Mahan v. Reynolds Metals Co., LR-C-83-70.

• Decision Date: 28 July 1983
• Docket Number: No. LR-C-83-70.,LR-C-83-70.
• Citation: 569 F. Supp. 482
• Parties: James M. MAHAN v. REYNOLDS METALS COMPANY and The Reynolds Retirement Plan.
• Court: U.S. District Court — Eastern District of Arkansas

569 F. Supp. 482

James M. MAHAN v. REYNOLDS METALS COMPANY and The Reynolds Retirement Plan.

No. LR-C-83-70.

United States District Court, E.D. Arkansas, W.D.

July 28, 1983.

J. Bruce Cross, Little Rock, Ark., for plaintiff.

Robert Lindsey, Little Rock, Ark., for defendants.

MEMORANDUM AND ORDER

EISELE, District Judge.

Pending before the Court is the defendant's motion for summary judgment. For the reasons stated below, the motion will be granted.

The essential facts of this case are generally undisputed. Since July 31, 1963, the plaintiff has been an employee at the Hurricane Creek Plant of the defendant Reynolds Metals Company ("Reynolds") and a member of the collective bargaining unit for which the International Union, United Steelworkers of America ("Steelworkers") is the recognized representative. The plaintiff is also a participant in the Reynolds Metals Company Pension Plan for Hourly Employees, Plan No. 002 ("Pension Plan") which is incorporated by reference into the collective bargaining agreement existing between Reynolds and the Steelworkers. Article XXXVI of the collective bargaining agreement further declares that "the parties agree to comply with and be bound by all of the Pension Plan's terms and provisions."

It appears that the plaintiff sustained on-the-job injuries in 1966, 1973 and 1978. He has been on leave of absence from his employment since June 1978, receiving worker's compensation and supplemental insurance benefits. In April 1980 he requested that he be allowed to return to his job as a Stores Clerk, but Reynolds refused his request for the reason that the company believed he was not physically capable of doing the work. The dispute between plaintiff and Reynolds was ultimately resolved through binding arbitration. In his Opinion signed July 7, 1981, Permanent Umpire Howard A. Cole found that the plaintiff did not have the capacity to return to the Stores Clerk job. The Umpire declined, however, to go beyond the narrow issue presented to him, and stated that he would not rule whether there was some other job classification for which the plaintiff was suited. In concluding, he noted that the issue of permanent disability was neither claimed nor proved in the case before him.

In an about face, the plaintiff on August 13, 1981, made a written application pursuant to the terms of the Pension Plan requesting disability retirement benefits on the ground that he was totally disabled and could not return to work at Reynolds. The Pension Committee reviewed the application and rejected it because it found that there was bargaining unit work that the plaintiff was capable of doing. In December of 1981 the plaintiff notified Reynolds that he was appealing the decision of the Pension Committee pursuant to the terms of the Pension Plan. Adhering to the appeals procedure, the plaintiff selected his private physician and Reynolds selected their company doctor, and when the two doctors could not agree on the plaintiff's capability for work, a third physician was chosen by mutual agreement of the first two physicians. The third physician, Dr. T.M. Durham, agreed with the company physician that the plaintiff could perform any one of three different jobs in the bargaining unit. Thus the appeals procedure specified by the Pension Plan was followed and a majority of the "Medical Board of Physicians" found that the plaintiff was not prevented from engaging in a bargaining unit occupation and therefore was not "permanently incapacitated."

The Pension Plan provided that "the medical opinion of a majority of such Medical Board shall be final and binding upon the Company, the Union and the Employee." Nevertheless, shortly after the Medical Board issued its decision, the plaintiff filed a grievance with respect to the Board's decision, only to withdraw the grievance on November 29, 1982. This action was then brought on January 27, 1983.

The gravamen of the plaintiff's complaint is that the defendant has arbitrarily and capriciously refused to pay him the disability retirement benefits to which he is entitled under the Pension Plan. Instead of bringing his action under Section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, for breach of the collective bargaining agreement, the plaintiff seeks relief under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1)(B), which states: "A civil action may be brought ... by a participant or beneficiary ... to recover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan ....")

The defendant contends that the plaintiff's suit is barred for the reason that the decision of the Medical Board is a decision made pursuant to binding arbitration and therefore is res judicata of the plaintiff's entire claim. The plaintiff counters this argument by stating that ERISA provides him with a statutory cause of action that cannot be foreclosed because of an arbitration decision on the same issue.

The issue critical to the resolution of this case is a legal one: what effect does an arbitration decision have upon an individual employee's pension claim brought in an action under ERISA? In other words, when an employee is denied benefits under his company pension plan and that denial is upheld pursuant to binding arbitration provisions in the plan and the collective bargaining agreement, must the district court in the employee's ERISA suit relitigate the entire matter de novo, uphold the arbitration decision unless arbitrary and capricious, or treat the arbitration decision as res judicata of the issue?

It appears that the law has become well settled that, before an employee may assert a judicial cause of action under ERISA, he must first exhaust all administrative procedures outlined in his pension plan, subject only to well recognized exceptions to the exhaustion doctrine. Kross v. Western Electric Co., 701 F.2d 1238, 1243-45 (7th Cir.1983); Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir.1980); Scheider v. United States Steel Corp., 486 F.Supp. 211 (W.D. Pa.1980); Taylor v. Bakery & Confectionary Union & Industry International Welfare Fund, 455 F.Supp. 816 (E.D.N.C.1978).

The essential rationale for holding that administrative procedures must be exhausted before an ERISA suit can be brought in Federal court incorporates the legislative history of ERISA, congressional intent, the requirements outlined in ERISA itself, and important policy considerations. The following from the Amato decision, 618 F.2d at 566-568 (footnotes omitted), summarizes the rationale:

It is true that the text of ERISA nowhere mentions the exhaustion doctrine. The question therefore may be raised as to whether Congress intended to grant the authority to the courts to apply that doctrine in suits arising under ERISA. Like Judge Dupree in Taylor v. Bakery and Confectionary Union and Industry International Welfare Fund, 455 F.Supp. 816 (E.D.N.C.1978), we conclude from both the legislative history and the text of ERISA that Congress did intend to grant such authority to the courts, and that sound policy requires the application of the exhaustion doctrine in suits under the Act.

We note first that in enacting ERISA, Congress "intended that a body of Federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans." 120 Cong.Rec. 29942 (1974) (remarks of Senator Javits). Second, the legislative history of ERISA forges an explicit link between suits under ERISA and suits under section 301 of the LMRA. House Conf.Rep. No. 93-1280, the Joint Explanatory Statement of the Committee of Conference on ERISA, reprinted in 1974 U.S.Code Cong. & Admin.News, pp. 5038, 5107, says that all actions under ERISA to enforce benefit rights under a covered plan or to recover benefits under the plan, whether brought in federal or state courts, "are to be regarded as arising under the laws of the United States in similar fashion to those brought under section 301 of the Labor-Management Relations Act of 1947." But the federal courts have long fashioned federal common law under § 301 of the LMRA, see Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957); and part of that law has been that where administrative remedies are available they must usually be exhausted by an aggrieved party before his § 301 complaint will be heard, see e.g., Buzzard v. Local Lodge 1040 Int'l Ass'n of Mach. and Aero. Wkrs., 480 F.2d 35 (9th Cir.1973). The legislative history of ERISA thus clearly suggests that Congress intended to grant authority to the courts to apply the exhaustion requirement in suits arising under the Act.

Third, ERISA itself requires covered benefit plans to provide administrative remedies for persons whose claims for benefits have been denied. Section 503, 29 U.S.C. § 1133. It also permits the Secretary of Labor to prescribe regulations governing such administrative remedies, Section 505, 29 U.S.C. § 1135; and the Secretary has done so, 29 C.F.R. § 2560.503-1. As Judge Dupree notes in Taylor, supra, the institution of such administrative claim-resolution procedures was apparently intended by Congress to help reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a nonadversarial method of claims settlement; and to minimize the costs of claims settlement for all concerned. It would certainly be anomalous if the same good reasons that presumably led Congress and the Secretary to require covered plans to provide administrative remedies for aggrieved claimants did not lead the courts to see that those remedies are regularly used. Moreover, the trustees of covered benefit plans are granted broad fiduciary rights and responsibilities under ERISA, sections 401 through 414, 29 U.S.C. §§ 1101-1114,

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