2005 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-14-2005

Martorana v. Bd Trustees 420

Precedential or Non-Precedential: Precedential

Docket No. 04-1181

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1

 PRECEDENTIAL 

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 04-1181

 

MICHAEL MARTORANA,

 Appellant

v.

THE BOARD OF TRUSTEES OF STEAMFITTERS

LOCAL UNION 420 HEALTH,

WELFARE AND PENSION FUND;

STEAMFITTERS LOCAL UNION 420

 

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil No. 03-cv-01029)

District Judge: Honorable Stewart Dalzell

 

Argued January 25, 2005

Before: SCIRICA, Chief Judge, RENDELL and FISHER,

Circuit Judges.

(Filed: April 14, 2005)
2

John N. Salla

Joseph M. Armstrong [ARGUED]

Salla & Armstrong

2001 Market Street, Suite 3410

Two Commerce Square

Philadelphia, PA 19103

 Counsel for Appellant

Margaret M. Underwood [ARGUED]

Jacoby Donner

1515 Market Street, Suite 2000

Philadelphia, PA 19102

 Counsel for Appellee

 

OPINION OF THE COURT

 

RENDELL, Circuit Judge

Appellant, Michael Martorana, brought suit against the

Board of Trustees of the Steamfitters Local Union 420 Health,

Welfare and Pension Fund (“the Board”) alleging that the Board

improperly denied benefits due to him pursuant to an ERISA

plan. The Board then brought a counterclaim alleging that

Martorana owed $4100 in back contributions toward the cost of

health care coverage from October 1994 to December 1999. 
3

The District Court granted summary judgment in favor of

the Board on both Martorana’s claim and the Board’s

counterclaim. The District Court also awarded attorney’s fees

to the Board for Martorana’s claim for increased pension

benefits and directed that these fees be paid by way of the

Board’s withholding no more than $160 per month from

Martorana’s pension benefits. On appeal, we must decide

(1) whether the grant of summary judgment was proper,

(2) whether the order assessing fees against Martorana’s pension

benefits contravenes ERISA and its underlying policies, and

(3) whether the award of attorney’s fees was proper. 

I. Factual and Procedural Background

Martorana joined the Union on July 27, 1972, and

worked steadily until he sustained a serious injury while

performing work as a Union member on March 21, 1994. He

then began to collect Workers’ Compensation benefits, which he

continued to receive at least through November 2003. 

Martorana applied for Social Security disability benefits

on November 30, 1995, and the Social Security Administration

(SSA) determined that he was eligible for such benefits on

December 14, 1997. Although the SSA found that Martorana

became disabled on March 21, 1994, it awarded benefits

retroactive only to November 1994 because of certain time

restrictions imposed by federal law.
4

In addition to his Workers’ Compensation and Social

Security benefits, Martorana requested, and received, the

Disability Retirement Pension to which he was entitled under

the Union’s Pension Plan. In the summer of 2000, Martorana

first contended that the Board had improperly calculated his

disability pension benefits because, when calculating his length

of service (upon which the amount of pension is based), it failed

to take into account the period during which he received

Workers’ Compensation. At its July 20, 2000 meeting, the

Board rejected Martorana’s claim because under the terms of the

pension plan “credited hours,” but not “contribution hours,”

accrue during the period when a worker is receiving Workers’

Compensation, and the calculation of disability pension benefits

depends on one’s total contribution hours not one’s credited

hours. Martorana appealed this decision unsuccessfully to the

Board.

While Martorana was making his claim for additional

benefits, the Board demanded that Martorana pay $4400 in pastdue healthcare contributions to the Welfare Plan for the medical

coverage he had received between October 1994 and December

1999. Martorana argued that the Welfare Plan did not require

him to contribute to the plan while he was an “active”

participant. The Board pointed out that he could not be an

“active” participant in the Welfare Plan while simultaneously

receiving benefits under the Pension Plan. When Martorana

resisted contributing to the Welfare Plan, the Board refused to

pay $300 of his medical claims, and it now concedes that the
5

amount of Martorana’s past-due healthcare contributions should

be reduced by $300 to $4100. 

Martorana initiated this action in The Delaware County

Court of Common Pleas, alleging that in calculating his years of

service, and in assessing past-due healthcare contributions

against him, the Board failed to comply with the terms of the

Pension Plan and Welfare Plan, respectively, in violation of

ERISA, 29 U.S.C. § 1001, et seq., and requesting declaratory

judgment. 

The Board removed the case and filed a counterclaim for

$4100 in past-due healthcare contributions. On December 22,

2003, the District Court entered an order granting summary

judgment in favor of the Board on all claims and thereafter in

January 2004 entered a further order granting judgment in favor

of the Board for $8,217.08 in attorney’s fees and costs based on

the Pension Plan claim, stating “[d]efendant may collect the

judgment... only by reducing plaintiff’s monthly Disability

Retirement Pension by an amount not to exceed $160.00 per

month.” The District Court noted “awarding the attorneys fees

and costs incurred in defending Martorana’s claim for additional

pension benefits serves the socially useful purpose of deterring

similar unfounded claims that consume courts’ limited

resources.”

 Martorana filed two unsuccessful motions for

reconsideration in the District Court and now appeals to us. On
6

appeal, we must decide whether the grant of summary judgment

against Martorana on the Pension Plan claim and the Welfare

Plan claim were proper, whether the order allowing essentially

for a monthly set-off of Martorana’s pension benefits violates

ERISA and its underlying policies, and whether the award of

attorney’s fees was appropriate. We find that the grant of

summary judgment was appropriate, but that the District Court

erred in both the award of attorney’s fees and the manner in

which it ordered them to be paid. Accordingly, we will reverse

in part and remand to the District Court.

The District Court had jurisdiction pursuant to ERISA, 29

U.S.C. § 1132(e) and general federal question jurisdiction

pursuant to 28 U.S.C. § 1331. We have jurisdiction over this

appeal under 28 U.S.C. § 1291. 

II. Discussion

A. Summary Judgment

Martorana brought his claims pursuant to 29 U.S.C.

§ 1132(a)(1)(B), invoking his right to sue under ERISA to

“recover benefits due to him under the terms of the plan, to

enforce his rights under the terms of the plan, or to clarify his

rights to future benefits under the terms of the plan.” We

exercise plenary review over the District Court's decision to

grant summary judgment. See Blair v. Scott Specialty Gases,

283 F.3d 595, 602-03 (3d Cir. 2002). We apply the same
7

standard as used by the District Court. Id. 

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,

115 (1989), the Supreme Court stated that “a denial of benefits

challenged under § 1132(a)(1)(B) is to be reviewed under a de

novo standard unlessthe benefit plan gives the administrator or

fiduciary discretionary authority to determine benefits or to

construe the terms of the plan.” In the present case, the Pension

Plan gives the Board “the sole and absolute discretion to

determine eligibility for benefits underthe Plan, and to construe

and interpret the provisions of the Plan...” Similarly, the

Welfare Plan provides that “[t]he Trustees shall have the sole

and absolute discretion to determine eligibility for benefits

under the Plan of Benefits, and to construe and interpret the

provisions of the Plan of Benefits and this Trust Agreement...”

Therefore, we must determine whether the decisions of the

Board in rejecting Martorana’s claims for increased pension

funds and requiring payment of back healthcare premiums were

arbitrary and capricious. 

We will overturn the decisions of the Board only if they

were “without reason, unsupported by the evidence or

erroneous as a matter of law. This scope of review is narrow,

and ‘the court is not free to substitute its own judgment for that

of the [administrator] in determining eligibility for plan

benefits.’” Mitchell v. Eastman Kodak Co., 113 F.3d 433, 439

(3d Cir. 1997) (citations omitted). 
8

We have little difficulty concluding that the Board’s

ruling was not arbitrary or capricious. As noted above,

Martorana seeks to ignore the plain provisions of the plan that

provide that only credited hours accrue during the period when

a worker is receiving Workers’ Compensation, and the

calculation of disability pension benefits depends not on total

credited hours, but rather on contribution hours. Martorana’s

refusal to recognize this renders his claim, as noted by the

District Court, totally lacking in merit. 

Furthermore, we find that the Board’s determination that

Martorana was a Retiree, and, therefore, required to make

contributions to the healthcare fund, was supported by ample

evidence, and, more specifically, by the clear terms of the plan.

We, therefore, find that neither decision by the Board was

arbitrary or capricious, and will affirm the District Court’s grant

of summary judgment on both.

B. Equitable Set-off of Pension Benefits

The District Court’s award of attorney’s fees, discussed

more fully below, was accompanied by its allowance of a

monthly set-off of Martorana’s pension benefits as the method

of payment of those fees. Martorana contends on appeal that

the District Court’s order effected an attachment or equitable
 Appellees contend that the issue of equitable set-off is not 1

properly before us because in his Notice of Appeal Martorana

only stated that he was appealing the December 22, 2003 Order

of the District Court, which granted summary judgment to the

Board on both claims and awarded the Board attorney’s fees

with respect to Martorana’s increased pension claim. However,

under Fed. R. App. P. 4, this Notice was required to be filed

within thirty days of the December 22, 2003 Order and,

therefore, would have had to have been filed before the District

Court issued the order allowing for equitable set-off on January

26, 2004. Subsequently, in his Concise Summary of the Case,

filed with this Court on February 2, 2004, Martorana specifically

stated that he was appealing “the order of the lower court

wherein his pension benefits are subject to garnishment.” As we

have noted in the past, we “will exercise appellate jurisdiction

over orders that are not specified in the notice of appeal where:

(1) there is a connection between the specified and unspecified

orders; (2) the intention to appeal the unspecified order is

apparent; and (3) the opposing party is not prejudiced and has a

full opportunity to brief the issues.” Polonksi v. Trump Taj

Mahal Associates, 137 F.3d 139, 144 (3d Cir. 1998).

Furthermore, “[i]n the attorney’s fees context, this court has

found that ‘an adequate connection exists between a specified

order that designates the prevailing party for purposes of

attorney’s fees and an unspecified order that quantifies the

attorney’s fee award.” Id. (citations omitted). Therefore, we

have little difficulty concluding that the issue of equitable setoff as a means to recoup attorney’s fees is properly before us on

9

set-off of his pension benefits that contravenes ERISA policy.1
appeal.

 Our review of the District Court’s determination that 2

equitable set-off was a permissible means by which the Board

could recover attorney’s fees involves examination of a

conclusion of law. Therefore, our review of this issue is de

novo. Allen-Myland, Inc. v. IBM Corp., 33 F.3d 194, 201 (3d

Cir. 1994).

10

He also contends that the allowance of equitable set-off violates

the terms of the Pension Plan itself, and Pennsylvania law. We

find that the equitable set-off does contravene ERISA and

ERISA policy, and need not discuss Martorana’s other two

contentions. ERISA § 206(d)(1) mandates that “[e]ach pension 2

plan shall provide that benefits provided under the plan may not

be assigned or alienated.” 29 U.S.C. 1056(d)(1) (2005). At first

glance, therefore, it would seem that any attempt to attach

pension funds would violate the statute. However, in the past,

we have recognized certain exceptions to ERISA’s antiattachment provisions. Specifically, in Coar v. Kazmir, 990

F.2d 1413 (3d Cir. 1993), a plan fiduciary, who was also a plan

participant, challenged the reduction of his pension benefits to

allow the plan to recoup the damages he caused when he

engaged in a conspiracy to obtain kickbacks in exchange for

channeling $20 million from the pension fund’s assets. In Coar,

we held that such a reduction was permissible. In doing so, we

observed the apparent conflict between two ERISA sections -

Section 206(d)(1) and Section 409(a). For, Section 409(a)
11

mandates that a person who breaches his or her duties to a

pension fund “shall be personally liable to make good to such

plan any losses to the plan resulting from such breach... and

shall be subject to such other equitable relief as the court may

deem appropriate...” 29 U.S.C. § 1109(a) (2005). We,

therefore, concluded that in the context of a restoration of plan

funds due to a fiduciary breach, ERISA permits attachment of

or setoff against the pension benefits of a fiduciary/plan

participant who has committed the breach. 

However, in arriving at this conclusion, we observed the

caution with which the Supreme Court has approached the

subject of attachment of ERISA pension plan benefits. In

Guidry v. Sheet Metal Workers Nat'l Pension Fund, 493 U.S.

365, 376 (1990), the Court warned:

Nor do we think it appropriate to approve

any generalized equitable exception -- either for

employee malfeasance or for criminal misconduct

-- to ERISA's prohibition on the assignment or

alienation of pension benefits. Section 206(d)

reflects a considered congressional policy choice,

a decision to safeguard a stream of income for

pensioners (and their dependents, who may be,

and perhaps usually are, blameless), even if that

decision prevents others from securing relief for

the wrongs done them. If exceptions to this policy
12

are to be made, it is for Congress to undertake

that task.

 As a general matter, courts should be loath to announce

equitable exceptions to legislative requirements or prohibitions

that are unqualified by the statutory text. The creation of such

exceptions, in our view, would be especially problematic in the

context of an antigarnishment provision. Such a provision acts,

by definition, to hinder the collection of a lawful debt. A

restriction on garnishment therefore can be defended only on

the view that the effectuation of certain broad social policies

sometimes takes precedence over the desire to do equity

between particular parties. It makes little sense to adopt such a

policy and then to refuse enforcement whenever enforcement

appears inequitable. A court attempting to carve out an

exception that would not swallow the rule would be forced to

determine whether application of the rule in particular

circumstances would be ‘especially’ inequitable. The

impracticability of defining such a standard reinforces our

conclusion that the identification of any exception should be left

to Congress.

Therefore, in undertaking our analysisin this case, we do

so with the cautionary advice of the Supreme Court in mind.

Because the present case is factually and legally distinguishable

from Coar, we decline to extend the exception to ERISA’s antigarnishment provision to encompass the equitable set-off of

pension benefits here. First, while Coar involved a perceived
13

conflict between two sections of ERISA, §§ 206(d) and 409(a),

the case before us presents no such conflict. We are not called

upon to reconcile two seemingly contradictory sections of the

statute; rather, we must only determine whether an additional

exception to § 206(d) should be made when a plan participant

becomes obligated to pay the plan’s fees when he brings a

frivolous lawsuit. No other section of ERISA even speaks to

this situation, much less mandates an exception in this

circumstance.

 Second, we are not confronted with a breach of fiduciary

duty, as in Coar. Rather, unlike in Coar where a fiduciary who

was also a plan participant knowingly deprived the plan of

millions of dollars, in this case, Martorana simply exercised his

right to bring suit under ERISA in order to determine his

entitlement to certain benefits. This is the very purpose of 29

U.S.C. § 1132(a)(1). It does not follow from the District

Court’s determination that Martorana’s suit over the pension

benefits was frivolous that we should allow for recoupment of

attorney’s fees from the benefits. In Coar we were faced with

deliberate, criminal behavior by a plan fiduciary which led to

depletion of the fund. In allowing equitable set-off of Coar’s

liability to the pension fund against his own benefits, we were

seeking to promote the purposes underlying ERISA. As we

stated:

Neither does the legislative history of

§ 206(d)(1), which courts have described as
14

‘sparse’ and ‘inconclusive’ indicate[s] that a

dishonest trustee should be shielded from the

consequences of a breach of fiduciary duty. On

the contrary, the ‘only available [legislative]

history states that the objective of the provision

was to ‘further ensure that the employee’s

accrued benefits are actually available for

retirement purposes...’ If, as indicated by the

legislative history, the anti-alienation provision is

intended to ‘protect plan beneficiaries by

ensuring that plan assets are used only for

payment of benefits’ we think that Congress’s

purpose ‘would be undermined, not advanced, by

an interpretation that prohibited offset under

these circumstances,’ because the Pension Fund’s

assets would be dissipated further through

payments to those who had looted the fund rather

than being preserved for the beneficiaries’ use.

Coar, 990 F.2d at 1420 (citations omitted).

While Appellees argue that this rationale should lead us

to extend Coar’s reasoning to the case at hand, we decline to do

so. While it may be argued that plan participants, like

Martorana, who bring suits which are ultimately found to be

frivolous, deserve the same treatment asfiduciaries who breach

a duty to the Plan and “loot” the fund, we are not persuaded.

For, unlike a deliberate looter, a plan participant who, in

earnest, but in error (and perhaps obstinately) seeks to enforce
 The other exceptions provided by Congress allow for offset 3

when it is ordered under a judgment of conviction for a crime

involving the pension plan and when offset is ordered pursuant

to a settlement agreement between the Secretary and the plan

participant, or a settlement agreement between the Pension

Benefit Guaranty Corporation and the participant, in connection

with a violation (or alleged violation) of fiduciary duty, by a

fiduciary or any other person. 29 U.S.C. § 1056(d)(4)(A)(i) and

(iii). 

15

or clarify plan rights he believes he has, does not act with

complete disregard for the well-being of the very fund which he

issupposed to help manage. The fact that ERISA allowsfor the

award of attorney’s feesto the prevailing party at the discretion

of the court in suits such as the one brought by Martorana is

generally sufficient, we believe, to prevent plaintiffs from

bringing suits which they know or strongly suspect to be

without merit. There is no need to increase deterrence by

running afoul of the statutory prohibition and assessing fees

against the pension benefits of such participants.

Finally, in 1997, Congress amended § 206 to specifically

allow for the set-off of pension benefits in several specific

situations. Congress listed among these the very situation

presented in Coar, namely when a fiduciary breaches his duty to

the plan. 29 U.S.C. § 1056(d)(4)(A)(ii). None of the 3

amendments to § 206, however, specifically apply to the

situation we are faced with here and we refuse to craft another
16

exception to § 206 where Congress has not recognized one.

Therefore, for the reasons stated above, we hold that the

allowance of equitable set-off of attorney’s fees from

Martorana’s pension benefits by the District Court contravenes

ERISA policy and we will, therefore, reverse this order and

remand for proceedings consistent with this opinion.

C. Award of Attorney’s Fees

Finally, on appeal, Martorana challenges the District

Court’s award of attorney’s fees in this case. As noted above,

the District Court has discretion to award attorney’s fees to

either party in an ERISA suit. See 29 U.S.C. § 1132(g)(1)

(2005). We have previously required that district courts

consider several factors before awarding such fees. These

include: (1) the offending party’s culpability or bad faith;

(2) the ability of the offending parties to satisfy an award of

attorney’sfees; (3) the deterrent effect of an award of attorney’s

fees; (4) the benefit conferred upon members of the pension

plan as a whole; and (5) the relative merits of the parties’

positions. Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d

Cir. 1983). 

Martorana contends that the District Court erred in

giving too little weight to the first factor, Martorana’s lack of

bad faith, and too much weight to the others. Because we find

that the District Court gave insufficient weight to the second

factor, Martorana’s ability to pay, we will reverse the award of
17

attorney’s fees and remand for further consideration.

In considering Martorana’s ability to pay, the District

Court found that the record did not contain sufficient evidence

to determine whether or not he could pay an award of attorney’s

fees, but did note that “[i]t seems likely that these fees and costs

are not large and that the Board could recoup them by reducing

Martorana’s monthly Disability Retirement Pension by an

affordable amount for a few years. Our hunches

notwithstanding, we will not make a final finding as to

Martorana’s ability to pay at this time.” Instead, the District

Court determined that the monthly set-off from the pension

benefit he was to receive would be appropriate. Indeed, the

District Court appeared to be trying to help Martorana by

requiring the plan to look only to this monthly allocation for

satisfaction of the fee award, perhaps in recognition of

Martorana’s probable lack of other resources. Putting aside the

possibility of the equitable set-off, the District Court made no

other finding as to Martorana’s ability to pay. Because

articulation by the District Court of its analysis and conclusions

on each of the five Ursic factors is mandated under our case law

before an award is entered, See McPherson v. Employee’s

Pension Plan of American Re-Insurance Co., Inc., 33 F.3d 253,

254 (3d Cir. 1994), we hold that the District Court’s failure to

consider Martorana’s ability to pay without the possibility of

equitable set-off was error. We will therefore reverse the award

of attorney’s fees and remand forfurther proceedings consistent

with this opinion.
18

III. Conclusion

Based on the reasoning above, we will AFFIRM the

December 22, 2003 order of the District Court granting

summary judgment to the Board on both claims. However, we

will REVERSE the January 26, 2004 order of the District Court

granting attorney’s fees to the board and allowing for their

recoupment through an equitable set-off of Martorana’s

monthly pension benefits.

_________________________________