Graphic Communications Union, Dist. Council No. 2, AFL-CIO v. GCIU-Employer Retirement Ben. Plan

• Decision Date: 26 October 1990
• Docket Number: Nos. 89-55227,AFL-CI,P,GCIU-EMPLOYER,89-55261,s. 89-55227
• Citation: 917 F.2d 1184
• Parties: , 12 Employee Benefits Ca 2814 GRAPHIC COMMUNICATIONS UNION, DISTRICT COUNCIL NO. 2,laintiff-Appellant, Cross-Appellee, v.RETIREMENT BENEFIT PLAN, Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1184

917 F.2d 1184

59 USLW 2306, 12 Employee Benefits Ca 2814

GRAPHIC COMMUNICATIONS UNION, DISTRICT COUNCIL NO. 2 AFL-CIO, Plaintiff-Appellant, Cross-Appellee, v. GCIU-EMPLOYER RETIREMENT BENEFIT PLAN, Defendant-Appellee Cross-Appellant.

Nos. 89-55227, 89-55261.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 11, 1990.

Decided Oct. 26, 1990.

Steven J. Kaplan, Gilbert & Sackman, Los Angeles, Cal., for plaintiff-appellant-cross-appellee.

Kirke M. Hasson, Kim Zeldin and Robert M. Westberg of Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant-appellee-cross-appellant.

Appeal from the United States District Court for the Central District of California.

Before WALLACE, THOMPSON and O'SCANNLAIN, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We again confront the tension created by the competing concerns of access to the courts and the enforcement of agreements to arbitrate employee benefit plan disputes. We must determine whether the congressional guarantee of ready access to the federal courts renders a mandatory arbitration agreement unenforceable.

I

Between 1979 and 1986, Owens-Illinois Forest Products Group ("Owens-Illinois") operated a plant at Tracy, California for the purpose of manufacturing corrugated boxes. Since 1979, Graphics Communications Union, District Council No. 2 ("the Union"), or a predecessor union has been the exclusive bargaining representative of the production and maintenance employees at the Tracy plant. Under the collective bargaining agreements between Owens-Illinois and the Union, Owens-Illinois contributed to an employee benefit plan ("the GCIU-Employer Retirement Benefit Plan" or "the Plan"). The Plan was administered by a joint board of trustees comprised of multiple employer and union representatives and was regulated under the Employee Retirement Income Security Act of 1974 ("ERISA"). See generally 29 U.S.C. Secs. 1001-1461 (1988).

In June 1986, Owens-Illinois sold the plant to Temple-Inland, Inc. ("Inland") as "a going business"; Inland continued to operate the plant with the same employee complement. Inland and the Union soon signed a new labor agreement which does not require Inland to contribute to the GCIU-Employer Retirement Benefit Plan. A new Inland plan was also established, which does not give employees any credit for work performed between 1979 and 1986 when they were employees of Owens-Illinois.

In June 1987, the Union wrote to the Plan on behalf of approximately 125 employees at the Tracy Plant and requested the application of certain special-vesting rules. Those rules are provided for in article VII, section 4 of the Plan Document and are entitled "Vesting On Termination Due to Closure of a Plant or Department." ¹ On June 29, 1987, the Plan's administrative office denied the Union's claim, stating that "the Plan rules have not been met and special vesting cannot be applied." Letter from Arthur L. DeKuhn to Stephen E. Northrup (June 29, 1987) (officially reporting the decision of the Administrative Office of the GCIU-Employer Retirement Fund). The Union appealed to the trustees, who upheld the Plan administrator's decision.

Article XIII, section 5(c) of the Plan Document gave the Union the right to appeal the trustees' decision to final and binding arbitration. The Union declined to do so. Instead, it filed suit in federal district court, seeking both a declaration that the arbitration provision violated ERISA and a resolution of the vesting-rights issue.

On December 9, 1988, the Plan filed a motion to dismiss the suit, alleging that the Union had failed to exhaust the Plan's internal claims procedure, including arbitration. The Plan additionally requested attorney's fees. The Union opposed the motion to dismiss and moved for partial summary judgment.

Without stating the reasons for its decision, the district court granted the Plan's motion to dismiss the action. The court denied the Union's motion for summary judgment and the Plan's motion for attorney's fees.

The Union timely appeals from the district court's order dismissing its action and denying its motion for summary judgment. The Plan timely cross-appeals from that part of the district court's order which denied its request for attorney's fees. We have jurisdiction over both appeals under 28 U.S.C. Sec. 1291.

II

If a participant in an employee benefit plan has had a claim for benefits denied by a plan's administrator, section 503 of ERISA requires that the plan "afford a reasonable opportunity ... for a full and fair review by the appropriate named fiduciary." 29 U.S.C. Sec. 1133(2) (1988); accord 29 C.F.R. Sec. 2560.503-1(g) (1989). The parties agree that this requirement was satisfied in the instant dispute. After the Union's claim for benefits was denied by the Plan's administrator, the trustees reviewed the administrator's decision and upheld it. The disputed question raised here is, what must come next?

The Plan contends that if the Union is aggrieved by the trustees' decision, it may appeal that decision to an impartial arbitrator. It relies on article XIII, section 5 of the Plan Document to support this contention. This section provides that a party dissatisfied with the trustees' decision "shall have the right to appeal the matter to arbitration." It provides in its entirety as follows:

5. Reviewing Hearing and Arbitration Procedures....

(c) Appeal to Arbitration

If the Participant or beneficiary is dissatisfied with the written decision of the Trustees, he shall have the right to appeal the matter to arbitration in accordance with the labor arbitration rules of the American Arbitration Association, provided that he submit a request for arbitration to the Trustees, in writing, within sixty (60) days of receipt of the written decision. If an appeal to arbitration is requested the Trustees shall submit to the arbitrator a certified copy of the record upon which the Trustees' decision was made.

The question for the arbitrator shall be (1) whether the Trustees were in error upon an issue of law, (2) whether they acted arbitrarily or capriciously in the exercise of their discretion, or (3) whether their findings of fact were supported by substantial evidence. The decision of the arbitrator shall be final and binding upon the Trustees, upon the appealing party, and upon all other parties whose interests are affected thereby.

The expenses of arbitration shall be borne equally by the appealing party and the Trust Fund, unless otherwise ordered by the arbitrator.

Plan Document, art. XIII, Sec. 5 (paragraph break added); accord Trust Agreement of the GCIU-Employer Retirement Fund, art. X, Sec. 5 (as amended through July 1, 1984). ² The Union and the Plan agree that this provision is for mandatory arbitration. ³

The Union argues that it has the right to seek judicial review of the trustees' decision. It points to section 502 of ERISA, which authorizes a participant or beneficiary to bring a civil action "to recover benefits due to him under the terms of his 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." 29 U.S.C. Sec. 1132(a)(1)(B) (1988). The Union also emphasizes that Congress intended in ERISA to "provid[e] for ... ready access to the Federal courts." Id. Sec. 1001(b).

The Union advances several arguments that the arbitration provision to which it agreed cannot be enforced. We address the contentions in turn. ⁴

A

First, the Union contends that the so-called arbitration agreement is unenforceable because it requires arbitration of "questions of law." The Union contends that the law of this Circuit forbids enforcement of an arbitration provision when the disputed issues raise "legal questions."

We have previously considered, in significantly varying contexts, whether exhaustion of internal remedies is a prerequisite to a court's consideration of an ERISA issue. In our first case on the question, we held that federal courts should usually require that parties seeking a review of a decision by an employee benefit plan's administrator first seek review of that decision from the plan's trustees. See Amato v. Bernard, 618 F.2d 559, 567-68 (9th Cir.1980). We subsequently held that such exhaustion was not required, even where an agreement mandated final and binding arbitration, before a statutory claim under section 510 of ERISA ⁵ could be brought in federal court. See Amaro v. Continental Can Co., 724 F.2d 747, 752 (9th Cir.1984). We emphasized in Amaro that only interpretation of ERISA (viz., section 510) was required in that case and that such interpretation "is a task for the judiciary, not an arbitrator." Id. at 751.

We have articulated the distinction between Amaro and Amato. On the one hand, "[e]xhaustion of internal dispute procedures is not required where the issue is whether a violation of the terms or provisions of the statute has occurred." Fujikawa v. Gushiken, 823 F.2d 1341, 1345 (9th Cir.1987) (citing Amaro, 724 F.2d at 751), cert. denied, 487 U.S. 1240, 108 S.Ct. 2913, 101 L.Ed.2d 945 (1988); accord Johnson v. St. Frances Xavier Cabrini Hosp., 910 F.2d 594, 595-97 (9th Cir. Aug. 6, 1990) (agreement to arbitrate disputes not enforceable in ERISA context when the claim at issue concerned alleged violation of "various sections of ERISA," for the answer to the claim would be "found within the statutory provisions of ERISA"). On the other hand, exhaustion, at least to the level of the trustees, is ordinarily required where an action seeks " 'a declaration of the parties' rights and duties' under the pension plan." Fujikawa, 823 F.2d at 1346 (quoting Amato, 618 F.2d at 561) (emphasis in original).

Thus, the fundamental question here is whether the claim the Union seeks to assert arises under the employee benefit plan or under ERISA. See Amaro, 724 F.2d at 748, 751 (adherence to an "agreement [which] mandate[d] final and binding arbitration of contractual...