Mcdonald v. Pension Plan of Nysa-Ila

Page 151

320 F.3d 151

James MCDONALD, Plaintiff-Appellee-Cross-Appellant, v. PENSION PLAN OF THE NYSA-ILA PENSION TRUST FUND and Board of Trustees of the Pension Plan of the NYSA-ILA Pension Trust Fund, Defendants-Appellants-Cross-Appellees.

Docket No. 01-9226.

Docket No. 01-9316.

United States Court of Appeals, Second Circuit.

Argued: September 6, 2002.

Decided: February 10, 2003.

COPYRIGHT MATERIAL OMITTED

Donato Caruso (C. Peter Lambos, Nicholas G. Maglaras of Lambos & Junge and Thomas W. Gleason, Ernest L. Mathews, Jr. of Gleason & Mathews, P.C. on the brief), Lambos & Junge, New York, NY, for Defendants-Appellants-Cross-Appellees.

Edgar Pauk, New York, NY, for Plaintiff-Appellee-Cross-Appellant.

Before: CALABRESI and B.D. PARKER, Circuit Judges, COTE, District Judge.^*

B.D. PARKER, JR., Circuit Judge.

James McDonald worked as a longshoreman intermittently from 1953 until his retirement in 1991, after which he received a lifetime pension. Believing his pension calculations failed to reflect 13 years during which he had accrued benefits, he sued the Pension Plan of the NYSA-ILA Pension Trust Fund and its Trustees (collectively, the "PTF"), principally challenging a Plan provision that permitted the PTF to disregard years of service rendered prior to a break in service that occurred before the passage of the Employee Retirement Income Security Act of 1974 ("ERISA"). See 29 U.S.C. §§ 1001 et seq.

The district court agreed in part and required the PTF to amend the Plan to remove the break-in-service provision retroactively to January 1, 1976, the effective date of ERISA. The district court also dismissed McDonald's other claims for class relief, recalculation of statutory penalties, and reassessment of photocopying expenses. The PTF appeals and McDonald cross-appeals.

We agree with the court below that ERISA § 204, 29 U.S.C. § 1054, trumps the Plan's break-in-service provision that limits the accrual of benefits arising from pre-ERISA employment. McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 153 F.Supp.2d 268, 280-81 (S.D.N.Y.2001) ("McDonald I"). We also conclude, however, that ERISA § 202(a)(3)(A)'s definition of a "year of service" as service in excess of 1,000 hours in a year may affect McDonald's claim for additional benefits and the need, if any, for the Plan's retroactive amendment. 29 U.S.C. § 1052(a)(3)(A). Since this potentially dispositive issue was not fully explored below, we remand so it can receive additional consideration. Next, we conclude that the district court acted well within its discretion in denying class-wide relief and that it correctly calculated statutory penalties. We disagree, however, with the Court's evaluation of what constitutes reasonable photocopying expenses. See ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4). The judgment of the district court is thus affirmed in part, reversed in part, and vacated and remanded in part.

BACKGROUND

The material facts are not in dispute. The pension plan at issue is a joint labor-management trust fund that administers a defined-benefit, multi-employer pension plan for longshoremen such as McDonald. This fund's Trustees are the administrators of the Plan.

The PTF has modified the Plan several times since its creation in 1950. Initially, the Plan provided only a single benefit — a flat, monthly sum called a Service Retirement Pension ("SRP") — to retired participants. Eligibility for the SRP originally was limited to those employees 65 years or older who had been employed in the industry for a continuous period of at least 25 years and who were actively employed in the industry at the time of their retirement. The Plan gave pension credit for any year in which an individual worked a minimum of 400 hours (a "year of credited service"), but to satisfy the Plan's 25-year minimum service requirement, an individual needed an average annual employment of at least 700 hours.

Following the enactment of ERISA, the PTF modified the Plan to provide an additional Vested Rights Pension ("VRP") for employees who failed to satisfy the SRP's more rigid eligibility requirements. The VRP contains the following formula for benefits:

(a) for years of credited service in the industry prior to January 1, 1976, [a plan participant] shall receive 1-1/2% of the maximum monthly benefit in effect at the time he ceased employment in the industry, multiplied by years of credited service earned prior to January 1, 1976; and

(b) for years of credited service after January 1, 1976, he shall receive 3% of the maximum monthly benefit in effect at the time he ceased employment in the industry, multiplied by the number of years of credited service earned on or after January 1, 1976 plus 3% of (a) above multiplied by the number of years of credited service after January 1, 1976.

(c) [I]n no event shall a participant receive more than 100% of the maximum monthly benefit in effect at the time he ceased employment in the industry.

1985 Plan, p. 52. In November 1995, the PTF again amended the Plan, retroactive to January 1, 1976, to provide that all vested participants would accrue benefits in accordance with the VRP benefit formula and that those participants eligible for both the SRP and the VRP would receive the greater of the two benefits.

McDonald started working under the Plan in 1953 and earned 13 years of "credited service," under the Plan's definition, between 1953 and 1969. For the following three consecutive years, however, he failed to earn any years of credited service. Under the Plan's provisions then in effect, as a consequence of this break in service, McDonald's first 13 years of credited service no longer counted toward the benefits that he would receive on retirement. Between 1973 and 1991, McDonald earned 10 years of credited service. When McDonald turned 65, the PTF awarded him a monthly pension of approximately $263 based on these 10 years of credited service. In calculating McDonald's pension, the PTF used the VRP formula but did not count any years of service prior to 1970.

In 1999 McDonald sued, contending that the PTF's calculations violated ERISA. He asserted a variety of claims seeking individual as well as class relief. In one claim for individual relief, he argued that ERISA § 202's requirement that, with certain exceptions, "all years of service ... shall be taken into account" for benefit accrual purposes nullified the Plan's break-in-service provision and entitled him to 13 additional pre-ERISA years of service towards the calculation of his pension. The PTF argued, in contrast, that since § 203 allowed break-in-service provisions to survive for purposes of pre-ERISA vesting, these provisions would also survive for purposes of pre-ERISA benefit accrual, and, consequently, permit the PTF to disregard McDonald's 13 years of credited service prior to his 1970-1972 break in service.

In response to cross motions for summary judgment, the district court (Naomi Reice Buchwald, Judge) agreed with McDonald on this claim. In a thorough opinion the court concluded that, for purposes of determining an employee's participation in a plan, ERISA § 202(b), with certain enumerated exceptions, required that "all years of service" under the plan must be taken into account. Based on this reading of the statute, the court found that ERISA invalidated the Plan's break-in-service provisions that limited accrued benefits arising from pre-ERISA employment, and the court held that McDonald was entitled to credit for 23 years of service. Specifically, the court concluded that "ERISA § 203(b)(1)(F), 29 U.S.C. 1053(b)(1)(F), which permits plans to exclude, for vesting purposes, years of service that would have been disregarded under a pre-ERISA plan's break in service rules, is not applicable in determining the accrued benefit payable to an employee who has satisfied the vesting requirements." McDonald I, 153 F.Supp.2d at 275. The court emphasized that the text of ERISA was dispositive. Although the court reviewed secondary sources, it concluded that referencing legislative history and administrative commentary was unnecessary because "Congress has addressed the precise question at issue here and answered it in [McDonald's] favor." Id. at 276. In addition, the court determined that the Plan's pre- and post-ERISA accrual provisions complied with ERISA. Finally, the court concluded that a $30 photocopying bill (at 15 cents per page) from the Plan was reasonable, that plaintiff's counsel's claim to the contrary "border[ed] on the frivolous," and that his pursuit of a claim of that size was "vexatious and unprofessional." Id. at 291.

Following this decision, the PTF agreed to credit McDonald for 25 years of service under a Plan provision that authorized the award of two additional years of service to Plan participants who had earned 23 years of credited service. Although McDonald was therefore eligible for pension benefits of $1,000 per month, the PTF refused to award him interest for any period before the district court's March 29, 2001 decision.

In October 2001, the district court issued its second decision. McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, No. 99 Civ. 9054, 2001 WL 1154630, 2001 U.S. Dist. LEXIS 15534 (S.D.N.Y. Oct. 1, 2001) ("McDonald II"). It denied McDonald's request for class-wide relief but held that McDonald was entitled to an immediate lump sum payment of past due pension benefits with interest from January 1, 1990, and that the PTF must retroactively amend its Plan to January 1, 1976. Finally, the district court awarded McDonald $1,065 pursuant to ERISA § 502(c)(1) because of the PTF's failure to furnish various documents but declined to find the PTF's calculation of photocopying expenses unreasonable.

The PTF appealed the district court's award of increased pension benefits and McDonald cross-appealed, challenging the district court's (1) refusal to grant class-wide relief, (2) determination that the Plan...