Petition — Burroughs v. Board of Trustees of the Pension Trust Fund

Supreme Court, U. &

FILED

Iu the Supreme Conte.

DEC 27 1976

HAEL RODAK, JR., CLER

United States

76-872

Peary fr) Oo]

preparing TONGINEFERS, «

Lie ‘ ropcle nis

j ;

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

\. \ ABLONSKE,

ct. born é

Wioiam H.C

James AM. AMotnrss,

DReWer, PATRIDGE &

Attorne “Us TO) P hiliowe)

CA 941068

SAN FRANCISCO

Subject Index

Page

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EE itn cue Cesena deed aeed ene tee $eee ee eereL mae 2

PD MINI. ono oc bere06456snccecdbedceuscaewecbeces 2

ee: SE: neue ckyees cécaen¥aGunneceenaeeranac 2

ee Or ee cnc i occesceweden dese ceudunebese 2

Beeeems for eromtionn the WE .....505 w cc peccccessccceem 7

Pn Glowecgces talaccedseeayact odes entacebeeuteat 16

Table of Authorities Cited

Cases Pages

Alyeska Pipeline Service Co. v. Wilderness Society, 421

FS BF ere ern, Aeere eer 6,7

Arroyo v. United States, 359 U.S. 419 (1959) ........... 10

Hall v. Cole, 412 U.S. 1 (1973) ........... 7, 9, 10, 11, 12, 14, 15

Kiser v. Huge, 517 F.2d 12387 (1974) .......cccceccccsees 13, 14

Kiser v. Miller, 364 F.Supp. 1311 (D.C.D.C., 1973) ...... 13

Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970) .....

LUeediidedetsd ee adds den eenesawenaaanred 7, 8, 9, 10, 11, 13

Sprague v. Ticonic National Bank, 307 U.S. 161 (1939)..7, 8,12

Trustees v. Greenough, 105 U.S. 527 (1881) ............ 7

United States v. Ryan, 350 U.S. 299 (1956) ............. 10

Yablonski v. United Mine Workers of America, 466 F.2d 424

Dt .ceve euehivaneraueeedatnebanerterekren cake 11,12

Statutes

Labor-Management Relations Act of 1947:

Section 302 (29 U.S.C. §186) .......cececees 2, 3, 5, 6, 13, 15

Section 302(¢)(5) (29 U.S.C. §186(¢) (5) ...... 3, 4, 9, 10, 11

Labor-Management Reporting and Disclosure Act of 1959:

aeteams. WEE CEP UG. SEER) ccc ccccsccdsvvcccsvess y

2B U.G.C. § 1254(1) ........cccccccsesccccevscccceccecs 2

Iu the Supreme Court

OF THE

United States

OcToBEer TERM, 1976

No.

BENJAMIN R. BuRROovUGHS,

Petitioner,

VS.

Boarp or TRUSTEES OF THE PENSION TRUST FUND

FOR OPERATING IONGINEERS, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Petitioner Benjamin R. Burroughs respectfully

prays that a writ of certiorari issue to review the

judgment and opinion of the United States Court

of Appeals entered in the above-entitled proceeding

on October 4, 1976,

OPINIONS BELOW

The opinion of the Court of Appeals, not yet re-

ported, appears in Appendix A hereto, infra at pp.

2

vill, The opinion of the United States District

Court for the Northern District of California is re-

ported at 398 F.Supp. 168, and appears in Appen-

dix 13 hereto, infra at pp. ix-xxvi.

JURISDICTION

The judgment of the Court of Appeals was entered

on October 4, 1976. The jurisdiction of this Court is

invoked under 28 U.S.C, §1254(1),

QUESTION PRESENTED

Whether the United States District Courts have the

power to award attorneys’ fees, in actions under See-

tion 302 of the Labor-Management Relations Act of

IN47 (29 U.S.C. 9186), where an employee-beneficiary

of a union welfare fund has been successful in obtain:

ing injunctive relief against a “structural” violation

of that section by the trustees of the fund.

STATUTE INVOLVED

Section 302 of the Labor-Management Relations Act

of 1947 (29 ULS.C, S186) is set forth in Appendix C

hereto, infra at pp. xxvii-xxx.

STATEMENT OF THE CASE

Petitioner commenced an action for damages, in-

Junctive and declaratory relief, under Section 302 of

“s 3

the Labor-Management Relations Act of 1947 (29

U.S.C. §186), in the United States District Court for

the Northern District of California on November 23,

1973 (C.R. 1).' His complaint alleged that the de-

fendants, trustees of a jointly-administered employee

pension fund established pursuant to Section

302(¢) (5) (29 U.S.C. §186(¢)(5)), had violated that

section by wrongfully denying his application for a

disability pension filed on October 31, 1972 (C.R.

1-14). Specifically, petitioner alleged that the de-

fendant trustees had acted arbitrarily in denying his

pension application pursuant to their “break-in-em-

ployment” rule, which operated to divest employee-

beneficiaries of their accrued pension credits in the

event that they failed to earn at least one quarter of

such credit during a period of three years, and their

“Social Security Disability Benefit” rule, which re-

quired that employee-beneficiaries establish their en-

titlement to a Social Security Disability Benefit as a

prerequisite to receiving a disability pension from the

Fund (See C.R. 116, 187).

Petitioner’s action was tried by the District Court

commencing on February 10, 1975, and on April 14,

1975, the District Court issued its Findings of Fact

and Conclusions of Law (Appendix B, pp. 1x-xxvi).

The District Court found that the defendant trustees

had acted on petitioner’s pension application in a

manner which was “arbitrary and capricious” and,

“CR.” references are to the Clerk’s Record on Appeal which

is on file in the Court of Appeals below, “R.T.” references are to

the Reporter’s Transcript on Appeal, also on file in the Court of

Appeals below.

4

therefore, in violation of their duty under Section

302(¢)(5) (Appendix B, p. xxii).

The District Court’s judgment was based upon its

finding that the “break-in-employment” rule, as ap-

plied to petitioner, was “arbitrary and capricious

under the circumstances, in that [petitioner] was not

notified of the Rule until over two years after the

Rule began operating to cut off his acerued pension

rights.” (Appendix B, p. xxii). Specifically, the

District Court found that while the Rule was not

formulated until the official execution of the trust

agreement on December 30, 1959 (Appendix B, p.

xi), and participants in the plan were not noti-

fied of its existence until on or about April 27, 1960

(Appendix B, p. xix), it had been applied retro-

actively, from January 1, 1958, the beginning date

for employer contributions to the plan, to eut off the

pension rights of those who earned — insufficient

amounts of pension credit in 1958, 1959, and 1960

(Appendix b, p. xviii). The Distriet Court con-

cluded that this application of the Rule was arbitrary

and capricious, and thus in violation of Section

302(¢)(5) of the Act, as well as the principles of

law and equity, because:

“... since the Break-in-Employment rule by its

terms allows a participant three years in Which

to accumulate the required minimum hours of

contributory employment to remain a pension

plan participant, plaintiff should have been al-

lowed three years in which to aceumulate said

minimum hours from the date plaintiff was put

on notice of the rules Failure of the Board of

Hy)

Trustees to allow plaintiff said three years from

the date of notice was arbitrary and capricious

in light of all of the circumstances .. .”

(Appendix B, p. xxii). It further concluded that

the action of the defendant trustees in administering

the trust “in a manner lacking in fundamental due

process” was, within the meaning of Section 302,

“tantamount to a basic structural defect in the trust”

(Appendix B, pp. xxv-xxvi). The District Court rea-

soned that:

“As a practical matter, whether the unjust ex-

clusion of a pensioner is obtained from the

exclusive provision of the trust fund itself or

from the arbitrary and exclusionary implemen-

tation procedures of trustees, the ultimate effect

is that the trust is not operated for the ‘sole and

exclusive benefit of the employees.’ ”

(Appendix B, p. xxvi).

With respect to the “Social Security Disability

Benefit” requirement, the District Court found that

“although an applicant for a social security benefit

must meet the test of being disabled and also must

meet an earnings requirement, when the Board of

Trustees adopted the social security disability test,

its sole focus was on the disability aspect, not on the

earnings requirement.” (Appendix B, p. xiv. See also

R.T. 98). Thus, it concluded that:

“To the extent the definition of total disability

within the Pension Plan requires a participant

to receive a social security disability award, or its

equivalent, said requirement is unreasonable on

its face and as applied to plaintiff in that the

.°

earnings aspect of such an award was not in-

tended to ne a focus for determining eligibility

for disability benefits under the Pension Plan.”

(Appendix B, p. xxii).

Accordingly, the Distriet Court upheld petitioner's

claim and granted him a permanent injunction com-

pelling the defendant trustees to pay him disability

pension benefits for so long as he remained eligible

under the terms of the plan (Appendix 1B, pp. xxiii-

xxiv). The Distriet Court refused, however, to grant

petitioner an award reimbursing him for the attor-

neys’ fees he had expended in securing his pension

(Appendix B, pp. xxiv-xxv. See also R.T. 177-178).

Petitioner noticed a timely appeal from that portion

of the District Court’s judgment which denied him

an award of attorneys’ fees, and the defendant trus-

tees then cross-appealed on the merits of the judg-

ment (CLR. 230, 233).

On October 4, 1976, the United States Court of

Appeals for the Ninth Cireuit affirmed the judgment

of the Distriet Court in all respects, holding that the

action of the defendant trustees in denying petitioner

a pension pursuant to its “break-in-employment” rule

Was “arbitrary and capricious” in the cirenmastances

and therefore in violation of Section 302. (see Preah

dix A, pp. v-vil), but that petitioner was not

entitled to attorneys’ fees under the “common fund

or common benefit” doctrine reaffirmed by this Court

in Alyeska Pipeline Service Co, v. Wilderness Soci-

ely, 421 US, 240 (1975). Thus, the Court of Appeals

noted that “in this case, no records have been main-

——

7

tained [by defendant trustees] which would have

revealed the number or identity of persons benefitted

by Burroughs’ action [and] the class of beneficiaries

is thus of indeterminable size and not easily identifi-

abie” (Appendix A, p. viii). In such circumstances,

the Court of Appeals concluded, petitioner had failed

to establish ‘ta factor common to all... common bene-

fit decisions” of this Court (Appendix A, p. vill).

REASONS FOR GRANTING THE WRIT

1. The decision of the Court of Appeals in this

case collides squarely with the decisions of this Court

in a long line of cases culminating with Alyeska Ptpe-

line Service Co. v. Wilderness Society, 421 U.S, 240

(1975). Although the Court in Alyeska reaffirmed the

long-established rule that “in the United States, the

prevailing litigant is ordinarily not entitled to collect

a reasonable attorneys’ fee from the loser” (421 U.S.

at 247); it also reaffirmed an equally well-established

exception to the rule permitting an equity court to

award attorneys’ fees where the prevailing litigant

has conferred a substantial benefit on an ascertain-

ble class of persons, and the granting of fees from

a common fund will operate to spread the costs of

the litigation among such persons. (/d, at 257-2958,

citing Trustecs v. Greenough, 105 USS. 527 (1881);

Sprague v. Ticonie National Bank, 30% U.S. 16]

(1939); Mills v. Electric Auto-Lite Co., 396 US, 375

(1970); and Hall v, Cole, 412 U.S. 1 (1973)).

8

A review of the above-cited decisions of this Court

shows that this “substantial benefit” exception has

been considerably broadened over the years. In

Sprague v, Ticonic National Bank, supra, the Court

held that an award of attorneys’ fees was proper

even where the plaintiff had not sued on behalf of

a class, so long as the stare decisis effect of the plain-

tiffs suecessful litigation operated as a practical mat-

ter to benefit others who were similarly situated (See

OOT US. at 167). Mills uv. Electric Auto-Lite Co.,

supra, further broadencd the “substantial benefit”

exception by holding that the benefit conferred need

not be a monetary one, There, the plaintiffs were

corporate sharcholders who brought suit under the

securities laws to set aside a corporate merger aecom-

plished through the use of a false and misleading

proxy statement (See 396 U.S. at 377). The Court

concluded that their action had benefitted both the

corporation and the other shareholders, justifying an

award of attorneys’ fees from the corporate treasury,

even though the suit had not produced “a monetary

recovery from which the fees could be paid .. 2”

(Id. at 392), Rejecting the contention that creation

of a “common fund” was a prerequisite to the lower

court's power to award fees, the Court held that “the

expenses incurred by one shareholder in the vindiea-

tion of a corporate right of action can be spread

among all shareholders through an award against the

corporation, regardless of whether an aetual Honey

recovery has been obtained in’ the corporation's

favor” (Id. at 394). The rationale for sueh an award

9

is that the litigation “corrects or prevents an abuse

which would be prejudicial to the rights and interests

of the corporation” and that such “corporate thera-

peuties” justify the payment of fees fiom the cor-

porate treasury (/d. at 396).

Similarly, Hall v, Cole, supra, approved an award

of fees to a union member who had brough! suit,

under the “free speech” provisions of Seeton 102

of the Labor-Management Reporting and D:-losure

Act of 1959 (29 U.S.C. $412), to vindicate his own

right to criticize union policies, Although his action

had conferred no financial benefit on the union or

any of its members, an award of fees from the union

treasury was held appropriate because the plaintiff,

by vindicating his own statutory rights, “necessarily

rendered a substantial service to his union and to all

of its members” (412 U.S. at 8). Speeificaliy, the

‘ourt found that such litigation operates to dispel

the “chill” east upon the free speech rights of other

members, and thus “contribute[s] to the preservation

of union democracy.” (1bid.). An award of fees from

the union treasury in such circumstances “simply

shifts the costs of the litigation to the class that has

henefitted from them” (/d, at 8-9, citing Mills, supra).

Under the standards set forth in the above-cited

decisions of this Court, an award of attorneys’ fees

was clearly appropriate in the circumstances of this

ease. Section BO2(¢)(5) of the Labor-Management

Relations Act of 1947, under which petitioner brought

suit, requires that the trustees of union welfare and

pension funds administer such funds “for the sole

10

and exclusive benefit of the employees” (See 29

U.S.C. §186(¢)(5)). This provision reflects a clear

congressional intent to prevent misuse or mismanage-

ment of fund assets, and to that end Congress has

established “specific standards . . . to assure that

welfare funds would be established only for pur-

poses which Congress considered proper and ex-

pended only for purposes for which they were

established ..." Arroyo v. United States, 359 U.S.

419, 426-427 (1959). See also United States v. Ryan,

390 U.S, 299 (1956). Moreover, Congress has assured

“continuing compliance with these standards in the

administration of welfare funds” by making the pro-

Visions of Seetion 2302(¢) (5) “explicitly enforceable

in Federal Distriet Courts by civil proceedings under

§302(¢).” Arroyo v. United States, supra (359 U.S,

at 427).

An employee-heneficiary of a union welfare fund

who is suecessful in obtaining judicial relief against

a so-called “structural” violation of Section 302(¢) (5),

thus restoring the fund to its original, lawful purpose

as intended hy Congress, must by definition confer

a substantial benefit on both the fund as an entity

and on its employee-beneficiaries as a ¢lass. This

benefit is directly analogous to the “corporate thera-

peuties” referred to in Mills v. Electric Auto-Lite

Co., supra, and to the “preservation of union demoec-

racy” referred to in Hall v, Cole, supra. In each Case,

the litigation in question serves to implement an im-

portant congressional poliey by correcting an institu-

tional abuse, and in each case an award of fees from

cee ens a.

11

the funds of the institution itself serves to spread

the costs of the litigation among the benefitted class,

whether they be corporate shareholders, union mem-

bers, or pension fund beneficiaries. See Mills, supra,

396 U.S. at 396; and Hall v. Cole, supra, 412 U.S.

at 9-10.2 Nor is it determinative that the plaintiff’s

action does not increase or preserve the total assets

of the entity involved, or bestow a direct financial

benefit on each and every one of the persons with an

interest therein, Mills holds unequivocally that a mon-

etary benefit is not a prerequisite to an award of fees,

and the holding in Hall v, Cole clearly confirms this

point.

In this case, the courts below found that the pen-

sion fund in question had been administered by the

defendant trustees in a manner which was “arbitrary

and capricious” (Appendix A, p. v), and therefore

in violation of the “sole and exclusive benefit” re-

quirement of Section 302(¢)(5), but concluded that

petitioner was not entitled to an award reimbursing

him for the attorneys’ fees he had incurred in obtain-

ing judicial relief against such violation, In so hold-

ing, the Court of Appeals below totally ignored the

2In Mall v. Cole, the Court cited with approval the decision of

the Court of Appeals for the Distriet of Columbia Circuit in

Yablonski v.\United Mine Workers of America, 466 F.2d. 424

(1972). There, the Court of Appeals expressly rejected the con-

clusion of the district court below that fees were inappropriate in

a serics of individual actions for injunctive relief under the

LMRDA because “the Yablonski lawsuits did not benefit anyone

except Yablonski.” (/d. at 430). Noting that Congress’ concern

in passing the LMRDA had been focused on ‘‘the overriding im-

portance to union democracy of free and fair elections”, the court

found that the litigation before it “contributed, both in the short

and the long run, to the achievement of this objective” (Ibid.).

12

important non-economic benefit which petitioner’s ac-

tion conferred upon the fund as an entity and its

beneficiaries as a class. Concerning itself exclusively

with the financial benefit bestowed by petitioner’s

action upon other beneficiaries of the fund who were

similarly situated with respect to the “break-in-em-

ployment” rule, the Court of Appeals based its deci-

sion on the fact that such persons could not be

identified from the records of the fund. In such eir-

cumstances, it concluded, “no definite class of bene-

ficiaries has been ascertained” and an award of fees

was therefore impermissible. (See Appendix <A, p.

viii).

This decision is, we submit, totally irreconcilable

with the decisions of this Court in Sprague v. Ticonic

National Bank, Mills v. Electric Auto-Lite Co., and

Hall v. Cole, supra, all of which reject the rationale

that fees can be awarded only where the plaintiff

brings suit as the representative of a class. See also

Yablonski v. United Mine Workers, supra, cited with

approval by this Court in Hall v. Cole. It is similarly

in conflict with this Court’s decisions in Mills and

Hall v, Cole, which hold unequivocally that a mone-

tary benefit is not a prerequisite to an award of fees,

and that litigation which corrects an institutional

abuse, thus implementing an important congressional

policy, by definition confers a “substantial benefit”

on both the institution in question and all of the

persons who have an interest in it. Certiorari should

accordingly be granted to insure compliance by the

lower courts with the decisions of this Court.

13

2. The decision below is in conflict with the deci-

sion of the Court of Appeals for the District of

Columbia in Kiser v. Huge, 517 F.2d 1237 (1974),

a case involving substantially the same question pre-

sented here, There, the plaintiffs were coal miners

who had been denied pensions pursuant to the so-

called “signatory-last-employment” rule of the United

Mine Workers pension fund, They sued under Sec-

tion 302, were successful in invalidating the rule and

obtaining their pensions, and were ultimately granted

a substantial award of attorneys’ fees. Kiser v. Miller,

364 F.Supp. 1311 (D.C.D.C., 1973). Although their

action neither increased nor preserved the assets of

the fund as a whole, and the granting of pensions to

them and to other beneficiaries who were similarly

situated did not benefit the beneficiaries of the fund

as a class, the district court justified the award of

fees as follows:

“The Court realizes that in taxing the fund, the

Fund beneficiaries are the onés who will actually

bear the burden, In this instance the Court finds

the imposition would neither be burdensome nor

unjustified. The Court bases its findings on the

facts that the award is a reasonable and modest

one, and that the entire fund benefitted from this

suit with the prevention of general fiduciary

abuse and improvement of the institutional fune-

tioning of the fund as an entity.”

On appeal, the Court of Appeals in Kiser v. Huge,

supra, affirmed this award of fees as a proper appli-

cation of the “substantial benefit” doctrine of Mills,

supra. In so holding, it relied expressly upon “the

14

[district] court’s finding that it is appropriate for

the fund to bear the costs of plaintiffs’ legal fees

since ‘the entire fund benefitted from this suit with

the prevention of general fiduciary abuse and im-

provement of the institutional functioning of the fund

as an entity.’ (517 F.2d at 1256-1257).

This decision is in clear conflict with that of the

Court of Appeals below, and this Court should ae-

cordingly grant a writ of certiorari to resolve this

conflict in authority on an important question of

federal law.

3. The decision of the Court of Appeals presents

an important question of federal labor policy which

should be resolved by this Court. In Hall v. Cole,

supra, an action under the LMRDA, this Court noted

that:

“ ,. not to award counsel fees in cases such as

this would be tantamount to repealing the Act

itself by frustrating its basie purpose. It is diffi-

cult for individual members of labor unions to

stand up and fight those who are in charge.

The latter have the treasiry of the union at their

command and the paid union counsel at their

heck and call while the member is on his own...

An individual union member could not carry

such a heavy financial burden. Without counsel

fees the grant of federal jurisdiction is but a

gesture for few union members could avail them-

selves of it.”

(412 U.S. at 13, quoting from 462 F.2d 780-781).

Thus, the Court concluded that it was “simply un-

tenable to assert that in establishing the bill of rights

oem wey om ——

15

under the act’ Congress intended to have those rights

diminished by the uneseapable fact that an aggrieved

union member would be unable to finance litigation.”

(Tbid.).

This reasoning applies with equal or greater force

in the context of Section 302. The typical plaintiff

in litigation under that section will be a union mem-

ber who is either disabled—as is the petitioner in this

case—or Whose earning capacity has been reduced

by age. Such persons are even less able to bear the

financial burdens of litigation than the active union

members in Hall v. Cole, and, as in Hall v, Cole, the

defendants in Section 302 litigation will have the

virtually unlimited financial resources vf the fund

available to pay their own attorneys. The inevitable

result of denying attorneys’ fees to employee-benefi-

ciaries who bring suit under Section 302 will be to

discourage all such litigation, and thus permit the

abuses prohibited by Congress to go uncorrected. The

petitioner in this case, who was forced to expend

several thousand dollars in attorneys’ fees to obtain

a pension he had been unlawfully denied, well illus-

trates this point, Congress could hardly have intended

such a result.

16

CONCLUSION

Kor the above reasons, a writ of certiorar’ should

issue to review the judgment and opinion of the

United States Court of Appeals for the Ninth

Circuit,

Respectfully submitted,

Josern A, YABLONSKI,

Danie. B. pe uMAN,

YABLONSKI, Boru & EpeLMAN,

WinntamM HH, Carper,

JAMES M. Mornis,

Brewer, Parrivcge & Morris,

Attorneys for Petitioner,

December 23, 1976,

(Appendices Follow)

APPENDICES

Appendix A

United States Court of Appeals

for the Ninth Cireuit

Benjamin R. Burroughs, :

Plaintiff-A ppeliant,

vs.

“rer . ° mn No. 75-2897

board of Trustees of the Pension Trust

Fund for Operating Engineers, et al.,

Defendants-A ppellees,

Benjamin R. Burroughs,

Plaintiff-Cross- Appellee,

vs.

No. 75-3289

Board of Trustees of the Pension Trust

Fund for Operating Engineers, et al.,

Defendants-Cross-4 ppeliants, |

| October 4, 1976 |

Appeal from the United States District Court

for the Northern District of California

OPINION

Before: Wricur and Trask, Circuit Judges,

and Waters,” District Judge.

Wriaut, Cirenit Judge:

This case involves two appeals. One is brought by

the Board of Trustees of the Pension Trust Fund

*Honorable Laughlin E. Waters, United States District Judge of

the Central District of California, sitting by designation.

ll

for Operating Engineers [hereinafter Trustees] from

a judgment of the district court holding that the

Trustees acted arbitrarily and capriciously in apply-

ing retroactively a break-in-employment rule to plain-

tiff Burroughs so as to deny him pension benefits.

Burroughs appeals from the district court’s failure

to award him attorneys’ fees.

I.

FACTS

The Pension Trust Fund for Operating engineers

was established pursuant to a collective bargaining

agreement, dated May 20, 1957, between Local 3 of

the International Union of Operating Engineers and

the Associated General Contractors of California. Ine.

The agreement provided that, commencing January 1.

Mo8, the employers covered thereby were to make

contributions to the pension fund for each hour

worked by covered employees.

Under the terms of the pension plan, “pension

credit” was defined as the number of years of service

to the industry accumulated and maintained for each

covered employee. “Past service credit” was defined

as periods of employment prior to an employee’s con-

tribution date, and “future service credit” referred

to periods of employment on and after the employee's

contribution date. The contribution date for a uheun

employee was defined as either January 1, 1958, or

such later date as the Trustees might fix for a par-

ticular bargaining group.

ll

Burroughs had accumulated 1514 years of past ser-

vice credit before 1958. From 1958 to 1972 he acquired

11% years of future service credit. He suffered a to-

tally disabling heart attack in 1972 and applied for a

disability pension.

His application was rejected because, by failing to

work at least 350 hours for a contributing employer

during any of the years 1958-60, Burroughs had suf-

fered a “break-in-employment” under the terms of the

trust agreement. That cancelled all his past service

credit and rendered him ineligible for a disability

pension.

Alleging that he had not received notification of the

break-in-employment rule until 1960, at which time

it was retroactively applicable to January 1, 1955,

Burroughs sued the Trustees for wrongful denial of

pension rights in violation of §302(¢)(5) of the

Labor Management Relations Act of 1947 [LMRA],

29 U.S.C. § 18606) (5).

II.

THE DISTRICT COURT'S DECISION

The district court indicated that the break-in-

employment rule, when taken together with the pro-

visions of the plan for the vesting of pension credits,

was reasonable on its face and that its adoption by

the Trustees was not arbitrary and capricious. It

held, however, that the application of the rule to

Burroughs at the end of 1960 was arbitrary and

capricious because Burroughs was not notified of the

iv

")! : .

rule until more than two years after the rule was in

effect, cutting off his accrued pension rights.

III.

SECTION 302(ce) JURISDICTION

Section 302 of the LMRA in general forbids an

employer to make monetary payments to any rep-

resentative of its employees and forbids such repre-

sentative to accept such payments. Section 302(¢)(5)

creates an exception for payments to an employee

pension fund by stating that the general prohibitions

of Ȥ 502 do not apply:

with respect to money or other thing of value

paid to a trust fund established by such repre-

sentative, for the sole and exclusive be nefit of the

employees of such employer, and their families

and dependents... .

29 U.S.C. § 186(¢)(5) (emphasis added).

Section 302(e) grants district courts jurisdiction to

determine whether the provisions of a given retire-

ment fund constitute a structural defect in violation

of § 302(¢)(5). Section 32U2(e) does not, however,

confer general power to interfere with provisions of

agreements freely entered into between unions and

employers which regulate day-to-day administrative

matters of pension coverage and eligibility. Lugo v.

Employees Retirement Fund, 388 F., Supp. 1001

(D.C.N.Y. 1975).

A structural defect is present when a pension plan

excludes a sizeable number of union members with

no reasonable purpose behind their exclusion, thus

v

failing to satisfy the requirement that the fund shall

be for the “sole and exclusive benefit” of all em-

ployees. See Insley v. Joyce, 330 F. Supp. 1228, 1233

(D.C, Ul, 1971).

In its conclusions of law the district court found

that the failure of the Trustees to administer the trust

in a manner consistent with fundamental due process

was in substance tantamount to a basic structural

defect and said:

[W]|hether the unjust exclusion of a pensioner

is obtained from the exclusive provisions of the

trust fund itself or from the arbitrary and ex-

clusionary implementation procedures of the

trustees, the ultimate effect is that the trust 1s

not operated for the “sole and exclusive benefit

of the employees.”

This finding is consistent with the law of this circuit.

See Alvarez v. Erickson, 514 F.2d 156 (9th Cir.), cert.

denied 423 U.S..874 (1975).

IV.

ARBITRARY AND CAPRICIOUS ACTION

A break-in-employment rule is not by itself arbi-

trary and capricious, as the district court implicitly

held. This court, as was the court in Kosty v, Lewis,

219 F.2d 744 (D.C. Cir. 1963), is not concerned with

what the elegibility requirements for the pension are,

but rather with how the changes in qualifications are

made.

In Kosty, the plaintiff miner was already eligible

for retirement and pension rights at the time the

vl

pension eligibility requirement was changed without

notice or grace period. As that court stated, the

bounds of fundamental fairness were over-reached be-

‘cause of “the failure of the Trustees to accord any

notice or period of grace which would have afforded

some reasonable possibility for an employee like ap-

pellant to have elected to retire and take the pension

available immediately prior to the change.” Jd. at

749.

Burroughs’ pension had not vested when the nego-

tiated pension plan went into effect, although it would

have vested in 1966 had the break-in-employment not

occurred, Pension rights need not be vested, however,

prior to a change in qualification requirements before

the change can be deemed arbitrary and capricious.

In Lee v. Nesbitt, 453 F.2d 1309 (9th Cir. 1971),

plaintiff seaman had been denied a retirement pension

hecause at the time the break-in-employment rule was

implemented he had not reached retirement age, al-

though he had completed his minimal employment

requirement. This court found such action to be arbi-

trary and capricious.

As the teachings of Kosty and Lee thus indicate,

it was fundamentally unfair for the Trustees to apply

the break-in-employment rule to employees such as

Burroughs who had no notice of its existence and

hence no reasonable opportunity to protect themselves

from its impact during the years to which it was

retroactively applied. As the district court stated in

its conclusions of law:

vu

[S]Jinee the Break-in-Emplovment Rule by its

terms allows a participant three vears in which

to accumulate the required minimum hours of

contributory employment . . . plaintiff should

have been allowed three years in which to accum-

ulate said required minimum hours from the date

plaintiff was put on notice of the Rule.

V.

ATTORNEYS’ FEES

As emphasized in Alyeska Pipeline Service Co. v.

Vilderness Society, 421 U.S. 240 (1975), attorneys’

fees are not ordinarily recoverable by the prevailing

litigant in the absence of statutory authorization.

Section 302 of the LMRA gives no such authorization.

Under the historic equity jurisdiction of federal

courts, however, some exceptions to the general rule

have arisen: where a common fund or common bene-

fit has been created by the prevailing litigant, Mil/s v.

Electric Auto-Lite Co., 396 U.S. 375 (1970); Hall v.

Cole, 412 U.S. 1 (1973); where there has been bad

faith by the losing party, Vaughan v. Atkinson, 369

U.S. 527 (1962); or where there has been willful vio-

lation of a court order, Toledo Scale Co. v. Comput-

ing Scale Co., 261 U.S. 399 (1923).

Under the common fund exception, courts orig-

inally permitted a plaintiff to recover attorneys’ fees

when his action in bringing suit resulted in the re-

covery or establishment of a fund in which others

had the right to share. In Mills v. Electric Auto-Lite

Co., supra, the Court expanded this doctrine hold-

ing that there was no need for the creation of an

actual fund, as long as a “substantial benefit” of some

kind had acerued to the enriched class and the court

had “jurisdiction over an entity through which the

contribution ean be effected.” Alyeska, supra at 276

(Marshall, J. dissenting). It is argued by appellant

Burroughs that the common benefit rationale should

apply here.

In this case, however, no definite class of bene-

ficiaries has been ascertained. It is argued that any

other beneficiary of the pension plan who incurred a

break-in-employment prior to December 31, 1963, the

end of the third full year after notification to the

members of the existence of the break-in-employment

rule, will be in a position to take advantage of the

ruling here. The Supreme Court, however, has identi-

fied a factor common to all its common-benefit decis-

ions which is not present. It stated:

In this Court’s common-fund and common-benefit

decisions, the class of beneficiaries was small in

number and easily identifiable. The benefits could

be traced with some accuracy, and there was

reason for confidence that the costs could indeed

be shifted with some exactitude to those henefit-

ing.

421 U.S. at 265, n.39.

In this case, no records have been maintained which

would have revealed the number or identity of per-

sons benefitted by Burroughs’ action. The class of

beneficiaries is thus of indeterminable size and not

easily identifiable. The decision of the district court

is therefore affirmed.

Appendix B

United States District Court

Northern District of California

No. C-73-2080 WHO

Benjamin R. Burroughs, )

Plaintiff,

Vs.

Board of Trustees of the Pension Trust (

Fund for Operating Engineers, et al.,

Defendants. !

[Filed Apr. 14, 1975]

FINDINGS OF FACT AND CONCLUSIONS

OF LAW

This case was tried to the Court sitting without a

jury on February 10 and 20, 1975. The Court having

received oral and documentary evidence introduced

by the parties at trial, and having duly considered

said evidence and the points of law and authorities

cited in, the trial briefs of the parties, and having

heard all the arguments of counsel, and being fully

advised in the premises, now makes the following

Findings of Fact and Conclusions of Law pursuant

to Rule 52 of the Federal Rules of Civil Procedure.

- Findings of Fact

1. This is a civil action under the Labor Manage-

ment+Relations Act of 1947 for injunctive, declara-

tory and monetary relief. Jurisdiction is conferred

by 29 U.S.C. §186(e) and 28 U.S.C. §§1331, 2201.

2. Plaintiff was born on August 30, 1911; he

joined Local 3A of the International Union of Oper-

ating Engineers on August 7, 1943; he transferred to

Local 3 of the International Union of Operating En-

gineers (“Local 3”) on January 4, 1947; he main-

tained his membership in Local 3 from and after

August 7, 1945.

3. On December 30, 1959, Local 3 and the prede-

cessor in interest to the Associated General Contrac-

tors of California, Inc., executed the Trust Agree-

ment, Pension Trust Fund for Operating Engineers.

4. By its terms the Trust Agreement, Appendix A

thereto (together with all amendments and modifica-

tions to the Trust Agreement and Appendix A) and

the applicable provisions of collective bargaining and

other labor agreements with the Associated General

Contractors of California, Ine. and other employers,

form the Pension Plan of Local 3 (“the Pension

Plan”).

5. Under the terms of the Pension Plan, employ-

ers having collective bargaining agreements with

Local 3 are referred to as “Individual Employers” or

“Contributing Employers”. Said Individual Employ-

ers are required to make payments to the Pension

Trust Fund for Operating Engineers (“the Pension

Fund”) of sums of money measuured by the number

of hours worked by each employee of such Individual

Employer for the purpose of providing retirement

benefits and pensions for their employees and their

beneficiaries.

ee

x1

6. As executed on December 30, 1959, the Trust

Agreement (Article 1, Section 4) defined “Covered

Kmployee” as any employee of a Contributing Em-

ployer whose work or work classification is covered

by a Collective Bargaining Agreement. Subsequently

that definition was modified by an undated First

Amendment to the Trust Agreement, so as to include

all full time paid officers, and all employees classified

as representatives (regardless of grade), administra-

tive staff specialists, dispatchers and accountants on

which Local 3 paid into the Pension Fund on the

same basis that Individual Employers covered by the

Master Agreement between the predecessor of the

Associated General Contractors of California, Ine.,

and Local 3 paid on their employees who were Cov-

ered Employees, Thereafter, on March 7, 1966, that

definition was again modified (by the Third Amend-

ment to the Trust Agreement), so as to include all

employees of a Joint Apprenticeship Committee or

Committee on which Local 3 is represented, and all

employees of the Local 3 Credit Union on which the

appropriate Joint Apprenticeship Committee or

‘redit Union or both pay into the Pension Fund on

the same basis as Local 3 pays into the Pension Fund,

excluding in the case of a Joint Apprenticeship Com-

mittee and the Credit Union those employees covered

by a Labor Agreement with a Labor Organization.

7. The Pension Plan (Article A, Seetion 2, See-

ond Revised Appendix A) defines “Pension Credit”

as the vears of service which are accumulated and

maintained for Covered Employees in aecordance

with the Pension Plan. “Past Service Credit” is de-

xii

fined as periods of employment prior to an em-

ployee’s Contribution Date to the extent credited in

accordance with the Pension Plan, while “Future

Service Credit” means periods of employment on and

after the employee’s Contribution Date to the extent

credited in accordance with the Pension Plan. The

“Contribution Date” is defined as January 1, 1958,

or such later date as may be fixed by the Board of

Trustees for a particular Bargaining Group and is

the date applicable to the Bargaining Group in which

the Covered Employee was employed when the first

contribution to the Pension Fund was made on his

behalf.

8. Local 3 has, at all times relevant, negotiated

and executed Labor Agreements with employers in

the construction industry, in part with associations

of contractor employers and in part with individual

contractor employers (including joint ventures).

Throughout this period, the number of Individual

Employers or Contributing Employers defined in the

Trust Agreement has expanded and the industries

covered by labor agreements with Local 3 have like-

wise expanded. The assets of the Pension Fund have

grown considerably and as of the date of trial total

over $100 million. Individual Employers having or

covered by agreements with Local 3 inelude the mem-

bers of the Associated General Contractors; General

Contractors Association of Hawaii; Construction

Equipment Dealers of Northern California; Steel

Fabricators and Erectors Council of Northern Cali-

fornia, Northern Nevada and Utah; California Con-

oes. ar

em ee

eee

tractors Council; Utah Chapter of the Associated

General Contractors; Pile Driving Contracting Asso-

ciation of Northern California, Northern Nevada

and Utah; Nevada Chapter of the Associated General

Contractors; Pacific Shipbuilding and Ship Repair

Firms; Rock, Sand and Gravel Producers Association

of Northern California; Dredging and Contractors

Association of California, Nevada, Utah and Hawaii;

Engineering and Grading Contractors Association;

and other employer associations. These agreements

establish, in pertinent part, a Covered Employee’s

bargaining group, rate of contribution to the Pension

Fund (“Contribution Rate”), the effective date of

contributions to the Pension Fund (“Contribution

Date”), and a recognition clause, recognizing Local 3

as the exclusive collective bargaining agent of all

employees covered by labor agreements and as out-

lined in the extensive job classifications listed

therein.

®. At the time plaintiff applied for his pension,

Article C, Section 7, Second Revised Appendix A,

provided as follows:

“A Covered Employee shall be entitled to retire

on a Disability Pension if he was or becomes to-

tally disabled at a time when:

a. He has attained at least age 50 but has not

attained age 65 and has at least 10 vears of

Pension Credit without a break in employ-

ment as defined in Article ID, Section 5; or

b. he has not attained age 65 and has at least

15 years of Pension Credit, without a break

in employment as defined in Article D, See-

tion 5; and

xiv

c. if he meets the requirements in Subsections

a. or b. above, he has also received two

quarters of Future Service Credit, unless

he is totally disabled on or before the Con-

tribution Date for the Bargaining Group in

which he was employed at the time he be-

came disabled.

10. At the time plaintiff applied for his pension,

Article C, Section 9, Second Revised Appendix A,

provided as follows:

“A Covered Employee shall be deemed totally

disabled upon determination by the Social Secu-

rity Administration or its equivalent that he is

entitled to a Social Security Disability Benefit or

its equivalent in connection with his Old Age

Survivors and Disability Insurance Coverage or

its equivalent. The Loard may at any time, or

from time to time, require evidence of continued

entitlement to such Social Security Disability

benefits or equivalent benefits.”

11. Although an applicant for a social security

benefit must meet the test of being disabled and also

must meet an earnings requirement, when the Board

of Trustees adopted the social security disability test,

its sole focus was on the disability aspect, not on the

earnings requirement.

12. On or about March 14, 1972, plaintiff suffered

a myocardial infarction which rendered him totally

disabled to perform his occupation as an employee of

the construction industry.

13. The Social Security Administration deemed

plaintiff totally disabled, but denied him a Social Se-

He ee ae ene etn ae

xv

curity Disability Benefit for the sole reason that he

had not met the Social Security earnings require-

ment,

14. The Pension Plan, in Article D, Section 5.a.

provides as follows:

“a. General Rule. It shall be considered a

break in employment and a Covered Employee's

previously accumulated Pension Credit shall be

cancelled if after the January 1 coinciding with

or next following his Contribution Date he fails

to earn one quarter of Future Service Credit in a

period of three consecutive calendar years, unless

such Covered Employee was permanently and

totally disabled on or before January 1 of the

year in which contributions commenced for the

Bargaining Group in which he was employed at

the time he became disabled.”

This rule is known as the Break-in-Employment

Rule.

15. At the time plaintiff applied for his pension,

Article D, Section 6.a. read as follows:

“Under the circumstances described below, an

Employee shall have his Pension Credits vested

and the break rule set forth in Section 5 of this

Article D shall not operate to deprive him of his

previously accumulated Pension Credit.

(1) Beginning January 1, 1972, an Em-

ployee’s Pension Credit is vested if he (a) has

accumulated 25 years of Pension Credit or (b)

is at least age 45 and has accumulated at least 10

years of Pension Credit.

(2) Between January 1, 1965 and January 1,

1972, an Employee’s Pension Credit was vested if

he (a) had accumulated 25 years of Pension

Credit or (b) was at least age 55 and had accu-

mulated at least 10 years of Pension Credit.

(3) Before January 1, 1965, an Employee’s

Pension Credit was vested if he was at least age

55 and had accumulated at least 10 years of Pen-

sion Credit.”

16. Under the terms of the Pension Plan, once a

Covered Employee’s pension credit vests, the Break-

in-Employment Rule does not operate to deprive him

of his previously accumulated pension credit.

17. Local 3 has maintained, and at all times perti-

nent to this litigation maintained, employment dis-

patch procedures for the dispatch of Local 3 members

and others to jobs throughout Local 3’s multi-stage

territory and jurisdiction. The employment received

by those dispatched from the hiring halls is subject, to

economic fluctuations, weather and other factors pe-

culiar to the construction industry. An operating

engineer may work for numerous employers during

his working life. The duration of the jobs available

may and does significantly fluctuate.

18. Between April 1, 1942, and December 31, 1957,

plaintiff worked in the geographical jurisdiction of

Local 3 on work of the type covered by labor agree-

ments with Local 3. During this period he aceumu-

lated fifteen and one-fourth years of pension credit,

all of which was past service credit,

19. Between January 1, 1958, and March 14, 1972,

according to the records of the Pension Fund, plain-

tiff earned an additional one and one-half years of

6 ne ee ott»

oo nh ln ae

**

pension credit so that at the time of his retirement

he had accumulated a total of sixteen and three-

fourths years of pension credit.

20. Between January 1, 1958, and March 14, 1972,

plaintiff, with few exceptions, maintained himself

available for employment by registering in the em-

ployment offices maintained by Local 3 and contacting

said offices regularly. During said period of time he

worked for numerous employers. He received dis-

patches to most of these and, when dispatches from

Local 3 were not forthcoming, he sought employment

on his own, Even im those instances when plaintiff

was working for employers to whom he had not been

dispatched, he generally maintained his registration

for employment. His wife, during these periods,

would remain at home so that she could notify plain-

tiff in the event telephone calls from Local 3 employ-

ment offices were forthcoming. They were not.

21. In order to improve his chances of being dis-

patched to employment, plaintiff at various times reg-

istered in employment offices outside the area of his

residence, as well as within, and, in 1969, enrolled at

Rancho Murictta, a training facility for operating

engineers, in order to improve his skills and thus his

chances of being dispatched to employment,

22. On October 31, 1972, plaintiff applied for a

disability pension based upon his total disability

within the construction industry; his application was

received by the Board of Trustees on November 6,

1972; plaintiff was informed on May 3, 1973, that,

although he did not appear to qualify for a pension,

xviii

his application would be presented to the Pension

Approvals Committee for consideration; on May 17,

1973, the Pension Approvals Committee met and de-

termined that plaintiff did not qualify for a pension

on the grounds that he had incurred a break in em-

ployment at the end of calendar year 1960 and again

at the end of calendar year 1968; on July 12, 1973,

plaintiff appealed the decision of the Pension Ap-

provals Committee to the Secretary of the Pension

Trust Fund; plaintiff's appeal was heard before an

Appeals Committee on August 13, 1973; thereafter,

the Appeals Committee upheld the action of the Pen-

sion Approvals Committee,

23. As a result of the first break in employment,

at the end of calendar year 1960, all of plaintiff's

previously accumulated past service pension credits

were cancelled pursuant to the terms of the Pension

Plan.

24. Plaintiff’s first break in employment was based

on a finding that he had worked fewer than 350 hours

for Contributing Employers in each year during the

three-year period from January 1, 1958, to December

31, 1960, During 1958 plaintiff worked well over 350

hours, performing his normal funetion as an equip-

ment operator, but his employer was not a Contrib-

uting Employer. During 1959 and 1960 plaintiff had

brief jobs with Contributing Employers, received

through the union dispatch office, but the number of

hours worked on such jobs totaled less than 350 in

each year. During this period plaintiff regularly re-

ported to the union hall to seek work, and never re-

<a eo

ee ee ee ee re me =

ves

WR we .

xix

fused any job he received from the union dispateh

office.

all

25. The first notification to the participants in

the Pension Plan, ineluding plaintiff, of the Break-in-

Employment Rule was on or about April 27, 1960.

26. Had the Board of Trustees not applied the

Break-in-Employment Rule to plaintiff at the end of

1960, plaintiff would have had his pension rights

vested upon his attaining age 55 years on August 30,

1966, Having had his rights then vested, the Break-

in-Employment Rule could not have cancelled plain-

tiff’s previously accumulated pension credit.

27. As a result of the application of the Break-

in-Employment Rule to plaintiff by the Board of

Trustees, plaintiff has been denied a monthly pension

benefit since November 1, 1972, the time he was first

eligible for same.

28. Had plaintiff been granted a pension upon his

application for same, he would have been able to

enjoy the benefits conferred by the Pensioned Oper-

ating Engineers Health & Welfare Trust Fund.

29. As a result of plaintiff’s being denied a dis-

ability pension, he was required to expend his own

funds for medical care, a portion of which would

have been covered by the Pensioned Operating En-

gineers Health & Welfare Trust Fund,

30. Asa further result of plaintiff’s being denied

a pension, piaintiff was required to expend and did

expend sums of money to purchase medical insurance

to cover injuries and illnesses that would have been

xx

covered by the Pensioned Operating Engineers Health

& Welfare Trust Fund.

31. Asa further result of plaintiff's being denied

a pension, plaintiff was required to expend and did

expend sums of money to hire attorneys to prosecute

this action on his behalf.

32. Since the beginning of the Pension Fund,

plaintiff has been a union member and worked as an

operating engineer in the construction industry. He

has worked over 3,000 hours for Contributing Em-

ployers, and contributions to the Pension Fund have

heen made by such employers on his behalf.

33. The Break-in-Employment Rule was included

in the Pension Plan upon the recommendation of the

actuaries for the Pension Plan. One of the actuarial

assumptions upon which the Pension Plan was then

based, and continues to be based, was the rate at

which employees would withdraw from employment

as operating engineers in the area covered by the

Pension Plan. Among the persons who are actuarily

assumed to have withdrawn from such employment

are those who incur a break in employment under

the Rule. Similar rules are included in many other

comparable pension plans within the industry.

Conclusions of Law

1. This Court has jurisdiction under 29 U.S.C,

§186 and 28 U.S.C. §81331 and 2201 to review allega-

tions relating to violations of the statutory require-

ments of Section 302(¢)(5) of the Labor Management

Relations Act (29 U.S.C. §186(¢)(5)) under which

Pe Oe ne tn ent lt Os Cnt eT A lain

ee

xxl

the Pension Fund was created. The scope of judicial

review in this action is restricted te determining

whether the action of the Board of Trustees of the

Pension Fund was arbitrary or capricious. Kosty v.

Lewis, 319 F.2d 744, 747 (D.C. Cir. 1963), eert. den.

875 US, 964 (1964); Roark v. Lewis, 401 F.2d 425,

427 (D.C. Cir, 1968).

2. The Board of Trustees of the Pension Fund is

required by the Trust Agreement, by Seetion

302(¢)(5) of the Labor Management Relations Aet,

and by principles of law and equity, to administer

the trust and manage the funds and assets of the

trust for the exclusive benefit of its participants and

their beneficiaries.

3. The Board of Trustees of the Pension Fund

is required by the Trust Agreement, by Section

302(¢)(5) of the Labor Management Relations Act,

and by principles of law and equity, to establish eri-

teria for eligibility for benefits that are just and

reasonable, and not arbitrary, restrictive, or which

have as their purpose and effect the unnecessary

exclusion of participants from eligibility for benefits.

4. Under the requirements of Seetion 302(¢) (5)

of the Labor Management Relations Act, the Break-

in-Employment Rule, when taken together with the

provisions for vesting of pension credits, is reason-

able on its face, and its adoption by the Board of

Trustees was not arbitrary or capricious.

5. Under the requirements of Section 302(¢)(5)

of the Labor Management Relations Act, and under

principles of law and equity, application of the

Xxil

Break-in-Employment Rule to plaintiff at the end of

1960 was arbitrary and capricious under the circum-

stances, in that plaintiff was not notified of the Rule

until over two years after the Rule began operating

to cut off his accrued pension rights. Kosty v. Lewts,

supra.

6. Under the requirements of Section 302(¢) (5)

of the Labor Management Relations Act, and under

principles of law and equity, since the Break-in-

Employment Rule by its terms allows a participant

three years in which to accumulate the required mini-

mum hours of contributory employment to remain a

Pension Plan participant, plaintiff should have been

allowed three years in which to accumulate said re-

quired minimum hours from the date plaintiff was

put on notice of the Rule. Failure of the Board of

Trustees to allow plaintiff said three years from the

date of notice was arbitrary and capricious in light

of all of the circumstances of plaintiff’s employment

history, both before and after adoption of the Pension

Plan. Lavella v. Boyle, 444 F.2d 910 (D.C. Cir. 1971),

cert, den. 404 U.S. 850 (1971).

7. To the extent the definition of total disability

within the Pension Plan requires a participant to re-

ceive a social security disability award, or its equiva-

lent, said requirement is unreasonable on its face and

as applied to plaintiff in that the earnings aspect of

such an award was not intended to be a focus for de-

termining eligibility for disability benefits under the

Pension Plan.

OS Meee ee Ae ORR Pe o

xxl

8. As a direct and proximate result of the viola-

tions of Section 302 of the Labor Management Rela-

tions Act set forth hereinabove, plaintiff has been

damaged in being denied a monthly pension benefit

from November 1, 1972, to date, and is thus entitled

to the sum of the monthly pension benefits denied

him, together with interest on each said monthly pen-

sion benefit at the legal rate, from the due date of

each payment to the date of judgment herein.

9. Asa further direct and proximate result of the

Violations of Section 302 of the Labor Management

Relations Act as set forth hereinabove, plaintiff is

entitled to damages, plus interest, for those medical

expenses that would have been covered by the Pen-

sioned Operating Enginecrs Health & Welfare Trust

Fund had plaintiffs pension not been unlawfully

denied him, in an amount consistent with the terms of

said Pensioned Operating Engineers Health & Wel-

fare Trust Fund.

10. As a further direct and proximate result of

the violations of Section 302 of the Labor Manage-

ment Relations Act as set forth hereinabove, plaintiff

is entitled to recover from defendant Board of Trus-

tees the amount of money expended by plaintiff in

purchasing medical insurance for himself and his

wife, plus interest at the legal rate from date of each

premium payment to the date of judgment herein,

Il. As a further direct and proximate result of

the violations of Section 302 of the Labor Manage-

ment Relations Act as set forth hereinabove, plaintiff

Xxiv

is entitled to a permanent injunction requiring the

Board of Trustees of the Pension Fund to pay to

plaintiff each month a pension benefit consistent with

the terms of the Pension Fund and for so long as

plaintiff remains eligible for same under the terms of

the Pension Plan.

It Is Hereby Ordered that plaintiff will prepare,

serve and file a certificate of counsel regarding attor-

neys’ fees and a judgment in accordance with the

foregoing findings of fact and conclusions of law, in

form approved by defendants, on or before April 25,

1975.

Dated: April 11, 1975.

/s/ William H. Orrick, Jr.

William H. Orrick, Jr.

United States District Judge

Ne ee ne Co ee i eo le” oli ~

United States District Court

Northern District of California

No. C-73-2080 WHO

Benjamin R. Burroughs, )

Plaintiff, |

Vs.

Board of Trustees of the Pension Trust f

Fund for Operating Engineers, et al.,

Defendants. J

{ Filed Jul. 25, 1975]

AMENDMENTS TO FINDINGS OF FACT AND

CONCLUSIONS OF LAW

Good cause appearing,

It is Hereby Ordered that:

1. Finding of Fact No. 31 is deleted from the

Court’s findings.

2. The Court makes the following additional Con-

clusions of Law:

“1A. The Court has jurisdiction to review the

Board of Trustee’s administration of the trust

fund as well as the specific terms of the trust

plan. Lugo v. Employees Retirement Fund of the

Illum, Prod, Indus., 366 F.Supp. 99 (E.D. N.Y.

1973).

JA. A failure of the Board of Trustees to

administer the trust in a manner lacking in fun-

damental due process is in substance tantamount

to a basic structural defect in the trust. As a prae-

tical matter, whether the unjust exclusion of a

pensioner is obtained from the exclusive provi-

sions of the trust fund itself or from the arbi-

trary and exclusionary implementation procedures

of the trustees, the ultimate effect is that the

trust is not operated for the ‘sole and exclusive

benefit of the employees’. Lugo v. Employees

Retirement Fund of the Illum. Prod. Indus.,

supra.”

Dated: July 24, 1975.

/s/ William H. Orrick, Jr.

William H. Orrick, Jr.

United States District Judge

ee

Appendix C

LABOR-MANAGEMENT RELATIONS ACT OF 1947, SECTION 302

(29 U.S.C. § 186)

§ 186. Restrictions on payments and loans to employee

representatives, labor organizations, officers and

employees of labor organizations, and to employ-

ees or groups or committees of employees; excep-

tions; penalties; jurisdiction; effective date; ex-

ception of certain trust funds,

* * +

(c) The provisions of this section shall not be

applicable (1) in respect to ay money or other thing

of value payable by an employer to any of his em-

ployees whose established duties include acting openly

for such employer in matters of labor relations or

personnel administration or to any representative of

his employees, or to any officer or employee of a labor

organization, who is also an employee or former em-

ployee of such employer, as compensation for, or by

reason of, his service as an employee of such em-

ployer; (2) with respect to the payment or delivery

of any money or other thing of value in satisfaction

of a judgment of any court or a decision er award

of an arbitrator or impartial chairman or in com-

promise, adjustment, settlement, or release of any

claim, complaint, grievance, or dispute in the absence

of fraud or duress; (3) with respect to the sale or

purchase of an article or commodity at the prevailing

market price in the regular course of business; (4)

with respect to money deducted from the wages of

XXxVili

employees in payment of membership dues in a labor

organization: Provided, That the employer has re-

ceived from each employee, on whose account such

deductions are made, a written assignment which shall

not be irrevocable for a period of more than one

year, or beyond the termination date of the applicable

collective agreement, whichever occurs sooner; (5)

with respect to money or other thing of value paid

to a trust fund established by such representative, for

the sole and exclusive benefit of the employees of

such employer, and their families and dependents (or

of such employees, families, and dependents jointly

with the employees of other employers making similar

payments, and their families and dependents) ; Pro-

vided, That (A) such payments are held in trust for

the purpose of paying, either from principal or in-

come or both, for the benefit of employee, their fam-

ilies and dependents, for medical or hospital care,

pensions on retirement or death of employees, com-

pensation for injuries or illness resulting from occu-

pational activity or insurance to provide any of the

foregoing, or unemployment benefits or life insugance,

disability and sickness insurance, or accident insur-

ance; (B) the detailed basis on which such payments

are to be made is specified in a written agreement

with the employer, and employees and employers are

equally represented in the administration of such

fund, together with such neutral persons as the repre-

sentatives of the employers and the representatives

of employees may agree upon and in the event the

employer and employee group deadlock on the ad-

ee ee

fs eee moe

an eee

xxix

ministration of such fund and there are no neutral

persons empowered to break such deadlock, such

agreement provides that the two groups shall agree

on an impartial umpire to decide such dispute, or in_

event of their failure to agree within a reasonable

length of time, an impartial umpire to decide such

dispute shall, on petition of either group, be appointed

by the district court of the United States for the

district where the trust fund has its principal office,

and shall also contain provisions for an annual audit

of the trust fund, a statement of the results of which

shall be available for inspection by interested persons

at the principal office of the trust fund and at such

other places as may be designated in such written

agreement; and (C) such payments as are intended

to be used for the purpose of providing pensions or

annuities for employees are made to a separate trust

which provides that the funds held therein cannot be

used for any purpose other than paying such pensions

or annuities (6) with respect to money or other thing

of value paid by any employer to a trust fund estab-

lished by such representative for the purpose of

pooled vacation, holiday, severance or similar benefits,

or defraying costs of apprenticeship or other training

programs: Provided, That the requirements of clause

(B) of the proviso to clause (5) of this subsection

shall apply to such trust funds; (7) with respect to

money or other thing of value paid by any employer

to a pooled or individual trust fund established by

such representative for the purpose of (A) scholar-

ships for the benefit of employees, their families, ard

xxx

dependents for study at educational institutions, or

(B) child eare centers for preschool and school age

dependents of employees: Provided, That no labor

organization or employer shall be required to bargain

on the establishment of any such trust fund, and re-

fusal to do so shall not constitute an unfair labor

practice: Provided further, That the requirements of

clause (B) of the proviso to clause (5) of this sub-

section shall apply to such trust funds; or (8) with

respect to money or any other thing of value paid

by any employer to a trust fund established by such

representative for the purpose of defraying the costs

of legal services for employees, their families, and

dependents for counsel or plan of their choice: Pro-

vided, That the requirements of clause (B) of the

proviso to clause (5) of this subsection shall. apply

to such trust funds: Provided further, That no such

legal services shall be furnished: (A) to initiate any

proceeding directed (1) against any such emplover

or its officers or agents except in workman’s compen-

sation eases, or (11) against such labor organization,

or its parent or subordinate bodies, or their officers

or agents, or (iil) against any other employer or

labor organization, or their officers or agents, in any

matter arising under subchapter II of this chapter

or this chapter; and (B) in any proceeding where

a labor organization would be prohibited from defray-

ing the costs of legal services by the provisions of the

Labor-Management Reporting and Disclosure Act of

1959.