Workers tricked out of benefits can sue Justice Breyer critical of Massey-Ferguson

March 20, 1996|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON - The Supreme Court gave workers and their $$ families yesterday a clear-cut right to sue to regain health and other benefits that they were tricked out of through management manipulation aimed at saving a company money.

The 6-3 ruling said the 1974 ERISA law governing workers' benefits assures a right to sue if the administrators of a benefits plan violate their duty to protect the workers' stake in the plan's guarantees.

The decision covers only workers' rights to benefits other than pensions. Pensions are guaranteed for workers whose right to them has been vested. Other benefits health care and vacations, for example can be dropped if done so within a plan's procedures. While they exist, however, plan officers must protect them.

Justice Stephen G. Breyer, in announcing the ruling, said the case involved "very bad activity on the employer's part" in using "trickery" to induce about 1,500 employees of Massey-Ferguson Inc., an Iowa manufacturer of farm equipment, to switch their benefit plans into a new division that company executives fully expected to go bankrupt.

Management, which acted as administrator of the benefits plan, carried out a maneuver (dubbed "Project Sunshine") to shift most of the corporation's heaviest debts into the new division in order to isolate problems of the financially strapped company and allow other divisions to prosper.

Included in the debts that Massey- Ferguson wanted to shift were its obligations to some of its workers for health care and other benefits.

Through a campaign of what a federal judge called "a brilliant manipulative effort," the company's executives persuaded 1,500 workers in its money-losing divisions to accept the shift.

When the new division collapsed, the workers' benefits other than pensions also vanished.

Workers and their families, all beneficiaries of the new division's benefit plan, sued to regain those benefits by including those workers in the parent company's still-sound benefits plan.

A federal judge ordered Massey-Ferguson to reinstate workers' rights, putting them into the parent company's plan and thus restoring their benefits. That is the result the Supreme Court upheld yesterday.

In doing so, the majority gave a broad reading to the duties of executives who also serve as plan administrators to look after their workers' plan benefits. The court gave an equally broad reading of the scope of the right of workers and their families to sue.

The Breyer majority opinion was supported by Chief Justice William H. Rehnquist and Justices Ruth Bader Ginsburg, Anthony M. Kennedy, David H. Souter and John Paul Stevens.

Justice Clarence Thomas, writing for the dissenters, said the ruling "has no basis" in the law Congress passed to protect workers' benefit plans. The dissent was joined by Justices Sandra Day O'Connor and Antonin Scalia.

In a second ruling yesterday, the court decided unanimously that a private property owner who has been forced to clean up a hazardous-waste site has no right after the hazard has been ended by the cleanup to sue others who might be to blame to force them to share the costs.

That ruling spared a brother and sister from having to pay part of the costs for removal of contaminated soil under a piece of property they formerly owned in Los Angeles. The property for years had been the site of a gasoline station, and petroleum products had leaked into the ground.

KFC Western Inc., which set up a Kentucky Fried Chicken restaurant on the site after buying it, discovered that the soil contained high levels of lead and benzene. It was ordered to clean up the site and spent $211,000 doing so. It then sued the former owners to force them to pay for the cleanup.

Pub Date: 3/20/96

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