Rehmar v. Smith

• Decision Date: 15 October 1976
• Docket Number: No. 74-1953,74-1953
• Citation: 555 F.2d 1362
• Parties: 93 L.R.R.M. (BNA) 2657, 94 L.R.R.M. (BNA) 2511, 79 Lab.Cas. P 11,718, 80 Lab.Cas. P 11,856, 1 Employee Benefits Ca 1799 Lillian Yanks REHMAR, Plaintiff-Appellee, v. Bernard L. SMITH et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1362

555 F.2d 1362

93 L.R.R.M. (BNA) 2657, 94 L.R.R.M. (BNA) 2511,

79 Lab.Cas. P 11,718, 80 Lab.Cas. P 11,856,

1 Employee Benefits Ca 1799

Lillian Yanks REHMAR, Plaintiff-Appellee, v. Bernard L. SMITH et al., Defendants-Appellants.

No. 74-1953.

United States Court of Appeals Ninth Circuit.

Oct. 15, 1976.

As Amended on Denial of Rehearing Jan. 3, 1977

Rehearing En Banc Denied June 6, 1977.

Richard Ernst (argued), Wilmington, Cal., for defendants-appellants.

Samuel R. Tannenbaum (argued), of Levy & Tannenbaum, Los Angeles, Cal., for plaintiff-appellee.

Before CHAMBERS, GOODWIN and WALLACE, Circuit Judges.

WALLACE, Circuit Judge:

Lillian Rehmar (Lillian) brought this action against two pension fund trustees to recover a survivor's benefit allegedly due her under a collectively-bargained pension plan. The district judge applied principles developed by California courts in interpreting insurance contracts and gave judgment to Lillian for $18,800 plus interest and costs. The trustees appealed claiming that the state law of commercial insurance contracts should not have been applied. We reverse and remand.

I. Facts

Sam Rehmar (Sam), a radio operator on merchant ships, worked under the terms of a collective bargaining agreement between the shipowners and his union, the American Radio Association (Union). The agreement provides welfare and pension benefits for Union members. The agreement also prescribes eligibility rules. The benefits are funded by employer contributions to trust funds which are jointly administered by representatives of the Union and the employers in equal numbers pursuant to § 302(c)(5) of the National Labor Relations Act (Act), 29 U.S.C. § 186(c)(5).

Sam lived with Lillian for many years although they never obtained a marriage license or participated in a wedding ceremony. In 1969 Sam applied for pension benefits naming "Lilian Yanks" as beneficiary and designating her relationship to him as "friend." He did not retire at that time. On April 2, 1972, Sam again applied for pension benefits naming "Lilian Yanks" as his beneficiary but he omitted to state her relationship. On May 22, 1972, he submitted a "permanent data form" applicable to the welfare plan only, naming "Lilian Y. Rehmar" as his beneficiary and designating her relationship as "wife." He was to begin receiving his pension on June 1, 1972, but he died on May 30, eight days after he made his final submission.

Three types of survivor's benefits are payable to a Union member's designated "beneficiary" under the welfare and pension plans. Under the welfare plan, a deceased member's beneficiary is entitled to a lump sum payment. Lillian received $20,000 under this provision.

The other two survivor's benefits are provided by Article IV, section 9, of the pension plan. Only the second benefit, described in subsection B, is involved in this case. That subsection provides:

In the event a pensioner . . . shall die before 60 monthly pension payments have accrued, payment of the monthly pension amount shall continue to be made up to a maximum of 60 payments including those accrued before the death of the pensioner:

(1) To his named beneficiary during his life if such beneficiary falls within the following classes:

(a) Spouse . . . ;

(c) Others who would fall within the term of "dependent" as defined under the ARA Pension and Welfare Plan.

(2) If no beneficiary has been named or if the named beneficiary is not in the classes designated in Paragraph (1) above, to the following persons, in the order named, and in equal shares where necessary:

(a) Spouse . . . ;

(b) Children . . . ;

(c) Others who would fall within the term of "dependent" as defined under the ARA Pension and Welfare Plan.

The Union Pension and Welfare Plan limits the term "dependent" to the children, wife or parents of the member.

Lillian applied for benefits under subsection B, but her application was denied on the ground that although she was a named beneficiary, she was not a member of one of the required classes.

Seeking review of that denial, Lillian filed a complaint for declaratory relief in California Superior Court. She claimed to be entitled to the survivor's benefit provided by Article IV, § 9B of the pension plan as the "designated wife of the decedent." The trustees petitioned for removal of the case to federal court and answered the complaint by denying that Lillian was entitled to any benefits under the pension plan. Lillian thereupon filed a memorandum asserting three grounds for entitlement to § 9B benefits. First, 9A and 9B are ambiguous and that ambiguity should be resolved against the trustees. Second, Lillian was a "dependent" of Sam and entitled to recover under § 9B(1)(c). Third, the trustees are estopped to deny Lillian benefits because they previously accepted without objection Sam's pension application designating Lillian as beneficiary, when she could not so qualify.

After a trial, the district judge gave a lump sum judgment to Lillian. He concluded that the trustees are estopped to deny Lillian recovery both because they employed the term "beneficiary" with different and confusing meanings in the welfare and pension plans and because they accepted Sam's applications naming Lillian as beneficiary. We hold that the district judge erred in applying principles of California insurance law which are either inapplicable, or, if otherwise applicable, inconsistent with federal labor policy.

II. Jurisdiction under § 301

We must first determine whether the district court had jurisdiction of this case under § 301 of the Act, 29 U.S.C. § 185. The trustees argue that jurisdiction exists under § 301 and that the case must therefore be decided by reference to federal common law fashioned from national labor policy. Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). Lillian claims that § 301 is inapplicable, that the jurisdiction of the district court was based on diversity of citizenship, 28 U.S.C. § 1332, and that the court was therefore bound to apply state law.

Section 301(a) provides:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . or between any such labor organizations, may be brought in any district court . . . without respect to amount in controversy or without respect to the citizenship of the parties.

29 U.S.C. § 185(a). The trustees argue that since the pension plan is part of a contract between an employer and a union and Lillian's suit is for a violation of that contract, jurisdiction over the suit exists under § 301.

Lillian's first response is that § 301 is limited to suits between unions and employers and does not cover suits by beneficiaries of workers against the trustees of trust funds. This response is without merit. Section 301 jurisdiction is not dependent upon the parties to the suit but rather the nature or subject matter of the action. Jurisdiction exists as long as the suit is for violation of a contract between a union and employer even if neither party is a union or an employer. Alvares v. Erickson, 514 F.2d 156, 162-64 (9th Cir.), cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975); see Smith v. Evening News Association, 371 U.S. 195, 200-01, 83 S.Ct. 267, 9 L.Ed.2d 246 (1962). The pension benefit eligibility rules, which Lillian alleges were violated, qualify as a contract between a labor organization and an employer. Alvares v. Erickson, supra, 514 F.2d at 161.

Lillian's second contention is that § 301 does not encompass suits enforcing "uniquely personal" rights. She cites Association of Westinghouse Salaried Employees v. Westinghouse Elec. Corp., 348 U.S. 437, 75 S.Ct. 489, 99 L.Ed. 510 (1955), where the Court held that § 301 did not confer federal jurisdiction over a suit by a union to collect wages allegedly due its members under a collective bargaining contract. Three Justices of the six-Justice majority were concerned about the constitutionality of giving the federal courts jurisdiction of suits arising under the state law of contracts and, to avoid this problem, concluded that Congress did not intend to confer federal jurisdiction over suits for breaches of collective bargaining contracts "relating to compensation, terms peculiar in the individual benefit which is their subject matter . . . ." Id. at 460, 75 S.Ct. at 500 (opinion of Frankfurter, J.). Two justices saw the only issue as one of statutory interpretation and concluded that Congress did not intend "to authorize a union to enforce in a federal court the uniquely personal right of an employee . . . to receive compensation for services rendered his employer." Id. at 461, 75 S.Ct. at 501 (opinion of Warren, C. J.). Justice Reed characterized the suit as one for breach of individual employment contracts and not for violation of a collective bargaining agreement. He concluded that § 301 was not even literally applicable. Id. at 464, 75 S.Ct. 489.

Two years later in Textile Workers Union v. Lincoln Mills, supra, the Court removed the basis for the constitutional doubts expressed by Justice Frankfurter in Westinghouse by holding that federal courts must fashion federal common law from national labor policy in suits under § 301. Five years later in Smith v. Evening News Association, supra, the Court said that "subsequent decisions here (most importantly Textile Workers v. Lincoln Mills ) have removed the underpinnings of Westinghouse and its holding is no longer authoritative as a precedent." 371 U.S. at 199, 83 S.Ct. at 269. The Court articulated its reasons for concluding that § 301 covers suits for the enforcement of individual rights arising from collective bargaining contracts:

The rights of individual employees concerning rates of pay and conditions of employment are a major focus of the negotiation and administration of collective bargaining contracts. Individual claims lie at the heart of the...