2013 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

5-23-2013 

# S t a nle y P iesesk

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D ock e t N o . 12-3348

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w . v i l l a no v a . e du/thir dc ir c uit_2013/810NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

______________ No. 12

- 3348

______________ STANLEY PIESESKI ; PATRICK KOST, Appellants

v. NORTHROP GRUMMAN CORPORATION; NORTHROP GRUMMAN ELECTRONIC SENS ORS & SYSTEMS DIVISION PENSION PLAN

NORTHROP GRUMMAN CORPORATION

v. CBS, INC., formerly known as VIACOM, INC., successor by merger to C BS Inc., f/k/a WESTINGHOUSE ELECTRIC CORPORATION. Third Party Defend a nts

______________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. Civ. Action No

. 2

- 01

- cv - 00993 ) District Judge: Honorable Terrence V. McVerry

______________ Submitted Under Third Ci rcuit LAR 34.1(a)

May 16, 2013

______________ Before: SMITH, FISHER, and SHWARTZ , Circuit Judges

(Opinion Filed : May 23, 2013 )2 ______________ OPINION

______________ SHWARTZ, Circuit Judge

. I. INTRODUCTION Plaintiffs Stanley Pieseski and Patr ick K ost , on behalf of themselves and similarly situated former employees of Northrop Grumman Corporation (“Northrop Grumman”) , brought suit alleging Defendants Northrop Grumman and Northrop Grumman Electronic Sensors & Systems Division Pension Plan (the “North rop Grumman Plan”) failed to provide job separation benefits in violation of the Employee Retirement Income Security Act of 1974 , as amended (“ERISA”)

. Plaintiffs argue that the District Court erred in entering summary judgment against Plaintiffs and in f avor of D efe ndant s . For the reasons set forth below, we will affirm.
As we write principally for the benefit of the parties, we recite only the essential facts and procedural history

. 1 Plaintiffs were long

- time employees of Westinghouse Electric Corpo ration (“Westinghouse ”) and participants in Westinghouse’s pension p lan (the “Westinghouse Plan”) until they became Northrop Grumman employees

. Northrop Grumman purchased certain assets from Westinghouse pursuant to the terms of a January 3, 1996 Asset Pu rchase Agreement (the “APA”). Among other things, the APA provided

1 In accordance with our standard of review, see infra Section II , we set forth the facts in the light most favorable to Plaintiffs. Skerski v. Time Warner Cable Co. , 257 F.3d 273, 278 (3d Cir. 2001)

.3

that cert ain employees of Westinghouse’s Elect ronic Sensors & Systems Division (“ESSD”) , including P laintiffs , would become Northrop Grumman employees

. Northrop Grumman established a succ essor pension plan to the Westinghouse Plan for the benefit of these employees and Plaintiffs became participants in the Northrop Grumman Plan. Plaintiffs continued to work for Northrop Grumman until 1999, when they were both laid off through no fault of their own but rather for reasons associated with Northrop
Grumman ’s business. After their lay off, Plaintiffs sought certain permanent job

s eparation benefits (“PJS Benefits ”) to which they contend they were entitled under the Northrop Grumman Plan , but D efendants refused to award these benefits. Plaintiffs
assert that Northrop Grumman ’s refusal to provide PJS B enefits violated ERISA s ection 204(g), ERISA’s “anti

- cutback provision , ” codified at 29 U.S.C. § 1054(g) , 2 and

2 Section 204(g) in pertinent part p rovides: (1) The accrued benefit of a part icipant under a plan may not be decreased by an amendment of the plan

. . . (2) For purposes of paragraph (1), a plan amendment which has the effect of

— (A) eliminating or reducing an early retirement benefit or a retirement

- type subsidy (as defined in regulations), or (B) eliminati ng an optional form of benefit, with respect to benefits attributable to service before the amendment shall be t reated as reducing accrued benefits. In the case of a retirement

- type subsidy, the preceding sentence shall apply only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. 29 U.S. C. § 1054(g).4

breached its fiduciary duty with re spect to the N orthrop Grumman Plan pursuant t o 29 U.S.C. § 1104(a)

. The issue here is whether Plaintiffs were entitle d to PJS B enefits after they transferred from the Westinghouse Plan to the Northrop Grumman Plan. Under the Westinghouse Plan, eligible employees were entitled to PJS B enefits after a specifically

defined permanent job separation had occurred. The Westinghouse Plan defined the term “Permanent Job Separation” as “the termination of the employment of an Employee with an Employer , Affiliate d Entity, or Excluded Unit through no fault of his own for lack of work for reasons associated with the business for whom such Employer, Affiliated Entity, or Excluded Unit determines . . . there is no reasonable expectation of recall.” App. 1 32

. The t er ms “ Employer ” and “ Affiliated Entity ” encompass Westinghouse, its subsidiaries, and its joint ventures. The term “ Excluded Unit ” refers to a limited group of Westinghouse employees excluded from the Plan . Before Northrop Grumman’s purchase, an amendmen t to the Westinghouse Plan first narrowed and then, effective Septemb er 1, 1998, eliminated the PJS B enefits from the Westinghouse Plan. This Court found t hat amendment, otherwise known as the “Sunset Amendment,” violate d s ection 204(g) in Bellas v. CBS , Inc. , 221 F.3d 517 (3d Cir. 2000)

. Because the Northrop Grumman Plan, as the successor to the Westinghouse Plan, carried forward the same amendment nar rowing and eliminating the PJS B enefits5

ruled illegal in Bellas , Plaintiffs allege in this action that t he Northrop Grumman Plan

narrow ed and eliminat ed the PJS B enefits and that doing so was, as in Bellas , illegal. Although the District Court initially granted Plaintiffs’ motion for partial summary judgment and certified a class of former Westinghouse Pla n participants , the District
Court later reconsidered this decision in light of Shaver v. Siemens Corp. , 670 F.3 d 462 (3d Cir. 2012) , and entered ju dgment in favor of Defendants. This appeal followed.

I I . JURISDICTION AND STANDARD OF REVIEW The District Court had jurisdiction in this case pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e) and (f). W e have jurisdict ion over this appeal pursuant to 28 U.S.C. § 129 1. We exercise plenary review on an appeal from summary judgment , applying the

same s tandar d as the District Court. See Tri

- M Gr oup , LLC v. Sharp , 638 F.3d 406, 415 (3d Cir. 2011). W hen considering a m otion for summary judgment, we “must draw all reasonable inferences from the underlying facts in the light most favorable to the non

moving part y.” S kerski , 257 F.3d at 278 (citation omitted). We will affirm an o rder for summary judgment only if “there is no genuine issue as to any material fact and [] t he moving party is entitled to judgment as a matter of law.” Ruehl v. Viacom, Inc. , 50 0 F.3d 375, 380 n.6 (3d Cir. 2007) (internal quotation marks and citation omit ted).
I II . DISCUSSION
In Shaver , this Court reversed the district c ourt’s ruling in a very similar case , where Siemens was alleged to have violated ERISA s ection 204(g) when it failed to6

provide PJS B enefits to a class of former Westinghouse employees Siemens had hired following an asset purchase from Westinghouse. This Court concluded that : (1) the Westingho use Plan explicitly denied PJS B enefits to former Westin ghouse employees who were hired by a successor employer, Shaver , 670 F.3 d at 4 88

- 92 ; and (2) Siemens
did not contractually obligate itself in its asset purchase agreement to provide PJS
B enefits to those former Westinghouse employees

. Id. at 492

- 97. The same conclusions
app l y here. A. Northrop Grumman’s Obligations Under the Westinghouse Plan While Plaintiffs tr y to distinguish this case from Shaver by pointing to the fact that the Northrop Grumman P lan , unlike the Siemens plan, is called a “successor” and “continuation” of t he Westinghouse Plan in its plan document, the same Westinghouse Plan provision denying PJS B enefits to employees hired by a successor employer is present here. In the section detailing the PJS B enefits, the Westinghouse Plan explicitly stated that a perm anent job separation occurs if there is a termination with an “Employer, Affiliated Entity, or Excluded Unit,” app. 1 32 , and “ in no event shall a Permanent Job Separation occur if an Employee is offered continued employment by . . . a successor employer wh ich is neither an Employer, Affiliated Entity, nor an Excluded Unit.” App.
133

. Northrop Grumman was not an Employer, Affi liated Entity or Excluded Unit under the Westinghouse Plan . Moreover, Plaintiffs were “offered continued employment” with Northrop Grumman pursuant to the APA . Thus, Plaintiffs did not have a permanent job7

s eparation from Westinghouse as defined by the Westinghouse Plan

. B ecause Westinghouse only provided PJS B enefits to employees who were permanently separated from Westinghouse, an d Plaintiffs ’ employment with successor Northrop Grumman excluded them from this category of employees, they were not entitled to PJS B enefits under the Westinghouse Plan

. Cf. Shaver , 670 F.3d at 48 7

- 88

. Put differently, once Plaintiffs were offered emp loyment by Northrop Grumman, they were “forever disqualified” from receiving PJS B enefits under the “successor employer” provision of the Westinghouse Plan

. Id. at 490. Because Plaintiff s were not entitled to PJS B enefits under the Westinghouse Plan as a result of their immediate employment with Northrop Grumman, they suffered no “cutback” of a benefit. 3 Id. at 486, 488 (s ection 204(g)

“ cannot create an entitlement to benefits when no entitlement exists under the terms of

3 Plaintiffs ’ argument that a successor employer like Northrop Grumman who sponsors a spin

- off plan “steps into the shoes” of and should be treated as the original employer (i.e., Westinghouse ) and their reliance on IRS General Counsel Mem orandum (“GCM”) 39824, 1990 WL 698027, as well as this Court’s analysis of th e GCM in Dade v. North American Philips Corp. , 68 F.3d 1558, 1563 (3d Cir. 1995) , do not change the result . The IRS GCM simply notifies a successor employer who tak es over a plan in a spin

- off that it is liable to the same extent as the predecessor for any plan amendments adopted by the predecessor that purport to cut accrued benefits in violation of section 204(g). There is no dispute that a successor employer can be liable for ERISA violations stemming from the plan and amendments that it inherits, but determining this liability requires an analysis of the terms of the plan itself. For the reasons just stated, the Westinghouse Plan obligations and liabilities that Northrop Grum man inherited did not include providing employees, like Plaintiffs, PJS Benefits when the employees did not satisfy the plan requirements to obtain them. Hence, Northrop Grumman cannot be liable under ERISA section 204(g) for failing to provide PJS Benefi ts to Plaintiffs pursuant to the Westinghouse Plan.8

the [p]lan

. . . . In sum, we fi nd that s ection 204(g) does not protect from cutback an early retirement benefit for a plan participant who has not satisfied and never can satisfy the conditions for receiving the benefits that are subject to cutback.” ) (citation omitted ).
B. Northrop Grumm an’s Obligations Under the APA and its Plan Plaintiffs also have no contractual basis to obta i n such benefits from the Northrop Grumman Plan. T he terms of the APA govern Northrop Grumman’s obligation to provide the PJS B enefit s . The APA required only th at Northrop Grumman provide benefits comparable to the Westinghouse benefits in effect on the date of the APA. Northrop Grumman did just that, in corporating all provisions of the Westinghouse Plan , including the section on PJS B enefits for qualifying form er Westinghouse employees. From its inception, t he Northrop Grumman Plan provided PJS Benefits for qualifying Northrop Grumman employees who sustained a permanent job separation on or before August 31, 199 8

. Consequently , a lthough the Northrop Grumman Pl an contained a sunset provision that eliminated PJS Benefits for employees laid off after August 31, 1998 , that provision was present from the Northrop Grumman P lan’s inception, and it

t herefore did not function as an amendment that later reduced an existi ng benefit. 4 Thus, Northrop Grumman’s decision not to award PJS Benefits to Plaintiffs under the Northrop

4 The ruling in Bellas does not change the outcome of this case. Bellas involved a lawsuit by Westinghouse employees against Westinghouse over the illegality of the Sunset Amendment and involved no succ essor employer. 221 F.3d at 519

- 21. Unlike the situation in Bellas , Northrop Grumman did not make an amendment to previously

accrued PJS Benefits.9

Grumman Plan was not a “ cutback ” in violation of 204(g). B ecause the Northrop Grumman Plan always and only provided PJS Benefits to employees who su stained a permanent job separation before September 1, 1998 and Plaintiffs were laid off after that date , they did not qualify to receive PJS Benefits from Northrop Grumman.

For these reasons , Plaintiffs fail to demonstrate a violation of s ection 204(g). Because Plaintiffs’ breach of fiduciary duty claim is derivative of their s ection 204(g) claim , P laintiffs’ failure to demonstrate a violation of s ection 204(g) dooms their claim for breach of fiduciary duty. IV. CONCLUSION For the foregoing reasons, we will affirm the District Court’s grant of summary judgment in favor of Defendants

. 5

5 Because we are affirming the grant of summary judgment in Defendants’ favor, and hence Plaintiffs are e ntitled to no PJS Benefits, Plaintiffs’ appeal of the District Court decision concerning remedies is moot.