Anderson v. Suburban Teamsters North. Ill. Pension

• Decision Date: 01 December 2009
• Docket Number: No. 07-15532.,07-15532.
• Citation: 588 F.3d 641
• Parties: Bruce W. ANDERSON, Plaintiff-Appellant, v. SUBURBAN TEAMSTERS OF NORTHERN ILLINOIS PENSION FUND BOARD OF TRUSTEES, in its capacity as Administrator of the Suburban Teamsters of Northern Illinois Pension Plan; Suburban Teamsters of Northern Illinois Pension Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

588 F.3d 641

Bruce W. ANDERSON, Plaintiff-Appellant, v. SUBURBAN TEAMSTERS OF NORTHERN ILLINOIS PENSION FUND BOARD OF TRUSTEES, in its capacity as Administrator of the Suburban Teamsters of Northern Illinois Pension Plan; Suburban Teamsters of Northern Illinois Pension Plan, Defendants-Appellees.

No. 07-15532.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 14, 2009.

Filed December 1, 2009.

Andrea A. Ambrose and Colin B. Vandell, Latham & Watkins LLP, Los Angeles, CA, for the plaintiff/appellant.

Barry G. Collins, Asher, Gittler, Greenfield & D'Alba, Ltd., Chicago, IL, for the defendants/appellees.

Appeal from the United States District Court for the District of Arizona, David G. Campbell, District Judge, Presiding. D.C. No. CV-05-01377-DGC.

Before: STEPHEN S. TROTT and CARLOS T. BEA, Circuit Judges, and SUZANNE B. CONLON,^* District Judge.

TROTT, Circuit Judge:

Bruce Anderson appeals the district court's determination, following a bench trial, that the Suburban Teamsters of Northern Illinois Pension Fund Board of Trustees ("the Trustees") did not abuse their discretion in partially denying his claim for disability benefits pursuant to a plan maintained under the Employee Retirement Income Security Act ("ERISA"). In the past, the Plan specified one way to calculate disability benefits. Before Anderson applied for benefits, the Plan was amended to change the formula for calculating benefits depending on the date the employee became disabled. Anderson claims the Trustees improperly determined the date of his disability, resulting in a lower benefit. Anderson claims also that if the Trustees appropriately determined the date of his disability, then the 1999 amendment violates ERISA's anticutback rule. Finally, Anderson claims the Trustees improperly applied a Qualified Domestic Relations Order ("QDRO"), allocating half of his pre-divorce disability benefits to his ex-wife. We affirm.

I BACKGROUND

For much of his life, Anderson worked as a mechanic. In July 1996, Anderson suffered an on-the-job knee injury that required surgery. In December 2006, Anderson was diagnosed with osteoarthritis. In addition to his bad knee, Anderson suffers from degenerative disk disease, carpal tunnel syndrome, tinnitus, depression, and bone spurs in his shoulders.

Believing that he might be able to find a job that would allow him to work despite his injury, Anderson went to school from 1997 to 2001 and did not work. He earned a degree in Business Administration and hoped to work in the computer field.

Anderson and his wife divorced in 1999. The QDRO entered in the Andersons' state court divorce proceeding provided that Anderson's ex-wife was to receive the actuarial equivalent of fifty percent of Anderson's accrued pension as of February 25, 1999. The payments to Anderson's ex-wife were to begin "at her election following the Participant attaining his earliest retirement age as defined by the Plan."

Unable to find a job in the computer field, Anderson went back to union employment in 2001. From June to October, he worked fifty-one days as a truck driver. Finding himself unable to continue to perform this work because of his pain, Anderson stopped working and has not worked since. In August 2003, Anderson applied to the Suburban Teamsters of Northern Illinois Pension Fund ("the Fund") for disability benefits under its pension plan ("the Plan"). The applicable version of the Plan at that time was the Plan as amended on January 1, 1999 ("1999 Plan").

The Fund is a multi-employer benefit trust fund. Participating employers contribute to the Plan pursuant to various collective bargaining agreements. The Board of Trustees—which administers the Plan—is made up of both employer and employee representatives.

The Plan provides for several different types of pensions. For example, an employee might be eligible for a Normal Retirement Pension under § 5.01, an Early Retirement Pension under § 5.02, a 30-Year Pension under § 5.03, or a "25 and Out" Pension under § 5.06.

In addition to these types of pensions, Article 6 of the Plan provides disability benefits—called a "disability retirement pension"—for employees who become "totally and permanently disabled." The Plan defines "totally and permanently disabled" as follows:

A Participant shall be considered totally and permanently disabled only if he suffers from a physical or mental condition which will continue for a long and indeterminate period of time and which will prevent him from pursuing any and all gainful occupations and from performing any work for compensation or benefit during that period of time.

1999 Plan, § 6.03.

The Plan calculates benefits based on Benefit Credits participants earn during their employment. Normally, an employee receives Benefit Credits only for periods when the employee actually works. However, before the Plan was amended in 1999, employees were covered by the 1995 version of the Plan ("1995 Plan"). Under the 1995 Plan, if an employee became disabled,

[t]he amount of such Disability Retirement Benefit shall be equal to 100% of the amount of Age Retirement Benefit to which the Participant would be entitled at his Normal Retirement Age, calculated as if he remained in Covered Employment continuously from the onset of his total and permanent disability until his Normal Retirement Age, except that with respect to a Participant whose Disability Retirement Benefit becomes effective on or after April 1, 1977, each payment prior to his Normal Retirement Age shall be equal to 75% of such Age Retirement Benefit, increasing to 100% of such Age Retirement Benefit at the Participant's Normal Retirement Age.

1995 Plan, § 6.02 (emphasis added). Thus, the disabled employee was allocated Benefit Credits for future years even though the employee would not be working.

The 1999 Plan, in contrast, contains two different ways to calculate a disability benefit. If an employee became disabled prior to May 1, 1998, the employee's benefit would be determined using the same calculation described above: the employee would receive extra Benefit Credits for years not actually worked. 1999 Plan, § 6.02(b).

If, however, an employee became disabled after May 1, 1998, the disability benefit would be equal to "100% of the amount of Age Retirement Benefit to which the Participant would be entitled at his Normal Retirement Age, based on Benefit Credits actually earned." 1999 Plan, § 6.02(a) (emphasis added). Under this formula, the employee would not receive any extra Benefit Credits for future years of unemployment due to disability.

Anderson claimed he was disabled as of June 1, 1997. The Trustees, however, determined that Anderson was totally and permanently disabled as of November 2001 and partially denied his application. The Trustees informed Anderson they could not "reconcile a disability date prior to November 2001 with the fact that you worked for a significant period from June through October 2001." Because Anderson became disabled after May 1, 1998, the Trustees applied § 6.02(a) of the 1999 Plan instead of § 6.02(b). Anderson's disability benefit was based only on those Benefit Credits he actually earned while he was working. Anderson earned 11.3 Benefit Credits before 1997 and 0.3 Benefit Credits in 2001. Based on this number of Benefit Credits, the Trustees found that the amount of Anderson's disability benefit was $878.08 per month. This amount consisted of $869.31 attributable to his pre-1997 employment, and $8.77 attributable to his 2001 employment.

The Trustees then applied Anderson's QDRO to divide Anderson's portion and his ex-wife's portion of his benefits. They split the $869.31, which accrued while Anderson was married, by fifty percent. Anderson was therefore entitled to $434.66 (half of the amount attributable to his pre-divorce employment) plus the $8.77 from his 2001 employment, for a total monthly benefit of $443.43.

Anderson appealed the partial denial of his claim, as well as the QDRO reduction, but the Trustees came to the same conclusion on appeal. Anderson then filed a complaint in the Arizona District Court. After a bench trial, the district court entered judgment in favor of the Trustees. The court also denied Anderson's motion for a new trial. Anderson timely appealed to this court.

II STANDARD OF REVIEW

We face first a threshold question: what standard of review applies to the Trustees' determination regarding the date of disability and thus their decision partially to deny Anderson's application? The court will review de novo the district court's decision to apply an abuse of discretion standard to the Trustees' decision. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 962 (9th Cir.2006) (en banc).

When a court reviews an ERISA plan administrator's decision to grant or deny benefits, de novo is "the default standard of review." Id. at 963. However, if the plan grants discretion to the plan administrator "to determine eligibility for benefits or to construe the terms of the plan," the court reviews the administrator's decision for an abuse of discretion. Id. (quotation omitted).

Even if a plan grants discretion to the administrator, the standard of review shifts to de novo if the administrator engages in "wholesale and flagrant violations of the procedural requirements of ERISA, and thus acts in utter disregard of the underlying purpose of the plan as well." Id. at 971.¹ That is, de novo review is justified if the administrator's decision was so plagued with errors and "so far outside the strictures of ERISA" that we cannot say the administrator actually exercised discretion. Id. at 972. Most procedural errors do not alter the abuse of discretion standard, but the court should consider such errors when deciding whether the administrator abused its discretion. Id.

The parties agree that the Plan grants discretion to the Trustees. Therefore, unless the Trustees committed wholesale and flagrant...