Luby v. Teamsters Health, Welfare, and Pension Trust Funds

• Decision Date: 09 May 1991
• Docket Number: Nos. 90-1900,90-1912,s. 90-1900
• Parties: , 14 Employee Benefits Cas. 1477 Diane C. LUBY v. TEAMSTERS HEALTH, WELFARE, AND PENSION TRUST FUNDS, Charles J. Schaffer, Jr., and Patricia J. Golosky, Patricia J. Golosky, Appellant. Diane C. LUBY v. TEAMSTERS HEALTH, WELFARE, AND PENSION TRUST FUNDS, Charles J. Schaeffer, Jr., and Patricia J. Golosky, Teamsters Health & Welfare Fund of Philadelphia & Vicinity and Charles J. Schaeffer, Jr., Appellants. . Submitted Under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 1176

944 F.2d 1176

60 USLW 1477, 14 Employee Benefits Cas. 1477

Diane C. LUBY v. TEAMSTERS HEALTH, WELFARE, AND PENSION TRUST FUNDS, Charles

J. Schaffer, Jr., and Patricia J. Golosky,

Patricia J. Golosky, Appellant.

Diane C. LUBY v. TEAMSTERS HEALTH, WELFARE, AND PENSION TRUST FUNDS, Charles

J. Schaeffer, Jr., and Patricia J. Golosky,

Teamsters Health & Welfare Fund of Philadelphia & Vicinity

and Charles J. Schaeffer, Jr., Appellants.

Nos. 90-1900, 90-1912.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit Rule 12(6)

May 9, 1991.

Sept. 20, 1991.

Howard M. Goldsmith, Goldsmith & Hoffman, Philadelphia, Pa., for appellant Golosky.

James D. Crawford, James J. Leyden, Frank C. Sabatino, Louis D. Lappen, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellants Teamsters Health, Welfare & Pension Trust Fund and Charles J. Schaffer, Jr.

Jon Marshall, Philadelphia, Pa., for appellee.

Before MANSMANN, ROSENN, and NYGAARD, Circuit Judges.

OPINION OF THE COURT

NYGAARD, Circuit Judge:

In this Employee Retirement Income Security Act of 1974 action the threshold issue on appeal is the proper standard and scope of review to be exercised by the district court over a fact based beneficiary determination made by a Teamsters Health & Welfare Fund Administrator. The district court exercised de novo review, awarded the retirement Fund death benefits to the decedent's wife and directed restitution of the benefit payment to the Fund be made by the unqualified payee.

We decide that the de novo standard of review mandated by Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) for ERISA benefit denials based on plan interpretation extends as well to beneficiary decisions based upon purely factual questions. Thus, we conclude that the district court properly exercised de novo review, that restitution is proper and supported by the evidence, and will affirm.

I.

Francis Luby, Jr., died in 1988. Although Luby and his wife Diane separated in 1974, they never divorced. Francis Luby lived with Patricia Golosky for eleven years, until shortly before his death.

Because Francis Luby was a participant in the Teamsters Health and Welfare Fund of Philadelphia and Vicinity, his beneficiary is entitled to a $20,000 lump sum death benefit. The Fund requires that participants fill out a beneficiary card, kept on file at the Fund office. The problem here is when Francis Luby died, there were two beneficiary cards on file. To compound the problem, the first card, signed by Luby in 1968, designated his wife as beneficiary; the second, filed in 1987, designated his girlfriend.

When a Fund member has more than one beneficiary card on file, Fund policy requires that benefits be paid to the beneficiary named on the most recent valid card. Fund guidelines also require that beneficiaries apply to the Fund to receive death benefits.

Shortly after Luby died, Mrs. Luby visited the Fund office and filed a claim for the death benefit. Instead of paying her, the Fund paid the $20,000 death benefit to Golosky, the designee on the most recent beneficiary card. ¹ Golosky had not filed a claim with the Fund.

Mrs. Luby then filed a complaint for wrongful denial of death benefits in Pennsylvania state court against Golosky, the Fund and its Administrator. She alleged that the card designating Golosky as beneficiary was not valid because it had not been signed by her husband. The Fund removed the case to federal district court under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). Also, the Fund and the Administrator (collectively the "Fund") filed a cross-claim for restitution against Golosky in the event Mrs. Luby prevailed. Golosky filed a responsive cross-claim against the Fund, asserting that if Mrs. Luby is entitled to the death benefit, Golosky is entitled to damages from the Fund because it was negligent in providing Francis Luby with ambiguous or otherwise improper designation of beneficiary forms.

After a bench trial, the district court decided that Mrs. Luby was entitled to the death benefit, with interest, and that the Fund was entitled to restitution from Golosky. The district court further concluded that Golosky's cross claim against the Fund was without merit. Golosky and the Fund appealed.

II.

Our threshold issue is whether the district court erred by exercising de novo review over the Fund Administrator's decision to pay death benefits to Golosky. ERISA is silent on the proper standard by which the district court should review fact findings made by plan administrators, such as here where there is a dispute between two potential beneficiaries, and challenged under 29 U.S.C. § 1132(a)(1)(B). Before 1989, nearly all federal courts reviewing ERISA administrator's benefit denials adopted the arbitrary and capricious standard used to review trustee decisions under the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(c).

In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109, 109 S.Ct. 948, 953, 103 L.Ed.2d 80 (1989), the Court rejected the wholesale adoption of the LMRA's arbitrary and capricious standard by courts reviewing ERISA administrator benefit decisions. The Court concluded that the LMRA's deferential standard of review was untenable in ERISA contexts because it afforded less protection to beneficiaries than before ERISA's enactment, contravening ERISA's goal of protecting the interests of Plan members and their beneficiaries. Firestone, 489 U.S. at 109-110, 109 S.Ct. at 953-954.

When a plan does not grant an administrator discretion to interpret ambiguous plan terms, the Court held that an administrator's denial of benefits would not be reviewed under an arbitrary or capricious standard.

[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard, unless the benefit plan gives the administrator authority to determine eligibility for benefits or to construe the terms of the plan.

Firestone, 489 U.S. at 115, 109 S.Ct. at 956-957.

Hence, we must first decide whether the terms of this Plan grant the Administrator discretion to act as a finder of facts to decide who Luby's lawful beneficiary really was, thus warranting deference for his decision to pay the death benefit to Golosky. We conclude that the Plan neither expressly nor impliedly grants such discretion.

A. Administrator Discretion Under the Plan

Whether a plan administrator's exercise of power is mandatory or discretionary depends upon the terms of the plan. Drawing from trust law principles, the Court in Firestone noted that the terms of the plan are construed without deferring to either party's interpretation. 489 U.S. at 112, 109 S.Ct. at 955. "The terms of trusts created by written instruments are 'determined by the provisions of the instrument as interpreted in light of all the circumstances and such other evidence of the intention of the settlor with respect to the trust is not inadmissable.' " Id. (quoting Restatement (Second) of Trusts § 4, comment d (1959)).

Here the Fund admits that the terms of the Plan do not specifically grant the Plan Administrator authority to make beneficiary determinations. The Fund contends that the Plan, taken as a whole, impliedly grants the Administrator authority to do so.

Discretionary powers may be implied by a plan's terms even if not granted expressly. See De Nobel v. Vitro Corp., 885 F.2d 1180, 1187 (4th Cir.1989) (no "magic words," such as "discretion is granted ...," need be expressly stated in order for the plan to accord the administrator discretion to interpret plan terms and to hear and decide disputes between persons alleging themselves to be beneficiaries, so long as the plan on its face clearly grants such discretion). Nonetheless, we are not persuaded that the Plan impliedly grants the Administrator authority to make beneficiary determinations.

The Fund contends that specific language in the original Declaration of Trust authorized the Trustees at the time the Fund was established to "consider and decide upon a program for payment of benefits from the Trust Fund ..." Declaration of Trust, p 9, JA at 338-39. The Fund points out that, in addition to establishing a system of fund administration at the time of the Trust's creation, the Trustees have discretion to amend the Declaration of Trust, and thus, could amend the system of Trust administration. See Declaration of Trust, p 3 & 4, JA at 338. The Fund contends that this general grant of broad administrative power upon the Trustees carries with it the implication that the Fund Administrator has discretion to interpret Plan language and decide disputes between Plan beneficiaries. We agree with the district court that "[t]he language quoted by the Fund merely gives the Trustees discretion to select a system of Trust administration." District court order and memorandum at 5, 1990 WL 181053.

In particular, the Plan's general grant of administrative powers to Plan Trustees does not refer specifically to any power to decide disputes between beneficiary claimants. Likewise, the Plan neither states nor implies that fact-based beneficiary determinations are to be accorded deference on review. If a plan's grant of general administrative power is construed to be the general grant of discretionary power to decide all disputes arising under the Plan, then an ERISA plan administrator's decisions might all be subject to deferential review. Such a conclusion would defeat the Supreme Court's purpose in Firestone: to insure that when a plan's terms do not confer certain discretionary powers on a plan trustee, a trustee's exercise of such discretion is subject to de novo review.

The Fund also argues that because the Declaration of Trust expressly granted Trustees discretionary authority in a number of specified areas, similar discretion is impliedly granted in other unspecified areas of Plan administration. We are not persuaded. Nothing in the...