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Pizlo v. Bethlehem Steel Corp.

decided as amended october 16 1989.: August 21, 1989.

LAWRENCE PIZLO, ET AL, PLAINTIFFS-APPELLANTS
v.
BETHLEHEM STEEL CORPORATION; GENERAL PENSION BOARD OF BETHLEHEM STEEL CORPORATION AND SUBSIDIARY COMPANIES; PENSION TRUST OF BETHLEHEM STEEL CORPORATION AND SUBSIDIARY COMPANIES; PENSION PLAN OF BETHLEHEM STEEL CORPORATION AND SUBSIDIARY COMPANIES, DEFENDANTS-APPELLEES



Appeal from the United States District Court for the District of Maryland at Baltimore. J. Frederick Motz, United States District Judge. CA-88-1047-JFM.

Murnaghan, Circuit Judge, Butzner, Senior Circuit Judge and Tilley, United States District Judge for the Middle District of North Carolina, sitting by designation.

Author: Tilley

TILLEY, District Judge

Plaintiffs, present and former salaried employees of Bethlehem Steel Corporation, appeal the dismissal of a series of claims under the Employee Retirement Income Security Act, 29 U.S.C. ยง 1001 et. seq. ("ERISA") and state law claims based upon breach of an employment contract, promissory estoppel and negligent misrepresentation. The district court did not dismiss Plaintiffs' state law claim regarding breach of contract to pay compensatory time and indicated it would remand the claim to state court*fn1 We affirm the dismissal of the supplemental payment claims, and the ERISA claims, but reverse with directions to remand to state court the dismissed state law claims relating to the alleged formation of an employment contract for a minimum term.

I

In the summer of 1982, Bethlehem Steel Corporation ("Bethlehem") distributed a brochure describing a variety of changes to Bethlehem's compensation and benefit programs that were to become effective on January 1, 1983. Allegedly contrary to a representation made by Bethlehem's chairman of the board earlier in the year that there would be no changes to the pension plan, these changes included the imposition of a penalty for early retirement. Specifically, an incremental percentage decrease in an employee's retirement benefit was imposed if he or she retired prior to attaining the age of 62. The brochure describing the changes was accompanied by a recorded statement from Bethlehem's president, apparently intended to assuage employees' fears. The statements informed employees that modifications to the plan were for the purpose of "[encouraging] employees to remain with Bethlehem for a full career."

Shortly after this brochure and recorded statement were distributed, Bethlehem organized a series of meetings, held in the summer of 1983, between the employees of its Sparrows Point plant and John Roberts, the general manager of the plant. The purpose of these meetings was to provide the employees with more details about the changes to the pension plan. At the meetings, Roberts allegedly told the employees that they were "the team" and that "there will be no more cuts in staff." He added that the employees should feel free to take their spouses to dinner, buy a new car or purchase a new home, because they had no reason to fear not having a job with Bethlehem. With respect to the early retirement penalty, Roberts stated that the purpose for the provision was to keep the employees working at Bethlehem until they reached age 62.

Two and one-half years later, the plan was amended again, effective January 1, 1986. This amendment "froze" the level of retirement benefits to those earned as of December 31, 1985. As such, those Plaintiffs still working as of December 31, 1985, were not entitled to any additional benefits under the plan. The freeze of benefits was applied by calculating an individual's retirement benefits using earnings and continuous service as of December 31, 1985.

Subsequently, some of the Plaintiffs were terminated prior to their respective 62nd birthdays. The 1983 amendments resulted in those persons receiving lower benefits than they would have received had they remained in the company's employ until age 62.

Plaintiffs filed the instant action in the Circuit Court for Baltimore County, Maryland as a protective action on March 10, 1988. The litigation between these parties originally began, however, in 1986 when two related cases were filed in the United States District Court for the District of Maryland where Plaintiffs in this case were initially proceeding as two separate groups. Those employees who had been terminated by Bethlehem prior to April, 1986, had filed suit on April 17, 1986, in a case entitled Moyer v. Bethlehem Steel Corp., Civ. No. JFM-86-1223 ("Moyer"); those still employed by Bethlehem on and after April 1, 1986, had filed suit on December 23, 1986 in Pizlo v. Bethlehem Steel Corp., Civ. No. JFM-86-3788 ("Pizlo I"). The Plaintiffs in Moyer filed an amended complaint on February 12, 1987, and the Plaintiffs in Pizlo I did the same on April 10, 1987. Both groups of Plaintiffs were represented by the same attorneys.

The original and first amended complaints in Moyer alleged causes of action for breach of fiduciary duty under ERISA based upon an alleged improper funding of a retirement plan, breach of contract, and fraud and deceit. Similarly, both the original and amended complaints in Pizlo I stated claims for breach of fiduciary duty, improper funding of Bethlehem's pension plan, and breach of contract. Each of the complaints named as defendants: Bethlehem, the members of the corporation's Board of Directors, the corporation's General Pension Board, the Pension Trust and certain individual officers of the corporation.

In response to the first amended complaints in both Moyer and Pizlo I, the Defendants moved to dismiss or, in the alternative, for a more definite statement. As part of those motions, Defendants also moved to disqualify Plaintiffs' counsel because one of the attorneys had worked for Bethlehem prior to entering private practice. The District Court of Maryland, in separate memorandum opinions, concluded that the Moyer and Pizlo I Plaintiffs had filed complaints too vague insofar as they alleged that Defendants had "underfunded" the pension plan. The court further concluded that ERISA preempted Plaintiffs' state law claims. Accordingly, the court dismissed both actions, but granted Plaintiffs leave to amend the ERISA claims. The court also granted the motion to disqualify counsel.

After obtaining new counsel and several extensions of time, Plaintiffs filed second amended complaints in Pizlo I and Moyer on February 26, 1988. Anticipating that the complaints had exceeded the permissible scope of their leaves to amend, Plaintiffs filed this action in the Circuit Court for Baltimore, Maryland ("Pizlo II"). Defendants then removed it to the United States District Court for the District of Maryland.

Thus, as of the middle of March, 1988, three separate but related suits alleging nearly identical claims were before the district ...


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