Rodriguez v. MEBA Pension Trust, 88-2901

• Decision Date: 07 April 1989
• Docket Number: No. 88-2901,88-2901
• Citation: 872 F.2d 69
• Parties: 10 Employee Benefits Ca 2377 Juan RODRIGUEZ; Maria A. Rodriguez, Plaintiffs-Appellants, v. MEBA PENSION TRUST; Lucille Hart, Administrator, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 69

872 F.2d 69

10 Employee Benefits Ca 2377

Juan RODRIGUEZ; Maria A. Rodriguez, Plaintiffs-Appellants, v. MEBA PENSION TRUST; Lucille Hart, Administrator,

Defendants-Appellees.

No. 88-2901.

United States Court of Appeals, Fourth Circuit.

Argued Jan. 9, 1989.

Decided April 7, 1989.

Amy Loeserman Klein (William E. Cohen, Marc A. Bernstein, Short, Klein & Karas, P.C., Washington, D.C., on brief), for plaintiffs-appellants.

Joseph Edward Kolick, Jr. (Angelo V. Arcadipane, Marcus C. Migliore, Dickstein, Shapiro & Morin, Washington, D.C., on brief), for defendants-appellees.

Before ERVIN, Chief Judge, and WINTER and WILKINSON, Circuit Judges.

WILKINSON, Circuit Judge:

This case involves a challenge under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Sec. 1001 et seq., to defendant trust's determination to deny pension benefits to plaintiffs. The district court found it lacked ERISA jurisdiction and, alternatively, that defendant had acted properly in denying benefits. We disagree on both grounds and reverse.

I.

Plaintiff Juan Rodriguez is a retired marine engineer who became a member of the Maritime Engineer Beneficial Association (MEBA) in 1944. Upon retirement in 1965, he began receiving a monthly pension in the amount of $300, subject to periodic increases. He has continued to receive this pension since 1965.

In 1967, plaintiff began employment as a port engineer for Sea-Land Service, Inc. Sea-Land entered into a collective bargaining agreement with MEBA in June, 1968. In response to an inquiry from plaintiff, I.A. Lamy, vice-president of MEBA and trustee of the MEBA trust, informed plaintiff that he was required to apply for reinstatement to union membership but that such "[m]embership will not interfere with your pension."

Subsequently, on October 16, 1968, the MEBA pension trust regulations were amended and employees in plaintiff's position were offered the option of suspending their pension checks and accruing further benefits or continuing to receive pension checks but foregoing further accruals. Notice of this option was hand-delivered on November 25, 1969 to MEBA members who were affected by this new provision. Plaintiff never received such notification.

On December 18, 1972, plaintiff wrote Mildred Killough, then MEBA trust administrator, requesting a clarification of his status with the trust. Killough responded on March 1, 1973, informing plaintiff that he could have elected to have his pension benefits suspended under the 1968 option, thus accruing additional credits, but that since he elected to continue to receive pension benefits, he could accrue no further credits. For the next twelve years, although he corresponded with the trust on several occasions, plaintiff did not question his right to exercise the 1968 option.

On January 25, 1985, upon contemplating retirement from Sea-Land, plaintiff wrote the administrator of the MEBA trust requesting information on a lump sum payment of benefits. Frederick Jackson, pension trust manager, advised plaintiff that such a payment was not available because of his failure to suspend pension payments under the 1968 option. Plaintiff, through counsel, then requested a formal review of the denial of benefits.

The MEBA Pension Trust reviewed plaintiff's requests on three separate occasions and denied them each time. The denials were predicated upon plaintiff's failure to suspend his pension payments under the 1968 option. The trust did not dispute the fact that Rodriguez was at one time eligible to exercise the option.

On December 23, 1987, Juan and Maria Rodriguez filed suit under ERISA, challenging the MEBA trust's denial of their requested pension benefits. Plaintiffs moved for summary judgment on May 6, 1988, claiming that Juan Rodriguez did not receive notice of his option in 1968 or 1969, and that the decision to deny him the opportunity to exercise this option now was arbitrary and capricious. Defendants claimed that plaintiffs' action was not cognizable under ERISA, that it was untimely under a variety of limitations theories, and that the trust's decision was proper because plaintiff failed to respond to the March, 1973 letter from Killough which notified him of the option.

The district court ruled for defendants. It concluded that ERISA did not apply to plaintiffs' claim; that plaintiffs' suit was barred by Maryland's statute of limitations which applied as a result of diversity jurisdiction; and that if the suit was timely, the trust's denial of benefits was proper. This appeal followed.

II.

ERISA is a comprehensive scheme of national scope designed to supplant diverse state regulation of private retirement plans. Accordingly, the Act supersedes "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. Sec. 1144(a). Recognizing, however, that it would be problematic to judge pre-ERISA conduct by post-ERISA standards, Congress provided that preemption of state law under Sec. 1144(a) "shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." 29 U.S.C. Sec. 1144(b)(1). The application of ERISA thus depends upon: 1) a determination of the time the cause of action arose, and 2) a determination of the time of acts or omissions. See Tanzillo v. Local Union 617, International Brotherhood of Teamsters, 769 F.2d 140, 143-44 (3d Cir.1985); Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1500-1501 (9th Cir.1984); Quinn v. Country Club Soda Co., Inc., 639 F.2d 838, 840 (1st Cir.1981).

The district court concluded that plaintiffs met the first prong of the Sec. 1144 test because their cause of action did not accrue until 1986 when the trustees formally denied benefits. The court failed to exercise ERISA jurisdiction because it found "the critical acts or omissions" were omissions of notice in 1969 and the Killough letter of 1973. We hold, however, that ERISA jurisdiction is proper because both the cause of action and the operative acts or omissions occurred after January 1, 1975.

A.

The district court correctly recognized that the date of accrual of the cause of action would not defeat ERISA jurisdiction. An ERISA cause of action does not accrue until a claim of benefits has been made and formally denied. Tanzillo, 769 F.2d at 144; Menhorn, 738 F.2d at 1498; Quinn, 639 F.2d at 840; Paris v. Profit Sharing Plan for Employees of Howard B. Wolf, Inc., 637 F.2d 357, 361 (5th Cir.1981). To hold otherwise would require lay participants and beneficiaries to be constantly alert for "errors or abuses that might give rise to a claim and start the statute of limitations running." Menhorn, 738 F.2d at 1501. It also would burden the judicial system with multiple and premature actions.

Plaintiff first made a claim for benefits in 1985, one year before his retirement. The MEBA trustees correspondingly did not formally deny him pension benefits until February, 1986. Thus, plaintiffs' cause of action did not accrue until 1986.

B.

The timing of the critical acts or omissions is also no bar to ERISA jurisdiction in this case. In Martin v. Bankers Trust Co., 565 F.2d 1276 (4th Cir.1977), this court held that where an employee had retired, filed his claim for benefits, and had benefits denied pre-ERISA, the mere filing of a post-ERISA suit did not establish jurisdiction under Sec. 1144. We have not yet considered, however, whether ERISA applies where a plaintiff's application for pension benefits is made and denied post-ERISA, but at least some acts occur pre-ERISA, as in this case.

Among the circuits to consider this issue, two competing views have evolved. The Third Circuit regards the trustees' act in denying a pension application as an act or omission which is subject to ERISA. Tanzillo, 769 F.2d at 144. See also Coward v. Colgate-Palmolive Co., 686 F.2d 1230, 1234 (7th Cir.1982) (denial of pension benefits post-ERISA was sufficient to invoke ERISA, even though employee had retired years before ERISA); Reiherzer v. Shannon, 581 F.2d 1266, 1268-69 (7th Cir.1978). By contrast, the First and Ninth Circuits have held that if the trustees' denial is the "inevitable result of unequivocal pre-effective date interpretations" of the plan, then the denial is not reviewable. Menhorn, 738 F.2d at 1501; Quinn, 639 F.2d at 841.

We adopt the Third Circuit view. While a claim determination may require the plan's trustees to consider pre-ERISA acts, the act of denying a pension post-ERISA will invariably involve a "contemporaneous construction of the plan's provisions ... to which ERISA's fiduciary standards apply." Tanzillo, 769 F.2d at 144. Such a view fosters the congressional intent "to extend the protections of ERISA ... as soon as practicable," Winer v. Edison Brothers Stores Pension Plan, 593 F.2d 307, 313 (8th Cir.1979), so as to "provid[e] ... ready access to the Federal courts." 29 U.S.C. Sec. 1001(b). It also promotes Congress' intention that exceptions to ERISA's preemption provisions be narrowly construed. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46, 107 S.Ct. 1549, 1552-1553, 95 L.Ed.2d 39 (1987) ("preemption provisions of ERISA are deliberately expansive"). Further, the Third Circuit approach has the advantage of certainty. Courts need only look to the date of the trustees' determination to decide whether ERISA applies. Finally, equitable considerations support this standard. Plan participants cannot be expected to inquire about benefits until retirement. Because plan trustees will not act on a participant's claim until it is made their act of denying a claim will inevitably involve a post-ERISA interpretation of the plan.

Here the MEBA trustees did not deny plaintiff's claim until February, 1986, over ten years after ERISA's effective date. In so doing they engaged in a contemporaneous construction of the plan's provisions. Plaintiffs may therefore contest the trust's actions under ERISA and...