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United States District Court, Northern District of Illinois, E.D

February 11, 1982


The opinion of the court was delivered by: Aspen, District Judge:


Plaintiff Samuel Torrence brought this action under § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a)(1)(B), seeking relief for the alleged wrongful denial of pension fund benefits. Named as defendants were the Chicago Newspaper Association-Drivers Union Pension Plan ("Plan"), the Chicago Newspaper Association-Drivers Union Pension Administrative Board ("Board"), and the First National Bank of Chicago ("Trustee").*fn1 Jurisdiction is alleged pursuant to 29 U.S.C. § 1132(e). On December 1, 1981, this Court granted defendants' motion for partial summary judgment as to plaintiff's claim that the Board's decision denying him benefits was arbitrary and capricious. Disposition of defendants' motion for full summary judgment was continued however, pending the submission of supplemental briefs relating to plaintiff's claim that defendants may be equitably estopped from denying him pension benefits. We now deny defendants' pending motion for summary judgment.

The factual background of this case is set out in some detail in the Court's prior opinion resolving the first issue raised by this motion.*fn2 The equitable estoppel issue presented here arises from plaintiff's decision in 1965 to leave the Capitol News Agency to work for the Charles Levy Circulating Company, Inc. ("Levy") delivering periodicals to low-volume outlets in troubled areas of Chicago. Torrence now alleges that union officials and Board members induced him to take the job with Levy and assured him at the time that the job switch would not impair his pension rights. Plaintiff continued in this capacity until 1972 when he joined the Chicago Tribune Company as a driver-salesman. Throughout this entire period, plaintiff was a dues-paying member of the affiliated union. Upon his retirement, however, plaintiff learned that his seven years with Levy constituted a "break in service" disqualifying him from receiving benefits from the Union Pension Plan.*fn3 Plaintiff's opposition to defendants' motion for summary judgment is thus grounded on the premise that a material issue of fact exists whether the union's inducements and assurances to plaintiff in 1965 were sufficient under the circumstances to estop defendants from denying him pension benefits upon his retirement.

Assuming plaintiff's factual allegations are true, Cedillo v. International Association of Bridge and Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10-11 (7th Cir. 1979), defendants in this action are not entitled to summary judgment. As reflected in our prior opinion on this motion, the applicability of the doctrine of equitable estoppel under ERISA is by no means clear. Torrence, supra at 747. Although the Seventh Circuit has questioned the "advisability of employing estoppel principles" in a union pension plan dispute, Reiherzer v. Shannon, 581 F.2d 1266, 1267 n. 1 (7th Cir. 1978), no Seventh Circuit rule dictates the result in this case.*fn4 Under these circumstances, the Court is compelled to examine the rationale underlying courts' general reluctance to apply estoppel principles in union pension plan disputes and whether that rationale applies in this case.

The fiduciary duties of pension plan trustees under ERISA are directed "solely in the interest of participants and beneficiaries . . . for the exclusive purpose of . . . providing benefits to participants and their beneficiaries." 29 U.S.C. § 1104(a)(1)(A)(i) (1976). Moving defendants argue that compelling them to distribute pension benefits to plaintiff in this case would violate these fiduciary duties and work to the prejudice of eligible participants and beneficiaries. Defendants argue further that payment of pension benefits to a person who has been deemed ineligible to receive such benefits would impair the actuarial soundness of the pension plan. The Court finds none of these arguments persuasive in this case.

The fiduciary duty of pension plan trustees toward "participants and beneficiaries" under ERISA cannot be viewed myopically.*fn5

As a remedial statute, ERISA was intended, inter alia, to "ensure that legitimate expectations of workers in receiving retirement benefits actually materialize." United Association of Journeymen and Apprentices v. Myers, 488 F. Supp. 704, 708 (M.D.La. 1980). Viewing ERISA in this light, it would be incongruous for the Court to permit defendants to defeat the potentially legitimate expectations of plaintiff by resorting to a narrow interpretation of their statutory duties.

The defendants' fiduciary duty to provide benefits to participants and beneficiaries under the plan necessarily encompasses a subsidiary duty to maintain the integrity and credibility of the plan itself. The denial of benefits to plaintiff, a former participant, does not advance that end. The importance of such a duty is manifest in this case where, unlike many of the cases cited by the defendant,*fn6 union officials and Board members allegedly encouraged plaintiff to accept the job with Levy in addition to merely assuring him that his eligibility for benefits would continue. If union and Board officials are permitted to affirmatively mislead current participants in this manner, the fiduciary duty to provide pension benefits to those participants constitutes nothing more than a hollow formalism.

Further, this Court is not satisfied that compelling the defendants to distribute pension benefits to plaintiff would either deflate the pension fund for other eligible participants or impair the "actuarial soundness" of the Plan in any meaningful sense. The size of the pension fund in this case has been increased by contributions made in plaintiff's behalf by the Chicago Sun-Times, the Capitol News Agency and the Chicago Tribune for work performed from 1958 to 1965 and again from 1972 to 1979. Payment of pension benefits to plaintiff would simply draw upon those funds contributed to the Plan in his behalf.

Although the actuarial soundness of this pension fund no doubt depends in part upon contributions on behalf of employees who will never receive benefits, those same actuarial calculations cannot justify the denial of benefits to employees who will never receive benefits solely because of the affirmative misconduct of union officials and Board members. To deny plaintiff a possible remedy in this case would, in effect, elevate the alleged misconduct of defendants to the level of a legitimate actuarial risk. This result, in addition to producing a substantial hardship for plaintiff, would fail to serve the interests of current participants and their beneficiaries to whom defendants owe a fiduciary duty.

  The potential depletion of the pension funds cited by
defendants as a result of this case is further mitigated by
§ 7.10(m) of the pension plan which requires that the Board:

   . . purchase such insurance and [ ] pay such
  premiums for the Members of the Board and any
  employees of the Board to cover any liability or
  loss to the trust funds occurring by reason of
  the act or omission of a Member of the Board and
  any employee of the Board, provided however that
  all such insurance shall permit recourse by the
  insurer of such insurance contracts against a
  Member of the Board in the case of a breach of a
  fiduciary obligation by such Member.

Id. Although neither party has raised this insurance provision in their supplemental briefs, it would appear from the terms of the provision that the pension fund will not be deflated in any way by granting relief to plaintiff if he can substantiate his allegations. To the extent plaintiff's benefits will be paid out of insurance proceeds, current participants and beneficiaries will not be prejudiced in any respect.

Recognizing, therefore, that principles of equitable estoppel may bar the defendants from denying plaintiff pension benefits, this Court will deny defendants' motion for summary judgment. It is so ordered.

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