The opinion of the court was delivered by: WEINFELD
OPINION FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff, Abraham Harris, has been a member of Local 2 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry ("Local 2" or "Union") since 1941 and an active plumber by trade for twenty years, 1941-1949 and 1962-1972, with a fourteen-year "hiatus" in which he owned and managed a toy store. He commenced this action against the Joint Plumbing Industry Board ("Industry Board"), four of its officers, and his Union, seeking a declaration of entitlement to pension benefits under the 1952 Trust Agreement between the Union and the employers with which it has collective bargaining agreements. The Industry Board, composed of representatives of Local 2 and the employers, administers the Pension and Welfare Fund ("Fund") established pursuant to that agreement for the benefit of members of the Union. Harris was denied pension benefits in August 1972 on the basis of his failure to qualify under the eligibility rules of the Fund as amended in 1966 and 1971. He challenges the amended rules as arbitrary and unreasonable either for all purposes or as applied to him. Contending that the amendments were secretly adopted and that the employees, the intended beneficiaries of the Fund, were not informed of these changes, he further charges all defendants with fraud and deceit and Local 2 with a breach of its duty of fair representation. This Court has both federal question
and diversity jurisdiction
of the claims asserted.
In 1950, Local 2 and the Association of Contracting Plumbers of the City of New York entered into a collective bargaining agreement which provided for the establishment of the Fund to be financed solely by employer contributions and administered by the Industry Board in accordance with the provision of the Taft-Hartley Act that such funds be maintained for "the sole and exclusive benefit of employees."
By Agreement and Declaration of Trust dated January 2, 1952, the Fund and the Industry Board were formally created. Pursuant to the terms of the Trust Agreement, the Trustees were empowered to make, amend and repeal such rules as they deemed necessary or proper to carry out the provisions of the Agreement. Exercising this power, the Trustees in 1952 promulgated the initial rules and regulations ("the Plan") setting forth pension eligibility requirements, to wit: (A) attainment of age 65; (B) at least 15 years membership in the Union; (C) of which five years immediately preceded the date of application for retirement; (D) employment of any duration by a contributing employer in each of the two years preceding the date of application, unless waived because of illness or disability, and (E) 1,250 days of employment at the plumbing trade during his membership in the Union.
The only link in these requirements between employer contributions to the Fund and the employees' qualification for benefits is requirement "D" that the employee be employed by a contributing employer for an unspecified number of days during the two years preceding his application for benefits. A booklet distributed to union members during the 1960s describing the plan indicated that in satisfying the requisite 1,250 working days in requirement "E", credit would be given "for employment by a plumbing contractor prior to the establishment of our benefit plan."
With the exception of the addition of a disability retirement provision in 1960, the next substantial amendment to the Plan occurred in 1963. To comply with rulings of the National Labor Relations Board, union membership was eliminated as a condition of eligibility; instead, employment with a contributing employer, regardless of union membership, qualified a retiree for pension benefits. The provisions requiring fifteen years of union membership, five of which preceded retirement were deleted in their entirety.
The net effect of the 1963 amendment was that an employee would qualify if he (1) attained the age of 65 or became disabled prior thereto, (2) had been employed for an unspecified number of days by a contributing employer during the two years preceding his application for benefits, and (3) had accumulated 1,250 days of contributory employment.
In 1966, the Plan was again amended. All prior conditions of eligibility, except those relating to age, were deleted and a new provision was substituted which required fifteen consecutive years of contributory employment immediately prior to retirement, during which period the Fund must receive contributions on the employee's behalf for at least 1,250 days of work.
Finally, in 1971 the Plan was amended to provide an alternative means of qualifying for benefits by accumulating 2,100 days of contributory employment through fifteen years of "unbroken credited service," a break deemed to occur if the employee had not had two quarters of employment thirty-five days per calendar year constituting 1/4's credit within any three consecutive calendar years. A vesting provision was added with respect to this alternative. In 1972 a new pension information booklet was prepared reflecting the current amendments and distributed to employees.
As noted earlier, Harris worked for nine years in the plumbing trade from 1941-1949. Because of the scarcity of plumbing jobs in the New York metropolitan area during this period, he was required to travel to various parts of the United States where he was referred to plumbing concerns by other locals affiliated with the international union. Because of illness and inability to obtain steady work closer to home, Harris opened a toy store which he operated until 1962. When the plumbing business began to pick up in the early 1960s, Harris sold his store and in January 1962 returned to full employment in the plumbing trade and continued in the industry through August 1972 when illness forced him to retire. In that eleven-year period, he worked eight full years of approximately 250 days per year; a partial year of 130 days in 1966 due to a six-month long strike; a partial year of 101 days in 1970 when he suffered a heart attack; and 139 days in 1972 when by August he was completely disabled by his cardiac condition and began to receive federal disability benefits. In all, he accumulated approximately 2,370 days of contributory employment distributed over an eleven-year period. When he advised an officer of the Industry Board that he wished to apply for retirement benefits, he was informed that he was not eligible because of his failure to meet the required fifteen consecutive years of contributory employment.
Although this Court may determine whether the 1966 eligibility requirements are arbitrary and capricious under either federal or state law, it is mindful of the admonition of our Court of Appeals that the federal statutory provision
is not a license for federal courts to invalidate an eligibility rule "simply because an agreed division of pension benefits strikes a court as unfair."
Since the scope of review of the eligibility requirements under state law is, if anything, broader than under federal law, and encompasses as well the issue of whether the application of otherwise reasonable requirements to a particular individual is arbitrary and capricious,
New York law will be applied in resolving the questions posed by this litigation.
As to the reasonableness of the 1966 amendment, this Court is bound by a recent New York Court of Appeals decision, Mitzner v. Jarcho,
concerning a challenge to the same pension plan, which held the amendment was reasonable on its face.
Under the circumstances of that case, however, the Court held that the Trustees acted arbitrarily and capriciously in applying the amendment so as to deprive the employee of benefits.
We are guided by the Court's analysis in making that determination.
By the time the 1966 amendments were passed, Max Mitzner had been an active plumber and union member since 1939. Except for a one-year break in service in 1961, he worked for contributory employers from the time the Fund was established. He was initially denied benefits in 1966 because he had not accumulated the required 1,250 days; he resumed employment through 1968, inquired about benefits again and, for the first time, was informed of the fifteen consecutive contributory years requirement, which he failed to meet because of the 1961 break in service. In holding the Trustees' decision to withhold benefits arbitrary, the Court weighed "the duty owed (by the Trustees) to the retired members to provide benefits against the duty owed to the fund to safeguard it from depletion for the benefit of active members who will apply for benefits in the future."
Although the obligation to safeguard the integrity of the Fund was furthered by the 1966 eligibility requirements, the Court noted that "no showing was made that sound actuarial practice required that this claimant be denied benefits, nor was there evidence that the amendment was adopted to avert pending financial distress."
With respect to the Trustees' duty to the retired employee, the Court stressed three factors: (1) Mitzner, because of his length of service in the plumbing trade, ...