Grossmuller v. International Union, United Auto., Aerospace and Agr. Implement Workers of America, UAW, Local 813

• Decision Date: 02 September 1983
• Docket Number: No. 82-1635,82-1635
• Parties: 4 Employee Benefits Cas. 2082 GROSSMULLER, Raymond v. INTERNATIONAL UNION, UNITED AUTOMOBILE AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW, LOCAL 813 of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America UAW, and the Budd Co., the Budd Company Consolidated. Appeal of the BUDD COMPANY CONSOLIDATED RETIREMENT BENEFIT PLAN FOR EMPLOYEES.
• Court: U.S. Court of Appeals — Third Circuit

Page 853

715 F.2d 853

4 Employee Benefits Cas. 2082

GROSSMULLER, Raymond v. INTERNATIONAL UNION, UNITED AUTOMOBILE AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW, LOCAL 813 of

the International Union, United Automobile, Aerospace and

Agricultural Implement Workers of America UAW, and the Budd

Co., the Budd Company Consolidated.

Appeal of the BUDD COMPANY CONSOLIDATED RETIREMENT BENEFIT

PLAN FOR EMPLOYEES.

No. 82-1635.

United States Court of Appeals, Third Circuit.

Argued July 12, 1983.

Decided Sept. 2, 1983.

Carter R. Buller (argued), Robert M. Goldich, Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., for appellant.

Stephen G. Pollock (argued), Stack & Gallagher, P.C., Philadelphia, Pa., for appellee Grossmuller.

Before SEITZ, Chief Judge, and SLOVITER and VAN DUSEN, Circuit Judges.

OPINION OF THE COURT

VAN DUSEN, Senior Circuit Judge.

This appeal from a district court order restoring plaintiff's entitlement to disability benefits under his former employer's pension plan requires consideration of three issues. First, did the pension plan's claims procedure comply with the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1133 (ERISA)? Second, was it an abuse of discretion to award to the plaintiff benefits retroactive to the date of his termination from the plan's coverage? Third, was it an abuse of discretion to enjoin the pension plan from undertaking any prospective termination of plaintiff's benefits without adoption by the plan, and approval by the district court, of a claims procedure consonant with ERISA? We hold that the district court correctly concluded that the pension plan's claims procedure failed to satisfy ERISA requirements and properly awarded the plaintiff retroactive benefits. We also hold that the wording of the injunction prohibiting prospective termination of the plaintiff's benefits was ambiguous. Accordingly, the order of the district court will be affirmed in part and reversed in part and the matter will be remanded to that court for further proceedings consistent with this opinion.

I.

In July of 1973 plaintiff (hereafter "Grossmuller") began receiving disability benefits under the terms of a consolidated retirement benefit plan which had been established by a collective bargaining agreement between his employer, the Budd Company, and the United Automobile, Aerospace and Agricultural Implement Workers of America. A local board, composed of three Budd Company and three union representatives, administered the plan locally by determining the rights of plan participants, by receiving and acting upon benefit applications, by authorizing payments and by notifying participants of any termination or suspension of benefits and the reasons therefor. The national board, consisting of four members appointed by the Budd Company and four by the union, provided forms to claimants to be used in filing and processing applications, heard and determined appeals from the local boards and interpreted the pension plan for participants.

To remain eligible for disability benefits, Grossmuller, a pensioned participant in the plan, could not engage in regular employment or in an occupation for remuneration or profit. In 1977 the Budd Company's personnel manager, a member of the local board, received information leading him to believe that Grossmuller was so employed and therefore no longer eligible for benefits. To investigate, the personnel manager contacted a private detective, who appeared personally before the board with movies allegedly showing Grossmuller tending bar at a country club. The detective also presented a report, based upon an interview with the owner of the club, that Grossmuller was working off a $3800. loan which he had received from the owner. On August 10, 1977, the board, on the basis of this evidence, voted unanimously to terminate Grossmuller's benefits. Five days later the board notified Grossmuller of the decision and cited gainful employment as the basis for terminating his benefits. The board did not apprise Grossmuller of what evidence it considered.

Grossmuller then went to the local union president, Henry Gryn, who was also a member of the local board. At trial, Gryn's and Grossmuller's recollections of their conversation differed. Grossmuller testified on direct examination that Gryn said that the local board had a meeting and found that Grossmuller had been gainfully employed. According to Grossmuller, Gryn gave him a form for filing an appeal but provided him with no other information about the decision.

Gryn, however, recalled that during the colloquy he explained to Grossmuller the evidence presented to the local board, as follows:

"I told him that the evidence was very strong. I told him about the film and the different things that were in the film.

"We also told him about the investigator's comments about the loan that he had. I also told him that he had an obligation to try to give us some evidence that would contradict what was in this film and what was said by the investigator.

"I also explained to him the appeal procedure but I did not give him a form....

"Q But, when you described the appeal procedures to him, that during that conversation that you had with him, you didn't tell him that he had a right to appear in front of the Board, did you?

"A No, I did not.

"Q Did you tell him he could introduce documentary evidence?

"A Yes."

(N.T. 231a-32a). In a letter dated August 30, 1977, Grossmuller protested the termination of his benefits and requested an appearance before the board. On September 14, 1977, the board sent Grossmuller instructions and a form with which to appeal the decision. Eight days later Grossmuller completed and returned the form. On October 12, 1977, the local board affirmed the denial of benefits without allowing Grossmuller to appear before it and informed him of his right to appeal the decision to the national board. Grossmuller did so, and on December 20, 1977, the national board reviewed and denied Grossmuller's appeal.

In December of 1979 Grossmuller filed this action in the Court of Common Pleas of Philadelphia County against the Budd Company and the union, which removed the matter to the United States District Court for the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1446(d). In March of 1980 the district court ordered Grossmuller to join the plan as an indispensable party. The company, union and plan all moved for summary judgment, which the district court granted on March 17, 1981, in favor of the company and union. The district court later granted part of the plan's motion but denied the remainder. See Grossmuller v. International Union, U.A.W., 511 F.Supp. 709 (E.D.Pa.1981). ¹

In September of 1981 the district court, sitting without a jury, heard evidence on the issue of whether the plan's claims procedure satisfied ERISA requirements. The court rendered a decision favorable to Grossmuller on September 10, 1982. From this order the plan filed the instant appeal. See Grossmuller v. Budd Company Consolidated Retirement Benefit Plan for Employees, 547 F.Supp. 111 (E.D.Pa.1982). ²

II.

The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1133, provides that

"In accordance with regulations of the Secretary, every employee benefit plan shall--

(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim."

Although the statutory requirements under subsection (1) are clear and precise, the parameters of "a reasonable opportunity ... for a full and fair review," provided in subsection (2), need further elaboration. The legislative history of ERISA affords scant insight into the exact procedure contemplated by Congress, but the intent of encouraging internal resolution of claims is apparent. The House conference report accompanying the act directed courts to regard ERISA civil actions brought by participants and beneficiaries "as arising under the laws of the United States in similar fashion to those brought under § 301 of the Labor Management Relations Act of 1947." H.R.Rep. No. 93-807, 93d Cong., 2d Sess., reprinted in [1974] U.S.Code Cong. & Ad.News 4639, 5107. Within the labor context federal courts have consistently favored internal resolution procedures in order to promote orderly settlement of disputes, to assure uniform processing and treatment of claims, and to avert whenever possible the expense and delay incident to resort to the courts. See generally Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 96 S.Ct. 1048, 47 L.Ed.2d 231 (1976), and Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967). ³ See also 29 U.S.C. § 173(d). ERISA also endorsed this policy by conferring broad managerial discretion upon the pension plan trustees, who are primarily responsible for devising and implementing claims procedure. See Toland v. McCarthy, 499 F.Supp. 1183 (D.Mass.1980), and Sample v. Monsanto Co., 485 F.Supp. 1018 (E.D.Mo.1980). Thus, "full and fair review" must be construed not only to allow a pension plan's trustees to operate claims procedures without the formality or limitations of adversarial proceedings but also to protect a plan participant from arbitrary or unprincipled decision-making. ⁴

To afford a plan participant whose claim has been denied a reasonable opportunity for full and fair review, the plan's fiduciary must consider any and all pertinent information reasonably available to him. The decision must be supported by substantial evidence. The fiduciary must notify the participant promptly, in writing and in language likely to be...