Niagara of Wisconsin Paper Corp. v. Paper Industry Union-Management Pension Fund

• Decision Date: 04 November 1986
• Docket Number: No. 85-5231,UNION-MANAGEMENT,85-5231
• Citation: 800 F.2d 742
• Parties: 123 L.R.R.M. (BNA) 3042, 105 Lab.Cas. P 12,032, 7 Employee Benefits Ca 2313 NIAGARA OF WISCONSIN PAPER CORPORATION, Appellant, v. The PAPER INDUSTRYPENSION FUND; Wayne E. Glenn, Joe J. Bradshaw, James Dassaro, John E. Price, Irving Rolnick, Robert Sherry, Arnold Nemiro and M.L. Talmadge, Trustees of The Paper Industry Union Management Pension Fund, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 742

800 F.2d 742

123 L.R.R.M. (BNA) 3042, 105 Lab.Cas. P 12,032,

7 Employee Benefits Ca 2313

NIAGARA OF WISCONSIN PAPER CORPORATION, Appellant, v. The PAPER INDUSTRY UNION-MANAGEMENT PENSION FUND; Wayne E Glenn, Joe J. Bradshaw, James Dassaro, John E. Price, Irving Rolnick, Robert Sherry, Arnold Nemiro and M.L. Talmadge Trustees of The Paper Industry Union Management Pension Fund, Appellees.

No. 85-5231.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 10, 1986.

Decided Sept. 3, 1986.

Rehearing Denied Nov. 4, 1986.

Stuart T. Williams, Minneapolis, Minn., for appellant.

Michael J. Dell, New York City, for appellees.

Before LAY, Chief Judge, and ROSS and WOLLMAN, Circuit Judges.

ROSS, Circuit Judge.

Niagara of Wisconsin Paper Corporation (Niagara) brought this action under the Labor-Management Relations Act (LMRA), 29 U.S.C. Secs. 141-187 (1982) for damages and injunctive relief against The Paper Industry Union-Management Pension Fund and its trustees (Fund or trustees), alleging that the Fund arbitrarily and capriciously cancelled past service credits of Niagara's employees upon Niagara's withdrawal from the Fund. The district court ¹ granted the Fund's motion for summary judgment and dismissed Niagara's complaint. Niagara of Wisconsin Paper Corp. v. The Paper Industry Union-Management Fund, 603 F.Supp. 1420, 1422-23 (D.Minn.1984) (August Order). In addition, the district court subsequently denied Niagara's motions for reconsideration, for further discovery and for leave to amend its complaint. Niagara of Wisconsin Paper Corp. v. The Paper Industry Union-Management Fund, 603 F.Supp. 1423, 1431 (D.Minn.1984) (December Order). Niagara appeals from portions of these adverse rulings and for the reasons discussed below, we now affirm.

I. FACTS

The Fund is a large, multi-employer pension fund governed by section 302(c)(5) of the LMRA, 29 U.S.C. Sec. 186(c)(5), and the Employee Retirement Income Security Act (ERISA), 29 U.S.C. Secs. 1001-1368 (1976), as amended by the Multi-Employer Pension Plan Amendments Act of 1980 (MPPAA), 29 U.S.C. Secs. 1381-1461 (1982). The Fund operates as a trust, providing pension and other benefits to employees covered under collective bargaining agreements negotiated by various affiliates of the United Paper Workers International Union. Niagara is a manufacturer of paper products and from 1973 through January 31, 1981 Niagara made contributions to the Fund on behalf of its eligible employees. Effective January 31, 1981 Niagara withdrew from the Fund and established its own pension plan for the benefit of its employees. Pursuant to a collective bargaining agreement with its employees entered into at the time, Niagara agreed to make up any benefits or credits cancelled or denied by the Fund due to Niagara's withdrawal from the Fund.

To counteract the effect of Niagara's withdrawal from the plan the Fund took the following two steps to safeguard the solvency of the plan. First, in August, 1981 the Fund imposed withdrawal liability upon Niagara under section 1381 of MPPAA. The Fund determined that Niagara's share of the plan's unfunded vested benefits was approximately $1.5 million. Second, in April, 1982 the Fund cancelled certain unfunded past service credits ² of Niagara employees who were not on pension by April 1, 1982, based upon the advice of its actuaries, the Martin E. Segal Company (Segal). Segal had calculated that the pension benefits to Niagara participants were valued at $6.6 million and that Niagara's total contributions, including the $1.5 million withdrawal liability equalled only $3.3 million, resulting in a substantial shortfall to the Fund. Segal advised the Fund that the actuarial balance of the Fund was in jeopardy unless the Fund cancelled the past service credits.

From October, 1981 through April, 1983 Niagara made its required monthly withdrawal liability payments to the Fund. Niagara stopped making its payments in May, 1983 and in June, 1983 Niagara filed this suit and a motion for a preliminary injunction. Niagara alleged that the Fund arbitrarily and capriciously cancelled past service credits of Niagara's employees, refused to participate in arbitration demanded by Niagara and caused Niagara to pay monies in excess of its properly calculated withdrawal liability. Niagara asserted claims under both ERISA and the LMRA. Niagara's request for a preliminary injunction was denied. The Fund filed a motion to dismiss the complaint, or alternatively, for summary judgment.

On December 23, 1983 the district court entered a memorandum and order granting the Fund's motion to dismiss Niagara's claim to compel arbitration as untimely and to dismiss Niagara's claims under ERISA for lack of subject matter jurisdiction. However the district court denied the Fund's motion to dismiss Niagara's claims under the LMRA holding that there was jurisdiction to hear Niagara's challenge to the Fund's cancellation of past service credits. ³

The remaining LMRA claims proceeded before the district court on the cross motions by Niagara and the Fund for summary judgment. Following oral argument and the submission of written memoranda the district court granted the Fund's motion for summary judgment, holding that the trustees' actions were not arbitrary and capricious and that Niagara failed to establish a violation of Sec. 302(c)(5) of the LMRA. ⁴ August Order, supra, 603 F.Supp. at 1422.

Thereafter Niagara filed motions to reconsider, for further discovery, and for leave to amend the complaint to plead breach of contract claims under Sec. 301(a) of the LMRA, 29 U.S.C. Sec. 185(a) ⁵. The district court denied these motions, December Order, supra, 603 F.Supp. at 1431, and Niagara appealed after the entry of a final judgment in June, 1985.

Since Niagara does not appeal the dismissal of its request to compel arbitration, the initial withdrawal liability calculation, or the dismissal of its ERISA claims, the sole focus of this appeal is the dismissal of Niagara's LMRA claims challenging the Fund's cancellation of the past service credits. For reversal, Niagara specifically argues that: 1) the district court erred in denying partial summary judgment to Niagara and in granting summary judgment to the Fund on Niagara's Sec. 302(c)(5) claim; and 2) the district court abused its discretion in denying Niagara's motion for leave to amend its complaint after dismissal of its complaint to add claims under section 301(a).

II. DISCUSSION

A. Section 302(c)(5)

1. Standard of Review

Niagara brought this action challenging the Fund's action under section 302(c)(5) of the LMRA. Section 302(c)(5) allows payments to pension and similar trust funds only if they are for the "sole and exclusive benefit" of employees. This court has jurisdiction under section 302(e) ⁶ to restrain violations of subsection (c)(5). Arroyo v. United States, 359 U.S. 419, 426-27, 79 S.Ct. 864, 868-69, 3 L.Ed.2d 915 (1959). Section 302(c)(5) has been construed to impose on trustees the burden of fiduciary care, as defined under traditional trust law principles. NLRB v. Amax Coal Co., 453 U.S. 322, 330, 101 S.Ct. 2789, 2794, 69 L.Ed.2d 672 (1981). Each trustee bears an "unwavering duty of complete loyalty" to employees, id. at 329, 101 S.Ct. at 2794, and this duty "to trust beneficiaries must overcome any loyalty to the interest of the party that appointed him," id. at 334, 101 S.Ct. at 2796. It is well settled in this circuit that federal courts may overturn a decision of private pension fund fiduciaries only if the decision is arbitrary, capricious or an abuse of discretion. ⁷ Severs v. Allied Construction Services, Inc., Employees' Profit Sharing and Stock Ownership Plan, 795 F.2d 649, 650-51 (8th Cir.1986); Lawrence v. Westerhaus, 780 F.2d 1321 1322 (8th Cir.1985); Central Hardware Co. v. Central States, Southeast and Southwest Areas Pension Fund, 770 F.2d 106, 109 (8th Cir.1985), cert. denied, --- U.S. ---, 106 S.Ct. 1515, 89 L.Ed.2d 914 (1986); Geigle v. Flacke, 768 F.2d 259, 262 (8th Cir.1985); Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d 567, 571 (8th Cir.1984); and Bueneman v. Central States, Southeast and Southwest Areas Pension Fund, 572 F.2d 1208, 1209 (8th Cir.1978). If there is evidence supporting the decision, it is not arbitrary, capricious or an abuse of discretion. Severs, supra, 795 F.2d at 651; Lawrence, supra, 780 F.2d at 1322-23; Torimino v. United Food and Commercial Workers International Union Industry Pension Fund, 548 F.Supp. 1012, 1014 (E.D.Mo.1982), aff'd, 712 F.2d 882-83 (8th Cir.1983) (per curiam).

The district court granted summary judgment to the Fund because Niagara did not establish a violation of section 302(c)(5). Summary judgment is appropriate only if there is "no genuine issue as to any material fact and * * * the moving party is entitled to a judgment as a matter of law." FED.R.CIV.P. 56(c). Further, as was recently held by the Supreme Court, the inquiry involved in a ruling on a motion for summary judgment necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits. Anderson v. Liberty Lobby, Inc., --- U.S. ---, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). Thus, like the district court, we need only determine whether there was any genuine factual conflict on the question of the arbitrary and capricious nature of the Fund's action. Severs, supra, 795 F.2d at 651; Lawrence, supra, 780 F.2d at 1323.

2. Merits

We understand Niagara's attack on the district court's entry of summary judgment for the Fund to be twofold. ⁸ First, Niagara takes the position that it was entitled to partial summary judgment because it established that the trustees violated a fiduciary duty imposed by section 302(c)(5) when they cancelled the past service credits. Secondly, Niagara maintains that the entry of summary judgment was not proper because there existed disputed issues of material fact...