Walling v. Brady
| Citation | 125 F.3d 114 |
| Decision Date | 30 July 1997 |
| Docket Number | No. 96-7526,No. 74,74,96-7526 |
| Parties | 21 Employee Benefits Cas. 1437 Joseph R. WALLING, and other individuals similarly situated v. Edward J. BRADY; Harold R. Brohawn; John D. Daniello; William R. Hickman; Terrance M. Shannon; John W. Stewart; James R. Wahl; Alfred C. Wilson, Jr., as Trustees of the Plumbers and Pipe Fitters Local UnionPension Fund; Plumbers and Pipe Fitters Local UnionPension Fund, Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Richard L. Abbott (argued) Theisen, Lank, Mulford & Goldberg, Wilmington, DE, for Appellee Joseph R. Walling, and other individuals similarly situated.
Kent Cprek (argued), Richard B. Sigmond, Sagot, Jennings & Sigmond, Philadelphia, PA, for Appellants Edward J. Brady, Harold R. Brohawn, John D. Daniello, William R. Hickman, Terrance M. Shannon, John W. Stewart, James R. Wahl, Alfred C. Wilson, Jr., as Trustees of the Plumbers And Pipe Fitters Local Union No. 74 Pension Fund, Plumbers and Pipe Fitters Local Union No. 74 Pension Fund.
Susan K. Hoffman, Pepper, Hamilton & Scheetz, Philadelphia, PA, for Amicus-Appellees Local Union No. 626, United Brotherhood of Carpenters & Joiners of America Pension Fund, as Plan Sponsor of Carpenters Local No. 626 Pension & Annuity Plan, Teamsters Pension Trust Fund of Philadelphia and Vicinity, Teamsters Health and Welfare Fund of Philadelphia and Vicinity, Carpenters Pension and Annuity Fund of Philadelphia and Vicinity Carpenters Health and Welfare Fund of Philadelphia and Vicinity, Steamfitters Local Union No. 420 Pension Fund, Steamfitters Local Union No. 420 Welfare Fund.
Before: COWEN, ALITO and SEITZ, Circuit Judges.
Appellants appeal from the February 9, 1996, order of the district court granting summary judgment to plaintiff-appellee Joseph R. Walling and a class of persons he represents, and denying appellants' cross motion for summary judgment. Walling v. Brady, 917 F.Supp. 313 (D.Del.1996). The district court held that the Board of Trustees ("Trustees") of an ERISA-qualified multi-employer pension fund had abused its discretion when it amended its pension plan to authorize the payment of an additional $100 per month to only 85% of the fund participants rather than the full membership. We will reverse.
The Plumbers and Pipefitters Local Union No. 74 Pension Fund ("Pension Fund") and the Trustees were sued by a class of 54 participants in the Pension Fund, with Walling appointed as the designated class representative. The plaintiffs asserted that the Trustees unlawfully diverted pension funds in violation of 29 U.S.C.A. § 1103(c)(1) (1985 and Supp.1997) and breached their fiduciary duty under 29 U.S.C.A. § 1104. The eight individuals serving as trustees of the Pension Fund (four are appointed from the union, four from management) are the same eight people who serve as the trustees of the Plumbers and Pipefitters Local Union No. 74 Welfare Fund ("Welfare Fund"). The management representatives to the boards of trustees are appointed by the Delaware Mechanical Contractors' Association, Inc., which represents the multiple employers who support the Pension Fund and the Welfare Fund.
The Pension Fund is a defined-benefit plan. It does not have a "finite asset pool" and is able to incur unfunded liabilities. The employers and the Pension Fund jointly share liability for the fund's obligations. The provisions of the Pension Fund give the Trustees, collectively as plan administrator, wide latitude to
[d]ecide all questions relating to the interpretation of the Trust Agreement and Plan. The exercise of discretion or determination of questions arising in the administration, interpretation and application of the Trust Agreement or Plan shall be final and binding except as otherwise provided by law.
App. at 349-50. The plan administrator also may "[a]mend, alter or otherwise change the Pension Plan in any way not inconsistent with applicable laws or regulations of government agencies or the provisions of this Trust." Id. at 350.
An actuarial consultant retained by the Trustees reported that successful investments had caused the Pension Fund to have a surplus. The Trustees were aware that the Welfare Fund was simultaneously faced with increased health care costs and that the Trustees had already decided, in their capacity as the Welfare Fund board of trustees, to impose a requirement that all Welfare Fund participants pay a $100 per month fee for their coverage, which previously had not required such a fee. The Trustees chose to address the imbalance between the funds by paying an additional $100 per month in benefits to those members of the Pension Fund who, by virtue of also being members of the Welfare Fund, would now have to pay $100 each month to the Welfare Fund: "The Trustees openly concede that the motivation behind this additional $100 per month Pension Fund benefit was to maintain the purchasing power of those retired Welfare Fund individuals who now shouldered an additional $100 monthly burden, presumably on a fixed income." Walling, 917 F.Supp. at 317. The Trustees also noted that the Pension Fund did not reduce the benefits for Walling or any member of his class; indeed, all Pension Fund participants received a separate 5% increase in benefits. The Walling class members, as well as all the other members of the Pension Fund, have received more than they had anticipated receiving from the Pension Fund upon retirement. The class members consist of Pension Fund members who do not also participate in the Welfare Fund; they retired without fulfilling sufficient years of service to qualify for Welfare Fund benefits.
Walling and his class asserted that the surplus should have either been retained by the Pension Fund or distributed equally to all participants. They note that all Pension Fund members were faced with rising health care costs, regardless of whether they were Welfare Fund participants, and claimed that the payment of an additional, monthly $100 to only the 85% of Pension Fund members who are also Welfare Fund members was not a valid "Pension Fund interest." Id. at 322.
The district court agreed with Walling. It held that appellants violated their fiduciary duty of loyalty in amending the plan to provide the supplemental $100 benefit. In so holding, the district court determined that appellants violated their duty of loyalty, whether that duty is reviewed under the strict " 'prudent' person standard" or the more relaxed "arbitrary and capricious" standard. Id. at 321. We will reverse. We hold that no fiduciary duty applies, and that the Trustees acted within their powers as settlors in amending the Pension Fund plan.
Subject matter jurisdiction over this matter was exercised by the district court pursuant to 29 U.S.C.A. § 1132, as an action to clarify benefits and enforce rights under the Employee Retirement Income Security Act ("ERISA"). We have appellate jurisdiction under 28 U.S.C.A. § 1291 (1984). This court exercises plenary review over the district court's grant of summary judgment. We will affirm summary judgment "if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Smith v. Hartford Ins. Group, 6 F.3d 131, 135 (3d Cir.1993).
The district court concluded that the fiduciary duty (set forth in 29 U.S.C.A. § 1104) applied to the Trustees' amendment to the Pension Fund plan, which provided for the additional $100 per month payment. It determined that the Trustees had failed to act with the duty and loyalty required of a fiduciary. In the view of the district court, under either the "prudent person" or the "arbitrary and capricious" standard of review, the Trustees' actions were improper. The court based its decision largely on a perceived difference between multi- and single-employer plans, citing dicta in Siskind v. Sperry Retirement Program, Unisys, 47 F.3d 498, 506 (2d Cir.1995). Siskind states that multi-employer plans differ from single-employer plans on the issue of fiduciary obligations. As the Second Circuit explained:
The cases holding plan amendment to be an administrative and fiduciary task concern multiemployer pension plans, jointly administered by trustees representing the employers and trustees appointed by and representing the union. In the multiemployer setting, trustees amending a pension plan affect the allocation of a finite plan asset pool .... For that reason trustees administering a multiemployer plan are expected to act solely for the benefit of beneficiaries and are barred from acting on the employers' behalf.
Id. (emphasis added) (citations and internal quotations omitted). In contrast, the employer sponsoring a single-employer plan, "must have latitude in the sound management of its business to determine the benefits it will guarantee." Id. at 505 (citing Johnson v. Georgia-Pacific Corp., 19 F.3d 1184, 1188 (7th Cir.1994)). The court then held, "to the extent [the trustees' actions are] not regulated by ERISA, they may act without invoking their fiduciary duties to plan beneficiaries." Id. at 507.
Arguments are advanced by both parties concerning whether the Siskind approach (analyzing single- and multiemployer cases differently) has been made obsolete by the Supreme Court's recent decision in Lockheed Corp. v. Spink, 517 U.S. 882, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), which was filed after the district court entered the appealed-from order. In Lockheed, the Supreme Court explained that:
Plan sponsors who alter the terms of a plan do not fall into the category of fiduciaries. As we said with respect to the amendment of welfare benefit plans ... "[e]mployers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans." When employers undertake those actions, they do not act as fiduciaries, but are analogous to...
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