Scheuer v. Central States Pension Fund

• Decision Date: 04 June 1973
• Docket Number: Civ. A. No. 69-C-636.
• Citation: 358 F. Supp. 1332
• Parties: Howard N. SCHEUER, Plaintiff, v. CENTRAL STATES PENSION FUND, a foreign corporation, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

358 F. Supp. 1332

Howard N. SCHEUER, Plaintiff, v. CENTRAL STATES PENSION FUND, a foreign corporation, Defendant.

Civ. A. No. 69-C-636.

United States District Court, E. D. Wisconsin.

June 4, 1973.

Miriam L. Eisenberg, Milwaukee, Wis., for plaintiff.

Alan M. Levy, Milwaukee, Wis., for defendant.

DECISION AND ORDER

JOHN W. REYNOLDS, Chief Judge.

Plaintiff, a member of the teamsters union for more than thirty years, is seeking pension benefits from the defendant pension fund. The fund, which is administered by a board of trustees composed of an equal number of employer and teamster representatives, has declared plaintiff ineligible for benefits on the ground that his self-employed status between 1956 and 1965 constituted a break in service within the meaning of the pension fund. The effect of finding a break in service is that plaintiff lost all service credit for his work prior to the break and hence has failed to accumulate the twenty years of service needed for eligibility. Plaintiff claims that he did not break his term of service and, alternatively, that even if he did, defendant is estopped from denying benefits because plaintiff was assured, after his break in service, that he would now be eligible and he has relied, to his detriment, on that assurance. Jurisdiction is based on diversity of citizenship, and the parties do not contest that Wisconsin law applies.

Defendant has moved for summary judgment claiming that as a matter of law the trustees' decision that plaintiff was self-employed between 1956 and 1965 must be upheld and that this decision alone is an absolute bar to any relief. I cannot conclude that the trustees' decision must be upheld. I do conclude that there are facts in genuine dispute which are material to plaintiff's estoppel claim, and that the estoppel claim cannot be dismissed as a matter of law.

The affidavits and depositions submitted reveal the following facts. In 1937 plaintiff joined the teamsters union as a truck driver. At first, plaintiff was a member of Local 619; he transferred his membership to Local 563 in 1942 and then to Local 200 in Milwaukee in 1965.

Since 1949 plaintiff has been hauling groceries and produce on a regular basis for the E. R. Godfrey Company of Milwaukee. Primarily he has driven the company trucks and trailers; he has been paid by the mile for this driving and by the hour for loading, unloading, and other personal services. He has also owned his own tractor throughout this period and has been paid by the mile for its use as well.

In 1956 Ball Motor Service (hereafter "Ball") assumed responsibility for hauling the Godfrey products. Though plaintiff's work was not affected, save perhaps for a change in uniform and in the lettering on his tractor, his paper status changed completely. Where before he had clearly been treated as an employee of Godfrey, he now entered a lease agreement with Ball which made him appear much like an independent contractor. The details of his status are described below, but among other things Ball did not pay pension benefits for plaintiff as Godfrey had done before, nor did plaintiff attempt to pay benefits on his own behalf.

This situation continued for nine years. Then in 1965 when plaintiff switched to Local 200 in Milwaukee, he arranged for Ball to pay into the pension fund the amount which should have been paid over the last nine years, a total of $1,053.60, and to make regular payments on plaintiff's behalf from that time forth. Plaintiff personally reimbursed Ball for all payments.

Plaintiff claims that he only paid the amount due between 1956 and 1965 and arranged for continuing payments because he was promised by the teamsters' representative, Clarence Johannes, in 1965, that he would be eligible for the pension in 1968 when he reached the age of 57. Mr. Johannes denies making such a promise.

In denying plaintiff's application in 1969, the trustees indicated briefly by letter that since no wages were reported to the Social Security Administration from 1956 to 1965, it appeared plaintiff was self-employed in that period. The trustees did not find that plaintiff would have been eligible were it not for his self-employed status during that period.

I.

It should be noted at the outset that contrary to the implication in plaintiff's brief a finding that plaintiff was not self-employed between 1956 and 1965 does not necessarily result in declaring plaintiff eligible for pension benefits. The trustees did not find, nor does it appear from the record, that plaintiff would otherwise be eligible were it not for his self-employed status. On the contrary, examination of the pension plan suggests that plaintiff's failure to have payments made into the fund by his employer between 1956 and 1965 may have constituted a break in service even if plaintiff were an employee during that period.¹ But since defendant has based this motion for summary judgment solely on the claim that plaintiff was selfemployed, it would be premature to evaluate all other possible reasons for the trustees' decision especially since they have not been given. Moreover, under the view adopted here, plaintiff will be entitled to relief regardless of the basis of the trustees' action if he prevails on the estoppel claim.

Defendant emphasizes that the pension agreement puts sole responsibility for determining eligibility into the hands of the trustees and that the trustees' decision is not to be overturned unless it is arbitrary. Gaydosh v. Lewis, 133 U.S.App.D.C. 274, 410 F.2d 262 (1969). Defendant contends the rule of thumb used by the trustees in distinguishing employees from self-employed independent contractors, namely, whether the alleged employer paid social security benefits, is in itself a reasonable basis for decision. I disagree. Even assuming that the purposes of the Social Security Act are the same as the purposes of the pension fund and that hence the meaning of "self-employed" is the same in both,² there is no indication the administrators of the Social Security Act ever determined that it was proper for plaintiff to file as self-employed. Surely the fact that Ball and plaintiff contracted for plaintiff to file as self-employed is not conclusive:

"* * * Contracts, however `skilfully devised,' Lucas v. Earl, 281 U.S. 111, 115, 50 S.Ct. 241, 74 L.Ed. 731, should not be permitted to shift tax liability as definitely fixed by the statutes." United States v. Silk, 331 U.S. 704, 715, 67 S.Ct. 1463, 1469, 91 L.Ed. 1757 (1947).

As plaintiff points out, using social security records which at best indicate the parties' conception of their relationship supplies ready conclusions without any examination of the actual situation. The trustees' desire to use a standard which facilitates administration of the fund is understandable, but the magnitude of an applicant's interest merits more thorough examination.

Defendant also contends that even if the trustees' rule of thumb was an unsatisfactory rationale, their conclusion that plaintiff had been self-employed between 1956 and 1965 was reasonable in light of all the circumstances. Defendant's contention is supported by several facts. When Ball took control of trucking in 1956, plaintiff entered into a leasing agreement with him. (Ptf's dep. at 7.) The lease which was renewed each year in substantially the same form (Ball's dep. at 4) provided that Ball would rent plaintiff's tractor for 26½ cents per mile, payment to be made on a weekly basis, and plaintiff was to pay all license fees, taxes, and operating and maintenance expenses. Ball's collision liability was limited to $25.00. Plaintiff assumed responsibility for employing and paying the driver of the tractor including the payment of any social security, unemployment compensation and workmen's compensation insurance, and withholding taxes. Plaintiff also agreed to hold Ball harmless for any injury to the driver. (Ex. No. 1 attached to Ball's dep.) Pursuant to the leasing agreement plaintiff paid his own social security contributions and income taxes. Plaintiff also took advantage of the lease agreement to employ a driver for brief, irregular periods prior to 1959. Though plaintiff's name appeared on Ball's employee seniority list, he did not fall under the seniority rules for work assignment, retaining the same route, mileage, and hourly wages from 1956 to 1965. (Ball's dep. at 1.) Nor did plaintiff receive certain fringe benefits such as health insurance granted Ball's acknowledged employees. (Ball's dep. at 7.)

To evaluate the effect of these factors and those mentioned below, the criteria used in similar contexts to distinguish the self-employed from the employed should be considered. One similar context in which this distinction is often necessary is, of course, a dispute about what party should properly have paid social security taxes. There, as here, the distinction is drawn in light of the purpose of protecting those who labor for others from some of the insecurities of modern life which confront the elderly.³ In the leading opinion concerning the Social Security Act, United States v. Silk, 331 U.S. 704, 716, 67 S.Ct. 1463, 1469, 91 L.Ed. 1757 (1947), the United States Supreme Court held that:

"* * * degrees of control, opportunities for profit or loss, investment in facilities, permanency of relation and skill required in the claim independent operation are important for decision. No one is controlling nor is the list complete. * * *"

Treasury Regulation 90, promulgated under Title IX of the Social Security Act, Art. 205, provides:

"(b) Generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as

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