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CAWLEY v. NMU PENSION & WELFARE PLAN

September 5, 1978

John Frederick CAWLEY, Plaintiff,
v.
NMU PENSION AND WELFARE PLAN, Defendant



The opinion of the court was delivered by: SAND

Plaintiff, a disabled seaman, seeks a declaratory judgment that he was wrongfully denied a pension by defendant NMU Pension and Welfare Plan ("Plan"). Plaintiff seeks monetary relief for the amount due together with attorneys' fees, interest and costs. Defendant, on the other hand, argues that the Trustees acted within their authority, and pursuant to valid regulations, in denying plaintiff's application for pension benefits. Both sides have moved for summary judgment. For the reasons set out below, defendant's cross-motion for summary judgment is granted.

FACTS

 Plaintiff, John Cawley, was a member of the National Maritime Union ("NMU") from 1937 until 1957. In 1957, he joined the United Fruit Company as a licensed officer and continued to serve as a licensed officer until April, 1971. While serving as a licensed officer, he was a member of the Brotherhood of Marine Officers ("BMO"). From April, 1971 to April, 1972, plaintiff collected severance pay from United Fruit and then retired with a pension from that company. After leaving United Fruit, plaintiff never returned to active employment, having become disabled in July, 1971. *fn1" He applied for a NMU pension in July, 1974 when he reached retirement age of sixty-five.

 The Trustees of the Plan denied his application on the ground that his failure to work in covered employment since 1957 caused him to incur a break in service which cancelled his prior pension credits. *fn2" Under the Plan regulations, this break in service could have been avoided if plaintiff returned to work in covered employment for four quarters. Plaintiff never worked these four quarters, allegedly because of a disability.

 After having been denied a pension, plaintiff filed this action for declaratory relief. Federal jurisdiction is predicated on section 502(f) of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. section 1132(f). At plaintiff's request, the Trustees reconsidered his application after this action was filed; however, they again found him ineligible. Besides reiterating the four-quarter requirement, the Trustees found that plaintiff was ineligible under another regulation which required ten years of post-1951 contributory service before an employee would be credited with his pre-1951 service. *fn3"

 PLAN

 The Plan under which plaintiff applied for benefits was created in 1950 by an agreement between NMU and the employers of unlicensed seamen represented by the NMU. The Plan was financed solely by employer contributions; however, no contributions were required for pre-1951 service. At the time of its inception, a seaman's eligibility for an NMU pension depended on three major factors: (1) having reached the age of sixty-five; (2) having twenty years of pension credit; and (3) not having incurred a break in service which meant that, to avoid cancellation of prior pension credits, a seaman had to work at least two hundred days in every three year period.

 Under these eligibility requirements, plaintiff did not qualify for a pension when he left NMU in 1957. After 1959, however, these eligibility requirements were altered in several ways that potentially could have made plaintiff eligible for an NMU pension. In 1964, the Trustees amended the Plan to provide a "grace period" to the break in service rule if a seaman served as a licensed officer for four quarters. *fn4" Besides this "four quarter rule", the Trustees adopted a "ten year rule" in 1968, which limited a seaman's entitlement to service credit for periods of employment prior to the funding of the Plan in 1951. Before the amendment, pension credits were awarded for the years 1937 through 1950 on the basis of either employment as a seaman on ocean-going vessels of the American Merchant Marine or membership in the NMU. The ten year rule provided that awards for pre-1951 service could be made only if an employee earned at least ten years' service credit after January 1, 1951. *fn5"

 STANDARD OF REVIEW

 Plaintiff argues that the Trustees improperly denied his claim on the grounds that he failed to work the requisite four quarters after he left licensed employment and that he failed to meet the requirements of the ten year rule. According to plaintiff, the Trustees breached their fiduciary obligations in adopting these regulations. Specifically, plaintiff argues that the Board of Trustees failed "to administer the trust and manage the funds and assets of the trust for the exclusive benefit of its participants and their beneficiaries". Plaintiff's Brief, p. 8.

 Before examining the merits of plaintiff's claims, we note that under the terms of the Plan the Trustees had the authority to promulgate and establish rules and regulations for the administration and operation of the pension program. *fn6" Thus, this Court's review of the Trustee's actions is necessarily limited to whether the eligibility requirements, or the application of these requirements to the particular facts, are arbitrary or capricious. See, e.g., Riley v. MEBA Pension Trust, 570 F.2d 406, 412-13 (2d Cir. 1977); Rehmar v. Smith, 555 F.2d 1362, 1371-72 (9th Cir. 1977); Johnson v. Botica, 537 F.2d 930, 935 (7th Cir. 1976); Beam v. International Organization of Masters, Mates & Pilots, 511 F.2d 975, 979-80 (2d Cir. 1975). *fn7"

 Under this standard, we need not determine whether the Trustees drafted the best possible eligibility requirements. It is sufficient that the Trustees' requirements have a rational justification. Riley v. MEBA Pension Trust, supra; see also Roark v. Boyle, 141 U.S.App.D.C. 390, 392, 439 F.2d 497, 499 (1970) (in applying the arbitrary and capricious standard of review, courts should be careful "to avoid second guessing the discretionary judgments of the Trustees . . .").

 FOUR QUARTER REQUIREMENT

 Plaintiff challenges the denial of his pension on the basis of his failure to meet the four quarter requirement on several grounds. Initially, plaintiff argues that on its face the regulation is arbitrary and capricious. Further, plaintiff urges that even if the regulation is facially valid, it should not be applied to him because his intervening disability made it impossible for him to work the requisite quarters. Finally, plaintiff argues that because other ...


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