Flanagan v. Inland Empire Elec. Workers Pension Plan & Trust, No. 91-36188

• Decision Date: 30 August 1993
• Docket Number: No. 91-36188
• Parties: , 17 Employee Benefits Ca 1022 John FLANAGAN; Joseph Missett, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. INLAND EMPIRE ELECTRICAL WORKERS PENSION PLAN & TRUST; Paul L. Briggs; Ralph R. Ecker; Don H. Swartz; Glen L. Evans; George R. Elgin; Clayton M. Smith; John Doe, its named fiduciaries, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1246

3 F.3d 1246

62 USLW 2200, 17 Employee Benefits Ca 1022

John FLANAGAN; Joseph Missett, individually and on behalf

of all others similarly situated, Plaintiffs-Appellants, v. INLAND EMPIRE ELECTRICAL WORKERS PENSION PLAN & TRUST; Paul

L. Briggs; Ralph R. Ecker; Don H. Swartz; Glen L. Evans;

George R. Elgin; Clayton M. Smith; John Doe, its named

fiduciaries, Defendants-Appellees.

No. 91-36188.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 15, 1993.

Decided Aug. 30, 1993.

Stephen M. Rummage, Richard J. Birmingham, Bruce Lamka, Clifford Cantor, Davis Wright Tremaine; Seattle, WA, for plaintiffs-appellants.

Allen Bruce McKenzie, Donaldson, Kiel & McKenzie, Seattle, WA, for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before: CANBY, WIGGINS, and T.G. NELSON, Circuit Judges.

CANBY, Circuit Judge:

Former participants in a multiemployer, collectively-bargained pension plan brought this action under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. Secs. 1001-1461 (West 1985 & Supp.1993), seeking injunctive and monetary relief against the plan and its trustees. The plaintiffs contend that the plan denied them vested benefits and that the plan's trustees breached fiduciary duties. The district court granted the defendants summary judgment. We reverse and remand.

I

John Flanagan and Joseph Missett were employed in the construction of nuclear power facilities at Hanford, Washington. When work on those facilities slowed dramatically, the two men lost their jobs in 1983. Flanagan and Missett, each four-year veterans of the project, had been accruing benefits as participants under the Inland Empire Electrical Workers Pension Plan and Trust (the Plan). However, each fell short of the Plan's five-to-ten year service term required in order for accrued benefits to become nonforfeitable; that is, for those benefits to vest.

The Plan, in compliance with federal law, allowed the men four years, their length of service prior to layoff, in which to resume covered employment without forfeiting the prior service credit towards vesting. That allowance is known as the "rule of parity." See 26 U.S.C. Sec. 411(a)(6)(D) (1988) (Internal Revenue Code (IRC) provision); 29 U.S.C. Sec. 1053(b)(3)(D) (1988) (parallel ERISA provision). Neither had returned to covered employment when the Plan terminated in 1985.

Upon the Plan's termination, its trustees distributed the Plan's assets among those it deemed to be its participants. The Plan made no distribution to persons subject to the rule of parity, nor did it notify those persons of the termination. Flanagan and Missett eventually filed claims for benefits, but the Plan rejected those claims. The two then brought this action, in November 1990, on behalf of themselves and similarly situated former employees. ¹

The Plan had enjoyed "qualified" status under federal law. Qualified status afforded tax benefits to the employers and to the labor organizations that contributed to the Plan, but required that the Plan meet minimum standards contained in ERISA and the IRC. One of those standards provided that, upon a partial or complete termination of the Plan, accrued benefits of "affected employees" become nonforfeitable. 26 U.S.C. Sec. 411(d)(3) (1988). The Plan document implemented that standard, providing that in the event of a partial or a complete termination the "rights of each affected Participant ... shall be nonforfeitable." Flanagan and Missett argue that they are entitled to pension benefits because they were affected participants when the Plan terminated.

The district court disagreed. It reasoned that the plaintiffs were no longer participants in the plan after their layoff in 1983. It rejected the argument that the rule of parity preserved their accrued benefits until the Plan terminated in 1985.

The plaintiffs argued in the alternative that their rights in the Plan had vested upon a partial termination of the Plan that allegedly had occurred in 1982-83, prior to their discharge. During that year, participation in the Plan had declined significantly due to layoffs. That decline, they argued, had amounted to a partial termination under the Code. See Treas.Reg. Sec. 1.401-6(b)(2) (1988).

Without deciding whether a partial termination had occurred, the district court found that the partial termination claims were time-barred. The court applied the six-year Washington statute of limitation applicable to contract actions, Wash.Rev.Code Ann. Sec. 4.16.040 (West 1988 & Supp.1993), and found that the statute had begun to run on the date of the alleged partial termination. The court refused to toll the statute.

The district court had jurisdiction over the matter under 29 U.S.C. Sec. 1132(e), and we have jurisdiction over the appeal under 28 U.S.C. Sec. 1291. The standard of review is de novo. Wang Lab. v. Kagan, 990 F.2d 1126, 1128 (9th Cir.1993). The parties raise no disputed issues of material fact. Therefore, we ask only whether the district court correctly applied the relevant substantive law when it granted the defendants summary judgment. See id.

II

We consider initially the claims against the Plan, and focus upon the benefit claims that arose from the complete termination of the Plan in 1985. We conclude that former employees who were subject to the rule of parity when the Plan terminated are "affected participants" within the meaning of the Plan. Summary judgment for the Plan was improper because those persons retained accrued benefits which became nonforfeitable when the Plan terminated. We further conclude that the plaintiffs' action to obtain those benefits was filed in a timely manner.

A

Notwithstanding the district court's ruling to the contrary, we conclude that Flanagan, Missett, and former employees similarly situated were participants in the Plan when the Plan fully terminated. Participant status is relevant here for two reasons. First, by its terms ERISA Sec. 502(a)(1)(B) permits only participants or beneficiaries of a plan to sue for benefits. See 29 U.S.C. Sec. 1132(a)(1)(B) (1988). Second, under section 11.02 of the Plan document, only the accrued benefits of "affected participants" became nonforfeitable as a result of the plan's termination. The parties appear to assume that participant means the same thing in each of those contexts, and we see no reason to doubt that assumption. We believe that the term as defined in the plan controls our inquiry, insofar as that meaning does not conflict with that contained in the relevant provisions of ERISA and the IRC. See Tilley v. Mead Corp., 927 F.2d 756, 760 (4th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 3013, 120 L.Ed.2d 886 (1992).

Section 2.21 of the Plan document defines a participant in the Plan as

an Employee or former Employee who has become a Participant in the Plan in accordance with section 4.01 and who is participating in the Plan in one of the categories of participation specified in section 4.02.

Flanagan and Missett became participants under section 4.01, prior to their layoff, because their employer had begun making contributions on their behalf. Section 4.02 provides in relevant part:

Each participant shall be considered to be an Active Participant, Inactive Participant, Terminated Vested Participant, Terminated Non-Vested Participant, or Retired Participant, as follows:

. . . . .

(d) "Terminated Non-Vested Participant" means a former Employee who has terminated his participation in accordance with Section 8.01 [and] who does not have a Vested Interest in accordance with Section 8.03....

Flanagan and Missett were terminated non-vested participants in 1985. Each man had "terminated his participation" in the Plan after his 1983 layoff because neither returned to work for the number of hours required for renewed participation under section 8.01. In addition, neither man had a vested interest in the Plan under the usual five-to-ten year service requirement contained in section 8.03.

The plaintiffs maintain that under section 4.02 of the Plan, terminated non-vested participants remain participants for purposes of the Plan. The plain language of sections 2.21 and 4.02 compels us to agree. Terminated non-vested participants are but one subset of the overall group of participants. ²

The district court believed that a plain language reading of section 4.02 was untenable, on the ground that such a reading necessarily made the concept of participant subgroups meaningless. We disagree. There may have been other provisions of the Plan, not at issue here, which were implemented differently among individual participants. ³ If so, implementation of those provisions either might have required, or might have benefitted from, subdividing the set of Plan participants. Cf. Connecticut Nat'l Bank v. Germain, --- U.S. ----, ----, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992) (courts should reject an interpretation that renders a statutory provision wholly superfluous, not merely redundant or meaningless in some respects).

We reject the defendants' similar reasoning that to recognize a terminated non-vested employee as a participant requires that every former employee be given benefits. In the first place, benefits do not flow simply because one is labeled a participant. In the present case, for example, plaintiffs are protected against forfeiture of benefits on termination of the Plan only if they qualify as "affected" participants. In addition, all employment is not necessarily participation. ERISA permits a qualified plan, like this one, to require each employee to tally up to 1,000 hours of service in a single year before the employee may participate in that plan. See 29 U.S.C. Sec. 1052(a)(1)(A)(ii), (3)(A) (1988). ⁴

Our reading of participant is consistent with the scope of IRC Sec. 411(d)(3). To a degree, that section has a broader reach than the Plan itself: the statute speaks of employees...