Nowak v. Ironworkers Local 6 Pension Fund

• Decision Date: 15 April 1996
• Docket Number: No. 675,D,675
• Citation: 81 F.3d 1182
• Parties: Ralph J. NOWAK, Plaintiff-Appellant, v. IRONWORKERS LOCAL 6 PENSION FUND, William Bohen, as Plan Administrator and Trustee, and Richard P. Kempf, as Plan Administrative Manager, Defendants-Appellees. ocket 95-7566.
• Court: U.S. Court of Appeals — Second Circuit

Page 1182

81 F.3d 1182

Ralph J. NOWAK, Plaintiff-Appellant, v. IRONWORKERS LOCAL 6 PENSION FUND, William Bohen, as Plan

Administrator and Trustee, and Richard P. Kempf,

as Plan Administrative Manager,

Defendants-Appellees.

No. 675, Docket 95-7566.

United States Court of Appeals,

Second Circuit.

Argued Dec. 14, 1995.

Decided April 15, 1996.

Alan J. Bozer, Buffalo, New York (William P. Keefer, Albrecht, Maguire, Heffern & Gregg, P.C., Buffalo, New York, on the brief), for plaintiff-appellant.

Robert L. Boreanaz, Buffalo, New York (Lipsitz, Green, Fahringer, Roll, Salisbury & Cambria, on the brief), for defendants-appellees.

Before: WINTER, WALKER, and CABRANES, Circuit Judges.

JOSE A. CABRANES, Circuit Judge:

Plaintiff-appellant Ralph J. Nowak appeals from a May 15, 1995, final judgment of the United States District Court for the Western District of New York granting summary judgment in favor of defendants-appellees Ironworkers Local 6 Pension Fund (the "Fund"), William Bohen, and Richard Kempf on the ground that the Fund's denial of Nowak's application for a disability retirement pension was properly based on the clear and unambiguous language of the 1973 version of the Fund's Pension Plan (the "1973 Plan"), and dismissing his complaint with prejudice. On appeal, Nowak argues that the district court erred because the eligibility requirements of the 1973 Plan were ambiguous and therefore, under New York contract law, should have been construed in his favor. As will become clear, we are required to consider whether the court properly exercised subject matter jurisdiction before we turn to the merits of Nowak's appeal.

I. FACTS

For the purposes of this appeal, the parties do not dispute the following facts. Nowak was a member of the International Association of Bridge, Structural and Ornamental Iron Workers Local Union Number 6 (the "Union") from September 21, 1955, through June 1, 1973, and between September 1955 and June 1971, he worked to accrue approximately 15.2 years of service. As a member of the Union, Nowak was entitled to certain benefits as set forth in the Ironworkers Local No. 6 Pension Plan, which was first established in 1966. When Nowak left the Union, the 1973 version of the Plan was in effect; the Plan was later amended in 1985, 1988, and 1993.

On January 26, 1993, Nowak submitted an application to the Fund for a Total Disability Retirement Pension ("disability pension" or "disability benefits") based on a January 19, 1993, determination by the Social Security Administration that Nowak was disabled and therefore entitled to monthly Social Security disability benefits. Nowak's disability is not disputed. ¹ On April 8, 1993, Nowak was informed that his application was denied because he lacked the five years of credited future service (five years of service after June 1, 1966) necessary for vested pension benefits under the Plan. Nowak resubmitted his application for benefits on May 5, 1993, and was again notified of his ineligibility on October 28, 1993. The stated grounds were (1) Nowak's failure to accrue the requisite five years of credited future service for a vested pension, and (2) the fact that Nowak had incurred a break in service before completing the requirements for disability pension benefits under the Plan.

On January 12, 1994, Nowak filed suit in the New York Supreme Court, Erie County, alleging (1) that the Fund breached its obligation to pay his disability pension under the Plan; (2) that Kempf, as Administrative Manager, breached his fiduciary duty by refusing to pay disability pension benefits under the Plan; and (3) that the Fund violated its obligations to pay retirement disability benefits under the Plan in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B). On February 11, 1994, the Fund removed the proceeding to the United States District Court for the Western District of New York, pursuant to 28 U.S.C. § 1441, on the ground that the federal court had original subject matter jurisdiction of the ERISA action.

After removal to federal court, Nowak filed an amended complaint on March 1, 1994, again claiming that the action arose under ERISA, re-stating the three original causes of action, and adding a fourth claim for attorney's fees under ERISA. On June 8, 1994, with the consent of the parties, the district court entered an order referring all further proceedings in the case to United States Magistrate Judge Leslie G. Foschio. See 28 U.S.C. § 636(c).

On June 15, 1994, the defendants filed a motion to dismiss or, in the alternative, a motion for summary judgment, arguing that Nowak had failed to exhaust his remedies under the 1993 version of the Pension Plan (the "1993 Plan") before filing suit, and was therefore precluded from filing the action. That motion was amended to argue, as an additional ground for summary judgment, that Nowak was not entitled to benefits under the 1973 Plan because he had failed to accumulate the five years of future service necessary to entitle him to a Vested Deferred Pension under the Plan and he had incurred a break in service prior to fulfilling the requirements for a Total Disability Retirement Pension. On July 22, 1994, Nowak filed a cross-motion for summary judgment on the ground that his claim was governed by the 1973 Plan, under which he claimed that (1) there was no administrative exhaustion provision and (2) he was entitled to a disability pension.

In a thoughtful Decision and Order filed May 4, 1995, the district court held that it did not have federal subject matter jurisdiction because ERISA did not apply to Nowak's action. Relying on 29 U.S.C. § 1144(b)(1)'s statement that ERISA does not govern "any cause of action which arose, or any act or omission which occurred, before January 1, 1975," the magistrate judge found that Nowak's denial of disability benefits was based on the 1973 Plan's "break-in-service" provision. He held that the 1973 Plan's adoption of its break-in-service policy was the relevant act or omission under § 1144(b)(1), and that because this policy was adopted prior to January 1, 1975, ERISA could not apply to Nowak's action. Accordingly, he found that subject matter jurisdiction did not exist and remanded Nowak's state law claims to state court pursuant to 28 U.S.C. § 1447(c). ²

On Nowak's oral motion for reconsideration, the district court issued a second Decision and Order on May 12, 1995, exercising supplemental jurisdiction over Nowak's remaining state law claims. Reviewing Nowak's claims under state contract law principles, the court held that the administrative exhaustion requirement of the 1993 Plan was not relevant to Nowak's action and that no such requirement existed under the applicable 1973 Plan. However, it found that based on the unambiguous language of the 1973 Plan, Nowak was not entitled to benefits.

Nowak had applied for a Total Disability Retirement Pension under p 3.4 of the Plan, which reads:

An Employee shall be entitled to retire on a disability pension if he becomes Totally Disabled on or after June 1, 1966 and after he has completed at least fifteen years of Credited Service.

When the Plan was first established in 1966, it included two provisions for the calculation of accrual of benefits--one based upon a member's service before June 1, 1966, the effective date of the Plan, and the other based upon a member's service after June 1, 1966. Accordingly, an employee's total Credited Service takes into account his service before June 1, 1966 ("Credited Past Service"), and after June 1, 1966 ("Credited Future Service"). ³

The district court found that Nowak accumulated 10.8 years of Credited Past Service and 4.4 years of Credited Future Service for a total of 15.2 years of total Credited Service at the time of his "break in service" ⁴ on June 1, 1973. The court held that because Nowak incurred a break in service well before he satisfied the criteria for disability retirement benefits--that is, before he was found to be disabled in 1993--he lost all Credited Service pursuant to p 2.5 of the Plan ⁵ and was not entitled to a disability pension. Observing that it was undisputed that Nowak failed to accumulate the five years of Credited Future Service necessary for him to qualify for a Vested Deferred Pension under p 4.1 (a pension that would have vested prior to Nowak's break in service), the court held that Nowak's break in service was "fatal to his claim for a disability pension under the 1973 Plan," and granted summary judgment in favor of the defendants. On May 15, 1995, the court entered a final judgment in the case and dismissed Nowak's complaint with prejudice. Nowak appeals from this judgment arguing that the district court erred in its construction of the terms of the 1973 Plan, and that he is entitled to judgment as a matter of law.

II. DISCUSSION

Before considering Nowak's appeal on its merits, we must determine whether the district court, having dismissed Nowak's ERISA claim, properly asserted supplemental jurisdiction over his state law claims. To the extent that this inquiry involves a question of subject matter jurisdiction, we determine sua sponte whether the court properly exercised its authority. Mansfield, C. & L.M. Ry. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511-12, 28 L.Ed. 462 (1884); Clarkson Co. v. Shaheen, 544 F.2d 624, 627 (2d Cir.1976).

A. Supplemental Jurisdiction

Under 28 U.S.C. § 1367(a), district courts have "supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." While the district court may, at its discretion, exercise supplemental jurisdiction over state law claims even where it has dismissed all claims over which it had original jurisdiction, see 28 U.S.C. § 1367(c)(3), it cannot exercise supplemental jurisdiction unless there...