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. e du/thir dc ir c uit_1997/179Filed 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

2Susan 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 pla intiffappellee Joseph R. Walling and a class of persons h e represents, and denying appellants' cross motion fo r 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-e mployer

3pension fund had abused its discretion when it amen ded its

pension plan to authorize the payment of an additio nal $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 Pen sion 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. T he plaintiffs asserted that the Trustees unlawfully di verted pension funds in violation of 29 U.S.C.A. § 1103(c) (1) (1985 and Supp. 1997) and breached their fiduciary duty u nder 29 U.S.C.A. § 1104. The eight individuals serving a s trustees of the Pension Fund (four are appointed fr om the union, four from management) are the same eight peo ple who serve as the trustees of the Plumbers and Pipef itters Local Union No. 74 Welfare Fund ("Welfare Fund"). T he management representatives to the boards of trustee s are appointed by the Delaware Mechanical Contractors' Association, Inc., which represents the multiple em ployers 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 unf unded liabilities. The employers and the Pension Fund joi ntly share liability for the fund's obligations. The pro visions of the Pension Fund give the Trustees, collectively as plan administrator, wide latitude to

[d]ecide all questions relating to the interpretati on of the Trust Agreement and Plan. The exercise of discretion or determination of questions arising in the administration, interpretation and application of t he 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 w ay not inconsistent with applicable laws or regulations of government agencies or the provisions of this Trust ." Id. at
350.

4An actuarial consultant retained by the Trustees re ported

that successful investments had caused the Pension Fund to have a surplus. The Trustees were aware that the Welfare Fund was simultaneously faced with increase d health care costs and that the Trustees had already decided, in their capacity as the Welfare Fund boar d of trustees, to impose a requirement that all Welfare Fund participants pay a $100 per month fee for their cov erage, which previously had not required such a fee. The T rustees 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 openl y concede that the motivation behind this additional $100 per month Pension Fund benefit was to maintain the purchasing power of those retired Welfare Fund indi viduals who now shouldered an additional $100 monthly burde n, 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 hi s class; indeed, all Pension Fund participants received a se parate 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 f rom the Pension Fund upon retirement. The class members con sist of Pension Fund members who do not also participate in the Welfare Fund; they retired without fulfilling s ufficient years of service to qualify for Welfare Fund benefi ts.

Walling and his class asserted that the surplus sho uld 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 tha t appellants violated their fiduciary duty of loyalty in amending the plan to provide the supplemental $100

5benefit. In so holding, the district court determin ed that

appellants violated their duty of loyalty, whether that duty is reviewed under the strict " `prudent' person sta ndard" or the more relaxed "arbitrary and capricious" standar d. Id. at 321. We will reverse. We hold that no fiduciary dut y applies, and that the Trustees acted within their p owers as settlors in amending the Pension Fund plan.

II.

Subject matter jurisdiction over this matter was ex ercised by the district court pursuant to 29 U.S.C.A. § 113 2, 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. § 129 1 (1984). This court exercises plenary review over th e district court's grant of summary judgment. We will affirm summary judgment "if there is no genuine issue of m aterial fact and the moving party is entitled to judgment a s 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 dut y (set forth in 29 U.S.C.A. § 1104) applied to the Trustee s' amendment to the Pension Fund plan, which provided for the additional $100 per month payment. It determine d that the Trustees had failed to act with the duty and lo yalty required of a fiduciary. In the view of the distric t court, under either the "prudent person" or the "arbitrary and capricious" standard of review, the Trustees' actio ns were improper. The court based its decision largely on a perceived difference between multi- and single-empl oyer 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 pl ans on the issue of fiduciary obligations. As the Second C ircuit explained:

6The cases holding plan amendment to be an

administrative and fiduciary task concern multiemployer pension plans, jointly administered b y 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 p ool

. . . . For that reason trustees administering a multiemplo yer 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 si ngleemployer plan, "must have latitude in the sound management of its business to determine the benefit s it will guarantee." Id. at 505 (citing Johnson v. Georgia-Pacific Corp. , 19 F.3d 1184, 1188 (7th Cir. 1994)). The court th en held, "to the extent [the trustees' actions are] no t regulated by ERISA, they may act without invoking their fiduc iary 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 r espect to the amendment of welfare benefit plans . . . "[e]mployers or other plan sponsors are generally f ree 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 fiducia ries, 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 cl ear that

7this reasoning applied to both "pension benefit pla ns" 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 hin t that single- and multi-employer plans should be analyzed differently. At the same time, the silence of Lockh eed on this topic could arguably be a result of its subjec t matter, a single-employer plan. The Court did not mention m ultiemployer plans nor state that its decision was inte nded to reach them or to address their particular character istics.

While we do not read Lockheed to be the definitive word
that there are never valid occasions on which to di stinguish between the two types of plans, we find that the in stant case is clearly one in which the fiduciary duty doe s 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 fea ture (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 m ultiemployer 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 di stinction" and found no reason to treat multi-employer and sin gleemployer plans differently when the sponsor of eith er is merely amending its plan:

[A]mendment of multi-employer plans does not [materially] differ from amendment of single-employ er plans. . . . A company "normally acts in its role a s employer, not in its role as fiduciary" when amendi ng a single-employer plan. Musto , 861 F.2d at 912. Imposition of fiduciary obligations in favor of pla n participants and beneficiaries would thus divide th e company's loyalties, a result ERISA was designed to

8prevent. The trustees of a multi-employer plan do n ot

act in the role of employers when enacting plan amendments which simply affect the allocation of an asset pool among participants and beneficiaries. Se e
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 case s involving single-employer plans, the policy encoura ging employers to establish welfare benefit plans is ser ved 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 t he trustees' loyalties and might keep them from pressi ng for generous welfare plan benefits.

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

As noted above, the Pension Fund is a multi-employe r 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 in stant case, the employers and the Pension Fund jointly sh are liability for the fund's obligations. The rationale for having the fiduciary duty of loyalty apply is therefore ab sent, because the Trustees have the power to incur unfund ed liabilities, as with any settlor or grantor in a si ngleemployer trust. All employers in a multi-employer p lan are collectively a single employer in the language of 2 9 U.S.C.A. § 1060 (explaining that other ERISA sections should "be applied as if all employees of each of the employer s 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 m eant to encompass more than single employers:

The term "plan sponsor" means (I) the employer in t he case of an employee benefit plan established or

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

of a plan established or maintained by two or more employers or jointly by one or more employers and o ne or more employee organizations, the association, committee, joint board of trustees, or other simila r group of representatives of the parties who establi sh 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 mul tiemployer plans. Finding no such difference here, we hold that the simple fact that the plan at issue is a mu ltiemployer plan is insufficient to cause the fiduciar y duty to
attach to the Trustees' actions.

C.

The principal reason that the fiduciary duty typica lly attaches to the actions of plan trustees--that thei r action is administrative or discretionary in character--is ab sent 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-/mult iemployer distinction described in the foregoing par agraphs is a byproduct of this more central distinction. Mu sto noted
the interconnectedness of these two sets of distinc tions:

In amending a multi-employer plan, where the level of contributions of each participating employer has generally been set by collective bargaining, the tr ustees "affect the allocation of a finite plan asset pool between participants," as defendants point out in their bri ef, and hence act as plan administrators subject to a fiduciary duty. But when, as here, there is only on e employer, there is normally no "plan asset pool" to be affected. In amending a single employer plan, there fore, the company normally acts in its role as employer, not in its role as fiduciary.

861 F.2d at 912.

10In the instant case, the district court properly pl aced

emphasis on the fiduciary-administrator/employer-pl an modifier dichotomy. "[W]hen employers wear `two hat s' as employers and administrators, `they assume fiduciar y status "only when and to the extent" that they func tion in their capacity as plan administrators, not when the y 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., I nc. , 883 F.2d 221, 225 (3d Cir. 1989)(citations omitted) ). As to the meaning of "business . . . not regulated by ERI SA," 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 Supr eme 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," a nd therefore subject to ERISA fiduciary duties, "to th e 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 cour t:

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, no t 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

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

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 dra wing 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 discretionar y and therefore not fiduciary).1 "Discretion" for the pur pose of determining the applicability of fiduciary obligati ons means solely that the plan administrator is making a choi ce reserved to it by the plan document in administerin g the plan, not tinkering with the plan document itself.

These dichotomies, single-employer/multi-employer a nd employer/fiduciary, are useful as guideposts in det ermining whether the fiduciary duty applies. In the particul ar matter before us, the employer/fiduciary dichotomy unequiv ocally
tells us that the Trustees were not acting as a fiduciary when they amended the Pension Fund's plan design. E RISA clearly states, in pertinent part:

___________________________________________________ ______________

1. See, e.g. , Fagan v. National Stabilization Agreement of Shee t Metal
Indus. Trust Fund , 60 F.3d 175, 178 (4th Cir. 1995); Izzarelli v. Re xene Prods. Co. , 24 F.3d 1506, 1524-25 (5th Cir. 1994); United Pap erworkers 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, amen d, 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. St andard 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 o r 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).

12Except 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 respecti ng management or disposition of its assets, (ii) he renders investment advice for a fee . . . or has any author ity or responsibility to do so, or (iii) he has any discre tionary 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 thefid uciary duty is present here.

IV.

We reject the district court's statement that the "[t]rustees enacted the amendment to advance non-Pe nsion Fund interests." Walling , 917 F. Supp. at 322. The court simply identified the wrong criteria: since the Tru stees, as settlors, were free to scrap the plan altogether, t hey were
free to advance non-Pension Fund interests in makin g design changes to it.

In sum, the ERISA fiduciary obligations simply do n ot 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 rel evant ERISA regulations. No such regulation was implicate d 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 securit y for the amount of the deficiency). Walling and his class ha d no accrued or vested benefits that were affected by th e 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 rig ht, 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 direc tion to enter an order granting the Trustees' motion for su mmaryjudgment.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

14