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WASHINGTON-BALTIMORE NEWSPAPER GUILD LOCAL 35 v. W

January 17, 1983

WASHINGTON-BALTIMORE NEWSPAPER GUILD LOCAL 35, affiliated with the Newspaper Guild, AFL-CIO-CLC, et al., Plaintiffs-Plaintiff-Intervenors,
v.
The WASHINGTON STAR COMPANY, et al., Defendants



The opinion of the court was delivered by: PARKER

 BARRINGTON D. PARKER, District Judge:

 This litigation calls into play application of provisions of the Employee Retirement Income Security Act 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. Specifically, the Court must determine who is the lawful claimant to approximately four million dollars of surplus assets in an employee benefit plan terminated in 1981 by The Washington Star Company ("The Star"). The plaintiffs and plaintiff-intervenors who claim the surplus include former Star employees and several local unions -- the Washington-Baltimore Newspaper Guild, Local 35; the Washington Mailers' Union, No. 29; Local Union No. 26, International Brotherhood of Electrical Workers; Graphic Arts International Union, Local 285; Columbia Typographical Union, No. 101; and Newspaper & Graphic Communications Union, Local 6 ("Guild"). The defendants include The Washington Star Company; Time, Inc., owner of The Star; the Evening Star Employees' Benefit Plan ("Plan"); the Plan's Board of Trustees; and the several individual trustees. Time, Inc. purchased The Star in 1978, prior to the commencement of this litigation.

 The plaintiffs seek to enjoin the Star from appropriating the surplus assets. They allege that the defendants' claim violates provisions of ERISA. *fn1" The parties have filed cross-motions for summary judgment. *fn2" For the reasons discussed below, the Court determines that after a consideration of the material undisputed facts, the defendants should prevail as a matter of law and the Star is entitled to the surplus assets in the employee benefit plan.

 I.

 The background events and material facts in the proceeding are not disputed and may be briefly stated.

 The Washington Star Company was for a long time a publisher of an afternoon and early evening newspaper in this City. Starting in 1918, it maintained a pension plan providing retirement and disability benefits for its salaried employees. The pension plan was known as The Evening Star Employees Benefits Plan. Through its entire life it was funded exclusively by contributions from The Star and administered by a committee of trustees appointed by The Star.

 Two documents govern its operation: a Plan document describing a definite and fixed level of benefits, and a Trust Agreement executed between the Plan's Trustees and the Star. The operative Trust Agreement was executed in 1945. Amendments to the Agreement, made in 1976 and 1981, give rise to this litigation. Prior to 1976, the Trust Agreement provided that, in the event the company terminated the Plan, "no part of the Trust Fund shall ever revert to the company or inure to its benefit prior to satisfaction of all liabilities to employees under the Plan."

 In September 1976, the trustees amended and restated the Plan document and Trust Agreement. The terms of Article XI of the amended 1976 Trust Agreement are central to this dispute. The amended section 1 of the Article included a provision for future amendment of the Trust Agreement:

 
1. This Trust Agreement may be amended from time by the Employer, provided that no amendment shall divert the Trust Fund as then constituted, nor any part thereof, to a purpose other than for the exclusive benefit of employees covered by the Plan or their beneficiaries, and provided further that no amendment shall be adopted if it adversely affects continuing qualification of the Plan under § 401(a) of the IRC, the tax exemption of the Trust under § 501(a) of the IRC, or is in violation of ERISA or any other applicable law (emphasis added).
 
Any amendment of the Trust Agreement which affects the duties or responsibilities of the Trustees must be agreed to in writing by said Trustees.

 Section 2, as amended, governed the trustees' right to terminate the trust:

 
2. The Trust may be terminated by the employer at any time. Upon termination, the Trustees shall pay all obligations of the Trust and distribute the balance in the Trust Fund in such manner as they determine will best effectuate the purpose of this Trust and in accordance with ERISA or other applicable law. In no event shall any of the Trust Fund be used to discriminate in favor of officers, shareholders or highly compensated employees or be returned to the Employer or be used for, or diverted to, purposes other than for the exclusive benefit of employees covered by the Plan or their beneficiaries (emphasis added).

 In late July 1981, the Star announced the closing of the newspaper, stating at the same time that the last edition would be published on August 7, 1981. The Star also terminated the Plan and purchased a group annuity contract from the Prudential Insurance Company of America designed to guarantee the payment of all of the Plan's defined benefit obligations. At the same time, the Plan trustees amended Section 2, Article XI of the 1976 Trust Agreement to provide for reversion to the Star of the surplus in the Plan's assets. The amended section 2 provided:

 
2. The Trust may be terminated by the employer at any time. Upon termination, the Trustees shall pay all obligations of the Trust and distribute the balance in the Trust Fund in the manner provided in the Plan. In no event shall any of the Trust Fund be used to discriminate in favor of officers or highly compensated employees, or be used for, or diverted to, purposes other than for the exclusive benefit of employees covered by the Plan or beneficiaries; provided that any assets remaining in the Trust Fund after the full satisfaction of all liabilities of the Plan to participants and their beneficiaries shall be returned to the Employer (emphasis added).

 The Guild charges that the Star and the trustees, as Plan fiduciaries, violated their fiduciary responsibilities under ERISA by amending the Trust Agreement. The defendants contend that ERISA permitted such an amendment and that even in the absence of ...


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