Reed v. N.E.C.A. Local Union No. 313 I.B.E.W. Pension Fund

Filing 30

MEMORANDUM OPINION re 17 MOTION for Summary Judgment, and 18 MOTION for Summary Judgment. Signed by Judge Richard G. Andrews on 7/28/2014. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

RICHARD REED,

Civil Action No. 13-cv-00736-RGA
Plaintiff,

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v.

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N.E.C.A. LOCAL UNION NO. 313
I.B.E.W. PENSION FUND,

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Defendant.

Martin D. Haverly, Esq. and Stephanie M. Smith, Esq., Wilmington, Delaware, Attorneys for
Plaintiff.

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Timothy J. Snyder, Esq. and Curtis J. Crowther, Esq., Wilmington, Delaware, Attorneys for
Defendant.
MEMORANDUM OPINION

July

X, 2014
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Before the Court are the parties' motions for summary judgment (D.I. 17, 18), supporting
memoranda (D.I. 19, 24), and reply briefs (D.I. 26, 28). For the reasons discussed, the
Defendant's motion is granted in part and denied in part and the Plaintiff's motion is granted in
part and denied in part.

BACKGROUND
The Plaintiff enrolled in the Defendant's union pension fund when he became a
journeyman wireman in 1989. (D.I. 19 at 9). The Plaintiff remained an union member
throughout his career. (Id.). In the summer of2011, the Plaintiff applied for permanent
disability benefits, after experiencing severe, chronic back pain for years. (Id.). At the time, the
Plaintiff had over eighteen years of credited service under the plan and over twenty years in the
union. (Id.). The Plaintiffbegan to receive disability pension income in October 2011. (Id. at 911). Each month, he received $2,362.42. (Id. at 9). In May 2012, the Defendant amended the
plan, causing the Plaintiff to receive $1,858.46 per month, a $503.96 reduction. (Id. at 12). At
the January 25, 2012 board meeting, the Defendant amended the disability pension plan's
provisions. (D.I. 24 at 8). This amendment created a new calculation of pension amounts for
those who started receiving disability benefits after January 1, 2012.
The parties agree that this amendment by itself did not affect the Plaintiff. (D.I. 24 at 8).
On February 29, 2012, however, the Defendant considered a resolution that the January
amendment would also apply to "disability pensioners who have not yet attained the age 55."
(D.I. 20, p. AOl 11; D.I. 24 at 9). The Defendant approved the change in April 2012. (D.I. 24 at
9). The Defendant notified the Plaintiff of the change on May 18, 2012. (D.I. 20, p. AOl 13).
The new amendment went into effect for the Plaintiff's June 2012 pension payment. (D.I. 24 at
9).

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The Plaintiff appealed the reduction of benefits on July 10, 2012. (D.I. 19 at 12). On the
same day, he wrote a letter to the Defendant and asked for copies of:

[All] documents governing the operation of the [Defendant's health and welfare
and pension and disability pension fund,] [i]ncluding insurance contracts,
collective bargaining agreements, and a copy of the latest annual report (Form
5500 series), and an updated summary plan description. I will also need a
summary of the [plan's] financial report. If different, I request a copy of the
annual Funding Notice for the [Defendant's plan]. I request the names of the plan
trustees, theri attendance record, and the names of the plan's [fiduciaries] and any
consultants used, or to be used to create any new [rules] or changes concerning
the [Defendant's fund]. I request a copy of any information or data submitted by
any trustee, fiduciary, or consultant to be tor that has been used to change or
amend the [plan or the fund]. I request a copy of the minutes from the Board of
Trustees meetings that took place in 2012, 2011, 2010 and a copy of the minutes
from the plan['s] fiduciary meetings containing all relevant information in
regard[] to the plan['s] financial status or any need for change concerning
pensioners[']/disability pensioners['] benefits. I request a copy of the current
terms and conditions of the [plan and the fund] and the terms and conditions of
the same fund as they were on October 1, 2011.

(D.I. 20 at A0121). On July 23, 2012, the Defendant sent a reply letter to the Plaintiff
acknowledging the appeal and the document requests. (D.I. 19 at 5-6). The Defendant's letter
stated that the Board of Trustees would review the requests at its July 25, 2012 meeting. (Id. at
13). The Defendant did not consider the appeal until its October 24, 2012 meeting, when it
denied the appeal. (D.I. 24 at 10). The Defendant notified the Plaintiffby letter on October 31,
2012. (Id. at 10).
On October 10, 2012 (before the board's decision about the appeal), a representative of
the Defendant mailed the Plaintiff the current Summary Plan Description (with the amendments
to date), the most recent Form 5500 for 2010, the current collective bargaining agreement, and
the latest Annual Funding Notice for the plan. (D.I. 19 at 13). Accompanying the documents
was a letter that stated that the Defendant was still reviewing the request for the other documents
and hoped to have copies of the other documents to which the Plaintiff was entitled soon. (Id).

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The Plaintiff received the October 10th letter and documents on October 15, 2012, which was 91
days after his request. (Id).
The Plaintiff filed a complaint against the Defendant in April 2013 for the loss of plan
benefits (Count I), for the failure to provide requested documents (Count II), for misrepresenting
the terms of the plan (Count III), for breaching fiduciary duty by reducing the Plaintiffs benefits
(Count IV), and for breaching fiduciary duty by misrepresenting the terms of the plan (Count V).
(D.I. 1). Counts III and V were dismissed in October 2013. (D.I. 16). Both the Plaintiff and the
Defendant filed motions for summary judgment on October 18, 2013. (D.I. 17, 18).

DISCUSSION
A. Legal Standard
Under Rule 56(a) of the Federal Rules of Civil Procedure, a court may grant a motion for
summary judgment if the movant shows that there are no genuine disputes of materials facts and
that the movant is entitled to judgment as a matter oflaw. Material facts are those that may
affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Courts use a de nova standard of review in ERISA benefits decision cases, unless the plan
administrator has authority to determine benefits or construe the plan's terms. See Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When the administrator has discretionary

authority, the proper standard of review for ERISA cases is the arbitrary and capricious
standard. 1 See Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008). The parties do not
dispute that the standard of review is arbitrary and capricious. (D.I. 19 at 19; 24 at 5-6). The
arbitrary and capricious standard is a deferential standard ofreview. See Firestone, 489 U.S. at
11 ("A trustee may be given power to construe disputed or doubtful terms, and in such

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The Third Circuit uses the phrases "abuse of discretion" and "arbitrary and capricious"
interchangeably. See Fleisher v. Standard Ins. Co., 679 F.3d 116, 121 n.2 (3d Cir. 2009).
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circumstances the trustee's interpretation will not be disturbed ifreasonable."). In the Third
Circuit, "[a]n administrator's decision constitutes an abuse of discretion only if it is
'without reason, unsupported by substantial evidence or erroneous as a matter oflaw. "' Miller

v. American Airlines, Inc., 632 F.3d 837 (3d Cir. 2011) (quotingAbnathya v. HoffinannLaRoche, Inc., 2 F.3d 40, 45 (3d Cir. 1993)).
B. Decision
The chief issue is whether the Defendant was allowed to reduce the Plaintiffs permanent
disability benefits under the terms of the plan. It is clear that Section 9.01 of the plan gives the
Defendant discretionary authority over the plan. (D.I. 20, p. A0052). However, the terms of the
plan are ambiguous. See Bill Gray Enters., Inc. Employee Health and Welfare Plan v. Gourley,
248 F.3d 206, 218 (3d Cir. 2001) ("Whether terms in an ERISA Plan document are ambiguous is
a question oflaw. A term is 'ambiguous if it is subject to reasonable alternative
interpretations.'").
ERISA plans can include both retirement benefits and welfare benefits. Generallyspeaking, retirement benefits, once vested, cannot be reduced. Welfare benefits, on the other
hand, can be changed. The benefit at issue here has aspects of both a retirement benefit and a
welfare benefit. The benefit arises in part from the participant having a disability, and disability
benefits are usually considered to be welfare benefits. The benefit arises in part from length of
service, and its amount is computed similarly to the way a pension is calculated.
In the plan in which Mr. Reed participated, there are various provisions that shed some
light on the nature of the benefit at issue.
Article VI, which is captioned, "Retirement Benefit Eligibility and Amount,"2 describes
four sorts ofretirement pensions: the "Normal Retirement Pension," the "Early Retirement

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I do not rely upon the title, as the Plan states they are "included solely for convenience
ofreference," and cannot "be construed as part [of the Plan]." Plan§ 9.11 (D.I. 20, A0055).
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Pension," the "Disability Retirement Pension," and the "Widow's Benefit." Plan§§ 6.01, 6.04,
6.06, 6.11 (D.I. 20, A0026, A0028, A0029). The Disability Retirement Pension requires, among
other things, a minimum of ten years of service, and its amount is calculated using the "Normal
Retirement Pension" amount. Plan §§ 6.06, 6.07 (D.I. 20, A0028-29). In order for a participant
to get a ''Normal Retirement Pension" or an "Early Retirement Pension," the participant has to
file a written application as set forth in Plan§ 8.01 (see Plan§§ 6.01 & 6.04(a)), but there is no
such requirement for obtaining a "Disability Retirement Pension." (See Plan §§ 6.06 to 6.10).
"In order to receive payment of a pension, the Participant must make written application to
become a retired Participant to the Trustees .... " Plan§ 8.01.
In Article II, a break in service that would otherwise disqualify a person from
participation in the Plan does not do so when the participant "[h]as a nonforfeitable right to a
retirement benefit as provided in Section 4.02," or "[i]s entitled to permanent and total disability
benefits in accordance with Section 6.06," or "[h]as retired and is entitled to retirement benefits
in accordance with Section 6.01 or 6.04." Plan § 2.02 (D.I. 20, AOOl 8). The benefits of§§ 6.01
& 6.04 are distinguished as "retirement" benefits while the benefits of§ 6.06 are referred to as

"disability" benefits.
In Article IV, the Plan discusses "nonforfeitability." "The normal retirement benefit"
becomes "nonforfeitable (Vested)" ''upon [attainment] of National Retirement Age." 3 Plan§
4.02(a). If the participant's work is governed by a collective bargaining agreement, the
participant "shall be Vested, and, therefore, have a nonforfeitable right to receive a retirement
benefit, as provided in Article VI, upon completion often (10) years of Vesting Service or ten
(10) years of Credited Service." Plan§ 4.02(b). If the participant's work is not governed by a

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I believe that "National Retirement Age" is a typo and that it should be read to say
''Normal Retirement Age." "Normal Retirement Age" is defined as age 62 or the age at which
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collective bargaining agreement, then the participant "shall be Vested upon completion of five
(5) years of Vesting Service." Id. It appears that the provisions of§ 4.02(b) are being
superseded by those of§ 4.02(c), which provide that a participant "who earns Credited Service
after January 1, 1997 shall be Vested and, therefore have a nonforfeitable right to receive a
retirement benefit, as provided in Article VI, upon completion of five ( 5) years of Vesting
Service or five (5) years of Credited Service." The last subsection of§ 4.02 appears to be a
"grandfather clause," which provides that participants who "completed at least fifteen (15) years
of Credited Service prior to incurring a Permanent Break in Service [before 197 6], as defined in
Article V ... shall be Vested and therefore, have a nonforfeitable right to receive a retirement
benefit, as provided in Section 6.01 or 6.04." Plan§ 4.02(d).
Article VIII, which is lengthy, discusses various aspects of retirement benefit payments.
It specifically distinguishes at points between normal retirement pensions and early retirement

pensions. Plan§§ 8.04(a)(2)(C) & 8.04(b)(2)(C) (both citing "Section 6.05"); § 8.04(b)
(discussing a participant "who has received retirement benefits in accordance with Article VI").
The discussion does not refer to disability retirement pensions.
Upon review of the Plan, and particularly the aforementioned sections, I cannot say that
the Plan unambiguously makes a Disability Retirement Pension a vested retirement benefit that
cannot be reduced. First, in Article II, the Plan refers to the benefits at issue as disability benefits
and not as retirement benefits. Second, the procedure for obtaining a retirement pension is
specified; the procedure for obtaining a disability pension is not. Third, the minimum length of
service for a retirement pension is five years; for a disability pension, it is ten years. This is
significant, not only because it draws a distinction between the two, but because it also undercuts
Plaintiff's major argument. Plaintiffs position, boiled down to its essence, is that§ 4.02(c)

the participant has five years of service, whichever occurs later. Plan § 1.18.
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unambiguously provides that Mr. Reed has "a nonforfeitable right to receive a retirement benefit,
as provided in Article VI, upon completion of five (5) years of [service];" that every benefit in
Article VI is a "retirement benefit;" and thus, once he began to receive a disability pension, it
could not be reduced. Section 4.02(c) and Article VI do not mesh as cleanly as Mr. Reed
suggests. The normal retirement and early retirement benefits of Article VI require a minimum
of five years of service; the disability retirement benefits of Article VI require a minimum of ten
years of service. Thus, if§ 4.02( c) were read as Mr. Reed would have it, it would require that he
have a vested right to a disability retirement pension after five years of service, which would
contradict the express requirement that there be ten years of service before there is any eligibility
for a disability retirement pension.
Since the Plan does not unambiguously support Mr. Reed's position, the Trustees of the
Plan have discretion to interpret the Plan. I therefore cannot find that their interpretation is
arbitrary and capricious.
There are two other issues to be addressed in relation to Mr. Reed's entitlement to
benefits.
First, he relies upon the Summary Plan Description. The Summary Plan Description
explains in "An Overview of Your Pension Plan" that "[y]ou have a non-forfeitable right to Plan
benefits once you become 'vested."' (D.I. 20, p. A0068). The Summary Plan Description
explains the "Disability Pension" in its "Types of Pensions" section: "If you are totally and
permanently disabled and you cannot work, you may be eligible to retire with a disability
pension." (Id., p. A0156). The Supreme Court ruled that summary document terms are not the
terms of the plan. See Cigna Corp. v. Amara, 131S.Ct.1866, 1878 (2011). Thus, the Plaintiff
may not replace the terms of the plan with the description.

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Second, Mr. Reed argues that the Trustees did not properly amend the Plan. Section
10.01 of the plan says that the Trustees may amend the plan "in any respect, retroactively or
otherwise" as long as the changes do not adversely affect benefits accrued before an amendment.
(D.I. 20 at A0056). The plan defines "accrued benefits" as "the retirement benefit a Participant
would receive at his Normal Retirement Date." (Id. at A0006).

Therefore, the Trustees were

permitted to retrospectively or prospectively amend the plan as it applied to the Plaintiffs
permanent disability benefits.
Therefore, on Counts I and IV, I will grant the Defendant's motion for summary
judgment.
Count II alleges a failure to provide timely documents the Plan was obligated to supply.
There is no disputed material fact that the Plan did not timely provide the documents. Thus, I
consider the five factors set forth in Gorini v. AMP, Inc.: (1) bad faith, (2) length of delay, (3)
number ofrequests, (4) documents withheld, and (5) prejudice to party. See 94 Fed. Appx. 913,
919-20 (3d Cir. 2004). The Defendant gave Mr. Reed the requested documents 91 days after the
request, 61 days late. Considering all the circumstances, including the legislative determination
that timely compliance serves the public interest, I believe that an award of penalties is
appropriate, but since I do not believe that there was bad faith, and I do not see any particular
harm to the Plaintiff from the delay, I believe that $25 per day is an appropriate penalty, and I
will therefore award $1525 as a penalty.
A separate order will be entered.

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