Cann v. Carpenters Pension Trust for Southern Cal.

• Decision Date: 18 May 1987
• Docket Number: No. CV 80-4073-SVW.,CV 80-4073-SVW.
• Citation: 662 F. Supp. 501
• Parties: George W. CANN, Plaintiff, v. CARPENTERS PENSION TRUST FOR SOUTHERN CALIFORNIA, Defendants.
• Court: U.S. District Court — Central District of California

662 F. Supp. 501

George W. CANN, Plaintiff, v. CARPENTERS PENSION TRUST FOR SOUTHERN CALIFORNIA, Defendants.

No. CV 80-4073-SVW.

United States District Court, C.D. California.

May 18, 1987.

Ronald Dean, Pacific Palisades, Cal., for plaintiff.

James P. Watson, Cox, Castle & Nicholson, Los Angeles, Cal., for defendants.

OPINION AND ORDER

WILSON, District Judge.

Plaintiff George Cann seeks a declaratory judgment from this court to the effect that he has not lost, due to a break in service, the 15½ years of pension credits he had accumulated with the defendant pension trust. In the discussion below,¹ the court explains how the holding of Lee v. Nesbitt, 453 F.2d 1309 (9th Cir.1972), and the doctrine of equitable estoppel require a finding for the plaintiff.

A. FACTUAL SUMMARY

By at least December 31, 1964, George Cann had accumulated 15½ years of pension credits in the Carpenters Pension Trust for Southern California ("CPT") (some of the credit was accumulated through a sister trust). At that time, he was 35 years old.

Under the provisions of the CPT pension plan, 15 years of service qualifies a participant for a pension. Pension credits, however, will not vest until one reaches age 45. Furthermore, credits accumulated before reaching age 45 can be lost because of the plan's "break-in-service" rule. Under this rule, a participant must work at least one-quarter year in "covered employment" (employment with unionized employers working within the jurisdiction of management-labor pension trusts covering unionized carpentry employees) within a consecutive three year period or else forfeit all earned credit. The plan contains certain exceptions to the break-in-service rule.² For example, an employee could receive a "grace period" that would suspend operation of the break-in-service rule for up to three consecutive calendar years if he was unable to earn pension credit due to involuntary unemployment.³ An employee could also obtain a grace period while employed as a supervisor for an individual employer⁴ or while self-employed in an industry other than the building and construction industry.⁵

The events surrounding the alleged break in service in this case are as follows. After December 31, 1964, Cann earned no credited service in the CPT. From that date until 1968, Cann made efforts to find covered employment, but was unsuccessful. After 1968, Cann no longer signed in at the union hall in an effort to get covered employment.

Between 1965 and 1967, Cann became concerned that he might lose his pension credits because of a break in service. The record of correspondence between him and the CPT shows that he tried to obtain a grace period for several reasons including involuntary unemployment, but that the CPT never adequately responded to his assertion that he was involuntarily unemployed.

Cann first wrote to the CPT on May 14, 1966 asking that his "Trust Fund" be "frozen" for an indefinite period because of lack of work. See Plaintiff's Exhibit 3 (note that Cann did not ask for a "grace period" or mention any of the grounds entitling one to a grace period which were described above). In response to Cann's request, the CPT wrote back and merely told Cann that in order to save his credits, he had to earn at least 1 quarter of credits within 3 consecutive calendar years until his credits vested. This letter did not respond to the "freeze" request. See Plaintiff's Exhibit 4.

On September 26, 1966, Cann wrote back to the CPT and told the trustees that he felt entitled to a "Section 6 and 7," and he referred to himself as self employed, as a supervisor, and as unable to obtain construction work. See Plaintiff's Exhibit 9. The reference to "Sections 6 and 7" alludes to those parts of the 1964 Plan that dealt with the break in service rule and vesting. The court believes that Cann was arguing by this September 26, 1966 letter that he qualified for a grace period under the three categories mentioned above. The CPT responded to this request on October 11, 1966 by sending Cann a form to apply for the supervisory grace period. See Plaintiff's Exhibit 22. Cann filled out this application and returned it. See Defendant's Exhibit 5. The CPT reviewed the application in December 1966 and denied it, noting that he did not qualify for a supervisory grace period because he had not worked for an individual employer. The CPT suggested that Cann could obtain a grace period if Cann was an owner or officer of a corporation, worked with the tools of the trade, was paid by that corporation, and made contributions upon himself. See Plaintiff's Exhibit 14.

Cann did not incorporate, but he did not give up trying to save his credits. On May 12, 1967, Cann wrote to the CPT asking for a grace period due to involuntary unemployment. See Plaintiff's Exhibit 7. This time, Cann specifically mentioned the applicable section number and the ground. The CPT considered this request and denied it, although they did not specifically address the question of whether Cann was involuntarily unemployed. See Plaintiff's Exhibit 8. The CPT communicated this denial to Cann in a letter dated June 19, 1967. See Plaintiff's Exhibit 15.

Cann next heard from the CPT on October 24, 1968 when it informed Cann that he had lost his credits due to a break in service lasting three years. See Plaintiff's Exhibit 16. The record of correspondence thus shows that the CPT never adequately addressed the question of Cann's involuntary unemployment before it terminated his credits.

In 1980, Cann began an effort to obtain a pension from the CPT. In July 1980, Cann appeared before the Pension Appeals Committee of the CPT to challenge the rule that required pension plan participants to have attained the age of 45 in order for their pension credits to vest. This appeal was denied. Cann then brought this declaratory relief action in federal court. In November 1983, Cann again appeared before the Pension Appeals Committee to protest application of the break-in-service rule in his case. As a result of that hearing, the CPT awarded Cann a grace period due to involuntary unemployment from January 1, 1965 through December 31, 1968. In November 1985, Cann appeared yet again before the Pension Appeals Committee to ask for a grace period due to involuntary unemployment from 1969 to 1972. The Committee denied this request for two reasons. First, it was unpersuaded that Cann was a victim of involuntary unemployment during that period. Second, it felt that he had been given the maximum period provided by the CPT Pension Plan.

B. THE PLAINTIFF'S THEORY OF RECOVERY

Cann believes he is entitled to a pension from the CPT despite the CPT's break-in-service rule. He notes that by the end of 1964, he had earned 15½ years of pension credits, enough to qualify him for a pension. At that time, however, he was only 35 years old, and his credits would not vest until September 21, 1974, when he became 45 years old. He admits that he obtained no covered employment from 1965 through 1974, but he argues that he should be spared from the workings of the break-in-service rule for two reasons. First he notes that he has proven to the CPT that he was involuntarily unemployed from January 1, 1965 to December 31, 1968. As for the remaining six year period, he argues that he would have been willing to do whatever he had to do to obtain covered employment. He blames the CPT for his failure to find covered employment during that period because the CPT told him in 1968 that his credits had been cancelled. (In fact, his credits should not been cancelled.)⁶ In reliance upon the CPT's representation that his credits had been cancelled, Cann made no efforts after 1968 to find covered employment. He argues that had he been properly informed about his true status in 1968, he would have made efforts to find covered employment. If he had found such employment, Cann says, he would have worked. If not, he would have been entitled to a grace period due to involuntary unemployment.

The CPT responds that Cann cannot succeed with this argument for two reasons. First, it argues that giving Cann a pension here would in effect be giving him a ten-year grace period for involuntary unemployment when the plan rules provide that no grace period can be longer than three years. Second, it notes that Cann's theory is based on the assumption that his detrimental reliance on the CPT's representations would allow this court to estop the CPT from finding that he was voluntarily unemployed after 1968. The CPT argues, however, that the doctrine of equitable estoppel cannot be used by the court when reviewing the decisions of pension trustees.

The court rejects these arguments by the CPT. First, the court finds that the CPT cannot limit the effect of a grace period for involuntary unemployment for three years. Second, the court finds that the doctrine of equitable estoppel is available to it to review the decisions of pension trustees.

C. THE BREAK-IN-SERVICE RULE

The CPT argues that it could not have given Cann a grace period for involuntary unemployment from 1969 to 1974 or even to 1971 because such grace periods can only be for a maximum of three years under the plan rules. See 1964 Plan, article IV, section 6(b). If the CPT granted Cann's request, the grace period would be almost ten years, or at least seven years.⁷

The CPT cannot limit the grace period for involuntary unemployment to three years because it would violate the teaching of Lee v. Nesbitt, 453 F.2d 1309 (9th Cir. 1972). That case involved a seaman, Handee Lee, who had earned 16¼ years of pension credits by 1955, when he was 48 years old. To be eligible for a pension, Lee needed 15 years of credits, and he had to be 60 years of age. When he turned 60, Lee applied for a pension, but the pension was denied because he had suffered a break in service during the period from 1955-57. (The plan's rules required that Lee work a total of 200 days within any three year period,...