Connell v. Trustees of the Pension Fund

affirm the dis I would therefore itations. plaintiffs’ Lanham

trict court’s dismissal

Act claim.3 fraud CONNELL;

Phillip Charles J.

Nelson, Appellants, THE PENSION FUND

TRUSTEES OF DISTRICT THE IRONWORKERS

OF NEW NORTHERN JER

COUNCIL OF

SEY; Council of The Northern District

Ironworkers, and its Constituent Local

Unions.

No. 96-5047. Appeals,

United States Court

Third Circuit.

Argued Jan. 1997. July

Decided

Lewis, opinion Judge, filed con-

curring dissenting part. part claims, agree court's majority's affirmance so I affirm with the jurisdiction supplemental plaintiffs' not to law dilution and in- decision exercise dismissal of state appealed plaintiffs’ other law claims all of fringement over state once claims. Plaintiffs claims had been dismissed. of their federal their federal dismissal of remainder

Jersey and the Northern District Council of Ironworkers and its Constituent Local Un- ions. NYGAARD, LEWIS,

Before: SCHWARZER, Judges, and Senior District Judge.*

OPINION THE OF COURT SCHWARZER, Judge. Senior District appeal we are on called interpret knowledge” require- the “actual ment ERISA’s statute of in an action for fiduciary duty. See 29 1113(a)(2)(A); U.S.C. Kurz also (3d Co., Philadelphia Elec. Cir.1996); International Union Electronic Erie Workers Murata North (3d Cir.1992); 980 F.2d 889 Gluck v. (3d Cir.1992). Corp., Unisys 960 F.2d 1168 Phillip Connell, an who worked as iron- employment1 nearly worker covered con tinuously between Nelson, Charles has worked as iron- periodically worker covered 1951, brought since this action Pension Fund of the Ironworkers District (the Jersey Council New Northern “Fund”). manages pension bargaining established under collective agreement employers between and the Northern District Council Ironworkers (whose locals are affiliated with the Interna Bridge, tional Association of Structural & AFL-CIO) (the Ironworkers, Ornamental Craner, Nelson, (Argued), John A. Craner “Union”). Connell and Nelson claim Scheer, P.A., NJ, Plains, Satin & Scotch for arbitrarily capriciously Fund acted Appellants Phillip J. Connell and Charles 186(c)(5) §§ of 29 and 1104 Nelson. enforced its break-in-service provides for cancellation accrued Joseph Pagano (Argued), R. & Jardine P.A., NJ, Pagano, specified Springfield, Appellees for credits after absence employment, canceling thereby Trustees of Pension Fund of Iron- from covered workers District Council of previously Northern New their earned credits.2 The Fund Schwarzer, workers, (1977), *The Honorable William W Senior Local 232 NLRB 504 enf'd nom., Judge Bridge, District for the Northern District of Cali- NLRB v. sub International Ass'n of fornia, sitting by Ironworkers, designation. & Local Structural Ornamental Cir.1978); (3d 586 F.2d 835 v. Local Moore booklet, According to the Fund’s " Bridge, International Ass’n Structural & Orna Employment’ jobs ‘Covered consists of the Ironworkers, mental 66 N.J. A.2d 1 which contributions are made to the (1975), capacity a de diminished their to earn [by employer].” living cent as ironworkers and that their breaks involuntary subject 2. Connell and Nelson also claimed that the Un in service discriminatory practices, equitable hiring exception ion’s see Iron- to an to the break-in-service contends, things, prior years fer service had canceled among other that because to file failed because he had two breaks service. He Connell and Nelson receiving actual notice representative three union within contacted a after receiv- of their credits were As ing that certain the notice of cancellation. he said at canceled, by is barred the ERISA trial, thought the action I find out “That’s when better of limitations. thing.” Appellee’s statute Br. at about this whole 13 trial). testimony at (quoting Nelson’s as an ironworker Connell worked to from 1971 to 1993. 1962 1968 and trial, a district After bench first knew that he He testified trial he Fund, finding court ruled favor lost certain credits as a result of were not but the claims time-barred in service when he received cred- his break application of break-in-service rule to it statement from the District Council arbitrary was not and Connell and Nelson then consulted his 1981. Connell capricious they voluntarily left cov plan book and found the break-in-service jobs employment were ered available agent to see to rule. He went his business departures with notice that such would cause represen- plain com and then called the Fund to be credits canceled. Connell tative, “quoted the broken-service [sic] appeal the court’s decis rule, years you’re you if out and three jurisdiction appeal have ion.3 We you ... aren’t vested lose the credit for AFFIRM, § 28 1291 and albeit under U.S.C. years you Appellee’s those had in.” Br. at 13 grounds. on different trial). testimony (quoting Connell’s Nelson worked off on as an ironworker DISCUSSION 1951 1973. He continu- between worked ously outside the trade between 1973 and The claims Connell and Nelson 1984, duty Nelson ironwork the Fund for breach of resumed 186(c)(5) employment §§ today. and remains covered arise 29 U.S.C. under 1104(a)(1)(A)©.4 he He testified that he first found out ERISA’s statute of limita tions, 1113(a)(2)(A), pre-1974 pension applies § lost his 29 to about 1981 U.S.C. 1982, arising statutory a document from claims under both of when he received these provisions.5 stating Brewery v. N.J. the District Council that his credits See Struble Fund, See, e.g., by canceling rule. F.2d 82 Knauss 583 tention that credits under (holding that enforcement of a its break-in-service breached its 186(c)(5) arbitrary capri- §§ break-in-service clause was and 1104. violation of Un- case, 1132(a)(1)(B) § cious where hiatus was caused der the this does involuntary unemployment inability to right find to distinct not create relief from that work). disposition 186(c)(5) covered arising §§ In view of our under and 1104. And even appeal, we do not reach this claim. to if Nelson able state claim under 1132(a)(1)(B), § the claim would be time-barred. Jersey’s New statute of limitations for contract disregarded suggests 3. The dissent that we have actions, Kennedy apply, which would v. Elec- findings underlying the factual the district Plan, (5th 954 tricians Pension F.2d 1120 disposition court’s Fund’s statute of limita- Cir.1992) State Mut. Johnson v. tions defense. We do not the district Life Assur. Co. findings, we ] nevertheless "exercise[ Cir.1991)); National Oil Co. v. see also Iranian plenary applying legal standard of review when Int’l, Mapco (citing Snider, John- precepts Easley to facts.” example approval with as an where state (3d Cir.1994). son We therefore applied was to statute of limitations federal stat- review de novo the district court's decision time-bar), years. 1113(a)(2) ute that lacked is six N.J. apply § whether to 29 U.S.C. on the § Slat. As had notice Ann. 2A:14—1. facts before it. in 1981 his forfeited credits date, began to run on that and whatever purports to 4. Nelson also state claim under 29 1132(a)(1)(B) might § action he under 1132(a)(1)(B) (permitting action was barred after 1987 or 1988. clarify brought beneficiary rights be "to his plan”). to future under the terms benefits independent No and Nelson claim that we not such claim exists of his claim for 5. Connell fiduciary duty—i.e., only argu breach of Nelson’s consider the Fund’s statute cross-appeal claim for "future benefits” arises out of his con- because the Fund failed ment Fund, Emp. effect of which was to Trust cause accrued Welfare (3d Cir.1984). provides fully upon partial benefits That not vest termi- 331-32 section nation, could be deemed knowl- part: in relevant edge of a violation of provisions the technical ... No action be commenced of ERISA. We noted that: fiduciary’s to a ... respect company literature to em- distributed ... obligation after the earlier of— ployees ... amendments] described as [the (1) (A) years six after the date participants’ improving pack- benefit part of last action which constituted a ages---- participant For a dis- ... or ... breach or violation partial cerned a cause of termi- (2) the earliest date on three after nation may required at that time ... have plaintiff knowledge actual which the a plan review the document of the and violation____ the breach plan’s balance sheet ... a level of research 1113(a). § 29 We held that scrutiny inconsistent with section high 1113 sets for bar “Section a standard knowledge 1113’sactual standard. ring prior claims fiduciaries to the Gluck, 960 F.2d at 1179. We remanded expiration six-year of the section’s each employee determination “when period.” Unisys Corp., Gluck v. 960 F.2d knowledge actual of all material facts rele- “ (3d Cir.1992).6 1168, 1176 knowl ‘[A]ctual claim,” vant to a partial having termination edge requires of a breach or violation’ that a emphasized, however, holding “that our does plaintiff actual of material all not mean that the statute limitations can necessary to that some understand begin plaintiff never to run until a con- first exists, claim include ... facts could lawyer.” sults with a Id. of a transaction’s harmful conse Gluck, Following we held International (citations omitted). quences____” 1177 Id. at Union Electronic v. Workers Murata Erie A breach occur without a (3d 889, North 980 F.2d 900 plaintiffs having suffered actual harm. Zie Cir.1992), that beneficiaries had notice Co., gler v. Connecticut Ins. 916 General Life plan of a amendment but were not informed (9th Cir.1990). 548, 551 Plaintiffs’ com provided that the amendment for reversion plaint the that Fund’s cancellation employer excess funds to the lacked the credits under said, aof breach. As we then arbitrary capricious sufficiently rule is showing Murata “failed to make the of actual fiduciary alleges a claim for breach of duties. knowledge necessary ‘stringent to meet the (3d v. 82 Knauss 583 F.2d requirement’ imposed by ... 29 U.S.C. Cir.1978). committed, If a breach was it (a) ](2).” (citing Id. at 901 960 1113[ upon must have cancella occurred 1176). F.2d at credits; plan, tion the terms of the Recently, company we held where a that immediately accrued credits were canceled to change decides to make material its period after a break-inservice exceeded the plan misrepresents its intent (i.e., specified by plan the in 1971 for Connell modification, of limi- make such a Nelson). and in 1964 1978for begin employee tations will once an run In we change Gluck held that mere of knows of his benefits and employer’s plan, ineligibility. Philadelphia own v. amendments benefit See Kurz ruling support appearing district on that decree in the court's adverse of a matter record, although argument issue. Be- his involve Their contention without merit. court"). upon judgment reasoning attack lower "seek[s] fh[e] sustain ap- [below] ... there was no need for a cross peal.” Surplus Brokerage v. Reserve Ins. Co. 6. The Fund does not contend that the action is Corp., (citing six-year 570 F.2d 9 491 that barred statute. It is clear if 204.11(3) (2d ¶ ed.)); Moore’s United break- Practice the forfeiture of credits under the Co., Ry. Exp. U.S. States American 265 in-service resulted a breach of (1924) duties, constituting part 68 L.Ed. of that S.Ct. the last action payment (stating appel- that "it is likewise settled that breach did not occur until of reduced may, cross-appeal, urge taking lee without benefits to the beneficiaries. Cir.1996). (3d LEWIS, concurring Judge, Co., Elec. dissenting. Kurz, plaintiffs’ found that In we begin was sufficient to change majority’s I agree with the conclusion 1113(a)(2) because: running of judgment af- should be however, separately, I write firmed. not a technical violation This was limita- disagree statute of ERISA’s ERISA, cleverly concealed nor Appellants’ tions claim. bars the openly PE Co announced amendment. disagreement with the My lies employees receive certain better interpretation of Gluck benefits, not. and others would (3d Corporation, Unisys Similarly, in this case were Id. knowl- we held “actual rule and requires aware of the Fund’s break-in-service edge knowl- of breach already applied edge least of all relevant facts at sufficient were aware knowledge that give plaintiff to them. provision or ERISA has been breached It is Connell 1178. This violated.” early as 1981 that the Fund knew as or 1982 determine, requires as [to] “the district court pension apply their credits canceled matter, the date on which each the ing the rule and that break-in-service knowledge of breach employee had actual the their would future Fund’s actions diminish Knowledge or Id. at 1176. of the violation.” Kurz, plaintiffs in Like the their benefits. distinguished from breach is alleged both the breach constituting the viola- the actions breach or they consequential injury and the id.; tion. Elec- See International Union of thereby “knowledge gave suffer them v. Murata Erie North Amer- tronic Workers fiduciary duty [may ica, or been breached have] F.2d Gluck, plaintiffs actually F.2d provision (requiring showing ERISA violated.” “that Indeed, only of events that occurred 1178. both knew not at Connell which constitute the violation but breach sufficiently aggrieved by the ac felt Fund’s supported also claim of that those events representatives. tions to their union fiduciary duty or violation under Thus 1981 or Connell Nelson ERISA”). all of the [material] had “actual Gluck, violation,” at elements Noting “stringent” actual knowl- Gluck’s 1176, including knowledge edge of the harmful requirement, the district court found pension although consequences flowing “demonstrat- from the cancellation plaintiffs aware Union, ed that became of their loss the credits. See International 1981,” during fund had credits 901; at at Nel- [Connell to demonstrate that “failed nothing There was left for them discover actually potential son] knew of their ERISA to do to file nothing more them Fund, of action.” Pension Connell legal suit or counsel. As we stated to seek (D.N.J. 92-1655, op. slip Civ. at Jan. No. Kurz, consequences’ ‘harmful ... were “the conclusion, support To this (citation Kurz, 96 at 1551 obvious.” drew factual inferences district court certain omitted).7 action, having Their been filed non-jury testimony presented more after there than three is Specifically, the court that Con- trial. found fore time-barred. learning nell’s failure to take action after credits than The is AFFIRMED. of his loss other judgment rule, hypothetical concerning pair union's of of break-in-service discriminato- 7. The dissent’s histories, against on ry ironworkers discriminated their nonunion status has no the basis practices, of their own bearing Un- here. them. the effect of the rule’s hypothetical plaintiffs, like dissent's who hypothetical, own The as it be on its sound they lost were unaware that credits terms, to the facts of is not relevant members, they were not Connell because union case. clearly knew in 1981 or 1982 of the Moreover, contacting the administrator and Nel- contrary to majority’s indi- cation, express any it enough son’s failure concerns to the is not administrator about the break-in-service that a duty “may have” “clearly [they] been provision indicate[d] were not breached ERISA Rather, potential plaintiff violated. aware of their cause of action.” Id. must have ac- 6,11 tual knowledge that a & “has” provision breached or ERISA violated. majority The seems overlook the district 960 F.2d at 1178. inferences, concluding: court’s factual While this distinction merely seem is in this case that [I]t Connell semantic, important, perhaps as early and Nelson knew as as 1981 or 1982 following hypothetical explain. will Assume that the Fund had their canceled that Smith and Jones were non-union iron by applying the break-in-service workers occasionally worked the iron rule and that the Fund’s actions would participated trade and in a multi-employer diminish future benefits. Their actu- pension supported fund that both union and al of both the breach non-union workers. Smith and consequential injury they and the would Jones received notice that pen- some of their thereby gave “knowledge them suffer sion credits would be lost they fiduciary duty [may been breached have] incurred breaks in service. Assume further provision or ERISA violated.” they questioned representative Fund but were Maj. Op. at 158 told that the Fund 960 F.2d at was mere- 1178) (alteration ly enforcing its original). Gluck in they were on notice. Jones conclusion does not follow from its and Smith upset were about their lost premise. Although credits and was established that have even that Connell and Nelson knew in assumed the Fund was treat- 1981 or 1982 of ing But, unfairly. them fund’s action which without other constituted information, is, thought Jones and breach—that Smith its enforcement they just were out of luck. of the break-in-service rule—it Now assume that does not fol- in they Jones and Smith knowledge low that had actual discovered that the practice notes, only applying Fund was majority breach itself. The further rule to non-union workers. without reference to the district court’s findings, that Connell and Nelson must have Under the statute of limitations “ had ‘actual of all of the [materi- would start to run in when Smith and ” they al] elements of the violation’ because Jones learned that the was discriminat- sufficiently aggrieved by “felt the Fund’s ac- ing in its enforcement the break-in-service representa- tions to their union words, rule. In other the statute would start Maj. Op. tives.” they possessed to run when knowledge that the enforcement of the break-in-service rule violated ERISA. Under the anal- earlier, however, As noted the district which, view, ysis, my relaxes Gluck’s opposite court reached exact conclusion “stringent” requirement, Jones and Smith testimony the same facts and cited bringing would be barred from their claim Indeed, majority. the district court three-year because the statute would have found that Connell’s and Nelson’s actions running they started in 1981 when first after receiving notice of their lost they learned that had lost credits due to “clearly indicate[d] their break in service. potential were not aware of their ERISA Connell, 92-1655, cause of action.” hypothetical Civ. No. discussed above is not slip op. at disregard, Here, 16. would not as the that different from the ease at hand. does, majority the district factual they de- Connell admit knew termination that they Connell’s and Nelson’s ac- 1981 or 1982 that had lost credits. But tions, thereof, or lack they they they indicated that allege incurred the breaks no of a breach. service because the union had discriminated Thus, allocating iron work. them in

against they could show if Connell of America UNITED STATES involuntarily, ironworking trade left the the break-in-service enforcement of Altigraci ROSARIO, Appellant. might them constituted the union’s discrim of ERISA.1 Had breach No. 96-5286. and Nelson out ination forced Connell Appeals, Court of United States involuntarily, they and had not trade Third Circuit. (say, the discrimination thought they just example, they Argued Jan. work), unlucky obtaining they would July Decided possessed “actual requisite knowledge” of a breach merely they had been

ERISA Indeed, they credits.

notified of lost all lacking “actual

would be constituting breach [the]

material

fiduciary duty [which] or violation ERISA qua sine non for

is three-year limitation.”

[ERISA’s]

F.2d at 1177. then, simply, the actual

Put necessarily

requirement intertwined theory or the

the cause Ad- v. Consultants &

breach. Martin

ministrators, Inc., 966 F.2d 1078

1992) (courts take “the must into account

complexity underlying transac-

tion, legal complexity claim and violation”).

egregiousness bottom,

At of what a determination very fact-

plaintiffs knew and when is a inquiry.

intensive (requiring to deter- court “as a matter”

mine run).

began agree I cannot with

majority’s disregard of the inferences here.

the district court drew from the facts 1981) ("We recognized 1. We Knauss v. believe dis- (3d Cir.1978), plan beneficiary voluntary incurs involuntary that if tinction between involuntarily, break in service determining crucial breaks in service is justification why come must forward operation given of a break in arbitrariness of the rule is enforceable. See also Van Fossan rule.”). service Teamsters, 649 F.2d International Brotherhood of

Case Details

Case Name: Connell v. Trustees of the Pension Fund

Court Name: Court of Appeals for the Third Circuit

Date Published: Jul 9, 1997

Citation: 118 F.3d 154

Docket Number: 96-5047

Court Abbreviation: 3rd Cir.