Gaines v. Amalgamated Ins. Fund

• Decision Date: 25 February 1985
• Docket Number: No. 84-1245,84-1245
• Citation: 753 F.2d 288
• Parties: GAINES, Edith, Appellee, v. The AMALGAMATED INSURANCE FUND, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 288

753 F.2d 288

GAINES, Edith, Appellee, v. The AMALGAMATED INSURANCE FUND, Appellant.

No. 84-1245.

United States Court of Appeals Third Circuit.

Argued Nov. 1, 1984.

Decided Jan. 23, 1985.

Rehearing and Rehearing En Banc Denied Feb. 25, 1985.

Jennifer A. Stiller, Ernest L. Tsoules, Jr. (Argued), Berriman & Schwartz, King of Prussia, Pa., Joseph T. Sebastianelli Law Associates, Malvern, Pa., for appellant.

Robert A. Rosin (Argued), Michael L. Golden, Philadelphia, Pa., for appellee.

Before GARTH and SLOVITER, Circuit Judges, and BARRY, District Judge. ^*

OPINION OF THE COURT

GARTH, Circuit Judge:

On essentially undisputed facts, the parties to this case dispute whether the Trustees' of the Amalgamated Pension Fund ("the Fund") interpretation of the Plan document to deny disability benefits to Edith Gaines is a permissible one. The district court found the Trustees' interpretation to be arbitrary and capricious and directed payment of benefits to Gaines. Because we believe that the Trustees' interpretation of the Plan is a reasonable one, and is therefore neither arbitrary nor capricious, we reverse the judgment of the district court.

I.

The Plan provision in question requires for eligibility, that a disability claimant:

(b) Has been Totally and Permanently Disabled, as defined in Section 2.1 ¹ hereof, such disability has continued for a period of at least 18 consecutive weeks, and is eligible to receive disability insurance benefits under Title II of the Federal Social Security Act within nine months of last date of Covered Employment.

Section 4.3(b). The Trustees interpret this provision to require for Plan eligibility that a claimant actually becomes eligible to receive benefits within nine months of termination of employment. ² Under the Trustees' view, only those found to have become disabled within three months of termination are in fact eligible; the Trustees having interpreted the nine-month provision of the Plan to take into account the six-month waiting period prescribed by Social Security.

Gaines, on the other hand, interprets this provision to require only that the Social Security Administration find that the onset of the claimant's disability, rather than the eligibility to receive Social Security benefits, occurred within nine months of termination. Since a claimant is not eligible to receive Social Security Disability benefits until six months after the date of onset of disability, this difference between the two interpretations is significant.

At trial, the parties stipulated that Gaines was a covered employee, had served the required number of years, and last worked on August 4, 1978. An Administrative Law Judge's report ³ found that Gaines' disability commenced on April 23, 1979 (eight months and nineteen days after her termination). According to the April 23, 1979 date of onset of disability, Gaines' Social Security benefits began in October, 1979, 14 months after termination, or five months beyond the period of time which would qualify Gaines under the Trustees' interpretation of the Plan.

II.

Judicial review of interpretation of a pension plan document by the Trustees charged with administering the Plan is limited to whether the Trustees' interpretation is arbitrary and capricious. Wolf v. National Shopmen Pension Fund, 728 F.2d 182, 187 (3d Cir.1984); Rosen v. Hotel and Restaurant Employees and Bartenders Union, 637 F.2d 592, 596 n. 5 (3d Cir.), cert. denied, 454 U.S. 898, 102 S.Ct. 398, 70 L.Ed.2d 213 (1981).

A plan interpretation should be upheld even if the court disagrees with it, so long as the interpretation is rationally related to a valid plan purpose and not contrary to the plain language of the plan. See Miles v. New York State Teamsters Conference Pension and Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 601 (2d Cir.), cert. denied --- U.S. ----, 104 S.Ct. 105, 78 L.Ed.2d 108 (1983). Our review of the district court's determination that the Trustees' interpretation was arbitrary and capricious is plenary for application of legal principles. Findings of fact are measured by a clearly erroneous standard. The question of whether ambiguity exists is a question of law, subject to plenary review. See Fox v. U.S. Department of Housing, 680 F.2d 315, 319 (3d Cir.1982).

The terms of the Plan provide for eligibility for a disability pension if the claimant "is eligible to receive disability insurance benefits under Title II of the Federal Social Security Act within nine months of last date of Covered Employment." Under the Social Security Act (SSA), 42 U.S.C. Sec. 423, the time of entitlement for disability benefits is defined as "each month beginning with the first month after his waiting period...." Section 423(c)(2) defines this waiting period as "[t]he earliest period of five consecutive calendar months throughout which the individual with respect to whom such application is filed has been under a disability...." Thus, under the SSA, benefits do not begin, nor is a claimant entitled to benefits, until the sixth month after the onset of disability. Gaines' eligibility certificate therefore bore a "date of entitlement" of "10/79", or six months after April 23, 1979, the date of onset of disability.

The waiting period under the SSA is seen necessary to ensure that a claimant's disability is in fact a permanent disability. See H.Rep. No. 1189, 84th Cong., 1st Sess. 6 (1955), U.S.Code Cong. & Admin.News 1956, p. 3877. The Trustees urge that the Social Security waiting period also serves to insure that the disability for which claim is made was the cause of the claimant's termination of employment: that is, that a disability whose onset is closer in time to termination of employment is a disability more likely to be employment related. ⁴

Given this background, we cannot agree with Gaines that the onset date must be the date which controls for qualification under the nine-month provision of the Plan. By its plain meaning, "eligible to receive" disability insurance benefits is clearly susceptible to an interpretation by the Trustees that the entitlement date for Social Security benefits must fall within the nine-month period prescribed by the Plan. ⁵ Nor can we say that the Trustees' interpretation of the Plan, which depends upon the "entitlement date" under the Social Security Act, is unrelated to any valid Plan purpose. We conclude that the interpretation by the Trustees is therefore neither arbitrary nor capricious, and, as a consequence, must be upheld.

III.

The judgment of the district court will be reversed, and the district court will be directed to enter judgment for the Amalgamated Insurance Fund.

SLOVITER, Circuit Judge, dissenting.

Edith Gaines was an employee in the clothing industry insured under a collectively bargained for multiemployer pension and disability plan, administered by defendant Amalgamated Insurance Fund. Plaintiff left her employment on August 4, 1978, alleging permanent and total disability. A doctor's report in the record finds Mrs. Gaines suffers from a variety of chronic conditions, including degenerative arthritis, diabetes, and hypertensive cardiovascular disease, and states that she was totally and permanently disabled as of October, 1978.

In September, 1978 plaintiff filed an application for disability benefits under the Social Security Act. These benefits were awarded by an Administrative Law Judge by decision dated August 3, 1979, which stated that "beginning on April 23, 1979, the claimant was under a 'disability' as that term is defined in the Social Security Act." Payment of Social Security benefits does not begin until five months after this onset date. 42 U.S.C. Sec. 423(c)(2)(A) (1982). Therefore, Gaines began to receive Social Security disability benefits in October 1979.

In February 1980, Gaines filed an application for disability benefits under her fund's retirement plan. There is no question that she met the length of service requirements of the plan and was permanently and totally disabled under the meaning of the plan provisions. The trustees of the plan rejected her application, however, because they concluded that she was not "eligible to receive disability insurance benefits under Title II of the Federal Social Security Act within nine months of the last date of Covered Employment," (emphasis added), as required by the plan.

The trustees interpret the plan's requirement that a participant must be "eligible to receive disability insurance benefits ... within nine months" to mean that s/he must not only have an onset date established by the Social Security Administration within 9 months, but also must be entitled to receive benefits commencing on (or dating retroactively back to) a date within 9 months. Thus, according to the trustees, although Gaines was found by the Social Security Administration to have become disabled within nine months of the last date of covered employment, she was nonetheless not entitled to her disability pension because the 5 months waiting period established by statute for disability claimants precluded her from receiving benefits within the nine months.

The district court found that the trustees' interpretation was arbitrary and capricious, the agreed upon standard of review, and entered judgment for plaintiff. In Dennard v. Richards Group, Inc., 681 F.2d 306, 314 (5th Cir.1982), the court stated, "A rational and reasonable interpretation of a plan may still be arbitrary and capricious if contrary to the plain meaning of the plan." The court further stated, "When the trustee's interpretation of a plan is in direct conflict with the express language in a plan, this action is a very strong indication of arbitrary and capricious behavior." Id. We also have recently held that when a trustee's decision deviated from the terms of a plan or established interpretations, that determination was arbitrary and capricious. Wolf v. National Shopmen Pension Fund, 728 F.2d...