Source: http://openjurist.org/616/f2d/433/gordon-v-ilwu-pma-benefit-funds
Timestamp: 2016-12-08 03:24:32
Document Index: 426396208

Matched Legal Cases: ['§ 185', '§ 1132', '§ 1001', '§ 1021', '§ 1101', '§ 1031', '§ 1144', '§ 1051', '§ 1081', '§ 1051', '§ 1101', '§ 1104', '§ 1132', '§ 301', '§ 304']

616 F. 2d 433 - Gordon v. Ilwu-Pma Benefit Funds HomeFederal Reporter, Second Series 616 F.2d.
The district court claimed jurisdiction under Section 301(a) of the Labor-Management Relations Act, 29 U.S.C. § 185(a),1 and Section 502(f) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(f).2 Without referring to any of the provisions of ERISA, the court found that the trustees had interpreted their eligibility rules unreasonably and that, therefore, their denial of the estate's claim was arbitrary and capricious.
ERISA, 29 U.S.C. §§ 1001 et seq., was enacted by Congress as a program to protect beneficiaries of pension and welfare plans. See Martin v. Bankers Trust Co., 565 F.2d 1276, 1278 (4th Cir. 1977). It established rules for reporting and disclosure, participation, vesting, funding, and fiduciary responsibilities under the plans. Id.
The majority of ERISA's substantive provisions, including those dealing with reporting and disclosure, 29 U.S.C. §§ 1021-1031, and fiduciary responsibilities, 29 U.S.C. §§ 1101-1114, did not become effective until January 1, 1975. See 29 U.S.C. §§ 1031, 1114, 1144; Cowan v. Keystone Emp. Profit Sharing Fund, 586 F.2d 888, 893 (1st Cir. 1978). Since both Ira and Angelina Miller died before 1975, the trustees cannot be held to have violated the reporting and disclosure provisions, as they were not yet in effect. See 29 U.S.C. § 1144.3 The provisions governing participation and vesting, 29 U.S.C. §§ 1051-61, and funding, 29 U.S.C. §§ 1081-86, are also inapplicable as they do not apply to "employee welfare benefit plans."4 29 U.S.C. §§ 1051, 1081(a)(1). Therefore, only the fiduciary responsibility provisions of ERISA, 29 U.S.C. §§ 1101-14, are applicable.
Since ERISA's fiduciary duties did not become effective until January 1, 1975, a violation of those duties must amount to a breach of trust in the administration of the plan after that date.5 The trustees' denial of the estate's claim occurred after January 1, 1975; therefore, at the time of the denial, the trustees' actions were subject to ERISA's fiduciary standards. 29 U.S.C. § 1104 provides, in part, that:
The trustees contend that this statute imposes the same standard of judicial review as is applied under the Labor-Management Relations Act, i. e., whether the decision was arbitrary and capricious. Consequently, the applicability of any of ERISA's fiduciary requirements to this case would be of no importance because the result would be the same as the one which would obtain under the Labor-Management Relations Act. After reviewing the case law,6 we are inclined to agree with this analysis. Accordingly, we find that the applicability of ERISA to this case is inconsequential, because the actions of the trustees would be subject to the same standards of judicial review under ERISA's fiduciary provisions as they are under the Labor-Management Relations Act and Rehmar v. Smith, supra.
The court found that a longshoreman who had read the rules printed in the Plan's brochure would legitimately expect that his wife would receive the extended benefits if she were alive at the time of his death. Under the principles of commercial insurance and probate laws, the court's analysis would be correct the insurance proceeds would vest in the beneficiary upon the death of the insured. See Rosetti v. Hill, 161 F.2d 549 (9th Cir. 1947). However, in this case, we are not dealing with "standardized form contracts offered by commercial insurance companies to individual consumers of lesser bargaining strength on a take-it-or-leave-it basis." Rehmar v. Smith, 555 F.2d at 1368. The ILWU-PMA welfare plan was the result of collective bargaining between Ira Miller's union and his employers, parties of equal bargaining strength. Our opinion in Rehmar makes it clear that in this case, the principles of state commercial insurance and probate law are inapplicable.7
The district court's reliance on California commercial insurance and probate principles to construe the Plan's eligibility rules was erroneous, as was its inference of estoppel. Rehmar v. Smith. Therefore, its judgment must be reversed. The question remains, however, as it did in Rehmar, whether judgment should be entered for the trustees.
The trustees interpreted the Program III rules as requiring a claimant to personally execute the necessary documentation in order to establish his or her eligibility for extended death benefits. Unless this interpretation was unreasonable, it must be upheld on review. Rehmar v. Smith, 555 F.2d at 1372. Where the rules are susceptible to more than one reasonable interpretation, the court may not substitute its judgment for that of the trustees. Miniard v. Lewis, 387 F.2d 864, 865 (D.C.Cir.1967), cert. denied, 393 U.S. 873, 89 S.Ct. 166, 21 L.Ed.2d 144 (1968).
The district court recognized that the substance of the trustees' position was reasonable and in conformance with the purpose of Program III, which was to provide benefits for qualified surviving dependents (i. e., spouse or unmarried children) so that they could continue to meet their living expenses. Nevertheless, the court concluded that the rules were susceptible to only one rational interpretation that a qualified dependent is entitled to extended benefits if he or she is alive when the participant dies, regardless of whether he or she personally completes the required documentation. In reaching this conclusion, the court relied on commercial insurance and probate law principles which, as stated above, are inapplicable to this case. Absent these principles, it cannot be said that the trustees' interpretation was unreasonable.
We believe that the rules can reasonably be read to support the trustees' position. Specific language pointing out that certain documentation must be "supplied upon request" in order to establish a claimant's eligibility was included in the description of the Plan distributed to participants. The affidavit form sent to Angelina within three days of her husband's death specified that it was to be completed only by the surviving person claiming to be qualified. This requirement, that the claimant personally complete the affidavit, was reiterated in an administrative rule adopted by the trustees.8 Reading these rules as requiring an applicant to establish his or her qualifications by personally completing the required forms is not unreasonable.
In the present case the trustees disposed of the claim in accordance with uniform interpretations of the Program III rules that have been consistently followed in similar cases. Such adherence to a consistent pattern of interpretation is significant evidence that the trustees have not acted arbitrarily. See Rehmar v. Smith, 555 F.2d at 1372.9
The trustees have established that a rational nexus exists between the purpose of the Plan and their decision. See Roark v. Lewis, 401 F.2d 425, 429 (D.C.Cir.1968). The benefit claimed by the estate, of which Angelina Miller's adult daughter is the sole beneficiary, was denied because its payment would contravene the purpose of the trust (to provide living expenses for dependents); it would allow the trust funds to be put to a use not permitted by the terms under which Program III was created. The trustees' decision to deny the claim fulfills rather than frustrates the purpose of the Plan. See Pete v. United Mine Wkrs. of Am. Welf. & R. F. of 1950, 517 F.2d 1275, 1286 (D.C.Cir.1975). Since it conforms to a reasonable interpretation of the Plan's rules, and has been a consistent position of the trustees, it cannot be deemed arbitrary and capricious. Accordingly, final judgment must be entered in favor of the trustees.10
See Morgan v. Laborers Pension Trust Fund for N. Cal., 433 F.Supp. 518, 522 n.6 (N.D.Cal.1977) ("If defendants' administration of the plan violated their general fiduciary duties after January 1, 1975, they are liable as provided for in ERISA.") If there was such a violation, jurisdiction over the suit would exist in federal district court. Section 502 of ERISA, 29 U.S.C. § 1132. See note 2, supra
See, e. g., Morgan v. Laborers Pension Trust Fund for N. Cal., 433 F.Supp. 518 (N.D.Cal.1977):
"To give meaning to the rights of beneficiaries involved in any fiduciary relationship, the courts have always found it necessary to subject the conduct of the fiduciaries to judicial review and correction. Where, however, the instrument defining the fiduciaries' duties gives them broad discretion, as is generally the case with welfare and pension trusts, the courts limit their review and intervene in the fiduciaries' decisions only where 'they have acted arbitrarily or capriciously towards one of the other persons to whom their trust obligations run.' We find this standard of judicial review, which leads neither to abdication of traditional judicial control fiduciaries nor to excessive judicial intervention in trust operations, in harmony with federal labor policy."
Id. at 524, (quoting Rehmar v. Smith, 555 F.2d 1362, 1371 (9th Cir. 1976)). See also Riley v. MEBA Pension Trust, 570 F.2d 406, 413 (2d Cir. 1977).
If congressional labor policy is successful, these parties are of relatively equal bargaining strength. There is no basis in the record before us for treating this collective bargaining agreement as a contract of adhesion. Indeed, we doubt that the California courts would apply adhesion contract analysis in this case. To the extent that the principles of California commercial insurance law would be applicable, however, we hold that they are not consistent with the federal policy of treating parties to collective bargaining contracts as parties of equal strength
The affidavit form and the administrative rule adopting its use were not included in the brochure describing the Plan, but they were otherwise available for perusal by participants or beneficiaries. The administrators were under no obligation to provide participants with a description of the procedures to be followed in a claim for benefits
The Welfare Pension Plan Disclosure Act, 29 U.S.C. §§ 301-09, in effect at the pertinent time here, did not require the administrators of a welfare plan to deliver a description of procedures to be followed in a claim for benefits, except upon written request. 29 U.S.C. §§ 304-06. There is no evidence that such a request was made in this case.
In Reiherzer v. Shannon, 581 F.2d 1266, 1273-74 (7th Cir. 1978), the arbitrariness of the denial of Reiherzer's pension on the ground that he was "self-employed" was demonstrated by the "ability of the trustees to blow hot or cold on the definition of 'self-employed' under the Plan." Another example might be where the trustees deviated from their normal eligibility requirements in order to deny benefits on account of race or religion. See Roark v. Lewis, 401 F.2d 425, 427 (D.C.Cir.1968). These examples are altogether different from the present case where the trustees have consistently refused to pay extended death benefits to dependents who would otherwise be qualified but for their failure to survive the deceased longshoreman for a period of time sufficient to enable them to complete the necessary forms
In view of this disposition it is not necessary for us to consider the estate's claim for interest and attorneys' fees