1997 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-30-1997

Walling v. Brady

Precedential or Non-Precedential:

Docket 96-7526

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Recommended Citation

"Walling v. Brady" (1997). 1997 Decisions. Paper 179.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/179
Filed July 30, 1997 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 96-7526 

JOSEPH R. WALLING, and other 

individuals similarly situated 

v. 

EDWARD J. BRADY; HAROLD R. BROHAWN; 

JOHN D. DANIELLO; WILLIAM R. HICKMAN; 

TERRANCE M. SHANNON; JOHN W. STEWART; 

JAMES R. WAHL; ALFRED C. WILSON, JR., 

as Trustees of the Plumbers and Pipe 

Fitters Local Union No. 74 Pension Fund; 

PLUMBERS AND PIPE FITTERS LOCAL UNION NO. 74 

PENSION FUND, 

Appellants 

On Appeal from the United States District Court 

for the District of Delaware 

(D.C. No. 94-cv-00410) 

Argued June 16, 1997 

BEFORE: COWEN, ALITO and SEITZ, Circuit Judges

(Filed July 30, 1997) 
Richard L. Abbott, Esq. (argued) 

Theisen, Lank, Mulford & Goldberg 

P.O. Box 1470 

1201 Orange Street 

One Commerce Center, Ninth Floor 

Wilmington, DE 19899 

 COUNSEL FOR APPELLEE 

Joseph R. Walling, and other 

individuals similarly situated 

Kent Cprek, Esq. (argued) 

Richard B. Sigmond, Esq. 

Sagot, Jennings & Sigmond 

510 Walnut Street 

The Penn Mutual Towers, 16th Floor 

Philadelphia, PA 19106-3683 

 COUNSEL FOR APPELLANTS 

Edward J. Brady 

Harold R. Brohawn 

John D. Daniello 

William R. Hickman 

Terrance M. Shannon 

John W. Stewart 

James R. Wahl 

Alfred C. Wilson, Jr., as Trustees 

of the Plumbers And Pipe Fitters 

Local Union No. 74 Pension Fund 

Plumbers and Pipe Fitters Local 

Union No. 74 Pension Fund 

 2 
Susan K. Hoffman, Esq. 

Pepper, Hamilton & Scheetz 

18th & Arch Streets 

3000 Two Logan Square 

Philadelphia, PA 19103-2799 

COUNSEL FOR 

AMICUS-APPELLEES 

Local Union No. 626, United 

Brotherhood of Carpenters & 

Joiners of America Pension Fund, 

as Plan Sponsor of Carpenters 

Local No. 626 Pension & Annuity 

Plan 

Teamsters Pension Trust Fund of 

Philadelphia and Vicinity 

Teamsters Health and Welfare 

Fund of Philadelphia and Vicinity 

Carpenters Pension and Annuity 

Fund of Philadelphia and Vicinity 

Carpenters Health and Welfare 

Fund of Philadelphia and Vicinity 

Steamfitters Local Union No. 420 

Pension Fund 

Steamfitters Local Union No. 420 

Welfare Fund 

OPINION OF THE COURT 

COWEN, Circuit Judge. 

Appellants appeal from the February 9, 1996, order of 

the district court granting summary judgment to plaintiffappellee Joseph R. Walling and a class of persons he 

represents, and denying appellants' cross motion for 

summary judgment. Walling v. Brady, 917 F. Supp. 313 (D. 

Del. 1996). The district court held that the Board of 

Trustees ("Trustees") of an ERISA-qualified multi-employer 

 3 
pension fund had abused its discretion when it amended its 

pension plan to authorize the payment of an additional 

$100 per month to only 85% of the fund participants rather 

than the full membership. We will reverse. 

I. 

The Plumbers and Pipefitters Local Union No. 74 Pension 

Fund ("Pension Fund") and the Trustees were sued by a 

class of 54 participants in the Pension Fund, with Walling 

appointed as the designated class representative. The 

plaintiffs asserted that the Trustees unlawfully diverted 

pension funds in violation of 29 U.S.C.A. § 1103(c)(1) (1985 

and Supp. 1997) and breached their fiduciary duty under 

29 U.S.C.A. § 1104. The eight individuals serving as 

trustees of the Pension Fund (four are appointed from the 

union, four from management) are the same eight people 

who serve as the trustees of the Plumbers and Pipefitters 

Local Union No. 74 Welfare Fund ("Welfare Fund"). The 

management representatives to the boards of trustees are 

appointed by the Delaware Mechanical Contractors' 

Association, Inc., which represents the multiple employers 

who support the Pension Fund and the Welfare Fund. 

The Pension Fund is a defined-benefit plan. It does not 

have a "finite asset pool" and is able to incur unfunded 

liabilities. The employers and the Pension Fund jointly 

share liability for the fund's obligations. The provisions of 

the Pension Fund give the Trustees, collectively as plan 

administrator, wide latitude to 

[d]ecide all questions relating to the interpretation of 

the Trust Agreement and Plan. The exercise of 

discretion or determination of questions arising in the 

administration, interpretation and application of the 

Trust Agreement or Plan shall be final and binding 

except as otherwise provided by law. 

App. at 349-50. The plan administrator also may "[a]mend, 

alter or otherwise change the Pension Plan in any way not 

inconsistent with applicable laws or regulations of

government agencies or the provisions of this Trust." Id. at 

350. 

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An actuarial consultant retained by the Trustees reported 

that successful investments had caused the Pension Fund 

to have a surplus. The Trustees were aware that the

Welfare Fund was simultaneously faced with increased 

health care costs and that the Trustees had already

decided, in their capacity as the Welfare Fund board of 

trustees, to impose a requirement that all Welfare Fund 

participants pay a $100 per month fee for their coverage, 

which previously had not required such a fee. The Trustees 

chose to address the imbalance between the funds by

paying an additional $100 per month in benefits to those 

members of the Pension Fund who, by virtue of also being 

members of the Welfare Fund, would now have to pay $100 

each month to the Welfare Fund: "The Trustees openly 

concede that the motivation behind this additional $100 

per month Pension Fund benefit was to maintain the 

purchasing power of those retired Welfare Fund individuals 

who now shouldered an additional $100 monthly burden, 

presumably on a fixed income." Walling, 917 F. Supp. at 

317. The Trustees also noted that the Pension Fund did not 

reduce the benefits for Walling or any member of his class; 

indeed, all Pension Fund participants received a separate 

5% increase in benefits. The Walling class members, as well 

as all the other members of the Pension Fund, have 

received more than they had anticipated receiving from the 

Pension Fund upon retirement. The class members consist 

of Pension Fund members who do not also participate in 

the Welfare Fund; they retired without fulfilling sufficient 

years of service to qualify for Welfare Fund benefits. 

Walling and his class asserted that the surplus should 

have either been retained by the Pension Fund or 

distributed equally to all participants. They note that all 

Pension Fund members were faced with rising health care 

costs, regardless of whether they were Welfare Fund

participants, and claimed that the payment of an 

additional, monthly $100 to only the 85% of Pension Fund 

members who are also Welfare Fund members was not a

valid "Pension Fund interest." Id. at 322. 

The district court agreed with Walling. It held that 

appellants violated their fiduciary duty of loyalty in 

amending the plan to provide the supplemental $100 

 5 
benefit. In so holding, the district court determined that 

appellants violated their duty of loyalty, whether that duty 

is reviewed under the strict " `prudent' person standard" or 

the more relaxed "arbitrary and capricious" standard. Id. at 

321. We will reverse. We hold that no fiduciary duty 

applies, and that the Trustees acted within their powers as 

settlors in amending the Pension Fund plan. 

II. 

Subject matter jurisdiction over this matter was exercised 

by the district court pursuant to 29 U.S.C.A. § 1132, as an 

action to clarify benefits and enforce rights under the 

Employee Retirement Income Security Act ("ERISA"). We 

have appellate jurisdiction under 28 U.S.C.A. § 1291 

(1984). This court exercises plenary review over the district 

court's grant of summary judgment. We will affirm 

summary judgment "if there is no genuine issue of material 

fact and the moving party is entitled to judgment as a 

matter of law." Smith v. Hartford Ins. Group, 6 F.3d 131, 

135 (3d Cir. 1993). 

III. 

A. 

The district court concluded that the fiduciary duty (set 

forth in 29 U.S.C.A. § 1104) applied to the Trustees' 

amendment to the Pension Fund plan, which provided for 

the additional $100 per month payment. It determined that 

the Trustees had failed to act with the duty and loyalty 

required of a fiduciary. In the view of the district court, 

under either the "prudent person" or the "arbitrary and 

capricious" standard of review, the Trustees' actions were 

improper. The court based its decision largely on a

perceived difference between multi- and single-employer 

plans, citing dicta in Siskind v. Sperry Retirement Program,

Unisys, 47 F.3d 498, 506 (2d Cir. 1995). Siskind states that 

multi-employer plans differ from single-employer plans on 

the issue of fiduciary obligations. As the Second Circuit 

explained: 

 6 
The cases holding plan amendment to be an 

administrative and fiduciary task concern 

multiemployer pension plans, jointly administered by 

trustees representing the employers and trustees 

appointed by and representing the union. In the 

multiemployer setting, trustees amending a pension 

plan affect the allocation of a finite plan asset pool . . . . 

For that reason trustees administering a multiemployer 

plan are expected to act solely for the benefit of 

beneficiaries and are barred from acting on the 

employers' behalf. 

Id. (emphasis added)(citations and internal quotations

omitted). In contrast, the employer sponsoring a singleemployer plan, "must have latitude in the sound 

management of its business to determine the benefits it will 

guarantee." Id. at 505 (citing Johnson v. Georgia-Pacific

Corp., 19 F.3d 1184, 1188 (7th Cir. 1994)). The court then 

held, "to the extent [the trustees' actions are] not regulated 

by ERISA, they may act without invoking their fiduciary 

duties to plan beneficiaries." Id. at 507. 

B. 

Arguments are advanced by both parties concerning 

whether the Siskind approach (analyzing single- and multiemployer cases differently) has been made obsolete by the 

Supreme Court's recent decision in Lockheed Corp. v.

Spink, ____ U.S. ____, 116 S.Ct. 1783 (1996), which was 

filed after the district court entered the appealed-from 

order. In Lockheed, the Supreme Court explained that: 

Plan sponsors who alter the terms of a plan do not fall 

into the category of fiduciaries. As we said with respect 

to the amendment of welfare benefit plans . . . 

"[e]mployers or other plan sponsors are generally free 

under ERISA, for any reason at any time, to adopt, 

modify, or terminate welfare plans." When employers

undertake those actions, they do not act as fiduciaries, 

but are analogous to the settlors of a trust. 

___ U.S. at ___, 116 S.Ct. at 1789 (citations 

omitted)(alteration in original). The Court made clear that 

 7 
this reasoning applied to both "pension benefit plans" and 

"welfare benefit plans." Id. at 1789-90. 

Lockheed speaks of "plan sponsors," a term that applies 

to both single-employer sponsors and multi-employer

sponsors under ERISA, and the opinion lacks any hint that 

single- and multi-employer plans should be analyzed

differently. At the same time, the silence of Lockheed on 

this topic could arguably be a result of its subject matter, 

a single-employer plan. The Court did not mention multiemployer plans nor state that its decision was intended to 

reach them or to address their particular characteristics. 

While we do not read Lockheed to be the definitive word 

that there are never valid occasions on which to distinguish 

between the two types of plans, we find that the instant 

case is clearly one in which the fiduciary duty does not 

apply. Lockheed states in simple language that "[p]lan 

sponsors who alter the terms of a plan do not fall into the 

category of fiduciaries." Id. at 1789. The plan feature (a 

finite asset pool) on which Siskind based its deviation from 

this bright-line rule is not present here. 

In discussing the distinction between single- and multiemployer plans, Siskind drew heavily on the Sixth Circuit's 

opinion in Musto v. American General Corp., 861 F.2d 897, 

912 (6th Cir. 1988). Musto placed importance on the fact 

that a multi-employer plan involves a finite asset pool. 

However, before Siskind was decided, the Sixth Circuit 

issued Pope v. Central States Southeast & Southwest Areas

Health and Welfare Fund, 27 F.3d 211 (6th Cir. 1994). Pope

did not place emphasis on the "finite asset pool distinction" 

and found no reason to treat multi-employer and singleemployer plans differently when the sponsor of either is 

merely amending its plan: 

[A]mendment of multi-employer plans does not 

[materially] differ from amendment of single-employer 

plans. . . . A company "normally acts in its role as 

employer, not in its role as fiduciary" when amending 

a single-employer plan. Musto, 861 F.2d at 912. 

Imposition of fiduciary obligations in favor of plan 

participants and beneficiaries would thus divide the 

company's loyalties, a result ERISA was designed to

 8 
prevent. The trustees of a multi-employer plan do not 

act in the role of employers when enacting plan 

amendments which simply affect the allocation of an

asset pool among participants and beneficiaries. See

Musto, 861 F.2d at 912. However, multi-employer plan 

trustees assume a position analogous to that of a 

single-employer plan administrator when they amend a 

plan to protect its financial stability. As in cases 

involving single-employer plans, the policy encouraging 

employers to establish welfare benefit plans is served 

by permitting trustees of multi-employer plans to 

amend such plans without fiduciary considerations. 

Furthermore, and again like cases involving singleemployer plans, imposition of fiduciary obligations in 

cases involving multi-employer plans would divide the 

trustees' loyalties and might keep them from pressing 

for generous welfare plan benefits. 

Pope, 27 F.3d at 213-14 (citations omitted). 

As noted above, the Pension Fund is a multi-employer 

plan that does not have a "finite asset pool," yet the 

presence of such a pool is the sole reason Siskind

articulated for distinguishing between single- and multiemployer plans. Pope stands for the proposition that the 

Sixth Circuit, despite its authorship of Musto, is prepared 

to treat single- and multi-employer plans similarly in the 

absence of some other salient difference. In the instant 

case, the employers and the Pension Fund jointly share 

liability for the fund's obligations. The rationale for having 

the fiduciary duty of loyalty apply is therefore absent, 

because the Trustees have the power to incur unfunded 

liabilities, as with any settlor or grantor in a singleemployer trust. All employers in a multi-employer plan are 

collectively a single employer in the language of 29 U.S.C.A. 

§ 1060 (explaining that other ERISA sections should "be 

applied as if all employees of each of the employers were 

employed by a single employer"). Section 1002(16)(B) of 

ERISA uses the term "plan sponsor" rather than 

"employer," indicating that the term "sponsor" is meant to 

encompass more than single employers: 

The term "plan sponsor" means (I) the employer in the 

case of an employee benefit plan established or 

 9 
maintained by a single employer . . . or (iii) in the case 

of a plan established or maintained by two or more 

employers or jointly by one or more employers and one 

or more employee organizations, the association, 

committee, joint board of trustees, or other similar 

group of representatives of the parties who establish or 

maintain the plan. 

Id.

The distinction embraced in dicta by Siskind, and relied 

upon by the district court, was due to its finding a material 

difference in the administration of single- and multiemployer plans. Finding no such difference here, we hold 

that the simple fact that the plan at issue is a multiemployer plan is insufficient to cause the fiduciary duty to 

attach to the Trustees' actions. 

C. 

The principal reason that the fiduciary duty typically 

attaches to the actions of plan trustees--that their action is 

administrative or discretionary in character--is absent 

here. ERISA draws a distinction between employers 

modifying their plans ("plan modifiers") on the one hand, 

and fiduciaries exercising the discretion vested in them as 

plan administrators, on the other. The single-/multiemployer distinction described in the foregoing paragraphs 

is a byproduct of this more central distinction. Musto noted 

the interconnectedness of these two sets of distinctions: 

In amending a multi-employer plan, where the level of 

contributions of each participating employer has 

generally been set by collective bargaining, the trustees 

"affect the allocation of a finite plan asset pool between 

participants," as defendants point out in their brief, 

and hence act as plan administrators subject to a 

fiduciary duty. But when, as here, there is only one 

employer, there is normally no "plan asset pool" to be 

affected. In amending a single employer plan, therefore, 

the company normally acts in its role as employer, not 

in its role as fiduciary. 

861 F.2d at 912. 

 10 
In the instant case, the district court properly placed 

emphasis on the fiduciary-administrator/employer-plan 

modifier dichotomy. "[W]hen employers wear `two hats' as 

employers and administrators, `they assume fiduciary 

status "only when and to the extent" that they function in 

their capacity as plan administrators, not when they 

conduct business that is not regulated by ERISA.' " Walling, 

917 F. Supp. at 319 (first alteration in original)(quoting 

Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 234 

n.10 (3d Cir. 1994)(quoting Payonk v. HMW Indus., Inc., 

883 F.2d 221, 225 (3d Cir. 1989)(citations omitted)). As to 

the meaning of "business . . . not regulated by ERISA," id., 

we stated in Nazay v. Miller, "ERISA's concern is with the 

administration of benefit plans and not with the precise 

design of the plan." 949 F.2d 1323, 1329 (3d Cir. 

1991)(citing Hozier v. Midwest Fasteners, Inc., 908 F.2d 

1155, 1159 n.3 (3d Cir. 1990)). Similarly, the Supreme 

Court explained in Varity Corp. v. Howe, ___ U.S. ___, ___, 

116 S.Ct. 1065, 1071 (1996), that 

a "person is a fiduciary with respect to a plan," and 

therefore subject to ERISA fiduciary duties, "to the 

extent" that he or she "exercises any discretionary

authority or discretionary control respecting 

management" of the plan, or "has any discretionary 

authority or discretionary responsibility in the 

administration" of the plan. ERISA § 3(21)(A) [29 

U.S.C.A. 1002(21)(A)]. Varity was both an employer and

the benefit plan's administrator [,] 

and was therefore acting as a fiduciary only to the extent it 

acted as an administrator. In Lockheed, the Court 

concluded that "the act of amending a pension plan does 

not trigger ERISA's fiduciary provisions." 116 S.Ct. at 1790. 

This approach was acknowledged by the district court: 

Courts have reasoned that an employer who is also a

plan administrator acts as a fiduciary only when it

functions in its capacity as plan administrator, not 

when it conducts business that is not regulated by 

ERISA. Because ERISA does not require the creation of 

employee pension plans in the first instance, an 

employer who designs, amends, or terminates a 

 11 
pension benefit plan is not "administering"[the] plan 

and thus does not act as a fiduciary. 

Walling, 917 F. Supp. at 319-20 (citations omitted). 

Nonetheless, the district court failed to recognize the result 

dictated by this distinction. Because the Trustees were not 

administering the plan, their amendment was not a 

fiduciary act. 

The jurisprudence of this area is marked by the drawing 

of a sharp distinction between 1) the sponsors of a plan 

acting as an administrator (which is discretionary and 

therefore fiduciary) and 2) the sponsors of a plan amending, 

altering, terminating, or otherwise redesigning the plan 

itself (functions considered to be not discretionary and 

therefore not fiduciary).1 "Discretion" for the purpose of 

determining the applicability of fiduciary obligations means 

solely that the plan administrator is making a choice 

reserved to it by the plan document in administering the 

plan, not tinkering with the plan document itself. 

These dichotomies, single-employer/multi-employer and 

employer/fiduciary, are useful as guideposts in determining 

whether the fiduciary duty applies. In the particular matter 

before us, the employer/fiduciary dichotomy unequivocally 

tells us that the Trustees were not acting as a fiduciary 

when they amended the Pension Fund's plan design. ERISA 

clearly states, in pertinent part: 

_________________________________________________________________ 

1. See, e.g., Fagan v. National Stabilization Agreement of Sheet Metal

Indus. Trust Fund, 60 F.3d 175, 178 (4th Cir. 1995); Izzarelli v. Rexene

Prods. Co., 24 F.3d 1506, 1524-25 (5th Cir. 1994); United Paperworkers

Int'l Union v. Jefferson Smurfit Corp., 961 F.2d 1384, 1386 (8th Cir. 

1992); McGann v. H & H Music Co., 946 F.2d 401, 407 (5th Cir. 1991); 

Hozier, 908 F.2d at 1160-61; Musto v. American Gen. Corp., 861 F.2d at 

912 ("[W]hen an employer decides to establish, amend, or terminate a 

benefits plan, as opposed to managing any assets of the plan and 

administering the plan in accordance with its terms, its actions are not 

to be judged by fiduciary standards."); Young v. Standard Oil (Indiana), 

849 F.2d 1039, 1045 (7th Cir. 1988) ("In short, an employer does not 

owe its employees a fiduciary duty when it amends or abolishes a 

severance benefit plan."); Cunha v. Ward Foods, Inc., 804 F.2d 1418, 

1432-33 (9th Cir. 1986); Phillips v. Amoco Oil Co., 799 F.2d 1464, 1471 

(11th Cir. 1986); Amato v. Western Union Int'l, Inc., 773 F.2d 1402, 1417 

(2d Cir. 1985). 

 12 
Except as otherwise provided in subparagraph (B), a

person is a fiduciary with respect to a plan to the

extent (I) he exercises any discretionary authority or 

discretionary control respecting management of such 

plan or exercises any authority or control respecting 

management or disposition of its assets, (ii) he renders 

investment advice for a fee . . . or has any authority or 

responsibility to do so, or (iii) he has any discretionary 

authority or discretionary responsibility in the 

administration of such plan. 

29 U.S.C.A. § 1002(21)(A) (emphasis added). None of the 

above-described situations that give rise to thefiduciary 

duty is present here. 

IV. 

We reject the district court's statement that the 

"[t]rustees enacted the amendment to advance non-Pension 

Fund interests." Walling, 917 F. Supp. at 322. The court 

simply identified the wrong criteria: since the Trustees, as 

settlors, were free to scrap the plan altogether, they were 

free to advance non-Pension Fund interests in making 

design changes to it. 

In sum, the ERISA fiduciary obligations simply do not 

apply to a plan amendment. See Lockheed, 116 S.Ct. at 

1789. The Trustees, acting collectively as settlor, were free 

to make any amendment that did not run afoul of relevant 

ERISA regulations. No such regulation was implicated here. 

See, e.g., 29 U.S.C.A. § 1054(g)(amendment generally may 

not decrease accrued plan benefits) and § 1085b (if

adoption of an amendment results in underfunding of a 

defined benefit plan, the sponsor must post security for the 

amount of the deficiency). Walling and his class had no 

accrued or vested benefits that were affected by the 

Trustees' actions. The Pension Fund plan explicitly states: 

12.04 No Vesting in Assets. No person other than 

the Trustees of the Pension Fund shall have any right, 

title, or interest in any of the income or property of any 

funds received or held by or for the account of the

Pension Fund, and no person shall have any vested 

right to benefits provided by the Pension Plan . .. . 

 13 

App. at 180. 

V. 

For the reasons stated herein, we will reverse the 

February 9, 1996, order of the district court. The matter 

will be remanded to the district court with a direction to 

enter an order granting the Trustees' motion for summary 
judgment. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals

for the Third Circuit

 14