Reiherzer v. Shannon

• Decision Date: 11 August 1978
• Docket Number: No. 77-1911,77-1911
• Citation: 581 F.2d 1266
• Parties: 99 L.R.R.M. (BNA) 2689, 84 Lab.Cas. P 10,876, 1 Employee Benefits Ca 1175 James J. REIHERZER, Plaintiff-Appellee, v. Daniel J. SHANNON, and Central States, Southeast and Southwest Areas Pension Fund, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1266

581 F.2d 1266

99 L.R.R.M. (BNA) 2689, 84 Lab.Cas. P 10,876,

1 Employee Benefits Ca 1175

James J. REIHERZER, Plaintiff-Appellee, v. Daniel J. SHANNON, and Central States, Southeast and Southwest Areas Pension Fund, Defendants-Appellants.

No. 77-1911.

United States Court of Appeals, Seventh Circuit.

Argued March 3, 1978.

Decided Aug. 11, 1978.

Alan M. Levy, Milwaukee, Wis., for defendants-appellants.

Arnold P. Anderson, Eau Claire, Wis., for plaintiff-appellee.

Before PELL and WOOD, Circuit Judges, and FLAUM, District Judge. ^*

FLAUM, District Judge.

This appeal concerns the rights of plaintiff, James J. Reiherzer, to a disability pension pursuant to the provisions of the International Brotherhood of Teamsters' Central States, Southeast and Southwest Areas Pension Plan (Plan). In his amended complaint Reiherzer alleged that trustees of the Plan "wrongfully refused to pay . . . disability benefits" to him even though he met all of the Plan's eligibility requirements. Furthermore, Reiherzer alleged that the trustees, by their actions and statements, were estopped to deny him a disability pension. After a bench trial, the district court entered judgment for plaintiff and ordered defendants to pay plaintiff a disability pension of $100 per month for life, retroactive to October 1, 1968. For reasons other than those expressed by the district court, ¹ we affirm.

The relevant facts are undisputed. ² In 1942 Reiherzer joined Local 200 of the International Brotherhood of Teamsters. After working as a truck driver at Barry Transfer Co. from November, 1948 to January, 1949, Reiherzer became employed with A. G. Cartage, Inc. (Cartage). Until his retirement in 1968 due to his total disability resulting from arthritis, Reiherzer's only employment was with Cartage.

From 1949 to 1951 Reiherzer was employed at Cartage solely as a teamster truck driver. In 1951, however, Reiherzer purchased the controlling share of the stock of Cartage and became the company's president and chief executive officer. ³ By 1955 plaintiff owned 90 percent of the stock in Cartage. Although he had become Cartage's president, Reiherzer's day-to-day activities were not changed. Over 90 percent of his on-the-job duties consisted of driving truck or working on the loading dock, while the remainder of his work day was spent doing miscellaneous office work. Reiherzer did, however, assume the power to hire and fire employees of Cartage and to conduct Cartage's labor negotiations. These powers were exercised by Reiherzer on various occasions and it was he who signed the collective bargaining agreements on behalf of Cartage with the local union. Furthermore, Reiherzer was not paid on an hourly basis as were the rest of the teamsters working at Cartage, but rather was paid a salary equal to the pay of the average truck driver plus his share of the profits earned by Cartage for the year.

Although Cartage had only three shareholders, defendants do not contend that it was a "sham" corporation. Thus, it was Cartage and not Reiherzer which owned the operating authority for the business, and Reiherzer held none of the assets used in the business in his own name. The proper corporate forms were maintained by Cartage and there is no evidence to suggest that corporate funds were commingled with Reiherzer's personal funds. On the advice of counsel in 1959, Cartage began filing its federal income tax returns as a Subchapter S, small business corporation pursuant to 26 U.S.C. §§ 1371 Et seq., and Reiherzer stopped deducting Social Security taxes from his monthly salary declaring himself "self-employed." ⁴

In 1955, pursuant to a collective bargaining agreement, Cartage began making payments to the Plan on behalf of its teamster employees. From 1955 to 1968, each month Cartage submitted a check to the Plan along with the names of those persons for whom contributions were being made. Reiherzer's name appeared on the lists submitted to the Plan, and as president of Cartage he signed the accompanying contribution checks. During this time no official of the Plan notified Cartage that Reiherzer was ineligible to participate in the pension program. In total, Cartage contributed over $3,000 to the Plan on Reiherzer's behalf.

Although Reiherzer retired in 1968 and sold his stock in Cartage, it was not until April 1974 that he filed a formal application for a disability pension with the Plan. ⁵ At that time, the 1973 edition of the Plan was in effect, with the provisions relevant to plaintiff's disability pension application identical to those provisions existing in the 1967 edition of the Plan in effect at the time of plaintiff's retirement. Article III Section 4B of the Plan set forth the eligibility requirements for a disability pension providing:

B. Conditions for Qualifications for Disability Pension. An employee (a) who becomes totally and permanently disabled . . . prior to his 62nd birthday after

(1) completion of fifteen years of continuous service in the industry; and

(2) completion of three years of continuous service under a collective bargaining agreement for any employee who became a member of a Plan prior to July 1, 1967 . . .; and

(3) payment of eighty weeks contributions to the Trust Fund by the employer on his behalf for any employee who became a member of the Plan prior to July 1, 1967 . . .; and

(4) contributions by his last employer on his behalf under a collective bargaining agreement providing for contributions at a rate of not less than.$7.00 per week for two years and $8.00 per week thereafter . . . . ⁶

On November 14, 1974 defendants rejected plaintiff's application. Defendants stated that from 1959 to 1968 plaintiff was "self-employed" with Cartage and was therefore out of "covered employment." ⁷ By being out of "covered employment" for five years after 1955, defendants stated that plaintiff had suffered a "break in service" ⁸ under the Plan and accordingly did not have the requisite 15 years continuous service in the industry. ⁹ This was the only reason given Reiherzer for the denial of his pension application, the defendants in no way suggesting that Reiherzer had failed to meet the remaining eligibility requirements.

I. Jurisdiction

Initially this action was brought by plaintiff in state court and it was subsequently removed to the district court pursuant to 28 U.S.C. § 1441(b). For obvious reasons, ¹⁰ the parties have not challenged the subject matter jurisdiction of this court. Nevertheless, this court, of course, must assure itself that such jurisdiction exists in this case.

Defendants' removal petition raised three jurisdictional bases: the Labor-Management Relations Act, §§ 301 and 302, 29 U.S.C. §§ 185, 186 and the Employee Retirement Income Security Act of 1974 (ERISA) § 502, 29 U.S.C. § 1132. For the reasons stated below, we find subject matter jurisdiction exists over Reiherzer's claim of wrongful rejection of his pension application pursuant to section 502 of ERISA.

This court has previously ruled that section 302 of the Labor-Management Relations Act does not confer subject matter jurisdiction on the federal courts over claims concerning the incorrect application of pension eligibility standards by the trustees of a pension plan. Johnson v. Botica, 537 F.2d 930 (7th Cir. 1976). Section 302 provides that employer payments to union officials are illegal except in certain limited circumstances. 29 U.S.C. § 186(a). One of these circumstances is when the employer payments are made

to a trust fund established by (a union) for the sole and exclusive benefit of the employees of such employer . . . .

Id. § 186(c)(5). Section 302(e) provides that the provisions of section 302(c) may be enforced by way of civil actions in the federal district courts. In Johnson, referring to section 302, the court stated:

The courts have consistently recognized that Congress did not intend to burden the courts with claims as to whether a pension benefit was correctly or incorrectly denied . . . .

537 F.2d at 933. Rather, section 302(e) conferred jurisdiction on the federal courts over claims by putative pension beneficiaries alleging that the "pension plan is arbitrary, capricious, or in some way contrary to the exclusive benefit of employees." Id. This construction was consistent with those decisions holding that section 302(e) conferred subject matter jurisdiction on the federal courts over claims by pension beneficiaries alleging that the pension plans, themselves, contained "structural defects." See, e. g., Lugo v. Employees Retirement Fund of Illumination Products Industry, 529 F.2d 251 (2d Cir.), Cert. denied, 429 U.S. 826, 97 S.Ct. 81, 50 L.Ed.2d 88 (1976); Bowers v. Moreno, 520 F.2d 843 (1st Cir. 1975); Alvares v. Erickson, 514 F.2d 156 (9th Cir.), Cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975). Since Reiherzer in his amended complaint does not allege that the Plan contains an illegal eligibility requirement under section 302(c) (5) which makes the Plan not for the exclusive benefit of the employees in the teamster industry, section 302(e) cannot be a basis upon which this court can consider Reiherzer's claim that his pension was wrongfully denied.

However, whether this court has jurisdiction over Reiherzer's claim pursuant to section 301 raises more difficult questions, questions this court has yet to consider. ¹¹ Section 301(a) provides:

(a) Suits for violation(s) of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. § 185(a). The courts which have considered the question of whether this section provides jurisdiction in cases of this sort have divided on its resolution. See Cuff v. Gleason, 515 F.2d 127 (2d Cir. 1975); Beam v. International...