Court Opinion

ID: 2962308
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:56:06.990709+00
Date Added: 2024-06-11T11:42:28.337961
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-1488                                DOMINGO DIAZ, ET AL.,                               Plaintiffs, Appellants,                                          v.                        SEAFARERS INTERNATIONAL UNION, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                    [Hon. Raymond L. Acosta, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                        Torruella and Boudin, Circuit Judges.                                              ______________                                 ____________________            Carlos A.  Del Valle Cruz  with whom Jose  Luis Gonzalez  Castaner            _________________________            _____________________________        was on brief for appellant Domingo Diaz.            Mary T.  Sullivan with whom  Segal, Roitman &  Coleman, and  Ellen            _________________            _________________________       _____        Silver, Associate Counsel, Seafarers Pension  Plan, were on brief  for        ______        appellee.                                 ____________________                                   January 10, 1994                                 ____________________                       BREYER,  Chief Judge.    Domingo Diaz,  a  retired                                ___________             seaman,   brought  this   lawsuit   against  the   Seafarers             International Union  and the Union's Pension Plan.   He says             that the  Plan should have  provided him a pension  of about             $450  per month,  rather than  about  $200 per  month.   The             Plan's  failure  to do  so,  in Diaz's  view,  represents an             erroneous application of  the Plan's own pension-calculation             rules  and thereby  violates  federal  law.    See  Employee                                                            ___             Retirement Income Security Act of 1974  (ERISA), 29 U.S.C.               1104(a)(1)(D)  ("[Plan  trustees]  shall  discharge  [their]             duties  .  .   .  in  accordance  with   the  documents  and             instruments  governing the  plan .  . .  .").   The district             court found  that the  Plan, through  its trustees,  did not             improperly apply the Plan's rules.   We agree, and we affirm             the district court's judgment.                                          I                                      Background                                      __________                       A. Basic Facts.   The following key facts  are not                          ___________             contested:                       1.   From  1943 to 1960 Diaz worked on ships whose                            employees were  represented by  the Seafarers                            International  Union  (SIU).     During  that                            period, the SIU had no pension plan.                       2.   In  1960 Diaz  quit.   Soon  after, he  began                            working   on  ships   whose  employees   were                                         -2-                                          2                            represented  by the  National Maritime  Union                            (NMU).                       3.   In 1961 the  SIU developed a pension  plan --                            the  Seafarers   Pension  Plan   --  covering                            seafarers who work on SIU-represented ships.                       4.   In  1968  Diaz,  then  still  working  on NMU                            ships, was  injured and stopped working  as a                            seaman altogether.                       5.   In 1975  Diaz recovered  from his injury  and                            began to work again as a seaman, this time on                            SIU ships.                       6.   In 1988 Diaz retired, at age 65, having spent                            the previous 13 years on SIU ships.                       B.  The  Seafarers  Pension Plan.    The Seafarers                           ____________________________             Pension Plan provides pensions based upon time worked on SIU             ships,  but not  on  other  ships.   It  normally permits  a             seafarer  to include, in the pension level calculation, time             that  he  worked  even  before  the  plan  first  came  into             existence  in  1961   --  even  though  employers   did  not             contribute before 1961  and the relevant pension  funds must             therefore come  from contributions  (and related  investment             earnings) made in  respect to work  performed later, and  by             others.                       Despite the  ordinary practice  of crediting  pre-             1961 work,  the trustees  gave Diaz credit  only for  the 13             years he  worked on  SIU ships after  he recovered  from his             injury  in 1975 and  returned to SIU work.   They denied him                                         -3-                                          3             credit  for the 17  years he worked  on SIU  ships before he             left  SIU employment  in 1961  (and before  the SIU  had any             pension plan)  because they  concluded that,  in respect  to             that  work, Diaz  suffered a  "break in  service" under  the             plan's "break in service" rule.  The rule prohibits counting             work prior  to a "break  in service," defined as  failure to             perform  90  or more  days  of SIU  work  in  each of  three             consecutive calendar years between 1968 and 1975 (when ERISA             took effect).  The rule states specifically:                       If  during the  period  from January  1,                       1968 to December  31, 1975, an  employee                       received credit for less than 90 days of                       Service in each of three (3) consecutive                       calendar years, a Break of Service shall                       occur.                       If such  a Break of Service occurs, said                       employee  shall  lose   all  credit  for                       Service  prior  to  and  including  said                       three (3) year period . . . .              Seafarers Pension Regulations, Article 2, Section D(1).                       The  upshot is  that Diaz  received  a pension  of             about $200 per  month (and without certain  health benefits)             instead of the $450 per  month (plus such benefits) to which             he believed himself entitled.                       C.  Procedure.    Diaz  brought  this  lawsuit  in                           _________             federal   district   court   under   ERISA,   29   U.S.C.                1132(a)(1)(B),  which  authorizes  an  employee  action  "to                                         -4-                                          4             recover benefits  due to him  under the terms of  his plan."             ERISA requires trustees to follow their own rules, see id.                                                                  ___ ___             1104(a)(1)(D), and Diaz argues that the trustees have failed             to do  so by  misinterpreting the break  in service  rule in             applying  it to  his  situation.   The district  court found             against Diaz.                                          II                                  Standard of Review                                  __________________                       Ordinarily,   a    court   will    give   trustees             considerable leeway to  interpret and to apply  pension plan             rules,  setting aside those  trustee decisions only  if they             are arbitrary, capricious, or an abuse of discretion.   See,                                                                     ____             e.g.,  Lockhart v.  United  Mine  Workers  of  America  1974             ____   ________     ________________________________________             Pension Trust, 5 F.3d 74, 78  n.6 (4th Cir. 1993); Gordon v.             _____________                                      ______             ILWU-PMA  Benefit Funds, 616 F.2d  433, 439 (9th Cir. 1980).             _______________________             Diaz  points out, however,  that the Supreme  Court has said             that this deferential standard of review is appropriate only             where the "benefit plan" itself gives the trustees                       discretionary  authority   to  determine                       eligibility for benefits  or to construe                       the terms of the plan.             Firestone  Tire &  Rubber Co.  v. Bruch,  489 U.S.  101, 115             _____________________________     _____             (1989); see also Allen v.  Adage, Inc., 967 F.2d 695, 697-98                     ___ ____ _____     ___________             (1st Cir. 1992).  Diaz says that the  version of the benefit                                         -5-                                          5             plan in effect when he applied for a pension did not provide             the trustees with the "discretionary authority" to determine             eligibility or  construe the terms  of the plan.   Hence, we             must review trustee decisions de novo.                                           __ ____                       Diaz's   argument   is    unconvincing,   however.             Firestone  concerned  certain  terms   ("reduction  in  work             _________             force")  set forth  in what  was in  effect the  basic trust             instrument, which  terms the trustees  had construed against             the employees.   The argument in the case  before us focuses             on  the application  (and implicit  interpretation),  not of             terms contained in the basic  trust instrument, but of rules             ______________________________________________         _____             promulgated  by the trustees pursuant to powers delegated by             ____________________________________________________________             that instrument.  And, the distinction is important.             _______________                       The Firestone  opinion turned  on the  traditional                           _________             legal doctrine that trustee powers are                        determined  by the rules of law that are                       applicable to the situation . . . and by                                                             __                       the  terms of the trust as the court may                       ________________________________________                       interpret  them, and not  as they may be                       _______________                       interpreted by the trustee himself . . .                       .             3  W. Fratcher,  Scott on  Trusts    201,  at 221  (emphasis             added); see  Firestone, 489 U.S.  at 112.   That is  to say,                     ___  _________             courts  ordinarily  interpret  (independently)  the  trust's             terms.  The Firestone Court concluded that, since                         _________                                         -6-                                          6                       there  is no  evidence  that under  [the                       benefit plan] the  administrator has the                       power to construe uncertain terms [i.e.,                       terms of the  trust] or that eligibility                             _____________                       determinations   are    to   be    given                       deference,             the proper standard of review is de novo.  489 U.S. at 111.                                              _______                       Traditional trust  law, however, does  not suggest             that  courts   normally  should,  or  do,  substitute  their             judgment for reasonable  trustee interpretations of  trustee             rules  promulgated   pursuant  to  powers  that   the  trust             instrument  grants to those trustees.   To the contrary, one             would ordinarily assume  that a trust instrument's  grant of             power to make  rules and to apply rules carries  with it (to             avoid  unnecessary  administrative  complexity)  an  implied             power to interpret those  rules reasonably and  consistently             with  the  instrument and  other  provisions  of  law.   Cf.                                                                      ___             Lockhart  v. United  Mine Workers  of  America 1974  Pension             ________     _______________________________________________             Trust, 5 F.3d 74,  78 n.6 (4th Cir.  1993) ("Given that  the             _____             Trustees  have  the  authority to  formulate  the  rules and                                                _________             regulations  that implement  the  Plan .  .  . ,  it  is not             subject  to  question that  the  Trustees  have  the .  .  .             discretion  to interpret these  rules and regulations  . . .                            _________             .") (citations omitted) (emphasis added).  And, courts would             presumably  review  any  such exercise  of  delegated  rule-             interpretive  power  as  they would  any  other  exercise of                                         -7-                                          7             delegated  power, i.e., with a degree of interpretive leeway             that reflects the  trustees' likely better  understanding of             how they intended their own rules to apply.  Cf. Restatement                                                          ___             (Second) of  Trusts    187 ("Where  discretion is  conferred             upon the  trustee with respect  to the exercise of  a power,             its exercise is not subject  to control by the court, except             to prevent an abuse by the trustee of his discretion.")  I n             this case, the terms of the  trust itself are not in  issue.             The trust document, at the time  of Diaz's application, gave             the trustees broad, discretionary, authority to make, and to             apply,  rules  governing  eligibility  for  pensions.    The             document specifically said:                       The  Trustees  shall  without limitation                                             __________________                       have  the  power  .   .  .  to  .   .  .                       [f]ormulate and adopt  a pension program                       . . . and promulgate and establish rules                       . .  . for .  . . [its] operation  . . .                       and  in pursuance  thereto (but  without                       intent   to   limit    such   authority)                       formulate  and  establish  conditions of                       eligibility .  . . and all other matters                                              _________________                       which the  Trustees in  their discretion                       ________________________________________                       may   deem   necessary  or   proper   to                       ________________________________________                       effectuate  the purposes  and intent  of                       ________________________________________                       the pension program.                       ___________________             Seafarers  Pension  Agreement  and  Declaration  of   Trust,             Article III, Section 1 (emphasis added).  It added a general             clause stating:                       The [T]rustees  are empowered to  do all                                                            ___                       acts whether or not expressly authorized                            ___________________________________                                         -8-                                          8                       herein,  which the  [T]rustees may  deem                       necessary  to  accomplish   the  general                       purposes of the Trust.             Id. Section 5 (emphasis added).               ___                       This language demonstrates broad trustee authority             to determine the content of  the rules they promulgate.  The             document  provides  no reason  for  finding  any significant             difference   between   1)    determining   content   through             promulgating  new  rules,  and  2)  determining  content  by             interpreting   old  ones.     Hence,  consistent   with  our             discussion above,  we interpret the document's explicit, and             broad,  power to  create  "rules"  governing "conditions  of             eligibility" as carrying  with it a similarly  broad implied             power to interpret those rules.   And, the existence of such             a delegated  power seems  to be what  Firestone had  in mind                                                   _________             when it called  for "evidence" of  a grant of  discretionary             authority to determine eligibility for benefits.  Firestone,                                                               _________             489 U.S. at  111; cf. Curtis v. Noel, 877 F.2d 159, 161 (1st                               ___ ______    ____             Cir.  1989)   (holding  that   plan  language   giving  plan             administrator  power  to   determine  "which  Employees  are             eligible  to participate in  the Plan" and  "provid[ing] all             parties  dealing with  the Plan  an  interpretation of  Plan             provisions  on request"  indicates  deferential standard  of             review of trustee eligibility decisions); Jett v. Blue Cross                                                       ____    __________                                         -9-                                          9             & Blue Shield of Alabama, Inc., 890 F.2d 1137, 1138-39 (11th             ______________________________             Cir.  1989)   (same  for   plan   language  giving   "Claims             Administrator"  power   to  make   "final  and   conclusive"             determinations  "in the  administration of  the [plan],"  so             long  as  such  determinations are  "reasonable");  but  cf.                                                                 ___  ___             Sisters of the Third Order of St. Francis v. SwedishAmerican             _________________________________________    _______________             Group  Health Benefit Trust,  901 F.2d 1369,  1371 (7th Cir.             ___________________________             1990)  (explaining that circuit courts appear split over the             degree  of  plan language  specificity  required to  trigger             deferential review of trustee determinations).                       Finally, Diaz argues that the trustees, in effect,             confessed  that the  SIU  plan  does  not  meet  Firestone's                                                              _________             requirements  for deferential  review, for,  after Firestone                                                                _________             (and  after Diaz had applied for  his pension), the trustees             sought and obtained an amendment to the plan document giving             them  the  "absolute  and  exclusive  authority  to  .  .  .             interpret Plan Rules"  and "sole discretion to .  . . apply"             them.  Not surprisingly, we think this amendment merely made             express  a power  that,  for  reasons  already  stated,  was             plainly implied  all along.   (Why  the trustees  decided to             clarify the plan's language in  this way is not explained in             the record; perhaps they  wanted to play it safe in light of                                         -10-                                          10             Firestone  and the possibility that lower courts would later             _________             misread it.)                       The   end  result  is  that  we  shall  apply  the             "arbitrary and capricious" standard of review.                                         -11-                                          11                                         III                                 Review of the Merits                                 ____________________                       Diaz  concedes that  his absence  from  work after             being  injured counted  as a  "break in  service" under  the             plan's "break in service" rule as literally interpreted.  He                                            ________________________             did not  perform three months of  SIU work in each  of three             consecutive years between 1968 and  1975.  But, Diaz  argues             that the trustees  should not interpret the  rule literally.             He says that  they should not  count an involuntary  absence                                                     ___________             from work --  a break caused, for example,  by an on-the-job             injury -- as a "break in  service" under the rule.  And,  he             points  to  several  circuit  court  cases  that  have  held             trustees' refusals to treat involuntary absences this way to             be  arbitrary and  capricious.   See,  e.g.,  Van Fossan  v.                                              __________   ______________             International  Bhd. of Teamsters Union Local No. 710 Pension             ____________________________________________________________             Fund,  649 F.2d 1243,  1248-49 (7th  Cir. 1981)  (finding it             ____             arbitrary and capricious to apply "break in service" rule to             worker  who  leaves fund-covered  employment  involuntarily,             such  as because  of a  permanent  shoulder disability,  and             citing other circuit cases on point).                       The  problem for  Diaz is  that  the trustees  are             willing  to  assume (for  purposes  of  this case)  that  an             involuntary  absence does not count as  a "break in service"             ___________               ___                                         -12-                                          12             under  the  rule.    But,  that  willingness  is  still  not             sufficient  to win  Diaz  his augmented  pension.   That  is             because the trustees say that any such "involuntary absence"             exception  must  involve  an involuntary  absence  from  SIU                                                                      ___             service, not  from some other  kind of service.   After all,             one who left SIU service well before 1968 and works steadily             thereafter  in  a  totally  different  industry cannot,  and             should not be able to,  overcome the "break in service" rule             simply because an  injury caused him  to be absent  (between             1968 and 1975) from that totally different job.                                      _________________                       The trustees  also recognize  that Diaz's  case is             not quite that simple.  He did, indeed, leave SIU employment             well before  1968 and  he did not  return to  SIU employment             until after 1975, and he was employed on NMU, not SIU, ships             in the interval.  But, when he did return to shipping, after             recovering from his injury in 1975, he returned to work, not             on NMU, but on SIU, ships.  In light of this fact,  it is at                            ___             least possible, as  the trustees rightly suggest,  that "but             for his injury in 1968, he would have left the NMU ships and             resumed  shipping with  the SIU"  in  time not  to suffer  a             "break  in service"  under the  rule --  in which  case, the             trustees  further suggest,  they  would have  ignored Diaz's             post-injury absence.   But, they  add, the single  fact that                                         -13-                                          13             Diaz  returned to  SIU shipping  after  recovering from  his                                              _____             injury is not enough to show that he would have left the NMU             (and  returned to  the SIU)  without the  injury.   In their                                          _______             view, in the absence of an injury, it is more likely  that a             seaman would  continue in,  rather than  leave, his  current             job.                       We  cannot quarrel with  the reasonableness of the             trustees'  interpretation of  their rule,  at  least on  the             assumptions  they  are  willing to  make.    They assume  an             exception  for  an  involuntary   break  in  service;   they             understand the  special situation  of one  who has  left SIU             employment before, but  returns after, an injury;  and, they             impose a minimal  factual SIU-connection,  namely a  showing             that, without  the injury, the  seaman would have  worked on             SIU  ships.   But, whether  or not  Diaz made  the requisite             factual  showing  --   dependent  as  the  question   is  on             generalizations about  how seafarers ordinarily behave -- is             precisely the kind of matter that courts should leave in the             hands of the trustees, who,  after all, often must draw upon             their  knowledge of  the industry  in deciding  how best  to             share a limited amount of money among different plan members             with varying claims,  of varying strength.   See Richards v.                                                          ___ ________             United Mine  Workers of Am.  Health & Retirement  Funds, 851             _______________________________________________________                                         -14-                                          14             F.2d 122, 123 (4th Cir.  1988) ("[W]e may not substitute our             judgment of the facts in this case for that of the Trustees,             for it is  the Trustees whose expertise in  this area arises             from daily and continual experience.") (citation omitted).                       In these  circumstances, and against  the backdrop             that the  payment at stake  here is for pre-1961  service (a             time  when  no  pension  fund   existed  and  no  one   made             contributions on  behalf of Diaz's work), we cannot say that             the  trustees' interpretation  or application of  their rule             was arbitrary.                        Consequently, the  judgment of the  district court             is                       Affirmed.                       ________                                         -15-                                          15