Nichols v. Board of Trustees of Asbestos Workers Local 24 Pension Plan

• Citation: 835 F.2d 881
• Decision Date: 11 December 1987
• Docket Number: No. 82-1959,82-1959
• Parties: , 56 USLW 2358, 10 Fed.R.Serv.3d 66, 9 Employee Benefits Ca 1177 Donna L. NICHOLS, et al., Appellants, v. BOARD OF TRUSTEES OF the ASBESTOS WORKERS LOCAL 24 PENSION PLAN, et al.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 881

835 F.2d 881

266 U.S.App.D.C. 304, 56 USLW 2358,

10 Fed.R.Serv.3d 66,

9 Employee Benefits Ca 1177

Donna L. NICHOLS, et al., Appellants, v. BOARD OF TRUSTEES OF the ASBESTOS WORKERS LOCAL 24 PENSION PLAN, et al.

No. 82-1959.

United States Court of Appeals District of Columbia Circuit.

Argued June 3, 1983.

Decided Sept. 24, 1987.

Opinions Filed Dec. 11, 1987.

Daniel M. Schember, with whom Katharyn M. Marks and James B. Klimaski, Washington, D.C., were on brief, for appellants.

Michael J. Roach, Atty., Dept. of Justice, with whom Glenn L. Archer, Jr., Asst. Atty. Gen., Stanley S. Harris, U.S. Atty., and Michael L. Paup, Atty., Dept. of Justice, Washington, D.C., were on brief, for federal appellees.

Thomas P. McErlean, Washington, D.C., for appellee Board of Trustees of Asbestos Workers Local 24 Pension Plan. James Buckley Ostmann, Washington, D.C., also entered an appearance for the Board.

Before ROBINSON and STARR, Circuit Judges and WRIGHT, ^* Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROBINSON.

Dissenting Opinion filed by Circuit Judge STARR.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge:

In May, 1979, the board of trustees of the Asbestos Workers Local 24 Pension Plan proposed amendments designed to effect a retroactive decrease in the plan's retirement benefits. The Internal Revenue Service (IRS) approved the amendments shortly thereafter. Three adversely-affected retirees then filed suit in the District Court to block the amendments, contending that Section 302(c)(8) of the Employee Retirement Income Security Act (ERISA) ¹ prohibits retroactive alteration of the Plan, that the trustees' action flouted statutorily-prescribed fiduciary duties, and that agency approval of the benefit reduction was arbitrary and procedurally deficient. On cross-motions for summary judgment, the District Court dismissed the case, concluding that neither the trustees, IRS, nor the plan amendments themselves transgressed ERISA or any other applicable provision of law.

We find that IRS approved and thereby validated the benefit decrease on the basis of deliberations plainly inadequate to satisfy ERISA's specific, unequivocal requirements. We therefore vacate the judgment appealed from and remand to the District Court with instructions to return the case to IRS for appropriate further proceedings.

I

The Asbestos Workers Local 24 Pension Plan is a defined-benefit, multiemployer program established pursuant to a collective-bargaining agreement between the Insulation Contractors Association of Washington, D.C., Inc., and the Asbestos Workers Local No. 24 of the International Association of Heat and Frost Insulators. ² In 1977, the plan entitled eligible participants to monthly retirement benefits of $16.80 for each year of service in covered employment. ³ On April 12, 1977, the trustees increased the monthly benefit for plan participants retiring after October 1, 1977, to $24.80 per credit year. ⁴ Ernest Nichols, Raymond Bell, and Ralph Tomlin, who later became the plaintiffs herein, fell within the category, and qualified for and received monthly payments at the higher level. ⁵

The plan did not fare well during the two years following this change. The number of hours worked annually in covered employment declined markedly, and a significant number of plan participants unexpectedly elected early retirement. At the then-existing contribution rate and benefit level, this combination of factors resulted in substantial unfunded plan liabilities. ⁶ To secure the plan's financial viability, and to enhance the prospect of a merger with the larger and potentially more stable National Asbestos Workers Pension Plan, the trustees, on May 30, 1979, adopted amendments repealing the 1977 monthly benefit retroactively to July 1, 1977, and reinstating the previous monthly benefit of $16.80 per credit year. ⁷ The amendments mandated recalculation of pensioners' retirement payments at the lower level and thus pared their monthly benefits by approximately one-third. ⁸

The benefit reduction did not become effective immediately because Section 302(c)(8) of ERISA ⁹ requires retroactive amendments to qualifying plans to be cleared with IRS. The trustees submitted the amendments and supporting materials to IRS on September 21, 1979, ¹⁰ and IRS formally approved them on December 17 following. ¹¹ This removed the statutory impediment to their implementation by the trustees, and thereupon retirees' monthly payments under the plan decreased. ¹²

Nichols' repeated efforts to obtain relevant information from the trustees and to participate in the IRS review of the plan amendments met with resistance and refusal. Before the trustees submitted the amendments to IRS, Nichols twice sought a copy of the accompanying materials. ¹³ The trustees not only rejected each request, ¹⁴ but did not even notify Nichols individually when, much later, they made duplicates available for inspection or purchase. ¹⁵ Nichols' attempts to procure copies from IRS and to intervene in the agency's Section 302(c)(8) proceeding for review of the amendments ¹⁶ proved similarly futile; IRS denied the request for the materials ¹⁷ and simply ignored the query respecting participation. ¹⁸ Nichols obtained the requested documents from the trustees on January 9, 1980, ¹⁹ three weeks after IRS, without his input, approved the amendments and sanctioned the benefit decrease he had hoped to forestall.

II

Unable to defeat the benefit rollback by administrative means, Nichols, later joined by Bell and Tomlin, filed suit in the District Court ²⁰ for declaratory and injunctive relief against the trustees and IRS. ²¹ They contended that the amendments were invalid because the trustees, by adopting them, ²² by denying Nichols' information request, ²³ by submitting incomplete financial data to IRS, ²⁴ and by failing to collect employer contributions due under reciprocal agreements, ²⁵ contravened the fiduciary obligations imposed by Section 404 of ERISA. ²⁶ The plaintiffs also attacked IRS's review of the trustees' action, arguing that the agency ignored statutorily-mandated factors, ²⁷ denied the intervention request in violation of their statutory and constitutional rights, ²⁸ and approved the amendments without the support of substantial evidence. ²⁹ Finally, the plaintiffs claimed that even aside from improprieties in trustee conduct or IRS deliberation, the benefit reduction failed to satisfy Section 302(c)(8)'s substantive requirements. ³⁰

On cross-motions for summary judgment, the District Court rejected these claims and refused to invalidate the challenged amendments. The court concluded that the trustees' adoption and approval of the amendments did not violate Section 404, citing a number of considerations--the broad discretion customarily accorded trustees in matters of fund administration, the trustees' evenhanded treatment of plan beneficiaries, compliance with IRS procedures and requests, and seemingly good faith efforts to oversee payment of reciprocal contributions, preserve the financial viability of the plan, and submit accurate data to IRS. ³¹

The court also rejected, on different grounds, the contention that the trustees' denials of Nichols' information requests breached the fiduciary duties imposed by Section 404. ³² Because ERISA subjects trustees of qualifying funds to several express disclosure requirements, none of which the plaintiffs claimed the trustees infringed, the court held that it would find a breach of fiduciary obligation for lack of disclosure only if the trustees had engaged in "egregious" conduct ³³ or otherwise acted in a manner inconsistent with "fundamental fairness." ³⁴ The trustees had granted access to the application materials in December, 1979, and Nichols acquired copies less than a month later. The plaintiffs' failure to demonstrate that more timely disclosure would have altered the administrative outcome was deemed confirmation of the court's determination that the trustees' refusal of Nichols' presubmission requests was neither egregious nor fundamentally unfair. ³⁵

The District Court was similarly unresponsive to the plaintiffs' contention that the amendment exceeded Section 302(c)(8)'s bounds on retroactivity. The plaintiffs wielded a single statement in the legislative history to support their construction of Section 302(c)(8) as restricting the permissible retroactive effect of amendments to a two-year period; they argued that the plan amendments overstepped this limitation by retroactively reducing the retirement benefits to which they were entitled for all the years they had worked in covered employment, not only those after 1977. ³⁶ The court dismissed this contention, accepting instead the agency's interpretation of Section 302(c)(8) as prohibiting only those amendments that, unlike the one disputed here, reduced benefits already accrued at the beginning of the first validly affected plan year. ³⁷

The plaintiffs' challenge to IRS's deliberative process fared no better. The court put aside, not their assertion that IRS did not consider all statutorily-enumerated factors, but their argument that ERISA required the agency to do so. It then dismissed the plaintiffs' claim, finding that "[t]he record in this case shows that the IRS considered a sufficient number of the pertinent factors in light of the evidence submitted by the Trustees ... and existing circumstances." ³⁸

Proceeding to the plaintiffs' final contention, the court held that the agency's refusal to allow Nichols to intervene did not taint the proceeding from which it excluded him. ³⁹ Because Section 302(c)(8) contemplates action by IRS within ninety days after submission of a proposed retroactive amendment, ⁴⁰ denial of Nichols' request to intervene was thought to promote substantially "the orderly conduct of public business" and thus survived scrutiny under Section 6(a) of the Administrative Procedure Act, ⁴¹ upon which the claim was...