Donald Tompkins v. Central Laborers' Pension Fun ( 2013 )


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  •                            In the
    United States Court of Appeals
    For the Seventh Circuit
    No. 12-1995
    D ONALD J. T OMPKINS,
    Plaintiff/Counter-Defendant-Appellant,
    v.
    C ENTRAL L ABORERS’ P ENSION F UND,
    Defendant/Counter-Plaintiff-Appellee.
    Appeal from the United States District Court
    for the Central District of Illinois.
    No. 4:09-cv-004004—Sara Darrow, Judge.
    A RGUED O CTOBER 31, 2012—D ECIDED M ARCH 13, 2013
    Before E ASTERBROOK, Chief Judge, and W ILLIAMS and
    S YKES, Circuit Judges.
    W ILLIAMS, Circuit Judge. The Central Laborers’ Pension
    Fund (the “Fund”) terminated Donald J. Tompkins’s
    disability benefits because he became employed
    full-time and, therefore, no longer had a “total and per-
    manent disability.” Tompkins, who brought this action
    2                                             No. 12-1995
    under the Employee Retirement Income Security Act
    (“ERISA”), 
    29 U.S.C. §§ 1001
     et seq., challenges the
    Fund’s interpretation of its definition of “total and per-
    manent disability.” The Fund, which acknowledges that
    the relevant definition provision is ambiguous, argues
    that its interpretation is entitled to deference under the
    arbitrary-and-capricious standard of review. We agree.
    Despite Tompkins’s arguments to the contrary, the
    Fund based its decision to terminate his benefits on a
    reasonable interpretation of the definition provision.
    And because none of Tompkins’s remaining argu-
    ments challenging that decision has merit, we affirm
    the district court’s decision granting summary judg-
    ment in the Fund’s favor.
    I. BACKGROUND
    Tompkins, who began working as a laborer in Illinois
    in 1978, is a participant in the Fund, a not-for-profit,
    multi-employer pension fund established and admin-
    istered pursuant to ERISA. In July 1999, Tompkins filed
    an application for a disability pension from the Fund
    based on chronic asthmatic bronchitis, which he at-
    tributed to working with cement dust for twenty-two
    years. At that time the Fund was administered pursuant
    to the Summary Plan Description, Revised and Effective
    July 1, 1995 (“Revised SPD”) and the Restated Plan
    Rules and Regulations-Amended and Restated Effective
    October 1, 1994 (“First Restated Plan”). The Fund did not
    mail or otherwise provide the First Restated Plan to
    Tompkins or any other Fund participants, but Tompkins
    No. 12-1995                                              3
    did receive a copy of the Revised SPD, which provided in
    relevant part that “[d]isability benefits are payable for
    life, assuming, of course, that you remain totally and
    permanently disabled.” The Revised SPD also referred
    participants to the provisions of the First Restated
    Plan, which defined “total and permanent disability”
    and explained when the Fund could terminate or
    suspend benefits.
    Amendment 7 to the First Restated Plan, which
    became effective in November 1998, included the fol-
    lowing provision:
    A Total and Permanent Disability shall mean that
    the Employee is totally and permanently unable
    as a result of bodily injury or disease to engage
    in any further employment or gainful pursuit as
    a Laborer or other Building Trades Crafts employ-
    ment in the construction industry for remunera-
    tion or profit, regardless of the amount, or
    unable to engage in further employment or
    gainful pursuit of non-Laborer or other non-
    Building Trades Crafts employment for which
    the employment is considered full-time and a
    primary source of income. For such non-Laborer
    or other non-Building Trades Crafts employment,
    provided a physician, selected by the trustees,
    considers the disability to be total and permanent,
    the Participant may earn up to $14,000 per cal-
    endar year in non-Laborer or other non-Building
    Trades Crafts employment and be considered
    totally and permanently disabled for purposes
    4                                               No. 12-1995
    of Section 3.10. Such disability must be considered
    total and permanent and will continue during
    the remainder of the Participant’s life. The
    trustees shall be the full and final judges of Total
    and Permanent Disability and of entitlement to
    a Disability Pension hereunder.
    The Fund did not provide Amendment 7 to Tompkins
    or any other plan participant.
    Tompkins’s application for a disability pension in-
    cluded an acknowledgment that he agreed to be bound
    by all the Fund’s rules and regulations, although he
    did not inquire about those rules or make any effort to
    find out what they were at the time he applied or before
    filing this lawsuit. In August 1999, the Fund approved
    Tompkins for “total and permanent disability” benefits
    in the amount of $2,115.43 per month, retroactive to
    January 1, 1999. The first time Tompkins received his
    monthly benefit, he was required to sign a Retirement
    Declaration that provided notice of disqualifying em-
    ployment for plan participants receiving retirement
    pensions but did not include the rules and regulations
    specific to disability pensioners.
    Tompkins received monthly disability benefits
    through May 2007. In June, the Fund sent him a letter
    suspending his disability pension, claiming that his
    full-time employment at Wilman Construction in 2005
    and 2006 led the Fund “to believe that [he] no longer
    [met] the Fund’s definition of ‘total and permanent dis-
    ability.’ ” The Fund found that Tompkins began working
    forty hours per week beginning in July 2005 and earned
    No. 12-1995                                             5
    $10,550 that year and $22,100 in 2006. The letter
    informed Tompkins that he had been overpaid $48,654.89
    in benefits from July 2005 through May 2007 and that
    the Fund would seek to recover that amount through
    its recovery process.
    The Fund based its decision to terminate Tompkins’s
    disability benefits on Section 3.10’s definition of “total
    and permanent disability.” Tompkins, who disputed
    the Fund’s interpretation of the definition, appealed the
    Fund’s decision. He made three arguments. First, he
    asserted that his 2005 work did not violate Section 3.10
    because the work was “non-laborer” employment that
    earned him less than $14,000. He also argued that the
    overpayment provisions should only apply once he
    earned $14,000 for the year. And finally, he asserted
    that he was not notified of the requirement to remain
    “totally and permanently disabled” to continue re-
    ceiving disability benefits.
    After the Fund unanimously denied his appeal in
    2008, Tompkins filed a complaint in federal court. In
    an amended complaint, he alleged: the Fund contro-
    verted the plain meaning of the Plan by failing to apply
    the $14,000 provision to his full-time employment as a
    non-laborer; the Fund breached its fiduciary duty by
    failing to provide him with proper notice of the rules
    governing suspension of his benefits; and the Fund vio-
    lated ERISA’s anti-cutback rule. The Fund filed a coun-
    terclaim for fraudulent concealment, alleging that
    Tompkins hid his full-time employment between 2005
    and 2007. Both parties filed motions for summary judg-
    6                                                No. 12-1995
    ment. The district court granted the Fund’s motion on
    all of Tompkins’s claims and held a two-day bench trial
    on the Fund’s counterclaim. After finding that there
    was no evidence that Tompkins intended to deceive the
    Fund into paying him benefits, the court ruled in favor
    of Tompkins on the Fund’s counterclaim. Tompkins
    appeals the district court’s summary judgment decisions
    on his claims that the Fund controverted the plain
    meaning of Section 3.10 and breached its fiduciary duty.
    II. ANALYSIS
    We review a district court’s summary judgment deci-
    sions de novo. Edwards v. Briggs & Stratton Ret. Plan, 
    639 F.3d 355
    , 359 (7th Cir. 2011). When we consider a
    district court decision following cross-motions for sum-
    mary judgment, “our review of the record requires
    that we construe all inferences in favor of the party
    against whom the motion under consideration is
    made.” Hendricks-Robinson v. Excel Corp., 
    154 F.3d 685
    ,
    692 (7th Cir. 1998).
    A. The Arbitrary-and-Capricious Standard Applies
    A district court reviews the denial of ERISA benefits
    de novo, “unless the benefit plan gives the administrator
    or fiduciary discretionary authority to determine
    eligibility for benefits or to construe the terms of the
    plan.” Firestone Tire & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 115
    (1989). When the terms of a plan provide for such discre-
    tion, judicial review of the administrator’s decision
    No. 12-1995                                              7
    is limited to an arbitrary-and-capricious standard,
    under which an administrator’s decision will be upheld
    “as long as (1) it is possible to offer a reasoned explana-
    tion, based on the evidence, for a particular outcome,
    (2) the decision is based on a reasonable explanation of
    relevant plan documents, or (3) the administrator has
    based its decision on a consideration of the relevant
    factors that encompass the important aspects of the
    problem.” Hess v. Hartford Life & Accident Ins. Co., 
    274 F.3d 456
     (7th Cir. 2004) (internal quotation omitted).
    The parties agree that the Plan grants the Fund’s
    trustees discretionary authority to interpret and apply
    its terms. Tompkins, however, relies on recent language
    from the Supreme Court to argue that the arbi-
    trary-and-capricious standard of review should not
    apply. In Conkright v. Frommert, the Court stated that
    “[u]nder trust law, a trustee may be stripped of defer-
    ence when he does not exercise his discretion honestly
    and fairly.” 
    130 S. Ct. 1640
    , 1651 (2010) (internal quota-
    tion marks omitted).
    Tompkins first suggests that a heightened standard
    of review is warranted under Conkright because the
    Fund acted in bad faith by failing to disclose three docu-
    ments to him: an internal memo sent in 1997 from one
    of the Fund’s consultants to an attorney stating that
    the general consensus was that the definition of “total
    and permanent disability” was too restrictive; a 1997
    letter sent from the same consultant to an attorney de-
    scribing an amendment to the plan that would allow
    a disabled person to earn up to $14,000 in non-construc-
    8                                              No. 12-1995
    tion work and continue to be eligible for disability
    benefits; and a proposed—but not adopted—2005 draft
    amendment to the plan that considered incorporating
    language that Tompkins argues would have only been
    necessary if his interpretation of the $14,000 provision
    were accurate. Tompkins alleges that because these
    documents support his view that the $14,000 provision
    applied to part-time and full-time work in non-laborer
    employment, the Fund acted in bad faith by not
    disclosing them to him prior to or during his April 2008
    appeal hearing.
    Tompkins’s bad-faith argument is meritless. After its
    adverse benefit termination, the Fund was required to
    provide Tompkins with copies of “documents, records,
    and other information relevant to [his] claim for bene-
    fits.” 
    29 C.F.R. § 2560.503-1
    (j)(3). And information is
    “relevant” if it: “(i) [w]as relied upon in making the
    benefit determination; (ii) [w]as submitted, considered,
    or generated in the course of making the benefit deter-
    mination . . .; (iii) [d]emonstrates compliance with the
    administrative processes and safeguards required . . . in
    making the benefit determination; or (iv) [i]n the case
    of a group health plan or a plan providing disability
    benefits, constitutes a statement of policy or guidance
    with respect to the plan concerning the denied treatment
    option or benefit . . . .” 
    Id.
     § 2560.503.1(m)(8). Tompkins
    does not argue that any of the documents he identifies
    were relevant under any of these bases of relevance.
    Rather, he asserts that they were available to the
    trustees at the time they denied his benefits, and, col-
    lectively, they show that the Fund acted in bad faith. But
    No. 12-1995                                                   9
    we will not characterize the Fund as acting in bad
    faith because it did not disclose documents it had no
    obligation to disclose.
    Tompkins next attempts to convince us that the Fund
    is not entitled to the arbitrary-and-capricious standard
    of review because a conflict of interest influenced its
    decision to terminate his disability benefits. “[A] benefits
    determination by a plan administrator is a fiduciary act,
    one in which the administrator owes a special duty
    of loyalty to the plan beneficiaries.” Raybourne v. Cigna
    Life Ins. Co. of N.Y., 
    700 F.3d 1076
    , 1081-82 (7th Cir. 2012).
    And “if a plan gives discretionary authority to an ad-
    ministrator or fiduciary who is operating under a
    conflict of interest, that conflict must be weighed . . . .” 
    Id. at 1082
    . We held that a conflicts analysis was not
    necessary when the plan at issue was a multi-employer
    welfare plan whose trustees consisted of an equal
    number of union and employer representatives, whose
    union representatives had “no discernible incentive to
    rule against an applicant,” and whose trustees were
    unanimous in their ruling. Manny v. Cent. States, Se. and
    Sw. Areas Pension & Health & Welfare Funds, 
    388 F.3d 241
    ,
    243 (7th Cir. 2004). Tompkins argues that a conflicts
    analysis is required here because the trustees, who
    ruled unanimously and who are split evenly among
    union and employer representatives, had an incentive
    to rule against him, as evidenced by the fact that they
    evaluated his claims at the same time they were
    concerned about the cost of the retirement plan.
    Tompkins’s evidence of a conflict of interest is minimal
    at best—a 2004 presentation emailed by the Fund’s con-
    10                                              No. 12-1995
    sultant to its executive director that included a recom-
    mendation that the Fund “ensure all disability pensioners
    are disabled” and a 2010 letter to participants and bene-
    ficiaries giving notice that the decline in financial
    markets put the fund in “endangered status” for the
    2009 plan year.
    We have previously held that “the arbitrary-
    and-capricious standard may be a range, not a point” and
    that “[t]here may be in effect a sliding scale of judicial
    review of trustees’ decisions—more penetrating the
    greater is the suspicion of partiality, less penetrating the
    smaller that suspicion is.” Van Boxel v. Journal Co. Emps.
    Pension Trust, 
    836 F.2d 1048
    , 1052-53 (7th Cir. 1987). The
    suspicion of partiality raised by Tompkins’s claim is
    negligible, in part because his evidence either predated
    the termination decision by four years or did not exist
    until nearly two years after it. Furthermore, there is
    no reason to suspect from that evidence—or any other
    evidence presented by Tompkins—that the Fund was
    motivated to improperly administer disability pensions
    around the time it made the decision to terminate
    his benefits. Tompkins’s arguments are simply not suf-
    ficient to change the applicable standard of review. The
    range of the arbitrary-and-capricious standard leaves
    us more than enough room to take Tompkins’s concerns
    into account while still granting the Fund’s trustees
    the appropriate amount of deference.
    On appeal, Tompkins argues that the district court
    should have addressed the conflict-of-interest issue
    before responding to his claims that the Fund was acting
    No. 12-1995                                              11
    in bad faith. This argument fails for several reasons.
    First, Tompkins did not argue for a particular sequence
    of review to the district court, and at summary judg-
    ment, he presented his bad-faith argument before his
    conflict-of-interest one. Additionally, he provides no
    authority for his argument that the district court
    should have considered the alleged conflict of interest
    first. Instead, he merely cites language stating that “a
    majority of the Supreme Court Justices consider the
    potential conflict of interest of a plan administrator (or
    its staff) serious enough to be given weight in judicial
    review of the denial of benefits.” Marrs v. Motorola, Inc.,
    
    577 F.3d 783
    , 788 (7th Cir. 2009). But Marrs does
    nothing to advance Tompkins’s cause, since it does
    not address the order in which a district court must
    consider arguments relevant to the selection of a
    standard of review. And ultimately, the order makes
    no difference. Tompkins’s evidence of bad faith and
    conflict of interest is insufficient to raise suspicions
    about the trustees’ actions that warrant raising the ap-
    plicable standard of review, regardless of which chal-
    lenge we consider first.
    B. The Fund Did Not Act in an Arbitrary or Capricious
    Manner
    The parties dispute the relevance of the phrase “[f]or
    such” in this excerpt from Section 3.10 (emphasis added):
    A Total and Permanent Disability shall mean that
    the Employee is totally and permanently. . . unable
    to engage in further employment or gainful
    12                                                No. 12-1995
    pursuit of non-Laborer . . . employment for which
    the employment is considered full-time and a
    primary source of income. For such non-Laborer . . .
    employment, . . . the Participant may earn up to
    $14,000 per calendar year in non-Laborer . . .
    employment and be considered totally and per-
    manently disabled . . . .
    Under Tompkins’s reading of this provision, the “for
    such” prefatory phrase, which allows pensioners to
    earn up to $14,000 through non-laborer employment,
    refers to all the language that precedes it (i.e., “non-Laborer
    employment for which the employment is considered
    full-time and a primary source of income”), such that
    a person employed full-time can remain “totally and
    permanently disabled” if he earns less than $14,000. In
    contrast, the Fund interprets the “for such” language as
    a general reference to the type of work allowed in
    the $14,000 provision such that a participant can earn
    up to $14,000 through non-laborer employment and
    remain “totally and permanently disabled,” but he
    cannot do so if he is employed as a laborer. According
    to the Fund, the $14,000 provision does not address
    the length of time the pensioner works; instead, it
    argues that the first sentence of Section 3.10 ac-
    complishes this by prohibiting a “totally and perma-
    nently disabled” participant from engaging in full-time
    non-laborer employment. According to the Fund, it
    intended the $14,000 provision to allow permanently
    disabled participants to maintain part-time employ-
    ment without losing their disability pensions.
    No. 12-1995                                               13
    Tompkins asks us to find the meaning of the $14,000
    provision so plain that the Fund acted arbitrarily and
    capriciously when it relied on it to terminate his bene-
    fits. See Hess v. Hartford Life & Accident Ins. Co., 
    274 F.3d 456
    , 461 (7th Cir. 2001) (“In some cases, the plain lan-
    guage or structure of the plan or simple common
    sense will require the court to pronounce an administra-
    tor’s determination arbitrary and capricious.”). The
    Fund responds that the language in the $14,000 provi-
    sion is ambiguous. We agree. There are certainly more
    efficient ways to communicate the Fund’s definition
    of “total and permanent disability.” And the “for such”
    preface seems unnecessarily confusing. In addition,
    Tompkins’s need to resort to extrinsic evidence, such
    as the 1997 memo and letter and the 2005 draft amend-
    ment, also suggests that the provision is, in fact, ambigu-
    ous. See Swaback v. Am. Info. Techs. Corp., 
    103 F.3d 535
    , 541 (7th Cir. 1996) (with ERISA plans, “[e]xtrinsic
    evidence should not be used where the contract is unam-
    biguous” (quoting GCIU Emp’r Ret. Fund v. Chi. Tribune
    Co., 
    66 F.3d 862
    , 865 (7th Cir. 1995)). Because of that
    ambiguity, the Fund’s interpretation of the $14,000 pro-
    vision is entitled to deference. That interpretation rests
    on a reasoned understanding of “total and permanent
    disability”: once a participant is engaged in full-time
    employment, regardless of how much he makes, he is
    no longer totally and permanently disabled. Given the
    required level of deference to the Fund’s interpreta-
    tion of its own plan, we cannot say the Fund acted arbi-
    trarily or capriciously when it denied Tompkins bene-
    fits for the time he was employed full-time.
    14                                           No. 12-1995
    C. The Fund Did Not Breach Its Fiduciary Duty
    Breaches of fiduciary duty occur when fiduciaries
    “mislead plan participants or misrepresent the terms
    or administration of a plan.” Anweiler v. Am. Elec. Power
    Serv. Corp., 
    3 F.3d 986
    , 991 (7th Cir. 1993). However,
    “while there is a duty to provide accurate information
    under ERISA, negligence in fulfilling that duty is not
    actionable.” Vallone v. CNA Fin. Corp., 
    375 F.3d 623
    , 642
    (7th Cir. 2004). Rather, there must have been an intent
    to “disadvantage or deceive” plan participants. Vallone,
    
    375 F.3d at 642
    .
    ERISA requires trustees to discharge their duties “in
    accordance with the documents and instruments gov-
    erning the plan . . . .” (the “plan document rule”). 
    29 U.S.C. § 1104
    (a)(1)(D). Tompkins argues that the Fund
    breached this duty by not providing him with the Plan
    Rules Governing Suspension, a document he argues set
    limits on his subsequent employment. Although the
    Plan acknowledges its failure to provide Tompkins with
    this document, Tompkins’s argument nonetheless fails
    because the Plan Rules Governing Suspension does not
    apply to disability benefits; rather, it details the sus-
    pension of regular pension benefits, as evidenced by its
    prohibition on pensioners receiving “any type of com-
    pensation” and the ability of pensioners to begin
    receiving benefits again after terminating disqualifying
    employment. It would not be logical for these provisions
    to apply to someone who is totally and permanently dis-
    abled. And given the deference that courts must give
    funds interpreting their own plan documents, it was not
    No. 12-1995                                             15
    arbitrary or capricious for the Fund to fail to give
    Tompkins a document that it believed did not apply to
    him.
    Tompkins also argues that the Fund breached its fidu-
    ciary duties of care, skill, prudence, and diligence by
    providing him with incorrect or insufficient notice of
    the terms of his disability benefits, pointing specifically
    to the Retirement Declaration that was not tailored to
    disability beneficiaries. Assuming that the Fund pro-
    vided inaccurate information to Tompkins by giving
    him the Retirement Declaration rather than one tailored
    to disability pensioners, there is no evidence of intent
    to deceive or disadvantage him. First, it was the
    Fund’s standard practice to provide that declaration
    to disability pensioners. And more importantly, the re-
    quirement that disability pensioners like Tompkins
    remain “totally and permanently disabled” was set out
    elsewhere, including in the Revised SPD, which
    Tompkins received.
    Finally, Tompkins suggests that the Fund breached
    its duty by not suspending his benefits in January 2004,
    when it discovered that he had earned $7,144.00 in
    2001 and $4,037.50 in 2002. This argument is meritless.
    When the Fund asked Tompkins to explain the nature
    of his 2001 and 2002 work, he responded that he worked
    eight to ten hours a week repairing nail guns and per-
    forming light office duties. This work was neither
    full-time nor connected to more than $14,000 in com-
    pensation, so it would not have triggered the termina-
    tion of benefits under either interpretation of the
    16                                          No. 12-1995
    $14,000 provision. Thus, the Fund’s failure to terminate
    his benefits was not a breach of its fiduciary duty.
    III. CONCLUSION
    For the reasons set forth above, we A FFIRM the judg-
    ment of the district court.
    3-13-13