Source: https://law.justia.com/cases/federal/appellate-courts/F3/94/236/602225/
Timestamp: 2019-08-19 15:02:39
Document Index: 542599652

Matched Legal Cases: ['§ 302', '§ 186', '§ 302', '§ 1002', '§ 3', '§ 1002', '§ 404', '§ 1104', '§ 302', '§ 186', '§ 510', '§ 1140', '§ 1140', '§ 1140', '§ 1140', '§ 1140', '§ 302', '§ 1104']

20 Employee Benefits Cas. 1761, Pens. Plan Guide P 23924ktommy J. Abbott, et al., Plaintiffs-appellants, v. Pipefitters Local Union No. 522 Hospital, Medical, and Lifebenefit Plan; Trustees of the Pipefitters Local Union No.522 Hospital, Medical, and Life Benefit Plan; and Josephwarren, in His Official Capacity As a Trustee of Thepipefitters Local Union No. 522 Hospital, Medical, and Lifebenefit Plan, Defendants-appellees, 94 F.3d 236 (6th Cir. 1996) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Sixth Circuit › 1996 › 20 Employee Benefits Cas. 1761, Pens. Plan Guide P 23924ktommy J. Abbott, et al., Plaintiffs-appella...
20 Employee Benefits Cas. 1761, Pens. Plan Guide P 23924ktommy J. Abbott, et al., Plaintiffs-appellants, v. Pipefitters Local Union No. 522 Hospital, Medical, and Lifebenefit Plan; Trustees of the Pipefitters Local Union No.522 Hospital, Medical, and Life Benefit Plan; and Josephwarren, in His Official Capacity As a Trustee of Thepipefitters Local Union No. 522 Hospital, Medical, and Lifebenefit Plan, Defendants-appellees, 94 F.3d 236 (6th Cir. 1996)
U.S. Court of Appeals for the Sixth Circuit - 94 F.3d 236 (6th Cir. 1996)
Argued May 20, 1996. Decided Aug. 29, 1996
The permissible structure of a union-sponsored benefit plan such as the one involved in this case is governed by § 302(c) (5) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c) (5). As required by § 302(c) (5) (B), the plan is administered by a body of trustees, with employers and employees having equal representation. Local 633 joined the plan in 1970 with the understanding that the trustees of the plan would continue to be drawn from Local 522. The trust agreement states that the trustees are to be drawn from Local 522 and the employers for whom that local's members work, and that Local 633 is entitled to one alternate trustee (who serves on a temporary basis in the absence of a regular trustee). In 1990, the two employer trustees were members of the employers association in Louisville, and the two employee trustees were the business manager and senior business representative of Local 522.
The trustees' powers and duties are detailed in both the plan and the trust agreement. Article IX of the plan states that the trustees are named fiduciaries, and imposes on them the duty to "act solely in the interest of Employees, Dependents, Survivors and Beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable administrative expenses." (Section 9.01.) Article VIII of the plan governs amendments, and provides that the plan "may be amended in any respect at any time ... by a resolution adopted by a majority vote of the Trustees, effective as of the date set forth in the resolution [.]"1 Article X states that " [a]ny rules, regulations, or procedures that may be necessary for the proper administration or functioning of this Plan that are not covered in this Plan or the Trust Agreement shall be promulgated and adopted by the Trustees."
(Section 2.2.) Section 7.1 vests administration of the trust fund "wholly in the Trustees" and grants the trustees the power to "obtain and evaluate all statistical and actuarial data which may be reasonably required with respect to the administration of the Health and Welfare Plan" and to make such other rules and regulations as may be necessary for the administration of the Plan. Section 7.2(l) authorizes the trustees to " [p]repare, promulgate and issue rules and regulations pertaining to application for benefits of the Fund, eligibility requirements to participate in the same and types and kinds of benefits to be secured from proceeds of the Fund."
The plan at issue is an employee welfare benefit plan as defined under ERISA, 29 U.S.C. § 1002(1), as it provides medical, health and life benefits. As the Supreme Court recently cautioned, ERISA does not create a substantive entitlement to such benefits, and employers and plan sponsors are generally free to adopt, modify or terminate such plans "for any reason at any time." Curtiss-Wright Corp. v. Schoonejongen, --- U.S. ----, ----, 115 S. Ct. 1223, 1228, 131 L. Ed. 2d 94 (1995). "Nor does ERISA establish minimum participation, vesting, or funding requirements for welfare plans as it does for pension plans." Id. Thus, plaintiffs had no vested right to continuation of the same schedule of benefits or the same contribution rates. Nonetheless, the trustees of the plan are fiduciaries under ERISA, and owe certain duties to the participants of the plan. The questions presented by this case are whether the specific decision at issue is subject to review for compliance with ERISA's fiduciary duties, and, if so, whether plaintiffs demonstrated that the trustees breached those duties.
A person is a "fiduciary," as that term is defined in ERISA § 3(21) (A), only when performing certain functions; e.g., "exercises any discretionary authority or discretionary control respecting management" of a plan. 29 U.S.C. § 1002(21) (A) (i). A fiduciary's functions do not include plan adoption, amendment, design or termination. Thus, it has long been the rule that an employer or plan sponsor does not act in a fiduciary capacity when adopting, modifying or terminating a welfare benefit plan. Curtiss-Wright Corp., --- U.S. at ----, 115 S. Ct. at 1228 (citing Adams v. Avondale Indus., Inc., 905 F.2d 943, 947 (6th Cir.), cert. denied, 498 U.S. 984, 111 S. Ct. 517, 112 L. Ed. 2d 529 (1990)).2 "When employers undertake those actions, they do not act as fiduciaries, but are analogous to the settlors of a trust [.]" Lockheed Corp. v. Spink, --- U.S. ----, ----, 116 S. Ct. 1783, 1789, 135 L. Ed. 2d 153 (1996) (citations omitted).
In Pope v. Central States Health and Welfare Fund, 27 F.3d 211 (6th Cir. 1994), this court extended the rule announced in Adams to a multi-employer welfare benefit plan such as the plan at issue here. The court explained:
This means, of course, that the trustees' actions are subject to review for compliance with ERISA's fiduciary obligations. Based upon the broad grant of powers to the trustees, however, we review the trustees' actions to determine only if they were arbitrary and capricious. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 956-57, 103 L. Ed. 2d 80 (1989); Whisman v. Robbins, 55 F.3d 1140, 1144 (6th Cir. 1995) (plan provisions similar to those in this case entitled trustees to arbitrary and capricious standard of review). A determination by plan trustees will not be found to be arbitrary and capricious if it is rational in light of the plan's provisions. Perry v. United Food and Commercial Workers Dist. Unions 405 and 442, 64 F.3d 238, 242 (6th Cir. 1995) (citing Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 984 (6th Cir. 1991)).
Plaintiffs claim that the trustees breached their fiduciary duties as set forth in ERISA § 404(a) (1), 29 U.S.C. § 1104(a) (1),3 by choosing to discriminate against the plaintiffs because they belonged to a different local. According to plaintiffs, the trustees breached their duty of loyalty as well as their obligation under the plan not to divert any benefit for purposes other than for the exclusive benefit of the participants. The sole evidentiary basis for plaintiffs' argument is the fact that the plan's trustees were drawn from Local 522, an arrangement to which Local 633 agreed upon joining the plan. The fact that Local 633 was not represented on the board of trustees is not alone wrongful, however. As noted, the composition of the trustee body for a union-sponsored plan such as this is governed by LMRA § 302(c) (5) (B), 29 U.S.C. § 186(c) (5) (B), which requires only that employees and employers have equal representation, not parity between the representatives of each union. International Bhd. of Teamsters, Joint Council 18 v. New York State Teamsters Council Health and Hosp. Fund, 903 F.2d 919, 922 (2d Cir.), cert. denied, 498 U.S. 898, 111 S. Ct. 251, 112 L. Ed. 2d 210 (1990). Nor will we infer that the trustees acted improperly merely because they necessarily would be affected by any decision which resolved the need to raise contribution rates. See Mahoney v. Board of Trustees, 973 F.2d 968, 971-73 (1st Cir. 1992) (trustees' status as beneficiaries does not necessitate strict standard of review of their decisions; decisions remain subject to arbitrary and capricious standard of review).
Plaintiffs also claim that defendants violated ERISA § 510, 29 U.S.C. § 1140,4 which prohibits discrimination against a participant for exercising a right protected by the plan or ERISA, or for the purpose of interfering with the attainment of any right to which the participant may become entitled. The district court dismissed plaintiffs' claim, holding that no impermissible discrimination occurred because the trustees did not interfere with a vested right to benefits. This court recently held, however, that § 1140 "prohibits interference with rights to which an employee 'may become entitled' under 'an employee benefit plan' and does not limit its application to benefits that will become vested." Shahid v. Ford Motor Co., 76 F.3d 1404, 1411 (6th Cir. 1996).5 We nonetheless affirm the district court's decision on two independent grounds.
Second, as explained by this court in Adcox v. Teledyne, Inc., 21 F.3d 1381, 1391 (6th Cir.), cert. denied, 513 U.S. 871, 115 S. Ct. 193, 130 L. Ed. 2d 126 (1994), § 1140 was enacted primarily to prevent employers from discharging or harassing their employees in order to prevent them from attaining benefits. " 'Congress designed [§ 1140] primarily to protect the employment relationship that gives rise to an individual's pension rights.' For conduct to fall within the parameters of § 1140, it 'must affect the individual's employment relationship in some substantial way.' Section 1140 'does not purport to protect the financial security of pension funds.' " Id. (quoting West v. Butler, 621 F.2d 240, 245-46 (6th Cir. 1980)) (internal citations omitted). Plaintiffs have neither alleged nor demonstrated that the trustees' actions affected their employment relationships as required by Adcox.
Several limitations are set forth on the ability to amend, none of which is relevant to plaintiffs' claims. The plan may not be amended to change the requirements that the union and employers association have equal numbers of trustees; that there be an annual audit of the plan; and that no portion of the fund may be diverted to a use other than for the benefit of beneficiaries. These limitations derive from LMRA § 302(c) (5)
The Supreme Court recently extended this rule to pension benefit plans in Lockheed Corp. v. Spink, --- U.S. ----, 116 S. Ct. 1783, 135 L. Ed. 2d 153 (1996)
Plaintiffs rely on § 1104(a) (1) (A), (B) and (D), which provide that:
Shahid also resolves defendants' argument, not addressed by the district court, that plaintiffs lack standing to assert their claims. The court held that a plaintiff has standing where, but for the alleged wrongful acts, the employee " 'would have been in a class eligible to become a member of the plan.' " Shahid, 76 F.3d at 1410-11 (quoting Swinney v. General Motors Corp., 46 F.3d 512, 519 (6th Cir. 1995)). Plaintiffs clearly meet that test here