Sharron v. Amalgamated Ins. Agency Services, Inc., 82-7095

• Decision Date: 02 May 1983
• Docket Number: No. 82-7095,82-7095
• Citation: 704 F.2d 562
• Parties: 113 L.R.R.M. (BNA) 3593, 97 Lab.Cas. P 10,124, 4 Employee Benefits Ca 2178 Eleanor C. SHARRON, Executrix of the Estate of Martin B. Sharron, Deceased, Plaintiff-Appellee, v. AMALGAMATED INSURANCE AGENCY SERVICES, INC., a corporation as Administrator of the Central States, Southeast and Southwest Areas Pension Fund, etc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 562

704 F.2d 562

113 L.R.R.M. (BNA) 3593, 97 Lab.Cas. P 10,124,

4 Employee Benefits Ca 2178

Eleanor C. SHARRON, Executrix of the Estate of Martin B Sharron, Deceased, Plaintiff-Appellee, v. AMALGAMATED INSURANCE AGENCY SERVICES, INC., a corporation as Administrator of the Central States, Southeast and Southwest Areas Pension Fund, etc Defendant-Appellant.

No. 82-7095.

United States Court of Appeals Eleventh Circuit.

May 2, 1983.

Goldberg, Previant, Uelmen, Gratz, Miller & Brueggeman, Timothy G. Costello, Milwaukee, Wis., and Beddow, Fullan & Vowell, J. Scott Vowell, Birmingham, Ala., for defendant-appellant.

Carlton, Boles, Clark, Vann, Stichweh & Caddis, George M. Boles, Birmingham, Ala., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before TJOFLAT, HILL and JOHNSON, Circuit Judges.

JOHNSON, Circuit Judge:

Central States, Southeast and Southwest Areas Pension Fund, an affiliate of the Teamsters Union, ¹ appeals from summary judgment in favor of plaintiff Martin B. Sharron. ² The Pension Fund contends that the district court erred in setting aside a decision of the Pension Fund Trustees denying Sharron's application for a total and permanent disability benefit. The Pension Fund also contests the district court's award of attorney's fees in favor of Sharron. We reverse.

I. FACTS

Martin Sharron worked as a truck driver for Mercury Freight Lines from 1948 until he left voluntarily on October 23, 1973. He was a member of Teamsters Local Union No. 612 and worked under a contract negotiated by the Union for the entire period of his employment with Mercury. In accordance with collective bargaining agreements, Mercury contributed to the Pension Fund on behalf of Sharron for a period of almost 18 years--from January 30, 1955 until his departure in 1973.

Following his departure from Mercury, Sharron worked as a self-employed truck driver until March 5, 1977. During that period of almost three and a half years, no contributions were made to the Pension Fund by him or by anyone on his behalf. On March 5, 1977, he suffered a disabling stroke. Four months later, he applied to the Pension Fund for a total and permanent disability benefit. The Pension Fund Trustees denied Sharron's application on the ground that he had failed to satisfy the 15 years continuous service requirement set out in Article III, Section 4, of the Pension Plan. ³ Although he had 15 years of continuous service with Mercury, the Plan requires 15 years with no subsequent break in service of three years or more. The Trustees counted the period of Sharron's self-employment as such a break in service and thus refused to count his prior service with Mercury. In September 1977, Sharron began receiving monthly Social Security disability benefits.

On October 9, 1979, Sharron went to work for Red Wing Carriers. The district court found that, following a probationary period, Red Wing made contributions on behalf of Sharron to the Pension Fund. ⁴ Sharron suffered another stroke on December 29, 1979, and stopped work for Red Wing. He then applied a second time to defendant for a total and permanent disability benefit, and the Trustees again turned his application down on the same ground on which they turned it down the first time.

II. SHARRON'S ELIGIBILITY FOR A DISABILITY BENEFIT

A. Standard of Review in the District Court

In reviewing the Trustees' decision, the district court was bound by a strict standard of review. As the former Fifth Circuit concluded in Bayles v. Central States, Southeast and Southwest Areas Pension Fund, 602 F.2d 97, 99 (5th Cir.1979):

According to the clear weight of federal authority, the actions of the trustees in the administration of the pension plan must be sustained as a matter of law unless plaintiff can prove such activities have been arbitrary or capricious.

Although the court below frequently referred to the arbitrary or capricious standard, it began its analysis with a statement that the Trustees' decision could be reversed if it was "arbitrary or capricious," "unreasonable," or not "fair and equitable." As support for the second and third standards, the court cited two cases: Teston v. Carey, 464 F.2d 765, 769 (D.C.Cir.1972), and Lee v. Nesbitt, 453 F.2d 1309 (9th Cir.1972). The opinion in Bayles, however, clearly establishes as the law of this Circuit ⁵ that the decision of the Trustees can be reversed only if it was arbitrary or capricious. The distinction between the standard enunciated in Bayles and those enunciated in Teston and Lee is significant. Courts have long recognized the need to provide pension fund trustees with flexibility in pension plan administration:

It is impossible, of course, to ascertain at the establishment of a fixed contribution type employee benefit plan what precise payments will be available for distribution to beneficiaries at some future date. The level of those payments can be established with certainty only by reference to general economic conditions, investment yields, the relative strength of a particular established fund, and the actual and projected levels of demands made upon the fund for payments at any specific time. Because of this confluence of complex economic considerations, trustees of a fixed contribution trust fund must, in most circumstances, be accorded some discretion in determining questions of eligibility and the precise contours of benefits to be awarded. See D. Fellers, A General Theory of the Collective Bargaining Agreement, 61 Calif.L.Rev. 633, 732-33 (1973); R. Goetz, Developing Federal Labor Law of Welfare and Pension Plans, 55 Cornell L.Q. 911 (1970).

Bricklayers, Masons and Plasterers Int'l Union of America, Local Union No. 15 v. Stuart Plastering Co., 512 F.2d 1017, 1026 (5th Cir.1975) (footnote omitted). Accordingly, a court should enforce a decision of pension fund trustees even though the court may disagree with it, so long as the decision is not arbitrary or capricious. In our view, the district court erred by relying in part on more lenient standards from other circuits. ⁶

B. Application of the Terms of the Pension Plan to Sharron

To qualify for a disability benefit under the 1973 Pension Plan, an employee must meet the requirements of Article III, Section 4(A), of the Plan, which provides:

Conditions for Qualification for Disability Benefit. An employee who becomes totally and permanently disabled (as hereinafter defined) after

(a) attainment of age forty-five; and

(b) completion of fifteen years of continuous service in the industry; and

(c) completion of three years of continuous service under a collective bargaining agreement for any employee who became a member of the Plan prior to July 1, 1967, and completion of five years of continuous service under a collective bargaining agreement for any employee who became a member of the Plan on and after July 1, 1967; and

(d) payment of forty weeks contributions to the Trust Fund by the employer on his behalf for any employee who became a member of the Plan prior to July 1, 1967, and payment of sixty weeks contributions to the Trust Fund on his behalf for any employee who became a member of the Plan on and after July 1, 1967, and payment of two hundred twenty-five weeks contributions to the Trust Fund by the employer on his behalf for any employee who became a member of the Plan on and after April 1, 1969

shall be eligible for a disability benefit, in accordance with Paragraph A of Section 5 of this Article. (emphasis added).

The phrase "continuous service" in Section 4(A)(b) is defined in the definitions Article (Article I, Section 14(A)) as follows:

Continuous Service in the Industry as an employee shall mean accumulated years of employment prior to retirement calculated from the employee's last employment or reemployment date following the last break in service. (emphasis added).

"Break in service" is defined in the same Article (Article I, Section 13):

A Break In Service, within the meaning of the Plan, shall occur if an employee is not in covered employment for a period of five consecutive years between February 1, 1955 and April 1, 1969 or for a period of three consecutive years after April 1, 1969. Service in the armed forces of the United States under Selective Service or during a war or international police action; absence on account of sickness or injury; or absence on account of a lay-off during which contributions have been paid to the Pension Fund for at least ten weeks each year up to a maximum of two years, shall not be included in determining a break in service. (emphasis added).

The Pension Fund Trustees denied Sharron's application for a disability benefit on the ground that a "break in service" precluded Sharron from counting the time prior to the break; therefore, he did not have a sufficient number of years in the industry to qualify for the benefit. Specifically, Sharron suffered a break in service of more than three years when he left Mercury Freight Lines in 1973 and remained self-employed until 1977. ⁷ According to Article I, Section 14(A), the time prior to the break in service does not count in determining whether Sharron served over 15 continuous years.

The district court agreed with the Trustees' determination that Sharron did not meet the terms of the Pension Plan because of the voluntary break in service. District Court Opinion at 6-7. In this appeal, Ms. Sharron admits that a break in service occurred and that the eligibility requirements of the Plan were not met. Nevertheless, the district court held, and appellee argues, that the Trustees should have approved Sharron's application because the plan was arbitrary and unreasonable as it applied to him. The district court offered two reasons in support of this holding. First, the pamphlet that was distributed to employees describing the Pension Plan did not clearly notify employees as to the break in service rule. By drafting an...