Tompkins v. Central Laborers
Filing
49
ORDER & OPINION entered by Judge Joe Billy McDade on 8/3/2011: For the foregoing reasons, Plaintiffs Motion for Summary Judgment Doc. 41 is DENIED, and Defendants Motion for Summary Judgment Doc. 42 is GRANTED in part and DEFERRED in part. Defend ants Motion for Summary Judgment is GRANTED as to Counts I and II. This case is set for Oral Argument on Monday, August 22, 2011 at 10:00 a.m. in Courtroom D of the Peoria Courthouse for arguments pertaining to Count III of Plaintiffs Amended Complaint. IT IS SO ORDERED. (JV, )
E-FILED
Wednesday, 03 August, 2011 08:54:27 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ROCK ISLAND DIVISION
DONALD J. TOMPKINS,
Plaintiff,
v.
CENTRAL LABORERS’ PENSION
FUND,
Defendant.
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Case No.
09-cv-4004
ORDER & OPINION
Before the Court are the parties’ cross-Motions for Summary Judgment (Docs.
41 & 42). Both motions have been fully briefed and are ready for determination by
this Court. For the following reasons, Defendant’s Motion for Summary Judgment
(Doc. 42) is GRANTED in part and DEFERRED in part, and Plaintiff’s Motion for
Summary Judgment (Doc. 41) is DENIED.
BACKGROUND1
Defendant is a not-for-profit, multi-employer ERISA fund, established and
administered pursuant to 29 U.S.C. § 1001 et. seq., and governed by a Board of
Trustees with equal representation from management and labor unions. (Doc. 42 at
3). Plaintiff began working as a laborer in Laborers’ Local 309, Rock Island, Illinois,
in November of 1978. (Doc. 41 at 2). Plaintiff was a Participant in Defendant Fund
as a result of such employment. (Doc. 41 at 2).
These background facts reflect the Court’s determination of the undisputed facts,
unless otherwise noted. Facts that are omitted are immaterial.
1
In July of 1999, Plaintiff filed an application for a “Disability Pension” with
Defendant, which included a “Statement of the Attending Physician” documenting
Plaintiff’s Chronic Asthmatic Bronchitis, as well as an “Employee’s Statement”
which attributed his condition to working with cement dust for twenty-two years.
(Doc. 41 at 11). On August 19, 1999, Defendant sent Plaintiff a letter approving
Plaintiff as eligible for “Total and Permanent Disability” benefits.2 (Doc. 41 at 11;
42 at 4). The letter indicated that Plaintiff’s monthly benefit would be $2,115.43
($1,955.43 + $160 Supplemental Pension), and that it was retroactive to January 1,
1999. (Doc. 41 at 11).
At the time Plaintiff applied for, and received, these disability benefits,
Defendant Fund was administered pursuant to the Central Laborers’ Pension Fund
Summary Plan Description revised and effective July 1, 1995, and the Restated
Plan Rules and Regulations – Amended and Restated Effective October 1, 1994,
(“First Restated Plan”) plus Amendment No. 7, dated November 10, 1998.3 (Doc. 42
at 3-4). Section 3.10 of the Plan, as amended by Amendment No. 7 and in effect at
the time Plaintiff received his award of disability benefits, defined “Total and
Permanent Disability.” (Doc. 42 at 6). The Section provided as follows:
A Total and Permanent Disability shall mean that the Employee is
totally and permanently unable as a result of bodily injury or disease
to engage in any further employment or gainful pursuit as a Laborer or
The Court will refer to Plaintiff’s “Total and Permanent Disability” benefits as
both “disability benefits” and “Disability Pension.” This interchangeable use is
based upon context, and neither reference indicates the Court’s position as to
whether the benefits were a pension benefit or a welfare benefit for purposes of the
anti-cutback rule.
3 Other governing Amendments were also in place at the time, however, as Plaintiff
points out, only Amendment No. 7 is relevant to the instant disposition.
2
2
other Building Trades Crafts employment in the construction industry
for renumeration or profit, regardless of the amount, or unable to
engage in further employment or gainful pursuit of Non-Laborer or
other non-Building Trades Crafts employment for which the
employment is considered full-time and a primary source of income.
For such non-Laborer or other non-Building Trades Crafts
employment, provided a physician, selected by the Trustees, considers
the disability to be total and permanent, the Participant may earn up
to $14,000 per calendar year in non-Laborer or other non-Building
Trades Crafts employment and be considered totally and permanently
disabled for purposes of Section 3.10.4 Such disability must be
considered total and permanent and will continue during the
remainder of the Participant’s life. The Trustees shall be the full and
final judges of Total and Permanent Disability and of entitlement to a
Disability Pension hereunder.
(Doc. 42 at 6-7).5 The First Restated Plan’s language, including the above provision,
was not mailed or otherwise provided to Plaintiff or any other Pension Fund
Participants (Doc. 41 at 15; 42 at 7), although Plaintiff was required to sign a
Retirement Declaration at the time he first received his benefits. (Doc. 19 ¶ 42; 42
at 21). Plaintiff received his disability benefits every month through May of 2007.
(Doc. 41 at 11).
On June 1, 2007, Defendant sent Plaintiff a letter suspending his disability
benefits (“Termination Letter”). (Doc. 42 at 8; Doc. 1-2 at 13). According to the
Termination Letter, Defendant had received information indicating that Plaintiff
received compensation for full-time employment at Wilman Construction during
The italicized language will hereinafter be referred to as the “$14,000 provision.”
The relevant section has been amended twice since the time Plaintiff was
determined eligible for benefits, first on September 9, 2002, and again on November
28, 2005. (Doc. 42 at 7-8). In its letter terminating Plaintiff’s benefits, Defendant
cited to §1.31 of the Restated Plan, which was made effective October 1, 1999, by
the September 9, 2002 amendment. However, both parties now agree that the
applicable version is section 3.10, as placed into effect by Amendment No. 7. (Doc.
42 at 14; 46 at 27).
4
5
3
calendar years 2005 and 2006. (Doc. 1-2 at 13).6 The Termination Letter further
states that such information had led them “to believe that you no longer meet the
Fund’s definition of ‘total and permanent disability’” and therefore that his
Disability Pension would be suspended effective June 1, 2007. (Doc. 1-2 at 13). The
Letter informed Plaintiff that Defendant also believed he had been overpaid during
the months of July 2005 – May 2007 in the amount of $48,654.89, and that it would
seek to recover this amount through its “recovery process.”
(Doc. 1-2 at 13).
Finally, the Termination Letter stated that Plaintiff was entitled to appeal the
suspension of his benefits pursuant to §7.6 of the Plan. (Doc. 1-2 at 13).7
On February 25, 2008, Plaintiff appealed the determination of Defendant
Fund, invoking Plan Sections 7.8(f) and 7.4. (Doc. 42 at 9).8 On April 21, 2008,
Plaintiff and his counsel personally appeared before the Board of Trustees of the
Fund and were allowed to present additional information and arguments in
furtherance of Plaintiff’s administrative appeal. (Doc. 42 at 9). Plaintiff did not
submit any documentation or present any evidence or argument consisting of
medical or vocational information regarding his current ability or inability to
perform full-time employment. (Doc. 42 at 9). Instead, Plaintiff argued three issues
on appeal: 1) his 2005 work was of the “non-Laborer” variety and he earned below
The information indicated that Plaintiff began working 40 hours a week for
Wilman Construction around July 1, 2005, and that he had earned $10,550.00 in
2005 and $22,100.00 in 2006. (Doc. 42-1 at 2; 42-3 at 19).
7 Section 7.6 is entitled “Review of Denied Disability Pension Claim.”
8 Section 7.8(f) is entitled “Suspension of Benefits” and 7.4 is entitled “Review of all
Denied Non-Disability Claims, Regardless of the Date Filed, and Disability Pension
Claims Filed Before January 1, 2002.” (Doc. 42 at 8-9). Plaintiff contends that he
invoked the correct procedure for appealing rather than the one Defendant cited to
in its Termination Letter. (Doc. 46 at 8).
6
4
$14,000 in compensation such that he should have still been considered “totally and
permanently disabled” for 2005; 2) the overpayment provisions should only apply
after Plaintiff earned $14,000 for the year and should not go into effect until his
salary exceeded that amount; and 3) Plaintiff was not properly notified of the
requirements to remain “totally and permanently disabled” in accordance with
ERISA and the plan documents. (Doc. 42-3 at 20-29).
Defendant denied Plaintiff’s
appeal on April 21, 2008 and by letter dated April 25, 2008 (“Letter Denying
Appeal”), informed Plaintiff of the Trustee’s unanimous decision. (Doc. 42 at 11;
Exh. A at 1).
In its Letter Denying Appeal, Defendant states that “a fundamental and
ongoing requirement for continued eligibility to receive a Disability Pension is the
Pensioner’s Total Disability Status,” and that therefore its determination centered
upon whether Plaintiff’s physical condition since July 1, 2005 was such that he
would meet the definition of “Total and Permanent Disability.” (Doc. 42-1 at 3).
The Letter goes on to state that because Plaintiff had demonstrated the ability to
work full-time since July 1, 2005, he no longer met that definition, and therefore
that his Disability Pension was properly terminated. (Doc. 42-1 at 3). The Letter
also considered Plaintiff’s proposed interpretation of the Total and Permanent
Disability provision, and found that it “would undermine the fundamental purpose
of the Plan’s Disability Pension: to provide steady income to those Participants who
are unable to work on account of a medical condition which, at the time the
Participant became eligible for the Disability Pension, the Trustees determined
5
would ‘continue during the remainder of the Participant’s life.’” (Doc. 42-1 at 4).
The Letter concluded by informing Plaintiff that he may bring a civil action as a
result of the denial of his claim pursuant to 29 U.S.C. § 1132(a). (Doc. 42-1 at 8).
On February 12, 2009, Plaintiff invoked that right and filed a Complaint
(Doc. 1) initiating the instant lawsuit. Plaintiff filed an Amended Complaint on
December 21, 2009 (Doc. 19). In his Amended Complaint, Plaintiff alleges that 1)
Defendant’s termination of his Disability Pension controverted the plain meaning of
the Plan by failing to apply the “$14,000 provision” to Plaintiff’s full-time
employment as a “non-Laborer” (Count I); 2) Defendant did not properly notify
Plaintiff of the Plan rules governing the suspension of his Disability Pension
benefits (Count II); and 3) Defendant is in violation the anti-cutback rule of ERISA
(29 U.S.C. § 1054(g)(2)). (Count III).9 Following discovery, on January 31, 2010,
Plaintiff filed his Motion for Summary Judgment, seeking judgment as a matter of
law as to Counts I and II of his Amended Complaint. (Doc. 41). On February 1,
2011, Defendant filed its own Motion for Summary Judgment, seeking judgment in
its favor on all three counts of Plaintiff’s Amended Complaint. (Doc. 42).
DISCUSSION
I.
Legal Standard
Summary judgment should be granted where “the pleadings, the discovery
and disclosure materials on file, and any affidavits show that there is no genuine
issue as to any material fact and that the movant is entitled to judgment as a
On December 21, 2009, Defendant filed a Counterclaim against Plaintiff for
fraudulent concealment. (Doc. 18). Defendant’s Counterclaim is not at issue in the
cross-motions for summary judgment.
9
6
matter of law.” FED. R. CIV. P. 56. In ruling on a motion for summary judgment,
the court must view the evidence on record in the light most favorable to the nonmoving party. SMS Demag Aktiengesellschaft v. Material Sciences Corp., 565 F.3d
365, 368 (7th Cir. 2009). All inferences drawn from the facts must be construed in
favor of the non-movant; however, the court is not required to draw every
conceivable inference from the record. Smith v. Hope School, 560 F.3d 694, 699 (7th
Cir. 2009). The court draws only reasonable inferences. Id.
It is not the court’s function to scour the record in search of evidence to defeat
a motion for summary judgment. Instead, the court relies on the non-moving party
to identify the evidence which creates an issue of triable fact. Cracco v. Vitran Exp.,
Inc., 559 F.3d 625, 632 (7th Cir. 2009) (quoting Greer v. Bd. of Educ., 267 F.3d 723,
727 (7th Cir. 2001)). If the evidence on record could not lead a reasonable jury to
find for the non-movant, then no genuine issue of material fact exists and the
movant is entitled to judgment as a matter of law. McClendon v. Indiana Sugars,
Inc., 108 F.3d 789, 796 (7th Cir. 1997). At the summary judgment stage, however,
the “court may not make credibility determinations, weigh the evidence, or decide
which inferences to draw from the facts,” such matters must be left for the jury.
Washington v. Haupert, 481 F.3d 543, 550 (7th Cir. 2007). The interpretation of an
ERISA plan is a subject particularly suited to disposition by summary judgment.
See Grun v. Pneumo Abex Corp., 163 F.3d 411, 419 (7th Cir. 1998).
7
II. Standard of Review of ERISA Plan
The Court’s review of a denial of benefits is performed de novo, “unless the
benefit plan gives the administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When the terms of the plan
provide for such discretion, judicial review of the administrator’s decisions is limited
to an arbitrary-and-capricious standard. Davis v. Unum Life Ins. Co. of Am., 444
F.3d 569, 575 (7th Cir. 2006). Under such standard, an administrator’s decision
will be upheld so long has it has “rational support in the record.” Id. (quoting
Leipzig v. AIG Life Ins. Co., 362 F.3d 406, 409 (7th Cir. 2004).
administrator’s
decision
will
not
be
overturned
unless
it
That is, “an
is
downright
unreasonable.” Id. (internal quotations omitted).
Here, the parties agree that the Plan grants Defendant’s Trustees
discretionary authority to interpret and apply the terms of the Plan. (Docs. 41 at
16; 42 at 12).10 As such, the Court must engage in an arbitrary-and-capricious level
of review.
Plaintiff, however, argues that a heightened standard of review is
appropriate because Defendant has acted in bad faith and is operating under a
conflict of interest. (Doc. 41 at 17-25).11
Section 6.3 of Article 6 of the First Restated Plan provides that Defendant Fund’s
Trustees have discretion to interpret the Plan. (Doc. 42 at 4).
11 Plaintiff also argues that the plain meaning of the Plan is at odds with
Defendant’s interpretation. (Doc. 41 at 16-22). However, because this argument
deals with review under the arbitrary-and-capricious standard rather than whether
the arbitrary-and-capricious standard should apply in the first place, the Court will
consider this argument after it determines the appropriate standard of review.
10
8
A. Defendant’s Alleged Bad Faith
Plaintiff points to language in the Supreme Court case of Conkright v.
Frommert, 130 S.Ct. 1640, 1651 (2010), for the proposition that “[u]nder trust law, a
trustee may be stripped of deference when he does not exercise his discretion
‘honestly and fairly.’” Plaintiff then appears to argue that the Defendant in this
case did not exercise its discretion “honestly and fairly” – i.e. in bad faith, because it
failed to disclose to him three documents Plaintiff believes to be relevant to the
denial of his benefits. (Doc. 41 at 19). These documents include 1) an internal
memo sent from one of Defendant’s consultants in 1997 stating that “the general
consensus is that the current definition [of total and permanent disability] is too
restrictive, even with the change that allows a participant to work in nonconstruction employment and earn up to $14,000 per year;” 2) a letter sent that
same year from the same consultant stating that “a disabled participant can earn
up to $14,000 per year in non-construction type of work and continue to be eligible
to receive disability payments from the Pension Plan;” and 3) a DRAFT Amendment
to the 1999 Restated Plan, which considered incorporating the following language:
“For such non-Laborer or non-Building Trades Crafts employment that is not
considered full-time and a primary source of income, notwithstanding the
restrictions of Section 7.8, the Participant may earn up to $14,000 per calendar year
in non-Laborer or other non-Building Trades Crafts employment and be considered
totally and permanently disabled.” (Doc. 41 at 20-21 (emphasis added)). Plaintiff
states that these documents support his interpretation that the “$14,000 provision”
9
applies to full-time, as well as part-time, work in non-Laborer employment, and
that it was bad faith for Defendant not to reveal them to him prior to or during his
April 21, 2008 Appeal hearing. (Doc. 41 at 21).12
Defendant responds that applicable federal regulations make clear that it
was under no obligation to provide Plaintiff a draft of a Plan amendment,
considered but not enacted some three years prior to the claims hearing. (Doc. 45 at
12). The Court agrees. Defendant was under no obligation to provide Plaintiff with
a draft amendment which it considered but did not adopt. Section 2560-503-1(j)(3)
of Title 29 of the Code of Federal Regulations requires that a plan provide a
claimant who has been denied benefits with copies of all documents, records, and
other information relevant to the claimant’s claim for benefits; such information is
relevant if it: “(i) was relied upon in making the benefit determination; [or] (ii) was
submitted, considered, or generated in the course of making the benefit
determination, regardless of whether such . . . information was relied upon in
making the benefit determination.” 29 C.F.R. § 2560-603-1(m)(8). Plaintiff does not
show how the DRAFT Amendment was relevant to Defendant’s determination that
he was no longer permanently and totally disabled.
Notably, the DRAFT
Amendment was not adopted, and therefore was not binding or relied upon in
anyway. Accordingly, the Court finds that Plaintiff has not demonstrated any bad
faith on the part of Defendant such that it should be stripped of the deference it is
otherwise owed under the Plan.
While Plaintiff references all three documents, his whole argument is based upon
Defendant’s failure to disclose the DRAFT Amendment. (See Doc. 41 at 20-22).
12
10
B. Conflict of Interest
Plaintiff also argues that this Court must engage in a more rigorous review of
Defendant’s decision to terminate Plaintiff’s disability benefits because it was
operating under a conflict of interest. (Doc. 41 at 22). Plaintiff claims that there is
an inherent conflict of interest which must be taken into account by this Court
because Defendant’s Board both evaluated claims and at the same time was
concerned about the cost of its retirement plan. (Doc. 41 at 22). Plaintiff points to
various evidence of Defendant’s “conflict,” including a 2004 power point
presentation which was sent to Defendant’s executive director and other officials
stating that “due to poor investment performance, the Fund needs to adjust benefits
until the investment loss has been funded” and a January 28, 2010 letter to
Participants and Beneficiaries in which it gave notice that due to “declines in
financial markets in recent years” the Fund was in the “Yellow Zone” or
“endangered status” for the 2009 Plan Year. (Doc. 41 at 24-25).
However, even if these two pieces of evidence were sufficient to establish that
the Board was concerned with its financial status when it decided to terminate
Plaintiff’s Disability Pension benefits, the Court finds that such an inquiry is less
demanding in this case. Here, Defendant is a not-for-profit, multi-employer ERISA
Fund, governed by a Board of Trustees with equal representation from management
and labor unions. (Doc. 42-2 ¶ 3). In Manny v. Central States, Southeast and
Southwest Areas Pension, 388 F.3d 241 (7th Cir. 2004), the Seventh Circuit held
that a conflicts analysis was not necessary when the plan at issue was a multi-
11
employer welfare plan, whose trustees consisted of an equal number of union and
employer representatives, the union representatives had no discernible incentive to
rule against the applicant, and the trustees were unanimous in their ruling. Id. at
243. At first glance, that appears to be the case here. (See Doc. 42-1 at 2 (“the
Trustees determine unanimously to deny Mr. Tompkins appeal.”).
However,
Plaintiff argues that here, unlike in Manny, the evidence indicates that the union
trustees did have an incentive to rule against him, namely the fact that the Plan
was in financial trouble. Accordingly, the Court will keep this potential conflict in
mind while reviewing Defendant’s decision under an “arbitrary and capricious” lens.
See Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008) (holding that a
potential conflict of interest “must be weighed as a factor in determining whether
there is an abuse of discretion.”); Manny, 388 F.3d at 243 (“holding that the
“arbitrary and capricious” standard is a range, not a point, and that judicial review
will be “more penetrating the greater is the suspicion of partiality.”).
III.
Count I
In Count I of his First Amended Complaint, Plaintiff alleges that the plain
meaning of the Plan mandates that his Disability Benefits should not have been
suspended until after he earned $14,000 in a given calendar year.
Plaintiff
maintains that the plain meaning of § 3.10 is that a Participant may remain “totally
and permanently disabled” if he earns up to $14,000 in a calendar year, so long as
he is engaged in non-Laborer or other non-Building Trades Crafts employment,
even if his employment is full-time. Accordingly, Plaintiff argues that Defendant
12
controverted the plain meaning of the Plan when it found him to no longer be totally
and permanently disabled based upon his full-time work in 2005, wherein he earned
less than $14,000. Plaintiff also argues that in every calendar year, he should be
allowed to earn up to $14,000, and that his disability benefits payments should only
be suspended for each year after he has surpassed that mark.
Section 3.10 reads as follows:
A Total and Permanent Disability shall mean that the Employee is
totally and permanently unable as a result of bodily injury or disease to
engage in any further employment or gainful pursuit as a Laborer or other
Building Trades Crafts employment in the construction industry for
renumeration or profit, regardless of the amount, or unable to engage in
further employment or gainful pursuit of Non-Laborer or other nonBuilding Trades Crafts employment for which the employment is
considered full-time and a primary source of income. For such nonLaborer or other non-Building Trades Crafts employment, provided a
physician, selected by the Trustees, considers the disability to be total and
permanent, the Participant may earn up to $14,000 per calendar year in
non-Laborer or other non-Building Trades Crafts employment and be
considered totally and permanently disabled for purposes of Section 3.10.
(Doc. 42 at 6-7). The second sentence of this provision specifically states “For such
Non-Laborer employment” directly after referring to Non-Laborer employment that
is full-time and a primary source of income. Plaintiff argues that this language
unambiguously indicates that the “$14,000 provision” applies to full-time NonLaborer employment. Defendant counters that the “for such” language only refers
to the type of work at issue, i.e. Non-Laborer employment, as opposed to the more
specific “full-time Non-Laborer” employment. (Doc. 45 at 14). While the Court
would be inclined to interpret the provision in the same manner as Plaintiff,
because of the deferential standard of review, this inclination is irrelevant. All that
13
matters is that the language is susceptible to more than one reasonable
interpretation, and Defendant’s interpretation is not unreasonable. See Davis v.
Unum Life Ins. Co. of Am., 444 F.3d 569, 575 (7th Cir. 2006).
The Seventh Circuit has held that under the arbitrary and capricious
standard of review, a plan’s decision should be upheld “as long as (1) it is possible to
offer a reasoned explanation, based on the evidence, for a particular outcome, (2)
the decision is based on a reasonable explanation of relevant plan documents, or (3)
the administrator has based its decision on a consideration of the relevant factors
that encompass the important aspects of the problem.” Sisto v. Ameritech Sickness
and Accident Disability Benefit Plan, 429 F.3d 698, 700 (7th Cir. 2006) (quoting
Houston v. Provident Life & Accident Ins. Co., 390 F.3d 990, 995 (7th Cir. 2004)).
Here, Defendant has proffered a reasonable explanation for its interpretation that
once a participant is engaged in full-time employment, regardless of whether or not
he reaches the $14,000 threshold, he is no longer considered “totally and
permanently disabled” for that year, or for future years. Defendant’s rationale is
that a participant is only “permanently and totally disabled” if he is incapable of
full-time employment due to his disability. Once a participant has shown that he is
capable of such employment and is no longer suffering from a disability, he can no
longer be considered “totally and permanently disabled,” even if he subsequently
terminates his other employment.13
Such reading is also consistent with § 3.12 of
Moreover, Defendant indicates that it has always interpreted § 3.10 to apply to
part-time employment, such that it cannot be said that it began to interpret it in
this way out of the potential desire to “save money,” as alleged by Plaintiff in his
conflict of interest argument. (See Doc. 42 at 16; 42-2 at 6).
13
14
the First Restated Plan, which provides that if a participant is no longer entitled to
disability benefits, he may apply for an Early Retirement Pension. Accordingly, in
deference to Defendant’s interpretation of its own Plan, the Court finds that it was
justified in terminating Plaintiff’s disability benefits beginning in July 2005, when
Plaintiff began to work full-time.
Therefore, Plaintiff’s Motion for Summary
Judgment as to Count I is DENIED, and Defendant’s Motion for Summary
Judgment as to Count I is GRANTED.
IV.
Count II
Section 1102(a)(1)(D) of Title 29 of the United States Code provides that “a
fiduciary shall discharge his duties with respect to a plan solely in the interest of
the participants and beneficiaries and . . . (D) in accordance with the documents
governing the plan.” In Count II of his First Amended Complaint, Plaintiff alleges
that Defendant “failed to follow Plan language in 1999 by incorrectly notifying the
Plaintiff of ‘the Plan Rules Governing Suspension.’” (Doc. 19 at 16).14 Relying upon
ERISA’s § 1104(a)(1)(D) “plan document rule,” Plaintiff alleges that at the time
Plaintiff was awarded Disability Pension benefits in August of 1999, the Plan had a
provision entitled “Notices” under the Section title “Suspension of Benefits,” found
in § 6.7(e)(1) of Amendment No. 7 of the First Restated Plan (effective October 1,
1998) (“§ 6.7(e)(1)”), which provided as follows: “Upon commencement of pension
benefit payments, the Trustees shall notify Pensioner of the Plan rules governing
suspension of pension benefits, including identity of the industries and area covered
As a remedy, Plaintiff claims, “that failure voids [Defendant’s] suspension and the
full amount of the claimed overpayment of $48,654.89.”
14
15
by the Plan.”
(Doc. 19 ¶ 39; 45-5 at 3).
It is Plaintiff’s position that because
Defendant failed to notify Plaintiff of the terms governing a finding of “Total and
Permanent Disability” found in § 3.10 of the Plan, including its “$14,000 provision,”
it breached its fiduciary duty to abide by the plan documents and give Plaintiff
notice of the rules governing the potential suspension of his benefits. (Doc. 19 ¶ 43;
42 at 4-5).
Plaintiff also claims that by failing to provide the proper notice to
Plaintiff regarding his continued entitlement to Disability Pension benefits,
Defendant breached its fiduciary duties of “care, skill, prudence, and diligence” as
established by 29 U.S.C. § 1104(a)(1)(B). (Doc. 19 ¶ 46; 46 at 21).15
A. Plan Documents Rule
Defendant does not deny that it failed to give Plaintiff documents containing
the “$14,000 provision” in August of 1999 when it found that he was entitled to
receive Disability Pension benefits. (Doc. 45 at 3). However, Defendant argues that
it did not violate the “plan documents rule” thereby because, according to
Defendant, the notice requirement in § 6.7(e)(1) dealt only with “disqualifying
employment” suspensions of regular pension benefits, and not disability benefits
such as those awarded to Plaintiff. (Doc. 45 at 17).
Defendant points to the context of §6.7(e)(1) to support its position that the
notice requirement therein had nothing to do with disability benefits. (Doc. 45 at
18-19). Section 6.7 of Amendment No. 7 begins with: “(a) An employee shall have
Plaintiff also argues that the Summary Plan Description provided by Defendant
was inadequate and therefore failed to comply with 29 U.S.C. § 1022. (Doc. 41 at
28; 46 at 21). However, a claim for relief pursuant to § 1022 was not raised in
Plaintiff’s First Amended Complaint, and therefore is not properly before the Court
at this juncture. See Shanahan v. City of Chicago, 82 F.3d 776, 781 (7th Cir. 1996).
15
16
his pension suspended for any period of Disqualifying Employment as defined
below.”
(Doc. 46-2 at 12).16
The Section goes on to define “Disqualifying
Employment” for an employee who, before the age of 53, retired after October 1,
1998 (such as Plaintiff) as: “(i) Employment with an Employer in any capacity in the
construction industry (either as a union or non-union construction worker), or (ii)
Employment which results in any type of compensation for services rendered, as
defined by the Internal Revenue Service, which is subject to Social Security taxes
and/or self-employment taxes, but only with respect to benefits accrued after
September 30, 1998.” (Doc. 46-2 at 12-13 (emphasis added)). Defendant contrasts
this provision with § 3.10, governing Total and Permanent Disability Benefits,
which provides, in part: “For such non-Laborer or other non-Building Trades Crafts
employment, provided a physician, selected by the Trustees, considers the disability
to be total and permanent, Participant may earn up to $14,000 per calendar year in
non-Laborer or non-Building Trades Craft employment and be considered totally
and permanently disabled for purposes of [this section].”
(Doc. 42 at 6-7).
Accordingly, it appears that a Participant earning disability benefits under the Plan
may earn up to $14,000 in certain areas of work and still be qualified for his
The Court notes Plaintiff’s argument that the definition of “Disqualifying
Employment” set out in subsections (a), (b), and (c) of §6.7 was not meant to apply
in the context of subsection (e) because the term is capitalized in the former and not
in the latter. The Court finds this argument unpersuasive. Not only do the
Defendant’ Trustees, who have discretion to interpret the terms of their own Plan,
believe that the distinction has no relevance, see Hess v. Reg-Ellen Machine Tool
Corp., 423 F.3d 653, 662 (7th Cir. 2005), but other Plan sections, which specifically
reference the defined term “Disqualifying Employment” also fail to capitalize it as
such. (See § 6.6 of the First Restated Plan (“To be considered retired, a Participant
must . . . not be engaged in disqualifying employment as defined in Section 6.7(a)
and (b).” (emphasis added)). (Doc. 42 Exh. B Part 1 at 99).
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17
benefits, while § 6.7 states that any income whatsoever will result in a suspension
of pension payments.17 Therefore, if § 6.7 were to be read as applicable to disability
benefits, § 3.10 would be rendered meaningless, a result that is to be avoided in
contract interpretation. See Dribeck Importers, Inc. v. G. Heileman Brewing Co.,
883 F.3d 569, 573 (7th Cir. 1989). Thus, according to Defendant, § 6.7 as a whole,
and §6.7(e)(1) specifically, have no relevance to disability benefits and therefore do
not require the type of notice set out therein.
The Court agrees with Defendant’s interpretation, especially in light of the
deference it must afford to Defendant’s interpretation of its own Plan. See Hess v.
Reg-Ellen Machine Tool Corp., 423 F.3d 653, 662 (7th Cir. 2005).
It is not
unreasonable to read §6.7(e)(1) as applying solely to regular pension benefits, as
opposed to the disability pension benefits that Plaintiff was earning, such that the
notice requirement encapsulated therein does not apply to Plaintiff. The Court
finds relevant not only the provisions pointed out by Defendant regarding the
definition of “Disqualifying Employment,” but also § 6.7(g) which deals with the
“Resumption of Benefits.” Pursuant to § 6.7(g), a Plan Participant could resume
receiving benefits, following suspension thereof, so long as the Participant notified
The Court finds unpersuasive Plaintiff’s argument that his benefits were
“suspended” pursuant to § 7.6(d). While the term “suspend” may have been used in
Defendant’s Termination Letter to Plaintiff, this does not necessarily implicate the
invocation of this subsection. Moreover, the definition of “Suspension of benefits” in
subsection (d) is “non-entitlement to benefits for the month.” (Doc. 46-2 at 13
(emphasis added)). As will be discussed below, disability benefits based upon “Total
and Permanent Disability” could not be stopped on a month-to-month basis based
upon work in “disqualifying employment.” Rather, if a Participant was no longer
deemed “totally and permanently disabled” pursuant to § 3.10 – because he was
capable of performing full-time work, he could apply for an Early Retirement
Pension. (See § 3.12 First Restated Plan, Doc. 42 Exh. B. Part I at 65).
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18
the Plan that his “Disqualifying Employment” had terminated. (Doc. 46-2 at 14-15).
This is contrasted with § 3.12 of the First Restated Plan, which provides that after a
Participant is found to be no longer totally and permanently disabled he may apply
for an Early Retirement Pension, which presumably would then be governed by the
rules of § 6.7. (Doc. 42 B-5 Part I at 65). Such a distinction makes sense in that
once a Participant is no longer “totally and permanently disabled” he may not
resume such status by simply stopping the employment in which he has engaged.
The applicability of this distinction to §6.7(e) is especially relevant in that § 6.7(e)
itself refers to a situation in which “benefits have been suspended and payment
resumed.”
(Doc. 46-2 at 13).
Accordingly, the Court finds that § 6.7(e) is not
applicable to disability benefits based upon a determination of “Total and
Permanent Disability” and therefore Defendant did not violate the “plan documents
rule” by failing to provide Plaintiff notice of the “$14,000 provision” at the time it
commenced his benefits.
B. Fiduciary Duties of Care, Skill, Prudence, and Diligence
Plaintiff also alleges that Defendant breached its fiduciary duties of care,
skill, prudence, and diligence by providing him with incorrect or insufficient notice
of the terms of his disability benefits. (Doc. 19 ¶ 46). On August 16, 1999, Plaintiff
signed a “Retirement Declaration” which is the typical “Disqualifying Employment
post-October 1998 Notice for a Service-Only or Regular Pension.” (Doc. 19 ¶ 42; 42
at 21).
This Retirement Declaration did not provide the Plan rules governing
Plaintiff’s Disability Pension, nor any information unique to the Disability Pension,
19
including the “$14,000 provision.” (Doc. 39 Exh. 16). Plaintiff therefore claims that
this notice was “incorrect.”18 In addition, Plaintiff alleges that in January 2004,
Defendant discovered that Plaintiff had earned $7,144.00 in 2001 and $4,037.50 in
2002, however it did not at that time suspend his disability benefits. (Doc. 19 ¶ 44).
Plaintiff therefore claims that Defendant’s “failure to give Plaintiff correct notice . . .
in 1999 along with the lack of suspension for those 2001 and 2002 earnings, misled
the Plaintiff to justifiably rely upon the fact that his performance of ‘non-Laborer or
other non-Building Trades Crafts employment’ was permitted without jeopardizing
any portion of his Disability Pension.” (Doc. 46 at 24).
The Seventh Circuit has held that a breach of fiduciary duty exists if
fiduciaries “mislead plan participants or misrepresent the terms or administration
of a plan.” Vallone v. CNA Fin. Corp., 375 F.3d 623, 640 (7th Cir. 2004) (quoting
Anweiler v. American Elec. Power Serv. Corp., 3 F.3d 986, 991 (7th Cir. 1993)).
However, “while there is a duty to provide accurate information under ERISA,
negligence in fulfilling that duty is not actionable.” Id. at 642 (holding that an
employer must have set out to disadvantage or deceive its employees in order for a
breach of fiduciary duty to be made out). Accordingly, while it may not have been
wise for Defendant to provide Plaintiff with a “Retirement Declaration” containing a
notice regarding disqualifying employment which, according to Defendant, was not
Defendant claims that the Retirement Declaration was applicable to Plaintiff
insofar as it required Plaintiff to sign the following declaration: “I have reviewed
and understand the Central Laborers’ Pension Fund’s Plan Rules and Regulations.”
(Doc. 42 at 28).
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completely applicable to him, there is no evidence that Defendant did so out of a
desire to deceive Plaintiff.
Moreover, there is no evidence of an intent to deceive by Defendant’s failure
to suspend Plaintiff’s benefits due to his 2001 and 2002 earnings. When Defendant
discovered these earnings in 2004, it asked Plaintiff to provide it with a written
explanation regarding the type of work he had been performing. (Doc. 1-2 at 9). In
response, Plaintiff stated that he worked “8-10 hours per week” repairing nail guns
and performing light office duties.
(Doc. 1-2 at 12).
Considering Plaintiff was
neither engaged in full-time employment nor as a “Laborer or other Building Trades
Crafts employment in the construction industry,” Defendant had no reason to
terminate his disability benefits at that time.19 Accordingly, Plaintiff has not shown
that Defendant set out to disadvantage or deceive Plaintiff regarding the terms of
his disability benefits, and any negligence on the part of the Defendant in this
regard is not sufficient to hold it liable for breach of fiduciary duty. Therefore,
Plaintiff’s claim that Defendant breached its fiduciary duties pursuant to ERISA by
not providing him proper notice of the terms of his disability benefits fails as a
matter of law, and Plaintiff’s Motion for Summary Judgment as to Count II is
DENIED and Defendant’s Motion for Summary Judgment as to Count II is
GRANTED.
The Court highlights the contrast Plaintiff’s reported 8-10 hours per week in 2001
and 2002 with the 40 hours a week he worked in 2005 and 2006.
19
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V.
Count III
In Count III of his Amended Complaint, Plaintiff seeks “ERISA Injunctive
Relief” to prevent Defendant from applying specific Plan provisions that work as a
forfeiture to Plan benefits and/or violate the “Anti-cutback Rule.” (Doc. 19 at 20).
Specifically, Plaintiff maintains that § 7.1 and § 3.3(d) of Defendant’s 1999 Restated
Plan work as a forfeiture; and that §§ 3.3(b), 3.7, and 4.3(b) violate the anti-cutback
rule of ERISA and also work or facilitate a forfeiture. (Doc. 19 at 24). Plaintiff has
not moved for summary judgment as to Count III. According to Plaintiff, “Count
[III] seeks injunctive relief under ERISA in the event specific Plan provisions
(unrelated to Counts [I and II]) are found to work a forfeiture of Plan benefits and/or
violate the anti-cutback rule under ERISA.” (Doc. 41 at 1-2) (emphasis added).
Defendant, on the other hand, moves for summary judgment as to Count III, as well
as Counts I and II; however it never specifically addresses Plaintiff’s claims. (See
Doc. 42).
While Defendant addresses the anti-cutback rule in arguing that it does not
apply to disability benefits such as those it alleges Plaintiff had been receiving,
(Doc. 42 at 24-26), its argument misses the fact that several of the provisions
Plaintiff claims violate the anti-cutback and forfeiture rules are not in any way
related to his own prior benefits, and specifically refer to regular pension benefits.
(See, e.g., § 3.7 (“The pension amount to which a Participant is entitled shall be
determined under the terms of the Plan as in effect at the time Participant
separates from Covered Employment;” § 7.1 (“A pension must be applied for in
22
writing with the Trustees in advance of the date pension payments shall commence.
However, in the case of a Disability Pension, pension payments shall commence
retroactively to the disability commencement date.
Otherwise, no retroactive
payments for months prior to submission of an application shall be made.”
(emphasis added); Plaintiff alleges in his Complaint that the non-retroactivity of
pension payments, other than disability pension payments, works as a forfeiture
(Doc. 19 ¶¶ 51-53)). Accordingly, the Court finds that the parties have insufficiently
briefed the matter such that the Court is not competent to rule upon it at this time.
However, because the question appears to be one that should be decided as a matter
of law, the Court believes that Oral Argument is appropriate.
Therefore,
Defendant’s Motion for Summary Judgment as to Count III is DEFERRED and
Oral Argument on the matter is set for August 22, 2011 at 10:00 a.m. in Courtroom
D of the Peoria Courthouse.
CONCLUSION
For the foregoing reasons, Plaintiff’s Motion for Summary Judgment (Doc.
41) is DENIED, and Defendant’s Motion for Summary Judgment (Doc. 42) is
GRANTED in part and DEFERRED in part.
Defendant’s Motion for Summary
Judgment is GRANTED as to Counts I and II. This case is set for Oral Argument
on Monday, August 22, 2011 at 10:00 a.m. in Courtroom D of the Peoria Courthouse
for arguments pertaining to Count III of Plaintiff’s Amended Complaint. IT IS SO
ORDERED.
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Entered this 3rd day of August, 2011.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge
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