Hatchigian v. International Brotherhood of Electrical Workers, Local Union No. 98 ( 2013 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 13-1377
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DAVID HATCHIGIAN,
Appellant,
v.
INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL UNION NO. 98, HEALTH &
WELFARE FUND; BOARD OF TRUSTEES OF LOCAL
UNION NO. 98 HEALTH & WELFARE FUND
__________________________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 11-cv-05177)
District Judge: Honorable Ronald L. Buckwalter
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Submitted Pursuant to Third Circuit LAR 34.1(a)
July 23, 2013
Before: FUENTES, VANASKIE and VAN ANTWERPEN, Circuit Judges
(Opinion filed: July 24, 2013)
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OPINION
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PER CURIAM
Appellant David Hatchigian appeals from an order of the District Court granting
summary judgment to the defendants. For the reasons that follow, we will affirm.
The International Brotherhood of Electrical Workers, Local Union No. 98 Health
and Welfare Fund is a trust fund established to fund health care benefits for the members
of IBEW Local Union No. 98. Hatchigian, a union member since 1968, was a participant
in the Fund. On August 17, 2007, Hatchigian received notice that his health care benefits
were being terminated because he did not meet the minimum requirement of 350 hours
worked during the previous quarter. The notice also informed him that he could choose
to elect continuing coverage through self-payment, pursuant to the Consolidated
Omnibus Budget Reconciliation Act (“COBRA”).
Hatchigian appealed the termination of his benefits to the Trustees of the Fund,
contending that he was eligible for continued coverage under Article IV, Section E of the
Health and Welfare Benefits Plan. Section E, entitled “Supplemental Coverage Under
Emergency Economic Conditions,” provides for continuing coverage to employees “who
are on work layoff and cannot find work opportunities due to economic conditions.”
Section E notes that such supplemental coverage is available “[t]o the extent the Trustees
determine that the Plan’s assets are sufficient and economic conditions warrant.” Section
E states that, upon a determination that the Plan’s assets are sufficient and economic
conditions warrant, the Fund “will” provide supplemental coverage.
Hatchigian’s appeal was denied in a November 29, 2007 letter sent from Frank M.
Vaccaro and Associates, administrators of the Fund, with an explanation that the Trustees
had not made a determination that economic conditions warranted the continuation of
coverage in 2007 for union members who were unemployed. Hatchigian sent an
amended communication to the Fund, reiterating his contention that he was eligible for
supplemental coverage under Section E. This second appeal was considered and denied
by the Trustees at their January 2008 meeting, and Hatchigian was subsequently notified
of the decision. Hatchigian’s COBRA coverage was terminated for the August 2007
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benefits quarter because he did not pay the required premium. Hatchigian did not receive
coverage for eight additional quarters prior to his retirement. Following his retirement,
Hatchigian was restored to long-term coverage.
On August 15, 2011, Hatchigian, through counsel, brought suit in the United
States District Court for the Eastern District of Pennsylvania against the Trustees and the
union, alleging violations of the Employee Retirement Income Security Act of 1974, 29
U.S.C. § 1001 et seq. (“ERISA”), and the Labor Management Relations Act of 1947
(“LMRA”), 29 U.S.C. § 141 et seq. Hatchigian sought to recover money damages in
excess of $23,000 for the benefit quarters between August 1, 2007 and June 1, 2010.
Hatchigian deposed several Trustees, after which the defendants moved for summary
judgment, Fed. R. Civ. Pro. 56(a). Hatchigian opposed the motion. In his opposition he
acknowledged deposition testimony to the effect that, although not insolvent, the Fund
was losing money during the relevant time period. However, Hatchigian then
supplemented his opposition with an exhibit showing union unemployment statistics for
2007. Based on this exhibit, Hatchigian contended that there was not full employment in
2007, and that unemployment was on the rise in the first two quarters of 2007.
In an order entered on January 15, 2013, the District Court granted the defendants’
motion and awarded summary judgment to the defendants on both counts of the
complaint. With respect to Hatchigian’s ERISA claim, the District Court concluded that
there was not enough in the summary judgment record to indicate a triable issue with
respect to whether the Trustees had acted in an arbitrary and capricious manner in failing
to extend supplemental coverage to unemployed union members for the August 2007
3
benefits quarter. See Hatchigian v. I.B.E.W. Local 98, Health and Welfare Fund, 2013
WL 159814, at *5 (E.D. Pa. January 15, 2013).
Hatchigian appeals pro se. We have jurisdiction under 28 U.S.C. § 1291. We
review a District Court’s grant of summary judgment de novo. See Alcoa, Inc. v. United
States, 509 F.3d 173, 175 (3d Cir. 2007). Hatchigian contends that the District Court
erred in awarding summary judgment to the defendants on his ERISA claim by failing to
consider the Trustees’ duty to monitor the daily “no-work” lists prior to rendering a
supplemental coverage determination, and by placing undue emphasis on the issue of the
Fund’s financial health. Hatchigian has not argued that the District Court’s disposition of
his LMRA claim was in error and thus this issue is waived. See Wisniewski v. Johns-
Manville Corp., 812 F.2d 81, 88 (3d Cir. 1987) (issue not addressed in brief is deemed
waived on appeal).
We will affirm. Summary judgment is proper where the summary judgment
record “shows that there is no genuine dispute as to any material fact and that the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(a). The moving party
has the initial burden of identifying evidence that it believes shows an absence of a
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In
addition, we are required to view the facts in the light most favorable to the non-moving
party, and make all reasonable inferences in his favor. See Armbruster v. Unisys Corp.,
32 F.3d 768, 777 (3d Cir. 1994). But, “[w]here the record taken as a whole could not
lead a rational trier of fact to find for the non-moving party, there is no genuine issue for
trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A
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genuine issue of material fact is one that could change the outcome of the litigation.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986).
When evaluating challenges to the denial of benefits in actions brought under
ERISA, 29 U.S.C. § 1132(a)(1)(B), district courts are to review the plan administrator’s
decision under a de novo standard of review, unless the plan grants discretionary
authority to the administrator or fiduciary to determine eligibility for benefits or interpret
the terms of the plan. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989).
When discretionary authority is given to an administrator of a plan, a deferential standard
– the “arbitrary and capricious” standard – is applied. See id. at 111. See also Estate of
Schwing v. The Lilly Health Plan, 562 F.3d 522, 525 (3d Cir. 2009) (“[C]ourts reviewing
the decisions of ERISA plan administrators or fiduciaries … should apply a deferential
abuse of discretion standard of review across the board[.]”). Hatchigian does not dispute
that the deferential “arbitrary and capricious” standard applies to his ERISA claim.1
When the arbitrary and capricious standard applies, a court should uphold the plan
administrator or fiduciary’s determination to deny benefits unless it was clear error or not
rational. See Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1141 (3d Cir. 1993).
Review is thus narrow, and a court is not free to substitute its judgment for that of the
1
Even if Hatchigian disputes the issue, see Appellant’s Brief, at 20, the summary
judgment record does not support an inference that the Trustees labored under a conflict
of interest in his case. See James v. Int’l Painters & Allied Trades Indus. Pension Plan,
710 F. Supp.2d 16, 24 (D.D.C. 2010) (“[A]s a multi-employer pension fund, as is the case
here, the defendants do not pay beneficiaries from their own funds . . . and thus the Court
need not be concerned about conflicts of interest.). Cf. Estate of Schwing, 562 F.3d at
525 (when abuse of discretion standard apples, any conflict of interest is but one of
several factors that may be considered in determining whether the administrator or
fiduciary abused its discretion).
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plan administrator or fiduciary in determining eligibility for plan benefits. Doroshow v.
Hartford Life & Accident Ins. Co., 574 F.3d 230, 234 (3d Cir. 2009).
Hatchigian argued in opposing the defendants’ summary judgment motion that he
failed to meet his hours during the August 2007 work quarter due to a shortage of work,
but he was willing and able to work, and thus the Trustees acted in an arbitrary and
capricious manner in failing to invoke Section E supplemental coverage for this period.
In support of his argument, he relied on a written statement the Fund provided to the
United States Department of Labor concerning when it decides to invoke Section E
supplemental coverage.2 In this statement, counsel for the Fund stated:
In determining whether or not to provide supplemental coverage, the
Trustees review the overall work hours and employment opportunities
available to participants as a whole. Supplemental coverage is extended
only when the Trustees conclude that a sufficient number of participants are
unable to find work opportunities due to economic conditions and through
no fault of their own. There is no magic formula used in making that
determination. Rather it is a decision made based on the facts and
circumstances at the time[.]
(Defendants’ Motion for Summary Judgment, Ex. “3,” Letter dated July 22, 2008 from
William T. Josem to Ellen W. Fontenot.)
The Trustees thus represented to the Labor Department that supplemental
coverage will be extended when a “sufficient number of participants are unable to find
work opportunities due to economic conditions.” And yet, Hatchigian argues on appeal,
they admitted in deposition testimony, that they failed to consider the daily out-of-work
lists. By failing to consider the daily out-of-work lists before deciding not to invoke
Section E supplemental coverage for the August 2007 benefits quarter, the Trustees acted
in an arbitrary and capricious manner in denying supplemental coverage.
2
The Department of Labor contacted the Fund after receiving a letter from Hatchigian.
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We agree with the District Court that there was no genuine issue of material fact
with respect to whether the Fund Trustees acted in an arbitrary and capricious manner in
deciding not to extend Section E supplemental coverage during the August 2007 benefits
quarter. As a threshold matter, the parties do not dispute that Section E on supplemental
coverage is a discretionary provision, and, that when supplemental coverage is triggered
under this provision, it is triggered for all participants who otherwise would qualify for
such coverage, and not just Hatchigian. Section E plainly leaves it to the individual
judgment of the Trustees whether or not to extend supplemental coverage for any given
benefit quarter. Hatchigian points to no language in the provision, set forth in the margin
with the emphasis in the original,3 to support an assertion that it will automatically go
3
Article IV, Section E
Supplemental Coverage Under Emergency Economic Conditions
To the extent the Trustees determine that the Plan’s assets are sufficient, the
Trustees may provide for benefits for individuals who are on work layoff and
cannot find work opportunities due to economic conditions. Upon determination
by the Trustees that the Plan’s assets are sufficient and economic conditions
warrant, the Fund will provide supplemental coverage. Accordingly, you will be
eligible for continued benefits even if you are unemployed and do not make
contributions to the Plan if you meet all the conditions outlined below: You must
have held eligibility status under the Plan for not less than four continuous
previous quarters immediately prior to your last work layoff. You will be entitled
to participate in the supplemental program only so long as you remain ready,
willing and available to work for a contributing employer.
* * * *
PLEASE NOTE THAT THE TRUSTEES HAVE THE POWER AND DUTY
TO TERMINATE COVERAGE OR TO REVISE THE CONDITIONS FOR
COVERAGE UNDER THIS PROVISION AT ANY TIME THEY
DETERMINE THAT SUCH TERMINATION OR REVISION IS
NECESSARY TO PRESERVE THE FUND'S ASSETS OR THAT
ECONOMIC CONDITIONS HAVE CHANGED. THE TRUSTEES WILL
RENEW OR CANCEL THIS PROVISION ON A QUARTERLY BASIS OR
AS MAY OTHERWISE BE NECESSARY.
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into effect for all union member electricians on the no-work lists, as he argues. See
Appellant’s Brief, at 9.
Moreover, nothing in the summary judgment record shows that the Trustees
ignored the unemployment factor. Although Hatchigian may have demonstrated for
summary judgment purposes that the daily out-of work lists were useful objective
information, he argues that they were the only true barometer of unemployment
throughout the union. He did not, however, support this allegation, as required by the
summary judgment rule, Fed. R. Civ. Pro. 56(e), or come forward with evidence to show
that the Trustees, who were equally divided between union and management
representatives, did not have direct and personal knowledge about whether union
unemployment was high and work opportunities few from April 2007 through June 2007,
the period relating to the August 2007 benefits quarter. Furthermore, as explained by the
District Court, “the Trustees decided to extend Supplemental Coverage under Section E
in May 2009 upon a determination that the Fund’s assets were sufficient and a sufficient
number of employees were out of work – demonstrating that there are circumstances
under which they will decide to do so.” Hatchigian, 2013 WL 159814, at *5.
In addition, Section E plainly permits the Trustees to consider the Fund’s assets.
Although the Fund was not insolvent, it had recently lost some of its value. Trustee
Burrows testified that the $37 million Fund had in prior years been worth $52 million. It
was reasonable for the Trustees to decide that the simple fact of cash on hand did not
warrant extending Section E supplemental coverage against a background of declining
assets. Accordingly, as held by the District Court, there was no triable ERISA issue with
respect to whether the Trustees failed in their duty to properly balance the work
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opportunities, the long-term viability of the Fund, and the number of affected participants
in arriving at their Section E adverse supplemental coverage decision with respect to the
August 2007 benefits quarter.
For the foregoing reasons, we will affirm the order of the District Court awarding
summary judgment to the defendants.
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