Wardle v. Central States, Southeast and Southwest Areas Pension Fund

• Citation: 627 F.2d 820
• Decision Date: 14 August 1980
• Docket Number: No. 79-2295,79-2295
• Parties: 2 Employee Benefits Ca 1633 Claude WARDLE, Sr., Plaintiff-Appellant, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 820

627 F.2d 820

2 Employee Benefits Ca 1633

Claude WARDLE, Sr., Plaintiff-Appellant, v. CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND Defendant-Appellee.

No. 79-2295.

United States Court of Appeals Seventh Circuit.

Argued May 1, 1980.

Decided Aug. 14, 1980.

William M. Olah, Terre Haute, Ind., for plaintiff-appellant.

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

Before SWYGERT, PELL and CUDAHY, Circuit Judges.

SWYGERT, Circuit Judge.

A Teamsters pension fund denied a truck owner-operator's application for retirement benefits because he allegedly lacked employee status in the industry for a number of years. The applicant challenges the denial in this action under § 502 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132. On appeal, we affirm the district court's refusal to overturn the fund's denial of pension benefits and its denial of the applicant's motion for a jury trial.

In September 1974 Claude Wardle applied for pension benefits from the Central States, Southeast and Southwest Areas Pension Fund in anticipation of his retirement at the end of the following February after forty-five years as a truck driver. Wardle had driven for Purcell & O'Haver, which was engaged in the manufacture of lumber, from 1954 through 1961 and for Lovelace Truck Service, a common carrier, starting in 1961. ¹ Wardle had withdrawn his Teamsters membership card when he began work for Purcell but had reinstated his membership when he switched to Lovelace. Central States had not received pension contributions on Wardle's behalf during his employment at Purcell, which was not unionized, but had during his stint at Lovelace, although the evidence is conflicting as to whether Wardle or Lovelace had actually paid the contributions. From 1954 through 1972, Wardle had done all his driving in equipment that he owned. In September 1972 he had disposed of his truck tractor and thereafter had driven only trucks owned by Lovelace.

Wardle's application for retirement benefits was to be judged according to the terms of Central States' written Pension Plan, as constituted July 1, 1973. One requirement for eligibility was the completion of "twenty years of continuous service in the industry." Pension Plan, Art. I, Sec. 15. ² The Plan defined "continuous service in the industry" to mean years of employment after the applicant's last "break in service." Pension Plan, Art. I, Sec. 14. ³ The definition of continuous service in the industry also specified that any time spent self-employed in the industry was not creditable toward satisfaction of this requirement. The Plan did not expressly define "self-employed," but did define "employee status." One requirement for such status was the following:

In all instances, the common law test, or the applicable statutory definition of master-servant relationship shall control.

Pension Plan, Art. I, Sec. 7(d).

After receipt of Wardle's application for retirement benefits, Central States sought information verifying his claim. It obtained, with Wardle's permission, earnings data from the Social Security Administration, statements from officials at both Purcell and Lovelace, responses to a six-page questionnaire about the details of Wardle's employment arrangements from both company officials and Wardle, and copies of Wardle's lease agreements with Lovelace.

On the basis of most of these documents, Edward Murtha, Administrator of the Pension Benefits Division, wrote Wardle on September 10, 1975, informing him of the denial of his application by the Pension Payment Committee of the Trustees. The reason given was that Wardle had been out of "covered employment," as defined by the written pension agreement, ⁴ from 1954 through August 1972 and therefore had incurred a break in service disqualifying him from receiving pension benefits. More specifically, the letter related, Wardle had not shown that he had had "employee status" while working for Purcell from 1954 to 1961 and for Lovelace from 1961 through August 1972. The letter indicated further that "(s)elf-employment cannot be considered covered employment." ⁵

The Committee later reexamined Wardle's application. On March 3, 1976 Regina Sedin, Supervisor in the Pension Processing Department, wrote Wardle informing him that the Committee had decided to "reaffirm their previous decision" and enclosed a copy of the earlier letter from Murtha. Sedin's letter also noted an affidavit of the Lovelace payroll clerk stating that pension contributions had been deducted from Wardle's paycheck from June 1961 through September 1972 and suggested, on behalf of the trustees, that Wardle apply for a refund of these contributions.

Wardle then brought this suit in federal court seeking review under 29 U.S.C. § 1132(a)(1)(B) of Central States' denial of his application. The complaint styled itself as one for compensatory damages of $92,400, the amount of benefits that Wardle estimated would accrue during his lifetime, punitive damages of $250,000, reasonable attorney fees and costs, and "all other just and proper relief." Wardle also filed a jury trial request with the district court. On April 23, 1979 the district court granted Central States' motion to strike Wardle's demand for a jury trial on the ground that this suit under ERISA was equitable in nature. On the same date the court denied Wardle's motion to increase his demand for punitive damages and ruled that punitive damages were not recoverable under ERISA. On September 27, 1979, after the receipt of stipulations, the presentation of evidence, and the hearing of oral argument, the court upheld Central States' decision to deny Wardle any pension benefits.

On appeal Wardle challenges all three rulings of the district court. We consider his contentions that the district court erred in upholding Central States' decision and in denying him a jury. Because we affirm the district court's ruling on both these points, we need not consider its ruling on the punitive damages claim.

I.

Wardle's principal contention on appeal is that Central States' decision to deny him retirement benefits is erroneous as a matter of law. We first discuss the appropriate standard of review in an ERISA action of a decision by pension fund trustees to deny pension benefits; we then apply that standard to the facts at bar.

The parties agree on the standard of review to be applied in this case. In Reiherzer v. Shannon, 581 F.2d 1266, 1272 (7th Cir. 1978), a case in which Central States was a defendant and in which the 1973 edition of the Plan also applied, we established that a challenge under § 502(a)(1)(B) of ERISA to a denial of pension benefits by a pension fund's trustees was to be overturned by a federal court only if it was "arbitrary and capricious in light of the language of the Plan." Along with the Fifth and Eighth Circuits, we thus applied the traditional standard of review of the law of trusts used in diversity jurisdiction cases challenging such decisions. Bayles v. Central States Pension Fund, 602 F.2d 97, 99-100 & n.3 (5th Cir. 1979); Bueneman v. Central States Pension Fund, 572 F.2d 1208, 1209 & n.3 (8th Cir. 1978); see also Riley v. MEBA Pension Trust, 570 F.2d 406, 408, 410 (2d Cir. 1977) (same standard of review applies to trustees' plan interpretations in an action seeking relief under § 502(a) generally). ⁶ The use of this standard of review in federal courts apparently originated in the District of Columbia Circuit, which has phrased the standard as "whether the Trustees have acted arbitrarily, capriciously, or in bad faith; that is, is the decision of the Trustees supported by substantial evidence or have they made an erroneous decision on a question of law." Danti v. Lewis, 312 F.2d 345, 348 (D.C.Cir.1962). See also Rehmar v. Smith, 555 F.2d 1362, 1371 (9th Cir. 1976). A federal court is to focus on the evidence before the trustees at the time of their final decision and is not to hold a de novo factual hearing on the question of the applicant's eligibility. Phillips v. Kennedy, 542 F.2d 52, 54 (8th Cir. 1976). As a general matter a court should not resolve the eligibility question on the basis of evidence never presented to a pension fund's trustees but should remand to the trustees for a new determination. See id. at 55 & n.10; Sturgill v. Lewis, 372 F.2d 400 (D.C.Cir.1966); Pickett v. UMW Health & Retirement Funds, 467 F.Supp. 2 (E.D.Tenn.1978); Ruth v. Lewis, 166 F.Supp. 346, 349 (D.D.C.1958). ⁷

The parties agree that the substantive eligibility issue in this case is whether Wardle had employee status while working for Purcell and Lovelace prior to September 1972. The parties also appear to agree that the critical issue in the determination is whether Wardle satisfied Section 7(d) of Article I of the Plan. Since neither party contends that any applicable statutory definition of employee exists, the standard is that of common law master-servant.

We long ago summarized the common law master-servant test to be applied to distinguish between an employee and an independent contractor.

(T)he employer-employee relationship exists when the person for whom the work is done has the right to control and direct the work, not only as to the result accomplished by the work, but also as to the details and means by which that result is accomplished, and that it is the right and not the exercise of control which is the determining element. A number of tests were pointed out, such as the right to hire and discharge persons doing the work, the method and determination of the amount of the payment to the workmen, whether the person doing the work is engaged in an independent business or enterprise, whether he stands to make a profit on the work of those working under him, the question of which party furnishes the tools or materials with which the work is done, and who has control of the premises where the work is done. In addition to the tests there mentioned,...