grant summary judgment in favor of Central States on Count IV of plaintiffs' amended complaint.
D. Count II
Count II of plaintiffs' amended complaint alleges that Central States breached its fiduciary duty by refusing Kroger employees pre-1971 contributory service credit while simultaneously granting other Plan participants credit for service performed prior to their involvement with the Fund. In response, the Fund argues that: (1) the fiduciary duties imposed under ERISA inures to the benefit of the Fund as a whole and not to any particular participant; (2) plaintiffs' preference claim was never presented as such to the trustees; (3) plaintiffs have failed to set forth facts sufficient to establish a deprivation of a vested right; and (4) the Kroger employees are not similarly situated to the UPS group. We address each of the Fund's arguments in turn.
Section 404(a) of ERISA sets forth the governing standard in this case, providing in pertinent part:
(1) . . . [A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and--
(A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan;
(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and
(D) in accordance with the documents and instruments governing the plan insofar as such documents and instructions are consistent with the provisions of this subchapter and subchapter III of this chapter.
29 U.S.C. § 1104(a) (1985 & Supp. 1991). For the definition of a fiduciary, however, we must turn to 29 U.S.C. § 1002(21):
a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets; (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.
Central States' initial assertion that it does not owe plaintiffs a fiduciary duty under § 404(a) stems from dicta in Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 141-44, 105 S. Ct. 3085, 3090-91, 87 L. Ed. 2d 96 (1985), which may be read as suggesting that the fiduciary duties imposed by ERISA on plan administrators run only to the plan itself, as opposed to individual beneficiaries. As such, the Fund argues that plaintiffs may not bring this action seeking individual benefits. We disagree. In Mass Mutual, the Supreme Court held that a plaintiff may not be awarded extraconstitutional damages based on a delay in the processing of a claim. Id. at 148, 105 S. Ct. at 3093. We do not take this limited holding to mean that a pension fund owes no duty to its beneficiaries. To the contrary, the Court in Mass Mutual noted that "there can be no disagreement with the . . . conclusion that . . . a beneficiary [may] bring an action against a fiduciary who has violated [a fiduciary duty imposed under ERISA]." Id. at 140, 105 S. Ct. at 3089. Moreover, Central States' proposition flies in the face of the legislative history of ERISA. As noted by Justice Brennan, "Congress intended by § 404(a) to incorporate the fiduciary standards of trust law into ERISA, and it is black letter trust law that fiduciaries owe strict duties running directly to beneficiaries in the administration and payment of trust benefits." Id. at 152-53, 105 S. Ct. at 3095-96 (Brennan, J., dissenting) (citations omitted). Indeed, other courts have found that the creation of preferences among participants can give rise to a breach of fiduciary duty claim. See Elser v. I.A.M. Nat. Pension Fund, 684 F.2d 648 (9th Cir. 1982) (forfeiture provision which arbitrarily and capriciously discriminated among participants amounts to a breach of fiduciary duty), cert. denied, 464 U.S. 813, 104 S. Ct. 67, 78 L. Ed. 2d 82 (1983); Smith v. National Distillers and Chemical Corp., 728 F. Supp. 491 (W.D. Tenn. 1989) (trustees may not grant preferences as between participants or beneficiaries of a plan); Winpisinger v. Aurora Corp. of Illinois, 456 F. Supp. 559 (N.D. Ohio 1978) (retroactive cancellation of past benefits of selected participants is inconsistent with fiduciary duties).
Central States' claim that plaintiffs' preferential treatment argument was not presented to the trustees, requiring us to remand the matter to the Fund, see Wardle v. Central States Southeast and Southwest Areas Pension Fund, 627 F.2d 820 (7th Cir. 1980), cert. denied, 449 U.S. 1112, 101 S. Ct. 922, 66 L. Ed. 2d 841 (1981), is likewise without merit. The transcripts from the earlier hearing before the Fund clearly highlight the preferential treatment given to UPS employees and offered to the CSX employees. The Fund admits as much by conceding that plaintiffs used those examples" to establish that the trustees had the "power" to grant credit for service prior to affiliation with the Plan. While plaintiffs did not explicitly use the term "breach of fiduciary duty" when describing the preference, the substance of the claim certainly was presented to the Fund. We now move to the merits of plaintiffs' claim.
In order to survive the present motion for summary judgment, plaintiffs must proffer facts sufficient to establish a deprivation of a vested right. See United Air Lines, 572 F. Supp. at 1504 n.6. Indeed, both Esler and Winpisinger, cited by plaintiffs in support of their § 404(a) claim, involved divesting some plan participants of past service credit, to the advantage of other participants. Plaintiffs do not dispute the general requirement, but rather contend that they were in fact deprived of a vested right. Specifically, plaintiffs argue that the representations regarding pre-1971 service with Kroger created a vested right to credit for that service, and that by divesting them of credit for the pre-1971 service, the Fund was able to give the UPS workers credit for three years prior to their affiliation with the Plan. However, as discussed supra subsection III(B)(2), the rights granted participants as a matter of law are confined to those expressed in the written agreement; oral representations may not modify the terms of the Plan. Accordingly, plaintiffs possessed no vested right in contributory credit for service prior to 1971.
In addition, the difference in treatment between plaintiffs and the UPS workers cannot be considered arbitrary and capricious if both groups were not similarly situated. See Smith, 728 F. Supp. at 494 (concluding that because the two groups of employees were not similarly situated plaintiffs could not sustain an action for breach of fiduciary duty on the basis of preferential treatment between participants); United Air Lines, 572 F. Supp. at 1501 n.3 ("nothing in ERISA requires the provision of identical benefit plans for differently-situated employee groups"). Central States has set forth evidence indicating that neither the UPS employees nor the CSX workers were similarly situated to plaintiffs. UPS was a contributing employer contemplating an increase in its contribution rates for a group of UPS employees in connection with a new CBA. The Fund's actuaries determined that the revenue provided through the enlarged contribution rate would exceed the additional benefits the Fund would become liable to pay if it granted the group three years of contributory service credit. CSX was a company that the IBT was attempting to organize. After an actuarial study of the composition of the CSX employee group, the Fund issued proposed terms of acceptance for the group should a CBA be reached providing for contributions into the Fund. One of the terms of acceptance provided that contributory credit for up to five years would be granted by the Fund. Plaintiffs have failed to proffer any facts in response tending to show that their group is similarly situated to either the CSX or the UPS employee groups. Instead, plaintiffs attribute this failure to the lack of cooperation on the part of Central States with regard to discovery. To the extent that the Fund refused to disclose relevant discovery materials, however, plaintiffs' course of action should have been to file a motion to compel. Plaintiffs' failure to file such a motion is insufficient to withstand the instant motion for summary judgment on Count II of the amended complaint.
E. Count III
Finally, plaintiffs claim that the Fund's disparate treatment between them and the UPS and CSX employee groups constitutes a "structural defect," within the meaning of § 302(c)(5) of the LMRA, 29 U.S.C. § 186(c)(5). Section 302(c)(5) prohibits employers from investing in pension plans that are "not for the sole and exclusive benefit of the employees." Before the enactment of ERISA, courts extrapolated a set of fiduciary duties from this sketchy language. To determine if a plan was truly for the sole and exclusive benefit of the employees, courts evaluated the eligibility requirements. Plans that arbitrarily and unreasonably prevented a large number of participants from receiving benefits were found to have a "structural defect." See Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052 (7th Cir. 1987); Ponce v. Const. Laborers Pension Trust, 628 F.2d 537, 543 (9th Cir. 1980). A federal court may remedy the defect by ordering the trustee to reform the plan, i.e., formulating a substitute provision that would meet the statutory standards. Johnson v. Botica, 537 F.2d 930, 937-38 (7th Cir. 1976).
The Fund would have us believe that, after Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989). § 302(c)(5) is a dead letter in actions for employee benefits. The Fund argues that, because ERISA "codified" the fiduciary duties that were originally read into § 302(c)(5), plaintiffs' exclusive cause of action rests under ERISA. We disagree. The Court in Firestone explicitly limited its analysis to "the appropriate standard of review in § 1132(a)(1)(B) actions challenging denials of benefits based on plan interpretations." id. at 108, 109 S. Ct. at 953. Nothing in the Court's reasoning compels this court to transform an action under § 302(c)(5) into an ERISA claim. Indeed, the Ninth Circuit recently rejected a similar contention, noting that the
argument that ERISA preempts the [LMRA] on pension issues is . . . untenable. Both the Supreme Court and this court have recognized that the [LMRA] provisions parallel the ERISA provisions and that trustees must meet the requirements of each. Where Congress intended ERISA to repeal or supersede other laws, state or federal, it said so. But it said nothing about section 302(c)(5). ERISA was not to affect any federal laws not specifically mentioned, and it does not preempt [an LMRA] claim.
Phillips v. Alaska Hotel & Restaurant Employees Pension Fund, 944 F.2d 509, 514 (9th Cir. 1991) (quoting Hurn v. Retirement Fund Trust of Plumbing, Heating and Piping Indus., 703 F.2d 386, 391 (9th Cir. 1983)). Accordingly, we turn to the merits of plaintiffs' LMRA claim.
"Courts are extremely reluctant to substitute their judgments for the judgments of trustees and will do so only if the actions of the trustees are not grounded on any reasonable basis." Ponce, 628 F.2d at 542. When a plaintiff does not challenge the eligibility requirement itself, but rather points to disparate treatment among participants, a court will interfere only if the enforcement of the rule is "arbitrary or capricious." Phillips, 944 F.2d at 515. As noted by the plaintiffs, this standard of review is the same standard that governed the above discussed ERISA claims (Counts I and II).
The burden remains with the plaintiffs in the first instance to show that the unequal treatment between them and the CSX and UPS employee groups was arbitrary or capricious. See Tafoya v. Western Conference of Teamsters Pension Trust Fund, 909 F.2d 344, 348 (9th Cir. 1990). As discussed supra subsection III(D), Central States has set forth satisfactory reasons for treating the various employee groups differently. Plaintiffs have offered no evidence to undermine the Fund's determination or show that its actions were arbitrary or capricious. Once again, to the extent that plaintiffs' attempts to gain discovery materials were unsuccessful, that eventuality is irrelevant to the instant motion for summary judgment in the absence of a timely motion to compel. Without any evidence indicating that the trustees' action in this case was arbitrary or capricious, plaintiffs' claim under § 302(c)(5) of the LMRA must fall.
Consequently, we grant summary judgment against plaintiffs on Count III of their amended complaint.
For the reasons as set forth above, plaintiffs' motion for class certification is denied, and Central States' motion for summary judgment is granted as to all four counts of the amended complaint. It is so ordered.
MARVIN E. ASPEN
United States District Judge