Bond v. Twin Cities Carpenters Pension Fund, 01-3300.

Decision Date08 October 2002
Docket NumberNo. 01-3300.,01-3300.
Citation307 F.3d 704
PartiesRichard S. BOND, Appellant, v. TWIN CITIES CARPENTERS PENSION FUND, sued as Twin City Carpenters and Joiners Pension Fund, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

Alan I. Silver, argued, Minneapolis, MN (Kevin P. Hickey, on the brief), for appellant.

Pamela Hodges Nissen, argued, Minneapolis, MN (David Anderson, on the brief), for appellee.

A brief amicus curiae was filed by AARP in support of appellant. Mary Ellen Signorille, AARP Foundation Litigation, Washington, DC, filed the brief, on which Melvin Radowitz, AARP also appeared.

Before MORRIS SHEPPARD ARNOLD, HEANEY and MURPHY, Circuit Judges.

HEANEY, Circuit Judge.

Richard S. Bond brought an action against Twin City Carpenters Pension Fund (Twin Cities Carpenters) for reimbursement of costs associated with the determination of his eligibility for benefits. He claims Twin City Carpenters' procedures for determining his eligibility for pension benefits violate the Employment Retirement Income Security Act (ERISA). The district court granted summary judgment in favor of Twin City Carpenters. We reverse.

BACKGROUND

Bond is a retired union carpenter. He is a participant in the Twin City Carpenters and Joiners Pension Fund (the Plan). Sometime after Bond retired, the Plan was amended to limit the work a retiree could do while still receiving benefits. Because Bond had been supplementing his pension with carpentry work, he sought a determination of whether the Plan's amendments applied to him.

The Plan required its participants to first seek a benefits determination through the Plan's Board of Trustees (the Board). If not satisfied with the Board's determination, the participant's sole remedy is to submit the claim to binding arbitration. The Plan directs the participants to bear half of the costs of arbitration, unless the arbitrator alters this presumption in the arbitrator's decision.

The Board found that Bond was indeed covered by the Plan's recent amendments. Unhappy with this determination, Bond sought further review by submitting his claim to binding arbitration. The arbitrator affirmed the Board's decision, and assessed costs and fees equally between the parties. Bond paid his share of the costs1, and then filed an action in district court seeking reimbursement. He argued that while the arbitrator's decision to split the costs of arbitration was consistent with the Plan, the Plan itself violates ERISA because its mandatory arbitration clause and its fee-splitting presumption together do not provide him a reasonable opportunity for full and fair review, as required by 29 U.S.C. § 1133. We agree.

DISCUSSION

Before reaching the issue of whether Bond was denied a reasonable opportunity for a full and fair review, we must first consider whether § 1133 and its regulations apply to Bond's case.

Section 1133 itself purports to govern decisions of Plan fiduciaries, but its accompanying regulations inform that it also governs appeals arising from that fiduciary decision. 29 C.F.R. § 2560.503-1(a) (1999) (stating scope of this section encompasses review of claim denials). Recent amendments to the regulations confirm that § 1133 is meant to apply to all claims procedures, including appeals from adverse determinations. 29 C.F.R. § 2560.503-1(b), 2560.503-1(b)(3) (2001).

This reading is consistent with the United States Department of Labor's interpretation of ERISA, articulated in an opinion letter in which the Department of Labor concluded that a Plan's appellate procedures, particularly arbitration, are still within the purview of § 1133. Because the Department of Labor's interpretation is consistent with § 1133, we decline to disturb it. See Chevron U.S.A., Inc. v. Natural Res. Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) (noting judicial reinterpretation of a statute should be reserved for circumstances where administrative interpretation is "contrary to clear congressional intent.") Accordingly, we hold that § 1133 and its regulations apply not only to fiduciary decisions, but also to appeals from fiduciary determinations.

Finding that Bond's plan is controlled by § 1133 and its regulations, we turn now to the substance of Bond's claim. Under ERISA, a plan must provide participants a reasonable opportunity for a full and fair review of benefits determinations. 29 U.S.C. § 1133. A review procedure violates ERISA if it "unduly inhibits or hampers the initiation or processing of plan claims." 29 C.F.R. § 2560.503-1(b)(1)(iii) (1999). The question, then, is whether a mandatory arbitration scheme with presumptive cost-splitting unduly inhibits or hampers the processing of claims.

We are guided in our analysis again by the Department of Labor's interpretation of this issue. In its opinion letter, the Department of Labor advises that when a plan requires participants to submit to arbitration, cost-splitting "contravenes the reasonableness standard set forth in section 2560.503-1(b)." (Appellant's Add. at 9-10.). This interpretation is not "contrary to clear congressional intent." Chevron, 467 U.S. at 843, 104 S.Ct. 2778. An independent review of the regulations at issue leads us to the same conclusion. Bond's case is controlled by the regulations in effect in 1999, when he filed his claim. These regulations are not a model of clarity, but they unequivocally prohibit plans from using procedures that hinder the processing of claims. 29 C.F.R. § 2560.503-1(b)(1)(iii) (1999). Under the ERISA plan in Bond's case, if a Plan participant wants to appeal an adverse board determination, they are faced with the presumption that they will have to shoulder half of the costs of arbitration. The threat of having to pay the arbitrator's expenses no doubt discourages the pursuit of many legitimate claims by those who cannot afford such costs. A claims system such as this is unduly burdensome, and not permitted by ERISA.2

ERISA does not require a claimant participating in a covered plan to use arbitration as part of the plan's appellate process. However, when a plan such as the one here provides for mandatory arbitration before allowing a claimant to initiate a civil action, it may not carry a presumption of cost-splitting. To hold otherwise would permit a plan to limit claims by merely adding an expensive appellate process to its claims procedure before allowing a claimant to initiate a civil action. Such a scheme subverts the intent of ERISA's claim provisions, as well as the regulations' mandate that the plan not unduly inhibit or hinder the processing for claims.

CONCLUSION

The plan in this case unduly inhibits the pursuit of ERISA claims, and is thus not in accord with ERISA's statutory and regulatory framework. We reverse the district court, and remand with instructions to require Twin Cities Carpenters pay Bond's share of the arbitration costs.

1. There is some question as to whether Bond in fact paid half of the costs, or whether the arbitrator accepted a lesser amount in lieu of full payment. At any rate, the arbitrator's award required both sides to pay half the costs; any discount subsequently granted to Bond is irrelevant.

2. Recent amendments to the regulations clarified this issue, and confirmed that "a provision or practice that requires payment of a fee or costs as a condition to making a claim or appealing an adverse benefit determination would be considered to unduly inhibit the initiation and processing of claims for benefits." 29 C.F.R. § 2560.503-1(b)(3) (2001).

MORRIS SHEPPARD ARNOLD, Circuit Judge, dissenting.

When Twin City Carpenters Pension Fund suspended Richard Bond's benefits because of the number of hours that he was working, Mr. Bond requested that the plan's board of trustees review the fund's determination. The board approved the suspension. Mr. Bond then pursued arbitration of his claim, as the plan required as a pre-requisite to filing a civil action; the arbitrator affirmed the board's decision and decided that Mr. Bond was responsible for half the arbitration costs. After Mr. Bond paid that amount, he filed the present action seeking reimbursement of the payment, claiming that the provision in the pension plan providing for sharing arbitration costs was illegal under § 503 of the Employment Retirement Income Security Act (ERISA) (29 U.S.C. § 1133). The district court ruled that the challenged provision did not violate ERISA, and Mr. Bond appealed. For the reasons that follow, I would affirm the judgment of the district court.

I.

I begin by examining the ERISA provision under which Mr. Bond seeks relief. Section 1133 requires, in relevant part, that employee benefit plans provide participants whose claims are denied with a procedure that affords "a reasonable opportunity" for "a full and fair review by the appropriate named fiduciary of the decision denying the claim."

There is no dispute that Mr. Bond's pension plan qualifies as an employee benefit plan under § 1133. The question is whether the plan's arbitration provisions creating a presumption that arbitration costs should be shared by the parties and granting an arbitrator discretion in dividing those costs, violate this statute. I believe that § 1133 simply does not govern these plan provisions because it does not purport to deal with proceedings that occur after a review by the fiduciary. Cf. Graphic Comm. Union v. GCIU-Employer Ret. Benefit Plan, 917 F.2d 1184, 1189 (9th Cir.1990); Chappel v. Lab. Corp. of Am., 232 F.3d 719, 725 (9th Cir.2000). The statute requires only that a participant whose claim for benefits has been initially denied by the plan have an opportunity for a "full and fair review" by the plan's named fiduciary. In this case, Mr. Bond does not contest the fact that the plan's named fiduciary (namely, the board) provided him with a "full and fair review," and so I believe that the statute has been fully satisfied.

Mr. Bond...

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