Malone v. Western Conf. of Teamsters Pension Trust

• Decision Date: 25 September 1980
• Citation: 110 Cal.App.3d 538,168 Cal.Rptr. 210
• Court: California Court of Appeals Court of Appeals
• Parties: , 92 Lab.Cas. P 12,920 Carolyn MALONE, Individually and as Personal Representative, etc., Plaintiff and Appellant, v. WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST, Defendant and Respondent. Civ. 45315.

Page 210

168 Cal.Rptr. 210

110 Cal.App.3d 538, 92 Lab.Cas. P 12,920

Carolyn MALONE, Individually and as Personal Representative, etc., Plaintiff and Appellant, v. WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST, Defendant and Respondent.

Civ. 45315.

Court of Appeal, First District, Division 1, California.

Sept. 25, 1980.

Rehearing Denied Oct. 24, 1980. See 169 Cal.Rptr. 90.

Hearing Denied Dec. 17, 1980.

Clifford B. Malone, Jr., Walnut Creek, for plaintiff/appellant.

Pillsbury, Madison & Sutro, Noble K. Gregory, Dennis K. Bromley, Robert A. Gordon, San Francisco, for defendant/respondent.

ELKINGTON, Acting Presiding Justice.

During his lifetime, Gaylord Malone commenced a superior court action against the Western Conference of Teamsters Pension Trust (the Trust) seeking thereby, among other things, to establish his right to a disability pension under a pension plan (the Plan) administered by the Trust. Pending the action Gaylord Malone died, and it was continued in the name of his widow, Carolyn Malone, individually as to her derivative rights and as his personal representative. The superior court thereafter entered judgment in favor of the Trust.

The present plaintiff, Carolyn Malone, in her individual and representative capacities, has appealed from the judgment.

Our concern on the appeal is the Plan, which was established under the authority of section 302 of the federal Labor Management Relations Act of 1947 as amended, which is better known as, and more conveniently found in, 29 United States Code section 186. We shall hereafter refer to the statute as Section 186.

The issue of the appeal is whether the Plan, at least as it was applied to Gaylord Malone, was arbitrary and capricious. And since we are concerned with uncontroverted evidence, and the interpretation of a written instrument in aid of which no extrinsic evidence was offered, the issue is for us one of law, unaffected by the findings of the superior court. (See Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866, 44 Cal.Rptr. 767, 402 P.2d 839.)

Section 186 was designed to prevent and penalize corruption in union-employer affairs at the expense of employee union members. (Roark v. Boyle (D.C. Cir. 1970) 439 F.2d 497, 501; Bricklayers, Etc., U. 15, Fla. v. Stuart Plaster. Co., Inc. (5th Cir. 1975) 512 F.2d 1017, 1024-1025; Collins v. United Mine Workers of Am. W. & R. Fund of 1950 (D.C. Cir. 1969) 298 F.Supp. 964, 970 (affd. 439 F.2d 494).) It proscribes the payment, loan, or delivery of "any money or other thing of value" by an employer to the "representative of any of his employees" and provides criminal sanctions for its violation. But it then establishes "exceptions," which appear to have obtained far more judicial attention than the expressed principal purpose.

Among Section 186's exceptions is its subdivision (c)(5), which permits collective bargaining agreements under which an employer may contribute to a trust fund for his employees' welfare or retirement, which contributions shall be used "for the sole and exclusive benefit of the employees of such employer " (emphasis added), and their families and dependents. Such payments are held in trust by trustees made up equally of employer and union representatives. If the contributions are made for the payment of employees' pensions they cannot be used for any other purpose.

The Trust and Plan were founded under the above described exception to the proscription of Section 186.

It is now settled that jurisdiction over actions such as that before us lies concurrently with the federal and state courts of the nation. (See Cox v. Superior Court (1959) 52 Cal.2d 855, 861, 346 P.2d 15; Local No. 2, Etc. v. Paramount Plastering, Inc. (9th Cir. 1962) 310 F.2d 179, 183 (cert. den., 372 U.S. 944, 83 S.Ct. 935, 9 L.Ed.2d 969); Branch v. White (1968) 99 N.J.Super. 295, 239 A.2d 665; Insley v. Joyce (N.D.Ill.1971) 330 F.Supp. 1228, 1231-1232.)

The Plan, as noted, resulted from collective bargaining between unions of the Western Conference of Teamsters (hereafter the Union) and the employers of their members. It was created around 1956. As originally established and as amended by its trustees (the Trustees) it provided, as here relevant, the following.

An employee's disability retirement benefit will be based in substantial part on his "contribution ratio." The length of his employment and thus the total of his employer's contributions will, according to a mathematical formula, determine the amount of his pension entitlement.

"An Employee (as here relevant) shall be eligible for a Disability Retirement Benefit . . . if . . . (b) he has had at least 15 years of Unbroken Service, (and) (d) he is disabled and is receiving Disability Insurance Benefits under the Federal Social Security Act, . . ." (As will be seen, the words which we have emphasized have created the appeal's principal issue.)

The material facts of the case are uncontroverted.

In 1965, after more that 16 consecutive years of employment as a teamster (i.e., a truck driver), of membership in the Union, and of employer contributions on his behalf from about the time of the Plan's creation, Gaylord Malone for some reason undisclosed by the record, changed to a different kind of employment. He had thus established "at least 15 years of unbroken" employment as a "covered employee" of the Plan. Up to that point his employers had always made the required contributions on his account to the Trust. About four years later, in 1969, he resumed his occupation as a teamster and his membership in the Union, thus regaining his status as a covered employee, for whom his employer resumed contributions to the Trust. In 1973 he suffered disability for which he received benefits under the federal Social Security Act.

Gaylord Malone's application to the Trust for disability retirement benefits was rejected for the reason that he had not had "at least 15 years of unbroken service" immediately preceding his application.

The instant action followed.

In the superior court the Trust contended that the Plan's above noted provision, that a disability retirement applicant must have had at least 15 years of unbroken service, must be construed to mean 15 years of such service immediately preceding the disability. (We, but arguendo only, so construe the Plan for the purpose of the appeal.)

The court agreed, and among others, made the following findings:

"Gaylord Malone incurred a break in service-as that term is defined in the Western Conference of Teamsters Pension Plan ('Plan')-on December 31, 1967.

. . . Under the clear terms of the Plan, Malone's prior service credits were canceled and forfeited when he incurred his break in service.

". . . Gaylord Malone was never eligible for a Disability Retirement Benefit and Carolyn Malone was and is not eligible for a Survivor Benefit under the Plan. . . .

". . . Defendant did not act arbitrarily, capriciously, or in bad faith in handling Malone's claim for benefits."

We note preliminarily that a trust, and fiduciary, relationship existed between the Trustees who promulgated and administered the Plan, and employees situated as was Gaylord Malone. (See 29 U.S.C. § 186; Bricklayers, Etc., U. 15, Fla. v. Stuart Plaster. Co., Inc., supra, 512 F.2d 1017, 1025; Lee v. Nesbitt (9th Cir. 1971) 453 F.2d 1309, 1311; Roark v. Lewis (D.C.Cir. 1968) 401 F.2d 425, 427-428; Insley v. Joyce, supra, 330 F.Supp. 1228, 1234.) The Plan will properly be construed in light of the well-known requirements of such a relationship.

While ordinary courts will not interfere with a bargained-for Section 186 plan, or with the trustees' acts or discretion under it, they will nevertheless do so where one or the other is found to be unlawful, or arbitrary, or capricious (Lee v. Nesbitt, supra, 453 F.2d 1309, 1311; Roark v. Boyle, supra, 439 F.2d 497, 501; Roark v. Lewis, supra, 401 F.2d 425, 427; Insley v. Joyce, supra, 330 F.Supp. 1228, 1234; Collins v. United Mine Workers of Am. W. & R. Fund of 1950, supra, 298 F.Supp. 964, 968), or not fair and equitable (Teston v. Carey (D.C.Cir. 1972) 464 F.2d 765, 769), or unreasonable (Lee v. Nesbitt, supra, p. 1311; Roark v. Boyle, supra, p. 501).

Employer contributions under the Plan such as were made on account of Gaylord Malone constitute benefits earned by the employees. They are "seen as quasi-salary, a portion of income which the employee acting through his union, chooses to have deferred so as to provide for or supplement retirement income." (Emphasis added; Roark v. Boyle, supra, 439 F.2d 497, 504.) And: " 'It is only just, said Congress, that the employee whose hour's work required the employer to make a payment . . . to the trust fund be assured of reaping the benefit of that payment.' " (Crawford v. Cianciulli (E.D.Pa. 1973) 357 F.Supp. 357, 373.)

For administrative simplification, "pooling" of the employer contributions is permitted, making it unnecessary to key an employee's pension rights to the precise contributions made on his account. But such rights will nevertheless depend to a substantial degree upon the contributions the employee has earned. Against a contention that such "pooled funds" might be used to the partial or total exclusion of an employee for whose account a portion of them was made, it was held: "A pooled fund is simply one large fund contributed to by a number of employers, instead of many smaller funds each contributed to by only one employer. For simplicity of administration and reduction of overall expense, Congress, it seems, allowed employers, by that portion of 302(c)(5) in parentheses, to use pooled funds. But surely it is clear that employers contributing to any pension fund are doing so only for the benefit of their own employees. The fact that the fund benefits as a whole by the comingling of all employer contributions does not overcome the presumption that employers are acting, to an overwhelming extent, in the interests of only...