Source: http://openjurist.org/654/f2d/650
Timestamp: 2015-04-01 04:50:07
Document Index: 357232525

Matched Legal Cases: ['§ 1132', '§ 203', '§ 1053', '§ 16600', '§ 203', '§ 16600', '§ 203', '§ 1053', '§ 203', '§ 1061', 'art, 435']

654 F2d 650 Smith v. Cmta-Iam Pension Trust | OpenJurist
654 F. 2d 650 - Smith v. Cmta-Iam Pension Trust	Home654 f2d 650 smith v. cmta-iam pension trust
654 F2d 650 Smith v. Cmta-Iam Pension Trust 654 F.2d 650
2 Employee Benefits Ca 1817
Don Ray SMITH, Plaintiff-Appellant,v.CMTA-IAM PENSION TRUST, et al., Defendants-Appellees.
No 79-4337.
Argued and Submitted Feb. 10, 1981.Decided Aug. 27, 1981.
Stanley T. Grydyk, Grydyk & Pierce, Richmond, Cal., for plaintiff-appellant.
Warren Saltzman, Saltzman & Johnson, San Francisco, Cal., argued, for defendants-appellees; David W. Hettig, San Francisco, Cal., on brief.
Before SNEED and ANDERSON, Circuit Judges, and TASHIMA*, District Judge.
Appellant Smith appeals from a dismissal of his complaint against the CMTA-IAM Pension Trust (the Plan). Jurisdiction was based on section 502(a)(1)(B) of the Employment Retirement Income Security Program (ERISA), 29 U.S.C. § 1132(a) (1)(B). We affirm in part and reverse in part.
The facts in this case are not in dispute. The CMTA-IAM Pension Trust is a multiemployer pension plan formed in 1960 by an agreement between the California Metal Trades Association (CMTA) and the International Association of Machinists (IAM). Employers participating in the Plan make contributions on behalf of IAM-member employees; employees thus covered receive service credits towards pension benefits.
The 1972 Plan revision controls this case and sets the normal retirement age for commencement of retirement benefits at 62 years of age. However, payment of benefits is subject to the condition stated in sections 5.1 and 5.4 of the Plan and Trust Indenture (all references are to the Plan's 1972 revision unless otherwise indicated). These sections provide that the retirement benefits of an otherwise eligible plan member will be suspended during any monthly period in which he is or becomes employed in either the "metal trades industry" or for a "participating employer."1 Benefits are not suspended if the "retiree" continues or returns to work in other types of employment. Under the circumstances described in section 5.4, working "retirees" may earn additional service credits during a suspension period. Section 8.11 confers upon the Plan's Administrative Committee (the trustees) broad powers relating to the administration of the Plan and, in particular, to the determination of all questions regarding eligibility for payment of benefits.
Appellant was a member of IAM from 1946 until 1962 while employed as a machinist for Bacon Vulcanizing Manufacturing Company, and its successor, Bacon American Corporation (Bacon). Bacon made contributions to the Plan on appellant's behalf for which the Plan credited appellant with 15.7 service units toward retirement benefits. His pension rights vested August 2, 1962. In August, 1970, appellant obtained employment as a forklift operator and warehouseman under the jurisdiction of the International Longshore and Warehouse Union at Owens-Illinois, a glass manufacturer (Owens). He worked at Owens until his retirement on April 1, 1978. Although Owens never made contributions to the Plan on appellant's behalf, Owens did contribute funds to the Plan for at least 32 of its employees who worked under the jurisdiction of the IAM.
While employed at Owens, appellant filed an application for retirement benefits to commence when he turned 62 years old on August 2, 1974. His application was denied because the trustees determined that appellant not only remained employed in the metal trades industry but also worked for an employer participating in the Plan.
After his retirement on April 1, 1978, appellant filed this suit to recover benefits allegedly due him from August 2, 1974, when he turned age 62, until April 1, 1978, the date the Plan commenced paying him benefits. The thrust of his complaint was that the trustees' determination that he worked for a participating employer was unreasonable and unjust because Owens never contributed to the Plan on his behalf. He also alleged that his work at Owens was in neither the metal trades industry nor the same trade or craft. In appellant's motion for summary judgment, he also claimed the Plan's suspension provision violated the nonforfeiture rule expressed in ERISA § 203(a), 29 U.S.C. § 1053(a); and that the suspension clause constituted a restraint on the exercise of his lawful trade in violation of Cal.Bus. & Prof.Code § 16600.2
The appellees filed a motion to dismiss for failure to state a claim and, in the alternative, a motion for summary judgment. While both parties submitted affidavits, the district judge rejected appellant's affidavit on the ground that he had failed to comply with the time limits for submittal mandated by a local rule. The district court dismissed appellant's entire complaint with prejudice for failure to state a claim. This appeal followed which requires that we address four issues. These are:
1. Was the trustees' interpretation of the Plan arbitrary or capricious and thus a breach of their fiduciary duties?
2. Is appellant entitled to review of his benefit suspensions under ERISA § 203(a), and, if so, does the Plan's suspension clause violate ERISA's general prohibition on the forfeiture of vested pension rights?
3. Does Cal.Bus. & Prof.Code § 16600 prohibit the suspension clause in question?
4. Was it improper for the district court to dismiss appellant's complaint without considering the late affidavit?
THE PLAN INTERPRETATION ISSUE
Our well-established rule is that the decisions of those empowered with the administration of an employee pension trust shall be sustained unless arbitrary or capricious or contrary to law. Ponce v. Const. Laborers Pension Trust, 628 F.2d 537, 541-42 (9th Cir. 1980); Gordon v. ILWU-PMA Benefit Funds, 616 F.2d 433, 437-38 (9th Cir. 1980); Aitken v. IP & GCU-Employer Retirement Fund, 604 F.2d 1261, 1264 (9th Cir. 1979); Rehmar v. Smith, 555 F.2d 1362, 1371 (9th Cir. 1976); Giler v. Board of Sheet Metal Workers of So. Cal., 509 F.2d 848, 849 (9th Cir. 1975)(per curiam); accord, Bayles v. Central States, Southeast & Southwest Areas Pension Fund, 602 F.2d 97, 99-100 (5th Cir. 1979); Bueneman v. Central States, Southeast & Southwest Areas Pension Fund, 572 F.2d 1208 (8th Cir. 1978); Riley v. MEBA Pension Trust, 570 F.2d 406, 412 (2d Cir. 1977). This is especially true where, as here, the trust instrument confers broad power on the administrators to determine eligibility for benefits under the plan. Aitken v. IP & GCU-Employer Retirement Fund, supra, 604 F.2d at 1264; Bayles v. Central States, Southeast & Southwest Areas Pension Trust, supra, 602 F.2d at 100; Riley v. MEBA Pension Trust, supra, 570 F.2d at 410.
Appellant argues that the trustees' interpretation of the Plan is incorrect because the Plan's provision for accrual of additional benefits would be rendered meaningless unless employment with a "participating employer" is construed to mean employment for which contributions are made. He also asserts that their interpretation works an injustice by allowing the Plan to deny benefits to an otherwise eligible member while failing to credit him with additional service units. In support of his argument, appellant refers us to the 1960 Explanation of Plan Provisions which states that the suspension provision "does not apply if you work for a participating employer in other than covered employment" and that covered employment is "work in a job classification for which a participating employer has agreed to make contributions to the Plan." He acknowledges that the 1960 Plan Explanation does not control his rights, but insists that when its provisions differ from the trustees' interpretation of the Plan an ambiguity arises that should be resolved in his favor.
We disagree. None of appellant's contentions require that the trustees' actions be characterized as arbitrary or capricious. In Rehmar v. Smith, supra, this court explicitly rejected the principle that an ambiguity in a plan should be interpreted in favor of coverage and held that where a collectively bargained pension plan gives the fiduciaries broad discretion, the courts should limit their review to whether the fiduciaries' decisions are arbitrary or capricious. 555 F.2d at 1371. Consistent with this approach we have held that when the administrators of a labor-management pension fund have been given authority to determine eligibility under the Plan, their reasonable resolutions of any ambiguities in the Plan's language will be sustained by this court. Gordon v. ILWU-PMA Benefit Funds, supra, 616 F.2d at 439; Aitken v. IP & GCU-Employer Retirement Fund, supra, 604 F.2d at 1266. Also where the rules are susceptible to more than one reasonable interpretation, we have said that the court may not substitute its judgment for that of the trustees. Gordon v. ILWU-PMA Benefit Funds, supra. Other courts employ the same approach. Thus, the Second Circuit has observed that the trustees' interpretation need not be the one this court would have reached, but only an interpretation which has rational justifications. See Riley v. MEBA Pension Trust, supra, 570 F.2d at 412.
In this case the trustees' interpretation is neither arbitrary nor capricious. Appellees have provided ample justification to support their determination that an otherwise eligible plan member is ineligible for benefits while he continues to work for an employer contributing to the Plan. Thus, failure of the Plan to suspend benefits to members who "retired" and then went to work outside the IAM bargaining unit for either the same or a different contributing employer would cause an anomalous situation to arise in which two co-workers, both vested Plan members and over 62 years old, would receive different retirement coverage. Specifically, a Plan member who remains with the same employer at the same job would clearly be prohibited from receiving payments, while his fellow worker would be drawing benefits from the Plan simply because he left a work position within the union's jurisdiction. A reasonable way to ameliorate this inequality is to interpret the suspension clause to require withholding of retirement benefits from an otherwise eligible member so long as he is employed by an employer making contributions into the Plan, regardless of whether the employer makes such contributions specifically on behalf of the applicant.
Moreover, appellant's employer, Owens, is clearly a "participating employer." The Plan is unambiguous. Section 6.1 of the Plan defines a participating employer as "any employer which qualified as such prior to April 1, 1972, and any employer which contributes to the Trust after that date.... " (italics added). It is undisputed that Owens made contributions to the Plan after April 1, 1972. The trustees' determination that Owens was a participating employer was certainly a reasonable, if not compelled, decision.3
Finally, there is no inconsistency between the suspension clause and the Plan's provision for accrual of additional benefits during a suspension period. The credit accrual clause does not state that a retirement age plan member who works for a participating employer must receive additional credits during the period he is suspended. Rather, the clause merely refers to the limited circumstances under which an early retiree may earn additional credits, i. e., when he works for a participating employer that makes contributions to the Plan on his behalf.4
The Plan has been consistently interpreted so as to suspend benefits to Plan members working for employers contributing to the Plan. Appellant does not contend otherwise. This is a reasonable interpretation and cannot be considered as either arbitrary or capricious.
Appellant's ERISA claim presents a more difficult problem. We must decide whether the suspension clause as interpreted violates federal law under ERISA § 203(a), 29 U.S.C. § 1053(a), which provides in part: "Each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age ...."5 A plan's failure to make payments to an eligible participant constitutes an impermissible forfeiture under the Act unless the conditions described in section 203(a)(3) are met.6 Appellant's position is that the Plan's suspension clause violates ERISA's nonforfeiture rule and falls within no exception. Appellees contend that section 203(a) does not apply in this case, and, in any event, the suspension clause is permissible under section 203(a)(3) (B)(ii). We address the applicability issue first.
A. Applicability of ERISA § 203(a) to the Determination of Appellant's Pension Rights
The various sections of ERISA became effective at differing times; section 203(a) became applicable to plans in existence on January 1, 1974 at the commencement of their plan years beginning after December 31, 1975. 29 U.S.C. § 1061(b)(2). Congress did not intend for ERISA to apply retroactively. City of Los Angeles Dept. of Water and Power v. Manhart, 435 U.S. 702, 721 n.40, 98 S.Ct. 1370, 1382 n.40, 55 L.Ed.2d 657 (1978).7 Accordingly, in Ponce v. Const. Laborers Pension Trust, supra, 628 F.2d at 541, this court refused to apply ERISA's mandatory vesting provisions so as to reinstate pension rights which had been forfeited pursuant to a pre-ERISA "break-in-service" rule because none of the appellants worked for employers contributing to appellee's mul