Insley v. Joyce

• Decision Date: 12 August 1971
• Docket Number: No. 71 C 744.,71 C 744.
• Citation: 330 F. Supp. 1228
• Parties: Claude W. INSLEY, Plaintiff, v. William D. JOYCE et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

330 F. Supp. 1228

Claude W. INSLEY, Plaintiff, v. William D. JOYCE et al., Defendants.

No. 71 C 744.

United States District Court, N. D. Illinois, E. D.

August 12, 1971.

COPYRIGHT MATERIAL OMITTED

George E. Faber, James P. Chapman, William J. Harte, Chicago, Ill., for Claude W. Insley.

Leo Segall, Michael C. Greenfield, Asher, Greenfield, Gubbins, & Segall, Chicago, Ill., for defendants.

MEMORANDUM OPINION

WILL, District Judge.

This class action, challenging a provision of a pension plan adopted by the defendants or their predecessors, is brought by a retired member of Local Union No. 710, International Brotherhood of Teamsters (hereafter referred to as Local 710), who, pursuant to the challenged provision, was denied a retirement pension by the defendants. The plaintiff alleges federal subject matter jurisdiction of this action under § 302 of the Labor Management Relations Act of 1947, 29 U.S.C. § 186 (hereafter referred to as the Act). The defendants move to dismiss the first amended complaint on the grounds that this Court lacks jurisdiction over the subject matter of the complaint and that the complaint fails to state a claim upon which relief may be granted.

The facts are not substantially in dispute. In February of 1955, the Pension Fund involved herein was established by representatives of Local 710 and the Central Motor Freight Association Inc. of Illinois, an association of trucking companies. The Pension Fund agreement provided that its trustees would pay retirement benefits to union members in accordance with the provisions of a Pension Plan to be formulated later. The Fund agreement provides for the employers to make continuing contributions pursuant to the provisions of the collective bargaining agreements entered into between the individual trucking companies and Local No. 710.

Some time after the establishment of the Fund, a Pension Plan was adopted by the trustees containing eligibility provisions for retirement pensions. This Plan provides that Local 710 members are entitled to retirement benefits if they have twenty years of "Credited Service" and satisfy other conditions which are not in issue in this case. The term "Credited Service" is defined as "* * * the sum of an Employee's Past Service and Future Service." The Plan further provides that no credit shall be given to an employee for past service for any period of covered employment prior to an interruption of covered employment of more than three years duration. It is this latter "break-in-service" provision which the plaintiff alleges violates Section 302 of the Act.

The plaintiff has been a member of Local No. 710 for more than thirty years, since about 1940. He apparently has "Covered Employment" from that time until about 1952. From February 1952 through April of 1956, he drove a truck for Reo Motors, the latter not having a collective bargaining agreement with Local No. 710. This employment period, therefore, is not considered under the Plan as "Covered Employment." From April of 1956 through November of 1967, when he retired, the plaintiff was again employed by employers who had collective bargaining agreements with Local No. 710, thus again accruing "Covered Employment." These latter employers made substantial contributions into the Pension Fund on behalf of the plaintiff pursuant to their collective bargaining agreements. After retirement, the defendants refused plaintiff's request for a retirement pension, notwithstanding his some twenty-three years of covered employment, because he had had a break in "Credited Service" as a result of his employment with Reo for more than three years which precluded crediting him with any employment prior to 1952, and notwithstanding further that his employment with Reo commenced three years before the Pension Fund was even established. He was thus not deemed to have the requisite twenty years of "Credited Service."

The first basis for the defendants' motion to dismiss is that this Court lacks jurisdiction over this complaint. The defendant contends that this Court has no jurisdiction to resolve disputes between parties to a pension plan created pursuant to Section 302. While this statement is correct as to disputes concerning the day-to-day administration of such a plan and trust, it is not determinative in the circumstances of this case.

Subsections (a) and (b) of Section 302 make it unlawful for an employer to make payments to a representative of his employees and for a representative to receive such payments. Subsection (c) (5) carves out an exception to the foregoing provisions for payments made to a trust fund complying with a statutorily enumerated list of requirements which include the following:

(1) the trust fund must be established for the sole and exclusive benefit of employees and dependents;

(2) payments must be held in trust to pay, from principal or income, for such employees' medical care, pensions, illness, etc.;

(3) the detailed basis of payments must be set forth in writing;

(4) employers and employees must have equal representation, with a provision for a neutral person or umpire;

(5) the plan must contain provisions for an annual audit; and

(6) there must be separate trusts for pension and annuity funds.

Subsection (e) of Section 302 provides that district courts of the United States shall have jurisdiction, for cause shown, to restrain violations of this section.

The case law appears to be settled, and the defendants agree, that this Court has jurisdiction to review all allegations regarding a union pension fund that relate to structural violations, by which term is meant violations of the statutory requirements enumerated in Section 302 (c) (5), although we have no jurisdiction to inquire into mere violations of fiduciary obligations or standards of prudence in the ordinary administration of the trust fund. Bowers v. Ulpiano Casal, Inc., 393 F.2d 421, 424 (1st Cir. 1968); Giordani v. Hoffmann, 295 F. Supp. 463, 470 (E.D.Pa.1969); Porter v. Teamsters etc. Funds, 321 F.Supp. 101, 103 (E.D.Pa.1970). Cf., Employing Plasterers' Association of Chicago v. Journeymen Plasterers' Protective and Benevolent Society of Chicago, 279 F.2d 92 (7th Cir. 1960). We must, therefore, determine if plaintiff's claims involve the structural requirements of Section 302 (c) (5).

The defendants categorize plaintiff's suit as one merely involving the interpretation and application of the Pension Plan adopted by the defendant-trustees. A careful reading of the complaint, however, indicates that the plaintiff specifically alleges that the break-in-service provision of the Pension Plan, which in effect divested him of the contributions made by employers on his behalf, renders the Plan violative of Section 302(c) (5) because the Plan as thus structured is not one for the sole and exclusive benefit of employees of the employers who have made substantial contributions to the Pension Fund. While the plaintiff does not allege the most obvious types of potential structural violations such as siphoning of trust funds for union purposes or lack of an annual audit, he does allege, in effect, that the divesting procedures adopted by the Fund's trustees operate so as to render it not for the exclusive benefit of the employees.

The initial issue of jurisdiction is thus easily resolved. When a claim is alleged to arise under the Constitution or laws of the United States, the federal district court must entertain the suit except when the alleged claim appears to be immaterial and made solely for the purpose of obtaining jurisdiction or unless it appears to a legal certainty that the claim is wholly insubstantial and frivolous so far as the Constitution and the laws of the United States are concerned. Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). A district court has jurisdiction when the right of a plaintiff to recover under his complaint will be sustained if the Constitution or the laws of the United States are given one construction and will be defeated if they are given another. Wheeldin v. Wheeler, 373 U.S. 647, 83 S.Ct. 1441, 10 L.Ed.2d 605 (1963). "Whether the complaint states a cause of action on which relief could be granted is a question of law and just as issues of fact it must be decided after and not before the court has assumed jurisdiction over the controversy." Bell v. Hood, supra, 327 U.S. at 682, 66 S.Ct. at 776. We conclude that plaintiff's claims are not frivolous and that this Court, therefore, does possess jurisdiction over his suit insofar as it alleges a structural violation of Section 302.

The defendants next contend that, even if we do possess jurisdiction over this suit, the complaint nevertheless fails to state a claim upon which relief can be granted under Section 302. Taken in the context of the entire complaint, the plaintiff alleges in effect that the Pension Plan provision adopted by the Trustees which results in a loss of Credited Service if an employee is out of Covered Employment for more than three years renders the Plan violative of the Section 302 requirement that the Trust Fund be used for the sole and exclusive benefit of employees, their families and dependents.

We agree with the defendants in their observation that nothing in Section 302 (c) (5) of the Act requires that all the moneys collected in a union pension fund be used for all the employees on whose behalf contributions were made by employers. This agreement, however, does not resolve the primary issue before us, i. e., whether a provision which prohibits certain employees from participating in the union pension fund renders the trust not for the exclusive benefit of the employees.

This issue cannot be resolved without additional relevant information concerning the effect on union members as a whole of this "break-in-service" provision. If it prevents a substantial number of the potential beneficiaries from receiving pensions to which they would otherwise be entitled if all...