22, 2000, EFS filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq. Thereafter, it continued operations as a Debtor-in-Possession. At the time of its Chapter 11 filing, EFS employed approximately 25 salaried, and 146 hourly, workers. The hourly employees are and/or were members of the USWA's local affiliates. On January 4, 2001, Richard E. Gordon, Esq. filed his appearance as counsel on behalf of USWA. He has been counsel of record for the Union both in the underlying bankruptcy proceedings and in this appeal.

On or about September 24, 2001, EFS informed its retirees that it would be terminating their benefits at the end of October 2001, and on October 31, 2001, EFS stopped paying retirees' medical benefits. As of that date, all of the appellants were either active employees or they had previously resigned from EFS; none of them had been receiving retirement benefits under either the 1984 Benefits Plan or the DDS Plan.

On November 15, 2001, the Bankruptcy Court approved the sale of substantially all of EFS's assets to the Park Corporation. That same day, the Debtor laid off substantially all of its work force, including those appellants who were still working at EFS.

The Debtor's Plan of Reorganization was filed with the Bankruptcy Court on July 12, 2002 and was confirmed in an order dated August 26, 2002. Under the terms of the Plan, the Park Corporation was to continue the business operations of EFS as a reorganized debtor free and clear of any claims or encumbrances by EFS's pre-petition creditors, including those persons who might have a claim to retirement benefits. The Plan required the remaining assets of the Estate to be pooled into a liquidating trust for the purpose of funding the claims of EFS's creditors.

No appeal was taken from the entry of this Confirmation Order, and the Bankruptcy Court entered a Final Decree Order on November 1, 2002. Meanwhile, pursuant to 11 U.S.C. ยง 1113, on November 30, 2001, EFS had filed a motion to reject its Collective Bargaining Agreement ("CBA") with the USWA (the "1113 Motion"). The Union opposed that motion. The Union was particularly concerned about unpaid vacation and personal days which its members had accrued in ...


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