In No. 84-5182, 755 F.2d 330 (3d Cir. 1985)

The dispositive question in these consolidated appeals is whether, in a class action brought by prospective pensioners under Sections 301 and 302 of the LMRA and Section 502 of ERISA, inclusion of an amendment to a pension fund plan in a ratified collective bargaining agreement provides sufficient notice of the terms of that amendment to prospective pensioners. The district court found that such notice was not sufficient as a matter of law, granted summary judgment for the pensioners against the Pension Benefits Guarantee Corporation ("PBGC") and certified its order as a final judgment under Rule 54(b), F.R.Civ.P. Because we conclude that inclusion of this pension fund amendment in the ratified collective bargaining agreement is sufficient notice to members of the bargaining unit, we reverse the grant of summary judgment and decide no other issues presented for review.

For example, presented for our review pursuant to 28 U.S.C. § 1292(b) is whether ERISA Sec. 4064 operates to impose liability retroactively upon employers who withdrew from a pension plan a year and a half before the enactment of ERISA and, if so, whether such application violates the Due Process Clause of the Fifth Amendment. Our certification of this question for review, however, was predicated upon the proper resolution of the notice issue below. Because we are reversing the district court's decision on the question of notice, and because we are uncertain as to what effect, if any, our decision today bears on the question certified under Sec. 1292(b), we remand it to the district court. In conjunction with its resolution of the remaining cross-claim, that court will decide whether to adhere to its original decision on the certified question; any appellate review will follow the entry of a final decision. We turn now to the operative facts of the issues we now decide.

In 1956, Anheuser-Busch, Inc., P. Ballantine & Sons, Liebman Breweries ("Rheingold"), Pabst Brewing Co., and two other corporations not involved here, established the New Jersey Brewery Employees Pension Fund. This fund was administered pursuant to the terms of a pension plan ("Plan") established by the fund trustees. In 1967, due to the declining health of the brewing industry, the participating employers and the brewery employees' bargaining representative (Teamsters Locals 4, 153, and 843) included a resolution in their collective bargaining agreement to incorporate a Partial Termination Clause into the Plan. This clause would determine the benefits of employees whose employer ceased to be a "Participating Employer" under the Plan.

After discussing a Partial Termination Clause extensively for three years, in April of 1970 the fund trustees tentatively reached agreement. Their proposed Partial Termination Clause was submitted to the employers and the joint board of the unions, which were then negotiating the 1970 area-wide collective bargaining agreement. These parties included the Partial Termination Clause¹  in the proposed labor agreement submitted to the memberships of Locals 4, 153 and 843 for ratification.

In May 1970, the area-wide collective bargaining agreement, which included the Partial Termination Clause, was approved by members of Locals 4, 153 and 843 employed at Pabst, Ballantine and Rheingold by a vote of 1305 (yes) to 168 (no). Appendix at 534. On May 27, 1970 this collective bargaining agreement, which we repeat by way of emphasis included the Partial Termination Clause, was signed by officials of the various companies, the Essex Brewers' Labor Association, the Brewery Workers' Joint Local Board of New Jersey, and Locals 4, 153 and 843. Appendix at 329. On May 28, 1970 the Plan trustees adopted the Partial Termination Clause which was inserted as Article VII in the Plan on the same day.

The Ballantine Brewery closed on April 1, 1972. By the terms of the Partial Termination Clause, many Ballantine employees were unable to receive their pension benefits. Appellees brought this action against the employers and the PBGC seeking the protection of pension benefits under the Plan notwithstanding the Partial Termination Clause. The district court certified a class consisting of "all individuals employed by Ballantine with ten or more years of service on April 1, 1972, and whose service credit was eliminated by the partial termination clause." Appendix at 112.

In a separate claim, somewhat unrelated to the precise issues before us, in 1973 Budweiser and Pabst withdrew from the Plan and established separate pension funds for their employees, and the last employer in the Plan, Rheingold, withdrew in 1977. The PBGC was appointed as statutory trustee in 1978. In its amended answer to the class claim, the PBGC asserted a cross claim against Anheuser, Pabst, and Rheingold under 29 U.S.C. § 1364 for their statutory share of the liability that the PBGC may incur as a result of the termination of the Plan.

In September 1980, the district court found that the Partial Termination Clause was arbitrary and capricious and granted summary judgment for the employees against the PBGC, but found for the defendant employers on all other claims. 526 F. Supp. 299. On appeal, we affirmed the district court's judgment in all respects except for the finding that the Partial Termination Clause was arbitrary and capricious. Adams v. New Jersey Brewery Employees' Pension Trust Fund, 670 F.2d 387, 404 (3d Cir. 1982). On this issue, we reversed and found the clause valid, but remanded the case to the district court to determine "whether proper notification of the partial termination clause was required and properly given." Id. at 391.

On remand, the district court found that the trustees did not provide adequate notice to the Plan participants and granted the appellee class's motion for summary judgment against the PBGC. The court certified this holding as a final judgment for purposes of appeal under Rule 54(b), F.R.Civ.P. The district court also denied Anheuser's and Pabst's motions for summary judgment on PBGC's cross-claim and granted Anheuser's and Pabst's motions for interlocutory appeal under 28 U.S.C. § 1292(b) on the issues presented therein.

The district court found that the trustees of the Plan did not provide the appellees with sufficient written or oral notice of the Partial Termination Clause, and that the clause could therefore not divest them of their pension rights, and granted appellees' summary judgment against the PBGC. It is to the propriety of this decision we now turn.

In reviewing the grant of a summary judgment motion, we must affirm if we determine that there are no disputed issues of material fact and that the plaintiffs are entitled to judgment as a matter of law. Coastal States Gas Corp. v. Department of Energy, 644 F.2d 969, 978-79 (3d Cir. 1981). Determining whether, as a matter of law, the appellees were afforded adequate notice of the terms of the Partial Termination Clause implicates the interpretation and application of legal precepts. Therefore, our review is plenary. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102-03 (3d Cir. 1981). Appellants argue that inclusion of the Partial Termination Clause in the 1970 collective bargaining agreement was sufficient notice to the appellees of the contents of that clause. We agree.

Integrity of the collective bargaining process under the National Labor Relations Act is critical to the stability of labor relations. The ability of duly elected bargaining representatives to bargain effectively is dependent in part upon its ability to bind the employees it represents to the terms of a negotiated agreement. In NLRB v. Allis-Chalmers Mfg. Co., 388 U.S. 175, 87 S. Ct. 2001, 18 L. Ed. 2d 1123 (1967), in finding that a union could discipline its members for crossing strike picket lines, the Supreme Court commented on the union's role in the bargaining process:

National labor policy has been built on the premise that by pooling their economic strength and acting through a labor organization freely chosen by the majority, the employees of an appropriate unit have the most effective means of bargaining for improvements in wages, hours, and working conditions. The policy therefore extinguishes the individual employee's power to order his own relations with his employer and creates a power vested in the chosen representative to act in the interests of all employees.... Thus only the union may contract the employee's terms and conditions of employment, and provisions for processing his grievances; the union may even bargain away his right to strike during the contract term, and his right to refuse to cross a lawful picket line. The employee may disagree with many of the union decisions but is bound by them.

Id. at 180, 87 S. Ct. at 2006 (footnotes omitted).

Following this reasoning, we have twice before held that the individual members of a union are bound by the terms of a no-strike clause in a collective bargaining agreement. Suburban Transit Corp. v. NLRB, 536 F.2d 1018, 1023 (3d Cir. 1976); Eazor Express, Inc. v. International Brotherhood of Teamsters, 520 F.2d 951, 960-61 (3d Cir. 1975), cert. denied, 424 U.S. 935, 96 S. Ct. 1149, 47 L. Ed. 2d 342, reh'g denied, 425 U.S. 908, 96 S. Ct. 1502, 47 L. Ed. 2d 758 (1976). The clause at issue here is similar to those involved in these cases in that it was part of a collective bargaining agreement. That the subject matter of the clauses differ does not change the binding nature of their application to union members.

A necessary corollary to the rule that all terms of a collective bargaining agreement are binding on the individual members of the bargaining unit, is the concept that parties to a valid contract have notice of the terms therein set forth. See, e.g., Federal Leasing Corp. v. Route 202 Corp., 525 F. Supp. 1024, 1029 (E.D. Pa. 1981); Farris Engineering Corp. v. Service Bureau Corp., 276 F. Supp. 643, 645 (D.N.J. 1967), aff'd, 406 F.2d 519 (3d Cir. 1969). Here, there can be no doubt that the union members had such notice of the Partial Termination Clause. The 1967 collective bargaining agreement called for an incorporation of such a clause in the Plan. Such a clause was included verbatim in the 1970 collective bargaining agreement. The 1970 agreement was ratified by union members by a large majority. Those same members may therefore not now assert that they cannot be bound by the terms of that agreement.

None of the cases upon which the district court relied concerned an amendment to a pension plan that was included in a collective bargaining agreement and duly ratified. See, e.g., Valle v. Joint Plumbing Industry Board, 623 F.2d 196 (2d Cir. 1980); Agro v. Joint Plumbing Industry Board, 623 F.2d 207 (2d Cir. 1980); Norton v. I.A.M. National Pension Fund, 553 F.2d 1352 (D.C. Cir. 1977); Kosty v. Lewis, 319 F.2d 744 (D.C. Cir. 1963), cert. denied, 375 U.S. 964, 84 S. Ct. 482, 11 L. Ed. 2d 414 (1964). Accordingly, they are not persuasive.

For the above reasons, we conclude that the district court erred in holding that notice of the Partial Termination Clause was inadequate. We hold that there was adequate constructive notice as a matter of law. Accordingly, we will reverse the grant of summary judgment for appellees against PBGC, and will remand the case to the district court for a final determination of the employers' liability on PBGC's cross-claim for any remaining unfunded portions of the Brewery Pension Fund. Because the issue certified under 28 U.S.C. § 1292(b) is necessarily involved in that determination, we decline to decide the interlocutory appeal and remand it for resolution in the proper course of the remaining litigation.

BECKER, Circuit Judge, concurring:

While I join in the opinion and judgment of the court, I write separately to express my belief that our holding--that the inclusion of an amendment to a pension plan in the collective bargaining agreement constitutes constructive notice to the beneficiaries of the pension trust--might not apply in other factual situations.

A helpful way of framing the issue in this case is to ask whether the pension trustees violated their fiduciary duty to the beneficiaries of the fund by relying on the inclusion of the Partial Termination Clause ("PTC") in the collective bargaining agreement to provide the beneficiaries with notice of this detrimental change in the plan. The trustees had a "fiduciary duty to preserve the financial security of [the] pension fund and to apply the assets of the fund for the benefit of the employees to the greatest extent possible." Adams v. New Jersey Brewery Employees' Pension Trust Fund, Local Union 843, 670 F.2d 387, 397 (3d Cir. 1982). Because they were balancing conflicting obligations--between present and future beneficiaries, and between financial security and the payment of benefits--these trustees were obligated to avoid acting in an arbitrary and capricious manner. Id. at 398; see Struble v. New Jersey Brewery Employees' Welfare Trust Fund, 732 F.2d 325, 334 (3d Cir. 1984).¹ 

By stating that, because the PTC was "included verbatim in the 1970 collective bargaining agreement" which "was ratified by union members by a large majority [, t]hose same members may therefore not now assert that they cannot be bound by the terms of that agreement," at 336, we have held, in effect, that the trustees did not act arbitrarily when they decided to notify their beneficiaries through the contract and its ratification procedure. I believe that this holding is correct here, where the clause in dispute affected active participants in the collective bargaining process--primarily current employees (and some former employees who had retired no more than ninety days earlier).²  It is also supported by the fact that these persons had earlier ratified a collective bargaining agreement which put them on notice that a partial termination clause of some sort was in the making. See id.

I can, however, posit a set of circumstances where the same result would not follow. For example, if the clause in question operated mainly to the detriment of retired workers, the fact that it was in the collective bargaining contract would not, in my opinion, necessarily constitute adequate notice. Retirees are not employees within the meaning of the National Labor Relations Act, 29 U.S.C. § 151 et seq., and they cannot properly be included in a bargaining unit with active employees. Allied Chemical & Alkali Workers of America, Local 1 v. Pittsburgh Plate Glass Co., 404 U.S. 157, 172-75, 92 S. Ct. 383, 393-96, 30 L. Ed. 2d 341 (1971). Retirees' benefits, moreover, are not a mandatory subject of bargaining, id. at 176-82, 92 S. Ct. at 396-99; consequently, a union is under no statutory duty to bargain for these benefits in negotiations with the employer. Id. at 181 n. 20, 92 S. Ct. at 398 n. 20. A union may, of course, choose to bargain on behalf of retirees, id.; see, e.g., Adams v. Gould Inc., 739 F.2d 858, 861-62 (3d Cir. 1984), but, in practical terms, union leaders have little incentive to obtain benefits for former employees at the expense of present workers. As a result, retired workers generally do not participate in the collective bargaining ratification process. To hold retirees automatically bound by a change in the pension trust agreement (for which they are entitled to notice) because it is included in the collective bargaining agreement would, in my view, create problems of extending the notion of constructive notice so far as to be unfair. Moreover, trustees who rely on the ratification process for notice under such circumstances might well be acting in an arbitrary and capricious manner. I therefore join in the opinion on the understanding that it does not extend beyond the facts of this case.³