Richard Lehman v. Warner Nelson

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RICHARD LEHMAN, on behalf of No. 15-35414
himself and others similarly situated,
Plaintiff-Appellee, D.C. No.
2:13-cv-01835-
v. RSM
WARNER NELSON; WILLIAM BECK,
JR.; BRIAN BISH; KLAAS A. DEBOER;
MICHAEL G. MARSH; ROCKY SHARP;
RICHARD BAMBERGER; DENNIS
CALLIES; CLIF DAVIS; TIM
DONOVAN; HARRY THOMPSON;
GARY YOUNGHANS, in Their
Capacity as Trustees of the Ibew
Pacific Coast Pension Plan; CLINT
BRYSON; MICHAEL CHURCH;
MICHAEL DOYLE; GREG ELDER;
GLEN FRANZ; GARY GONZALES;
CARL D. HANSON; PATRICK
POWELL; GARY PRICE; SCOTT
STEPHENS; ROGER TOBIN; GRANT
ZADOW,
Defendants-Appellants.
2 LEHMAN V. NELSON
RICHARD LEHMAN, on behalf of Nos. 15-35457
himself and others similarly situated, 15-35696
Plaintiff-Appellant/
Cross-Appellee, D.C. No.
2:13-cv-01835-
v. RSM
WARNER NELSON; WILLIAM BECK,
JR.; BRIAN BISH; KLAAS A. DEBOER; OPINION
MICHAEL G. MARSH; ROCKY SHARP;
RICHARD BAMBERGER; DENNIS
CALLIES; CLIF DAVIS; TIM
DONOVAN; HARRY THOMPSON;
GARY YOUNGHANS, in their capacity
as Trustees of the IBEW Pacific
Coast Pension Plan; CLINT BRYSON;
MICHAEL CHURCH; MICHAEL
DOYLE; GREG ELDER; GLEN FRANZ;
GARY GONZALES; CARL D. HANSON;
PATRICK POWELL; GARY PRICE;
SCOTT STEPHENS; ROGER TOBIN;
GRANT ZADOW,
Defendants-Appellees/
Cross-Appellants.
Appeal from the United States District Court
for the Western District of Washington
Ricardo S. Martinez, Chief Judge, Presiding
Argued and Submitted on June 12, 2017
Seattle, Washington
LEHMAN V. NELSON 3
Filed July 14, 2017
Before: Dorothy W. Nelson, Milan D. Smith, Jr.,
and Morgan Christen, Circuit Judges.
Opinion by Judge Christen
SUMMARY*
Employee Retirement Income Security Act
The panel affirmed in part and reversed in part the district
court’s judgment in favor of the plaintiffs in an ERISA class
action concerning a pension fund.
After the trustees of the IBEW Pacific Coast Pension
Fund learned that it would soon enter “critical status” under
the Pension Protection Act of 2006, they amended the
pension plan twice, in Amendments 14 and 24, and began
withholding at least $1.00 per hour from all employer
contributions to improve the plan’s funding status. The
named plaintiff was a “traveler” who worked in the
jurisdictions of various local union pension funds, and his
employers in those jurisdictions contributed to the local funds
for the areas in which the work was performed. Under a
reciprocal agreement among home funds, the plaintiff’s
employer contributions were transferred to his home pension
fund. Under Amendment 14, the Pacific Coast Fund withheld
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 LEHMAN V. NELSON
$1.00 per hour that the plaintiff worked in the Fund’s
jurisdiction.
The district court granted summary judgment in favor of
the plaintiff in part, ruling that the trustees abused their
discretion as plan administrator in interpreting Amendment
14’s $1.00 withholding to apply to reciprocal transfers. The
district court also certified a plaintiffs’ class. In a clarifying
order, the district court ruled that its previous orders also
applied to withholding under Amendment 24, and it awarded
damages for withholdings under both amendments.
The panel held that only Amendment 14 was fully
litigated before the district court, and vacated the damages
award for withholdings under Amendment 24 because the
trustees did not have notice that those withholdings were at
issue, nor an opportunity to respond. Affirming the damages
award for withholdings under Amendment 14, the panel held
that the district court correctly interpreted the interaction
between Amendment 14, Article 5 of the pension plan, and
the reciprocal agreement. The panel concluded that the
district court erred by ruling, in the alternative, that
interpretation of Amendment 14 to apply to travelers who
worked in the Pacific Coast Fund’s jurisdiction on a
temporary basis violated ERISA § 305. The panel remanded
for further proceedings on the withholdings under
Amendment 24.
The panel also vacated the district court’s award of
attorneys’ fees. It declined to reach the plaintiffs’ issues on
cross-appeal.
LEHMAN V. NELSON 5
COUNSEL
Seth Floyd (argued), Nathan R. Ring, and Michael A. Urban,
The Urban Law Firm, Las Vegas, Nevada, for Defendants-
Appellants/Defendants-Appellees/Cross-Appellants Warner
Nelson, et al.
Richard J. Birmingham (argued), Christine Hawkins, and
Joseph P. Hoag, Davis Wright Tremaine, Seattle,
Washington, for Plaintiff-Appellee/Cross-Appellant/Plaintiff-
Appellant Richard Lehman.
OPINION
CHRISTEN, Circuit Judge:
In May 2008, the Trustees of the IBEW Pacific Coast
Pension Fund learned that the Fund would soon enter “critical
status” under the Pension Protection Act of 2006. In
response, the Trustees amended the Pacific Coast Fund
Pension Plan twice—in Amendments 14 and 24—and began
withholding at least $1.00 per hour from all employer
contributions to improve the Plan’s funding status. Richard
Lehman filed a putative class action against the Trustees
under the Employee Retirement Income Security Act of 1974
(ERISA). Lehman alleged that the Trustees breached the
Pension Plan’s terms, violated ERISA sections 204 and 305,
and breached their fiduciary duties by withholding $1.00 per
hour from his employer contributions without providing an
accrued benefit.
The district court granted Lehman’s motion for summary
judgment, in part, and ruled that he was entitled to the
6 LEHMAN V. NELSON
withheld contributions under the terms of the Pension Plan.
After the parties stipulated to a class definition, the district
court certified the class and awarded damages, attorneys’
fees, and costs to the plaintiffs. The Trustees appeal the
summary judgment order, an order granting the plaintiffs’
motion to enforce or clarify the order, and the damages
award. The plaintiffs cross-appeal, seeking alternative relief
under ERISA sections 502(a)(2) and (a)(3) if the court
reverses the district court’s grant of summary judgment under
ERISA section 502(a)(1)(B). The plaintiffs also appeal the
district court’s determination of a reasonable hourly rate for
the attorneys’ fees award. We have jurisdiction under
28 U.S.C. § 1291, and we affirm in part, reverse in part, and
remand.
BACKGROUND
I. Travelers and the Electrical Industry Pension
Reciprocal Agreement
Richard Lehman is an electrician based in the Puget
Sound area. He is a member of the Puget Sound Electrical
Workers Pension Trust, but his profession frequently requires
him to perform work for employers located outside the
jurisdiction of his home pension fund. There are many so-
called “travelers” in the electrical construction industry who
work in the jurisdictions of other local union pension funds.
When Lehman and other travelers are temporarily employed
outside the jurisdiction of their home funds, their employers
contribute to the local funds for the areas where they perform
work.
In recognition of the fact that travelers could receive
multiple small pensions or lose pension benefits as a result of
LEHMAN V. NELSON 7
their work in other jurisdictions, the trustees of many local
funds entered into the Electrical Industry Pension Reciprocal
Agreement. Under the Reciprocal Agreement, travelers can
elect to have employer contributions electronically
transferred to a designated home pension fund.
The Reciprocal Agreement requires participating funds to
keep a “separate account” of contributions received on behalf
of each traveler and to transfer an amount equal to all
contributions received back to the traveler’s home fund
within thirty days of receipt. The Reciprocal Agreement
prohibits participating funds from charging administrative
fees “for the transfer or for any other reason.” Under the
Reciprocal Agreement, travelers accrue benefits in their home
pension funds for “[a]ll hours worked in any Participating
Fund for which Monies are transferred,” and the terms of
their home pension plans govern benefit accrual.
The Reciprocal Agreement requires participating funds to
“take all actions . . . necessary to fully implement this
Agreement.” Participating funds can amend the Reciprocal
Agreement at any time through “the written approval of a
proposed amendment by a simple majority.” Participating
plans can also terminate their participation in the Reciprocal
Agreement by following specified termination procedures.
Finally, the Reciprocal Agreement outlines a detailed dispute-
resolution process for participating funds to address any
disagreements or questions that arise out of the Agreement.
The IBEW Pacific Coast Pension Fund (the Pacific Coast
Fund) is a signatory to the Reciprocal Agreement. Article 5
of the Pacific Coast Fund Pension Plan (the Pension Plan)
incorporates provisions from the Reciprocal Agreement into
the Plan. Section 5.04 of the Pension Plan states that the
8 LEHMAN V. NELSON
Pacific Coast Fund “shall collect and transfer to the Home
Pension Fund all contributions received on behalf of the
Employee for work performed by the Employee within [the
Pacific Coast Fund’s] jurisdiction.”
II. The Pension Protection Act of 2006 and the Pacific
Coast Fund
The Pension Protection Act of 2006 is designed to help
severely underfunded multiemployer pension plans recover.
The Act—codified in relevant part at ERISA section
305—requires plan actuaries for multiemployer plans to
annually certify “whether or not the plan is or will be in
critical status for such plan year or for any of the succeeding
5 plan years” within ninety days of the start of the plan year.
29 U.S.C. § 1085(b)(3)(A)(i). If the plan is certified to be in
critical status, ERISA section 305(a)(2)(A) requires the plan
sponsor to “adopt and implement a rehabilitation plan”
formulated “to enable the plan to cease to be in critical status
by the end of the rehabilitation period.” Id. § 1085(a)(2)(A),
(e)(3)(A)(i). The Act sets a deadline for plan sponsors to
enact a rehabilitation plan after critical status certification, id.
§ 1085(e)(1)(A), but it does not prohibit plan sponsors from
acting before certification to improve the plan’s funding
status.
A. Amendment 14: $1.00 Hourly Withholding on all
Contributions
In May 2008, the Trustees of the Pacific Coast Fund
learned that the Pension Plan was severely underfunded for
2009 and subsequent plan years. Based on a report from the
Pension Plan’s actuary stating that the “Plan’s funding levels
were getting perilously close to critical status level under the
LEHMAN V. NELSON 9
Pension Protection Act of 2006,” the Trustees enacted
Amendment 14. Amendment 14 took effect on July 1, 2008
and added section 3.03(b) to the Pension Plan. Section
3.03(b) states:
Notwithstanding the foregoing or any other
provision of the Plan to the contrary effective
July 1, 2008, the first one dollar ($1.00) of
required contribution for each and every Hour
of Covered Work on and after July 1, 2008,
shall not result in any monthly benefit accrual
and shall be utilized solely to improve the
funding of the Plan. The same reduction is
applicable for required Contributions pursuant
to subscription agreements and reciprocal
transfers for each and every hour on and after
July 1, 2008. . . . The Trustees[’] intent in
adopting this reduction is to improve the
funding condition of the Plan and to
encourage collective bargaining parties to
recognize the need for increased hourly
contributions to the Plan.
Amendment 14 did not remove the language in section 5.04
of the Pension Plan governing transfers to travelers’ home
pension funds, and the Trustees did not terminate their
participation in the Reciprocal Agreement nor seek to amend
it before enacting Amendment 14.
B. Amendment 24: The Rehabilitation Plan
On June 29, 2009, the Pacific Coast Fund’s actuary
certified that the Pension Plan was in “critical status” for the
plan year beginning April 1, 2009. As required by the
10 LEHMAN V. NELSON
Pension Protection Act of 2006, the Trustees adopted a
formal rehabilitation plan on July 8, 2009 through
Amendment 24. Amendment 24 added several new
provisions to the Pension Plan, including Article 16, which
contains the Rehabilitation Plan itself. The Rehabilitation
Plan established a default schedule and two alternative
schedules describing required increases in employer
contributions and reduced benefit-accrual rates that would
take effect upon each schedule’s implementation.
The default schedule and two alternative schedules
contain different increases in required contribution levels
from employers and different reductions in benefit-accrual
rates. Because travelers who work in the Pacific Coast
Fund’s jurisdiction on a temporary basis accrue benefits in
their home funds, they are not affected by the changes in
benefit-accrual rates for the Pension Plan, but they are
affected by Amendment 24 in other ways.
First, Amendment 24’s Rehabilitation Plan imposed a
$1.00 hourly withholding from employer contributions for
contribution rates below $3.00 per hour.1 Second, the
Rehabilitation Plan established an additional withholding of
all required increases in employer contributions and all
surcharge payments made in accordance with the Pension
Protection Act of 2006.2 The Rehabilitation Plan describes
1
The $1.00 hourly withholding in Amendment 24 differs from that in
Amendment 14 because Amendment 24 only applies to contribution rates
less than $3.00 per hour while Amendment 14 applies to all contribution
rates.
2
The Pension Protection Act of 2006 mandates the imposition of an
“employer surcharge” for plans in critical status. See 29 U.S.C.
LEHMAN V. NELSON 11
the required increases in employer contributions as “non-
benefit contributions,” and explains the withholdings as
follows:
Participants who work inside the jurisdiction
of this Fund and who have employer
contributions sent to an outside fund under a
“money follows the man” reciprocity
agreement shall have the first dollar of each
hourly contribution (for contributions rates
less than $3.00 per hour), all increased non-
benefit contributions under any Schedule and
all employer surcharge contributions remain
in the [Pacific Coast Fund] for funding
purposes only. These contributions result in
no benefit accruals for any participant.
In sum, with respect to travelers who work in the Pacific
Coast Fund’s jurisdiction on a temporary basis, the
Rehabilitation Plan requires employers to contribute
increasing amounts of money over time, classifies all
increases beyond the contribution rates in effect on July 22,
2009 as “non-benefit contributions,” withholds all non-
benefit contributions, withholds $1.00 per hour on employer
contributions of less than $3.00 per hour, and withholds
surcharge payments. While the amount of the increase in the
new “non-benefit contributions” and the corresponding
withholdings vary among the default and alternative
schedules, all three schedules require increased contributions
and state that these increases “shall be utilized solely to
improve the funding condition of the Plan.”
§ 1085(e)(7). The parties do not dispute the Trustees’ right to withhold
the surcharge payments under Amendment 24.
12 LEHMAN V. NELSON
Amendment 24 did not delete or otherwise alter the text
of section 5.04—the Pension Plan provision requiring transfer
of all employer contributions received on behalf of travelers
(i.e., the “pass through” contributions routed to the travelers’
home funds). But Amendment 24 added sections to each
preexisting article of the Pension Plan, including Article 5,
stating that “for all benefits commencing on or after July 22,
2009, any provision in this Article which is inconsistent with
the requirements of Article 16, the Rehabilitation Plan, shall
be superseded by the provisions contained within Article 16,
except to the extent otherwise required by applicable law or
regulations.”
III. Procedural History
Between July 2008 and March 2009, the Pacific Coast
Fund withheld $1.00 per hour for each hour that Richard
Lehman worked in the Fund’s jurisdiction under Amendment
14. Lehman did not work in the Pacific Coast Fund’s
jurisdiction after March 2009 so he was never subjected to
any withholdings under Amendment 24’s Rehabilitation Plan.
In October 2013, Richard Lehman filed suit on behalf of
himself and all others similarly situated “to recover
reciprocity contributions improperly withheld by the
Defendants, and the earnings thereon.” In the alternative, he
requested “an accrued benefit based on such contributions.”
Lehman sought relief under ERISA sections 502(a)(1)(B),
(a)(2), and (a)(3), arguing that he was entitled to the withheld
contributions under the terms of the Pension Plan, that the
Trustees violated ERISA sections 204 and 305 through the
$1.00 hourly withholding, and that the Trustees breached
their fiduciary duties by improperly administering the Plan.
LEHMAN V. NELSON 13
Two months after Lehman filed suit, the Trustees moved
to dismiss, arguing that Lehman lacked the right to enforce
the terms of the Reciprocal Agreement. Roughly one week
later, Lehman moved for summary judgment. The parties
jointly requested that the district court defer briefing on class
certification until after it ruled on the outstanding motions.
The district court denied the Trustees’ motion to dismiss
and granted Lehman’s motion for summary judgment, in part.
The district court ruled that the Trustees abused their
discretion as plan administrator by interpreting Amendment
14’s $1.00 hourly withholding on all hours worked to apply
to transfers under Article 5 of the Pension Plan. The district
court reasoned that Amendment 14 was ambiguous with
respect to whether it applied to reciprocal transfers into or out
of the Pacific Coast Fund. If Amendment 14 applied to
reciprocal transfers out of the Fund, then Amendment 14
would conflict with Article 5 of the Pension Plan. The
district court granted summary judgment for Lehman on his
claim under ERISA section 502(a)(1)(B), ruling that Lehman
was entitled to relief under the terms of the Pension Plan.
In the alternative, the district court concluded that the
Trustees’ interpretation of Amendment 14 would violate
ERISA section 305 by reducing benefit-accrual rates on the
withheld contributions to zero. But the district court denied
summary judgment without prejudice on Lehman’s claims for
breach of fiduciary duty and equitable relief under ERISA
sections 502(a)(2) and (a)(3) because the court found that the
requested remedy—the transfer of all wrongfully withheld
contributions—was available under section 502(a)(1)(B).
Shortly after the district court granted summary judgment
in part, Lehman filed a motion for clarification, asking the
14 LEHMAN V. NELSON
court “to confirm that the relief granted to Plaintiff includes
earnings on the wrongfully withheld reciprocity
contributions.” The Trustees did not oppose the motion, and
the district court granted it.
After summary judgment and the first clarification order,
the parties jointly requested that the district court name
Lehman class representative and stipulated to a class
definition. The district court accepted the stipulation, and
defined the class as all individuals:
a. on whose behalf contributions were
required to be made to the IBEW Pacific
Coast Pension Plan pursuant to the terms of a
collective bargaining agreement at any time
from July 1, 2008 to present; and
b. who had requested that such contributions
be transferred to another pension fund
pursuant to the terms of the IBEW Pacific
Coast Pension Plan’s adoption of the National
Electrical Industry Pension Reciprocal
Agreement; and
c. who did not have such contributions
transferred in full, but instead, all or a portion
of such contributions were withheld by the
IBEW Pacific Coast Pension Plan, its agents,
employees, fiduciaries, affiliates, or service
providers.
The same day that the district court certified the class,
Lehman filed a second motion seeking clarification. In
response to discovery requests on the amount of damages, the
LEHMAN V. NELSON 15
Trustees indicated that they viewed the court’s summary
judgment order and its order granting the first motion for
clarification as only governing contributions withheld under
Amendment 14. In contrast, the plaintiffs maintained that
these orders applied to all amounts withheld from travelers’
contributions under Amendments 14 and 24, including the
required increases in employer contributions under the default
and alternative schedules in Amendment 24’s Rehabilitation
Plan. The Trustees opposed the plaintiffs’ second motion to
enforce or clarify, arguing that the complaint, first amended
complaint, summary judgment briefing, and district court’s
orders all focused on amounts withheld pursuant to
Amendment 14. According to the Trustees, the parties had
not yet litigated amounts withheld under Amendment 24. In
a four-page order, the district court ruled that its previous
orders applied to both the $1.00 hourly withholding under
Amendment 14 and “the often greater and equally
unsupported withholdings” under Amendment 24. The
district court awarded damages for withholdings under both
amendments.
Finally, the district court granted the plaintiffs’ motion for
attorneys’ fees and costs under ERISA section 502(g). See
29 U.S.C. § 1132(g). However, the district court ruled that
the plaintiffs “failed to meet their burden to establish a
reasonable hourly rate” and found the suggested rates
unreasonable. The court awarded an hourly rate of $350 for
all attorney time, compared to the requested hourly rates of
$665 for the lead class counsel and $400 for associates. This
cross-appeal followed.
16 LEHMAN V. NELSON
DISCUSSION
I. Only Amendment 14 Was Fully Litigated
The Trustees argue that the class raised a new legal theory
after the district court granted summary judgment to Lehman
and that the district court violated the Trustees’ due process
rights by ruling on the issue without giving them a full and
fair opportunity to respond. According to the Trustees, the
complaint, first amended complaint, summary judgment
briefing, and the district court’s orders all focused on the
$1.00 hourly withholding under Amendment 14. The
plaintiffs maintain that the summary judgment order and the
district court’s order granting the first motion to clarify also
applied to amounts withheld under Amendment 24’s
Rehabilitation Plan, including the $1.00 hourly withholding
on contribution rates below $3.00 per hour and the
withholding of all required increases in employer
contributions under the default and alternative schedules.
The district court agreed with the plaintiffs, ruling that the
parties had already litigated withholdings under Amendment
24, and awarding damages in an amount equal to all
withholdings under both amendments. We respectfully
disagree with the district court’s conclusion that the parties
fully litigated issues related to Amendment 24.
A. Allegations in the Complaints
“Federal Rule of Civil Procedure 8(a)(2) requires that the
allegations in the complaint ‘give the defendant fair notice of
what the plaintiff’s claim is and the grounds upon which it
rests.’” Pickern v. Pier 1 Imports (U.S.), Inc., 457 F.3d 963,
968 (9th Cir. 2006) (quoting Swierkiewicz v. Sorema N.A.,
534 U.S. 506, 512 (2002)). This court reviews de novo “a
LEHMAN V. NELSON 17
district court’s determination of whether a plaintiff’s
complaint complied with the notice pleading requirements”
under Rule 8(a)(2). Id.The Trustees are correct that the complaints focus almost
exclusively on the $1.00 withholding under Amendment 14,
and only vaguely refer to any withholding under Amendment
24.3 The complaints mention the $1.00 hourly withholding
on all contributions in Amendment 14 eight times, but never
mention the withholding of increased employer contributions
under Amendment 24. The factual allegations describe
Lehman’s work history and the parties agree that Lehman
was never subjected to any withholdings under Amendment
24, but the district court erroneously stated that Lehman was
subjected to withholdings under Amendment 24 in the
background section of its summary judgment order. The
complaints assert that “the Plan has improperly withheld
$1.00 for each hour that [Lehman] worked within the
jurisdiction of the Plan,” and that the “Trustees’ withholding
of $1.00 per hour of reciprocity funds violates the [Reciprocal
Agreement], as well as the Plan provisions.” All specific
allegations in the complaints refer to the $1.00 hourly
withholding in Amendment 14.
There are at best four references to Amendment 24’s
Rehabilitation Plan in the complaints. First, there is a
paragraph that states: “The withholding of contributions
without the accrual of benefits violates Section 305 of
3
With the defendants’ consent, Lehman filed a first amended
complaint on May 29, 2014, before the district court ruled on the
defendants’ motion to dismiss or Lehman’s motion for summary
judgment. The first amended complaint added new defendants, but is
otherwise identical to the original complaint.
18 LEHMAN V. NELSON
ERISA, 29 U.S.C. Section 1085. Under Section 305 of
ERISA, the schedule of benefits in a rehabilitation plan
cannot eliminate all future accruals.” This reference is
consistent with the plaintiffs’ argument that Amendment 14
constituted the first phase of the Trustees’ rehabilitation effort
under the Pension Protection Act of 2006 and violated ERISA
section 305 by reducing benefit-accrual rates on the
withholdings to zero. This paragraph is also located between
other paragraphs that explicitly refer to the $1.00 hourly
withholding in Amendment 14, suggesting that the
complaints’ reference to “a rehabilitation plan” likewise
pertains to Amendment 14.
The next reference states that the “Trustees violated their
fiduciary duty by adopting Rehabilitation provisions that
violated Plan provisions, ERISA, and the National Electrical
Industry Pension Reciprocal Agreement.” Although this
paragraph refers to multiple “provisions,” it is immediately
followed by a paragraph that describes the $1.00 hourly
withholding in section 3.03(b) of the Pension Plan
(Amendment 14) and does not refer to any specifics related
to Amendment 24.
Next, the complaints contend that “Article 16 of the Plan
does not authorize the withholding of $1.00 per hour if the
contribution rate is $3.00 or more. The Trustees wrongfully
withheld $1.00 on contribution rates of [$]3.00 or more.”
This is the only paragraph in the complaints that explicitly
refers to Amendment 24, which added Article 16 (the
Rehabilitation Plan) to the Pension Plan, but even this
paragraph does not refer to the withholding of increased
employer contributions under any of the schedules in the
Rehabilitation Plan. In fact, this paragraph suggests that the
Trustees did have the authority to withhold $1.00 per hour
LEHMAN V. NELSON 19
from contribution rates less than $3.00 per hour, i.e., the rate
in Amendment 24’s Rehabilitation Plan, because Amendment
24’s $1.00 hourly withholding only applies to contribution
rates less than $3.00 per hour, while Amendment 14’s $1.00
hourly withholding applies to all contribution rates.
The last possible reference to the Rehabilitation Plan in
the complaints similarly implies that the Trustees had the
authority to withhold contributions under Amendment 24:
“The application of the $1.00 funding withholding on
Reciprocity transfers prior to the effective date of the
Rehabilitation period violates Sections 305 and 204 of
ERISA.” If anything, this paragraph suggests that
withholdings after the Plan was actually certified to be in
critical status and the Trustees adopted the formal
Rehabilitation Plan in Amendment 24, do not violate ERISA.
Once the Plan’s actuary certified that the Plan was in critical
status in June 2009, ERISA section 305(e) required the
Trustees to adopt a formal rehabilitation plan “to enable the
plan to cease to be in critical status by the end of the
rehabilitation period.” 29 U.S.C. § 1085(e)(3)(A)(i). In
Amendment 24’s Rehabilitation Plan, the Trustees specified
that the Rehabilitation Period would last for thirteen years,
from April 1, 2010 to April 1, 2023.4
The complaints also refer to a letter from the counsel for
the Reciprocal Administrator, who opined that withholding
traveler contributions violated the Reciprocal Agreement.
Although the letter refers to the “rehabilitation plan,” the
letter is dated April 23, 2009, roughly three months before the
Trustees adopted Amendment 24. The letter analyzes a
4
The complaints incorrectly assert that the Rehabilitation Period
began on August 1, 2009.
20 LEHMAN V. NELSON
hypothetical $2.00 hourly withholding on all employer
contributions, analogous to the $1.00 hourly withholding in
Amendment 14. Thus, the use of “rehabilitation plan” in the
letter appears to refer to Amendment 14, not Amendment 24,
and we are not persuaded that the complaints’ reference to the
letter put the Trustees on notice that Amendment 24 was at
issue.
In sum, the complaints only made four vague references
to Amendment 24’s Rehabilitation Plan; two of these
references imply that the Trustees had the authority to
withhold $1.00 on contributions less than $3.00 per hour
under the Rehabilitation Plan and arguably imply that all
withholdings made pursuant to Amendment 24 were
permissible. The complaints make no mention of the
withholding of increased employer contributions under the
Rehabilitation Plan’s default and alternative schedules. The
complaints did not satisfy Rule 8’s liberal pleading
requirements because: (1) they did not refer to the class’s
claims under Amendment 24 nor explain the basis of these
claims; and (2) they included statements implying that
withholdings made pursuant to Amendment 24’s
Rehabilitation Plan were permissible. Lehman was not
subjected to any withholdings under Amendment 24, and the
class never sought to amend the complaint to describe the
withholding of increased employer contributions made
pursuant to the Rehabilitation Plan. On this record, we agree
with the Trustees that the complaints did not provide
adequate notice that the plaintiffs sought to recover
contributions withheld under Amendment 24, particularly the
withholding of increased employer contributions under the
default and alternative schedules in the Rehabilitation Plan.
LEHMAN V. NELSON 21
B. Summary Judgment Briefing
The district court concluded that the parties fully
addressed withholdings under Amendments 14 and 24 in their
summary judgment briefs, but again we respectfully disagree.
Although the summary judgment briefs mentioned
Amendment 24, they did not analyze the withholding of
increased employer contributions under the actual
Rehabilitation Plan. Instead, they continued to focus on the
$1.00 hourly withholding in Amendment 14 and continued to
suggest that the Trustees had the authority to withhold
contributions under Amendment 24.
The statement of the issues in Lehman’s motion for
summary judgment characterized the first two issues in the
case as: (1) “Does withholding a $1.00 per hour
administrative fee from transfer contributions violate Article
5 of the Pension Plan?” and (2) “Does the Defendants’
complete failure to count the non-transferred $1.00 per hour
contribution as a benefit accrual violate ERISA?” The
statement of facts in the summary judgment motion again
focused on Lehman and the $1.00 hourly withholding made
pursuant to Amendment 14. The argument section of the
motion devotes three pages to analyzing why the $1.00 hourly
withholding in Amendment 14 violates Article 5 of the
Pension Plan before turning to Amendment 24.
With respect to Amendment 24, the motion for summary
judgment quotes the provision that establishes both the $1.00
hourly withholding for contribution rates less than $3.00 per
hour and the withholding of all increased employer
contributions under the default and alternative schedules in
the Rehabilitation Plan. But then the motion offers three
reasons why this provision in Amendment 24 “does not
22 LEHMAN V. NELSON
authorize a dollar per hour contribution to the Pacific Coast
Fund,” and the first reason is that “Mr. Lehman’s and other
similarly situated Plaintiffs’ contributions were in excess of
$3.00 per hour and, therefore, the $1.00 per hour provision
does not apply.” This argument echoes the allegation in the
complaints that the “Trustees wrongfully withheld $1.00 on
contribution rates of $3.00 or more.” It distinguishes Lehman
from other travelers who received contributions less than
$3.00 per hour and were subject to the $1.00 hourly
withholding in Amendment 24’s Rehabilitation Plan,
suggesting that such travelers were not part of the proposed
class at the summary judgment stage.5
The next section of the summary judgment motion is
titled, “Defendants Violated ERISA Sections 305 and 204 by
Providing No Benefit to Travelers With Respect to the $1.00
Deductions From Reciprocity Contributions,” and repeatedly
refers to the $1.00 hourly withholding. In short, the motion
for summary judgment does not make any arguments about
the withholding of increased employer contributions, and the
motion’s arguments about Amendment 24 suggest that
Lehman was not one of the other travelers who received
contribution rates less than $3.00 per hour and were subject
to withholdings under Amendment 24’s Rehabilitation Plan.
The Trustees did not specifically respond to Lehman’s
arguments about Amendment 24 in their opposition to the
summary judgment motion. Instead, they argued generally
that the Trustees had the authority to amend the Pension Plan,
that the Reciprocal Agreement did not limit their authority,
5
The other two reasons offered to support the argument that
Amendment 24 does not authorize the $1.00 hourly withholding do not
shed light on the scope of withholdings litigated.
LEHMAN V. NELSON 23
and that the Trustees exercised this authority by enacting
Amendment 14. They maintained that the $1.00 hourly
withholding did not violate ERISA sections 204 and 305
because travelers continued to accrue benefits in their home
pension plans. Because the Trustees did not address
Lehman’s arguments about Amendment 24 in their
opposition, Lehman did not discuss the Rehabilitation Plan in
his reply brief.
C. Summary Judgment Order
The district court’s summary judgment order likewise
focused on the $1.00 hourly withholding in Amendment 14,
and did not discuss the withholding of increased employer
contributions under Amendment 24. The order characterized
the parties’ arguments as follows: “Plaintiff contends that
Defendants violated Article 5 of the Pension Plan by
subjecting reciprocity transfers to a $1.00/hour withholding.
Defendants deny that they violated the Plan. Rather, they
assert that they amended the Plan to allow for the
withholdings through Amendment No. 14.” The district court
then went on to analyze the relationship between Article 5 of
the Pension Plan—which requires the Pacific Coast Fund to
transfer all contributions received on behalf of travelers to
their home funds—and Amendment 14 in detail.
Under the heading “Effect of Amendment No. 14,” the
district court ruled that Amendment 14 “is ambiguous with
respect to whether it applies to reciprocal transfers out of as
well as into the Plan, and that such ambiguity must be
interpreted so as to avoid rendering nugatory other Plan
provisions or conflicting with ERISA.” Amendment 14
states:
24 LEHMAN V. NELSON
Notwithstanding the foregoing or any other
provision of the Plan to the contrary effective
July 1, 2008, the first one dollar ($1.00) of
required contribution for each and every Hour
of Covered Work on and after July 1, 2008,
shall not result in any monthly benefit accrual
and shall be utilized solely to improve the
funding of the Plan. The same reduction is
applicable for required Contributions pursuant
to subscription agreements and reciprocal
transfers for each and every hour on and after
July 1, 2008. . . .
The district court emphasized that the Pension Plan does not
define “reciprocal transfers,” and “[t]o the extent that
Amendment 14 applies solely to transfers into the Pension
Plan when it operates as an Employee’s Home Fund, it
neither conflicts with Article 5 of the Plan nor with the terms
of the Reciprocity Agreement incorporated into it.” The court
noted that applying Amendment 14 to transfers out of the
Pension Plan would conflict with section 5.04 of the Pension
Plan and with “Article 16 of the Rehabilitation Plan, which
only allows for withholding on reciprocal transfers out of the
Plan for contribution rates less than $3.00 per hour.” Thus,
the district court concluded that the Trustees abused their
discretion by interpreting Amendment 14 to authorize a $1.00
hourly withholding on travelers like Lehman, who request
transfers of employer contributions out of the Pacific Coast
Fund.
The district court’s reasoning with respect to the
ambiguity of Amendment 14 does not apply to Amendment
24. Amendment 24’s withholdings explicitly apply to
travelers “who work inside the jurisdiction of this Fund and
LEHMAN V. NELSON 25
who have employer contributions sent to an outside fund
under a ‘money follows the man’ reciprocity agreement.”
The summary judgment order relied on Amendment 24’s
clarity when it found that Amendment 14’s $1.00 hourly
withholding (on all contributions) would conflict with
Amendment 24’s $1.00 hourly withholding (on contribution
rates less than $3.00 per hour) if Amendment 14 applied to
transfers out of the Pacific Coast Fund. The court’s order did
not analyze whether the Trustees abused their discretion by
interpreting Amendment 24 to apply to reciprocal transfers
out of the Pension Plan or otherwise address the conflict
between Article 5 and Amendment 24.
In the alternative, and still under the “Effect of
Amendment No. 14” heading, the district court ruled that “an
Amendment allowing for withholding of outgoing reciprocity
transfers would be subject to reformation” because it would
violate ERISA section 305. The district court referred to “the
Amendment” throughout its discussion of ERISA section
305, suggesting that it was only addressing Amendment 14.
D. Stipulated Class Definition
On appeal, the class argues that the Trustees knew
Amendment 24 was at issue because the stipulated class
definition is “unrestricted as to time period” and refers to
contributions withheld from July 1, 2008 to present. The
class correctly asserts that this time period includes
withholdings under the Rehabilitation Plan in Amendment 24,
adopted on July 8, 2009. But this argument ignores the fact
that the Trustees did not immediately cease withholdings
under Amendment 14 after adopting Amendment 24. Instead,
Amendment 24’s withholding rates are triggered at varying
times depending on when each respective collective
26 LEHMAN V. NELSON
bargaining agreement expires. The required increases in
employer contributions and corresponding withholdings in
the Rehabilitation Plan’s default schedule take effect
180 days after the collective bargaining agreements in effect
on April 1, 2009 expire, unless the parties negotiate and
implement one of the Rehabilitation Plan’s alternative
schedules sooner. At oral argument, the Trustees explained
that some travelers were still subject to withholdings under
Amendment 14 as of the date of class certification because
their collective bargaining agreements had not yet expired.
Therefore, the fact that the complaints and stipulated class
definition refer to contributions withheld from July 1, 2008 to
present does not demonstrate that the parties litigated
withholdings under Amendment 24.
Because the class raised the issue of contributions
withheld under Amendment 24’s Rehabilitation Plan for the
first time in their second motion to enforce or clarify the
district court’s summary judgment order, and the district
court’s order did not analyze whether the Trustees abused
their discretion by interpreting Amendment 24 to apply to
contributions transferred out of the Pacific Coast Fund, the
district court erred by awarding damages for withholdings
under the Rehabilitation Plan. We vacate the damages award
with respect to withholdings under Amendment 24 because
the Trustees did not have notice that those withholdings were
at issue nor an opportunity to respond.
At oral argument, the Trustees explained that with proper
notice they would have argued that travelers are not entitled
to the required increases in employer contributions in the
default and alternative schedules under Amendment 24’s
Rehabilitation Plan because the Pension Protection Act of
2006 required the Trustees to increase employer contributions
LEHMAN V. NELSON 27
once the Fund entered critical status, and the increased
contributions would be analogous to surcharge payments
under the Act. The class does not maintain that they are
entitled to the surcharge payments withheld under
Amendment 24, and the district court did not wrestle with the
interaction between the Pension Protection Act’s
requirements, which are aimed at shoring up plans that enter
critical status, and Amendment 24, which purports to increase
the “pass through” employer contributions for travelers. We
therefore remand to the district court for further proceedings
consistent with this opinion.
II. The District Court Correctly Interpreted the
Interaction Between Amendment 14, Article 5 of the
Pension Plan, and the Reciprocal Agreement
The Trustees also argue that the district court erred by
granting summary judgment to Lehman and awarding
damages to the class for the $1.00 hourly withholding under
Amendment 14. More specifically, the Trustees maintain that
the district court erred by not incorporating the entire
Reciprocal Agreement into the Pension Plan, by deferring to
the Reciprocal Administrator’s opinion concerning the
Trustees administration of the Reciprocal Agreement, and by
allowing the plaintiffs to enforce the terms of the Reciprocal
Agreement.
“Where an ERISA Plan grants discretionary authority to
determine eligibility for benefits or to construe the terms of
the plan, a plan administrator’s interpretation of a plan is
reviewed for abuse of discretion.” Tapley v. Locals 302 &
612 of Int’l Union of Operating Eng’rs-Emp’rs Constr. Indus.
Ret. Plan, 728 F.3d 1134, 1139 (9th Cir. 2013) (citations and
internal quotation marks omitted). We review the district
28 LEHMAN V. NELSON
court’s application of this standard and the district court’s
grant of summary judgment de novo. See id.; Richardson v.
Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 985
(9th Cir. 1997).
Here, the Pension Plan grants the Trustees discretionary
authority to interpret the Plan. The class contends that we
should review the Trustees’ interpretation of Amendment 14
de novo because the Trustees never responded to Lehman’s
claim for benefits, but the class does not cite any Ninth
Circuit authority for this proposition. We need not resolve
whether abuse-of-discretion or de novo review applies
because the Trustees’ arguments in support of their
interpretation of Amendment 14 fail even under the
deferential abuse-of-discretion standard.
A. The Trustees Abused Their Discretion by Interpreting
Amendment 14 to Apply to Outgoing Reciprocity
Transfers
The parties agree that Article 5 of the Pension Plan
incorporates the entire Reciprocal Agreement into the Plan.
The Trustees maintain that the district court selectively
incorporated sections 12 and 27(a) of the Reciprocal
Agreement into the Pension Plan, which led the district court
to erroneously conclude that the Trustees’ interpretation of
Amendment 14 conflicted with Article 5 and the Reciprocal
Agreement.6 The Trustees concede that they could not
6
Section 12 of the Reciprocal Agreement contains the requirement
that participating funds transfer an amount equal to all contributions
received on behalf of a traveler to his or her designated home fund without
charging any fees. Section 27(a) states that the Reciprocal Agreement
LEHMAN V. NELSON 29
construe Amendment 14 “in a way that clearly conflicts with
the plain language of the Plan, renders nugatory other
provisions of the Plan, or lacks any rational nexus to the
primary purpose of the Plan.” Tapley, 728 F.3d at 1140
(citations and internal quotation marks omitted); see also
Richardson, 112 F.3d at 985. But the Trustees argue that the
district court failed to incorporate section 1(g) of the
Reciprocal Agreement, which allegedly demonstrates that
Amendment 14 does not conflict with Article 5 of the Plan.
Section 1(g) of the Reciprocal Agreement defines
“contributions” as “[t]he payment which an employer is duly
required to make by the terms of a collective bargaining
agreement, or is otherwise legally bound, to make to a
Participating Fund party hereto for the purpose of providing
a plan of benefits for Temporary or Permanent employees.”
According to the Trustees, the $1.00 hourly withholding in
Amendment 14 is not a “contribution” under the Reciprocal
Agreement because it is “not used to provide a plan of
benefits for employees.” Amendment 14 specified that the
withholding would be “utilized solely to improve the funding
of the Plan.” Thus, the Trustees maintain that they are not
required to transfer the $1.00 hourly withholding to travelers’
home pension funds under Article 5 because the withholding
does not meet the definition of “contributions” in the
Reciprocal Agreement.
The Trustees’ argument is inconsistent with the Pension
Plan’s own definition of a “contribution” and ERISA’s
purpose. Section 1.04 of the Pension Plan defines
“contribution” as “the payment made or to be made to the
“may be amended at any time by the written approval of a proposed
amendment by a simple majority of all Participating Funds.”
30 LEHMAN V. NELSON
Fund by any individual employer under the provisions of a
collective bargaining agreement.” This definition does not
limit “contributions” to mean only payments used by the
Pacific Coast Fund for a specific objective. The Trustees do
not dispute that the $1.00 hourly withholding in Amendment
14 is a payment made by an employer under the terms of a
collective bargaining agreement.
Further, ERISA’s purpose is “to protect plan participants
and beneficiaries.” Boggs v. Boggs, 520 U.S. 833, 845
(1997). To that end, ERISA mandates that the assets of a
plan “shall be held for the exclusive purposes of providing
benefits to participants in the plan and their beneficiaries and
defraying reasonable expenses of administering the plan.”
29 U.S.C. § 1103(c)(1). When read in the context of the
Pension Plan and ERISA, the Reciprocal Agreement’s
definition of “contributions” does not support the Trustees’
interpretation of Amendment 14. The district court correctly
determined that the Trustees’ interpretation would conflict
with and render nugatory section 5.04 of the Pension Plan.
Because Amendment 14 can be read consistently with Article
5 if it only applies to transfers into the Pacific Coast Fund and
does not apply to the “pass through” payments transferred out
of the Pacific Coast Fund to the travelers’ home funds, we
affirm the district court’s orders granting summary judgment
to Lehman and awarding damages to the class for all
contributions withheld under Amendment 14.
B. The District Court Did Not Defer to the Reciprocal
Administrator
Next, the Trustees argue that the district court erred by
deferring to the Reciprocal Administrator’s opinion about the
Trustees’ administration of the Pension Plan. Section 5 of the
LEHMAN V. NELSON 31
Reciprocal Agreement states that “neither the Reciprocal
Administrative Office nor the Reciprocal Administrator shall
have any discretionary authority, control or responsibility
over (i) the management, administration, or assets of any
Participating Fund, or (ii) the administration of the
Agreement by any Participating Fund.” The Trustees’
argument fails because the district court did not defer to the
Administrator.
Instead, the district court noted that the Trustees’
interpretation of Amendment 14 is problematic because it
would subject travelers to double taxation. Counsel for the
Reciprocal Administrator explained in a letter to the Trustees
that if Amendment 14 applies to travelers who temporarily
work in the Pacific Coast Fund’s jurisdiction, then both the
Pacific Coast Fund and the travelers’ home funds may impose
withholdings on employer contributions to improve the
funding condition of the respective plans. The district court
agreed with counsel for the Reciprocal Administrator that
“the participating fund merely acts as a conduit for money
transferred to the correct fund,” and concluded that
“[r]estricting participating funds to impose withholdings only
on reciprocity contributions transferred in prevents such
double taxation while still allowing participating funds to
protect their financial integrity.” The district court did not
defer to the Reciprocal Administrator by agreeing with the
concern about double taxation.
C. The Class Sued to Enforce the Pension Plan, Not the
Reciprocal Agreement
Finally, the Trustees maintain that the district court erred
by ruling that the class could enforce the terms of the
Reciprocal Agreement. The Trustees emphasize that the
32 LEHMAN V. NELSON
plaintiffs’ home pension funds did not follow the dispute-
resolution procedures outlined in the Reciprocal Agreement
and the Agreement does not grant the plaintiffs the right to
enforce its terms against the Trustees.
Section 31 of the Reciprocal Agreement states:
Any dispute, disagreement or question
between the Participating Funds arising out of
this Agreement shall first be referred to the
Reciprocal Administrative Office and notice
shall be given to any other parties to the
dispute. The Participating Fund giving such
notices must mail the notice within 180 days
of the cause of the dispute, disagreement or
question arising out of the Agreement. . . . If
the dispute is not satisfactorily resolved
within sixty (60) days from the time notice
thereof shall have been given to all parties, it
may be submitted to an arbitrator, if requested
in writing by either party, for binding
determination. . . . The award of the arbitrator
shall be final, binding, and conclusive upon
the parties to the dispute and it may be
enforced in any court of competent
jurisdiction. The arbitrator shall not have the
authority to modify or amend this Agreement.
Section 33 adds that “[n]othing in this Agreement, express or
implied, is intended to confer on any person not signatory
hereto any right to bring any claim, action or proceeding
arising in, or by reason of, this Agreement.” Only pension
fund trustees are signatories to the Reciprocal Agreement.
LEHMAN V. NELSON 33
The plaintiffs concede that their home pension funds did
not provide notice of a dispute under section 31 and that they
do not have the right to enforce the Reciprocal Agreement
under section 33. But contrary to the Trustees’ argument, the
district court did not determine that the plaintiffs could
enforce the terms of the Reciprocal Agreement as a stand-
alone contract. Rather, the district court ruled that the
plaintiffs could “enforce the terms of the Pension Plan, which
in turn incorporates aspects of the [Reciprocal Agreement].”
Nothing in the Reciprocal Agreement changes the plaintiffs’
rights to enforce the terms of the Pension Plan under ERISA
section 502(a)(1)(B). See 29 U.S.C. § 1132(a)(1)(B).
Therefore, the plaintiffs have the right to enforce Article 5 of
the Pension Plan, which incorporates the Reciprocal
Agreement.
III. The District Court’s Alternative Holding
Regarding ERISA Section 305
The Trustees also argue that the district court ignored the
plain language of ERISA section 305(e) in its orders granting
Lehman’s motion for summary judgment and the plaintiffs’
motion to enforce or clarify the summary judgment order.
The Trustees maintain that the district court erred: (1) by
applying ERISA section 305(e) to Amendment 14; and (2) by
ruling that all withholdings violated ERISA section 305
without considering whether the withholdings took place
under the alternative schedules in Amendment 24’s
Rehabilitation Plan.
34 LEHMAN V. NELSON
A. ERISA Section 305(e) Does Not Apply Before Critical
Status Certification
The district court ruled in the alternative that the Trustees
abused their discretion by interpreting Amendment 14 to
apply to travelers who work in the Fund’s jurisdiction on a
temporary basis because “the Plan so amended would violate
Section 305 of ERISA, which prevents Plans from adopting
default schedules that would entirely eliminate future
accruals.” The district court explained that “ERISA Section
305(e)(6)(A) provides a statutory floor on the rate of future
benefit accruals under a rehabilitation plan default schedule
equal to 1% of the contributions made on the participant’s
behalf.” See 29 U.S.C. § 1085(e)(6)(A). The Trustees
contend that ERISA section 305(e) does not apply to
Amendment 14 because the Trustees adopted the amendment
before the Pension Plan’s actuary certified that the Plan was
in “critical status,” and Amendment 14 is not a default
schedule subject to the requirements of section 305(e).
Pursuant to the Pension Protection Act of 2006, ERISA
section 305(b)(3) requires plan actuaries for multiemployer
plans to annually certify “whether or not the plan is or will be
in critical status for such plan year or for any of the
succeeding 5 plan years” within ninety days of the start of the
plan year. 29 U.S.C. § 1085(b)(3)(A)(i). If the plan is in
critical status, ERISA section 305(a)(2)(A) requires the plan
sponsor to “adopt and implement a rehabilitation plan in
accordance with the requirements of subsection (e) of this
section.” Id. § 1085(a)(2)(A). ERISA section 305(e)(1)(A)
explains that the plan sponsor must adopt a rehabilitation plan
no “later than 240 days following the required date for the
actuarial certification of critical status.” Id. § 1085(e)(1)(A).
Thus, the Trustees are correct that critical status certification
LEHMAN V. NELSON 35
is the statutory trigger for the requirement to develop a
rehabilitation plan. While ERISA section 305 creates a
deadline by which plan sponsors must adopt a rehabilitation
plan, it does not prohibit plan sponsors from taking action
before “critical status” certification.
Here, the Trustees enacted Amendment 14 in May 2008
“based on a report from the Plan’s actuary that stated the
Plan’s funding levels were getting perilously close to critical
status level under the Pension Protection Act of 2006.” On
June 29, 2009, the Pacific Coast Fund’s actuary certified that
the Pension Plan was in critical status for the plan year
beginning April 1, 2009. Shortly thereafter, the Trustees
adopted Amendment 24, which contained the formal
Rehabilitation Plan and default and alternative schedules.
Because certification is the statutory trigger for ERISA
section 305’s rehabilitation plan requirement, the district
court erred by describing Amendment 14 as a “default
schedule” and applying section 305 to Amendment 14.7
B. Withholdings Under Alternative Schedules in the
Rehabilitation Plan
Next, the Trustees argue that the district court erred by
failing to make a finding with respect to whether any of the
class members worked under the default or alternative
schedules in the Rehabilitation Plan before awarding damages
for withholdings under Amendment 24. The Trustees
maintain that ERISA section 305(e)(6) allows the Trustees to
7
We do not reach whether ERISA section 204 establishes minimum
benefit-accrual standards that apply to Amendment 14, see 29 U.S.C.
§ 1054, because we affirm the district court’s ruling with respect to
Amendment 14 on other grounds.
36 LEHMAN V. NELSON
adopt “alternative schedules to the default schedule that
establish lower or higher accrual and contribution rates” than
the statutory minimums otherwise described in section
305(e)(6). See 29 U.S.C. § 1085(e)(6)(B). The plaintiffs
concede that the Trustees’ interpretation of section 305(e)(6)
is correct, but argue that ERISA section 204 provides
minimum accrual requirements for the alternative schedules
in Amendment 24’s Rehabilitation Plan.
Because we hold that the parties did not fully litigate
withholdings under Amendment 24, we need not address
whether the district court erred by failing to make specific
findings about the alternative schedules in the Rehabilitation
Plan. If the district court determines on remand that the
plaintiffs are entitled to the transfer of all contributions
withheld under Amendment 24 based on the terms of the
Pension Plan, as it did with respect to Amendment 14, then it
need not determine whether the default and alternative
schedules in the Rehabilitation Plan violated ERISA’s
minimum accrual requirements.
IV. Cross-Appeal: Alternative Relief Under ERISA
Sections 502(a)(2) and (a)(3)
On cross-appeal, the class argues that if the court
determines that the Pacific Coast Fund is not required to
transfer all withheld reciprocity contributions to the travelers’
home funds under ERISA section 502(a)(1)(B), then the class
members are entitled to a benefit accrual for any withheld
contributions under ERISA sections 204, 305, and 502(a)(2).
The class further maintains that if the court determines that
the Pension Plan requires the Fund to transfer the withheld
contributions, but not the earnings thereon, then the class
members are entitled to the earnings pursuant to ERISA
LEHMAN V. NELSON 37
section 502(a)(3). The Trustees concede that if the class
members are entitled to a transfer of the withheld
contributions, they are also entitled to the earnings thereon.
Because we affirm the district court’s award of damages for
withholdings under Amendment 14 pursuant to ERISA
section 502(a)(1)(B) and we remand for further proceedings
on the withholdings under Amendment 24, we do not reach
whether the class would otherwise be entitled to benefits
accrual under ERISA sections 204, 305, and 502(a)(2).
V. Attorneys’ Fees
The plaintiffs separately appeal the district court’s award
of attorneys’ fees. The plaintiffs contest only the district
court’s determination of a reasonable hourly rate. Because
we reverse the district court’s order awarding damages with
respect to Amendment 24, we also vacate the attorneys’ fees
award.8
CONCLUSION
We vacate the damages award for withholdings under
Amendment 24’s formal Rehabilitation Plan because the
complaints did not provide adequate notice to the Trustees
that Amendment 24 was at issue. We affirm: (1) the district
court’s ruling that the Trustees abused their discretion by
interpreting Amendment 14 to conflict with Article 5 of the
Pension Plan; (2) the award of damages for the $1.00 hourly
8
To provide clarity on remand, we note that the district court did not
abuse its discretion by ruling that the relevant legal community for
purposes of calculating the fee award was the Western District of
Washington because that is the forum in which the district court sits. See
Gonzalez v. City of Maywood, 729 F.3d 1196, 1205 (9th Cir. 2013).
38 LEHMAN V. NELSON
withholding in Amendment 14 pursuant to ERISA section
502(a)(1)(B); and (3) the district court’s ruling that the
plaintiffs have the right to enforce the Pension Plan’s terms,
including the provisions that incorporate the Reciprocal
Agreement. We decline to reach the issues on cross-appeal,
vacate the attorneys’ fees award, and remand for further
proceedings consistent with this opinion.
Each party shall bear its own costs on appeal.
AFFIRMED in part, REVERSED in part, and
REMANDED.