Knauss v. Gorman
| Decision Date | 11 August 1978 |
| Docket Number | No. 77-2139,77-2139 |
| Citation | 583 F.2d 82 |
| Parties | 84 Lab.Cas. P 10,769, 1 Employee Benefits Ca 1491 Edmund KNAUSS, Appellant, v. Patrick E. GORMAN, Willard J. Carlson, R. Emmett Kelly, Irving Stern, Frank Cimino, Fred Clavio, Richard A. Hepp, Darrell V. Stiffler, John E. Boyd, Monroe M. Rochester and Oral Moody, Trustees solely in their official capacity, and Amalgamated Meat Cutters and Butcher Workman's Union and Industry Pension Fund. |
| Court | U.S. Court of Appeals — Third Circuit |
Michael A. Donadee, Neighborhood Legal Services Ass'n, Pittsburgh, Pa., for appellant.
Michael J. Boyle, Joseph A. Vater, Jr., Meyer, Unkovic & Scott, Pittsburgh, Pa., for appellees.
Before ADAMS, VAN DUSEN and ROSENN, Circuit Judges.
We are confronted in this case with two questions regarding employee-union joint pension funds established under the Taft-Hartley Act. First, it is necessary to determine whether certain alleged deficiencies in a pension plan represent "structural defects" over which a federal court may exercise supervision. Second, we must adjudge the circumstances under which a pension plan may divest beneficiaries of pension eligibility without violating the Taft-Hartley requirement that plans be operated for the "sole and exclusive benefit" of employees.
Edmund Knauss, the appellant, is a retired butcher. Born in 1908, he began work in 1936 for Oswald & Hess Co., a Pittsburgh meat packing firm. His employment with Oswald & Hess continued until the firm's bankruptcy in 1962.
In 1957, Local 424 of the Amalgamated Meat Cutters, in cooperation with Oswald & Hess and other meat packers, instituted a multi-employer pension fund pursuant to § 302(c)(5) of the Taft-Hartley Act. 1 Under the terms of the 1957 Fund, participating employers contributed a stipulated amount per year for each employee to fund pension benefits. As an employee of Oswald & Hess, Knauss became a member of the plan, and from 1957 to 1962 payments were made to the pension fund on his behalf.
The 1957 Fund provided that benefits were to be granted on retirement at age 65 to an employee who had worked a total of twenty or more uninterrupted years for any employer contributing to the plan. 2 This twenty year requisite could be fulfilled (a) by years worked for an employer prior to the commencement of employer contributions to the plan, denominated "past service credits," and (b) by employment during which contributions were made, denominated "future service credits." Thus, a portion of the benefits to workers employed at the commencement of the plan may be funded out of payments other than those made on their behalf. However, a break in covered employment of more than one year would cancel all credits for years served before the break, whether those years preceded or followed commencement of employer contributions.
After Oswald & Hess Co. went bankrupt, Knauss applied to the union hall for work with other employers participating in the Local 424 Plan. 3 When he failed to obtain such employment, he left Pittsburgh for the West Coast. After holding several non-union jobs there, Knauss returned to Pittsburgh in 1966. In May, 1966, Knauss found work at the Northside Packing Plant in Pittsburgh, another employer which contributed to the Local 424 Fund. Knauss continued to work at Northside until 1972, when he was laid off.
In the meantime, on January 12, 1970, the Local 424 Fund merged into the Amalgamated Meatcutters' National Pension Fund (the National Fund). By the terms of the merger, the assets of the Local 424 Plan were transferred to the National Fund and the Local Fund went out of existence. In return, the Local Fund's beneficiaries became participants in the National Fund. The merger agreement provided that benefits to former participants in the plan of Local 424 would be governed by the National Fund's standards except that the amount of benefits provided to individuals originally covered by Local 424 would be 75% Of those otherwise available to participants in the National Fund.
Under the National Fund's rules, a minimum of ten years of employment with a covered employer was a prerequisite to collecting pension benefits. Like the Local 424 Fund, the National Fund recognized both "past" and "future" service credits to satisfy the prerequisite, but, with some exceptions to be discussed, the National Plan denied credit for employment which occurred prior to a break of more than two years in covered service.DP Upon being laid off by Northside in 1972, Knauss applied to the National Fund for pension benefits. His claim was denied, despite the fact that his employers had contributed to Amalgamated funds on Knauss' behalf for a total of 11 years, and despite the fact that he had registered a total of 32 years of employment with covered employers. The National Fund's administrators determined that only the six years of service following his break in employment could be credited to Knauss' account, and that his remaining twenty-six years of service were to be disregarded.
After attempting unsuccessfully to have this decision reversed administratively, Knauss brought suit against the National Fund and its trustees in the district court under § 302(e) 4 of the Taft-Hartley Act. He claimed that the provision denying credits for contributions prior to a break in service was arbitrary and capricious, and therefore violated the requirement of § 302(c)(5) that joint employer-union pension plans be operated for the "sole and exclusive benefit" of employees.
Following a non-jury trial, the district court entered judgment against Knauss. The trial judge determined that he had jurisdiction of the claim under § 302(e). However, despite a belief that the break-in-service clause was "unfair," the trial judge held that because there was no proof that the break-in-service provision affected more than a single individual, the unfairness could not constitute a "structural defect" cognizable under § 302.
Knauss then filed a timely appeal. We vacate the judgment and remand.
§ 302 of the Taft-Hartley Act prohibits payments to unions by employers. § 302(c)(5), however, fashions an exception to that prohibition for monies "paid to a trust fund established . . . for the sole and exclusive benefit of the employees of such employer, and their families and dependents," provided that such a trust fund meets certain statutory requirements. 5 § 302(e) of the Act affirms that federal district courts have jurisdiction "to restrain violations of this section." Our first inquiry thus must be whether Knauss has set forth a claim cognizable under § 302.
In Associated Contractors v. Laborers International Union, 6 we noted that "although the extent of jurisdiction under § 302(e) is not yet settled, this much is certain: a federal court does have jurisdiction under the section to enforce a trust fund's compliance with the statutory standards set forth in subsection (c)(5) by eliminating those offensive features in the structure or operation of the trust that would cause it to fail to qualify for a (c)(5) exception." 7 Likewise, in this case we have no occasion to define further the reach of § 302, for as we said in Nedd v. UMW, 8 the allegation of such a "structural" violation is sufficient to vest the court with jurisdiction. 9
Here, Knauss alleges that the break-in-service provision of the rules of the National Fund arbitrarily excludes employees from benefits, and therefore does not operate for the sole and exclusive benefit of employees as required by § 302(c)(5). On its face, such an alleged defect would appear to support an action under § 302(e).
The trustees suggest, however, and the district court held, that a provision of a pension plan which allegedly violates the "sole and exclusive benefit" standard does not constitute a "structural defect" absent proof that a large number of potential beneficiaries are excluded by its operation. Thus, it is argued, since Knauss has not submitted evidence that other workers are also excluded by the operation of the break-in-service clause which he challenges, the provision cannot constitute a "structural" violation.
We note some tension between this argument by the trustees as to jurisdiction, and the trustees' claim on the merits that the break-in-service clause is necessary to preserve the plan's actuarial viability. If Knauss were the only individual affected by the clause, the actuarial stability of the pension plan would hardly be augmented by the clause's existence. If, as the trustees maintain, the clause is actuarially "necessary," A fortiori it must have effects that are broader than simply excluding Knauss.
In any event, if the break-in-service clause does arbitrarily and without justification bar otherwise eligible workers from pension benefits, it constitutes a "structural violation" cognizable under § 302(e), although only a single individual is currently affected. As the Seventh Circuit noted in Johnson v. Botica, 10 there are "some analytic difficulties in the use of the structural deficiency standard." Nonetheless, the distinction is rooted in the perception that Congress did not necessarily intend § 302(e) as a conduit to carry to the federal courts every claim for benefits denied by a § 302(c)(5) pension fund. Day-to-day discretionary decisions by the administrators of funds are not subject to continuous audit by federal courts. However, where a settled requirement capriciously excludes employees from benefits, it is not the prudence of the plan's administration which is at issue, but the fairness of its basic structure. Such an exclusion constitutes a failure to conform to the "sole and exclusive benefit" requirement, and thus may be reviewed in the federal courts without doing violence to the Congressional intent.
While there is language in some opinions asserting that a structural defect is one...
To continue reading
Request your trial
-
Michota v. Anheuser-Busch, Inc.
...Section 302(e) does not confer general supervisory power over the actions of the trustees in a jointly-administered plan. Knauss v. Gorman, 583 F.2d 82 (3d Cir. 1978). However, there is no question that an eligibility provision in a pension plan covered by § 302 which is arbitrary and capri......
-
Local 144 Nursing Home Pension Fund v. Demisay
...supervisory powers limited in various respects. See Riley v. MEBA Pension Trust, 570 F.2d 406, 412-413 (CA2 1977); Knauss v. Gorman, 583 F.2d 82, 86-87 (CA3 1978). Our most recent case in this area expressly reserved the question. See Mine Workers Health and Retirement Funds v. Robinson, 45......
-
Smith v. Hickey
...under Section 302(c) or to claims that trustees have acted arbitrarily and capriciously in adopting fund regulations. Knauss v. Gorman, 583 F.2d 82, 85-87 (3d Cir. 1978); Reiherzer v. Shannon, 581 F.2d 1266, 1270 (7th Cir. 1978); Riley v. MEBA Pension Trust, 570 F.2d 406 (2d Cir. 1977); Lug......
-
Adams v. New Jersey Brewery Employees' Pension Trust Fund, Local Union 843
...of the employees and therefore constitutes a "structural defect" under § 302 and must be eliminated from the trust. Knauss v. Gorman, 583 F.2d 82 (3d Cir. 1978). 22 In order to determine whether an eligibility requirement passes muster, an analysis must be made of the facts and circumstance......
-
Erisa: Fumbling the Limitations Period
...theory for the pension promise); Demisay v. Local 144 Nursing Home Pension Fund, 935 F.2d 528 (2d Cir. 1991); Knauss v. Gorman, 583 F.2d 82 (3d Cir. 1978). 14. See, e.g., George Lee Flint, Jr., ERISA: Jury Trial Mandated for Benefit Claims Actions, 25 LOY. L.A. L. REV. 361, 383-93 (1992) (r......