Rueda v. Seafarers Intern. Union of North America, AFL-CIO, AFL-CIO
| Decision Date | 16 May 1978 |
| Docket Number | AFL-CIO,No. 77-1423,77-1423 |
| Citation | 576 F.2d 939 |
| Parties | 98 L.R.R.M. (BNA) 3012, 83 Lab.Cas. P 10,601 Juan S. RUEDA, Plaintiff, Appellee, v. SEAFARERS INTERNATIONAL UNION OF NORTH AMERICA,, and Seafarers Welfare& Pension Plan, Defendants, Appellants. |
| Court | U.S. Court of Appeals — First Circuit |
Carolyn Gentile, Brooklyn, N.Y., for defendants-appellants.
Charles A. Cuprill-Hernandez, Ponce, P.R., for plaintiff-appellee.
Before COFFIN, Chief Judge, MOORE, ** Senior Circuit Judge, and BOWNES, Circuit Judge.
Appellee, a merchant seaman, brought a diversity action in district court against the pension plan of the union to which he belonged, challenging the trustees' denial of his application for a permanent disability pension. The district court found for the seaman, and this appeal followed. At issue is whether the trustees' interpretation of the pension eligibility requirement is arbitrary and capricious.
The Seafarers Pension Plan (SPP) 1 was established as part of a collective bargaining agreement between signatory employers and labor unions affiliated with the Seafarers International Union of North America. By the terms of the agreement, a board of trustees appointed by labor and management is authorized to formulate and administer a pension plan.
Article 1, Section 4 of the regulations promulgated by the trustees is entitled "Eligibility for a Disability Pension". 2 It provides that an employee who has become totally and permanently disabled shall be entitled to retire on a disability pension if two requirements are fulfilled. First, the employee must have at least 4,380 days of "covered employment". Second, 90 days of the employment must have accumulated during the calendar year prior to the application, and one day of it during the preceding six months. For convenience, we shall refer to the former as the "total" requirement and to the latter as the "recency" requirement. Article 1, Section 2, paragraph 10 defines the term "covered employment" as employment for which the employer is obligated to make contributions to the fund in behalf of the employee, and "periods of disability to the extent specified in the Regulations." 3 A third regulation, Article 11, Section 2b, entitled "Eligibility Extension", sets forth a complex provision governing both the extension and termination of eligibility under certain conditions. 4 The proper interpretation of this regulation is the substance of the issue on appeal.
The question here is whether the seaman fulfilled both the total and the recency portions of the eligibility requirement for a permanent disability pension. It is undisputed that between 1945 and May 18, 1967 he accumulated 3,704 working days. As a result of a job related injury incurred on May 18, 1967, he received temporary disability benefits from May 20, 1967 through April 8, 1970, a total of 1,110 days. On September 17, 1970 he was pronounced permanently disabled and on the same date applied to SPP for a disability pension. 5
Both parties agreed that the number of days the seaman had worked added to the number of days during which he had received benefits on account of his injury was 4,814, or more than the 4,380 days needed to fulfill the first part of the eligibility requirement. The seaman claimed that the second part was also fulfilled, in that the required 90 days of covered employment within the year prior to the application fell during the 1,110 days for which he received temporary disability benefits, as did the necessary one day within the preceding six months. 6 That point the trustees disputed. They maintained that although time covered by temporary benefits could be added to working days for the purpose of accumulating the requisite 4,380 days, it could not count toward the additional requirement of covered employment within the one year period and six month period immediately preceding the application. Under their interpretation, receipt of the first temporary disability benefit triggered the "Eligibility Extension", which preserved disability time as covered employment for 39 weeks, until February 16, 1968, with the result that the last day when appellee would have one day of covered employment in the prior six months would be August 16, 1968. Since the seaman had not applied for the pension until September 17, 1970, he did not have the number of days within six months and one year of his application required by the rule. 7
The district court, after submission of affidavits, answers to interrogatories and requests for admissions, and a stipulation, arrived at two relevant conclusions. First, it reasoned that the first part of Article 11, Section 2b, see n. 3, did not apply to this case, because "provisions for extension of benefits become relevant only if the employee's eligibility would otherwise be lost" and plaintiff was making no such claim. Second, this part of the section no longer being in the case, the court had no difficulty in concluding that since plaintiff had received disability payments from May 20, 1967 to April 8, 1970, he had not only sufficient days of covered employment to meet the total requirements but met the 90 days in one year and one day in six months requirements as well. Implicit in the court's conclusions is the assumption that any time creditable toward the total requirement is creditable toward the recency requirement.
We begin our task with the recognition, shared by the parties, that unless the trustees' interpretation of the plan is arbitrary and capricious, or without rational basis, it may not be disregarded. Johnson v. Botica, 537 F.2d 930, 935 (7th Cir. 1976); Gomez v. Lewis, 414 F.2d 1312, 1314 (3d Cir. 1969); Miniard v. Lewis, 128 U.S.App.D.C. 299, 387 F.2d 864, 865 (1967). We also must realize that we review for arbitrariness in the light of the trustees' responsibility to all potential beneficiaries. Gaydosh v. Lewis,133 U.S.App.D.C. 274, 410 F.2d 262 (1969). This duty in the large, the necessity to draw hard boundary lines, inevitably adversely affects some individuals who find themselves on the wrong side of a line. Johnson, supra; Gomez, supra.
In the present case the most appealing argument supporting appellee is that under the trustees' interpretation, appellee was in a Catch 22 plight: he had not been found totally and permanently disabled by the time he should have applied for his pension; yet by waiting until found disabled he was time barred from qualifying. While it may well be that appellee could have earlier filed a protective application or, for that matter, knew full well what his long run prognosis was, such speculations do not change the basic impact of the trustees' policy. Any recency requirement will inevitably result in some seamen exhausting their eligibility before they can conscientiously apply for a disability pension.
Given the standard of review which applies to this case, we must inquire whether, notwithstanding the injustices which may befall individuals, the scheme as viewed by the trustees is a rational one for SPP as a whole. The trustees argue that under their interpretation of the "Eligibility Extension" regulation, a worker has fifteen months of a consecutive "temporary" disability before he loses his "recency" eligibility (the 39 week or 9 month period of receipt of benefits which is treated as "covered employment" plus a further period of six months which includes the last day of the 39 week period). This, they say, insures that the great majority will be able to apply for a disability pension before their eligibility expires.
The trustees then point to the underlying rationale of the cut-off or recency requirement and the different treatment of disability time, allowing all such time to count for the total days requirement but limiting such time to fifteen months in determining whether the recency requirement has been met. The affidavits submitted by and for the trustees asserted that the financial feasibility and integrity of the SPP depended upon the trustees' ability at any reporting or planning date to know the number of individuals as to whom SPP had potential liability. With this number fixed, a total liability figure could be estimated, a contribution rate and funding standard established, and a proper reserve set aside and invested at short term rates to insure its liquidity. If no such device were used, it is claimed that potential demands would be more open-ended, resulting in allocating more reserve to be invested at less productive short term rates, resulting in diminished fund availability. 8 While thus supporting the concept of an eligibility cut-off, the trustees point to their more liberal approach to the total service requirement. All disability time is counted for this purpose, they say, in order to enable workers to avoid a break-in-service.
We need not be convinced that the trustees' approach is the only or the best way to plan and maintain the integrity of the fund. We need only be convinced that it is a rational one and is supported by a reasonable reading of the regulations. We cannot say the trustees' reasoning is irrational. Nor can we say it is without basis in the regulations.
Article 1, Section 2, paragraph 10 begins by defining "covered employment" as including both working time and "periods of disability to the extent specified in the Regulations." We note that if, as appellee argues, there was no limitation for eligibility purposes on periods of disability, the last seven words in this phrase would be misleading surplusage. According to the trustees, Article 11, Section 2b proceeds to specify the situations in which disability time shall be credited for eligibility purposes. The function of ...
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