Opinion ID: 596119
Heading Depth: 1
Heading Rank: 3

Heading: was the october 25, 1985 amendment valid?

Text: 61 The plaintiffs have articulated two related theories of liability under ERISA. First, they argue that by unilaterally amending the Plan documents and later distributing the excess funds to itself, both in contravention of the terms of the Plan documents, Murata violated its fiduciary duty to act in accordance with the documents and instruments governing the plan.... ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D) (1988). Second, the plaintiffs contend that because the Plan documents lacked a provision allowing for reversion of the excess assets in the Plans to the employer, Murata contravened ERISA § 4044(d)(1), 29 U.S.C. § 1344(d)(1) (1988), which provides that any residual assets of a single-employer plan may be distributed to the employer if ... the plan provides for such a distribution. (emphasis added). 62 The district court found the October 25, 1985 amendment to the Plan documents invalid because the amendment was adopted in contravention of two provisions governing the relationship of the parties: section 57 of the 1984 collective bargaining agreement and section 14.02 of the Plan documents. The court found that the language in section 57 of the collective bargaining agreement stating that neither the Company nor the Union shall demand any change in the Pension and Welfare Plan unambiguously prohibited Murata from unilaterally adopting any changes in the Plan documents. Further, the court found that section 14.02's command that n[o] ... amendment shall vest in the Company any right, title, or interest in or to the funds held by the Trustee also prohibited the 1985 amendment. Having invalidated the 1985 amendment, the court concluded that there was no other provision in the Plan documents that allowed for reversion of excess funds to Murata. Therefore, the court held that Murata's September 5, 1989 recoupment of the excess funds violated ERISA §§ 404(a)(1)(D) & 4044(d)(1), 29 U.S.C. §§ 1104(a)(1)(D) & 1344(d)(1). 11 63 We must first determine whether section 57 of the collective bargaining agreement or section 14.02 unambiguously prohibited Murata's 1985 amendment to the Plan documents. 64
65 Section 57 of the 1984 collective bargaining agreement prevented both the union and Murata from demand[ing] any change in the Pension and Welfare Plan. Murata contends that this language did not prohibit it from unilaterally amending the Plan documents, but rather only forbade it and the union from demanding changes to the Plans through collective bargaining during the course of the collective bargaining agreement. Murata characterizes section 57 as a standard zipper clause, which relieves parties of their statutory duty to bargain during the life of a collective bargaining agreement. 12 The plaintiffs respond that if both parties cannot negotiate a change to a collective bargaining agreement during the life of the agreement, then one side cannot amend it unilaterally. Therefore, according to the plaintiffs, the collective bargaining agreement unambiguously prohibits any amendment to the Plan documents during its lifetime. 66 We note at the outset that the parties could have drafted a clearer statement prohibiting all amendments to the Plan documents--that is, section 57 could have stated simply that all amendments to the Plan documents were prohibited during the life of the collective bargaining agreement. Instead, the parties chose to use the phrase demand any change. This persuades us that the clause might have been inserted, as Murata argues, for the purpose of regulating bargaining, or, as the plaintiffs suggest, for the purpose of regulating amendments to the Plan documents. We believe that the phrase demand any change, in this context, renders section 57 ambiguous. 67 In addition to the ambiguity in the language of section 57, we note that the background of the provision's adoption suggests that it may have been designed to do something other than prohibit all amendments to the Plan documents. Parties to collective bargaining are obligated to meet at reasonable times and confer in good faith with respect to wages, hours and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder.... See 29 U.S.C. § 158 (1988); see also First National Maintenance Corp. v. NLRB, 452 U.S. 666, 673-76, 101 S.Ct. 2573, 2578-79, 69 L.Ed.2d 318 (1981). Parties to collective bargaining agreements, however, often waive this statutory duty to bargain in good faith by including a zipper clause in their agreement. 68 A zipper clause exempts either all topics not mentioned in the agreement, or certain specified topics, from being subjects of mandatory bargaining during the life of the collective bargaining agreement. See Radioear Corp and International Union of Electrical, Radio and Machine Workers, Local 633, AFL-CIO-CLC, 214 NLRB 362 (1974); see generally Charles Morris, The Developing Labor Law 642 (Bureau of National Affairs, Inc., 1983). As one commentator has explained: 69 The union ... may waive its bargaining entitlement by agreeing to an entire agreement or zipper clause whereby the parties waive their statutory obligations to bargain over subjects not included in the agreement. Thus, when a union asks to bargain over a subject not contained in the agreement, the employer can refuse on the grounds that the zipper clause waives the union's right to force the employer to bargain over new issues raised during the term of the agreement. 70 Dennis Lynch, Deferral, Waiver, and Arbitration Under the NLRA: From Status to Contract and Back Again, 44 U Miami L Rev 237, 281 (1989). 71 While the plaintiffs' interpretation of section 57 as prohibiting any change to the Plan documents is plausible, the language might also be read as a standard zipper clause, prohibiting either party from attempting to bargain about the Plans during the life of the agreement. If the Plan documents did not otherwise prohibit Murata from unilaterally amending the Plans, Murata could, under the latter construction, enact amendments without obligation to bargain with the union, and the 1985 amendment would not be prohibited by the collective bargaining agreement. 72 For the foregoing reasons, we hold that it was error for the district court to consider the language of section 57 unambiguous. We will therefore reverse the district court's entry of summary judgment in favor of the plaintiffs insofar as it was grounded on the language of section 57. Since section 14.02 does not constitute a ground for upholding the summary judgment either, see infra, we will remand to the district court with instructions to consider extrinsic evidence bearing on the meaning of section 57. This would include, but not necessarily be limited to, evidence concerning the negotiations leading up to the 1984 agreement, and evidence concerning past practices between the union and Murata (and its predecessor corporations) and within the industry with regard to zipper clauses and unilateral amendment of plan documents. 13 B. Section 14.02 of the Plan Documents 73 The district court also held that the October 25, 1985 amendment was also prohibited by section 14.02 of the 1977 Plan documents, which circumscribed Murata's right to amend the Plan documents by providing that n[o] ... amendment shall vest in the Company any right, title, or interest in or to the funds held by the Trustee. Murata contends that the phrase funds held by the Trustee refers only to those monies in the plan necessary to satisfy liabilities to the Plans' participants. Therefore, Murata argues, section 14.02 did not prohibit an amendment allowing it to recoup any residual assets remaining after satisfaction of all liabilities. 74 To support its argument, Murata relies on two cases with similar fact patterns. In Wilson v. Bluefield Supply Co., 819 F.2d 457 (4th Cir.1987), the court considered the validity of an amendment to a defined benefits plan that allowed the employer to recoup the excess funds remaining in the Plan upon termination. At the time of the Plan's creation the Plan documents contained a provision that read: 75 No part of the Fund or interest therein nor any item of property included therein shall be withdrawn, assigned or otherwise transferred in whole or in part, either by the voluntary act of the Company or by operation of law or otherwise.... None of the assets belonging to the Fund hereby created, or of the income therefrom, shall be diverted or used for any purpose other than the exclusive benefit of the Participants as contemplated and provided by this agreement. 76 Id. at 461. The employer amended the Plan documents to allow for reversion of excess funds to itself upon termination and subsequently terminated the plan. Participants in the Plan brought suit, alleging that the amendment allowing for reversion was impermissible under this provision of the Plan. The district court, however, granted summary judgment in favor of the company. 77 The Fourth Circuit affirmed. The court noted that the phrase limited the company's right only to assets belonging to the Fund. Because the Plan elsewhere defined fund as the monies necessary for the uses and purposes herein provided, the court concluded that fund meant only those assets  'as were necessary to insure full payment of the plan's obligations to the participants.'  See id. at 464 (quoting In re C.D. Moyer Company Trust Fund, 441 F.Supp. 1128, 1132 (E.D.Pa.1977)). The court concluded that, under the terms of the Plan, there was a distinction between the assets necessary to satisfy debts owed to plan participants and residual assets remaining after such debts had been satisfied. The court held that, while the company had no title to any of the assets in the former category, it had the right to recoup those assets in the latter category remaining upon termination, and that the company breached no fiduciary duty by amending the Plan to allow such recoupment. 78 In In re C.D. Moyer Company Trust Fund, 441 F.Supp. 1128, 1131 (E.D.Pa.1977), aff'd without op., In re C.D. Moyer Co. Pension Trust, 582 F.2d 1273, aff'd without op., Appeal of Pension Ben. Guaranty Corp., 582 F.2d 1275 (3d Cir.1978), which also involved a defined benefits plan, the original Plan documents contained a similar provision limiting the employer's right to recoup monies in the Plan: 79 It shall, however, at all times be impossible, if any alteration, amendment, or revocation be made pursuant to this provision, for any of the trust corpus or income to be diverted to or revert to either of the employers or to be used for any purpose other than the exclusive benefit of the participants or their beneficiaries. 80 The court nevertheless permitted an amendment allowing the residual assets to revert to the employer upon termination of the plan. Because the Plan was for the purpose of providing such sums as may be necessary to pay for and to finance the benefits under the Plan, the court concluded that the phrase trust corpus or income referred only to those funds necessary to satisfy the Plan's liabilities. Therefore, the court held that the company was free to impose an amendment allowing for the reversion to itself of excess funds remaining upon termination of the Plan. Murata contends that the logic that controlled in Wilson and Moyer should apply here as well. 81 This court has twice confronted the question of what type of language may prohibit amendment to plan documents to allow for reversion of excess funds to the sponsoring employer. In DelGrosso v. Spang and Co., 769 F.2d 928 (3d Cir.1985), cert. denied, 476 U.S. 1140, 106 S.Ct. 2246, 90 L.Ed.2d 692 (1986), we considered whether an employer could amend a defined contribution plan to allow for reversion of excess residual assets to itself. However, the Plan documents explicitly prohibited the employer from amending the Plan unilaterally and specifically provided that [t]he contributions made by the Company hereunder may not, under any circumstances, revert to the Company, 769 F.2d at 935. Therefore, we found it a breach of fiduciary duty for the employer to have amended the Plan to allow for reversion of excess funds to itself. 82 In addition, we noted in DelGrosso that unlike under a defined benefits plan, the employer's donations to the defined contribution plan were made out of the employees' compensation in specific amounts required in the plan. See 769 F.2d at 935. Therefore, our decision that the Plan prohibited reversion did not implicate the policy concern that employers may be encouraged to underfund defined benefits plans for fear of losing any surplus. 83 Two years later, in Chait v. Bernstein, 835 F.2d 1017 (3d Cir.1987), we were faced with a fact pattern more analogous to the one present here. There, the employer amended a defined benefits plan to allow for reversion to itself of any excess funds remaining in the Plan upon termination. When the Plan was terminated, a participant brought suit, alleging that the Plan documents prohibited amendment to allow reversion of excess funds to the employer. The Plan documents provided that no ... amendment shall authorize or permit any part of the funds held under the Plan to be used for or diverted to purposes other than for the exclusive benefit of the Employees. Id. at 1022. We concluded that the inclusion of the 'exclusive benefit' language, standing alone, cannot be read to indicate that the Plan prohibited surplus reversion to the employer. Id. at 1023. As we read the Plan documents, they contained only the standard language requiring that the plans be for the benefit of employees, but did not contain a sufficiently specific prohibition of reversion of excess assets to the employer. We also emphasized the strong policy concern in favor of allowing reversion to the employer of excess assets in a defined benefits plan so that employers are not encouraged to underfund such plans. See id. at 1027. 84 We must decide here whether the language in the Plan documents differs sufficiently from the language in the plan in Chait as to justify prohibiting an amendment to allow reversion of excess funds to Murata. We note at the outset that the language here is more specific. As opposed to a general statement that the money in the Plans is to be used for the benefit of employees, section 14.02 states that n[o] ... amendment shall vest in the Company any right, title, or interest in or to the funds held by the Trustee. The language here specifically contemplates a limitation on the power of the Company to amend the Plans and is more than the boilerplate statement in Chait that the funds in the plan were for the exclusive benefit of the employees. 85 Nevertheless, we conclude that section 14.02 did not prohibit Murata's amending the Plans to allow it to recoup excess funds. The limitation on amendments only stated that the company could not amend the Plans to allow it to have an interest in funds held by the Trustee. Fund is defined in section 1.05 of the Plan documents as the Trust Fund held pursuant to the Agreement, while the Agreement is defined as the Agreement ... to be used for funding benefits under the Plan. Hence, funds held by the Trustee refers only to those funds necessary for funding benefits under the Plans and not to money remaining once all benefits have been paid out. Not only is this the definition of funds provided in these particular Plans, but it is also the meaning given to funds by courts in similar contexts. See Wilson, 819 F.2d at 463-65; Moyer, 441 F.Supp. at 1131-32. 86 Additionally, we note that in construing the language of the Plans we are influenced by the fact that the Plans at issue here are defined benefits plans, to which the employees did not individually contribute, but which depended upon Murata and its predecessor corporations to fund sufficiently. Because of the strong policy concern that employers not be encouraged to underfund defined benefits plans, see Chait, 835 F.2d at 1027, the language purporting to prohibit amendment to plan documents to allow for reversion of excess funds in a defined benefits plan must be quite explicit. 87 We find that the language in section 14.02, when read in conjunction with other provisions of the Plan documents, prohibits only amendments that would allow Murata to recoup funds necessary to provide benefits guaranteed under the Plans. We therefore hold that the district court erred in finding that section 14.02 prohibited Murata's adoption of the October 25, 1985 amendment. Given this conclusion (and our conclusion in the preceding section), the judgment must be reversed, and the case remanded for further proceedings. Although, on remand, the court may determine that the collective bargaining agreement forbade the 1985 amendment, we hold that section 14.02 of the Plan documents did not. 14 88