Johnson v. Botica

• Decision Date: 02 July 1976
• Docket Number: No. 75--1606,75--1606
• Citation: 537 F.2d 930
• Parties: 92 L.R.R.M. (BNA) 3366, 79 Lab.Cas. P 11,508 William JOHNSON, Plaintiff-Appellant, v. Joseph BOTICA et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 930

537 F.2d 930

92 L.R.R.M. (BNA) 3366, 79 Lab.Cas. P 11,508

William JOHNSON, Plaintiff-Appellant, v. Joseph BOTICA et al., Defendants-Appellees.

No. 75--1606.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 6, 1976.

Decided July 2, 1976.

George E. Faber, Jeffrey Lawrence, Chicago, Ill., for plaintiff-appellant.

Charles Orlove, Stephen E. Crable, Chicago, Ill., for defendants-appellees.

Before FAIRCHILD, Chief Judge, PELL, Circuit Judge, and EAST, Senior District Judge. ^*

PELL, Circuit Judge.

This case arose out of the denial of William Johnson's application for a disability pension by the Structural Iron Workers Local No. 1 Pension Trust Fund. After his pension was denied, Johnson filed a four-count complaint against the Trustees of the Pension Fund. The Trustees made successive motions to dismiss the complaint; and the district court, treating the motion to dismiss as one for summary judgment, in an unreported memorandum opinion granted summary judgment on all counts in favor of the defendants. The two major isues in this appeal which followed are 1) whether the trial court erred in exercising jurisdiction over this matter and 2) whether the trial court erred in concluding that the Trustees had not been acting in an arbitrary and capricious manner in setting up the pension plan or in construing and applying its provisions.

I. Background

On August 24, 1966, Structural Iron Workers Union Local No. 1 (hereinafter referred to as 'Union') and an association of employers entered into an agreement and declaration of trust creating the Pension Trust Fund effective on October 1, 1966. By the existing labor agreement, employers agreed to make contributions to the Fund on behalf of employees covered by said labor agreement. On December 21, 1966, the Trustees, the defendants in this litigation, adopted a Pension Plan setting forth eligibility requirements for a disability pension.

Under the terms of the Pension Plan, a disabled person is eligible for a disability pension if he has acquired a minimum number of fifteen years of work credits either prior to October 1, 1966, ('Past Service Credits') or after that time ('Future Service Credits'). Under Article III, Section 2(a)(3) of the Plan, an employee is entitled to past work credits only if, after October 1, 1966, he

was actively engaged in Covered Employment for a sufficient length of time to accumulate at least two (2) quarters of Future Service Pension Credits in the period October 1, 1966 to September 30, 1968.

In short, an employee would receive credit for employment before the Plan came into existence if he worked at least for two quarters in accordance with a formula giving such credit by working from 500 to 749 hours in a calendar year during the two-year period immediately following the inception of the Plan.

The plaintiff suffered a heart attack on June 23, 1967, which rendered him totally and permanently disabled within the meaning of the Plan. From the critical effective date of the Plan, October 1, 1966, to the date of disability, June 23, 1967, Johnson worked but 239 hours in covered employment. Accordingly, under the terms of the Plan, he was not sufficiently actively engaged in Covered Employment ¹ to be entitled to Past Service Credit. It is undisputed that the sole reason the Trustees denied Johnson's application for a disability pension was that he failed the active engagement condition for eligibility specified in Article III, Section 2(a)(3).

II. Jurisdiction

In its grant of summary judgment on the merit in favor of the defendant Trustees, the district court initially confronted the argument that § 302 of the Taft-Hartley Act, 29 U.S.C. § 186, did not confer jurisdiction upon the court. The court observed that the plaintiff's complaint alleged that Section 2(a)(3) of the Pension Plan 'structurally violated 29 U.S.C. § 186(c)(5) in that it is not for the sole and exclusive benefit of employees. . . .' The court recognized that Section 302(e), 29 U.S.C. § 186(e), confers jurisdiction on the district courts to restrain violations of the statute, and it observed that it would not review an alleged single abuse or misapplication of a facially adequate plan under the jurisdiction so conferred. Instead, the court followed the guidelines set forth in Moglia v. Geoghegan,267 F.Supp. 641 (S.D.N.Y. 1967), aff'd, 403 F.2d 110 (2d Cir. 1968), cert. denied, 394 U.S. 919, 89 S.Ct. 1193, 22 L.Ed.2d 453 (1969), and ruled that the allegation of a 'structural defect' in the terms of the Plan allowed it to take jurisdiction of the case. ²

We conclude that the district court correctly determined that it had jurisdiction under Section 302(e), 29 U.S.C. § 186(e). The courts have consistently recognized that Congress did not intend to burden the courts with claims as to whether a pension benefit was correctly or incorrectly denied, but the vast majority of courts have also held that jurisdiction at least extends to deciding whether a pension plan is arbitrary, capricious, or in some way contrary to the sole and exclusive benefit of employees, E.g., Lugo v. Emp. Retire. Fund of Illumination Prod. Ind., 529 F.2d 251 (2d Cir. 1976), cert. filed, 44 U.S.L.W. 3727 (1976); Bowers v. Moreno, 520 F.2d 843 (1st Cir. 1975); Alvares v. Erickson, 514 F.2d 156 (9th Cir. 1975), cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106.

Thus, in Lugo, the Second Circuit recognized that Section 302(e) had been the focus of considerable litigation and that several controversies about its meaning had developed. The Lugo court noted that the Second Circuit had joined the courts that had taken a narrow view of the scope of Section 302(e). Nonetheless, it concluded that Lugo's allegation that the trust fund was not for the sole and exclusive benefit of the employees provided a sufficient jurisdictional predicate for the court to decide the case. 529 F.2d at 255--56.

In Alvares, the Ninth Circuit noted the ambiguous legislative history regarding the scope of federal jurisdiction but observed that the more recent cases

have recognized a distinction between actions involving 'structural' deficiencies in the relevant trust which cause it to violate the 'sole and exclusive benefit' provisions of § 302(c)(5) and actions involving only questions of day-to-day fiduciary administration of welfare and pension funds. 514 F.2d at 165.

After setting forth a cogent discussion of the cases, the Alvares court accepted the structural violation concept of federal jurisdiction for reasons akin to those later approved in Lugo, supra.

Even those courts which have opted for a narrower reading of § 302(e) have recognized the viability of the structural violation test. In Bowers, the First Circuit discussed its approach to the structural deficiency concept. It referred to a statement in an earlier appeal arising out of the same litigation as expressing the proper standard to apply in testing the jurisdictional phase of the case:

. . . (O)ur statement in Bowers v. Ulpiano Casal, Inc. (393 F.2d 421, 424 (1st Cir. 1968)) . . . described the violations of § 302 subject to restraint by a district court as those constituting 'violations of basic structure, as determined by the Congress, not violations of fiduciary obligations or standards of prudence in the administration of the trust fund.' This is admittedly a severe standard, but one which we concluded was compelled by legislative history and followed by the majority of cases. 520 F.2d at 846.

On the record before it, the Bowers court could not say that the alleged breaches of fiduciary duty or breaches of contract reflected any structural defects in the Fund. Accordingly, it affirmed the district court's declination of jurisdiction under Section 302. Id.

Concededly, there are some analytic difficulties in the use of the structural deficiency standard as a measure of federal jurisdiction. We need not resolve the structural deficiency versus fiduciary administration dichotomy problem, if it is a problem in defining a sound basis for jurisdiction. See Alvares, supra at 166 n. 5. In the present case, we conclude that the express allegations in the complaint provided a sufficient predicate for the district court's acceptance of § 302 jurisdiction. Cf. Lugo, supra at 255--56. Accordingly, we need not consider the plaintiff's alternative argument that 28 U.S.C. § 1331 was a proper jurisdictional basis for the suit.

III. Propriety of Summary Judgment

There was an agreed statement of uncontested facts in this case. The appellant argues that summary judgment in favor of the defendants was improper in that he was not given appropriate notice that the Trustees' motion to dismiss was to be treated as one for summary judgment. The appellant further asserts the issue of Johnson's involuntary failure to comply with Section 2(a)(3) was clearly raised by he pleadings and that he could not predict that the trial court would make a factual inference that his failure to work 500 hours after the effective date of the pension plan was voluntary.

We think this argument is essentially meritless. Although the memorandum decision referred to cases where voluntary or involuntary withdrawal from covered employment appeared as a basis of decision, the district court did not rest its decision on those cases or their reasoning. After direct citation of Lee v. Nesbitt, 453 F.2d 1309 (9th Cir. 1972), and Giler v. Board of Sheet Metal Workers of So. Cal., 509 F.2d 848 (9th Cir. 1975), the court explained:

Moreover, none of the inequities present in those cases is present here. Consequently, the court finds that the plan is not defectively arbitrary under § 186(c)(5).

We read this language as an indication that the court was not relying upon the involuntary-voluntary distinction but rather upon its independent judgment that the terms of the pension plan were not arbitrary or capricious.

Under Fed.R.Civ.P. 52(a), findings of fact and conclusions of law are...