decided: June 9, 1980.
GEORGE HAEBERLE, PLAINTIFF-APPELLANT,
BOARD OF TRUSTEES OF BUFFALO CARPENTERS HEALTHCARE, DENTAL, PENSION AND SUPPLEMENTAL FUNDS, DEFENDANT-APPELLEE
Appeal from a judgment entered in the United States District Court for the Western District of New York, Chief Judge John T. Curtin, dismissing the complaint after a directed verdict in favor of defendant in an action seeking a declaration of entitlement to a pension and damages for benefits withheld. Affirmed.
Before Smith*fn* and Feinberg, Circuit Judges, and Gagliardi, District Judge.*fn**
I. STATEMENT OF FACTS
Appellant George Haeberle commenced this action against The Board of Trustees of Buffalo Carpenters Pension Fund ("the trustees") alleging that they had wrongfully denied him a pension. Haeberle was born in 1908, and was employed in the carpentry trade during his adult years. In 1955, he joined a local union affiliated with the Carpenter's District Council of Buffalo ("the union"). Six years later, in 1961, the union and the Construction Industry Employer's Association ("the employers") established the Buffalo Carpenter's Pension Fund in order to provide pension benefits to union members. In that same year, the trustees, comprised of two representatives of both the union and the employers, created a pension plan ("the plan"), providing that a member who reached age 65 and retired would be eligible for a pension if he had earned a minimum of fifteen pension credits.*fn1 In recognition of employment prior to the establishment of the plan, the plan awarded a full credit to employees for every year of membership in the union before 1961 regardless of the number of hours worked in the given year. The pre-1961 credits were designated "past service credits" to distinguish credits earned after the implementation of the plan. Another feature of the plan, the break in service rule, provided that an employee who failed to work a minimum of 150 hours in any one of three consecutive fiscal years would forfeit all previously earned credit.
In September 1975, the union notified Haeberle by letter that he had earned no credits for the two previous fiscal years, and that unless he earned at least 150 hours credit prior to May 31, 1976 he would suffer a break in service on that date. Sometime during October, 1975, Haeberle went to speak to Donald F. Bodowes, the fund administrator. According to the trial testimony of both Haeberle and Bodowes, Haeberle inquired about ERISA,*fn2 which Bodowes acknowledged would require amending the plan, and about pension eligibility requirements under the amended plan. Sometime after this visit, Haeberle left for Florida, where he spent the winter. He returned to Buffalo on approximately May 1st, 1976 and shortly thereafter again went to Bodowes' office. Although the trustees did not formally amend the plan to comply with ERISA until June 11, 1976, effective June 1, 1976, Bodowes advised Haeberle during this second conversation that Haeberle would not have sufficient pension credits to qualify for a pension under the amended ERISA plan.
Haeberle commenced this action on August 31, 1977 before he had formerly applied for and been denied pension benefits. The complaint nevertheless alleged that the trustees refused to award Haeberle the pension to which he was entitled under ERISA, and additionally, that the trustees had failed to amend the plan to conform it with ERISA by June 1, 1976, as allegedly required by that statute. The trustees, in their answer, asserted that Haeberle had failed to exhaust his administrative remedies, pursuant to Section 503(2) of ERISA, 29 U.S.C. § 1133*fn3 To remedy the defect, Haeberle requested and was granted a hearing before the trustees in May 1978. The trustees informed Haeberle by letter dated July 25, 1978 that they had denied his request for pension benefits. In summary, the trustees rejected Haeberle's application because they contended that by suffering a break in service on May 31, 1976, thereby forfeiting all previously earned credits, Haeberle could not qualify for a pension under the vesting provision of the amended plan which became effective on June 1, 1976. Haeberle then filed an amended complaint on the day of trial alleging that defendant had failed to comply with ERISA's requirements by June 1, 1975, as mandated, and that it had failed to provide a description of the plan to participants within 120 days of compliance.
At the jury trial, plaintiff testified to the following conversation with Bodowes in October 1975:
Donald Bodowes got my file out and said "yes, you have a vested interest under the new law and I will place a tab on your file and when our plan is accepted by the Government which we figure will be the following year, you will be entitled to a portion of a pension.'
Bodowes in contrast recalled the meeting differently.
A. Mr. Haeberle approached me in the Fund office and indicated to me that he felt that he was eligible for a form of pension from the Buffalo Carpenters Pension Fund. I reviewed his record and his record indicated that he did not have the required fifteen pension credits at that time and it was brought up by Mr. Haeberle the fact that perhaps he would be covered under the new upcoming ERISA and at that time I explained to him that ERISA was new to us as it was to most everyone; that we had not embarked on any form of vesting which he indicated to me would provide a route for him for his pension and I indicated to him at that time that I was aware of the fact that somewhere sometime we were going to have to have vesting incorporated in our plan. What form of vesting, I had no idea.
Q. Okay. Now, Mr. Bodowes, did you ever tell, during that conversation, did you tell Mr. Haeberle that (his pension) was vested?
A. No, I did not.
Following this conversation, Bodowes made a notation on Haeberle's file as follows: "(i)n on 10/28/75 was advised to wait for new pen. rules re vesting."
Plaintiff testified that he had not discussed the union letter warning of the break in service with Bodowes, nor had he made any effort to seek 150 hours of employment before departing for Florida.*fn4 On cross-examination concerning his activity in May following Bodowes' advice that he would not qualify for a vested pension under the amended plan, plaintiff explained that he had not attempted to seek employment because he believed there was insufficient time to accumulate 150 credit hours in order to forestall the impending break in service.*fn5 In addition to the salient portion of trial testimony set forth above, appellant acknowledged that the union sent him annual notices reflecting his accumulated pension credits as well as periodic information describing the plan and pension eligibility requirements. The parties at trial also submitted documentary evidence of the steps taken by the trustees to comply with ERISA.
The Trial Court reserved decision on the motion for a directed verdict at the close of plaintiff's case, and granted the renewed motion after both sides had rested. The Court held that the trustees' decision to deny Haeberle benefits was neither arbitrary nor capricious because he did not have sufficient credits to qualify for a pension under either the original or amended plan.*fn6 Since plaintiff's submission of proof revealed that he was relying on an estoppel theory, the District Court further held that the plaintiff would not have been entitled to judgment even if the jury had fully credited plaintiff's testimony describing the October conversation with Bodowes because Bodowes "lacked authority to bind the trustees." Finally, the court rejected plaintiff's argument that the trustees violated ERISA by failing to amend the plan in a timely fashion.*fn7
Haeberle raises three arguments on appeal: (1) that he has met the criteria for, and thus is entitled to, a vested pension under ERISA, (2) that if he does not qualify for an ERISA pension, it is due solely to appellee's failure to comply with ERISA in a timely manner, and (3) that the District Court erred by directing a verdict in favor of the trustees since Haeberle would have been entitled to a verdict on an estoppel theory had the jury credited his testimony that he relied on Bodowes' alleged representation.
Although we feel constrained once again to express reservation about the practice of taking a case away from a jury, rather than setting aside an incorrect verdict, if necessary, see Gratian v. General Dynamics, Inc., 587 F.2d 121, 122 (2d Cir. 1978), we agree with the District Court that the record supports the unassailable conclusion that appellant is not entitled to a pension under any theory and that the District Court therefore correctly ruled that defendant was entitled to judgment as a matter of law. Our review of the record indicates that the appellant does not meet the eligibility requirements for a pension, and that his argument that the trustees delayed in meeting ERISA's requirement only obfuscates the real issue of plaintiff's inadequate work record. A brief overview of ERISA is necessary for a full understanding of the first and second issues raised on appeal. The estoppel question also requires some familiarity with ERISA and the aspects of the statute that relate to this argument will also be discussed.
Congress enacted ERISA, codified at 29 U.S.C. §§ 1001, et seq., in 1974. This complex regulatory scheme imposes rigid standards on employee pension plans in order to establish "minimum standards . . . assuring the equitable character . . . and financial soundness" of private pension plans. 29 U.S.C. § 1001(a). See Cartledge v. Miller, 457 F. Supp. 1146, 1156 (S.D.N.Y.1978). ERISA is administered jointly by the Departments of Labor and Treasury. 29 U.S.C. §§ 1202, 1203, 1204. The statute regulates in several broad areas, establishing, inter alia, standards of fiduciary responsibility, requirements for the periodic filing of financial reports with the Secretaries of Labor and Treasury and mandatory disclosure of plan contents to participants. In addition, a plan must incorporate one of three alternative vesting provisions set forth in the statute. In anticipation that existing plans would undergo a period of transition in implementing ERISA's requirements, Congress provided that each of the several regulatory provisions would become effective on a different date. See Riley v. MEBA Pension Trust, 570 F.2d 406, 411 (2d Cir. 1977). Appellant's first argument that he had acquired sufficient pension credits to qualify for a vested pension under ERISA requires an examination of the requirements for a vested pension and the effective date of the vesting provision.
Section 203 of ERISA, 29 U.S.C. § 1053, establishes minimum vesting requirements. § 1053(a) provides:
Each pension plan shall provide that an employee's right to his normal retirement benefit is nonforfeitable upon the attainment of normal retirement age and in addition shall satisfy the requirements of paragraphs (1) and (2) of this subsection.
Paragraph (1) requires that an employee's rights in benefits derived from his own contributions be nonforfeitable. Paragraph (2) sets forth in subsections (A), (B) and (C) the three alternative vesting plans. Subsection (A), the operative vesting provision of the amended plan at issue provides:
A plan satisfies the requirements of this subparagraph if an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of the accrued benefit derived from employer contribution (emphasis added).
A "year of service," is defined as a year "during which the participant has completed 1,000 hours of service." 29 U.S.C. § 1053(b)(2)(A). The statute explicitly permits the exclusion of any credit for the years of service prior to the adoption of the original pension plan. 29 U.S.C. § 1053(b)(1)(C). This statutory section, imposing mandatory vesting requirements, becomes binding upon plans like the instant one which were in effect on January 1, 1974 at the beginning of the plan year that commenced after December 31, 1975. 29 U.S.C. § 1061. Since the plan year for the amended plan is the fiscal year June 1, through May 31, ERISA's mandatory vesting requirements did not become applicable to the amended plan until June 1, 1976.
Appellant's first claim, that he was wrongfully denied ERISA pension benefits to which he was allegedly entitled pursuant to 29 U.S.C. § 1053, is without merit for two reasons.*fn8 First, the decision of the trustees, properly undisturbed by the District Court, was that plaintiff could not invoke 29 U.S.C. § 1053 since that section did not become effective until June 1, 1976, after plaintiff had forfeited all previously earned pension credits. In Schlansky v. United Merchants & Manufacturers, Inc., 443 F. Supp. 1054 (S.D.N.Y.1977), the court rejected a claim that ERISA's vesting provision protected the pension rights of an employee who was discharged prior to the effective date of § 1053. Id. at 1064. The court's reasoning that ERISA did not apply retroactively is equally applicable to the instant situation in which Haeberle forfeited all previously earned pension credits on May 31, 1976 one day prior to the effective date of ERISA's vesting provision. Other courts have uniformly rejected claims seeking to invoke ERISA's vesting provision when employees' interests have been terminated prior to the effective date of § 1053. See Davis v. Central States Southeast & Southwest, 460 F. Supp. 926, 928 (E.D.Tenn.1978); Fremont v. McGraw-Edison Co., 460 F. Supp. 599, 601 (N.D.Ill.1978), aff'd in part, rev'd in part, 606 F.2d 752 (7th Cir. 1979). See also Keller v. Graphic Systems of Akron, Inc., 422 F. Supp. 1005, 1008-1009 (N.D.Ohio 1976). We are also persuaded that the trustees' decision should be upheld on the alternative ground that even had Haeberle not suffered a break in service, he would not have qualified for a pension under the amended plan. When the trustees amended the pension plan to conform to ERISA, they elected a ten year vesting provision that eliminated "past service credits". Haeberle's employment record, set out in the margin,*fn9 reveals that he worked a minimum of 1,000 hours, and thus accumulated one credit in each of only seven years after 1961. Thus, even assuming no break in service, appellant remains three pension credits short of the required credits for a vested pension under the amended plan.
Haeberle's second argument on appeal that his failure to qualify for an ERISA pension was due to appellee's noncompliance with its mandate requires some familiarity with two additional sections of ERISA, the provision establishing standards of fiduciary responsibility, 29 U.S.C. §§ 1101-1114, and the reporting and disclosure section, 29 U.S.C. §§ 1021-1031. The fiduciary responsibility provisions of ERISA became effective on January 1, 1975, or, with approval of the Secretary of Labor, on January 1, 1976. 29 U.S.C. § 1114(a) & (b)(2). The subject of frequent judicial interpretation and scholarly commentary, n.10 these sections are clearly designed to protect pension funds from improper and improvident acts by those entrusted with responsibility for their investment. The introductory provision to this portion of the statute provides that a written plan naming fiduciaries be established. 29 U.S.C. § 1102(a)(1) & (2). The reporting and disclosure sections require periodic filing of detailed financial statements and other descriptive information with the Secretaries of Labor and Treasury to insure a plan's compliance with ERISA's requirements. In addition, these provisions require that plan participants be provided with current information which may affect pension rights. Although compliance is required by January 1, 1975, 29 U.S.C. § 1031, a plan administrator may defer compliance until after IRS approval, provided that an ERISA notice is furnished to plan participants prior to May 30, 1976. 29 C.F.R. § 2520.104-6.