Bator v. Dist. Council 4

Decision Date27 August 2020
Docket NumberNo. 19-2626,19-2626
Citation972 F.3d 924
Parties Donald BATOR, et al., Plaintiffs-Appellants, v. DISTRICT COUNCIL 4, Graphic Communications Conference, IBT, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Larry D. Drury, Attorney, Thomas Michael Rebholz, Attorney, Larry D. Drury Ltd., Chicago, IL, for Plaintiffs - Appellants

Wesley G.S. Kennedy, Esq., Attorney, Allison, Slutsky & Kennedy, P.C., Chicago, IL, for Defendants - Appellees District Council 4, Graphic Communications Conference, IBT, Local 458-3M, GCC/IBT

Thomas Kennedy, Joseph J. Vitale, Attorneys, Cohen, Weiss & Simon LLP, New York, NY, Robert A. Seltzer, Attorney, Cornfield & Feldman, Chicago, IL, for Defendant - Appellee Board of Trustees of the Inter-Local Pension Fund of the Graphic Communications Conference of the International Brotherhood of Teamsters

Before Bauer, Kanne, and Barrett, Circuit Judges.

Kanne, Circuit Judge.

Plaintiffs Donald Bator, Edmond W. Moses, Christopher O'Malley, Michael Anthony Pappa, and Rogelio Jimenez, Jr. are former members of a union, Local 458-M.1 The Union participated in an employee-benefit pension plan administered by a Board of Trustees. In 2014, the Plaintiffs discovered the financial health of their pension plan was deteriorating. Several years later, the Plaintiffs sued the Trustees and the Union under the Employee Retirement Income Security Act of 1974 ("ERISA") for a breach of fiduciary duty. See 29 U.S.C. § 1132(a)(2). The Plaintiffs allege the Defendants’ actions and inaction resulted in an underfunding of their pensions. The district court dismissed the case for failure to state a claim under ERISA. We affirm.

I. BACKGROUND

The Plaintiffs are current employees of Bell Litho Inc., a graphic-communications company, and former members of Local 458-M Graphic Communications International Union. The Plaintiffs participated in an employee-funded benefit plan: the Inter-Local Pension Fund of the Graphic Communications Conference of the International Brotherhood of Teamsters. Unlike many defined-benefit plans, this pension plan is completely funded by contributions from the members of about sixty-nine unions; their employers do not contribute to or participate in the plan's governance. Instead, the plan is governed by Trust Indenture documents and administered by a Board of Trustees.2

The Trust Indenture documents provide that the plan's members must contribute a fixed amount to the plan each week, unless a member's union has set a different contribution amount (we'll have more to say about this later). In 2008, the Plaintiffs’ union, 458-M, voted to increase its members’ contributions to the plan from 6% to 8% of their weekly wages.

Several years later, in January 2014, the Trustees notified plan participants that the plan's financial health was deteriorating. So, the Plaintiffs and others petitioned Local 458-M to reduce their compelled-contribution rate. The Union denied that request.

In 2016, the collective-bargaining contract in place between Bell Litho and Local 458-M expired. During contract re-negotiations, the Plaintiffs again requested that the Union reduce their required contribution rate. The Union again refused and warned them that failure to contribute to the plan could result in expulsion from the Union.

In the back-and-forth between the Union and the Plaintiffs, it came to light that other members of Local 458-M (who worked for a different employer, Aurora Fast Print) were either contributing to the pension plan at lower rates than Bell Litho employees or not contributing at all. The Union explained that these non-contributing members were originally part of a different union that did not participate in the plan; when that union merged with Local 458-M, those members were allowed to participate in the plan under different conditions than the Plaintiffs.

Contract re-negotiations between Bell Litho and the Union were ultimately unsuccessful. In November 2016, the Union notified all Bell Litho employees that they would no longer be governed by the Union's collective-bargaining agreements, and their contributions to the plan would become vested. As a result, the Plaintiffs lost certain retirement benefits—including early withdrawal at age 59, a disability benefit, and a death benefit—available only to active contributors to the plan.

The Plaintiffs sued the Trustees and the Union for a breach of their fiduciary duties to the plan. Specifically, the Plaintiffs believe the Trustees breached their fiduciary duties by not enforcing the terms of the Trust Indenture regarding contributions when they allowed certain members of Local 458-M to contribute to the fund at lower rates. See 29 U.S.C. § 1104(a)(1)(D) (Fiduciaries of a pension plan must discharge their duties "in accordance with the documents and instruments governing the plan."). As for the Union, the Plaintiffs contend the Union breached its fiduciary duties under ERISA by failing to enforce its by-laws, which they claim would have required all members to contribute equally to the fund.

The district court dismissed Plaintiffs’ claims for failing to allege a plausible claim. Fed. R. Civ. P. 12(b)(6). First, the court concluded that the Trustees’ action—interpretation of the Trust Indenture—did not amount to a breach of fiduciary duty. Second, the court determined that the Plaintiffs’ factual allegations about the Union's actions did not support a claim that the Union acted as a fiduciary. As a result, the court concluded the Plaintiffs failed to allege plausible allegations amounting to a violation of ERISA's fiduciary-liability provisions.

II. ANALYSIS

We review the district court's dismissal for failure to state a claim de novo , Kubiak v. City of Chicago , 810 F.3d 476, 480–81 (7th Cir. 2016), accepting all well-pleaded factual allegations as true and drawing permissible inferences in the Plaintiffs’ favor. Id. We first address the Plaintiffs’ claims against the Trustees then turn to their claims against the Union.

A. The Trustees

The Plaintiffs claim the Trustees breached their fiduciary duties when they failed to enforce particular terms of the Trust Indenture related to member contributions. When confronted with a claim involving the interpretation of a pension plan, we must first resolve an antecedent question: how broad is the Trustees’ discretion to interpret the terms of the Trust Indenture? The Trustees contend the Trust Indenture confers broad discretion on the Trustees to interpret its terms. We agree.

An ERISA plan can specify that the administrator has broad discretion to interpret or apply it. See Young v. Verizon's Bell Atl. Cash Balance Plan , 615 F.3d 808, 818 (7th Cir. 2010). That scope of discretion, in turn, drives our standard of review: arbitrary and capricious review attaches to a broad grant of interpretive discretion. Lacko v. United of Omaha Life Ins. Co. , 926 F.3d 432, 439 (7th Cir. 2019). Otherwise, our review is plenary. Diaz v. Prudential Ins. Co. of Am. , 424 F.3d 635, 637 (7th Cir. 2005).

In determining the extent to which a pension plan grants a trustee discretion to construe its terms, "we review the language of the plan de novo as we would review the language of any contract." Id. Here, the applicable language of the Trust Indenture says:

The Trustees shall have the discretionary authority to construe the terms of this Trust Indenture and the governing documents of merged plans described in Article VII, and to determine eligibility for membership, eligibility for benefits and all other rights, benefits, privileges and obligations of membership under those documents.... The interpretation by the Trustees of these documents or any provision thereof shall be final and conclusive, and the determinations of the Trustees shall be binding upon all members and their beneficiaries and upon all applicants for membership.

We've previously concluded that language nearly identical to this excerpted language conferred a plan administrator with broad interpretive discretion. Cf. Johnson v. Allsteel, Inc. , 259 F.3d 885, 890 (7th Cir. 2001) ; Exbom v. Cent. States, Se. & Sw. Areas Health & Welfare Fund , 900 F.2d 1138, 1141 (7th Cir. 1990). In Exbom , the language in the trust agreement gave "the Trustees power to construe the provisions of the Agreement and the Plan," and stated that the Trustees’ interpretation of those documents "shall be binding." 900 F.2d at 1141.

Likewise, in Johnson , we considered plan language that a trustee "shall have discretionary authority to interpret and construe this Plan and to determine all questions arising under this Plan, including questions regarding eligibility, vesting and entitlement to benefits under the Plan." 259 F.3d at 887. We concluded this language was "sufficient to trigger deferential review" of the administrator's interpretation of the plan. Id. at 890.

So too here. The Trust Indenture unambiguously states that the Trustees have discretion to interpret its terms by specifying the Trustees "shall have the discretionary authority to construe the terms" and "determine eligibility for ... membership" or "benefits." And as in Exbom , that determination "shall be binding." Accordingly, we defer to the Trustees’ interpretation of the plan's governing instruments unless arbitrary and capricious. See Lacko , 926 F.3d at 439.

The Trustees’ interpretation "is not arbitrary and capricious if it falls within the range of reasonable interpretations," Green v. UPS Health & Welfare Package for Retired Emps. , 595 F.3d 734, 738 (7th Cir. 2010), or if it is "compatible with the language and the structure of the plan document," Estate of Jones v. Children's Hosp. & Health Sys. Inc. Pension Plan , 892 F.3d 919, 926 (7th Cir. 2018). But if the Trustees "def[y]" the "plan's plain language," that decision is arbitrary and capricious. Id. at 923. We turn, then, to interpreting the plan's terms.

The Plaintiffs seek to hold the Trustees liable for a breach...

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