Judge Rules Continental Can Schemed to Deny Pensions

Continental Can Co. developed a secret and sophisticated computer program used nationwide to deny longtime employees pension benefits, a federal judge ruled Wednesday.

In a sharply worded opinion against the company, U.S. District Judge H. Lee Sarokin directed Continental Can to begin negotiating settlements with about 2,500 Continental workers. Costs to the company could approach $500 million.

“The plan was shrouded in secrecy and executed companywide at the specific direction of the highest levels of corporate management,” Sarokin said in a written opinion.

“It was intended to save hundreds of millions of dollars in unfunded pension liabilities,” he wrote. “The evidence of the plan, its secrecy and its execution comes from the files of the defendants themselves. The documents are more than a smoking gun; they are a fusillade.”

Continental Can has a plant in Wayne, N.J., and 45 others nationwide. The company is based in Norwalk, Conn.

Several cases have been brought against Continental by aggrieved employees, including one in Sarokin’s court, but he said in his ruling that there was no need for all to be heard.

“What the judge has said is that this should end all the cases everywhere,” said Robert Plotkin, an attorney for the workers.

“This is not a case of a class-action suit where plaintiffs each have a claim to $10,” he continued. “What we’re talking here is, you have many former employees who have individual claims worth in excess of $100,000.”

Attorney Douglas G. Eakeley of Chicago, who represented Continental Can, did not immediately return a reporter’s calls. The pensions in question were negotiated in 1977 by the United Steelworkers for employees subject to periodic layoffs. They were designed to protect employees with long years of service who had not yet reached normal retirement age.

But attorneys for the workers have maintained, and the judge agreed, that Continental management adopted a secret computerized plan to prevent employees from vesting in the costly pensions by laying them off before they became eligible.

A federal pension law, called the Employee Retirement Income Security Act, prohibits employers from taking any action against workers for the purpose of interfering with their pensions.

“For a corporation of this magnitude to engage in a complex, secret and deliberate scheme to deny its workers bargained-for pension benefits raises questions of corporate morality, ethics and decency which far transcend the factual and legal issues posed by this matter,” the judge said.

Plotkin said that Sarokin’s ruling should convince the company to stop dragging the suit on but that he wasn’t counting on it.

“Continental’s continued efforts to avoid its obligations to those employees any way it can are deplorable,” he said.

Company attorneys had argued that there was no secret plan in place, and that even if there were, the employees would have been laid off anyway.

Sarokin rejected that argument. He appointed George L. Priest, a professor at Yale Law School, to assist the two sides in settling individual claims, and he ordered the money to be paid promptly.