Appeal from a judgment of the United States District Court for the Western District of New York, John T. Elfvin, Judge, holding, in an action under ERISA, that the Board of Trustees of the defendant pension fund had acted arbitrarily and capriciously in denying the plaintiff employees credit under the plan for years of service during which employer contributions were not paid on their behalf, and ordering the defendant to grant the plaintiffs such credit. The district judge also awarded attorney's fees to the plaintiffs. Judgment reversed; award of attorneys' fees vacated.
Lumbard, Meskill and Cardamone, Circuit Judges.
Plaintiffs, four employees and one former employee of the Continental Can Co., Inc., commenced this action in the Western District of New York in August 1977 under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (1976) (ERISA), to determine their eligibility for pension benefits from the defendant New York State Teamsters Conference Pension and Retirement Fund Employee Pension Benefit Plan (the Teamsters Plan). The plaintiffs, all of whom had worked for Continental for some years before Continental began to contribute to the Teamsters Plan on their behalf, sought through this action to establish their right to past service credit for years during which employer contributions were not paid. Judge Elfvin conducted a bench trial of the action from August 25th to August 28th, 1980, after which, on March 11, 1982 he ruled that the decision of the Teamsters Plan's Board of Trustees to deny the plaintiffs "new group" status, and with it, past service credit, was "arbitrary and capricious." He ordered the Teamsters Plan to grant the plaintiffs past service credit and to pay benefits accordingly. On June 7, 1982 Judge Elfvin granted the plaintiffs' post-trial motion for attorneys' fees under 29 U.S.C. § 1132(g) (1) (Supp. IV 1980). The Teamsters Plan now appeals from the judgment against it and the award of attorneys' fees. We reverse the judgment appealed from, and vacate the award of attorneys' fees.
With one exception to be noted later, the facts, for purposes of this appeal, are those found by the district court. Continental, at all relevant times, has operated three plants in the Buffalo, New York area. Prior to July 1, 1969 the plants' truck drivers were assigned to separate corporate divisions: the drivers at the Clay Street plant in Tonawanda, New York to Plant No. 418; the drivers at the Colvin Boulevard plant in Buffalo to Plant No. 81; and the drivers at the Shawnee Road plant in North Tonawanda, New York to Plant No. 506.
The plaintiffs are five drivers who prior to July 1, 1969 were assigned to Plant No. 506 at Shawnee Road. Teamsters Union Local 449 represented the drivers at the Clay Street and Colvin Boulevard plants and Teamsters Union Local 375 represented the plaintiffs. In a letter to Local 449 dated December 11, 1967 Continental agreed to abide by the terms of the so-called "National Master Freight Agreement" (NMFA). The NMFA required Continental to contribute to the Teamsters Plan on behalf of the Local 449 drivers. Continental did not contribute to the Teamsters Plan on behalf of the plaintiffs, who instead participated in a corporate pension plan.
On July 1, 1969 Continental merged the three trucking divisions into a single Plant No. 490. The merger did not entail a physical transfer of drivers but involved only minor changes in route assignments and the introduction of a central dispatch system. Because Local 449 had a union shop agreement with Continental, the merger of the drivers into a single bargaining unit required the plaintiffs to transfer their membership from Local 375 to Local 449. Concerned that the plaintiffs would not receive past service credit under the Teamsters Plan for pre-merger employment,*fn1 the president of Local 375, Stanley Clayton, asked Continental to apply to the Teamsters Plan to have the plaintiffs treated as a "new group." The new group rule is incorporated in section 3(2) of the Teamsters Plan.*fn2 Under the rule, an employee who joins the Teamsters Plan as part of a new group is entitled to receive credit for past service with the employer, up to a maximum of twenty years, if the employee works for the employer for another five years and the employer contributes to the Teamsters Plan on behalf of the employee for those five years. A new group is a unit of employees which commences participation in the Teamsters Plan on the same date that the relevant employer (the "Participating Employer"), first becomes obligated to and does make contributions to the Plan on its employees' behalf. (The "Applicable Effective Date").*fn3 The Participating Employer need not be the corporation as a whole, but may instead be a corporate division or plant. The purpose of the rule is to encourage new bargaining units to join the Teamsters Plan.
In response to Clayton's request, Continental on September 9, 1969 sent a letter to the Teamsters Plan's Board of Trustees requesting that the plaintiffs be accepted into the plan as a new group. In the letter, Continental offered to pay five years' worth of contributions on behalf of any Local 375 driver who retired before completing five years of service under the Teamsters Plan. The letter in this respect conflicted with the new group rule, since the rule requires the employee to be employed under the Teamsters Plan for at least five years in order to receive past service credit.
The Board of Trustees considered Continental's letter at its September, 1969 meeting. The Board voted unanimously to treat the plaintiffs as new employees not entitled to past service credit. The Board apparently believed that Continental had physically transferred the plaintiffs from their previous plant to a plant already participating in the Teamsters Plan. Clayton was a member of the Board and was present at the meeting. He attempted to explain to the other Board members that there had been no physical transfer but merely a merger of operating divisions. However, Clayton agreed that Continental's request for new group status for the plaintiffs could not be approved because of the conflict between Continental's offer and the new group rule's requirement of five years actual service. Clayton told the Board that he would request Continental to provide further information on the facts of the plaintiffs' case. On October 15, 1969, before receiving any additional information, the Board told Continental by letter that its application on behalf of the plaintiffs had been rejected.
In early September, 1969, an accident required one of the Local 375 drivers, Timothy Moriarty, to be hospitalized for several weeks. Moriarty applied for disability benefits from the New York State Teamsters Health and Hospital Fund. The Health and Hospital Fund and the Teamsters Plan had the same address and manager and very similar provisions. Approximately one month after his accident Moriarty began to receive benefits from the Health and Hospital Fund. Those benefits should not have been paid unless Moriarty qualified for past service credit under the new group rule of the Health and Hospital Fund.
In January, 1970, Local 449 and Continental executed a new participation agreement that required Continental to contribute to the Teamsters Plan on behalf of employees of "Continental Can Co., Inc., #490, Clay Street, Tonawanda, N.Y." The agreement required Continental to make payments retroactive from July 1, 1969. Ervin Walker, the president of Local 449 and a defendant in this proceeding, testified that the new participation agreement must have been executed because a new group joined the plan.
At the January, 1970, meeting of the Teamsters Plan Board of Trustees, Clayton again brought the plaintiffs' situation to the attention of the Board. He argued that the plaintiffs constituted a new group and were entitled to past service credit. The Board did not take formal action on the request for new group status, but instead asked Clayton to provide a letter describing Continental's merger of its trucking operations. Clayton apparently never sent the requested letter.
Clayton again raised the matter at the Board's next meeting, held from February 26 to March 2, 1970. According to Clayton, several of the Trustees began at this meeting to understand that Continental had not physically transferred the plaintiffs. The Board, however, again took no formal action on the request for new group status, but instead tabled further review of the plaintiffs' case until it received a letter from Local 449 detailing the plaintiffs' situation. Apparently the Board did not, following the meeting, request Local 449 to send it a letter, nor was such a letter ever received. The Board did not, at any time, formally rescind its September, 1969 vote denying the plaintiffs new group status.
The Board did not again consider the plaintiffs' status until the issue was raised by the retirement of plaintiff Harold Miles on January 9, 1976. Several months prior to his retirement Miles had submitted an application for pension benefits. On January 14, 1976 the administrator of the Teamsters Plan informed Miles by letter that his application for a pension had been rejected because he had only six and one-half years credited service under the plan. The plan required fifteen years service for payment of a pension. Miles complained to Clayton that the Teamsters Plan had not granted him past service credit. Clayton raised Miles' entitlement to past service credit at several Board meetings in 1976. In response, the Board referred to the minutes of its 1969 and 1970 meetings and again concluded that the plaintiffs ...