Schane v. Int'l Bhd. of Teamsters Union Local No. 710 Pension Fund Pension Plan

• Decision Date: 23 July 2014
• Docket Number: No. 13–3745.,13–3745.
• Citation: 760 F.3d 585
• Parties: Jeffory SCHANE, Plaintiff–Appellant, v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS UNION LOCAL NO. 710 PENSION FUND PENSION PLAN, et al., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

760 F.3d 585

Jeffory SCHANE, Plaintiff–Appellant,

v.INTERNATIONAL BROTHERHOOD OF TEAMSTERS UNION LOCAL NO. 710 PENSION FUND PENSION PLAN, et al., Defendants–Appellees.

No. 13–3745.

United States Court of Appeals,Seventh Circuit.

Argued May 22, 2014.

Decided July 23, 2014.

Michael Bartolic, Chicago, IL, for Plaintiff–Appellant.

Librado Arreola, Asher, Gittler & D'Alba, Chicago, IL, for Defendants–Appellees.

Before POSNER, FLAUM, and MANION, Circuit Judges.

FLAUM, Circuit Judge.

Jeffory Schane, now retired, receives a monthly pension from his union pension plan. The plan's board of trustees has determined that, based on its interpretation of the pension plan, Schane is entitled to $2,600 per month. Schane reads the plan differently, and believes he should receive $2,900. We are asked to decide whether the trustees' interpretation of the plan is arbitrary or capricious.

I. Background

In February 2008, Jeffory Schane suffered a job-related injury while working for YRC Roadway Express, a trucking company. He drew workers' compensation benefits until he returned to work in April 2009. Schane was medically cleared for light-duty work only, however, and with no work of that kind available, he resumed workers' compensation in March 2010. He continued taking workers' compensation benefits until he resigned from YRC on December 30, 2011.

YRC and its employees, including Schane, participate in the International Brotherhood of Teamsters Union Local No. 710 Pension Fund Pension Plan, a multi-employer benefit trust fund and an “employee pension benefit plan” within the meaning of 29 U.S.C. § 1002(2). Schane initially submitted a pension application to the plan in July 2009, after returning from his first stint on workers' compensation. However, he left blank the line on the application indicating his last day of work, apparently because the plan does not permit participants to take a pension while they are also receiving workers' compensation from their employer. See Summary Plan Description 4. The following March, Schane told the plan that his last day of work would be October 31, 2010. Three months later, he delayed his last day by a year, to October 31, 2011. In September 2011, he told the plan that he would no longer retire on October 31, 2011, either. Finally, on December 21, he wrote that he would retire at the end of the month and that his pension should therefore be effective on January 1, 2012. Schane resigned from YRC on December 30.

The Local No. 710 pension plan enumerates ten or so different pension categories, each with its own rules for calculating benefits. For present purposes we focus only on the “special regular pension,” for which Schane is eligible. Benefits in the special regular pension are essentially a function of two variables: the number of “future pension credits” the pensioner has accumulated and the pensioner's age at the time of retirement.

Over Schane's years of service at YRC, the company made pension contributions on his behalf. These contributions, which totaled 25.6 credits, ceased in August 2009; YRC's agreement with the union only obligated it to make payments for a limited period while the employee was on workers' compensation. Once YRC's obligation was discharged, Schane made additional self-pay contributions (worth 0.4 credits) between August and December 2009 to bring the total up to 26 credits.

Section 3.062(b)(i) of the pension plan provides that a participant who retires with 26 credits is entitled to $2,600 per month. But a participant who retires “on or after age 50” with “26 or more but less than 27” future pension credits is entitled to $2,900 per month. Plan § 3.062(b)(ii). Schane's age at the time of retirement is thus a significant question, to the tune of $3,600 per year. However, Schane and the plan cannot agree on the date that he “retired” for plan purposes. The plan's board of trustees says August 2009; Schane says December 2011.

The plan defines “retirement,” though not in an especially transparent way. An initial complication is that the term means different things depending on whether the pensioner has reached “Normal Retirement Age.” (Per section 1.19 of the plan, normal retirement age occurs when an employee turns sixty-five or accumulates ten years of service, whichever is later.) The parties agree that Schane retired before normal retirement age, so only that portion of the “retirement” definition is relevant. For completeness, however, we reproduce the second part of the definition in a footnote.

Section 6.05: Retirement or Retires

(a) Before attainment of Normal Retirement Age, “Retirement” or “Retires” means cessation of being employed in Covered Employment or engaging in any of the following:

(i) employment with any Contributing Employer;

(ii) employment in the same or related business as any Contributing Employer;

(iii) self-employment in the same or related business as any Contributing Employer;

(iv) employment or self-employment in any business which is under the jurisdiction of the Union at the time of such Retirement; or

(v) employment or self-employment ... in any position covered by a Teamster contract between that employer and any affiliate of the International Brotherhood of Teamsters.... ¹

Two terms in this definition require definition themselves. The first is “Covered Employment,” which means employment with an employer who makes contributions to the pension fund on the employee's behalf. Plan § 1.09(b). The second is “Contributing Employer.” Although this term is capitalized as if it were a specially defined term, it is not listed in the definitions section of the plan. But plain “Employer” is—in somewhat circular fashion, it means “any association or individual Employer” that must contribute to the trust fund pursuant to a collective bargaining agreement, or “any Employer not a party” to such an agreement but who assents to the trustees' satisfaction to be bound. Plan § 1.12. We take it therefore that “Contributing Employer” means an employer who contributes to the pension fund for some employees, but not for the particular employee in question.

In short, to use the plan's language, Schane was employed in Covered Employment until August 2009, when YRC ceased making contributions on his behalf. See Plan § 6.05(a). And Schane was engaged in employment with a Contributing Employer (namely, YRC) until December 2011, when he stopped receiving workers' compensation benefits and resigned from the company. See Plan § 6.05(a)(i).

After Schane submitted his final pension application, the board of trustees approved him for the lower pension of $2,600 per month. Schane appealed to a special committee of the trustees, arguing that although he ceased engaging in Covered Employment in August 2009, when he was forty-eight years old, his “retirement” did not occur until he also ceased employment with YRC in December 2011, at fifty. However, the committee upheld the trustees' initial determination. It reasoned:

Mr. Schane contends that he should receive a higher pension because he retired at age 50. Section 3.062(b)(ii) of the Pension Plan describes the benefits which are payable for a participant who Retires on or After Age 50 with twenty-five or more but less than thirty Future Pension Credits. “Retirement” or “Retires” means the cessation of being employed in Covered Employment (see Section 6.05). Covered Employment is defined in Section 1.09(b) as employment by an employer making contributions on behalf of the employee to the Fund. In Mr. Schane's case, his last contribution was made when he was forty-eight years old. Consequently, he did not satisfy the requirement of Retiring after age 50.

Schane then filed an action in federal district court under ERISA. Schane argued that the trustees erred by focusing only on whether he had ceased working for a covered employer, while ignoring whether—and when—he had also ceased engaging in the activities precluded by section 6.05(a)(i)-(v). The district court too rejected Schane's argument. It observed that the plan's definition of “retirement” was phrased in the disjunctive: “ ‘Retirement’ ... means cessation of being employed in Covered Employment or engaging in any of the following....” Plan § 6.05(a) (emphasis added). Furthermore, as the court noted, citing the Sixth Circuit's opinion in Marquette General Hospital v. Goodman Forest Industries, 315 F.3d 629, 633 (2003), “the word or does not also mean and.” In light of this disjunctive definition, the district court concluded, the trustees appropriately interpreted section 6.05 to require either cessation of covered employment or cessation of the later-enumeratedactivities—not both. It awarded summary judgment to the defendants.

II. Discussion

The plan gives the board of trustees discretionary authority to construe its terms and determine eligibility for benefits. Therefore, like the district court, we review the trustees' reasoning only under an arbitrary and capricious standard. Tompkins v. Cent. Laborers' Pension Fund, 712 F.3d 995, 999 (7th Cir.2013). This generous standard requires us to uphold a fiduciary's interpretation of plan documents so long as it “has rational support in the record,” Speciale v. Blue Cross & Blue Shield Ass'n, 538 F.3d 615, 621 (7th Cir.2008), but we are not a “rubber stamp.” Cerentano v. UMWA Health & Ret. Funds, 735 F.3d 976, 981 (7th Cir.2013).

The present dispute boils down to whether cessation of covered employment is sufficient for retirement or merely one of two necessary requirements (the other being cessation of the enumerated activities in section 6.05(a)(i)-(v)). The district court reasoned that, because the definition of “retire” took the form cessation of X or Y, the trustees were free to interpret it disjunctively: that is, to treat cessation of X as a sufficient condition. We find that the matter is not so clear.

Often, the word or does function as a straightforward disjunctive. Consider the following...