Siles v. ILGWU Nat. Retirement Fund

• Decision Date: 25 February 1986
• Docket Number: No. 85-1728,85-1728
• Parties: Emma SILES, Plaintiff-Appellant, v. ILGWU NATIONAL RETIREMENT FUND; Dennis Slipkoff; Alvin Kaplan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 923

783 F.2d 923

4 Fed.R.Serv.3d 193

Emma SILES, Plaintiff-Appellant, v. ILGWU NATIONAL RETIREMENT FUND; Dennis Slipkoff; Alvin

Kaplan, Defendants-Appellees.

No. 85-1728.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 11, 1985.

Decided Feb. 25, 1986.

Geoffrey V. White, Davis, Cowell & Bowe, San Francisco, Cal., for plaintiff-appellant.

Richard Grosboll, Neyhart, Anderson, Nussbaum, Reilly & Freitas, San Francisco, Cal., for defendants-appellees.

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

Before TANG and WIGGINS, Circuit Judges, and CURTIS, District Judge ^*

WIGGINS, Circuit Judge:

Emma Siles appeals from the district court's grant of summary judgment in favor of the International Lady Garment Workers Union (ILGWU) National Retirement Fund (Fund). She claims that the Fund's requirement that she work at least 435 hours in covered employment in 1974 and 1975 in order to qualify for a pension under a pension plan mandated by the Employee Retirement Income Security Act (ERISA) violates ERISA's transitional rules. 29 U.S.C. Sec. 1061(e) (1982). ¹ In the alternative, Siles claims that application of certain of the Plan's provisions to her constitutes a violation of the Fund trustees' fiduciary obligations. Siles also appeals the district court's decision not to certify this case for class action.

I. FACTS

The Fund was established in February 1951 to provide retirement benefits for union members. It is funded entirely through employer contributions. Under the Fund's retirement plan as it existed from 1951 through 1977 (the "pre-ERISA plan"), an employee became eligible for retirement benefits at the time she retired if she had worked in covered employment for at least twenty credited years, provided that she worked in each of the last ten years immediately preceding retirement. Retirement benefits under the pre-ERISA plan did not vest. An employee became eligible for benefits only at the time she reached age 62 or 65 and retired. Thus, an employee who did not work ten consecutive years immediately before she retired was not eligible for any benefits no matter how many years total she had worked. However, the pre-ERISA plan allowed the Fund trustees to excuse up to three years break in service or credit up to two years service if a break in service during the last ten years of employment was caused by circumstances such as illness, disability, or inability to find work.

In 1974, Congress enacted ERISA in response to inequities in the existing system of employee benefit plans. As a result of ERISA, most pension plans were required to adopt new, more liberal rules for determining which employees were eligible for benefits. In 1975 and 1977, the Fund amended its plan to bring the plan into compliance with ERISA (hereinafter the amended plan will be referred to as the "ERISA plan"). Some of the amendments dealt with what an existing employee had to do to become covered by the new ERISA-mandated provisions. This appeal involves the validity of section 3.2 of the ERISA plan, one of its transitional provisions. Section 3.2 provides in pertinent part:

Section 3.2 Eligibility Requirements --A Participant shall be eligible for a vested Pension payable as of the next March 1st after she meets all of the following requirements as of the end of any Plan Year after 1974:

(1) she has attained age 62;

(2) she has been credited with at least 10 Years of Vesting Service;

(3) she has been credited with at least 3 Years of Vesting Service after December 31, 1970; and

(4) She is a Participant on or after January 1, 1976 and has not incurred a Break in Service as of January 1, 1976 unless the Break was repaired by a year of Vesting Service after 1975. For the purposes of this paragraph, the following shall be deemed to be a Participant who has not incurred a Break in Service on or before January 1, 1976:

....

(c) a Participant who was credited with at least 435 hours in Covered Employment in 1974 and at least 435 hours of Covered Employment in 1975.

Siles contests the validity of section 3.2(4) of the ERISA plan.

Siles worked continuously in covered employment under the Fund's pension plan from late 1957 until May 1974, when she was laid off. From 1975 through July 1978, Siles continued to pay union dues and regularly sought job referrals from the Union's hiring hall. In 1975 she received three job referrals and was hired for one job for which she was credited with 43 hours of covered employment. In 1976 she obtained one referral from which she obtained a job for which she was credited with 259 hours of covered employment for that year. She has not received any other referrals and has not worked in covered employment since 1976. To obtain credit for a year of covered employment under the plan, an employee must work 870 hours during the year.

In July 1978, Siles turned 62 and applied for early retirement under the plan. In February 1979, her pension application was denied by the Fund. She appealed to the Fund's appeals committee, which denied her appeal in April 1979. The committee informed Siles that her application was denied because (1) she did not have the twenty years covered employment necessary to qualify for the twenty-year pension; ² and (2) she had not worked sufficient hours in 1975 or 1976 to qualify for the ERISA plan. The committee informed Siles that she needed to work one more year in covered employment to qualify for a pension under the ERISA plan. Siles claims that this is the first time that she received notice concerning the requirements to qualify for a pension under the ERISA plan.

A few days after the appeals committee's decision, Siles received a job referral for temporary work in covered employment. She did not attempt to obtain that job because she was working at a permanant full-time job in a bakery.

Siles brought suit in the district court against the Fund and two individuals, challenging the validity of the Fund's denial of her application for benefits. Siles moved the district court to certify a plaintiff class consisting of all beneficiaries of the Fund who had been denied benefits for the same reasons that her benefits had been denied. The district court denied the motion on the ground that Siles had not sufficiently proved numerosity or that she could adequately represent the class.

After denial of class certification, the parties each moved for summary judgment. The district court denied Siles's motion and granted the Fund's motion in part. The court declined to grant summary judgment on the issue of whether the Fund had given Siles adequate notice of what she needed to do to qualify for a pension under the ERISA plan. It found that there was an issue of fact regarding the adequacy of the notice given to Siles. The Fund then moved for summary judgment on that issue, and Siles filed a cross motion for summary judgment. The court granted the Fund's motion and denied Siles's. It held that while there was an issue of fact regarding whether the notice given to Siles was adequate, summary judgment was proper because Siles had not detrimentally relied on the lack of notice.

II. STANDARD OF REVIEW

We review a district court's grant of summary judgment de novo. Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir.1983). Summary judgment is appropriate if, viewing the evidence in the light most favorable to the party opposing the motion, there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Id.; Fed.R.Civ.P. 56(c). Although we review de novo the district court's grant of summary judgment on the issue of the trustees' breach of their fiduciary obligation, we may reverse the trustees' decision only if it was arbitrary and capricious. Brug v. Pension Plan of Carpenters, 669 F.2d 570, 573 (9th Cir.), cert. denied, 459 U.S. 861, 103 S.Ct. 135, 74 L.Ed.2d 116 (1982).

A district court's denial of class certification will not be overturned unless the district court abused its discretion. Wrighten v. Metropolitan Hospitals, 726 F.2d 1346, 1352 (9th Cir.1984).

III. DISCUSSION

A. Violation of ERISA

One of the principal purposes of ERISA is the protection of employees' rights to pensions. 29 U.S.C. Sec. 1001(a) (1982). This purpose is accomplished primarily through ERISA's minimum participation and vesting requirements. 29 U.S.C. Secs. 1052, 1053 (1982). These requirements became effective for plans in existence on January 1, 1974 at the beginning of the first plan year beginning after December 31, 1975. 29 U.S.C. Sec. 1061(b)(2) (1982); see Smith v. CMTA-IAM Pension Trust, 654 F.2d 650, 656 & n. 7 (9th Cir.1981).

However, to stop plans from cutting off employees between the time ERISA was enacted and the time it became effective, Congress enacted transitional rules. The transitional rule relevant to this appeal is contained in 29 U.S.C. Sec. 1061(e)(2) (1982), which provides essentially that a plan may change its vesting requirements after January 1, 1974 only if the new vesting requirements meet either of two requirements: be at least as favorable to employees as the vesting requirements under the pre-ERISA plan or comply with ERISA. ³

Siles claims that section 3.2(4) of the ERISA plan is both less beneficial to her than the break-in-service rules of the pre-ERISA plan and violates ERISA. Because we conclude that section 3.2(4) complies with ERISA, we need not address Siles first contention.

The only ERISA question we consider on this appeal is whether section 3.2(4) complies with ERISA's break-in-service rules for the minimum vesting requirements. ⁴ We hold that it does.

To understand Siles's claim it is necessary to understand ERISA's minimum vesting standards. ERISA allows pension plans to choose among three alternative minimum vesting provisions. 29 U.S.C. Secs. 1053(a)(1), (2) (1982). The vesting provision chosen by the Fund for its ERISA plan provides that "an employee with...