Chambless v. Masters, Mates & Pilots Pension Plan, s. 994

• Decision Date: 28 August 1985
• Docket Number: Nos. 994,D,1086,s. 994
• Citation: 772 F.2d 1032
• Court: U.S. Court of Appeals — Second Circuit
• Parties: 1985-2 Trade Cases 66,890, 6 Employee Benefits Ca 2209 Arthur CHAMBLESS and Mildred H. Chambless, Plaintiffs-Appellees, Cross-Appellants, v. MASTERS, MATES & PILOTS PENSION PLAN, Stephen P. Maher, Administrator of the Masters, Mates & Pilots Pension Plan, C.J. Bracco, Richard M. Casselberry, Michael Di Prisco, E. Gras, George Groh, Justin Gross, James R. Hammer, James J. Hayes, Martin F. Hickey, Charles Jess, Francis E. Kyser, Charles Landry, Orion A. Larson, Robert J. Lowen, Lloyd Martin, J. Eric May, David Merritt, Thomas E. Murphy, Henri L. Nereaux, William Ott, Martin Pecil, Franklin J. Riley, Jr., William I. Ristine, A.C. Scott, Capt. John Smith, Rupert Soriano, Ernest Swanson, Michaen Swayne, Allen Taylor, Nicholas Telesmanic, Kenneth P. Wenthen, C.E. Whitcomb, in their fiduciary capacity as Trustees of the Masters, Mates & Pilots Pensions Plan, Defendants-Appellants, Cross-Appellees, Amerada Hess Corporation, Amoco Shipping Company, Central Gulf Lines, Inc., American Maritime Association, National Transport Corp., Wabash Transport, Inc., Waterman Steamship Corporation, Maritime Services Committee, Inc., International Organization of Masters, Mates & Pilots, Defendants, Cross-Appellees. ockets 84-7987, 84-7989.

Page 1032

772 F.2d 1032

1985-2 Trade Cases 66,890, 6 Employee Benefits Ca 2209

Arthur CHAMBLESS and Mildred H. Chambless Plaintiffs-Appellees, Cross-Appellants, v. MASTERS, MATES & PILOTS PENSION PLAN, Stephen P. Maher Administrator of the Masters, Mates & Pilots Pension Plan C.J. Bracco, Richard M. Casselberry, Michael Di Prisco, E Gras, George Groh, Justin Gross, James R. Hammer, James J. Hayes, Martin F. Hickey, Charles Jess, Francis E. Kyser, Charles Landry, Orion A. Larson, Robert J. Lowen, Lloyd Martin, J. Eric May, David Merritt, Thomas E. Murphy, Henri L. Nereaux, William Ott, Martin Pecil, Franklin J. Riley, Jr., William I. Ristine, A.C. Scott, Capt. John Smith, Rupert Soriano, Ernest Swanson, Michaen Swayne, Allen Taylor, Nicholas Telesmanic, Kenneth P. Wenthen, C.E. Whitcomb, in their fiduciary capacity as Trustees of the Masters, Mates & Pilots Pensions Plan, Defendants-Appellants, Cross-Appellees, Amerada Hess Corporation, Amoco Shipping Company, Central Gulf Lines, Inc., American Maritime Association, National Transport Corp., Wabash Transport, Inc., Waterman Steamship Corporation, Maritime Services Committee, Inc., International Organization of Masters, Mates & Pilots, Defendants, Cross-Appellees.

Nos. 994, 1086, Dockets 84-7987, 84-7989.

United States Court of Appeals, Second Circuit.

Argued May 20, 1985.

Decided Aug. 28, 1985.

Arthur M. Wisehart, New York City (Irene M. Opsahl, John Whittlesey, Wisehart & Koch, New York City, of counsel), for plaintiffs-appellees, cross-appellants.

Bettina B. Plevan, New York City (Eileen Reinhardt, Joseph Baumgarten, Proskauer, Rose, Goetz & Mendelsohn, New York City, of counsel), for defendants-appellants, cross-appellees.

Burton M. Epstein, New York City (Steinberg & Tugendrajch, Hal R. Ginsburg, Levy & Tolman, New York City, of counsel), for defendant, cross-appellee Intern. Organization of Masters, Mates & Pilots.

Before FEINBERG, Chief Judge, and VAN GRAAFEILAND and PIERCE, Circuit Judges.

PIERCE, Circuit Judge:

The Masters, Mates & Pilots Pension Plan, et al. (MM & P or the Plan) appeal from an order of the United States District Court for the Southern District of New York (Carter, Judge), dated August 2, 1984, 602 F.Supp. 904, which found that plaintiff We hold that the district court was correct in finding that the amendment in question, while not violative of section 203(a) of ERISA, 29 U.S.C. Sec. 1053(a), is arbitrary and capricious and is therefore a nullity and also that the amendment would cause an unlawful reduction of Chambless' wage-related benefit. Furthermore, in our view, the arguments made by plaintiffs in their cross appeal are without merit.

Arthur Chambless' pension benefits were improperly postponed and reduced pursuant to an arbitrary and capricious amendment to the pension plan of which he and his wife are beneficiaries. The district court declared the amendment to be a nullity.

We affirm the decision of the district court.

BACKGROUND

The Plan, established in 1955, is a multi-employer plan designed to provide pension benefits to licensed deck officers who retire from sailing in the American Merchant Marine. It is jointly administered by an equal number of employer-designated and International Organization of Masters, Mates & Pilots (Union)--designated Trustees, in accordance with section 302(c)(5) of the Labor Management Relations Act of 1947, 29 U.S.C. Sec. 186(c)(5), and regulations adopted by the Trustees of the Plan (Plan Regulations). The daily administration of the Plan, however, has been delegated to an administrator. Stephen Maher, now Executive Director of the Plan, functioned as Administrator from 1965-81. The Administrator decides initially whether an applicant satisfies the Plan's eligibility requirements and determines the appropriate pension benefit the applicant is entitled to receive. The funds used to provide benefits under the Plan are contributed solely by the participating employers.

In order to receive pension benefits, a participant with a sufficient number of pension credits must "retire" within the meaning of the Plan Regulations. The pertinent portion of the definition of retirement in effect during the period in question herein, i.e., April 1977, as set forth in Article II-A, Section 15(a) of the Plan Regulations stated: "To be considered retired, a person must withdraw completely from any further employment, in any capacity, aboard any vessel whatsoever."

As for the amount of pension benefits to be received, Article II-A, Section 3, of the Plan Regulations, adopted as Amendment 15 in 1966 as a result of collective bargaining, provides for wage-related pension benefits based on the "average base monthly wages of the employee during the period of any 5 consecutive years within the last ten years immediately preceding the effective date of the pension, which will produce the highest average for the employee."

On August 26, 1976, the Trustees adopted Amendments 46 and 47 as new Plan Regulations (the Amendments). Amendment 46 relates to individuals who have at one time retired. It states in pertinent part:

If a Pensioner works in employment forbidden by this Section,

1. He shall not be entitled to pension benefits for any month of such employment and for six additional months, provided that the additional six month period shall not extend beyond his Normal Retirement Age ...; provided further, however, that if such employment is in the capacity of a Licensed Deck Officer on a U.S. flag ocean-going vessel employed by a company which is not a participant in the M.M. & P. Pension Plan or the MM & P/PMA Pension Plan ..., then the Pensioner shall not be entitled to pension benefits for any month of such employment nor for any months prior to such Pensioner reaching his Normal Retirement Age....

Amendment 47, on the other hand, relates to individuals prior to retirement. It states:

In the event a Participant, subsequent to his accrual of credit for 10 years of vesting service and prior to his retirement, is employed in the capacity of a Licensed In 1975, the Plan had already adopted Amendment 42, pursuant to which Article I, Section 13, stated that " 'Normal Retirement Age' shall mean the age of 65, or, if later, the age of the Participant on the tenth anniversary of his participation."

Deck officer on a U.S. flag ocean going vessel employed by a company which is not a participant in the M.M. & P. Pension Plan or the MM & P/PMA Pension Plan ..., such Participant shall not be entitled to any pension benefits prior to his reaching his Normal Retirement Age, as defined in Article I, Section 13.

As the district court noted, Amendments 46 and 47, adopted during the following year, were discussed in articles by Robert Lowen, then the Plan's Secretary-Treasurer, and Stephen Maher, the Plan Administrator, which were published in the October 1976 issue of the Plan's newspaper, the Pilot. The articles highlighted the Plan Regulations' ban on prohibited employment and discussed the meaning of the Amendments. One of the articles contained the full text of the two provisions. The December 1976 issue of the newspaper further discussed the Amendments. Copies of the newspapers were distributed at Union hiring halls, and, according to the Plan, were mailed to the homes of Union members and pension participants.

Plaintiff Chambless sailed as a member of the Union from 1944 until 1977. He worked, at various times, as a third mate, second mate, chief mate, and master. In November, 1976, Chambless applied for pension benefits, but shortly thereafter withdrew his application and continued employment aboard vessels covered by collective bargaining agreements with the Union.

On April 2, 1977, Chambless filed a second application for retirement benefits. Chambless received a letter from Maher, Administrator of the Plan, informing him of the Plan's definition of retirement. On June 30, 1977, a Plan employee wrote to Chambless, informing him that his application was being considered and that his monthly benefits would be approximately $920, presumably based on his 33 1/4 years of pension service credits as of April 2, 1977 and his average salary for his five highest salary years between 1967 and 1977.

Following an inquiry from Maher, in November 1977, Chambless informed the Plan that, between March 18, 1977 and April 1, 1977 and then again between April 4, 1977 and September 13, 1977, allegedly after asking a Union agent whether there would be any Union problem created in doing so, he had been employed as a master on vessels which did not participate in the Plan. According to Chambless, such employment was necessary as a result of the Union exerting pressure on older licensed deck officers to retire, by giving them only low paying and low grade assignments. Whereas between 1966 and 1975 Chambless had regularly received assignments as chief mate or master, subsequently, he allegedly was told to retire or to accept assignments as second or third mate.

By letters dated January 26, 1978 and January 28, 1980, Maher responded to Chambless and to his attorney stating that: 1) because Chambless had not retired under the Plan's definition of retirement, he was not eligible for a pension at that time; 2) pursuant to the definition of retirement in Article II-A of the Plan Regulations and pursuant to Amendment 47, the Plan would not pay him any pension until December 7, 1986, at which time Chambless would reach age 65, which the Plan defines as "normal retirement age"; and 3) the monthly benefits he could expect upon reaching 65 would likely be $470.

On June 24, 1980, Chambless brought this suit against the Plan, Plan Administrator Stephen Maher, the Union, the Plan's employer and Union Trustees, the Maritime Services Committee and the American Maritime Association, employer organizations that do collective bargaining for shipping companies, and six shipping companies that formerly employed Chambless, have contracts...