Saracco v. Local Union 786 Bldg. Material Pension Fund, 90-2257

• Citation: 942 F.2d 1213
• Decision Date: 16 September 1991
• Docket Number: No. 90-2257,90-2257
• Parties: Dominic SARACCO, Plaintiff-Appellant, v. LOCAL UNION 786 BUILDING MATERIAL PENSION FUND, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 1213

942 F.2d 1213

Dominic SARACCO, Plaintiff-Appellant, v. LOCAL UNION 786 BUILDING MATERIAL PENSION FUND, Defendant-Appellee.

No. 90-2257.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 7, 1991.

Decided Sept. 16, 1991.

Mark E. Wohlberg (argued), Chicago, Ill., for plaintiff-appellant.

Anthony Pinelli (argued), Chicago, Ill., for defendant-appellee.

Before FLAUM, RIPPLE and KANNE, Circuit Judges.

KANNE, Circuit Judge.

The underlying facts of this appeal are undisputed. After working for nearly three decades as a truck driver, Dominic Saracco became disabled in 1987. At the time of his disability, Mr. Saracco was a member of the International Brotherhood of Teamsters, Local Union 786, so he sought a reciprocal pension from the Local 786 Building Material Pension Fund. The fund's administrator (and its trustees on appeal) denied his application for a pension. His administrative remedies exhausted, Mr. Saracco then brought this ERISA action challenging the trustees' denial of his claim pursuant to 29 U.S.C. § 1132(a)(1)(B). ¹ Following the filing of cross-motions, the district court granted summary judgment in favor of the defendant. See 739 F.Supp. 1154 (N.D.Ill.1990).

On appeal, Mr. Saracco makes three arguments in support of his right to receive a pension. First, he contends that the district court erred in analyzing the trustees' decision under the arbitrary and capricious standard of review. In the alternative, he maintains that the trustees' interpretation and application of the break-in-service rules and reciprocity provisions of the pension plan was arbitrary and capricious. Finally, he argues that the pension fund's admission in its answer that he had earned 9.2 credits in the Chicago Truck Driver's Union Fund precluded the defendant from later contending that he had forfeited these years due to a subsequent break in service. We address each point in turn.

In a § 1132(a)(1)(B) challenge of a denial of pension benefits, our standard of review is governed by Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). In Firestone, the Supreme Court held that a denial of benefits must be reviewed de novo unless "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115, 109 S.Ct. at 956. If, however, the benefit plan gives the administrator discretion in such matters, challenges to his interpretations are to be reviewed under the arbitrary and capricious standard of review. Id. In this case, the pension plan's trust agreement vests the trustees with discretion "[t]o determine all questions arising in the administration, interpretation and application of the Pension Plan, including questions of eligibility." Trust Agreement, § 1(b). Thus, our review of the trustees' decision is limited to a determination of whether their decision was arbitrary and capricious. See, e.g., Rizzo v. Caterpillar, Inc., 914 F.2d 1003, 1008 (7th Cir.1990) (if plan gives administrator discretion, "arbitrary and capricious" standard of review is proper); Fuller v. CBT Corp., 905 F.2d 1055, 1058 (7th Cir.1990) (where plan provides that trustees are "to construe and interpret the plan," trustees' interpretation is to be given deference); Egert v. Connecticut Gen. Life Ins. Co., 900 F.2d 1032, 1035 (7th Cir.1990) (when plan administrator has "express discretionary authority ... to make benefits determinations, the appropriate standard of review is 'arbitrary and capricious.' ") (citing Reilly v. Blue Cross & Blue Shield United, 846 F.2d 416, 419 (7th Cir.), cert. denied, 488 U.S. 856, 109 S.Ct. 145, 102 L.Ed.2d 117 (1988)).

The arbitrary and capricious standard of review, as this court has repeatedly noted, is deferential. Fuller, 905 F.2d at 1058 (under the arbitrary and capricious standard of review, a court can overturn the determination of the trustees only if "they abused their discretion--which is to say, that they were not just clearly incorrect but downright unreasonable.") (citing Disher v. Information Resources, Inc., 873 F.2d 136, 140 (7th Cir.1989)); Exbom v. Central States, Southeast & Southwest Health & Welfare Fund, 900 F.2d 1138, 1142-43 (7th Cir.1990). We will uphold the trustee's "denial of a claim if the denial is based on a reasonable interpretation of the relevant plan documents." Shull v. State Machinery Co. Employees Profit Sharing Plan, 836 F.2d 306, 308 (7th Cir.1987). Thus,

[i]f the trustee makes an informed judgment and articulates an explanation for it that is satisfactory in light of the relevant facts, i.e., one that makes a "rational connection" between the issue to be decided, the evidence in the case, the text under consideration, and the conclusion reached, then the trustee's decision is final.

Exbom, 900 F.2d at 1433 (citing Smart v. State Farm Ins. Co., 868 F.2d 929, 936 (7th Cir.1989)). Under this standard of review, Mr. Saracco's challenge fails.

To be entitled to a Local 786 Fund pension, an employee must have worked for contributing employers to the pension plan for a period of time sufficient to earn credits amounting to ten years of "Vesting Service." At the time of his disability, Mr. Saracco had earned fewer than the ten-years credit he needed to vest in the Local 786 Fund. His failure to earn ten credits in the Local 786 Fund, however, did not necessarily preclude him from making a valid claim for a pension since the pension fund plan also provided that participants can combine service in several local unions in order to achieve sufficient credits to earn a reciprocal pension. Over the years, Mr. Saracco had earned over ten years credit in three teamster unions contributing to the reciprocal plans. But unfortunately, he had also experienced breaks in service which canceled those credits. ²

Recognizing that this requirement might unjustly prevent some workers from obtaining a pension, the plan provided a safety-net and permitted an employee to "repair" the cancellation of credits caused by a permanent break in service by earning five pension credits on the basis of work in covered employment. See Trust Agreement, § 5.4(d). Accordingly, Mr. Saracco sought to demonstrate that he had repaired his break in service. When Mr. Saracco first applied for his disability pension, the Local 786 Fund's records indicated that he had earned only 2.25 pension credits in the five years prior to his disability. He subsequently informed the pension fund that he had worked for the F. Smith Cartage Company from 1981 to 1987, but that no contributions or reports had been submitted by his employer. To substantiate his claim, he submitted records demonstrating that he had worked for, and been paid by, Smith Cartage during the five-year period in question. After the Local 786 Fund auditor reviewed the Smith Cartage records and submitted his report, the trustees determined that Mr. Saracco had earned an additional 1.5 credits for the five years of employment prior to his disability in 1982 for a total of 3.75 credits under the Local 786 Fund. So, even with the additional credits, Mr. Saracco still lacked the five pension credits needed to repair his break in service.

While acknowledging that he had not earned five credits in the Local 786 Fund, Mr. Saracco argued that he should be allowed to combine the credits he earned while working in Teamsters Local 786 and Local 731 (for a total of 5.65 credits) to achieve the five credits needed to repair his break in service and qualify for a reciprocal pension. The trustees disagreed, reasoning that they read the agreement as requiring Mr. Saracco to have earned all five credits in the Local 786 Fund in order to repair the pre-ERISA break in service.

Our review of the agreement satisfies us that the trustees' position (that all five credits must have been earned while in the service of Local 786) is consistent with the language of the plan's trust agreement. Section 5.4(d), which governs a participant's right to repair a break in service, provides that "if a person who had...