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WILLIAM JOHNSON v. JOSEPH BOTICA (07/02/76)

decided: July 2, 1976.

WILLIAM JOHNSON, PLAINTIFF-APPELLANT,
v.
JOSEPH BOTICA, WILLIAM P. TOOMEY. RONALD POLK. GEORGE J. KAMIN, RAYMOND F. PONTIOUS AND GEORGE N. WEILAND, TRUSTEES OF THE STRUCTURAL IRON WORKERS LOCAL NO. 1 PENSION TRUST FUND, DEFENDANTS-APPELLEES



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division No. 72 C 2819. BERNARD M. DECKER, Judge.

Fairchild, Chief Judge, Pell, Circuit Judge, and William G. East, Senior District Judge.*fn*

Author: Pell

PELL, Circuit Judge.

This case arose out of the denial of William Johnson's application for a disability pension by the Structural Iron Workers Local No. 1 Pension Trust Fund. After his pension was denied, Johnson filed a four-count complaint against the Trustees of the Pension Fund. The Trustees made successive motions to dismiss the complaint; and the district court, treating the motion to dismiss as one for summary judgment, in an unreported memorandum opinion granted summary judgment on all counts in favor of the defendants. The two major issues in this appeal which followed are 1) whether the trial court erred in exercising jurisdiction over this matter and 2) whether the trial court erred in concluding that the Trustees had not been acting in an arbitrary and capricious manner in setting up the pension plan or in construing and applying its provisions.

I. Background

On August 24, 1966, Structural Iron Workers Union Local No. 1 (hereinafter referred to as "Union") and an association of employers entered into an agreement and declaration of trust creating the Pension Trust Fund effective on October 1, 1966. By the existing labor agreement, employers agreed to make contributions to the Fund on behalf of employees covered by said labor agreement. On December 21, 1966, the Trustees, the defendants in this litigation, adopted a Pension Plan setting forth eligibility requirements for a disability pension.

Under the terms of the Pension Plan, a disabled person is eligible for a disability pension if he has acquired a minimum number of fifteen years of work credits either prior to October 1, 1966, ("Past Service Credits") or after that time ("Future Service Credits"). Under Article III, Section 2(a)(3) of the Plan, an employee is entitled to past work credits only if, after October 1, 1966, he

was actively engaged in Covered Employment for a sufficient length of time to accumulate at least two (2) quarters of Future Service Pension Credits in the period October 1, 1966 to September 30, 1968.

In short, an employee would receive credit for employment before the Plan came into existence if he worked at least for two quarters in accordance with a formula giving such credit by working from 500 to 749 hours in a calendar year during the two-year period immediately following the inception of the Plan.

The plaintiff suffered a heart attack on June 23, 1967, which rendered him totally and permanently disabled within the meaning of the Plan. From the critical effective date of the Plan, October 1, 1966, to the date of disability, June 23, 1967, Johnson worked but 239 hours in covered employment. Accordingly, under the terms of the Plan, he was not sufficiently actively engaged in Covered Employment*fn1 to be entitled to Past Service Credit. It is undisputed that the sole reason the Trustees denied Johnson's application for a disability pension was that he failed the active engagement condition for eligibility specified in Article III, Section 2(a)(3).

II. Jurisdiction

In its grant of summary judgment on the merits in favor of the defendant Trustees, the district court initially confronted the argument that § 302 of the Taft-Hartley Act, 29 U.S.C. § 186, did not confer jurisdiction upon the court. The court observed that the plaintiff's complaint alleged that Section 2(a)(3) of the Pension Plan "structurally violated 29 U.S.C. § 186(c)(5) in that it is not for the sole and exclusive benefit of employees. . . ." The court recognized that Section 302(e), 29 U.S.C. § 186(e), confers jurisdiction on the district courts to restrain violations of the statute, and it observed that it would not review an alleged single abuse or misapplication of a facially adequate plan under the jurisdiction so conferred. Instead, the court followed the guidelines set forth in Moglia v. Geoghegan, 267 F. Supp. 641 (S.D.N.Y. 1967), aff'd, 403 F.2d 110 (2d Cir. 1968), cert. denied, 394 U.S. 919, 22 L. Ed. 2d 453, 89 S. Ct. 1193 (1969), and ruled that the allegation of a "structural defect" in the terms of the Plan allowed it to take jurisdiction of the case.*fn2

We conclude that the district court correctly determined that it had jurisdiction under Section 302(e), 29 U.S.C. § 186(e). The courts have consistently recognized that Congress did not intend to burden the courts with claims as to whether a pension benefit was correctly or incorrectly denied, but the vast majority of courts have also held that jurisdiction at least extends to deciding whether a pension plan is arbitrary, capricious, or in some way contrary to the sole and exclusive benefit of employees, E. g., Lugo v. Emp. Retire. Fund of Illumination Prod. Ind., 529 F.2d 251 (2d Cir. 1976), cert. denied, 429 U.S. 826, 97 S. Ct. 81, 50 L. Ed. 2d 88 (1976); Bowers v. Moreno, 520 F.2d 843 (1st Cir. 1975); Alvares v. Erickson, 514 F.2d 156 (9th Cir. 1975), cert. denied, 423 U.S. 874, 46 L. Ed. 2d 106, 96 S. Ct. 143.

Thus, in Lugo, the Second Circuit recognized that Section 302(e) had been the focus of considerable litigation and that several controversies about its meaning had developed. The Lugo court noted that the Second Circuit had joined the courts that had taken a narrow view of the scope of Section 302(e). Nonetheless, it concluded that Lugo's allegation that the trust fund was not for the sole and exclusive benefit of the employees provided a sufficient jurisdictional predicate for the court to decide the case. 529 F.2d at 255-56.

In Alvares, the Ninth Circuit noted the ambiguous legislative history regarding the scope of federal jurisdiction but observed that the more recent cases

have recognized a distinction between actions involving "structural" deficiencies in the relevant trust which cause it to violate the "sole and exclusive benefit" provisions of § 302(c)(5) and actions involving only questions of day-to-day fiduciary administration of welfare and pension funds. 514 F.2d at 165.

After setting forth a cogent discussion of the cases, the Alvares court accepted the structural violation concept of federal jurisdiction for reasons akin ...


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