Elser v. I. A. M. Nat. Pension Fund

• Decision Date: 20 August 1982
• Docket Number: 81-5024,Nos. 80-6095,s. 80-6095
• Citation: 684 F.2d 648
• Parties: 95 Lab.Cas. P 13,774, 3 Employee Benefits Ca 2155 Madge H. ELSER and Margaret E. Thomas, individually and on behalf of all others similarly situated, Plaintiffs-Appellees and Cross-Appellants, v. I. A. M. NATIONAL PENSION FUND, Defendant-Appellant and Cross-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 648

684 F.2d 648

95 Lab.Cas. P 13,774, 3 Employee Benefits Ca 2155

Madge H. ELSER and Margaret E. Thomas, individually and on behalf of all others similarly situated, Plaintiffs-Appellees and Cross-Appellants, v. I. A. M. NATIONAL PENSION FUND, Defendant-Appellant and Cross-Appellee.

Nos. 80-6095, 81-5024.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted March 10, 1982.

Decided Aug. 20, 1982.

Robert M. Simpson, Rose, Klein & Marias, Los Angeles, Cal., for defendant-appellant and cross-appellee.

Robert D. Vogel, Pappy, Kaplon & Vogel, Los Angeles, Cal., for plaintiffs-appellees and cross-appellant.

Appeal and Cross-Appeal from the United States District Court for the Central District of California.

Before HAYNSWORTH ^* and CHOY, Circuit Judges and JAMESON, ^** District Judge.

JAMESON, Senior District Judge:

Defendant-appellant, I. A. M. National Pension Fund, has appealed from a judgment holding that the Fund's cancellation provisions are arbitrary and capricious and that plaintiffs-appellees, Madge H. Elser and Margaret C. Thomas, and others similarly situated, were improperly denied pensions.

I. Factual Background

The Fund operates a multiemployer pension plan structured in accordance with the requirements of Section 302(c)(5) of the Labor-Management Relations Act (LMRA), 29 U.S.C. § 186(c)(5), and as defined in Section 3(37) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1002(37). The plan was created in 1960 by the International Association of Machinists and Aerospace Workers (I.A.M.) and several employers of I.A.M. represented employees. The plan is administered by trustees designated by the international union and participating employers. Each participating employer and local union has agreed to comply with terms established in their collective bargaining agreements and in the trust agreement under which the plan was created and operates.

The plan provides that employees must have at least ten years of "credited service" to qualify for pension benefits. "Credited service" is comprised of both "past service credit" (i.e. credit for periods of eligible employment prior to an employer's initial contribution) and "future service credit" (credit for periods of covered employment for which contributions were actually made). ¹ Although the pension "vests" when an employee accumulates ten years of credited service, pension payments do not begin until the employee attains age fifty.

Waste King, former employer of Elser and Thomas, began contributing to the pension plan on January 1, 1969, pursuant to its 1968 collective bargaining agreement with I.A.M. District Lodge No. 94. In December of 1974, approximately fifty of Waste King's employees met to consider decertifying the I.A.M. union. The collective bargaining agreement between Waste King and the union expired January 31, 1975, at which time Waste King ceased contributing to the plan. On February 26, 1975, the employees met again to consider decertification. Two days later the union lost a decertification election.

Elser and Thomas were both employed by Waste King for at least ten consecutive years. As a result of Waste King's withdrawal from the plan on January 31, 1975, both appellees had only six years of future service credit. The remainder of their ten years service was past service credit.

When Waste King withdrew from the Fund in 1975, Article IX, Section 4 of the plan provided for retroactive cancellation of all past service credit should an employer cease making contributions to the Fund and remain in business. Excluded from this cancellation were those employees who were already receiving pensions or who had left their employment more than 24 months before or within 30 days after their employer's termination of participation. The plan also allowed the reinstatement of past service credit if the covered employee earned at least five more years of future service credit within eight years of his employer's termination of participation. ² The Fund had attempted to give employees notice of these provisions through pension booklets, union meetings and the I.A.M. newspaper. ³

On June 3, 1975, the Fund notified Waste King and the union by letter that pursuant to Article IX, Section 4, all past service credit accumulated by plan participants who had not left the employment of Waste King over 24 months before or 30 days after January 31, 1975 had been cancelled. This letter, which was not mailed to the plan participants, did not mention that past service credit could be restored by accumulating five additional years of future service credit within eight years or indicate that minimum service requirements could be met by obtaining future service credit from a different contributing employer. No plan participant avoided the forfeiture of past service credit by leaving the employment of Waste King during the 30 day grace period provided by the Fund. ⁴

Thomas terminated her employment with Waste King in August 1975 and applied for a pension shortly thereafter. As a result of the cancellation of her past service credit she did not have ten years credited service and her application was denied. Elser terminated employment in October 1977 and was subsequently denied a pension for the same reason.

II. Proceedings in District Court

In June, 1978 Elser and Thomas brought this action for injunctive and declaratory relief pursuant to § 302(c)(5) of the LMRA, 29 U.S.C. § 186(c)(5) and § 404(a)(1) of the ERISA, 29 U.S.C. § 1104(a)(1). They sought, inter alia, a judgment declaring that the cancellation of past service credit was unlawful, and therefore null and void, and "establishing plaintiffs' and the class they represent, eligibility for a pension under the Plan and stating the number of years of credited service to which said employees are entitled." The Fund's answer denied that the cancellation was unlawful and alleged that the plaintiffs were barred by waiver and estoppel, because they had voluntarily decertified the union with full knowledge of the consequences to their pension plan eligibility.

The case was submitted on stipulated facts. In a memorandum decision entered on September 5, 1980 the court found that the cancellation provisions were "arbitrary and capricious on their face and as applied to plaintiffs," and, as such, violative of both the LMRA and the ERISA. With respect to Thomas, the court found, as an alternative ground for relief that Thomas had not received adequate notice of the operation of the cancellation provisions. The court rejected the Fund's estoppel defense, since the plaintiffs "did not voluntarily decertify the union." ⁵

On October 29, 1980, the court certified the proposed class of approximately 75 plaintiffs in two subclasses. Subclass No. 1 includes nonretired employees who left Waste King employment before January 31, 1975 (the termination date of Waste King's contributions), but within 24 months before decertification and withdrawal. Subclass No. 2 includes persons employed by Waste King at the time of decertification and withdrawal. All members of the subclasses had at least ten years of continuous employment with Waste King.

In Findings of Fact and Conclusions of Law filed November 26, 1980, the court enjoined the Fund from removing past service credit in calculating plaintiffs' pension eligibility, and awarded retroactive pension benefits, interest, costs and attorney fees. A formal judgment was entered "in accordance with the Findings of Fact and Conclusions of Law". The Fund appealed from the judgment entered in favor of the plaintiff. Elser cross-appealed from the finding of adequate notice.

III. Issues on Appeal

The issues presented on appeal are (1) whether the plaintiffs waived their claim to past service credit through decertification of the union; (2) whether the Fund's rules for cancelling past service credit were arbitrary and capricious under LMRA § 302 (29 U.S.C. § 186) and ERISA § 404 (29 U.S.C. § 1104); and (3) whether the Fund gave the plaintiffs adequate notice of the cancellation provisions.

IV. Jurisdiction

Section 302 of the LMRA, 29 U.S.C. § 186, makes it "unlawful for any employer or association of employers" to pay any money or other thing of value to employee representatives. Section 302(c)(5) creates an exception for employee pension funds, stating that the provisions of Section 302 are not applicable

with respect to money or other thing of value paid to a trust fund established by such representative, for the sole and exclusive benefit of the employees of such employer, and their families and dependents (or of such employees, families, and dependents jointly with the employees of other employers making similar payments, and their families and dependents)....

29 U.S.C. § 186(c)(5) (emphasis added). Section 302(e), 29 U.S.C. § 186(e), provides that federal district courts have jurisdiction "to restrain violations of this section."

This court has consistently recognized that § 302(e) "grants district courts jurisdiction to determine whether the provisions of a given retirement fund constitute a structural defect in violation of § 302(c)(5)," but does not "confer general power to interfere with provisions of agreements freely entered into between unions and employers which regulate day-to-day administrative matters of pension coverage and eligibility." Burroughs v. Board of Trustees & Pension Trust, etc., 542 F.2d 1128, 1130 (9 Cir. 1976), cert. denied, 429 U.S. 1096, 97 S.Ct. 1113, 51 L.Ed.2d 543 (1977). See also Alvares v. Erickson, 514 F.2d 156, 165 (9 Cir.) cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975); Wilson v. Board of Trustees, etc., 564 F.2d 1299, 1300 (9 Cir. 1977); Ponce v. Construction Laborers Pension Trust, 628 F.2d 537, 541 (9 Cir. 1980). A "structural" defect is present when "pension trustees, acting under the authority of the trust fund 'arbitrarily and capriciously' den(y) pensions to employees."...