Music v. Western Conference of Teamsters Pension Trust Fund

• Decision Date: 29 August 1983
• Docket Number: No. 79-4251,79-4251
• Parties: 116 L.R.R.M. (BNA) 2347, 98 Lab.Cas. P 10,350 Frank MUSIC, Plaintiff-Appellant, v. WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 413

712 F.2d 413

116 L.R.R.M. (BNA) 2347, 98 Lab.Cas. P 10,350

Frank MUSIC, Plaintiff-Appellant, v. WESTERN CONFERENCE OF TEAMSTERS PENSION TRUST FUND,

Defendant-Appellee.

No. 79-4251.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 15, 1981.

Decided Aug. 2, 1983.

As Amended on Denial of Rehearing Aug. 29, 1983.

Dennis K. Bromley, Robert A. Gordon, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant-appellee.

Stephen McKae, Moore, Sizoo & Cantwell, Oakland, Cal., for plaintiff-appellant.

Appeal from the United States District Court for the Northern District of California.

Before SKOPIL, ALARCON, and BOOCHEVER, Circuit Judges.

ALARCON, Circuit Judge:

Appellant Frank Music appeals from a grant of summary judgment in favor of the Western Conference of Teamsters Pension Trust Fund and the denial of his cross-motion for summary judgment. For the reasons stated below, we reverse the judgment of the district court. ¹

FACTS

Frank Music (hereinafter "Music") was a participant in the Western Conference of Teamsters Pension Trust Fund (hereinafter "Trust Fund") for approximately 20 years before he suffered a disabling heart attack on November 6, 1975, at age 47.

Music thereafter applied for federal social security disability benefits (hereinafter "federal disability"). In August of 1976, the Social Security Administration declared Music permanently disabled and therefore eligible to receive those benefits. The federal disability insurance program requires a "waiting period" of five full, consecutive calendar months between the date an applicant first becomes disabled and the applicant's "date of entitlement", upon which he or she is eligible to receive benefits. 42 U.S.C. § 423(c)(2). Music was therefore declared eligible to receive federal disability benefits as of May 1, 1976, which was five full consecutive calendar months after his November heart attack. His federal disability benefits were paid retroactive to that date.

In August of 1976, Music submitted an application to the Trust Fund for disability retirement benefits [hereinafter "union disability pension."]. The Trust Fund determined that Music was eligible to receive a disability pension, ² and went about computing the amount of his monthly benefit payments.

Both at the time of Music's application for benefits and at the time of his disabling heart attack, the Pension Plan of the Western Conference of Teamsters [hereinafter "pension plan"] required that a disabled Music, however, contended that his pension eligibility should commence on the date he became disabled, in November of 1975, and that the amount of his monthly disability benefits should be computed under the more generous terms of the pension plan in effect at that time (hereinafter "the 1975 plan"). ⁴ The effect of the pension plan's five-month "waiting period" eligibility requirement, and thus the question of which benefits Music is entitled to, are the sole issues in this case. ⁵

                employee be receiving federal disability benefits before she or he was eligible to receive a union disability pension. 3  Music was therefore not eligible to receive a union disability pension until May 1, 1976, the date on which he became eligible for federal disability benefits.   The Trust Fund fixed the amount of his monthly disability benefits by the terms of the pension plan in force on May 1, 1976 (hereinafter "the 1976 plan").   The plan had gone into effect on January 1, 1976
                

DISCUSSION

Jurisdiction and Standard of Review

Music brought this action under § 302 of the Labor Management Relations Act, 29 U.S.C. § 186 (LMRA), and § 404 of the Employee Retirement Income Security Act, 29 U.S.C. § 1104 (ERISA).

Section 302 of the LMRA [29 U.S.C. § 186] contains a general prohibition against employers making payments of money "or other things of value" to union representatives. Section 302(c)(5), however, sets forth an exception to this general prohibition for payments made to an employee welfare or pension fund. Under § 302(c)(5), the general prohibition of § 302 does not apply "with respect to money or other things of value paid to a trust fund established ... for the sole and exclusive benefit of the employees of such employer, and their families and dependents...." § 302(c)(5), [emphasis added]. Thus, under § 302(c)(5), a pension trust fund must be operated "for the sole and exclusive benefit of the employees." Sailer v. Retirement Fund Trust, 599 F.2d 913, 914 (9th Cir.1979).

We have repeatedly emphasized that although § 302(e) grants district courts jurisdiction to determine whether the provisions of a given retirement fund constitute a structural defect in violation of § 302(c)(5), that section does not confer general powers to interfere with the day to day fiduciary administration of welfare and pension trust funds. See Ponce v. Construction Laborers Pension Trust, 628 F.2d 537, 541 (9th Cir.1980), Wilson v. Board of Trustees, Etc., 564 F.2d 1299, 1300 (9th Cir.1977); Burroughs v. Board of Trustees of Pension Trust, Etc., 542 F.2d 1128, 1130 (9th Cir.), cert. denied, 429 U.S. 1096, 97 S.Ct. 1113, 51 L.Ed.2d 543 (1977).

When pension trustees acting under the authority of the trust fund arbitrarily and capriciously deny pensions to employees a structural defect exists. Ponce, 628 F.2d at 541. Such arbitrary and capricious conduct is structurally deficient because it is deemed not to be for the sole and exclusive benefit of the employees. ⁶ Id. at 541-42.

Section 302(c)(5) which requires trustees to act for the "sole and exclusive benefit of the employees" imposes on trustees the burden of fiduciary care as defined on traditional equitable principles. NLRB v. Amax Coal Co., 453 U.S. 322, 330, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981). Thus, "a trustee bears an unwavering duty of complete loyalty to the beneficiary to the trust, to the exclusion of the interests of all other parties", id. at 329, 101 S.Ct. at 2794. This rule against divided loyalties must be enforced with "uncompromising rigidity." Id. at 329-330, 101 S.Ct. at 2794.

In United States Mine Workers, Etc. v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982), where the Supreme Court found that benefits determined in collective bargaining can be overturned only if they are in violation of another federal law, the Court also held that the "sole and exclusive benefit" provision of § 302(c)(5) "is simply that employer contributions to employee benefit trust funds must accrue to the benefit of employees and their families and dependents to the exclusion of all others." Id. at 570, 102 S.Ct. at 1231.

While holding that § 302(c)(5) did not authorize federal courts to review for reasonableness the provisions of collective bargaining agreements which fix eligibility rules for an employee benefit trust fund, the Court was careful to draw a distinction between cases like Robinson which involved collective bargaining and those where changes in eligibility levels were made unilaterally by the trustees of the fund. The Court recognized that in the latter type of cases:

The Court of Appeals has held ... "that the Trustees have 'full authority ... with respect to questions of coverage and eligibility' and that the court's role is limited to ascertaining whether the Trustees' broad discretion has been abused by the adoption of arbitrary or capricious standards." Noting that "[t]he institutional arrangements creating this Fund and specifying the purposes to which it is to be devoted are cast expressly in fiduciary form," the court stated that "the Trustees, like all fiduciaries, are subject to judicial correction in a proper case upon a showing that they have acted arbitrarily or capriciously towards one of the persons to whom their trust obligations run."

(citations omitted). Id. at 573, 102 S.Ct. at 1233.

Quoting NLRB v. Amax Coal Co., 453 U.S. 322, 101 S.Ct. 2789, 69 L.Ed.2d 672 (1981), the Court also iterated that in enacting § 302(c)(5), "Congress intended to impose on trustees traditional fiduciary duties." 455 U.S. at 573 n. 12, 102 S.Ct. at 1233 n. 12. The Court, however, left unanswered the question whether federal courts are authorized to enforce those duties. Id.

Although "it would be anomalous to conclude that § 302(c)(5) imposed fiduciary obligations on trustees but that federal courts were powerless to enforce them," Dudo v. Schaffer, 551 F.Supp. 1330, 1338 (E.Pa.1982), accord Hurn v. Retirement Fund Trust, 703 F.2d 386 (9th Cir.1983), we also need not resolve that issue. In Robinson, the Court stated that the "substantive terms of jointly administered employee benefit plans must comply with the detailed and comprehensive standards of ERISA." 455 U.S. at 575, 1234. In NLRB v. Amax Coal Co., the Court had previously recognized that "ERISA essentially codified the strict fiduciary standards that a § 302(c)(5) trustee must meet." 453 U.S. at 332, 101 S.Ct. at 2795. Thus, the fiduciary provisions of § 404 of ERISA, 29 U.S.C. § 1104, are applicable to the trustees actions in this case. Under § 404(a)(1) a fiduciary must discharge his or her duties with respect to the plan "solely on the interest of the participants and beneficiaries and (A) for the exclusive purpose of providing benefits to participants and their beneficiaries; and defraying reasonable expenses of administering the plan." We therefore, have jurisdiction under 29 U.S.C. § 1132. See Elser v. I.A.M. National Pension Fund, 684 F.2d 648 (9th Cir.1982), petition for cert. filed, 51 U.S.L.W. 3614 (U.S. Feb. 8, 1983) (No. 82-1325).

This court has recognized that trustees must have broad discretion in fashioning eligibility requirements for pensions and that judicial intervention is appropriate only where the trustees' actions in fashioning or applying those eligibility requirements do not have a reasonable basis or are arbitrary and capricious. See Ponce, 628 F.2d 541-42; Sailer v. Retirement Fund Trust, 599 F.2d...