Martorana v. Bd. of Trustees of Steamfitters Local

Decision Date14 April 2005
Docket NumberNo. 04-1181.,04-1181.
Citation404 F.3d 797
PartiesMichael MARTORANA, Appellant v. The BOARD OF TRUSTEES OF STEAMFITTERS LOCAL UNION 420 HEALTH, WELFARE AND PENSION FUND; Steamfitters Local Union 420
CourtU.S. Court of Appeals — Third Circuit

John N. Salla, Joseph M. Armstrong (Argued), Salla & Armstrong, Philadelphia, PA, Counsel for Appellant.

Margaret M. Underwood (Argued), Jacoby Donner, Philadelphia, PA, Counsel for Appellee.

Before: SCIRICA, Chief Judge, RENDELL and FISHER, Circuit Judges.

OPINION OF THE COURT

RENDELL, Circuit Judge.

Appellant, Michael Martorana, brought suit against the Board of Trustees of the Steamfitters Local Union 420 Health, Welfare and Pension Fund ("the Board") alleging that the Board improperly denied benefits due to him pursuant to an ERISA plan. The Board then brought a counterclaim alleging that Martorana owed $4100 in back contributions toward the cost of health care coverage from October 1994 to December 1999.

The District Court granted summary judgment in favor of the Board on both Martorana's claim and the Board's counterclaim. The District Court also awarded attorney's fees to the Board for Martorana's claim for increased pension benefits and directed that these fees be paid by way of the Board's withholding no more than $160 per month from Martorana's pension benefits. On appeal, we must decide (1) whether the grant of summary judgment was proper, (2) whether the order assessing fees against Martorana's pension benefits contravenes ERISA and its underlying policies, and (3) whether the award of attorney's fees was proper.

I. Factual and Procedural Background

Martorana joined the Union on July 27, 1972, and worked steadily until he sustained a serious injury while performing work as a Union member on March 21, 1994. He then began to collect Workers' Compensation benefits, which he continued to receive at least through November 2003.

Martorana applied for Social Security disability benefits on November 30, 1995, and the Social Security Administration (SSA) determined that he was eligible for such benefits on December 14, 1997. Although the SSA found that Martorana became disabled on March 21, 1994, it awarded benefits retroactive only to November 1994 because of certain time restrictions imposed by federal law.

In addition to his Workers' Compensation and Social Security benefits, Martorana requested, and received, the Disability Retirement Pension to which he was entitled under the Union's Pension Plan. In the summer of 2000, Martorana first contended that the Board had improperly calculated his disability pension benefits because, when calculating his length of service (upon which the amount of pension is based), it failed to take into account the period during which he received Workers' Compensation. At its July 20, 2000 meeting, the Board rejected Martorana's claim because under the terms of the pension plan "credited hours," but not "contribution hours," accrue during the period when a worker is receiving Workers' Compensation, and the calculation of disability pension benefits depends on one's total contribution hours not one's credited hours. Martorana appealed this decision unsuccessfully to the Board.

While Martorana was making his claim for additional benefits, the Board demanded that Martorana pay $4400 in past-due healthcare contributions to the Welfare Plan for the medical coverage he had received between October 1994 and December 1999. Martorana argued that the Welfare Plan did not require him to contribute to the plan while he was an "active" participant. The Board pointed out that he could not be an "active" participant in the Welfare Plan while simultaneously receiving benefits under the Pension Plan. When Martorana resisted contributing to the Welfare Plan, the Board refused to pay $300 of his medical claims, and it now concedes that the amount of Martorana's past-due healthcare contributions should be reduced by $300 to $4100.

Martorana initiated this action in The Delaware County Court of Common Pleas, alleging that in calculating his years of service, and in assessing past-due healthcare contributions against him, the Board failed to comply with the terms of the Pension Plan and Welfare Plan, respectively, in violation of ERISA, 29 U.S.C. § 1001, et seq., and requesting declaratory judgment.

The Board removed the case and filed a counterclaim for $4100 in past-due healthcare contributions. On December 22, 2003, the District Court entered an order granting summary judgment in favor of the Board on all claims and thereafter in January 2004 entered a further order granting judgment in favor of the Board for $8,217.08 in attorney's fees and costs based on the Pension Plan claim, stating "[d]efendant may collect the judgment . . . only by reducing plaintiff's monthly Disability Retirement Pension by an amount not to exceed $160.00 per month." The District Court noted "awarding the attorneys fees and costs incurred in defending Martorana's claim for additional pension benefits serves the socially useful purpose of deterring similar unfounded claims that consume courts' limited resources."

Martorana filed two unsuccessful motions for reconsideration in the District Court and now appeals to us. On appeal, we must decide whether the grant of summary judgment against Martorana on the Pension Plan claim and the Welfare Plan claim were proper, whether the order allowing essentially for a monthly set-off of Martorana's pension benefits violates ERISA and its underlying policies, and whether the award of attorney's fees was appropriate. We find that the grant of summary judgment was appropriate, but that the District Court erred in both the award of attorney's fees and the manner in which it ordered them to be paid. Accordingly, we will reverse in part and remand to the District Court.

The District Court had jurisdiction pursuant to ERISA, 29 U.S.C. § 1132(e) and general federal question jurisdiction pursuant to 28 U.S.C. § 1331. We have jurisdiction over this appeal under 28 U.S.C. § 1291.

II. Discussion
A. Summary Judgment

Martorana brought his claims pursuant to 29 U.S.C. § 1132(a)(1)(B), invoking his right to sue under ERISA to "recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." We exercise plenary review over the District Court's decision to grant summary judgment. See Blair v. Scott Specialty Gases, 283 F.3d 595, 602-03 (3d Cir.2002). We apply the same standard as used by the District Court. Id.

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court stated that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine benefits or to construe the terms of the plan." In the present case, the Pension Plan gives the Board "the sole and absolute discretion to determine eligibility for benefits under the Plan, and to construe and interpret the provisions of the Plan..." Similarly, the Welfare Plan provides that "[t]he Trustees shall have the sole and absolute discretion to determine eligibility for benefits under the Plan of Benefits, and to construe and interpret the provisions of the Plan of Benefits and this Trust Agreement..." Therefore, we must determine whether the decisions of the Board in rejecting Martorana's claims for increased pension funds and requiring payment of back healthcare premiums were arbitrary and capricious.

We will overturn the decisions of the Board only if they were "without reason, unsupported by the evidence or erroneous as a matter of law. This scope of review is narrow, and `the court is not free to substitute its own judgment for that of the [administrator] in determining eligibility for plan benefits.'" Mitchell v. Eastman Kodak Co., 113 F.3d 433, 439 (3d Cir.1997) (citations omitted).

We have little difficulty concluding that the Board's ruling was not arbitrary or capricious. As noted above, Martorana seeks to ignore the plain provisions of the plan that provide that only credited hours accrue during the period when a worker is receiving Workers' Compensation, and the calculation of disability pension benefits depends not on total credited hours, but rather on contribution hours. Martorana's refusal to recognize this renders his claim, as noted by the District Court, totally lacking in merit.

Furthermore, we find that the Board's determination that Martorana was a Retiree, and, therefore, required to make contributions to the healthcare fund, was supported by ample evidence, and, more specifically, by the clear terms of the plan. We, therefore, find that neither decision by the Board was arbitrary or capricious, and will affirm the District Court's grant of summary judgment on both.

B. Equitable Set-off of Pension Benefits

The District Court's award of attorney's fees, discussed more fully below, was accompanied by its allowance of a monthly set-off of Martorana's pension benefits as the method of payment of those fees. Martorana contends on appeal that the District Court's order effected an attachment or equitable set-off of his pension benefits that contravenes ERISA policy.1 He also contends that the allowance of equitable set-off violates the terms of the Pension Plan itself, and Pennsylvania law. We find that the equitable set-off does contravene ERISA and ERISA policy, and need not discuss Martorana's other two contentions.2 ERISA § 206(d)(1) mandates that "[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C. 1056(d)(1) (2005). At first glance, therefore, it would seem that any attempt to attach pension funds would violate the statute. However, in...

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