Robinson v. United Mine Workers of America Health and Retirement Funds

• Decision Date: 05 February 1981
• Docket Number: No. 78-2047,78-2047
• Citation: 640 F.2d 416,205 U.S.App.D.C. 330
• Parties: 106 L.R.R.M. (BNA) 2441, 205 U.S.App.D.C. 330, 90 Lab.Cas. P 12,551, 2 Employee Benefits Ca 1086 Gracie ROBINSON and Juanita Hager, on behalf of themselves and all other persons similarly situated, Appellants, v. UNITED MINE WORKERS OF AMERICA HEALTH AND RETIREMENT FUNDS et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 416

640 F.2d 416

106 L.R.R.M. (BNA) 2441, 205 U.S.App.D.C. 330,

90 Lab.Cas. P 12,551,

2 Employee Benefits Ca 1086

Gracie ROBINSON and Juanita Hager, on behalf of themselves and all other persons similarly situated, Appellants, v. UNITED MINE WORKERS OF AMERICA HEALTH AND RETIREMENT FUNDS et al.

No. 78-2047.

United States Court of Appeals District of Columbia Circuit.

Argued Sept. 20, 1979.

Decided Feb. 5, 1981.

Larry F. Sword, Somerset, Ky., for appellants.

Laura A. Kumin, Washington, D. C., with whom Timothy J. Parsons, William H. DuRoss, III, and E. Calvin Golumbic, Washington, D. C., were on the brief, for appellees.

Before SPOTTSWOOD W. ROBINSON, III and ROBB, Circuit Judges, and DAVIS, Judge, United States Court of Claims. ^*

Opinion for the Court filed by Circuit Judge SPOTTSWOOD W. ROBINSON, III.

Concurring opinion filed by Judge DAVIS.

Dissenting opinion filed by Circuit Judge ROBB.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge:

Trustees of the United Mine Workers health and retirement funds have denied permanent health-care coverage to the surviving spouses of two deceased coal miners. The disappointed claimants challenge the denial as arbitrary, and thus as a violation of Section 302(c) of the Labor-Management Relations Act. ¹ The District Court entered judgment for the trustees, finding dispositive the fact that they had acted in reliance upon eligibility rules derived from "explicit, informed and intense" collective bargaining. ² We hold that the eligibility standards themselves transgress federal law ³ and consequently are forbidden, even as the fruits of labor negotiations. ⁴ Accordingly, we reverse.

I

Section 302(c) excepts from a general prohibition against nonsalary payments by employers to employees those which are made into a trust fund to provide the latter with health or retirement benefits. ⁵ The United Mine Workers of America (UMW) first erected such a fund in 1947. ⁶ Three years later it was replaced by the UMW Welfare and Retirement Fund of 1950, created by the National Bituminous Coal Wage Agreement of that year. ⁷ That agreement specified that each coal operator participating in the contract would contribute a designated sum for each ton of coal produced, and that the monies would be used for pension and health-care coverage, but left to the trustees the particularization of eligibility requirements for benefits and the amounts thereof. ⁸

In 1974, pursuant to a new wage agreement, the 1950 fund was replaced by four trusts. Two of them govern only pension payments and so are not at issue here. Of the others, the "1974 Benefit Plan and Trust" provides health-care coverage prospectively for miners retiring after the wage agreement became operative on December 6, 1974; and "the 1950 Benefit Trust" replaced the earlier fund with coverage for miners who retired prior to the 1974 date. ⁹ Unlike their immediate predecessor, these two trusts undertake to limit the trustees' discretion to set eligibility standards. The 1974 wage agreement itself purports to establish the rules, ¹⁰ and the trustees are permitted to amend them unilaterally only to ensure compliance with applicable federal laws. ¹¹

Floyd Robinson and Paul C. Hager were active miners who died before the new trusts were adopted. Both were qualified for pensions by age and length of service, but chose instead to continue working and thus had not retired before their deaths. ¹² Appellants, their widows, became eligible, as survivors of working miners, to receive approximately five years of health benefits from the fund then in effect. ¹³ A surviving spouse of an already retired miner was entitled to about two years of coverage. ¹⁴

Several years later the 1974 wage agreement was adopted. It lengthened the period of benefits eligibility for at least some surviving spouses and dependents. The 1950 Benefit Trust extends permanent health-care coverage to the unmarried spouse and dependents of "a miner who dies ... (p)rior to the effective date of this Plan ¹⁵ ... at a time when he was receiving a retirement or disability pension under the eligibility rules" of the predecessor fund. ¹⁶ By the trustees' interpretation, this clause applies to survivors of miners who died while collecting pensions and, as well, to survivors of those who, though not actually receiving retirement payments at death, had ceased work and applied for them. ¹⁷ This construction, however, excludes widows and dependents of those miners who were eligible for pensions but who continued working and later died before applying for health-care benefits. ¹⁸ No such distinction is made in the terms of the 1974 Benefit Plan and Trust; survivors of those dying after December 6, 1974, will receive permanent benefits whether or not retirement actually occurred prior to death. ¹⁹

Appellants were refused permanent health-care coverage because their husbands worked until their deaths, respectively, in 1967 and 1971. On behalf of themselves and all others similarly situated, appellants sued in the District Court, charging that the trustees, by denying them such benefits, had acted arbitrarily and had violated their fiduciary duties, all in contravention of Section 302(c) of the Labor-Management Relations Act. ²⁰ During the course of the proceedings, the court ruled that appellants had made a showing of arbitrariness sufficient to shift the burden of proof to the trustees, and that in the absence of further evidence apellants would be granted summary judgment. ²¹

The trustees thereupon submitted documents and oral testimony pertaining to the conduct of the labor negotiations that culminated in the 1974 wage agreement containing the eligibility rules under which they had acted. ²² The court held that this evidence effectively rebutted appellant's prima facie case by establishing that the decision to exclude the appellant class from permanent health benefits was a rational choice consciously made by the participants in the collective bargaining. ²³ The court accordingly entered judgment for the trustees, and this appeal followed.

II

Our analysis must begin with an inquiry into the nature of the restrictions statutorily imposed on employee trust funds. Section 302(c) requires that the trusts be maintained "for the sole and exclusive benefit of the employees of (the contributing) employer, and their families and dependents." ²⁴ It also requires that payments be made only for medical care, pensions, compensation for occupational injuries and other like purposes. ²⁵ While these statutory provisions leave trustees with broad discretion to choose among rational alternatives in setting eligibility standards, ²⁶ this court has long held that, because Section 302(c) casts authority to establish benefit programs in fiduciary terms, it forbids arbitrary or capricious decisions by those who administer the funds. ²⁷ We have thus construed this section as demanding at least that the trustees' actions be procedurally fair ²⁸ and that their factual judgments be based on substantial evidence. ²⁹ Beyond this, however, we have consistently held that Section 302(c) also imposes substantive limitations on the nature of the eligibility rules that may be selected. ³⁰ We summarize our reading on the latter score for the assistance it offers to resolution of the issue at bar.

Section 302(c), we repeat, requires trust funds to be held "for the sole and exclusive benefit of the employees of (the contributing) employer." ³¹ Any rule denying benefits to miners on whose behalf significant contributions to a pension fund have been made appears on its face to contravene this statutory command, and thus calls for satisfactory explanation. ³² This is particularly true if, at the same time, the rule grants benefits to others who have worked a considerably lesser period of time for contributing employers. ³³ In all such circumstances, we have insisted that the trustees demonstrate some "rational nexus between the Fund's purpose and the (eligibility) requirement." ³⁴ Standards producing otherwise arbitrary discrepancies may be acceptable where the rule discourages workers from taking voluntary action that shifts the burden of supporting the fund to other employees, for instance by retiring early, ³⁵ by leaving the industry, ³⁶ or by working for noncontributing employers. ³⁷ Correspondingly, a differential is permissible when it rewards substantial service rendered employers who assist in maintaining the trust fund. ³⁸

What we must determine, then, is whether the rules challenged here meet the substantive demands of Section 302(c). Our task is made easier because the District Court expressly held, before receiving evidence describing the collective bargaining process from which the provision emerged, that the new eligibility standards appeared sufficiently arbitrary to compel judgment for the appellant class in the absence of further explanation. ³⁹ None of the rationales offered had convinced the court that the restriction on eligibility complained of reasonably related to the fund's purpose, nor do they satisfy us. We must add, moreover, that we do not find the subsequent presentation to the court any more persuasive.

Like others that we have been forced to overturn, ⁴⁰ the eligibility rules contested here exclude from permanent health-care coverage survivors of miners with substantial histories of contributory employment, while conferring that coverage on survivors of miners with appreciably less signatory employment. Appellants were themselves denied permanent health benefits despite more than 21 years of signatory employment by each of their husbands. ⁴¹ Contrastingly, the eligibility rules qualify survivors of miners with as little as one year of contributory service for permanent coverage so long as their husbands actually retired before death. ⁴² The facial inequity of this arrangement is further highlighted by the fact that the husband of one appellant died five days after reaching...