Lee v. Nesbitt, 25973.

• Decision Date: 07 February 1972
• Docket Number: No. 25973.,25973.
• Citation: 453 F.2d 1309
• Parties: Handee T. LEE, Plaintiff-Appellee, v. Robert NESBITT et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

453 F.2d 1309 (1971)

Handee T. LEE, Plaintiff-Appellee, v. Robert NESBITT et al., Defendants-Appellants.

No. 25973.

United States Court of Appeals, Ninth Circuit.

June 11, 1971.

As Modified on Denial of Rehearing February 7, 1972.

Michael A. Cardozo (argued), Edward Silver, of Proskauer, Rose, Goetz & Mendelsohn, New York City, Fredric C. Tausend, David G. Knibb, of Schweppe, Doolittle, Krug & Tausend, Seattle, Wash., for defendants-appellants.

Clinton F. Raymond, Jr. (argued), Dexter A. Washburn, of Jones, Grey, Bayley & Olsen, Paul J. Fisher, Seattle, Wash., for plaintiff-appellee.

Before KOELSCH, CARTER and WRIGHT, Circuit Judges.

KOELSCH, Circuit Judge:

Lee commenced this action in the District Court against the Trustees of the National Maritime Union Pension Trust, seeking a judgment declaring invalid one of the rules prescribing eligibility requirements for a retirement pension, specifically the "break-in-employment" rule (hereinafter "the rule"), and further declaring him to be entitled to a pension. Federal jurisdiction was based on the diversity of citizenship of the parties. Dersch v. United Mine Workers of America Welfare and Retirement Fund, 309 F.Supp. 395 (S.D.Ind.1969). Both parties made motions for summary judgment, the Court granted Lee's and this appeal followed.

The National Maritime Union Pension Trust (hereinafter "the Trust") was established by the National Maritime Union in 1953, pursuant to § 302(c) (5) of the Taft-Hartley Act (29 U.S.C. § 186(c) (5) (1964)), to provide pensions for the benefit of unlicensed seamen members. As required by that section, the Trust is administered by an equal number of employer and employee representatives, as trustees, for the benefit of those seamen whose employers contribute to the Trust fund. Under the Trust provisions, the trustees are vested with discretion to establish requirements governing eligibility for benefits and to determine questions of eligibility.

In 1967, when Lee applied for a pension, a seaman, to be eligible, was required to be at least 60 years of age and to have worked a minimum of 15 years in covered employment—defined as employment with a contributing employer. However, the rule, in effect, added a further requirement concerning continuity of employment; it provided: "If a person does not work in Covered Employment for at least 200 days in any period of three consecutive calendar years after January 1, 1953, it shall constitute a break in employment and his previous pension credits shall be cancelled."¹ The trustees denied the application on the ground that Lee had suffered a break in employment in the period 1955-1957; they also declared he had forfeited all his credits prior to 1957.²

In the district court Lee conceded that he had not worked 200 days during the period 1955-57 and indeed his affidavits showed that he had worked 81 days in 1955 and 106 days in 1957, but not at all in 1956. Thus during the period he had worked a total of only 187 days or 13 short of the required 200. However, he excused the deficiency by the further assertion that no employment was available in 1956 and that the break was involuntary. He took the position that the rule was unreasonable on its face because of the absence of a proviso staying its operation whenever employment was unavailable; in the alternative he urged that the trustees acted arbitrarily when they refused to imply such a proviso and denied him a pension. The district court held the rule to be reasonable, but the trustees' interpretation of it to be arbitrary.

Section 302 requires that a pension trust be "for the sole and exclusive benefit of employees." The trustees of such a trust, while possessing a large measure of discretion in prescribing conditions of eligibility for benefits, owe a fiduciary duty to the employees and may neither impose unreasonable conditions of eligibility nor act arbitrarily in determining who is eligible. Roark v. Lewis, 130 U.S.App.D.C. 360, 401 F.2d 425 (1968), adhered to sub nom. Roark v. Boyle, 439 F.2d 497.

(D.C.Cir. 1970). Lee does not question the reasonableness of the rule so far as it eliminates from pension coverage those seamen-employees who voluntarily choose not to maintain a continuity of employment. But he contends that the rule is unreasonable on its face because it also operates whenever a break is involuntary. This contention is too far reaching. Since the trust is solely funded by employers' contributions, the amounts of which are determined by the number of days an employee works in covered employment, denial of benefits can reasonably be rested upon an insufficiency of years of employment regardless of the reason. Thus, even if an employee, through no fault of his own, is prevented from completing a minimum period of employment, he may be denied a pension. Stasukonis v. Kennedy, 387 Pa. 216, 127 A.2d 678 (1956).

However, that is not this case. As indicated earlier—in footnote 2—by 1955, Lee had earned and was entitled to at least 15 years credits, having worked prior to that time without interruption. He was thus eligible for a pension on that date, save for the fact that he had not reached the age of retirement.

However, the...