Opinion ID: 345637
Heading Depth: 1
Heading Rank: 3

Heading: Judicial Review of Trustees' Decisions

Text: 35 The trustees argue that their decision denying Lillian benefits is not reviewable. Their argument can be summarized as follows: Section 302(c)(5) of the Act, 29 U.S.C. § 186(c)(5), requires that employees and employers (be) equally represented in the administration of (collectively-bargained pension funds), together with such neutral persons as the representatives of the employer and the representatives of the employees may agree upon and provides for neutral umpires to break deadlocks. The trustees contend that the administration of the fund is analogous to the grievance machinery. Therefore, those trustees appointed by the Union owe a duty of fair representation to employees such as Sam, cf. Vaca v. Sipes, 386 U.S. 171, 177-78, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967); Beriault v. Longshoremen's Union Local 40, 501 F.2d 258, 263 (9th Cir. 1974), but as long as this duty is fulfilled, the decision of (apparently all of) the trustees on Lillian's claim is final and binding on the parties. Cf. Republic Steel Corp. v. Maddox, 379 U.S. 650, 652-53, 85 S.Ct. 614, 13 L.Ed.2d 580 (1965); Humphrey v. Moore, 375 U.S. 335, 350-51, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964). Lillian has neither alleged nor proved a breach of the duty of fair representation. Accordingly, the argument goes, the district court should have entered judgment for the trustees. 36 The trustees are not the first to suggest that the structure of § 302(c)(5) implies that trust administration is an extension of or analogous to collective bargaining. See, e. g., Goetz, Developing Federal Labor Law of Welfare and Pension Plans, 55 Cornell L.Rev. 911, 921-25 (1970). But the cases involving trust administration indicate that the analogy to collective bargaining is not perfect. See id. at 923-25. Indeed, some courts have rejected the analogy outright. E. g. Miniard v. Lewis, 128 U.S.App.D.C. 299, 387 F.2d 864, 865 n. 5 (1967), cert. denied, 393 U.S. 873, 89 S.Ct. 166, 21 L.Ed.2d 144 (1968). The only statements of the Supreme Court on the issue are against the trustees' position. The Court has said that the union's role in the administration of the fund is of a far different order from its duties as collective-bargaining agent. Chemical Workers Local 1 v. Pittsburgh Plate Glass Co., supra, 404 U.S. at 170, 92 S.Ct. at 393. The Court has also suggested that retirees have a federal remedy under § 301 for breach of the obligation to pay pension benefits, Id. at 176-77 n. 17, 92 S.Ct. 383, and for unilateral changes in pension benefits, Id. at 181 n. 20, 92 S.Ct. 383. Yet an action for breach of the alleged duty of fair representation in the administration of a pension plan, which the trustees contend is Lillian's only remedy, has been held not to be maintainable under § 301. Nedd v. UMW, 400 F.2d 103, 105-06 (3rd Cir. 1968). We therefore reject the trustees' argument analogizing trust administration to collective bargaining as not supported by authority. 6 37 Nothing in the present case requires Lillian to prove a breach by the Union-appointed trustees of their duty of fair representation before a federal court can entertain, under section 301, her claim of breach of the agreement. 38 In addition, there is a very practical reason why an action for breach of the duty of fair representation should not be deemed to constitute the sole remedy for an aggrieved employee: such a remedy in some cases may be wholly inadequate to protect the employee or his dependents. Action on most trust matters can be taken by a simple majority of the trustees. Goetz, supra, at 923. Accordingly, the trustee-representatives of the employers and a neutral trustee could, on a wholly arbitrary or capricious basis, deny benefits to an employee even though all trustee-representatives of the employees voted to grant the benefits. In such a situation, the aggrieved employee's duty of fair representation action would be useless because the only group bound by that duty the representatives of the employees would not have breached the duty. The employee's injury from the arbitrary or capricious trustee conduct would go unremedied.B. The Danti Standard 39 This does not mean, however, that a federal court may substitute its judgment for that of the trustees. In a series of cases involving individual claims to benefits under pension trusts administered by the United Mine Workers Union, the District of Columbia Circuit has developed a standard for reviewing trustee decisions. Those decisions may be reversed only where they are arbitrary, capricious or made in bad faith, not supported by substantial evidence, or erroneous on a question of law. Danti v. Lewis, 114 U.S.App.D.C. 105, 312 F.2d 345, 348 (1962). See also Gomez v. Lewis, 414 F.2d 1312, 1314 (3d Cir. 1969); Miniard v. Lewis, supra, 387 F.2d at 865; Kosty v. Lewis, 115 U.S.App.D.C. 343, 319 F.2d 744, 747 (1963), cert. denied, 375 U.S. 964, 84 S.Ct. 482, 11 L.Ed.2d 414 (1964). 40 The trustees have not cited any of these cases, apparently in the belief that they are not applicable. We believe, however, that for several reasons the standard of judicial review enunciated in Danti and its progeny may be appropriately followed here. First, we concluded earlier that the federal courts have § 301 jurisdiction over cases involving individual claims to pension trust benefits. Thus, the federal courts in deciding Danti and the cases following it were not merely applying the general common law of the state as an exercise of their diversity jurisdiction. Rather they were pronouncing a rule of federal labor law applicable in all similar cases. 41 Even if, however, the only basis for jurisdiction for the Danti line of cases was diversity of citizenship (the basis for federal jurisdiction was not clearly identified), the standard developed in those cases is one that may properly be applied in suits under § 301. The District of Columbia Circuit recognized, in formulating that standard, that the institutional arrangements creating welfare and pension trust funds and specifying their purposes are cast expressly in fiduciary form . . . . Kosty v. Lewis, supra, 319 F.2d at 747; see also 29 U.S.C. § 186(c)(5) (directing that employers' contributions shall be held in trust). 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. Id. 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 persons to whom their trust obligations run. Id. We find this standard of judicial review, which leads neither to abdication of traditional judicial control of fiduciaries nor to excessive judicial intervention in trust operations, in harmony with federal labor policy. Accordingly, if the Danti standard is a statement of state law, or general common law, it is a standard we adopt. 7 See generally Goetz, supra, 55 Cornell L.Rev. at 936. C. Applying the Danti Standard 42 Although Lillian's complaint was obviously not drafted with the Danti standard of review in mind, it can clearly be read as at least challenging the trustees' interpretation of the term spouse in § 9B of the collective bargaining agreement. Even though they had never obtained a marriage license nor participated in a marriage ceremony, there was evidence that Sam thought of Lillian as his wife. The trustees, however, construed spouse to require a marriage valid under state law. There was no evidence or allegation that the trustees had ever interpreted the term in any other way. In addition, we find the interpretation reasonable. Therefore, the interpretation was not arbitrary or capricious. See Miniard v. Lewis, supra, 387 F.2d at 865. 43 It may well be, however, that Lillian's complaint could be interpreted as also challenging the handling of Sam's pension applications designating Lillian as beneficiary. There was no allegation or evidence that the trustees failed to disclose to Sam the benefit provisions. Lillian contends, however, that the trustees should have told Sam that Lillian would not be eligible for § 9B benefits. 44 We should allow the district court the first opportunity to assess this contention. That assessment must be made, however, within the limited scope of judicial review of trustees' decisions set forth in this opinion. 8 45 REVERSED AND REMANDED.