2013 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-23-2013

Stanley Pieseski v. Northrup Grumman

Precedential or Non-Precedential: Non-Precedential

Docket No. 12-3348

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NOT PRECEDENTIAL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 SENSORS & SYSTEMS DIVISION PENSION PLAN

NORTHROP GRUMMAN CORPORATION

v.

CBS, INC., formerly known as

VIACOM, INC., successor by merger to CBS Inc.,

f/k/a WESTINGHOUSE ELECTRIC CORPORATION.

Third Party Defendants

______________

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 Circuit LAR 34.1(a)

May 16, 2013

______________

Before: SMITH, FISHER, and SHWARTZ, Circuit Judges

(Opinion Filed: May 23, 2013)
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______________

OPINION

______________

SHWARTZ, Circuit Judge.

I. INTRODUCTION

Plaintiffs Stanley Pieseski and Patrick Kost, 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 “Northrop 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 favor of Defendants. 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 Corporation (“Westinghouse”) and participants in Westinghouse’s pension plan

(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 Purchase 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 certain employees of Westinghouse’s Electronic Sensors & Systems Division

(“ESSD”), including Plaintiffs, would become Northrop Grumman employees. Northrop 

Grumman established a successor 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 layoff, Plaintiffs sought certain permanent job 

separation benefits (“PJS Benefits”) to which they contend they were entitled under the 

Northrop Grumman Plan, but Defendants refused to award these benefits. Plaintiffs 

assert that Northrop Grumman’s refusal to provide PJS Benefits violated ERISA section 

204(g), ERISA’s “anti-cutback provision,” codified at 29 U.S.C. § 1054(g),

2

and 

 

2

Section 204(g) in pertinent part provides:

(1) The accrued benefit of a participant 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) eliminating an optional form of benefit,

with respect to benefits attributable to service before the amendment shall 

be treated 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 respect to the Northrop Grumman Plan pursuant to 29 

U.S.C. § 1104(a). 

The issue here is whether Plaintiffs were entitled to PJS Benefits after they 

transferred from the Westinghouse Plan to the Northrop Grumman Plan. Under the 

Westinghouse Plan, eligible employees were entitled to PJS Benefits after a specificallydefined 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, Affiliated 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. 132. 

The terms “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 amendment to the Westinghouse Plan 

first narrowed and then, effective September 1, 1998, eliminated the PJS Benefits from 

the Westinghouse Plan. This Court found that amendment, otherwise known as the 

“Sunset Amendment,” violated section 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 narrowing and eliminating the PJS Benefits 
5

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

narrowed and eliminated the PJS Benefits 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 Plan participants, the District 

Court later reconsidered this decision in light of Shaver v. Siemens Corp., 670 F.3d 462 

(3d Cir. 2012), and entered judgment in favor of Defendants. This appeal followed.

II. 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). We have jurisdiction over this appeal pursuant to 28 U.S.C. 

§ 1291. We exercise plenary review on an appeal from summary judgment, applying the 

same standard as the District Court. See Tri-M Group, LLC v. Sharp, 638 F.3d 406, 415 

(3d Cir. 2011). When considering a motion for summary judgment, we “must draw all 

reasonable inferences from the underlying facts in the light most favorable to the nonmoving party.” Skerski, 257 F.3d at 278 (citation omitted). We will affirm an order for 

summary judgment only if “there is no genuine issue as to any material fact and [] the 

moving party is entitled to judgment as a matter of law.” Ruehl v. Viacom, Inc., 500 

F.3d 375, 380 n.6 (3d Cir. 2007) (internal quotation marks and citation omitted).

III. DISCUSSION

In Shaver, this Court reversed the district court’s ruling in a very similar case, 

where Siemens was alleged to have violated ERISA section 204(g) when it failed to 
6

provide PJS Benefits to a class of former Westinghouse employees Siemens had hired 

following an asset purchase from Westinghouse. This Court concluded that: (1) the 

Westinghouse Plan explicitly denied PJS Benefits to former Westinghouse employees 

who were hired by a successor employer, Shaver, 670 F.3d at 488-92; and (2) Siemens

did not contractually obligate itself in its asset purchase agreement to provide PJS 

Benefits to those former Westinghouse employees. Id. at 492-97. The same conclusions

apply here.

A. Northrop Grumman’s Obligations Under the Westinghouse Plan

While Plaintiffs try to distinguish this case from Shaver by pointing to the fact that 

the Northrop Grumman Plan, unlike the Siemens plan, is called a “successor” and 

“continuation” of the Westinghouse Plan in its plan document, the same Westinghouse 

Plan provision denying PJS Benefits to employees hired by a successor employer is 

present here. In the section detailing the PJS Benefits, the Westinghouse Plan explicitly 

stated that a permanent job separation occurs if there is a termination with an “Employer, 

Affiliated Entity, or Excluded Unit,” app. 132, and “in no event shall a Permanent Job 

Separation occur if an Employee is offered continued employment by . . . a successor 

employer which is neither an Employer, Affiliated Entity, nor an Excluded Unit.” App. 

133. Northrop Grumman was not an Employer, Affiliated 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 job 
7

separation from Westinghouse as defined by the Westinghouse Plan. Because 

Westinghouse only provided PJS Benefits to employees who were permanently separated

from Westinghouse, and Plaintiffs’ employment with successor Northrop Grumman 

excluded them from this category of employees, they were not entitled to PJS Benefits 

under the Westinghouse Plan. Cf. Shaver, 670 F.3d at 487-88. Put differently, once 

Plaintiffs were offered employment by Northrop Grumman, they were “forever 

disqualified” from receiving PJS Benefits under the “successor employer” provision of 

the Westinghouse Plan. Id. at 490. Because Plaintiffs were not entitled to PJS Benefits 

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 (section 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 Memorandum

(“GCM”) 39824, 1990 WL 698027, as well as this Court’s analysis of the 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 takes 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 Grumman 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 Benefits to Plaintiffs pursuant to 

the Westinghouse Plan.
8

the [p]lan . . .. In sum, we find that section 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 Grumman’s Obligations Under the APA and its Plan

Plaintiffs also have no contractual basis to obtain such benefits from the Northrop 

Grumman Plan. The terms of the APA govern Northrop Grumman’s obligation to 

provide the PJS Benefits. The APA required only that Northrop Grumman provide 

benefits comparable to the Westinghouse benefits in effect on the date of the APA. 

Northrop Grumman did just that, incorporating all provisions of the Westinghouse Plan, 

including the section on PJS Benefits for qualifying former Westinghouse employees. 

From its inception, the Northrop Grumman Plan provided PJS Benefits for qualifying 

Northrop Grumman employees who sustained a permanent job separation on or before 

August 31, 1998. Consequently, although the Northrop Grumman Plan contained a

sunset provision that eliminated PJS Benefits for employees laid off after August 31, 

1998, that provision was present from the Northrop Grumman Plan’s inception, and it

therefore did not function as an amendment that later reduced an existing benefit.4Thus, 

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 successor employer. 221 F.3d at 519-21. Unlike the 

situation in Bellas, Northrop Grumman did not make an amendment to previouslyaccrued PJS Benefits. 
9

Grumman Plan was not a “cutback” in violation of 204(g). Because the Northrop 

Grumman Plan always and only provided PJS Benefits to employees who sustained 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 section 

204(g). Because Plaintiffs’ breach of fiduciary duty claim is derivative of their section 

204(g) claim, Plaintiffs’ failure to demonstrate a violation of section 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 entitled to no PJS Benefits, Plaintiffs’ appeal of the District Court 

decision concerning remedies is moot.