Opinion ID: 446927
Heading Depth: 1
Heading Rank: 4

Heading: Assets Attributable To Medical Division Employees

Text: 15 Plaintiffs read section X, insofar as it provides for transfer of pension funds attributable to Medical Division employees, as giving rise to two related claims: (1) that defendants breached the December 31, 1980 agreement by refusing to transfer to plaintiffs a pro rata share of the Healthco Plan's surplus, and (2) that this refusal also constituted a breach of a fiduciary duty under ERISA. The district court rejected this reading and held that the phrase attributable to referred only to the full funding warranty and conferred no right to a pro rata share of the surplus. The court's memorandum stated: 16 Those assets properly attributable to these employees are only amounts sufficient to fund the accrued benefit, that is, an amount sufficient to fund the employees' pensions commencing at normal retirement age. Although Healthco's employer contributions in excess of the accrued benefit might eventually have been used to meet its employer obligations, these funds have not yet been attributed to any employee. 17 The court further observed that transfer of a share of the surplus would not increase employee benefits, since the Healthco Plan was a defined benefit plan under ERISA, i.e., a plan that provides for fixed benefits not subject to fluctuation. See ERISA Sec. 3(35), 29 U.S.C. Sec. 1002(35) (1982). See also International Brotherhood of Teamsters v. Daniel, 439 U.S. 551, 554 n. 3, 99 S.Ct. 790, 794 n. 3, 58 L.Ed.2d 808 (1979) (Because the Fund made the same payments to each employee who qualified for a pension and retired at the same age, rather than establishing an individual account for each employee tied to the amount of employer contributions attributable to his period of service, the plan provided a 'defined benefit.' ). The court pointed out that only Foster would benefit by a transfer of assets over and above the full funding requirement and concluded that [s]uch a result is not mandated by the clear language of Section X. 18 In our view, however, section X is not clear and unambiguous. For we believe that the requirement of that section that the Healthco Plan transfer funds attributable to Medical Division employees is susceptible of two plausible readings. It may be seen merely as an explanation of the full funding warranty that follows, or as a separate entitlement to transfer of a pro rata share of the surplus. Neither reading is compelled by the language of section X or the other provisions of the agreement. 19 By its terms, the agreement shall be governed by and construed in accordance with the laws of the State of New York applicable in the case of agreements made and to be entirely performed within such State. Sec. XIX(H). Under New York law, parol evidence is admissible to determine the meaning of ambiguous contractual language. See Airco Alloys Div., Airco Inc. v. Niagara Mohawk Power Corp., 76 A.D.2d 68, 77, 430 N.Y.S.2d 179, 184 (4th Dep't 1980); 22 N.Y.Jur.2d, Contracts Sec. 195 (1982). 20 To resolve the ambiguity in section X, defendants, in support of their motion for summary judgment, filed with the district court an affidavit by Richard Kenney, Vice President of Finance and Administration of Healthco. Kenney's salient allegations were (1) that, during negotiations with Foster, the tentative purchase price for the Medical Division was adjusted on a dollar-for-dollar basis, with the parties intending that Foster pay for each asset it acquired; (2) that the parties agreed that the sum to be transferred to the Foster Plan would be only the amount necessary to meet Healthco's liability for the accrued employee benefit for which the employer was responsible under the Healthco Plan; and (3) that neither Healthco nor Foster intended the transfer to be any larger than the amount necessary to fund accrued employee benefits. 21 Plaintiffs have pointed to nothing in their papers opposing defendants' motion for summary judgment that contradicts Kenney's assertions. Indeed, in their memorandum of law opposing defendants' motion for summary judgment, plaintiffs argued that Kenney's affidavit was improper parol evidence but offered no substantive evidence to challenge his allegations. The only indication that plaintiffs disputed Kenney appeared in a footnote to their memorandum of law, where plaintiffs requested leave to submit supplemental affidavits that would contradict some of Kenney's assertions, should the court find his affidavit relevant. 22 Kenney's explanation of the intent behind section X is consistent with other provisions of the agreement, which enumerate in detail those assets to be transferred. It is also consistent with the detailed balance sheet prepared during negotiation of the agreement. Given these considerations, it is apparent that the parties to the agreement intended that Foster pay for each asset it acquired and that the surplus in the Healthco Plan not be included in their calculations. 23 In these circumstances, plaintiffs have failed to establish the existence of a genuine issue of material fact. Under the case law: 24 To be considered genuine for Rule 56 purposes a material issue must be established by sufficient evidence supporting the claimed factual dispute ... to require a jury or judge to resolve the parties' differing versions of the truth at trial. [Citation omitted.] The evidence manifesting the dispute must be substantial, [citation omitted] going beyond the allegations of the complaint [citation omitted]. 25 Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. denied, 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754 (1976). The oblique offer of proof in plaintiffs' footnote fails the test of rule 56(e), which provides in part: 26 When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. [Emphasis added.] 27 See First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968) (refusing to disregard rule 56(e) in antitrust action where plaintiff failed to provide significant probative evidence supporting the complaint); Soar v. National Football League Players' Ass'n, 550 F.2d 1287, 1289 n. 4 (1st Cir.1977) (refusing to deny summary judgment on the basis of vague supposition that evidence might be produced at trial); Salgado v. Piedmont Capital Corp., 534 F.Supp. 938, 944 (D.P.R.1981) (The rule means what it says.). Accordingly, we agree with the district court's conclusion that section X did not obligate Healthco to transfer any pension funds beyond those necessary to finance the employees' accrued benefits. 28 Plaintiffs have argued further that the district court relied on an erroneous factual premise, namely, that the surplus was traceable entirely to employer contributions. Whether or not the court indeed relied on this premise, and whether or not this premise is true, are irrelevant. For the Kenney affidavit and the surrounding circumstances explain the intent of the parties. 29 Finally, plaintiffs' ERISA claims are without merit. Plaintiffs characterize defendants as fiduciaries and cite ERISA Sec. 404(a)(1), 29 U.S.C. Sec. 1104(a)(1), and Winpisinger v. Aurora Corp. of Illinois, Precision Castings Div., 456 F.Supp. 559, 566 (N.D.Ohio 1978), for the proposition that fiduciaries may not prefer employees who would remain under the coverage of the Healthco Plan over those who would become participants in the Foster Plan. But, having been fixed, the pension benefits of Medical Division employees are not subject to increase, even should plaintiffs recover a pro rata share of the Healthco Plan's surplus. As long as the Foster Plan is fully funded, the employees are fully protected and will receive their defined benefits. Similarly, employees remaining under coverage of the Healthco Plan will enjoy no increase in their defined benefits by virtue of the surplus. In short, neither group of employees is preferred over the other and hence defendants have breached no fiduciary duty.