Shore v. International Painters & Allied Trades Industry Pension Plan

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT MAR 02 2011
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
DAVID SHORE, Nos. 10-15365 and 10-15437
Plaintiff-Appellee/ D.C. No. 2:08-cv-01508-PMP-RJJ
Cross-Appellant,
v. MEMORANDUM*
INTERNATIONAL PAINTERS AND
ALLIED TRADES INDUSTRY
PENSION PLAN,
Defendant-Appellant/
Cross-Appellee.
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, District Judge, Presiding
Argued and Submitted December 7, 2010
San Francisco, California
Before: REINHARDT, HAWKINS, and N.R. SMITH, Circuit Judges.
The International Painters and Allied Trades Industry Pension Plan (“IPAT”)
appeals the summary judgment grant to David Shore (“Shore”) in his ERISA action
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
seeking disability benefits under the Plan retroactive to 1974. The parties cross-
appeal the district court’s award of attorneys’ fees. We affirm on the merits but
remand for clarification of the reduction in attorneys’ fees.
Shore worked for employers who contributed to the Plan until he suffered an
on-the-job injury and became permanently and totally disabled on March 15, 1974,
as later determined by the Social Security Administration (“SSA”). After being
repeatedly told by IPAT he was one credit shy of pension eligibility, Shore applied
for a disability pension in 2003, submitting documentation of his 1976 SSA disability
determination, as well as proof that IPAT had miscalculated his credits and that he
was, in fact, eligible for a disability pension. IPAT ultimately accepted Shore’s credit
calculation, but denied his disability application, concluding: (1) his credits had never
vested and were thus nullified by his break in service as of 1977; and (2) his failure
to apply for a disability pension within twelve months of receiving the SSA disability
award, as required under the 1995 version of the Plan, disqualified him.
We have jurisdiction over Shore’s claim because a significant act—namely, the
award of SSA disability benefits in 1976, without which Shore could not qualify as
“permanently and totally disabled” as defined by the 1967 Plan—clearly occurred
after ERISA’s effective date. See 29 U.S.C. §§ 1132(e), 1144(b)(1). This fact,
combined with the accrual of Shore’s cause of action when he applied for and was
2
denied disability benefits in 2003, places his claim squarely within the jurisdictional
reach of ERISA and distinguishes his claim from the one asserted in Menhorn, where
all of the relevant acts giving rise to the benefits claim occurred pre-ERISA. See
Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1501-02 (9th Cir. 1984).
The parties dispute whether Shore’s claim is controlled by the 2003 Plan, which
confers discretionary authority on the Trustees, or the 1967 Plan, which does not. By
the 2003 Plan’s plain language, Shore’s pension eligibility is to be determined “in
accordance with the provisions of the Plan in effect at the . . . time the Employee . .
. left Covered Employment,” which is the 1967 Plan. The district court correctly
determined that the 1967 Plan governs and that, accordingly, the plan administrator’s
denial of Shore’s claim is reviewed de novo. See Shane v. Albertson’s, Inc., 504 F.3d
1166, 1169 & n.1 (9th Cir. 2007); see also Firestone Tire and Rubber Co. v. Bruch,
489 U.S. 101, 115 (1989).
Once the SSA deemed Shore eligible for Social Security Disability benefits, he
satisfied all three eligibility requirements for a disability pension set forth in Article
III, Section 8 of the 1967 Plan: (1) he was permanently and totally disabled prior to
attaining age sixty-five; (2) he had at least 120 units of pension credit; and (3) he had
accrued at least twelve units of future service credit in covered employment. The
1967 Plan does not condition entitlement to a disability pension on advance
3
application, as later versions of the Plan do. Therefore, “[b]y its mandatory language
(‘shall be entitled’),” the 1967 Plan entitles Shore to disability benefits retroactive to
his disability onset date. See Canseco v. Constr. Laborers Pension Trust for S. Cal.,
93 F.3d 600, 606 (9th Cir. 1996). Because application is merely a “procedural
requirement” “to initiate payment of benefits” rather than a condition of entitlement,
Shore’s failure to apply for payment of benefits until 2003 “cannot destroy [his]
eligibility.” See id. at 607. Likewise, the Plan’s break-in-service provisions do not
apply to a worker who has satisfied all pension eligibility requirements and is already
entitled to retire.1 See Banuelos v. Constr. Laborers’ Trust Funds for S. Cal., 382
F.3d 897, 904-05 (9th Cir. 2004). IPAT’s interpretation of Shore’s retirement itself
as a disqualifying “break in service” is incompatible with a holistic reading of the
Plan, as well as with circuit precedent.
IPAT’s attempt to distinguish Canseco by relying on Anderson v. Suburban
Teamsters of N. Ill. Pension Fund Bd. of Trustees, 588 F.3d 641 (9th Cir. 2009), is
equally misdirected, as Shore’s claim, though involving welfare rather than pension
benefits, does not implicate ERISA’s anti-cutback provision. See id. at 649; 29 U.S.C.
1
Because Shore already meets all three requirements of a disability pension
under the Plan and is thus entitled to retire, it is immaterial that he does not satisfy
a different Plan provision allowing employees falling short of pension eligibility to
preserve their accrued service credits notwithstanding a break in service.
4
§ 1054(g). Our interpretive principles in Canseco, which were not contingent on the
type of benefit at issue, apply no less to a claim for disability benefits rooted in the
express and unambiguous language of a plan document.
An award of reasonable attorney fees is within the district court’s discretion, but
a departure from the lodestar amount by as much as twenty percent must be supported
by specific and articulable reasons. See Moreno v. City of Sacramento, 534 F.3d
1106, 1112-13 (9th Cir. 2008). Such required specificity is lacking where the district
court explains its twenty-two percent reduction in number of hours solely by reference
to “the reasons set forth in Defendant’s Response,” which itself contains only vague
contentions that the hours claimed are excessive. Though we are mindful of the
district court’s busy docket, case law compels us to remand for a “concise but clear”
explanation of the court’s reduction in hours so as to ensure that no abuse of discretion
has occurred. See Gates v. Deukmejian, 987 F.2d 1392, 1399-1400 (9th Cir. 1992).
AFFIRMED in part, REVERSED in part, and REMANDED. Each party
to bear its own costs on appeal.
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FILED
MAR 02 2011
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
Shore v. International Painters and Allied Trades Industry Pension Plan, Nos. 10-
15365 and 10-15437
Judge N.R. SMITH dissenting,
Because the majority opinion (1) disregards our lack of jurisdiction in this
case and (2) ignores the unambiguous language of the plan, instead relying on
inapplicable precedent to hold that Shore was wrongfully denied disability
benefits, I am compelled to dissent.
1. Actions not governed by ERISA are not within the scope of the grant of
jurisdiction in 29 U.S.C. § 1132(e) and must be dismissed for lack of subject
matter jurisdiction. Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496,
1503-05 (9th Cir. 1984). Under 29 U.S.C. § 1144(b)(1), ERISA does not apply to
claims that accrue after ERISA became effective on January 1, 1975 if the claim
accrues through the denial of benefits based on “an unambiguous and
nondiscretionary plan provision adopted before the effective date.” Menhorn, 738
F.2d at 1501. This limitation reflects considerations of “fairness to defendants [by]
avoiding retroactive application of remedial principles not in effect at the time of
the conduct in question[].” Id. at 1500 n.3. It “would be unfair to judge pre-
ERISA conduct retrospectively by ERISA’s standards.” Id. at 1500. While
1
Shore’s claim accrued after 1975 when Shore’s claim was denied, the denial was
the inexorable consequence of the 1967 plan’s unambiguous and nondiscretionary
break in employment provisions. Thus, under Menhorn, the claim accrual is
insufficient to allow us subject matter jurisdiction.
Further, ERISA also does not apply if the substantial conduct giving rise to
the cause of action occurred prior to ERISA’s effective date. Id. at 1501-02. Here,
all substantial conduct giving rise to this cause of action occurred prior to January
1, 1975. All of Shore’s work and all plan contributions were made prior to 1975.
His disability also occurred prior to 1975. Even Shore’s call to IPAT, when he was
accurately informed that he was not vested,1 took place prior to 1975. Therefore,
we lack jurisdiction over this case.
The majority argues that the Social Security Administration’s determination
in 1976 that Shore was disabled is a significant act that gives rise to jurisdiction.
ERISA was enacted to govern “the conduct of fiduciaries in the administration of
employee benefit plans,” id. at 1498, not the actions of unrelated third parties. Cf.
29 U.S.C. 1002(14). Therefore, the determination by the SSA is irrelevant to our
jurisdiction. Even worse, the majority asks us to impose liability on IPAT for a
1
Contrary to the majority’s assertion, Shore was not told he was ineligible
for benefits; he was told he was not vested. He did not mention his disability at
this time.
2
third party’s act over which it had neither knowledge or control. Further, IPAT
did not even have reason to know of the SSA’s action, since Shore did not inform
the plan of his injury or disability until 2003. Lastly, the disability determination is
not a significant act giving rise to the cause of action. Shore’s claim was not
denied because he was not disabled, but rather because, according to the terms of
the 1967 (pre-ERISA) plan, his break in employment cancelled any previous
entitlement to benefits. Therefore, we have no jurisdiction here.
2. The majority fails to address the major issue in this case—and the issue on
which IPAT consistently relied when denying Shore’s claim—the operation of the
plan’s vesting and break in employment provisions. Instead, it erroneously held
that entitlement to benefits is equivalent to vesting.
This is not a case where the court must determine the circumstances under
which a benefit will vest. The plan document clearly outlines those circumstances:
the claimant must (1) be at least 50 years of age, (2) have 120 total pension credits,
and (3) have at least 60 future pension credits. It is undisputed that, at the time
Shore was disabled, he did not have 60 future pension credits, and was not 50 years
of age. Therefore, he was not vested in the disability plan at the time of his
disability. Benefits which are not vested may be cancelled by later plan
amendments or by a break in employment. See Nachman Corp. v. Pension Ben.
3
Guaranty Corp., 446 U.S. 359, 363-4.27 (1980) (vesting means that “the
employee’s right to the benefit would survive the termination of his employment”);
Anderson v. Suburban Teamsters of N. Ill. Pension Fund Board of Trs., 588 F.3d
641, 650 (9th Cir. 2009) (unvested welfare benefits not protected by anti-cutback
rules); Banuelos v. Construction Laborers’ Trust Funds, 382 F.3d 897, 904-05 (9th
Cir. 2004) (only vested benefits are not subject to break in service provisions).
The plan unambiguously provided that, if an employee did not earn at least
six pension credits in a three-year period, any pension credit would be cancelled at
the end of the third year. It is undisputed that Shore did not earn six pension
credits between 1974 and 1976. Thus, under the plain terms of the plan, any
pension credit, and thus any eligibility for disability benefits, was cancelled long
before Shore applied for benefits in 2003.
The majority’s holding that, once an employee qualifies for a benefit, the
break in employment rules do not apply disregards the plain language of this
disability plan. When interpreting a writing, we are required to “look to the
agreement’s language in context and construe each provision in a manner
consistent with the whole such that none is rendered nugatory.” Dupree v. Holman
Prof. Counseling Ctrs., 572 F.3d 1094, 1097 (9th Cir. 2009); see also Restatement
(Second) of Contracts § 202(2) (“A writing is interpreted as a whole, and all
4
writings that are part of the same transaction are interpreted together.”). This is
especially appropriate here, where labor and management “worked together to
formulate the details” of the plan through collective bargaining.
While the majority is correct that the plan specifies that an employee “shall
be entitled” to disability benefits after meeting certain requirements, the majority
ignores the express limitations to that entitlement contained in the plan as a whole.
The plan also plainly states that pension credits “shall be cancelled” after a three-
year break in employment. Further, the plan explicitly provides a limited
exception that employees who are vested “will remain entitled” to their benefits
even after a break in employment. If, as the majority posits, once an employee
became entitled to benefits he could never lose those benefits, this language
(“remain entitled”) would be “rendered nugatory.”
Banuelos, 382 F.3d 897, cited by the majority, is not to the contrary. Unlike
Shore, Banuelos was already vested under the terms of his pension plan before his
break in service. Id. at 904. Here, as in Banuelos, if Shore had “completed the
required service for vesting, a subsequent break in service [could not have]
deprived [him] of benefits.” Id. However, Shore had not completed the vesting
requirements, and thus the break in employment cancelled his pension credits.
The majority can point to no valid authority supporting its assertion that
5
eligibility for a benefit is equivalent to vesting. Canseco v. Construction Laborers
Pension Trust for Southern California, 93 F.3d 600 (9th Cir. 1996) is factually and
legally distinguishable. The plan provisions, the legal question decided, and the
type of benefits are all different from the present case. Under ERISA, welfare
benefits and pension benefits are treated quite differently. ERISA establishes
minimum vesting standards for pension benefits, but not welfare benefits. 29
U.S.C. § 1053. Welfare benefits vest only when and how the employer’s plan
specifies. Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1160 (9th
Cir. 2001). Pension benefits are protected by anti-cutback rules, but welfare
benefits are not. Anderson, 588 F.3d at 650.
Furthermore, Canseco did not address the relevant issue here: how vesting
and break in employment provisions may affect eligibility for benefits. It decided
one limited issue: whether—under that specific plan—submitting an application
was an eligibility requirement. 93 F.3d at 606-09. Not only are the application
provisions different in the IPAT plan, but the plan (as negotiated by the parties)
stipulates that employees who are not vested will have their pension credit
cancelled after a break in employment even if they were previously eligible for, but
6
not receiving, benefits.2 Under the plain terms of the plan as whole, Shore was not
entitled to a disability pension.
2
“Pensioners” (those who are retired and receiving benefits) are not subject
to the break in employment clause, which applies only to “Employees.”
7