Norton v. I.A.M. Nat. Pension Fund

• Decision Date: 21 March 1977
• Docket Number: No. 76-1269,76-1269
• Citation: 180 U.S.App.D.C. 176,553 F.2d 1352
• Parties: 95 L.R.R.M. (BNA) 2055, 180 U.S.App.D.C. 176, 81 Lab.Cas. P 13,122 Grover H. NORTON and Yellow Freight System, Inc., Appellants, v. I. A. M. NATIONAL PENSION FUND.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1352

553 F.2d 1352

95 L.R.R.M. (BNA) 2055, 180 U.S.App.D.C. 176,

81 Lab.Cas. P 13,122

Grover H. NORTON and Yellow Freight System, Inc., Appellants, v. I. A. M. NATIONAL PENSION FUND.

No. 76-1269.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 16, 1977.

Decided March 21, 1977.

John V. Long, Washington, D. C., with whom Alfred Lawrence Toombs, Washington D. C., was on the brief, for appellants.

Denis F. Gordon, Washington, D. C., with whom Mozart G. Ratner, Washington, D. C., was on the brief, for appellee.

Before BAZELON, Chief Judge and McGOWAN and MacKINNON, Circuit Judges.

Opinion for the court filed by McGOWAN, Circuit Judge.

McGOWAN, Circuit Judge:

The issue in this appeal from the District Court is whether the I.A.M. National Pension Fund acted in an arbitrary and capricious manner in denying appellant Norton's application for pension benefits. Norton and his employer, Yellow Freight System, Inc., brought suit in the District Court to compel payment of the pension. On cross-motions for summary judgment, the District Court ruled in favor of the Fund. Since we believe the Fund's actions to have been arbitrary and capricious in several respects, we reverse.

I

The I.A.M. National Pension Fund (originally the I.A.M. Labor-Management Pension Fund) was established in 1960 to provide retirement benefits for employees who are represented for the purpose of collective bargaining by chartered lodges of the International Association of Machinists and Aerospace Workers ("I.A.M."). Under the terms of the pension plan adopted by the Fund's trustees, the size of an employee's pension is directly related to the amount of his employer's contributions to the Fund on his behalf. To qualify for benefits, an employee must have, inter alia, a minimum of ten years of "credited service," defined as the sum of "past service" (meaning periods of employment prior to the time the employer commenced contributions to the Fund) and "future service" (periods of employment during which employer contributions were made).

Norton was employed as a garage mechanic by Yellow Freight and its corporate predecessors from some time in 1952 or 1953 until his retirement, allegedly because of a permanent physical disability, on May 12, 1975. In 1958, he became a member of District Lodge No. 46 of the I.A.M., which was the statutory collective bargaining representative of the unit in which he was employed. In November of 1961, Yellow Freight's predecessor entered into a collective bargaining agreement with I.A.M. District Lodge No. 46 and Local Lodge 35, effective December 1, 1961, which incorporated the terms of the I.A.M. Pension Plan and obligated the employer to make contributions to the Fund on behalf of the employees in Norton's bargaining unit. Thus, Yellow Freight's predecessor began making contributions for Norton's benefit in December 1961; at that time, Norton was credited with eight years of "past service."

Contributions on behalf of Norton were made, and accepted by the Fund, on a continuous basis from December 1961 through February of 1973. On September 25, 1966, Norton attained the age of fifty-five and thus became eligible for an "early retirement pension," pursuant to Article V, Section 4 of the Plan Rules then in effect, which established the following requirements for early pension eligibility: (1) the employee must be 55 years of age or older; (2) he must have accrued at least 10 years of credited service; and (3) he must have received at least six months of future service credit. ¹ The latter two requirements clearly were satisfied, since Norton had compiled more than four years of future service credit, in addition to the eight years of past service credit he was granted in 1961.

On December 1, 1966, Norton completed his fifth year of future service and his right to receive a pension therefore became "vested" pursuant to Article IV, Section 4 of the Plan Rules, which at all relevant times has provided that when an employee (1) has accumulated at least ten years of credited service including a minimum of five years of future service credit, and (2) has attained age 50, he acquires a "vested right" to receive his pension (upon reaching retirement age and making application in the required manner). ² Article IV, Section 4 also specifies, however, that this "vested right" is subject to the provisions of Article IX of the Plan Rules.

Article IX sets forth the basis for terminating participation in the Plan by employers who are delinquent in making agreed-upon contributions to the Fund, and for denying benefits to employees of delinquent employers. In addition, Section 4 of Article IX provides for penalties to employees working for employers who cease to be obligated to contribute to the Fund, but remain in business. At the time Norton's rights "vested," and at all times prior to July 1, 1973, the specified penalty consisted of a forfeiture of all past service credits. ³

In December 1972, Norton requested and received a pension application from the Fund. In its brief, the Fund concedes that had Norton filed his application at that time he would have qualified for an early retirement pension under the provisions of Article V outlined earlier. However, the Fund contends that the application was not submitted until July 1974. Norton claims that he filed the application with the secretary of his lodge the same month in which he received it, but takes the position that whether the application was submitted then or in 1974 is immaterial to the issues presented here. For purposes of this appeal, therefore, we assume that the application was received by Norton, but not filed, in December 1972.

On or about March 1, 1973, all of the Yellow Freight employees in Norton's bargaining unit, except Norton, resigned from Lodge 35 of the I.A.M. and joined a local of the Teamsters Union. Norton retained his membership in the I.A.M. and continued to pay his union dues. However, since Lodge 35 was no longer the designated exclusive representative of a majority of the employees in Norton's bargaining unit, no further negotiations took place between Lodge 35 and Yellow Freight concerning that unit, and the collective bargaining agreement then in effect between Yellow Freight and Lodge 35 expired by its own terms on June 30, 1973 and was not renewed. Yellow Freight continued to tender contributions to the Fund on Norton's behalf during the pendency of the collective bargaining agreement, and thereafter until Norton's retirement in May 1975, but starting in March 1973 the Fund refused to accept any payments from Yellow Freight.

On June 13, 1973, the Fund's trustees adopted a resolution amending Article IX Section 4 of the Plan Rules, effective July 1, 1973, so as "to increase the forfeiture imposed on employees of an active employer who 'withdraws' from the Plan, from all past service to all credited service," Brief for the Appellee I.A.M. National Pension Fund at 7 (emphasis in original). The revised rule provided an exception to this forfeiture for employees "whose employment ends within thirty (30) days of the employer's termination . . .," but under the terms of the amendment those employees who stayed with the employer would lose all service credit, including credit earned while the employer was making contributions to the Fund on their behalf. ⁴ According to the Fund Administrator,

the Trustees concluded that the continued soundness of the Fund required amendment of Article IX, Section 4 in a way which would increase the incentive for employees covered by the Fund to prevent, wherever possible, withdrawal from the fund by active contributing employers.

Affidavit of Frank A. Higgins, J.A. 84.

On June 28, 1973, two days prior to the expiration of the collective bargaining agreement between Yellow Freight and I.A.M. Lodge 35, and three days before the effective date of the amendment to Article IX, the Fund Administrator sent a letter addressed jointly to Yellow Freight's Vice President for Labor Relations and to I.A.M. District Lodge No. 46, with copies to Norton and the other members of his bargaining unit, informing them as to the consequences of the shift in union membership by Norton's fellow employees. On that same date, a similar letter was sent to the attorney then representing Norton, who had requested information about Norton's pension status in light of his compatriots' resignation from I.A.M. A copy of this second letter was also mailed directly to Norton. Both letters advised that the transfer of jurisdiction over Norton's bargaining unit from the I.A.M. to the Teamsters constituted a withdrawal by Yellow Freight, within the meaning of Article IX, Section 4 of the Plan Rules, from participation in the Fund. The letters further advised that Article IX, Section 4 required each employee's credited service to be cancelled unless he "terminates his employment within thirty (30) days of this letter and thereafter becomes employed in a Company which is a Contributing Employer to the I.A.M. Labor-Management Pension Fund." ⁵

On July 11, 1973, thirteen days after these "thirty-day" notices were sent, the Fund informed Norton by written memorandum that

All (of your) credited Service is cancelled. Your Pension Application (which was mailed to you in December 1972) is Void.

Reply Brief of Appellants, Exh. B. Thus, Norton was stripped of the eight years of past service credit and over eleven years of future service credit which he had earned; and when the Fund received his application, which we assume to have been in July 1974 as claimed by the Fund, no pension benefits were awarded.

The amendment to Article IX, Section 4 was repealed in December 1974, thereby restoring the prior rule under which past service, but not future service, credit is forfeited when an employer ceases participation in the Fund. However, the Fund evidently deemed this reversion to the prior rule to be inapplicable to...