Brown v. Babcock and Wilcox Co.

• Decision Date: 07 February 1984
• Docket Number: Civ. A. No. 283-102.
• Citation: 589 F. Supp. 64
• Parties: Lonell BROWN and Carl Poppell, Plaintiffs, v. The BABCOCK AND WILCOX COMPANY and the Babcock and Wilcox Company Pension Board, Defendants.
• Court: U.S. District Court — Southern District of Georgia

589 F. Supp. 64

Lonell BROWN and Carl Poppell, Plaintiffs, v. The BABCOCK AND WILCOX COMPANY and the Babcock and Wilcox Company Pension Board, Defendants.

Civ. A. No. 283-102.

United States District Court, S.D. Georgia, Brunswick Division.

February 7, 1984.

Edward E. Boshears, Brunswick, Ga., for plaintiffs.

Richard M. Scarlett, Brunswick, Ga., William A. Ziegler, New York City, for defendants.

ORDER

ALAIMO, Chief Judge.

This is an action brought under Section 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132. Plaintiffs are two ex-employees of the now idle Brunswick plant operated by defendant Babcock and Wilcox Company ("the Company"). This suit is a companion case to Chesser v. Babcock and Wilcox Company, et al., CV 283-83, wherein the Court granted summary judgment in favor of the Company and its Pension Board as to the pension claims asserted by some 40 ex-employees of the Company. The present action is now before the Court on defendants' motion for summary judgment.

FACTS

Plaintiffs were employed at the Company's Brunswick plant until their termination in April, 1982. Plaintiff Poppell apparently has a back problem which caused him to be away from the job for substantial periods of time beginning in August of 1980. In anticipation of the Company's plant-wide closure, Poppell was terminated from the Company's employ on April 2, 1982. Prior to his termination, Poppell applied for a disability retirement pension under ¶ 4 of Section IV of the Service Benefit Pension Plan ("the Plan") in effect at that time. By a letter dated July 26, 1982, Poppell was notified of the Pension Board's decision to deny his requested disability pension. The reason given for the denial was the determination of the Pension Board-selected physicians, Doctors Parke and Brown, that plaintiff was not totally and permanently disabled as required by the Plan. On September 27, 1982, Poppell inquired into the appeal procedure available to claimants upon the initial denial of a pension application. Pursuant to this request, Poppell was advised by a Board representative to direct his appeal to the Manager of Employee Benefits at McDermott, Inc., the parent company of Babcock and Wilcox.

With respect to plaintiff Brown's application for a disability retirement pension, he was forced to cease work because of a back injury sustained on August 20, 1980. He was dismissed from Company employ on April 3, 1982, and applied for a disability retirement pension in July of 1982. Unlike Poppell, Brown was determined by the Board-selected physicians to be totally and permanently disabled. Nevertheless, Brown's request for a disability pension was denied by letters dated September 30 and November 24, 1982. The Board's reason was that Brown had signed a form acknowledging that his employment had been terminated for all purposes on the date of his discharge and that this waiver occurred prior to the Board's receipt of Brown's disability application.

DISCUSSION

In their complaint, as further explained in their responsive briefs, plaintiffs are claiming generally that the Pension Board denied them their disability retirement pensions in violation of the ERISA statute. Plaintiffs argue that the Board breached its ERISA-based fiduciary duty by denying their applications for different reasons, even though they both executed the same form letter acknowledging the termination of employment for all purposes. Plaintiffs also claim that, because they were both disabled well before the plant closing, their disability pension rights were vested and, therefore, protected by ERISA's nonforfeiture provisions.

In their motion for summary judgment, the Pension Board and Company claim variously that plaintiffs have failed to exhaust their administrative remedies. In the alternative, defendants assert that they are entitled to a judgment on the merits as to each of the claims asserted in this suit by the plaintiffs. Based on a thorough reading of the parties' arguments and the applicable law, the Court will resolve the present motion by an analysis of defendants' claims that plaintiffs failed to exhaust their administrative remedies.

A. Exhaustion of Collective-Bargaining Agreement's Arbitration-Grievance Procedure

Defendants, in moving for summary judgment, argue that plaintiffs' suit is barred as a result of their failure to exhaust the grievance-arbitration procedure as spelled out in the Collective Bargaining Agreement (the "CBA"). The CBA, entered into by the union representing all hourly employees at the Brunswick plant and the Company, called for the Company to provide a pension plan for all employees. Additionally, Articles 6 and 7 of the CBA provided for a grievance-arbitration process to settle all disputes arising between employees and the Company. Based on these provisions, defendants assert that plaintiffs' pension claims in this suit amount to a dispute between the Company and plaintiffs within the meaning of Articles 6 and 7 of the CBA and, therefore, are subject to the mandatory grievance-arbitration procedure contained in the CBA.

In support of this argument, defendants cite an array of cases dealing with standard employee-employer disputes, such as wrongful termination and failure to promote. Obviously, such cases do not shed light on a case invoking the Court's jurisdiction under ERISA.

Additionally, defendants cite several ERISA cases dealing with the exhaustion of arbitration procedures set up by the terms of the pension plan itself. See, e.g., Challenger v. Local Union No. 1 of Intern. Bridge, 619 F.2d 645 (7th Cir.1980); Mahan v. Reynolds Metal Co., et al., 569 F.Supp. 482, 116 D.L.R. D-1 (E.D.Ark. 1983); Sample v. Monsanto, 485 F.Supp. 1018 (E.D.Mo.1980). These cases would warrant further consideration had the Company's Plan made specific reference to the contractual grievance provisions contained in the CBA as the exclusive remedy for claims benefits. Nowhere in the Plan, however, is there reference to mandatory arbitration procedures to resolve eligibility disputes.

Thus, defendants' argument is reduced to an attempt to impose upon ERISA claimants a twin exhaustion requirement. This argument, if accepted, would require a claimant to go first to the pension trustees and exhaust the administrative remedies provided by the terms of the plan. Second, a claimant receiving an adverse decision at the hands of the trustees would then be required to take up a grievance with his employer with resort to binding arbitration in the event that no claim settlement is reached. The Court finds no support for such a proposition in any case authority.¹

Moreover, the argument ignores the fact that the Plan itself gives to the Pension Board the sole authority to decide questions of eligibility. Section VII, ¶ 6 of the Plan provides that:

the Pension Board shall have the exclusive right to interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions. All interpretations, determinations, and decisions of the Pension Board ... in respect to any matter hereunder shall be conclusive and binding on all parties affected thereby.

Thus, as a matter of contract, the Plan leaves no room for an arbitrated result to supersede any decision of the Board. The Board administering the Plan in question here has promulgated no arbitration requirement that applies to claimants who disagree with the Board's determinations. Only ERISA, through its vesting of jurisdiction in federal courts to review the decisions of pension trustees, provides the authority for interfering with trustee actions. Even that authority, as explained below, is severely circumscribed by the deferential standard of review applied to trustee actions.

Although the exhaustion of grievance-arbitration procedures plays an important role in the harmonization of labor-management relations, the Court does not feel that such exhaustion should be enforced here where plaintiffs are seeking only Court review of trustee action with respect to their rights under ERISA. The Court, therefore, declines to accept defendants' invitation to bar plaintiffs from any relief afforded under ERISA because of their failure to resort to the CBA's grievance-arbitration procedure.

B. Exhaustion of Interfund Remedies

Federal courts are given the power to review the actions of pension trustees with respect to present pension claims by virtue of 29 U.S.C. § 1132, which provides that:

a civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, ... and to redress any act or practice which violates any provision of this subchapter or the terms of the plan....

When a trustee's decision as to eligibility is sufficiently finalized, the district court will uphold the determination unless it is found to be arbitrary, in bad faith, not supported by substantial evidence or erroneous on a question of law. Music v. Western Conference of Teamsters Pension Trust Fund, 712 F.2d 413, 418 (9th Cir.1983); Paris v. Profit Sharing Plan, Etc., 637 F.2d 357 (5th Cir.1981). The proper role of the district court, however, is not to determine questions of plan construction relating to eligibility and coverage. Those issues were left to the pension trustees by Congress in its enactment of ERISA. See Riley v. Meba Pension Trust, 570 F.2d 406 (2d Cir. 1977); Taylor v. Bakery and Confectionary Union, 455 F.Supp. 816 (E.D.N.C. 1978).

Pursuant to the adoption of a legal standard of review that leaves eligibility determinations, for the most part, with the trustees, the courts have also adopted and strictly enforced an exhaustion of interfund remedies principle. This principle allows for the development of a sufficient factual record to facilitate meaningful court review and, more importantly, serves as the mechanism to...