Deak v. Masters, Mates and Pilots Pension Plan
| Decision Date | 15 July 1987 |
| Docket Number | No. 84-3651,84-3651 |
| Citation | 821 F.2d 572 |
| Parties | , 9 Employee Benefits Ca 1306 William F. DEAK, et al., Plaintiffs-Appellees, Cross-Appellants, v. MASTERS, MATES AND PILOTS PENSION PLAN, et al., Defendant-Appellants, Cross- Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
MM & P Pension Plan, Frank E. Hamilton, III, Tampa, Fla., for defendant-appellants, cross-appellees.
James E. Thompson, James J. Cusack, John W. Robinson, IV, Tampa, Fla., David N. Dittmar, Weirton, W.Va., Joshua M. Morse, III, Tallahassee, Fla., for plaintiffs-appellees, cross-appellants.
Appeals from the United States District Court for the Middle District of Florida.
Before HILL, Circuit Judge, HENDERSON * and BROWN **, Senior Circuit Judges.
Introduction
Captain Deak brought this class action on behalf of 2,000 participants in the Masters, Mates and Pilots Pension Plan (Plan) under the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. Secs. 1001-1461. The District Court determined that the Trustees adopted Amendment 46 for the primary purpose of benefitting the MM & P Union and therefore breached their fiduciary duty under ERISA to act in the sole and exclusive interest of the participants and beneficiaries of the Plan.
The central issue on this appeal is whether the Trustees' actions were arbitrary and capricious in amending the Plan so that the length of time retirement benefits are suspended when a retiree becomes re-employed depends on whether the re-employment is with a contributing or non-contributing employer.
We affirm the District Court's holding that Amendment 46 violates ERISA because its discriminatory effect is arbitrary and capricious and the Trustees breached their fiduciary duty of loyalty to the Plan beneficiaries when they adopted the amendment.
The MM & P Pension Plan originally suspended retirement benefits for the period of re-employment plus six months. 1 In December 1975, in apparent anticipation of the provisions of ERISA due to become effective on January 1, 1976, the Trustees adopted several amendments to the Plan.
Amendment 42, 2 which is not contested in this appeal, changed the terminology in the Plan to prevent confusion with the new terminology used in ERISA. It changed the terminology in the Plan from "Normal Pension" to "Regular Pension" and added a definition for "Normal Retirement Age" which is identical to the definition used in ERISA. Amendment 46 3 revised the "Retirement Defined Rule" regarding the suspension of pension benefits during periods of re-employment. Following this amendment, pension benefits of retirees who become re-employed with non-contributing employers 4 are suspended for a longer period of time than those of retirees who become re-employed with contributing employers. 5 Prior to Amendment 46, retirees who accepted re-employment within the industry all had their pensions suspended for the same length of time regardless of whether their re-employment was with a contributing or non-contributing employer. Thus, the effect of Amendment 46 is to suspend benefits longer if a retiree accepts employment with a company who does not have a collective bargaining agreement with the MM & P Union.
Captain Deak contends that the Trustees enacted Amendment 46 for the sole purpose of benefitting the Union and thereby violated their fiduciary duties under ERISA. The Trustees, on the other hand argued before both this Court and the District Court that the primary purpose of Amendment 46 was to enhance the financial integrity of the Plan. According to the Trustees, the enhanced suspension for re-employment with non-contributing employers would induce steamship companies who hire non-MM & P employees, or non-Union employees to participate in the Plan in order to gain access to experienced licensed deck officers. Without this Amendment, the Trustees contend that there would be no incentive to use MM & P personnel. With no incentive to hire MM & P personnel, the steamship companies would hire non-MM & P employees and would stop contributing to the Plan. With no contributions, the Plan would be unfunded and unable to pay pensions that are already accrued and owed.
The District Court heard conflicting evidence on the Trustees' reasons behind Amendment 46. Despite the Trustees' compelling contentions, the District Court concluded that the amendment was for the primary benefit of the MM & P Union and not the Plan's participants and beneficiaries:
At trial and throughout their brief, the Defendants attempted to portray Amendment No. 46 as a rational and even necessary measure designed to protect the financial integrity of the Plan from the adverse consequences of certain developments in the maritime industry and the weakening financial status of some contributing employers.... [The Trustees argued that b]ecause the employment of other than MM & P Pension Plan personnel on [new, technologically advanced] ships would result in a loss of contributions to the Plan, Amendment No. 46 was adopted to encourage new owners and employers to seek MM & P Pension Plan personnel. The amendment would supposedly attract the new employers to MM & P Pension Plan members by discouraging the most experienced pensioners from seeking employment with non-contributing employers through the mechanism of a harsher penalty for employment with non-contributory employers than for employment with contributing ones.... The Defendants' after-the-fact explanations offered at trial concerning their motivations for the adoption of Amendment No. 46 simply do not mesh with the bulk of the evidence and inferences indicative of their intentions at the time of actual passage.
Deak v. MM & P Pension Plan, No. 84-3651, unpublished slip op. at 15-16 (M.D.Fla. June 5, 1985) (emphasis added).
The District Court's fact finding that the Trustees enacted Amendment 46 for the primary purpose of benefitting the MM & P Union is a plausible factual conclusion with sufficient support in the record and is thus not clearly erroneous. 6 We therefore proceed in our analysis bound by the District Court's finding of fact that the Trustees adopted Amendment 46 for the primary benefit of the union and not the Plan beneficiaries.
The standard of review to be employed by district courts when reviewing trustees' actions under ERISA was clearly established in this Circuit in Sharron v. Amalgamated Insurance Agency Services, 704 F.2d 562 (11th Cir.1983). "[T]he Trustees in the Administration of the Pension Plan must be sustained as a matter of law unless plaintiff can prove such activities have been arbitrary or capricious." Sharron at 564, quoting Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97, 99 (5th Cir.1979). 7
The Supreme Court mandated that trustees have full authority with respect to coverage and eligibility requirements and that a court's role is limited to determining whether the trustees abused their broad discretion by adopting arbitrary and capricious standards. U.M.W. v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982). 8 The District Court should restrict its examination to finding whether a rational relationship exists between the Trustees' actions and the Plan's purpose. 9 This Court, under Anderson v. Bessemer City, should not review for reasonableness, nor should it substitute its view of a rational relationship for that of the District Court, rather, we must examine the District Court's factual findings for plausibility in light of the evidence presented.
Representatives for the Plan contend that the District Court applied an incorrect standard in reviewing the disparate treatment between re-employment with contributing and non-contributing employers. The District Court stated that "[w]hile these justifications may appear reasonable at first glance, they do not withstand the careful scrutiny with which they must be analyzed." Deak, unpublished slip op. at 16 (footnote omitted).
The District Court's opinion clearly reflects that it did apply the correct standard of arbitrary and capricious conduct. The "careful scrutiny" language merely indicates that the trial court was not persuaded by the Trustees' "after-the-fact" explanations and that it closely examined the evidence to discover the true motivation of the Trustees in adopting Amendment 46 rather than merely examining whether the reasons given at trial could have been rationally related to legitimate concerns for the beneficiaries. We cannot overemphasis the importance of the District Court's finding of fact that the Trustee's contention that Amendment 46 was adopted solely to strengthen the Plan's financial integrity was an after-the-fact explanation. No matter how reasonable or rational the explanation may appear at this point in time, the District Court found that it was simply not the reason for the Trustees adopting Amendment 46.
The conditions imposed by Amendment 46 violate federal law in two ways: (i) they are arbitrary and capricious in both their effect on the class of beneficiaries represented by Captain Deak and the manner in which they were adopted; and (ii) they represent a breach of fiduciary duties because they were not enacted for the sole benefit of the Plan's beneficiaries.
In Elser v. I.A.M. Pension Fund, 684 F.2d 648 (9th Cir.1982), cert. denied, 464 U.S. 813, 104 S.Ct. 67, 78 L.Ed.2d 82 (1983), suspension provisions that deprived employees of past service credits were found arbitrary and capricious "because they discriminated among participants and because they were not actuarially justified." Id. at 657. Elser required the Trustees to show some rational nexus between the funds purpose and its discriminatory eligibility requirement. Id. at 656, quoting Roark v. Lewis, 401 F.2d 425, 429 (D.C.Cir.1968).
[B]ecause finite contributions must be allocated...
To continue reading
Request your trial
-
Izzarelli v. Rexene Products Co.
...such an incidental benefit cannot "legitimize" a fiduciary's improper (self-interested) motives. Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572, 579-81 & n. 12 (11th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). In Deak, the plaintiff was a partic......
-
Pension and Employee Stock Ownership v. Patterson
...breached his duty to act in the ESOP's best interests, Plaintiffs cite the Eleventh Circuit case of Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572, 580-81 (11th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988). They claim that Patterson, like each of ......
-
Brown v. Blue Cross and Blue Shield of Alabama, Inc.
...in the sole interests of the beneficiaries by acting to advance the interests of the sponsoring union, Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572, 579-81 (11th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988), or by acting to advance their persona......
-
Walling v. Brady
...861 F.2d 897, 912 (6th Cir.1988), cert. denied, 490 U.S. 1020, 109 S.Ct. 1745, 104 L.Ed.2d 182 (1989); Deak v. Masters, Mates and Pilots Pension Plan, 821 F.2d 572, 581 (11th Cir.1987), cert. denied, 484 U.S. 1005, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988); cf. Geib v. New York State Teamsters C......
-
Liability of Fiduciaries Under Erisa
...29 C.F.R. § 2509.75-8 at D-3. See, Donovan v. Mercer, 747 F.2d 304, 309 (5th Cir. 1984); Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572 (11th Cir. 1987); Local No. 9 v. Chapman, 744 F.Supp. 1008, 1019 (D.Colo. 1990); Freund v. Marshall & Ilsley Bank, 485 F.Supp. 629, 635 (W.D. W......