LANGMAN v. LAUB

Full title: SOLOMON LANGMAN, Plaintiff, v. EMMANUEL LAUB, JAMES JOHNSON, MEL WEITZ…

Court: United States District Court, S.D. New York

Date published: Mar 28, 2002

97 Civ. 6063 (MGC) (S.D.N.Y. Mar. 28, 2002)

Opinion

97 Civ. 6063 (MGC).

March 28, 2002

Scott M. Reimer, New York, New York, Attorney[s] for Plaintiff[s].

William K. Wolf, Esq., FRIEDMAN WOLF GRISI, New York, New York, Attorney[s] for Defendant[s].

OPINION

MIRIAM GOLDMAN CEDARBAUM, United States District Judge

Plaintiff Solomon Langman sues the Trustees of the Local 338 Retirement Fund (the "Fund") and the Fund on the ground that the Trustees' calculation of his retirement benefits violates the Employee Retirement Income Security Act ("ERISA"). Specifically, plaintiff complains: 1) that the Trustees decreased his accrued benefit in violation of section 204(g) of ERISA, 29 U.S.C. § 1054 (g), and section 411(d)(6) of the Internal Revenue Code; and 2) that the Trustees' calculation was an arbitrary and capricious interpretation of the Local 338 Retirement Plan. He also seeks attorney's fees pursuant to ERISA section 502(g) (1), 29 U.S.C. § 1132 (g)(1).

Both sides have moved for summary judgment on undisputed facts. In his motion for summary judgment, plaintiff asserts, for the first time, the following additional claims: 1) that the Trustees failed to give adequate notice of the Plan's provisions in the Summary Plan Description; and 2) that the Trustees' calculation fails to meet any of the three accrual schedules as required by 29 U.S.C. § 1054 (b)(1). For the reasons that follow, plaintiff's motion for summary judgment is denied with respect to all claims. Defendants' motion for summary judgment is granted with respect to all claims except the claim for attorneys' fees.

BACKGROUND

Both sides have agreed on all material facts. The Fund is a multi-employer pension plan as defined by ERISA. 29 U.S.C. § 1002 (37) (A). It provides pension benefits to employees and former employees of employers with collective bargaining agreements with Retail, Wholesale Chain Food Store Employees Union Local 338 ("Local 338"). The Fund is operated pursuant to the Agreement and Declaration of Trust (the "Trust Agreement"), and the Local 338 Retirement Plan (the "Plan"), as amended and restated in 1994 ("1994 Plan"). The main provisions of the 1994 Plan are summarized in the Summary Plan Description of the Local 338 Retirement Plan ("SPD"), as amended in 1996. The Plan had been amended and restated previously in 1981 ("1981 Plan") and in 1984 ("1984 Plan")

On December 15, 1953, Langman became a member of Local 338 and a participant in the Fund. From 1953 through August 8, 1973, he worked at Waldbaum's, Inc. ("Waldbaum's"), in a position covered by the Plan. In 1973, he was transferred to a position at Waldbaum's which was not covered by the Plan. He worked in that position from 1973 through June of 1979. In June of 1979, Langman left Waldbaum's. In October of 1979, he began work for another employer, in a job covered by the Plan. On May 1, 1996, he retired. At the time of his retirement, he had worked in employment covered by the Plan for a total of 32.666 years.

In July of 1996, Langman submitted an application to the Fund for an unreduced early retirement pension under the 1994 Plan, which provided for:

unreduced early retirement on the first day of any month coincident with or next following the date on which he has both attained age 60 and completed at least 30 years of Benefit Service provided he has worked 1,5000 or more hours . . . in each of the 5 full Plan Years immediately preceding his retirement.

1994 Plan, Art. III (2)(a). Under the Plan, an applicant receives upon retirement a monthly benefit equal to the number of years of the applicant's "benefit service," multiplied by the "benefit rate" in the last plan year in which the applicant worked. The benefit rate for 1974 was $5.00 per month for each year of service, the monthly benefit rate for 1984 was $20.00 per month for each year of service, and the monthly benefit rate for 1996 was $50.00 per month for each year of service. For example, if a retiree under the Plan had worked ten uninterrupted years, from 1986 to 1996, he would have received a monthly benefit of ten (the number of years worked) multiplied by $50.00 per month for each year of service(the benefit rate in 1996), or $500.00 per month.

The Trustees initially determined plaintiff's monthly retirement benefit to be $733.33. In calculating Langman's retirement benefit, the Trustees determined that he had incurred a separation from employment" from 1974 to 1979 within the meaning of Article V(7) of the 1994 Plan. That provision states:

An Employee shall be deemed to have separated from employment on the last day in which he receives an Hour of Service which is followed by a Plan Year in which he receives fewer than 500 Hours of Service. If such Employee subsequently returns to employment his pension amount will be determined on a pro rata basis. The amount of pension based on Benefit Service earned before his separation from employment shall be determined under the terms of the Plan on his first separation from employment. If after his return as an employee he earns three or more years of Vesting Service, the amount of pension based on Benefit Service earned after his separation from employment shall be determined under the terms of the Plan on his subsequent separation from employment.

1994 Plan, Art. V(7) (the "separation provision"). A similar provision was included, for the first time, in the 1984 Plan. Prior to 1984, the Plan did not provide for the freezing of an applicant's benefit rate for service occurring prior to a separation from employment.

The Trustees multiplied the number of plaintiff's pre-separation years of service, twenty, by the 1973 benefit rate of $5.00 per month for each year of service, which resulted in a monthly benefit of $100.00 attributable to his 1953-1973 employment. They also multiplied the number of plaintiff's post-separation years of service, twelve and two-thirds, by the 1996 benefit rate of $50.00 per month for each year of service, which resulted in a $633.33 monthly benefit for that period. The total monthly retirement benefit was the sum, $733.33.

After plaintiff appealed the initial award, the Trustees increased his total monthly retirement benefit to $1033.33. They reached this number by increasing the benefit rate applicable to his pre-separation service to the 1984 benefit rate of $20.00 per month for each year of service. The twenty dollars per month rate multiplied by the twenty years of pre-separation service resulted in a $400.00 monthly benefit for his service from 1953-1973.

DISCUSSION

I. Impermissible decrease under section 204(g)(1) of ERISA

Plaintiff first argues that defendants' denial of his request for increased benefits violated section 204(g)(1) of ERISA, 29 U.S.C. § 1054 (g)(1). That section states that "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan, other than an amendment described in section 1082(c)(8) or 1441 of this title." 29 U.S.C. § 1054 (g)(1).

Plaintiff first argues that the Trustees' application of the separation provision to his pre-separation years of service, by itself, violated section 1054(g)(1). However, the fact that the Trustees applied Article IV(6) of the 1984 Plan to a pre-1984 separation from employment is irrelevant if the amendment did not decrease Langman's monthly benefit as the term is defined by the Plan. For example, if the Trustees had frozen the benefit rate for each of plaintiff's pre-separation years of service at fifty dollars per month, the current level, such a freeze would not have violated section 1054(g)(1). Plaintiff cites Rybarczyk v. TRW, Inc., 235 F.3d 975 (6th Cir. 2000), but the language plaintiff cites simply states that a plan amendment may not reduce the accrued benefit for pre-amendment service. Rybarczyk, 235 F.3d at 983.

Thus, the issue is whether plaintiff's monthly benefit was in fact reduced. The Trustees applied the 1984 benefit rate of twenty dollars per month to plaintiff's pre-separation years of service. As of 1984, the Trustees would have applied the 1984 benefit rate to plaintiff's pre-1984 years of service, with or without the separation provision. Therefore, the Trustees' application of the separation provision did not retroactively reduce plaintiff's monthly benefits because they applied the same rate to plaintiff's pre-separation years of service that they would have applied without the amendment.

Plaintiff also argues that, at the time of the 1984 amendment, the Plan required the Trustees to apply to his pre-separation years of service the benefit rate of his last year of employment; that he reasonably expected to work beyond 1984; and that he reasonably expected that the benefit rate would increase after 1984. However, failure to provide a benefit that plaintiff "reasonably expected" to receive in the future does not constitute an impermissible "decrease" in accrued benefits in violation of 29 U.S.C. § 1054 (g)(1).

II. Review of the Trustees' Interpretation of the Plan

Plaintiff also argues that the Trustees interpreted the Plan in an arbitrary and capricious manner because even as written, the terms of the separation provision did not apply to plaintiff. A court may not review an ERISA plan administrator's interpretation of the plan de novo if the plan specifically reserves to the administrator discretionary authority to interpret the terms of the plan. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Under such circumstances, the administrator's interpretation is reviewed under the more deferential "arbitrary and capricious" standard. Pulvers v First Unum Life Ins. Co., 210 F.3d 89, 92 (2d Cir. 2000). In this case, the Trust Agreement gives the Trustees "full, final and conclusive authority to determine questions of . . . amounts of benefits . . . and all other related matters." Therefore, the Trustees' interpretation of the Plan may be overturned only if it is arbitrary and capricious. Under this standard, "[w]here both the trustees of a pension fund and a rejected applicant offer rational, though conflicting, interpretations of plan provisions, the trustees' interpretation must be allowed to control." O'Shea v. First Manhattan Co. Thrift Plan Trust, 55 F.3d 109, 112 (2d Cir. 1995) (quoting Miles v. New York State Teamsters Conf. Pension Ret. Fund Employee Pension Benefit Plan, 698 F.2d 593, 601 (2d Cir. 1983)).

Plaintiff argues that the Trustees' denial of his claim for increased benefits was arbitrary and capricious because the Trustees' interpretation of the separation provision of the 1994 Plan contradicts Article II (3) of the 1994 Plan. Article II (3) states in part:

A Participant's hours of work for the same Employer immediately . . . following transfer from employment under a Collective Bargaining Agreement shall be counted in determining his Vesting Service and in determining whether or not he had incurred a Break in Service.

1994 Plan, Art. II (3) (as amended December 17, 1996) (hereinafter referred to as the "transfer" provision). Because plaintiff was employed at a covered unit of Waldbaum's from 1953-1973, then immediately transferred to a non-covered unit of the same employer, he did not incur a "Break in Service" as used in the transfer provision. Plaintiff argues that a "Break in Service" as used in the transfer provision is the same as a "separation from employment" for purposes of the separation provision, and that he therefore did not incur a "separation from employment" as used in the separation provision. Because he did not incur a separation from employment, plaintiff argues, the Trustees erred in applying the separation provision to plaintiff's pre-1974 years of service.

Defendants respond that the transfer provision was meant to apply only to an employee's initial eligibility for benefits, and not to the subsequent computation of benefits. In support of their argument, defendants also cite Department of Labor Regulation Section 530.210(c) (1), which provides in part:

[I]n determining an employee's service for eligibility to participate and vesting purposes, all covered service with an employer or employers maintaining the plan and all contiguous noncovered service with an employer or employers maintaining the plan shall be taken into account.

29 C.F.R. § 2530.210 (c)(1). Defendants contend that Article II (3) was enacted purely to comply with the requirements of that regulation. Therefore, defendants argue, the Trustees reasonably interpreted the transfer provision as applying only to potential forfeitures of Vesting Service and Benefit Service.

The language of the Plan indicates that the transfer provision does not apply to calculation of benefits under the separation provision. The transfer provision determines whether or not an applicant has incurred a "Break in Service," whereas the separation provision refers to employees who have "separated from employment." The two terms are also defined slightly differently. A "Break in Service" is defined as "a Plan Year in which an Employee does not earn more than 500 Hours of Service." An employee is deemed to have separated from employment in a "Plan Year in which he receives fewer than 500 Hours of Service." Additionally, the fact that the term "Break in Service" is capitalized and defined in Article I suggests that the term has independent meaning from the term "separated from employment."

An analysis of the transfer provision in the context of the entire Plan also supports defendants' position. Article II, which contains the transfer provision, is entitled "Benefit Service and Vesting Service." The separation provision, on the other hand, is part of Article V, entitled "Payment of Pension." As their titles suggest, Article II sets out the manner in which a Plan participant gains years of service, and Article V deals with the calculation of pension payments upon retirement. The two articles are not entirely unrelated; as noted previously, an applicant's Benefit Service, defined in Article II, determines the amount of the applicant's monthly benefit upon retirement, as calculated in Article V. Nevertheless, an analysis of the language of the two provisions, as well as the entire Plan, shows that defendants' interpretation was not arbitrary and capricious.

Plaintiff also contends that defendants' interpretation of Article II (3) should not be accepted because the Trustees did not offer that interpretation in their initial denial letters to plaintiff. Plaintiff asserts that this omission violated 29 U.S.C. § 1133, which requires that the Trustees give notice to plaintiff of the "specific reasons for the denial" of a claim for benefits. However, section 1133 only required the Trustees to give the reason for the denial. It did not also require the Trustees to foresee and counter, in their initial denial letter, every argument plaintiff might make in a subsequent legal proceeding.See, e.g., Gallo v. Amoco Corp., 120 F.3d 918, 922 (7th Cir. 1996). The Trustees explained in their denial letters that the Plan and its separation provision required the Trustees to calculate the benefit for plaintiff's pre-separation service at the pre-separation rate. This was sufficient to satisfy the notice requirements of section 1133.

Plaintiff also cites Sheldon v. Barre Belt Granite Employer Union Pension Fund, 25 F.3d 74 (2d Cir. 1994) and Juliano v. HMO of New Jersey, Inc., 221 F.3d 279 (2d Cir. 2000). In Sheldon, the fund denied the plaintiff's request for disability pension benefits on the ground that the plaintiff had not survived for six months after the date of his disability. However, the magistrate judge's report, which was adopted by the district court, recommended denial of plaintiff's claim because the employee had failed to submit an application for benefits while he was alive. See Sheldon, 25 F.3d at 76-78. The Court of Appeals reversed the district court's decision because the magistrate judge's understanding of the fund's reason for denying benefits was "contradicted by all of the Fund's prior representations as to its reasons." Id. at 79. Here, by contrast, the Trustees consistently stated in the denial letters that the separation provision of the Plan requires the monthly benefit for plaintiff's pre-separation service to be calculated at the pre-separation rate. Juliano is similarly inapplicable to this case.

III. The Summary Plan Description

In his motion for summary judgment, plaintiff for the first time puts forward two additional contentions. First, plaintiff argues that the Trustees violated ERISA by failing to describe the effect of the separation provision in the SPD. ERISA requires that an employer provide to its employees a summary of the benefits plan, containing among other things a description of the "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits. . . ." 29 U.S.C. § 1022 (b). Plaintiff argues that the SPD failed to meet ERISA's disclosure requirements because the SPD did not inform him of the effect of the separation provision on his benefits. It is undisputed that the 1994 SPD, the only version provided by the parties, does not refer to the separation provision or its potential effect on plaintiff's benefits. Plaintiff argues that because the SPD failed to notify him of the effect of the separation provision, the SPD's terms should control over any "inconsistent" provisions in the Plan.

However, plaintiff has not shown that defendants' omission of the separation provision from the SPD caused him any monetary loss. A plaintiff may bring an action against a plan administrator "for any damages that result from the failure to disclose." Howard v. Gleason Corp., 901 F.2d 1154, 1159 (2d Cir. 1990). In Estate of Becker v. Eastman Kodak Co., 120 F.3d 5 (2d Cir. 1997), the defendant company's plan allowed employees to receive a single lump-sum payment at retirement instead of a monthly benefit, an option described in the SPD as well. However, the SPD did not explain that the lump-sum option was not available to employees who died before the effective date of retirement. The Second Circuit ruled that this omission was a violation of ERISA, but did not "grant entry of judgment for plaintiffs because there remains the question of causation." Eastman, 120 F.3d at 10. Rather, it remanded the case to the district court for a determination of whether "the SPD caused Becker to delay electing her retirement." Id. Similarly, in Vellieux v. Atochem North America, Inc., 929 F.2d 72 (2d Cir. 1991), the Second Circuit determined that the plaintiffs "demonstrated no cognizable prejudice from [defendant's] failure to fully comply with ERISA's disclosure requirements," and were therefore not entitled to damages.Vellieux, 929 F.2d at 76.

The Trustees amended the Plan in 1984 to include the separation provision, five years after plaintiff had returned to covered employment. Therefore, plaintiff would have been in the same position even if the Trustees had included a description of the separation provision in the 1984 SPD. The Trustees applied the separation provision to plaintiff, and this decision was not arbitrary or capricious.

IV. Enumeration Requirements Under 29 U.S.C. § 1054 (b)(1)

Finally, plaintiff also argues that the Plan fails to satisfy any of the three accrual schedules listed in 29 U.S.C. § 1054 (b)(1). "Defined benefit" plans, including the Plan, must satisfy one of the following tests: the "three percent" test, 29 U.S.C. § 1054 (b)(1) (A), the "133 1/3 percent" test, 29 U.S.C. § 1054 (b)(1)(B), or the "fractional" test, 29 U.S.C. § 1054 (b)(1)(C).

A defined benefit plan complies with the 133 1/3 percent test if:

the accrued benefit payable at the normal retirement age is equal to the normal retirement benefit and the annual rate at which any individual who is or could be a participant can accrue the retirement benefits payable at normal retirement age under the plan for any later plan year is not more than 133 1/3 percent of the annual rate at which he can accrue benefits for any plan year beginning on or after such particular plan year and before such later plan year.

29 U.S.C. § 1054 (b)(1)(B). In other words, a plan complies with the 133 1/3 percent test if a participant does not accrue monthly benefits in any plan year at a rate higher than 133 1/3 percent of the rate in any previous plan year. Under the Trustees' final calculation, plaintiff accrued monthly benefits at the rate of $50.00 for years of service from 1980-1996, and at the monthly rate of $20.00 for years of service from 1953-1973. Thus, plaintiff accrued monthly benefits from 1980 to 1996 at a rate that was 250 percent of the rate at which he accrued benefits from 1953 to 1973. From this, plaintiff argues that the Trustees' determination fails the 133 1/3 percent test.

However, as defendants note, ERISA provides a different method for calculating the rate of accrual with respect to years before the effective date of ERISA. ERISA went into effect in 1974. Accordingly, all of plaintiff's service between 1953 and 1973 predated ERISA. The statute provides in pertinent part:

Subparagraphs (A), (B) and (C) [defining the requirements of the three tests] shall not apply with respect to years of participation before the first plan year to which this section applies but a defined benefit plan satisfies the requirements of this subparagraph with respect to such years of participation only if the accrued benefit of any participant with respect to such years of participation is not less than . . . one-half of the accrued benefit to which such participant would have been entitled if subparagraphs (A), (B), or (C) applied with respect to such years of participation.

29 U.S.C. § 1054 (b)(1)(D). In other words, the Trustee's interpretation satisfies the 133 1/3 percent test if the applicant accrued benefits for any pre-1974 plan year at one-half the rate that the test would otherwise allow.

Plaintiff accrued monthly benefits for each of his post-1974 years of service at the rate of $50.00. Normally, under the 133 1/3 percent test, plaintiff would have had to accrue monthly benefits for each of his pre-1974 years at a minimum benefit rate of $50.00 per month, divided by 133 1/3 percent, or $37.50. However, under the method of calculation for pre-ERISA years provided in section 1054(b)(1)(D), the 133 1/3 percent test is satisfied if plaintiff accrued monthly benefits for pre-1974 plan years at half that rate, or $17.75. Plaintiff accrued monthly benefits at the rate of $20.00 in each of his pre-1974 plan years. Therefore, the Trustees' final determination satisfies the 133 1/3 percent test.

Plaintiff argues that the section 1054(b)(1)(D) formula does not apply unless the Plan contains a provision explicitly electing the method of calculation set out in that section for pre-ERISA years. In support of his argument, plaintiff cites the following excerpt from the House Conference Report that accompanied H.R. 2, the House bill enacted as ERISA:

The plan may choose which of the 3 standards it wishes to apply for the past (subject to the antidiscrimination rules); however, the same standard must be applied to all the plan's participants.

H.R. Conf. Rep. No. 93-1280 (1974), reprinted in 1974 U.S.C.C.A.N. 5038, 5057. This language is not in the statute and does not require that the Plan contain a provision explicitly electing to apply the method of calculation found in section 1054(b)(1)(D).

V. Attorneys' Fees

Both sides have requested attorneys' fees pursuant to 29 U.S.C. § 1132 (g)(1). In Chambliss v. Masters, Mates Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987), the Second Circuit set out five factors to consider, including:

(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants.

Chambliss, 815 F.2d at 871. Despite defendants' arguments to the contrary, there is no evidence of culpability or bad faith on anyone's part. The parties have not presented any evidence on the issue of their relative ability to pay. Although plaintiff has not succeeded, his claims were not frivolous. Therefore, an award of fees would not and should not deter other potential plaintiffs from asserting equally non-frivolous claims. Accordingly, neither party is entitled to attorneys' fees.

CONCLUSION

For the foregoing reasons, defendants' motion for summary judgment is granted and plaintiff's motion for summary judgment is denied. The parties' requests with respect to attorneys' fees are denied.

SO ORDERED.