Petition — Miles v. New York State Teamsters Conference Pension & Retirement Fund Employee Pension Benefit Plan

ee Caen eee

te. | SUM 27 1983

IN THE

Supreme Court of the United States

October Term, 1982

HAROLD MILES, EUGENE DARLAK, TIMOTHY MORIARTY,

JAMES STUERMER and EDWARD ZASTROW,

Petitioners,

vs.

THE NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

IRVING M. SHUMAN, ESQ.

2600 Main Place Tower

Buffalo, New York 14202

Counsel for Petitioners

Gross, SHUMAN, BRIZDLE,

Laus & GILFILLAN, P.C.

2600 Main Place Tower

I

[

4

— ae

i.

Questions Presented for Review

1. Is a determination of the Board of Trustees of a

multi-employer/union pension fund arbitrary and

capricious where the Trustees fail to provide

fundamental procedural rights to the affected employees,

base their decision on incorrect factual assumptions

(despite efforts by one of the Trustees to explain this

error to the others) and fail to notify the affected

employees of the determination at a time when the same

could have been acted upon by the employees?

2. Should an Appellate Court assume or guess at

what action Trustees would have taken based upon

correct factual assumptions, where the Trustees acted

upon incorrect factual assumptions, or should the matter

be remanded to the Trustees for further proceedings?

ii.

Parties to the Proceeding in

the Court Below

Plaintiffs:

HAROLD MILES

EUGENE DARLAK

TIMOTHY MORIARTY

JAMES STUERMER

EDWARD ZASTROW

Defendart<

THE NEW YORK STATE TEAMSTERS

CONFERENCE PENSION AND RETIREMENT

FUND EMPLOYEE PENSION BENEFIT PLAN

ERVIN WALKER

STANLEY CLAYTON

TABLE OF CONTENTS.

Page

Questions Presented for Review.................. i

Parties to the Proceeding in the Court Below....... ii

ee ad at os sw ive ace ev aaws.Cun iii

Ta GE AMOR 5 Soo aay cbii'e ba SE SS iii

INS ine win Spec cecntcctsemesvanespal 2

SE Lait. Ph GU G 004% » (Ee AYRE OC eRE 2

Statutory ID ain ein Ck 5 SRDS 0 ADO SRS OO EER On 2

Statement of the Case............... cece eee eees 3

NEG V's o di epce Kad ewe hers cueeate eee’ 7

EE Stak; he is ak obs he's ne chtetaaweee’ 11

I oc tian Will oth n hp cu gah ¥ 0 aah ope en ee's la-82a

TABLE OF AUTHORITIES.

Kosty v. Lewis, 319 F.2d 744 (DC Cir.,

Maggerd v. O’Connell, 671 F.2d 568 (DC Cir., 1982). 8

Paris v. Profit Sharing Plan, Etc., 637 Fed 357 (5th

UE EE in hid ill, Les bate ben 6 Abe Negus « bawia h 7

Riley v. MEBA Pension Trust, 570 Fed 406 (2nd

Rey ROR S oS de cwilals eae hat caeaae sed nupewnes 7

Saunders v. Teamsters Local 639, Employees

Pension Trust, 667 F.2d 146 (DC Cir., 1981) ..... 7

Wardle v. Central States, Southeast and Southwest

Areas Pension Fund, 627 F.2d 820 (7th Cir., 1980) 10

z

iv.

Page

APPENDIX.

Decision of the United States Court of Appeals For

the Second Circuit Decided January 20, 1983 (698

Ps COONS Ap Ray cho ake’ see b Ad til eb hes ss la

Findings of Fact, Conclusions of Law and Order of

Elfvin, U.S.D.J., Dated March 11, 1982......... 2la

Order of the United States Court of Appeals For the

Second Circuit Denying Petition For Rehearing

Filed March 29, 1983.................cceeeces 76a

Plaintiffs’ Exhibit 19— ension and Retirement

PE IO gia e che cicccevicvccesende 78a

IN THE

Supreme Court of the United States

October Term, 1982

No.

HAROLD MILES, EUGENE DARLAK, TIMOTHY

MORIARTY, JAMES STUERMER and

EDWARD ZASTROW,

Petitioners,

vs.

THE NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

The Petitioners, HAROLD MILES, EUGENE

DARLAK, TIMOTHY MORIARTY, JAMES

STUERMER and EDWARD ZASTROW, respectfully

pray that a Writ of Certiorari issue to review the

Judgment and Decision of the United States Court of

Appeals for the Second Circuit entered in this proceeding

on January 20, 1983.

2

Opinions Below

The opinion of the United States Court of Appeals for

the Second Circuit from which the Petitioners seek

certiorari is contained in the Appendix hereto at page la.

The original Findings of Fact and Conclusions of Law

and Order of the District Court for the Western District

of New York and the final Order of the United States

Court of Appeals for the Second Circuit denying

Petitioners’ motion for rehearing are also contained in

the Appendix.

Jurisdiction

The Judgment and Decision of the United States Court

of Appeals for the Second Circuit was entered on

January 20, 1983. A timely motion for rehearing was

made, and was denied by the United States Court of

Appeals for the Second Circuit on March 29, 1983, and

this Petition for Certiorari was filed within ninety days

of that date. This Court’s jurisdiction is invoked under

28 U.S.C. $1254.

Statutory Provisions

29 U.S.C. $1132(a)(1) and (g)

(a) A civil action may be brought

(1) By a participant or beneficiary

(A) for the relief provided for in subsection

(c) of this section, or

(B) to recover benefits due to him under the

terms of his plan, to enforce his rights under

the terms of the plan, or to clarify his rights to

future benefits under the terms of the plan.

(g) In any action under this subchapter by a

participant, beneficiary or fiduciary, the court in its

discretion may allow a reasonable attorney's fee and

costs of action to either party.

3

Statement of the Case

This action was commenced by the Petitioners, four

employees and one former employee of the Continental

Can Co., Inc. (Continental) pursuant to 11 U.S.C.

$1132(a) of the Employee Retirement Income Security

Act of 1974 (ERISA) to determine their eligibility for

pension benefits from the Respondent, THE NEW

YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN (the Teamsters Plan), and

in particular to determine their right to past service

credit for years during which they were employed by

Continental but for which contributions were not made

to the Teamsters Plan.

Prior to July 1, 1969 the Petitioners were employed by

Continental in its trucking division No. 506, operating

out of Continental’s Shawnee Road Plant in the City of

Buffalo, New York. The Petitioner's were, at that time,

represented by Local 375 of the International

Brotherhood of Teamsters, Chauffeurs, Warehousemen

and Helpers of America (Local 375), and participated in a

non-contributory pension plan administered by

Continental (the Continental Plan). At that same time,

Continental operated a separate trucking division No.

418 out of its Clay Street Plant in the Town of

Tonawanda, New York (a suburb of Buffalo), as well as a

third separate trucking division No. 81 out of its Colvin

Avenue Plant, in the City of Buffalo, New York. The

employees of trucking divisions 418 and 81 were

represented by Local 449 of the _ International

Brotherhood of Teamsters, Chauffeurs, Warehousemen

and Helpers of America (Local 449), and both groups of

employees participated in the Teamsters Plan prior to

July 1, 1969.

4

On or about July 1, 1969 Continental merged the three

trucking divisions into a single and newly formed

division No. 490, which replaced the three prior trucking

divisions, and whose employees were represented by

Local 449. Commencing as of July 1, 1969, contributions

were made on behalf of the Petitioners and all of the

other employees of division 490 to the Teamsters Plan,

and on July 26, 1970 a pension and retirement fund

stipulation (the Stipulation) effective as of July 1, 1969

was entered into between Local 449 and Continental

requiring contributions by Continental to the Teamsters

Fund on behalf of each of the employees in Continental's

division 490 (Petitioner’s Exhibit 19, a copy of which is

appended hereto as part of the Appendix). Application

was made by Continental to the Teamsters Plan to have

the Petitioners accepted as part of the new group

(Division 490), with the right to have past service credits

under the terms of the Plan for prior years in the employ

of Continental granted to a maximum of 20 years, after 5

years of future service credit. The application was

rejected by the Plan Trustees, at least in part upon the

incorrect assumption by the Trustees that the

Petitioners were not a part of the newly formed division,

but were rather transferred to the pre-existing division

which already participated in the Teamsters Plan. The

incorrect factual assumption was made despite repeated

attempts by Stanley Clayton, who was one of the

Trustees as well as the president of Local 375, to advise

the other Trustees of their error. No independent

investigation was made by or on behalf of the Trustees

to verify either their own erroneous assumption or

Clayton’s correct version of the facts. While the

determination was communicated to Continental and the

President of Local 375, it was never communicated

5

directly to the Petitioners and none of the Petitioners

became aware of the fact that they were not to receive

past service credits until Petitioner MILES retired better

than 6 years later.

Petitioner MILES retired effective as of January of

1976 and made application for pension funds from the

Teamsters Plan commencing on January 9, 1976. On

January 16, 1976, MILES received a notice from the

Teamsters Plan indicating that he was not eligible for

benefits due to the fact that he had only six years and

five months of credit and service and that he was not

credited with any service prior to July 1, 1969. This was

the first time any of the Petitioners knew of or were

informed that they were not going to receive past service

credits for the period of time employed with Continental

and as members of Teamsters Local 375 prior to

September 1, 1969. The Trustees offered no explanation

or reason to Miles or the other Petitioners as to why

credit had not been grantec for the period prior to July

1, 1969.

After a trial before the Court, the United States

District Court for the Western District of New York

granted Judgment to the Petitioners on their second and

fifth causes of action, alleging arbitrary and capricious

conduct on the part of the Trustees. The Court, inter

alia, held that the Trustees’ actions were arbitrary and

capricious in that they acted upon incorrect factual

assumptions despite Clayton’s repeated explanations to

them that the Petitioners were not being merged into a

pre-existing group already participating in the Teamsters

Pian, but were rather merged into a new group which

had just commenced to participate in the Teamsters Plan

pursuant to the Stipulation. The Court also found that

6

the plain language of the Plan itself required past service

credits to be granted to the Peticioners and further found

the conduct of the Trustees to be arbitrary and capricious

in that they failed to make any investigation whatsoever

into the facts, either in 1969 or in 1976, and completely

failed to communicate their original decision to the

Petitioners.

At trial the Teamsters Plan argued that the provisions

of the Plan relating to past service credit were not

applicable in that they were intended to induce new

groups to participate in the Plan which would not

otherwise be required to participate, whereas, they

contended, the Petitioners were required to participate in

the Teamsters Plan immediately upon what they still

erroneously believed to be the Petitioner's transfer to a

“pre-existing division. The Teamsters Plan, however,

failed to explain why a new agreement (the Stipulation)

would be required whereby Continental agreed to make

contributions to the Teamsters Plan on behalf of newly

formed division 490 employees, and the Court below

found this to be strong evidence that the interpretation

offered by the Trustees was arbitrary and capricious.

On Appeal, the United States Court of Appeals for the

Second Circuit reversed the Judgment in favor of

Petitioners and vacated the award of attorneys fees to

Petitioners’ counsel. The Court changed but one of the

lower Court's Findings of Fact, and determined that

contributions were indeed required to be made to the

Teamsters Plan on behalf of the Petitioners immediately

upon their merger into newly formed division 490, due to

the fact that division 490 was represented by Teamsters

Local 449, which was already participating in the

Teamsters Plan. The Court offered no explanation for the

7

existence of the Stipulation. Further, despite

acknowledging the fact that the Board of Trustees of the

Teamsters Plan had made its determination to deny past

service credits to the Petitioners upon incorrect factual

assumptions, the Court nevertheless determined that

“we cannot say that [the Board’s} conclusion was

irrational”, and further held that “the Board's

misunderstanding of the facts does not appear to have

effected its decision’. The Court of Appeals did not

address the Teamsters Plan's failure to communicate its

determination to the Petitioners in a timely fashion in

1969 as it related to the issue of whether or not the

Trustees acted in an arbitrary and capricious manner.

Argument

It is undisputed “black letter” law that a Court will

not interfere to substitute its Judgment for that of a

Board of Trustees of a Pension Fund absent a showing

that the Board's determination is arbitrary and

capricious. Paris v. Profit Sharing Plan, Etc., 637 Fed

357 (5th Cir., 1981); Riley v. MEBA Pension Trust, 570

Fed 406 (2nd Cir., 1977). However, it has been held that,

in making its determinations, not only must the

substance of a determination of a Board of Trustees not

be arbitrary and capricious, but that the procedures

followed in the making and enforcing the determination

must also not be arbitrary and capricious. The United

States Court of Appeals for the District of Columbia, in

Saunders v. Teamsters Local 639, Employees Pension

Trust, 667 F. 2d 146 (DC Cir., 1981), held that:

“Trustees thus are accountable for procedural

fairness, and must support their factual findings by

substantial evicence’’. 667 F. 2d 146, 148.

8

In that case, the Court held that the procedure employed

by the trustees in implementing an amendment to the

plan was arbitrary and capricious, in that the affected

employees were not notified of the amendment at a time

when they could have attempted to protect their

interests. Similarly, the same United States Court of

Appeals for the District of Columbia had previously held

in the case of Kosty v. Lewis, 319 F. 2d 744 (DC Cir.,

1963) that the limitations of fundamental fairness which

are imposed upon pension plan trustees were exceeded

by the failure of trustees to afford any notice or period of

grace with respect to a plan amendment, so as to afford

the affected employees an opportunity to protect their

previously vested rights. It appears clear that the

procedural fairness which trustees are required to afford

to plan participants includes the obligation to examine

saliently the facts of a given situation and to make

reasoned decision based upon that examination. Thus, it

was held, again by the Court of Appeals for the District

of Columbia in the case of Maggerd v. O'Connell, 671

F.2d 568 (DC Cir., 1982) that:

“Judicial intervention is required ‘if the Court

becomes aware, especially from a combination of

danger signals, that the [Tribunal] has not really

taken a ‘hard look’ at the salient problems, and has

not genuinely engaged in reasoned decision

making’ "’. 671 F. 2d 568, 571.

It is respectfully submitted that the determination in

this case made by the United States Court of Appeals

for the Second Circuit is in conflict with the decisions of

the United States Court of Appeals for the District of

Columbia, as cited above, in that it permits a

determination of the Plan Trustees denying past service

credits to the Petitioners to stand, notwithstanding the

9

absence of any of the aspects of procedural fairness

which would appear to be required of the Plan Trustees.

Not only did the Trustees in the instant case fail to

conduct their own investigation into any of the factual

circumstances surrounding the application to have the

Petitioners treated as a new group, but indeed acted

upon a misapprehension of the facts despite repeated

explanations by one of the Plan Trustees, as to what the

actual facts were. Further, it is undisputed that there

was a complete failure on the part of the Plan or its

Trustees to communicate its decision to the Petitioners

at any time prior to the retirement of HAROLD MILES,

more than six years after the decision-making process

had come to an end. Each of the Petitioners had

previously accumulated substantial periods of credited

time with the Continental Plan, and it would appear that

had the Petitioners been promptly notified of the

Trustees’ decision, at least some investigation could have

been undertaken as to the possibility of taking such

action as would have allowed them to remain as

participants in the Continental Plan. The failure of the

Trustees to communicate their decision denying new

group status and past service credits to the Petitioners

completely denied them this opportunity. The decision of

the Court of Appeals acknowledges that the decision of

the Trustees was made based upon erroneous facts, that

no independent investigation of the facts was ever

undertaken by the Trustees and that there was no

communication of the decision to the Petitioners, and

nevertheless upholds the decision and the decision-

making process, finding that it is not to be characterized

as “arbitrary or capricious’. It is submitted that this

decision squarely conflicts with those of the United

States Court of Appeals for the District of Columbia. It

10

appears that there is presently no decision of this Court

providing the Circuit Courts and District Courts with

guidance as to what procedural standards must be

allowed by pension plan boards of trustees in the

decision-making process.

Inasmuch as there would appear to be a conflict be-

tween the Second Circuit and the District of Columbia

Circuit as to those procedural rights which must be

afforded to plan beneficiaries by trustees in their

decision-making processes and inasmuch as the issue

clearly affects millions of employees who are participants

in and beneficiaries of plans governed by the Employee

Retirement Income Security Act of 1974, it is respectfully

submitted that the issue is one that is proper for review

by this Court.

Additionally, it has been held by the United States

Court of Appeals for the Seventh Circuit in the case of

Wardle v. Central States, Southeast and Southwest

Areas Pension Fund, 627 F.2d 820 (7th Cir., 1980) that:

‘“... As a general matter a Court should not resolve

the eligibility question on the basis of evidence

never presented to a pension fund’s trustees but

should remand to the trustees for a new

determination.’’ Wardle, supra, at 824.

Here, facts were presented to the trustees by Clayton

but were never considered by the trustees in making

their determination to deny new group status to the

Petitioners. While acknowledging this error, the Second

Circuit did not require a remand. Instead it proceeds to

determine how the trustees would have acted had they

considered the additional facts. This ruling conflicts with

the decision of the Seventh Circuit in Wardle, supra,

which conflict should be resolved by this Court.

11

Conclusion

For the reasons cited above, a writ of certiorari should

issue to review the Decision and Judgment of the United

States Court of Appeals for the Second Circuit.

Respectfully submitted,

IRVING M. SHUMAN, ESQ.

GROSS, SHUMAN, BRIZDLE,

LAUB & GILFILLAN, P.C.

2600 Main Place Tower

Buffalo, New York 14202

Counsel for Petitioners

June 20, 1983

[1321] APPENDIX

Decision of the United States Court of Appeals

for the Second Circuit Decided

January 20, 1983

UNITED STATES COURT OF APPEALS

For the Second Circuit

No. 202—August Term, 1982

(Argued September 20, 1982 Decided January 20, 1983)

Docket No. 82-7274

HAROLD MILES, EUGENE DARLAK, TIMOTHY

MORIARTY, JAMES STUERMER and

EDWARD ZASTROW,

Plaintiffs-Appellees,

against

THE NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN,

Defendant-Appellant.

ERVIN WALKER, as President of Local Union No. 449

of International Brotherhood of Teamsters,

Chauffeurs, Warehousemen and Helpers of America,

an Unincorporated Association, and STANLEY

CLAYTON, Individually and as President of Local

Union No. 375 of the International Brotherhood of

Teamsters, Chauffeurs, Warehousemen and Helpers of

America, an Unincorporated Association,

Defendants.

2a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

[1322] Before: LUMBARD, MESKILL AND

CARDAMONE,

Circuit Judges.

Appeal from a judgment of the United States District

Court for the Western District of New York, John T.

Elfvin, Judge, holding, in an action under ERISA, that

the Board of Trustees of the defendant pension fund had

acted arbitrarily and capriciously in denying the plaintiff

employees credit under the plan for years of service

during which employer contributions were not paid on

their behalf, and ordering the defendant to grant the

plaintiffs such credit. The district judge also awarded

attorney’s fees to the plaintiffs.

Judgment reversed; award of attorneys’ fees vacated.

ROBERT J. FELDMAN, ESQ., Buffalo,, New York

(Gross, Schuman, Brizdle, Laub & Gilfillan, P-C., Buffalo,

N.Y., David C. Laub, Esq., of counsel), for Plaintiffs-Ap-

pellees.

PETER P. PARAVATI, P.C., Utica, New York, for

Defendant-Appellant.

{1323} LUMBARD, Circuit Judge:

Plaintiffs, four employees and one former employee of

the Continental Can Co., Inc., commenced this action in

the Western District of New York in August 1977 under

3a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

the Employee Retirement Income Security Act of 1974,

29 U.S.C. § 1001 et seg. (1976) (ERISA), to determine

their eligibility for pension benefits from the defendant

New York State Teamsters Conference Pension and

Retirement Fund Employee Pension Benefit Plan (the

Teamsters Plan). The plaintiffs, all of whom had worked

for Continental for some years before Continental began

to contribute to the Teamsters Plan on their behalf,

sought through this action to establish their right to

past service credit for years during which employer

contributions were not paid. Judge Elfvin conducted a

bench trial of the action from August 25th to August

28th, 1980, after which, on March 11, 1982 he ruled that

the decision of the Teamsters Plan's Board of Trustees

to deny the plaintiffs ‘‘new group” status, and with it,

past service credit, was “arbitrary and capricious.” He

ordered the Teamsters Plan to grant the plaintiffs past

service credit and to pay benefits accordingly. On June

7, 1982 Judge Elfvin granted the plaintiffs’ post-trial

motion for attorneys’ fees under 29 U.S.C. § 1132(g)(1)

(Supp. IV 1980). The Teamsters Plan now appeals from

the judgment against it and the award of attorneys’ fees.

We reserve the judgment appealed from, and vacate the

award of attorneys’ fees.

With one exception to be noted later, the facts, for

purposes of this appeal, are those found by the district

court. Continental, at all relevant times, has operated

three plants in the Buffalo, New York area. Prior to July

1, 1969 the plants’ truck drivers were assigned to

separate [1324] corporate divisions: the drivers at the

Clay Street plant in Tonawanda, New York to Plant No.

418; the drivers at the Colvin Boulevard plant in Buffalo

4a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

to Plant No. 81; and the drivers at the Shawnee Road

plant in North Tonawanda, New York to Plant No. 506.

The plaintiffs are five drivers who prior to July 1, 1969

were assigned to Plant No. 506 at Shawnee Road.

Teamsters Union Local 449 represented the drivers at

the Clay Street and Colvin Boulevard plants and

Teamsters Union Local 375 represented the plaintiffs. In

a letter to Local 449 dated December 11, 1967

Continenta! agreed to abide by the terms of the so-called

“National Master Freight Agreement’’ (NMFA). The

NMFA required Continental to contribute to the

Teamsters Plan on behalf of the Local 449 drivers.

Continental did not contribute to the Teamsters Plan on

behalf of the plaintiffs, who instead participated in a

corporate pension plan.

On July 1, 1969 Continental merged the three trucking

divisions into a single Plant No. 490. The merger did not

entail a physical transfer of drivers but involved only

minor changes in route assignments and the introduction

of a central dispatch system. Because Local 449 had a

union shop agreement with Continental, the merger of

the drivers into a single bargaining unit required the

plaintiffs to transfer their membership from Local 375 to

Local 449. Concerned that the plaintiffs would not

receive past service credit under the Teamsters Plan for

pre-merger employment,' the president of Local 375,

‘ All of the plaintiffs had worked for Continental or a

corporation for a substantial number of years prior to July 1, 1969.

Harold Miles began employment with Continental in March, 1953,

Eugene Darlak in March, 1959, Timothy Moriarty in February, 1953,

James Stuermer in January, 1957, and Edward Zastrow in December,

1948.

5a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

[1325] Stanley Clayton, asked Continental to apply to the

Teamsters Plan to have the plaintiffs treated as a ‘“‘new

group.”” The new group rule is incorporated in section

3(2) of the Teamsters Plan.’ Under the rule, an employee

who joins the Teamsters Plan as part of a new group is

entitled to receive credit for past service with the

employer, up to a maximum of twenty years, if the

employee works for the employer for another five years

and the employer contributes to the Teamsters Plan on

behalf of the employee for those five years. A new group

is a unit of employees which commences participation in

the Teamsters Plan on the same date that the relevant

employer (the “Participating Employer”’), first becomes

obligated to and does make contributions to the Plan on

* Section 3(2) provides:

shall later occur, he was an Employee of the class for whom

Contributions have been made since January 1, 1954. Such

service shall be credited for the following periods and the

member shall have the right to designate the alternative of his

(a) Credit for service prior to January 1, 1954;

... if a member becomes a member on or after January 1, 1959,

he shall be limited to a maximum of 20 years’ credit for service

as an Employee...

6a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

its employees’ behalf. (The ‘‘Applicable Effective Date’’).’

The Participating [1326] Employer need not be the

corporation as a whole, but may instead be a corporate

division or plant. The purpose of the rule is to encourage

new bargaining units to join the Teamsters Plan.

In response to Clayton’s request, Continental on

September 9, 1969 sent a letter to the Teamsters Plan’s

Board of Trustees requesting that the plaintiff's be

accepted into the plan as a new group. in the letter,

Continental offered to pay five years’ worth of

contributions on behalf of any Local 375 driver who

retired before completing five years of service under the

Teamsters Plan. The letter in this respect conflicted with

the new group rule, since the rule requires the employee

to be employed under the Teamsters Plan for at least

five years in order to receive past service credit.

The Board of Trustees considered Continental’s letter

at its September, 1969 meeting. The Board voted

unanimously to treat the plaintiffs as new employees not

entitled to past service credit. The Board apparently

*“Participating Employer" and “Applicable Effective Date,’ are

defined in sections 1(2) and 1(13) of the Plan:

(2) “Participating Employer" means any person, firm, or

corporation having a collective bargaining agreement with the

Union which is authorized by the Board of Trustees to

participate in the Plan upon appropriate action by such

em>loyer acceptable to the Board of Trustees.

(13) “Applicable Effective Date’ means such date after

January 1, 1954 on which a Participating Employer, as herein

defined, shall first become obligated to make and does make

Contributions to the Fund on behalf of Employees in accordance

with the provisions of the Collective Bargaining Agreement and

the rules and regulations of this Fund.

Ja

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

believed that Continental had physically transferred the

plaintiffs from their previous plant to a plant already

participating in the Teamsters Plan. Clayton was a

member of the Board and was present at the meeting.

He attempted to explain to the other Board members

that there had been no physical transfer but merely a

merger of operating divisions. However, Clayton agreed

that Continental’s request for new group status for the

plaintiffs could not be approved because of the conflict

be- [1327] tween Continental’s offer and the new group

rule’s requirement of five vears actual service. Clayton

told the Board that he would request Continental to

provide further information on the facts of the plaintiff's

case. On October 15, 1969, before receiving any

additional information, the Board told Continental by

letter that its application on behalf of the plaintiffs had

been rejected.

In early September, 1969, an accident required one of

the Local 375 drivers, Timothy Moriarty, to be

hospitalized for several weeks. Moriarty applied for

disability benefits from the New York State Teamsters

Health and Hospital Fund. The Health and Hospital

Fund and the Teamsters Plan had the same address and

manager and very similar provisions. Approximately one

month after his accident Moriarty began to receive

benefits from the Health and Hospital Fund. Those

benefits should not have been paid unless Moriarty

qualified for past service credit under the new group rule

of the Health and Hospital Fund.

In January, 1970, Local 449 and Continental executed

a new participation agreement that required Continental

8a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

to contribute to the Teamsters Plan on behalf of

employees of ‘‘Continental Can Co., Inc. #490, Clay

Street, Tonawanda, N.Y.’’ The agreement required

Continental to make payments retroactive from July 1,

1969. Ervin Walker, the president of Local 449 and a

defendant in this proceeding, testified that the new

participation agreement must have been executed

because a new group joined the plan.

At the January, 1970, meeting of the Teamsters Plan

Board of Trustees, Clayton again brought the plaintiffs’

situation to the attention of the Board. He argued that

the plaintiffs constituted a new group and were entitled

to past service credit. The Board did not take formal

action [1328] on the request for new group status, but

instead asked Clayton to provide a letter describing

Continental’s merger of its trucking operations. Clayton

apparently never sent the requested letter.

Clayton again raised the matter at the Board's next

meeting, held from February 26 to March 2, 1970.

According to Clayton, several of the Trustees began at

this meeting to understand that Continental had not

physically transferred the plaintiffs. The Board, however,

again took no formal action on the request for new group

status, but instead tabled further review of the plaintiffs’

case until it received a letter from Local 449 detailing the

plaintiffs’ situation. Apparently the Board did not,

following the meeting, request Local 449 to send it a

letter, nor was such a letter ever received. The Board did

not, at any time, formally rescind its September, 1969

vote denying the plaintiffs new group status.

9a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

The Board did not again consider the plaintiffs’ status

until the issue was raised by the retirement of plaintiff

Harold Miles on January 9, 1976. Several months prior

to his retirement Miles had submitted an application for

pension benefits. On January 14, 1976 the administrator

of the Teamsters Plan informed Miles by letter that his

application for a pension had been rejected because he

had only six and one-half years credited service under

the plan. The plan required fifteen years service for

payment of a pension. Miles complained to Clayton that

the Teamsters Plan had not granted him past service

credit, Clayton raised Miles’ entitlement to past service

credit at several Board meetings in 1976. In response,

the Board referred to the minutes of its 1969 and 1970

meetings and again concluded that the plaintiffs were

not entitled to past service credit under the new group

rule. Although the membership of the Board had

partially changed between [1329] 1969 and 1976, the

1976 Board did not attempt to investigate the facts

itself.

This action was brought on August 8, 1977 when Miles

and the other drivers who belonged to Local 375 prior to

July 1, 1969—Eugene Darlak, Timothy Moriarty, James

Stuermer and Edward Zastrow—filed their complaint.

The plaintiffs’ second amended complaint, filed on

August 7, 1980, named as defendants the Teamsters

Plan, Ervin Walker in his official capacity as president of

Local 449, and Clayton, individually and in his official

capacity as president of Local 375. The second amended

complaint alleged seven causes of action, six pursuant to

29 U.S.C. § 1132(a)1) and one under state law. The first

10a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

three causes of action were asserted by Miles against the

Teamsters Plan. The next three causes of action

corresponded to the first three, except that they were

asserted by Darlak, Moriarty, Stuermer and Zastrow. In

the first and fourth causes of action the plaintiffs alleged

that they, Continental, and Locals 375 and 449 had

agreed at the time of the 1969 transfer that the plaintiffs

would be accepted into the Teamsters Plan as a new

group and would receive past service credit. In the

second and fifth causes of action the plaintiffs alleged

that the Board of Trustees had acted arbitrarily and

capriciously in denying them new group status. In the

third and sixth causes of action the plaintiffs alleged

that the Board had approved their request for new group

status at a meeting held in late 1969 or early 1970. The

seventh cause of action, asserted by the plaintiffs jointly

against Walker in his official capacity and against

Clayton personally and in his official capacity, alleged

that Clayton and Locals 375 and 449 fraudulently

misrepresented to the plaintiffs in 1969 that they would

receive past service credit if they transferred

membership from Local 375 to Local 449 and [1330]

worked for five years under the plan. As relief, Miles

requested the court to order the Teamsters Plan to pay

him a pension on the basis of full credit or past service.

The other four plaintiffs, who had not retired, requested

an order granting them past service credit under the

plan. All of the plaintiffs also sought compensatory and

punitive damages from Walker and Clayton.

In Judge Elfvin’s decision, filed March 11, 1982, he

concluded that the Board of Trustees had acted

lla

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

arbitrarily and capriciously in denying the plaintiffs

past service credit, and he granted judgment to the

plaintiffs on their second and fifth causes of action. He

concluded that the plaintiffs’ remaining causes of action

were unsupported by the facts. On June 7, 1982, Judge

Elfvin granted the plaintiffs’ post-trial motion for an

award of attorneys’ fees under 29 U.S.C. § 1132(g)(1).

The judge ruled that the relative merits of the parties’

positions, the ‘‘extremely cavalier’’ attitude of the Board

toward the plaintiffs’ application for new group status,

and the need to deter “‘callous” behavior by pension plan

trustees justified an award of attorneys’ fees against the

Teamsters Plan. Finding that the plaintiffs’ attorneys

were entitled to compensation for the risk they had

assumed in representing plaintiffs on a contingent fee

basis, the judge increased the final award of attorneys’

fees by fifty percent over the ‘lodestar’ figure

submitted by the attorneys. The Teamsters Plan appeals

from the judgment for the plaintiffs and from the award

of attorneys’ fees.‘

The Teamsters Plan argues that the plaintiffs’ claims

are barred by the statute of limitations. We disagree. As

ERISA does not prescribe a limitations period for

actions [1331] under § 1132, the controlling limitations

period is that specified in the most nearly analogous

state limitations statute. See Board of Regents v.

Tomanio, 446 U.S. 478, 483-84 (1980). Here, the six-year

limitations period prescribed by New York’s C.P.L.R.

§$ 213 controls. See Valle v. Joint Plumbing Indus. Bd., 623

‘The plaintiffs do not appeal from the judgment granted the

defendants on their first, third, fourth, sixth, and seventh causes of

action.

12a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

F.2d 196, 202 n.10 (2d Cir. 1980). A plaintiff's ERISA

cause of action accrues, and the six-year limitations

period begins to run, ‘‘when there has been ‘a repudiation

by the fiduciary which is clear and made known to the

beneficiaries.’ "’ Jd., quoting In re Barabash, 31 N.Y.2d

76, 80, 334 N.Y.S.2d 890, 893 (1972). See also Kosty v.

Lewis, 319 F.2d 744, 750 (D.C. Cir. 1963), cert. denied,

375 U.S. 964 (1964). The Teamsters Plan argues that the

plaintiffs had clear notice in 1969 that they would not be

treated as a new group, and that the plaintiffs’ suit is

therefore barred by their failure to commence suit by

1975. Judge Elfvin, however, found that the plaintiffs

did not receive clear notice that the Board repudiated

their claim until the Teamsters Plan in 1976 denied Miles

a pension. This finding of fact is not clearly erroneous.

We therefore proceed on the basis that the plaintiffs’ suit

was timely filed.

The Teamsters Plan argues that Judge Elfvin, in

analyzing the plaintiffs’ claim, exceeded the scope of

judicial review which may properly be applied to the

actions of pension plan administrators. We agree.

Moreover, in our view of the record, we cannot say that

the Board's conduct was arbitrary and capricious.

In order to avoid excessive judicial interference with

pension plan administration, the federal courts of appeals

generally have applied an “arbitrary and capricious”

standard of review in actions challenging the decisions of

plan administrators. See Dennard v. Richards Group,

Inc., 681 F.2d-306, 313 & n.11 (5th Cir. 1982) and cases

[1332] cited therein. We have stated that the lawful,

discretionary acts of a pension committee should not be

13a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

disturbed, absent a showing of bad faith or arbitrariness.

Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d

911, 915 (2d Cir. 1982). Accord, Haeberle v. Board of

Trustees of Buffalo Carpenters, 624 F.2d 1132, 1136 n.6

(2d Cir. 1980); Riley v. MEBA Pension Trust, 570 F.2d

406, 410 (2d Cir. 1977); Wyper v. Providence Washington

Ins. Co., 533 F.2d 57, 62 (2d Cir. 1976); Beam uv.

International Org. of Masters, Mates & Pilots, 511 F.2d

975, 980 (2d Cir. 1975). Where the trustees of a plan

impose a standard not required by the plan’s provisions,

or interpret the plan in a manner inconsistent with its

plain words, or by their interpretation render some

provisions of the plan superfluous, their actions may well

be found to be arbitrary and capricious. See Morgan uv.

Mullins, 643 F.2d 1320, 1321, 1324 (8th Cir. 1981);

Maness v. Williams, 513 F.2d 1264, 1267 (8th Cir. 1975).

However, the limited standard or review applied in these

cases does mean that the trial court should not conduct a

de novo hearing on a rejected applicant's eligibility for

benefits, see Wardle v. Central States, Southeast &

Southwest Areas Pension Fund, 627 F.2d 820, 824 (7th

Cir. 1980), cert. denied, 449 U.S. 1112 (1981), or disregard

a pension committee’s reasonable interpretation of plan

provisions. We fear that the district judge, in reviewing

the plaintiffs’ claim, failed to adhere to these limitations.

The district judge analyzed the plaintiffs’ claim in two

steps. First he decided upon a “‘correct”’ interpretation of

the new group rule. Second he considered whether the

Board’s failure to adopt the ‘‘correct”’ interpretation was

arbitrary and capricious.

T4a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

The district judge found that under the “correct”

interpretation of the new group rule the plaintiffs consti-

[1333] tuted a new group. He cited four principal items of

evidence as supporting his interpretation of the rule: (1)

the testimony of Walker and Clayton that the plaintiffs

were a new group; (2) the January, 1970 execution of a

new participation agreement between Local 449 and

Continental requiring Continental to make contributions

to the Teamsters Plan on behalf of employees of

“Continental Can Co., Inc. #490;"’ (3) Moriarty's receipt

of benefits from the Health and Hospital Fund, which

suggested that Moriarty was a new group member under

the Fund’s rule; and (4) the “‘fact,’’ found by him, that

the plaintiffs did not have to join the Teamsters Plan

when they joined Local 449, but that Local 449 could

instead have negotiated a separate pension agreement on

their behalf. (From this latter finding the judge

concluded that the plaintiffs’ entry into the Teamsters

Plan was consistent with the purpose of the new group

rule to add new bargaining units to the plan). On the

basis of this evidence the district judge found that in

merging its trucking operations Continental created a

new “Participating Employer,’’ Plant No. 490, and that

the plaintiffs were employed by that employer at the

time it first became obligated to contribute to the

Teamsters Plan, i.e., January, 1970. The judge therefore

concluded that the plaintiffs were employed by the

Participating Employer (Plant No. 490) at the Applicable

Effective Date (January 1970), and hence were entitled

to past service credit under the new group rule.

15a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

As the second step in his analysis, the district judge

found that the Board had acted arbitrarily and

capriciously in failing to reach the ‘correct”’

interpretation of the new group rule. The district judge

found that the Board in 1969 and 1970 mistakenly

believed that a transfer rather than a merger had

occurred. Although in- [1334] formed by Clayton that its

understanding was incorrect, the Board denied the

plaintiffs’ claim without further investigation. The

district judge concluded that in failing to investigate the

plaintiffs’ situation when clearly informed that its factual

assumptions were incorrect, in failing to notify either the

plaintiffs or Local 449 of the 1969 vote, and in failing in

1976 to initiate a new investigation when Miles applied

for a pension, the Board acted arbitrarily and

capriciously.

The Board had interpreted the new group rule quite

differently than did the district court. The Board

apparently believed that the Participating Employer was,

in general terms, the Clay Street plant, and that the

Applicable Effective Date was December 11, 1967, the

date on which contributions were first made on behalf of

the employees belonging to the Clay Street bargaining

unit (Local 449). The Board knew that the plaintiffs had

joined the covered bargaining unit (Local 449) in the

summer of 1969, and that Continental had not made

contributions on the plaintiffs’ behalf prior to that time.

The Board therefore concluded that the plaintiffs were

not employed by the Participating Employer at the

Applicable Effective Date and hence did not qualify for

new group status. We cannot say that this conclusion

16a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

was irrational. The district judge himself found that an

“employee [who] becomes a member of a particular

bargaining unit after the date on which the bargaining

unit first participates in the Teamsters Plan...is not

entitled to receive past service credit.’’ Equally

important, both the policy underlying the new group rule

and the rule’s financial implications suggest that the

Board acted rationally. As the district judge found, the

rule is intended to induce independent bargaining units

to join the Teamsters Plan. The inducement offered is

the guarantee of [1335] past service credit to the members

of the independent units. The district judge found that

the plaintiffs did not have to participate in the

Teamsters Plan when they joined Local 449, and that

Local 449 could have negotiated a separate pension

agreement on their behalf. He therefore concluded that

extension of new group status to the plaintiffs would

have been consistent with the rule's policy. We believe,

however, that the district judge’s finding of fact on this

issue is clearly erroneous. The clear weight of the

evidence indicates that the plaintiffs were not an

independent unit, but instead had to join the Teamsters

Plan upon joining Local 449.° As the Board, therefore,

* The district judge's finding is supported only by certain testimony

by Clayton. Clayton, however, later contradicted that testimony and

in his clearest testimony on the point indicated that the plaintiffs’

participation was mandatory. Miles, Moriarty, Stuermer, and Zastrow

all testified to their understanding that they had to join the

Teamsters Plan when they joined Local 449. The National Master

Freight Agreemett unambiguously required Continental to contribute

to the Teamsters Plan on the Plaintiffs’ behalf as soon as the

plaintiffs joined Local 449. See Articles 38(1)a) and 53(1) of the New

York State Teamsters Joint Council Freight Division Local Cartage

(Footnote continued on following page)

17a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

did not need to grant the plaintiffs special treatment in

order to add them to the plan, we reject the district

judge’s conclusion that the policy behind the rule

supported the plaintiffs’ application. Instead, because

the plaintiffs could not freely accept or reject

participation in the plan, the rule’s policy was not

implicated. With regard to the financial consequences of

granting new group status, it must be remembered that

a grant of past service credit requires the Teamsters

Plan to pay benefits [1336] for which the appropriate

employer contributions were never paid. It thus appears

that in denying the plaintiffs new group status the

Board merely declined to impair the plan’s financial

condition for the benefit of employees who had to

participate. Where both the trustees of a pension fund

and a_ rejected applicant offer rational, though

conflicting, interpretations of plan provisions, the

trustees’ interpretation must be allowed to control.

Lowenstern v. International Ass'n of Machinists and

Aerospace Workers, 479 F.2d 1211, 1213 (D.C. Cir. 1973).

The facts and policies discussed immediately above

convince us that the Board’s interpretation of the rule

(Footnote continued from preceding page)

Supplemental Agreement for the period April 1, 1967 to March 31,

1970 (supplement to and part of the National Master Freight

Agreement for the period commencing April 1, 1967). Because we are

left with a “definite and firm conviction that a mistake has been

committed,"’ the fact that some evidence supports the district judge's

finding does not preclude us from treating that finding as clearly

erroneous. United States v. United States Gypsum Co., 333 U.S. 364,

395 (1948).

18a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

was rational. The district judge should not have

overturned the Board's decision.*

Our conclusion that the Board's interpretation of the

new group rule was rational, and should not be set aside,

disposes of the claim that the Board’s decision-making

process was arbitrary and capricious. Nonetheless, we

think it necessary to note our disagreement with the

district judge’s statement that that the Board exhibited

“‘an extremely cavalier attitude’’ toward the plaintiffs. The

Board’s misunderstanding of the facts does not appear

to have affected its decision. Although Sol Tabor, the

actuarial consultant to the Teamsters Plan, testified that

if two corporate divisions merge, and enter into a new

bargaining agreement providing for contributions, [1337]

the employees will be entitled to past service credit, it

does not adequately appear that Tabor’s testimony was

directed to a situation where, as here, one of the merged

divisions previously was participating in the plan.

Instead, under the Board’s interpretation of the new

group rule, the new employees of a_ previously

participating Participating Employer are not entitled to

* We believe, moreover, that the evidentiary support for the district

judge's interpretation of the rule was not so great as the judge

himself believed. As previously noted, the district judge's finding that

the plaintiffs could have refused participation in the Teamsters Plan

is clearly erroneous. Moreover, we would have evaluated the

testimony of Walker and Clayton cognizant that both were

defendants in this action and present or former union representatives

of the plaintiffs. As no evidence or testimony was received to explain

the operation of the Health and Hospital Fund's new group rule, we

SHEE Ren Hepes Tile: Sap aaeE ae SEES See

from the Fund.

19a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

past service credit regardless of whether they are merged

or transferred into the «pplicable bargaining unit. Thus

Tabor testified that the plaintiffs could not have

obtained past service credit by entering into employment

with the previously participating Clay Street

Participating Employer, but only by forming a separate

bargaining unit at the Shawnee Road plant (which then

would be a separate Participating Employer) and

independently joining the plan. Nor do we see “‘cavalier”’

behavior in the Board’s failure to initiate its own

investigation into the plaintiffs’ circumstances. The

district judge found that “the Board demonstrated

repeated willingness to receive and consider additional

information concerning plaintiffs’ status.’ Given that

finding, the mere failure to initiate an investigation

cannot support a charge of gross disregard of duty.’

We conclude, therefore, that the Board interpreted the

new group rule rationally and did so with adequate

regard to the duties it owed the plaintiffs. We

accordingly reverse the judgment granted the plaintiffs

on their second and fifth causes of action.

{1338] Our reversal of the judgment also requires that

the award of attorneys’ fees to the plaintiffs be set aside.

Although success on the merits is not, in theory,

"The Board did not individually notify the plaintiffs of the

September, 1969 vote denying Continental's application to have them

treated as a new group. We see no reason why the Board could not

have given such notice. However, the Board did communicate the

vote to Continental, and the plaintiffs’ union representative, Clayton,

was present at and had knowledge of the vote. The Board could

reasonably have believed that Clayton or Continental would inform

the plaintiffs.

20a

Appendix—Decision of the United States Court of

Appeals for the Second Circuit

Decided January 20, 1983.

indispensable to an award of attorneys’ fees under 29

U.S.C. § 1132(g)(1),* rarely will a losing party in an action

such as this be entitled to fees. At least three of the five

factors ordinarily considered in reviewing requests for

attorneys’ fees under § 1132(g)(1) are affected by success

on the merits.’ Thus, in an action brought to redress the

private rights of individual applicants, ‘‘(a)n altogether

sufficient support for (a) court’s decision not to award

attorney’s fees under ERISA is that the attorney

obtained no relief under that statute.’’ Fase v. Seafarers

Weifare & Pension Plan, 589 F.2d 112, 116 (2d Cir. 1978).

In the present case, the three reasons cited by the

district court to support the award of attorneys’

fees—the relative merits of the parties’ positions, the

need to deter ‘“‘callous’’ behavior by pension plan

trustees, and the Board’s “gross and deliberate

indifference” to the plaintiffs’ claam—no longer are valid

under our view of the case.

The judgment for the plaintiffs is reversed; the award

of attorneys’ fees is vacated.

* Section 1132(g)\1) states:

In any action under this subchapter... by a participant,

beneficiary, or fiduciary. the court in its discretion may allow a

reasonable attorney's fee and costs of action to either party.

(Emphasis added).

*The five factors are: (1) the degree of the offending party's

culpability or bad faith, (2) the ability of the offending party to

satisfy an award of attorney's fees, (3) whether an award of fees

would deter other persons from acting similarly under like

circumstances, (4) the relative merits of the parties’ positions, and (5)

whether the action sought to confer a common benefit on a group of

pension plan participants. Ford v. New York Central Teamsters

Pension Fund, 506 F.Supp. 180, 183 (W.D.N.Y. 1980) (Elfvin, J.),

aff'd., 642 F.2d 664 (2d Cir. 1981).

2la

[1078] Findings of Fact, Conclusions of Law and Order

of Elfvin, U.S.D.J., Dated March 11, 1982

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NEW YORK

HAROLD MILES, EUGENE DARLAK, TIMOTHY

MORIARTY, JAMES STUERMER, and

EDWARD ZASTROW,

Plaintiffs,

vs.

THE NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN, ERVIN WALKER, as

President of Local Union No. 449 of the International

Brotherhood of Teamsters, Chauffeurs, Warehousemen

and Helpers of America, and Unincorporated

Association, and STANLEY CLAYTON, Individually

and as President of Local Union No. 375 of the

International Brotherhood of Teamsters, Chauffeurs,

Warehousemen and Helpers of America, and

Unincorporated Association,

Defendants.

CIV. 77-432E

Plaintiffs, four employees and one former employee of

Continental Can Co., Inc. (‘Continental’), commenced

this action under the Employee Retirement Insurance

Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et segq.,

22a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

to determine their entitlement to receive benefits from

the defendant New York State Teamsters Conference

Pension and Retirement Fund Employee Pension Benefit

Plan (‘‘the Teamsters Plan’). The action arises out of a

consolidation or merger of operations by Continental in

1969 whereby plaintiffs were transferred from defendant

Local Union No. 375 of the International Brotherhood of

Teamsters, Chauffeurs, Warehousemen and Helpers of

America (“Local 375’’) to defendant Local Union No. 449

of said International (‘‘Local 449’’). Prior to the transfer,

plaintiffs had [1079] been participants in a pension plan

operated by Continental, but thereafter became

participants in the Teamsters Plan. Plaintiffs claim to be

entitled to receive pension benefits from the Teamsters

Plan based on credit for service prior to the transfer.

Plaintiffs’ Second Amended Complaint, filed August 7,

1980, asserts seven causes of action. The first three

causes of action are asserted against the Teamsters Plan

by plaintiff Miles, who retired from Continental in 1975

and was denied benefits by the Teamsters Plan’s Board

of Trustees. In his first cause of action, Miles claims that

he is entitled to receive a pension based on past service

credits pursuant to an agreement between the parties at

the time of the transfer. Miles’s second cause of action

asserts that the denial of his application for benefits

under the Teamsters Plan was arbitrary and capricious.

His third cause of action alleges that the Board of

Trustees of the Teamsters Plan approved his application

for benefits based on past service credit at a meeting

some time in late 1969 or early 1970. The fourth, fifth

and sixth causes of action are asserted by plaintiffs

23a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Darlak, Moriarty, Stuermer and Zastrow and correspond

to Miles’s first, second and third causes of action, respec-

tively, except that said four plaintiffs are still employed

at Continental and seek a determination of their future

rights to receive benefits from the Teamsters Plan. The

seventh cause of action, asserted by all five plaintiffs, is

based on alleged fraudulent [1080] misrepresentations by

Local 375 and its President, defendant Clayton, and by

Local 449 in connection with the transfer. Defendant

Walker is sued in his capacity as President of Local 449

and Clayton is sued both personally and as President of

Local 375. Clayton was also a member of the Teamsters

Plan’s Board of Trustees from 1965 to 1976, but is not

sued in his capacity as trustee.

The case is currently pending before me for

preparation of findings of fact and conclusions of law fol-

lowing a non-jury trial conducted from August 25, 1980

to August 28, 1980. I issued a Memorandum and Order

concerning certain evidentiary motions on March 12,

1981 and directed the parties to submit proposed find-

ings of fact and conclusions of law by April 16, 1981.

After such proposals and all trial exhibits were belatedly

submitted to me in July, 1981, I took the matter under

advisement. Upon consideration of the evidence pre-

sented at trial and review of the parties’ proposed find-

ings of fact and conclusions of law, I conclude that

plaintiffs are entitled to judgment on their second and

fifth causes of action.

Miles became a member of Local 375 in 1946 and

' began working for Continental as a truck driver in

3

24a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

March, 1953.' He worked in such capacity until his

[1081] retirement in 1975. Moriarty became a member of

Local 375 in 1949. He began working for Continental as a

truck driver in February, 1953 and has worked there ever

since. Zastrow has been employed by Continental since

1948 but did not begin driving trucks until May, 1956, at

which time he also joined Local 375. Stuermer has been

working for Continental since 1951. He became a truck

driver in November, 1961 and presumably joined Local

375 at that time. Darlak began working for Continental

in 1959. He joined Local 375 in September, 1960 and has

been a truck driver for Continental since that time. Until

1969, all of the plaintiffs worked out of Continental's

plant number 506 located on Shawnee Road in North

Tonawanda, N.Y. (‘‘the Shawnee Road plant”) and were

represented by Local 375. Under an agreement between

Local 375 and Continental, plaintiffs participated in a

pension plan operated by Continental. Plaintiffs were the

only drivers employed by Continental at the Shawnee

Road plant.

In 1969 Continental decided to consolidate its trucking

operations by merging the Shawnee Road plant with

plant number 418, which was located on Clay Street in

Tonawanda, N.Y. (“the Clay Street plant’), and plant

number 81, which was located on Colvin Boulevard. The

merger did not entail the actual physical transfer of

' Miles, Moriarty and Stuermer began working for the Robert Gair

Company, which apparently was taken over by Continental some time

in the mid or late 1950’s. Their pension rights do not appear to have

been affected by the takeover, however, and I have therefore utilized

the date on which they began working for Robert Gair as the date of

commencement of their employment with Continental.

25a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

drivers f:om the Shawnee Road plant to the Clay Street

plant but rather involved the manner in which the

Shawnee Road drivers were supervised. After the

merger, drivers from the Shawnee Road plant telephoned

a dispatcher at [1082] the Clay Street plant to receive

their driving assignments for the following day. They

also delivered shipments of waste to the Clay Street

plant on their return trips, whereas prior to the merger

they had returned directly to Shawnee Road. The

consolidated trucking operation was denominated “plant

number 490°’ by Continental, and the old denominations

506, 418, and 81 were apparently discarded.

Drivers at the Clay Street plant were required to belong

to Local 449, which had a union shop agreement with

Continental. Consequently, the merger necessitated that

plaintiffs transfer their union membership from Local 375

to Local 449.” In a letter to Local 449 dated December 11,

*This transfer was required under the terms of the International

Union's Constitution. Clayton, who had become president of Local

375 in 1955 and continued in such capacity until 1976, testified at

trial that Local 375 could have staged a jurisdictional dispute with

Local 449 concerning representation of the Shawnee Road drivers

after the merger but that such a dispute would probably have been

resolved in favor of Local 449. Walker, who became president of Local

449 in December 1975, also indicated at trial that Local 375 probably

could not have waged a successful fight over representation of

plaintiffs. Walker further testified, however, that in his opinion Local

449 probably would have avoided a jurisdictional dispute with Local

375 if it had appeared that plaintiffs would lose pension benefits by

being forced to transfer their union membership. Welker’s testimony

in this regard is, of course, highly speculative, particularly in view of

the fact that he was not President of Local 449 at the time of the

merger. At any rate. the question whether plaintiffs were technically

required to transfer their union membership is not crucial to my

decision.

26a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

1967 (Plaintiffs’ Exhibit 20), Continental had agreed to

[1083] abide by the terms of the so-called ‘‘National Master

Freight Agreement,’’ which required Continental to make

contributions to the Teamsters Plan on behalf of the

drivers at the Clay Street plant. Thus, at the time of the

merger, the Clay Street drivers had been participants in

the Teamsters Plan for approximately two years.

The basis for plaintiff's claim that they are entitled to

receive credit under the Teamsters Plan for time spent in

the employ of Continental as members of Local 375 is

the Teamsters Plan’s so-called ‘“‘new group rule.’’ Under

this rule, an employee who is a member of a group of

employees which comes into the Teamsters Plan as a

new group is entitled to receive credit for past service

with the employer (up to a maximum of twenty years) if

the employee continues to work for the employer for

another five years and the employer makes contributions

to the Teamsters Plan on behalf of the employee for

those five years. However, if the employee becomes a

member of a particular bargaining unit after the date on

which the bargaining unit first participates in the

Teamsters Plan, he is not entitled to receive past service

credit. The rule is intended to encourage new bargaining

units to join the Teamsters Pian. Plaintiffs claim that

they are entitled to be treated as a new group within the

meaning of the rule.

The new group rule is incorporated in section 3 of the

Teamsters Plan, which section provides as follows:

27a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

[1084] ‘(2) A member [of the Tes .sters Plan] who

becomes a member after January 1, 1954 [the

effective date of the Teamsters Plan] shall be

entitled to credit for service as an Employee * * *

pursuant to (a) or (b) of this subsection, only for the

time spent in the employ of one or more

Participating Employers in contractural relations

with the Union, provided on January 1, 1954, or the

Applicable Effective Date, whichever shall later

occur, he was an Employee of the class for whom

Contributions have been made since January l,

1954. Such service shall be credited for the following

periods and the member shall have the right to

designate the alternative of his choice:

‘(a) Credit for service prior to January 1, 1954.

‘“(b) Credit for service prior to the Applicable

Effective Date * * *.

“Anything herein to the contrary notwithstand-

ing, if a member becomes a member on or after

January 1, 1959, he shall be limited to a maximum

of 20 years’ credit for service as an Employee * * *

prior to January 1, 1954 or the Applicable Effective

Date, depending on his choice as herein set forth

* **.” Plaintiffs’ Exhibits 1 and 2.)

Section 1 of the Teamsters Plan, which contains

definitional provisions, provided in pertinent part:

“(1) ‘Employee’ means a person who is in a

collective bargaining unit represented by the Union,

who is in the employ of any one of the participating

employers, and for whom the participating employer

has agreed to make contributions * * *.

28a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

‘(2) ‘Participating Employer’ means any person,

firm, or corporation having a collective bargaining

agreement with the Union which is authorized to

participate in the Plan upon appropriate action by

such employer acceptable to the Board of Trustees.

(3) ‘Union’ means one of the Local Unions * * *

375 [or] 449 * * * of the International Brotherhood

of Teamsters * * *.

* * * * &

[1085] ‘(5) ‘Contributions’ means the payment to

the [Teamsters] Fund [i.e., the Teamsters Plan] by

_ Participating Employers of such amount or amounts

‘as are specified in Collective Bargaining Agreements

. between the Union and Employers * * * or as the

same may be amended from time to time.

* * * *& *

‘(13) ‘Applicable Effective Date’ means such

date after January 1, 1954 on which a Participating

Employer, as herein defined, shall first become

obligated to make and does make Contributions to

the Fund [i.e., the Teamster Plan] on behalf of

Employees in accordance with the provisions of the

Collective Bargaining Agreement and the rules and

regulations of this Fund [i.e., the Teamsters Plan].”’

Plaintiffs’ Exhibits 1 and 2.

With regard to section 3(2) of the Teamsters Plan,

there is no dispute that plaintiffs became members of the

Teamsters Plan after January 1, 1954 and that

Continental is a participating employer in contractual

relations with the union as defined in section 1(2). The

controverted issue is whether on the Applicable Effective

Date plaintiffs were employees of the class for whom

29a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

contributions had been made since January 1, 1954. In

particular, plaintiffs and the Teamsters Plan offer

conflicting interpretations of the term ‘Applicable

Effective Date” as it is defined in section 1(13). Plaintiffs

argue that the Applicable Effective Date, as applied in

this action, means the date that Continental first became

obligated to make contributions to the Teamsters Fund

on their behalf—to wit, at the time they transferred from

a Local 375 bargaining unit to a Local 449 bargaining

unit. [1086] The Teamsters Plan urges that the

Applicable Effective Date means the date that

Continental first became obligated to make such

contributions on behalf of the drivers at the Clay Street

plant—viz., December 11, 1967. As I noted in my

Memorandum and Order entered February 25, 1980 (which

denied cross-motions by plaintiffs and the Teamsters

Plan for summary judgment), both interpretations of the

plan are tenable. I further indicated in said

Memorandum and Order that parole evidence concerning

interpretation of the Teamsters Plan would be admissible

because the intent and purpose of the Applicable

Effective Date provision could not be ascertained from

the language employed therein.

Although the sequence of events leading up to the

merger is somewhat confused, it seems clear that the

merger took place July 1, 1969 and that a series of meet-

ings among Local 375, Local 449, Continental and

drivers from all three plants was conducted prior

thereto. Considering that the trial of this action was

conducted some eleven years after the merger occurred,

it is not surprising that there was conflicting testimony

30a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

concerning the dates of the merger and the meetings. For

example, Miles testified that the merger occurred

September 1, 1969 and Stuermer testified that it took

place at the end of August. Moriarty, on the other hand,

testified that the merger occurred in July or early

August. Plaintiffs’ Exhibit 4, a letter to the Teamsters

Plan’s Board of Trustees from Continental dated

September 9, 1969, also [1087] suggests that the merger

occurred September 1, 1969; the letter requests the

Board to accept plaintiffs into the Teamsters Plan

effective as of said date.

However, the most persuasive evidence concerning the

date of the merger is provided by Plaintiffs’ Exhibit 19,

whick is an agreement entitled ‘‘Pension and Retirement

Fund Stipulation’”’ executed by Local 449 and

Continental January 26, 1970. The Stipulation requires

Continental to make contributions to the Teamsters Plan

on behalf of employees of plant number 490 as of July 1,

1969, thereby implying that the merger took effect on

that date. This inference is supported by Walker’s

testimony, based on his appointment book for the year

1969, that he attended a meeting at the Clay Street plant

among Local 449, Continental and drivers from both the

Shawnee Road and Clay Street plants June 12, 1969.

This meeting was held immediately prior to the merger.’

*It is clear from all of the testimony in the case that only one

meeting was held which was attended by drivers from both the

Shawnee Road and Clay Street plants, that this meeting was the last

of the series of meetings held prior to the merger and that this

meeting was held only a short while before the merger took place.

3la

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Further evidence that the merger occurred July 1 rather

than September 1 is provided by Plaintiffs’ Exhibit 9, a

letter dated January 14, 1976 from the Administrator of

the Teamsters Plan to Miles denying Miles’s application

for pension benefits due to lack of sufficient service. The

letter states that as of January, 1976 Miles had only “6

years and 5 tenths” credit. Such credit represents the

amount of time Miles worked under the Teamsters Plan

following [1088] the merger. Counting backwards, six and

one-half years from January, 1976 is July, 1969. Finally,

there is testimony that certain union records indicate

that some of the plaintiffs transferred their union

membership from Local 375 to Local 449 in July, 1969.

Local 375 was first informed of the forthcoming

merger in a telephone conversation between Fred Moss, a

business agent for Local 375, and one Schultz, who was

the supervisor of the Shawnee Road plant. During this

conversation, Local 375 was told that Continental was

creating a new trucking division and that it did not want

to renew the collective bargaining agreement then

applicable to the Shawnee Road drivers. The agreement

was due to expire at the end of July, 1969. At Clayton’s

request, a meeting was held at the Shawnee Road plant

the following day among Schultz, Moss, Clayton and one

Nieman, a management representative sent by

Continental to Buffalo from New York to handle the

merger.‘ At the meeting, Continental informed Local 375

‘Clayton testified that Nieman was at this meeting. Tr.Tr., Vol. III,

at 58. Miles, who came into the meeting later on, testified that

Nieman was not present. Tr.Tr., Vol. II, at 225. It seems probable

that Clayton's testimony is correct in this regard.

32a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

in general terms that there would be a consolidation of

trucking operations. [1089] The major concern of Local

75 at this meeting was the Shawnee Road drivers’

seniority and the drivers’ pension righis were not then

discussed. Miles, who apparently had happened by or

upon the meeting while it was going on, was invited to ©

sit in and was told that the merger was going to take

place. No other drivers were present at this meeting, but

Clayton testified that Moriarty telephoned him following

the meeting and that he, Clayton, informed Moriarty

what had occurred.’

According to Clayton’s testimony, a second meeting

between Local 375 and Continental was held two days

later. At this meeting, Clayton was informed that drivers

from Shawnee Road would not be physically transferred

to the Clay Street Plant but that they would receive

driving assignments from the Clay Street plant. Clayton

was also told, apparently for the first time, that drivers

at the Clay Street plant were participants in the

Teamsters Plan and that the Shawnee Road drivers

would no longer be covered under the Continental

pension plan. Clayton suggested that, in order to avoid a

loss of credit for past service by the Shawnee Road drivers,

Continental should apply to the Teamsters Plan to have

the drivers treated as a new group. [1090] Clayton

explained to Continental that employees brought into the

Teamsters Plan as part of a new group would receive

credit for past service with an employer, up to a

*Moriarty did not give specific testimony concerning this

conversation, but he did testify that he spoke with Clayton “‘now and

then” before the merger. Tr.Tr., Vol. I, at 152.

33a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

maximum of twenty years, if the employee continued to

work for the employer for at least five more years and

the employer made contributions on behalf of the

employee for those five years. Clayton also suggested

that Continental should offer to pay two years of

retroactive contributions on behalf of the Shawnee Road

drivers in order to place the Shawnee Road drivers in the

same relative position as the Clay Street drivers.*

Payment of retroactive contributions was not a

prerequisite to treatment as a new group, but Clayton

indicated that Continental might make such an offer as a

gesture of “good faith.’’ Clayton testified that,

subsequent to this second meeting, Nieman telephoned

him and stated that Local 449 and Continental had

agreed to Clayton’s proposals regarding seniority and

that Continental would apply to the Teamsters Plan to

have the Shawnee Road drivers treated as a new group.

Clayton also testified that, following the second

meeting, he explained the five-year requirement of the

new group rule to Miles.’ Clayton further testified that

Moriarty [1091] again telephoned him after this second

meeting. According to Clayton, he told Moriarty that

Continental would not renew its contract with Local 375

and that the Shawnee Road drivers had no alternative

but to join Local 449. Clayton also stated that he told

Moriarty that matters would be handled by Local 449.

Tr.Tr., Vol. III, at 86.

*As previously noted, in 1969 Continental had been making

contributions to the Teamsters Plan on behalf of the Clay Street

drivers for about two years.

’ Apparently, Miles could not recall this conversation with Clayton,

as he testified that he did not discuss the merger with Clayton until

after it had occurred. Tr.Tr., Vol. II, at 165.

34a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Subsequently, a meeting was held among Continental,

Local 449, Local 375 and the Shawnee Road drivers at

the Shawnee Road plant.’ This meeting was fairly brief

and provided the drivers with general information

concerning the merger. The meeting was run by Bill

Buckinroth, a business agent for Local 449, and was

attended by the plaintiffs and by Nieman, Schultz and

Moss.’ Apparently, plaintiffs were informed that an

arrangement would be worked out whereby they would

not lose credit for past service under the Continental

pension plan. Tr.Tr., Vol. II, at 226 (Miles’s testimony);

Vol. III, at 77 (Clayton’s testimony)."°

[1092] A final meeting was held at the Clay Street plant

about two weeks before the merger. This meeting was

also run by Buckinroth and was attended by Nieman and

other Continental representatives, Walker, and the

drivers from all three of the merged plants, including all

of the plaintiffs... No one from Local 375 attended

‘ Again, the date of this meeting is somewhat unclear. However, it

occurred prior to the meeting attended by the drivers from all three

plants.

* Stuermer, Zastrow and Darlak all testified that Walker was present

at this meeting. See, Tr.Tr., Vol. II, at 286 and 344; Vol. III, at 28.

However, Walker testified that he did not attend such a meeting, and

Miles also testified that Walker was not present. See, Tr.Tr., Vol. II,

at 254; Vol. III, at 342. I see no reason to doubt the veracity of

Walker's and Miles’s testimony in this regard.

'® Because Clayton himself did not attend the meeting, his testimony

is based on what Moss told him and is therefore hearsay.

'' Miles and Stuermer testified that one Kowalski, a supervisor at the

Clay Street plant, was present but that Schultz was not. Tr.Tr., Vol.

II, at 228, 287. Darlak testified that Schultz did attend. Tr.Tr., Vol.

III, at 29.

Stuermer also testified that Nieman was not present (Tr.Tr., Vol.

II, at 287), but other testimony is to the contrary.

35a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

because, as Clayton explained, by then the merger

concerned only Local 449.'* During the meeting,

plaintiffs were told that they would be covered by a

collective bargaining agreement between Local 449 and

Continental and that they would participate in the

Teamsters Plan. .

Plaintiffs’ rights under the Teamsters Plan were

discussed at this meeting but it is unclear whether they

were expressly told that they would definitely receive

credit for past service. Miles testified that plaintiffs were

told by Buckinroth that they would receive “past

pension rights,’’ provided that they worked an additional

five years. Tr.Tr., Vol. II, at 163-164. However, on cross-

examination, Miles [1093] testified that Buckinroth stated

that “everything would be taken care of,” and that

Nieman stated that ‘they [Continental and Local 449]

were working it out.” Jd., at 229-30. Miles’s testimony

on cross-examination indicates that no _ definitive

arrangement concerning past credit had been made.

Moriarty testified that the plaintiffs were told that they

would enter the Teamsters Plan ‘“‘as a group,’’ impliedly

with past service credit. Tr.Tr., Vol. I, at 145; Vol. II, at

76. Stuermer, Zastrow and Darlak also testified that

Buckinroth stated that plaintiffs would receive credit or

past service, provided that they worked for Continental

under the Teamsters Plan an additional five years.

Tr.Tr., Vol. II, at 290, 346; Vol. III, at 31. However,

Stuermer’s testimony on cross-examination that

plaintiffs were told that their pension rights were ‘‘being

"* Moriarty telephoned Clayton prior to the meeting and asked him to

attend, but Clayton declined.

36a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

taken care of”’ indicates that a firm arrangement had not

been made. Tr.Tr., Vol. II, at 303. Walker, who was in

training to become a business agent at the time, testified

that plaintiffs were told that they would be covered by

the Teamsters Plan but that there was no discussion

about their receipt of past service credit. Tr.Tr., Vol. III,

at 340. However, I find it unlikely that there would have

been no discussion concerning plaintiffs’ rights to receive

credit for past service. On balance. the evidence shows

that plaintiffs were most likely told that some

arrangement would be made (impliedly with the

Teamsters Plan) for them to receive past service credit.

[1094] Notes of the meeting were taken by Walker. At

some point during the meeting, Moriarty asked that the

“minutes” reflect that plaintiffs would be entitled to

past service credit as a new group. Moriarty also asked

that he be provided with a copy of the minutes, but such

a copy was never received by him. Walker testified that

he gave his notes on the meeting to Buckinroth but that

he could not find the notes in Buckinroth’s files. Tr.Tr.,

Vol. III, at 344.

Moriarty and Miles appear to have been the most

active of the plaintiffs with regard to past service credits

inasmuch as each had over fifteen years of service under

Continental’s pension plan. They dealt primarily with

Clayton because Clayton was a member of the Board of

Trustees of the Teamsters Plan and because he was

President of the local union from which they were

transferring their membership. Moriarty testified that he

telephoned Clayton several times prior to the merger and

that he also saw Clayton at a boat race in June, 1969.

37a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

According to Moriarty, Clayton assured him that

plaintiffs’ rights would be protected. On _ cross-

examination, he testified that Clayton told him that he

would receive credit from the Teamsters Plan for service

under the Continental pension plan. Tr.Tr., Vol. II, at 59.

In general, however, Moriarty’s testimony was vague,

contradictory and not very credible.

Miles testified that he discussed his pension rights

with Clayton after the merger had occurred. According

to [1095] Miles, he saw Clayton at the union hall and

Clayton told him that plaintiffs would receive a ‘paper’

from the Board of Trustees of the Teamsters Plan

indicating that they would be entitled to past service

credit as a new group. Tr.Tr., Vol. II, at 165-67. No

such paper was ever received by Miles or any of the

other plaintiffs. Miles further testified that, in several

telephone conversations, Clayton told him that plaintiffs’

pension benefits were “being taken care of.’’ Tr.Tr., Vol.

II, at 205. He also testified that, at the time of the

merger, he knew that the question whether plaintiffs

would receive past service credit had not been resolved.

Tr.Tr., Vol. II, at 202."

Moriarty and Zastrow also discussed their pension

inquired the status of his pension rights, and he, Clayton,

replied that there could be no resolution of the matter until

Continental applied to the Board of Trustees to have plaintiffs

38a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

taken care of.’ Tr.Tr., Vol. II, at 347. Moriarty testified

that Nieman had informed him that there was some

question whether Continental would be required to

contribute a certain amount of money to the Teamsters

Plan in order [1096] to have plaintiffs receive past service

credit. Tr.Tr., Vol. I, at 155-56. He also testified that

Nieman told him that an arrangement whereby plaintiffs

would receive past service credit would be made, but

that such an arrangement had not been finalized. Tr.Tr.,

Vol. i, at 178. Nieman apparently returned to his office

in New York shortly after the merger and no longer was

in Buffalo.

Sometime in September, discussions were held among

the plaintiffs concerning the possibility that they might

hire an attorney to clarify their pension rights.'* The idea

was initially proposed by Stuermer to Moriarty.

Apparently, both felt that an attorney might be helpful

in obtaining some firm indication that plaintiffs would

receive past service credit. However, Miles, Darlak and

Zastrow were satisfied that an arrangement would be

made [1097] so that they would not lose their past

39a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

service credit and that a lawyer was not necessary."

Thus, no action was taken by any of the plaintiffs to hire

a lawyer until the beginning of this lawsuit.

Continental sent a letter to the Teamsters Plan's

Board of Trustees September 9, 1969 requesting that

plaintiffs be accepted into the plan as a new group and

that they receive past service credit. Plaintiff's Exhibit

4.'* [1098] The letter stated that, if any of the plaintiffs

became eligible for and exercised retirement before five

years of service under the Teamsters Plan, Continental

would pay an amount of money sufficient to provide a

total of five years’ worth of contributions on behalf of

that particular employee. In this respect, the terms of

the letter were contrary to the Teamsters Plan's new

'* Darlak testified that he didn't ‘‘want no part of no lawyers because

I was..completely satisfied that it was all taken care of.’ Tr.Tr., Vol.

III, at 33. Zastrow testified that he was opposed to hiring a lawyer

because he believed that the union should have handled plaintiffs’

pension rights. Tr.Tr., Vol. Il, at 347. Miles testified that he trusted

Clayton and believed that Clayton would take care of the matter. /d..

at 168.

* Plaintiff's Exhibit 4 is an unsigned copy of the letter addressed to

the Board of Trustees and reads in pertinent part as follows:

“Please accept the following Teamster Employees of

Continental Can Company, Inc. Plant 490 into the Pension

Fund effective September 1, 1969.

“(Darlak, Miles, Moriarty, Stuermer, Zastrow * * *|

“It is agreed that should any of these men become eligible for

40a

Appendix—Findings of Fact, Conciusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

group rule, which requires the employee to be employed

under the Teamsters Plan for at least five years in order

to receive past service credit.

Sol Tabor, an actuarial consultant for the Board of

Trustees who also handled administrative matters,

presented the letter to the Board at its meeting held

from September 18 to September 20, 1969. The Board

rejected Continental’s application to treat plaintiffs as a

new group.’’ Tabor testified that the basis for [1099] this

rejection was that plaintiffs had been transferred from

one plant to another and that transferred employees were

not entitled to new group status.'* Clayton concurred in

‘'The minutes of the meeting held September 18, to September 20,

1969 read in pertinent part as follows:

“A letter dated September 9, 1969 from the Continental Can

Company, Inc., Buffalo Plant, was read. The Company had

transferred five employees from another Plant into the Buffalo

Plant. These employees had been covered by another Pension

Plan with another Union at this other Plant. The Buffalo Plant

is covered by the Teamsters Contract. The company is

requesting that these five persons be granted past service credit

for their employment in the other Plant not covered by the

Teamsters Contract, inasmuch as they would be considered as a

new group entering the Buffalo Plant. After discussion, on

motion made and seconded, the Trustees unanimously voted

that these five employees be treated as new employees, not as a

new group, and therefore not entitled to past service credit.”

Plaintiff's Exhibit 6.

“It is understood that these men will be treated as a new group

and their past service will be recognized by your Pension Fund

after five years of contributions on behalf of these men. * * *”’

“* Tabor testified that his understanding at the time of Continental's

application was that plaintiffs had been transferred to a new plant

rather than that a new division composed of three formerly separate

plants had been created. Tr.Tr., Vol. III, at 318-19.

4la

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

the Board’s conclusion that new group status could not

be granted on the basis of the September 9th letter

because the letter was contrary to the new group rule’s

requirement that an employee must continue to work for

the employer for five years following his entry into the

Teamsters Plan. Additionally, the letter did not offer to

make retroactive contributions on plaintiffs’ behalf as

Clayton had suggested and did not sufficiently describe

that there had been a [1100] merger rather than a mere

transfer of employees. Clayton believed, however, that

plaintiffs were entitled to be treated as a new group

because they had not merely been transferred to an

existing unit; rather, in Clayton's view, plaintiffs were

part of an entirely new division.’ [1101] Clayton stated

this belief to the Board and also told the Board that the

letter did not adequately describe the change that had

'* Clayton testified that:

“** * * while I could well realize that the [Teamsters Plan], under

no conditions, could accept what the company was proposing

insofar as the five year requirement was concerned, that, in my

opinion, did not alter the fact that this was a new group.* * *

“I tried to explain to the trustees again, the setup in the

Buffalo area, that the people in Shawnee Road had remained at

the Shawnee Road plant, the people at the 490 plant remained

at the 490 plant, that no merge—physical merge had taken

place outside of control. * * * I turned to Mr. Tabor, who had

read the communication, and I said, ‘* * * If these people were

still members of 375, it would be no problem here, and the mere

fact that 375 was obligated to transfer them to Local 449

should make no difference. It can make no difference. It’s still a

new group into the [Teamsters Plan]. We're not physically

involved with these people at the 490 plant. This is an entirely

new division.’ Tr.Tr., Vol. III, at 96-97.

It should be noted that Clayton's reference to the existing Clay

Street plant as ‘‘the 490 plant” is erroneous.

42a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

occurred. Clayton indicated to the Board that he would

contact Continental to have it provide further

information regarding the merger of its trucking

operations. However, before any further information was

obtained, a letter dated October 15, 1969 was sent to

Continental informing it that its application on behalf of

plaintiffs had been rejected. Plaintiffs were not formally

told, either by Continental, the Teamsters Plan or the

unions, that the Board had voted to reject Continental's

application to treat them as a new group.

In early September, 1969 Moriarty had been injured in

a boating accident which took place shortly after the

merger. As a result of the accident, Moriarty was

hospitalized and unable to work for several weeks.

Moriarty testified that he telephoned Clayton about a

month after the accident to inquire how he should go

about applying for disability benefits from the New York

State Teamsters Health and Hospital Fund (‘‘the Health

and Hospital Fund’’). Tabor also served as consultant

and in an administrative capacity for the Health and

Hospital Fund, which had the same address as the

Teamsters Plan. In response to Moriarty’s inquiry,

Clayton called Ann Stucko, who was manager of both

the Teamsters Plan and the Health and Hospital Fund.

According to Clayton, Stucko told him to have Moriarty

mail in the appropriate application [1102] forms and that

the Health and Hospital Fund would begin paying

disability benefits to Moriarty. Clayton also testified

that Stucko told him she could not pay Moriarty’s

hospital bills without Tabor’s approval. Stucko told

Clayton that T bor’s approval was necessary because

43a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

plaintiffs had been rejected as a new group by the Board

of Trustees of the pension plan. See, Tr.Tr., Vol. III, at

117-19. Moriarty subsequently obtained the proper forms

and mailed them to the Health and Hospital Fund, but

still did not receive benefits. He apparently telephoned

Clayton again, who in turn telephoned Don Wells, who

was President of Local 449 at the time. Moriarty

testified that he began receiving benefits (including

payment of his hospital bills) about a month or six weeks

after sending in the completed forms.

Moriarty testified that he had telephoned Clayton

three or four times in connection with his claim for

disability benefits. He also testified that he did not

discuss the status of plaintiffs’ pension rights with

Clayton during these conversations and that Clayton

never advised him that the Teamsters Plan’s Board of

Trustees had refused to accept plaintiffs as a new group.

Tr.Tr., Vol. I, at 158-59, 161. However Clayton testified

that, when Moriarty called to inquire about disability

benefits, he, Clayton, informed Moriarty that the Board

had in fact rejected the application which had been made

by Continental on plaintiffs’ behalf. Because [1103]

Clayton’s testimony was generally far more credible than

Moriarty’s, it seems likely that such a conversation did

take place. However, according to Clayton, he also told

Moriarty that the matter was still pending and that it

would be “clarified’’ and ‘‘takjen] care of.” Tr.Tr., Vol.

Ill, at 116-19, 248-49.

The October meeting of the Teamsters Plan’s Board of

Trustees was held after the 15th, the date of the letter to

Continental informing it that the Board had rejected its

44a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

application to treat plaintiffs as a new group. It is

unclear why the Board sent such a rejection letter to

Continental without first obtaining additional

information, as Clayton had indicated he would do. At

any rate, Clayton testified that he was unable to contact

Nieman before either the October or November meeting

of the Board. Finally, later in November, Nieman

returned Clayton’s telephone calls. Clayton testified that

he told Nieman that Continental’s application had been

rejected because its proposal concerning the five-year

provision was unacceptable and because the letter did

not make clear that plaintiffs had not been merely

transferred. Tr.Tr., Vol. III, at 110. According to

Clayton, he told Nieman to contact Tabor and clarify the

matter. Clayton further testified that in December, 1969

Nieman telephoned him a second time and informed him

that he, Nieman, had spoken with someone (not Tabor) at

the Teamsters Plan’s office and explained what had

[1104] occurred at the Shawnee Road and Clay Street

plants. Jd., at 210-11. Clayton presumed that Nieman had

spoken with Stucko. Of course, Clayton's testimony

concerning Nieman’s statement that he, Nieman, had

telephoned the Teamsters Plan is pure hearsay entitled

to little or no evidentiary weight. Tabor testified that he

had not received a phone call from anyone at Continental

nor had he received any message of such a phone call.

Id., at 287.

45a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

In November, 1969 Stuermer telephoned Clayton and

inquired about plaintiffs’ pension rights. Stuermer

testified that Clayton told him that the matter had been

resolved and that by Christmas he, Clayton, would send

Stuermer a letter to such effect. Tr.Tr., Vol. II, at 292-93.

Stuermer never received such a letter. Clayton’s account

of the November telephone conversation differs from

Stuermer’s. According to Clayton, he told Stuermer that

the application to treat plaintiffs as a new group had

been rejected and that he, Clayton, had been instructed

to contact Nieman to resolve the matter. Clayton also

testified that he told Stuermer that, if a new application

were submitted to the Board of Trustees by Continental,

he would have a copy sent to Stuermer. Tr.Tr., Vol. III,

at 126.

At the January, 1970 meeting of the Board of

Trustees,” Clayton again raised the question whether

plaintiffs would [1105] be entitled to receive past service

credits. The minutes of the meeting, held January 12th,

indicate that Clayton argued that plaintiffs should have

been treated as a new group and that they were entitled

to past service credit. Plaintiffs’ Exhibit 7. The minutes

also state that, “After discussion, at the request of the

Trustees, Mr. Clayton agreed to send in a letter

describing the actual condition and situation.” Ibid.

Clayton and Tabor also testified that Clayton was to

provide a letter setting forth the circumstances of

Continental’s merger of its trucking operations. Clayton

testified that he did send such a letter to the Board of

Trustees, but Tabor testified that such a letter was never

.* No meeting was held in December, 1969.

46a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

received by the Board. Because no copy of such a letter

was produced, it appears that Clayton failed to send it.

Clayton again raised the matter at the Board’s next

meeting, which was held from February 26 to March 2,

1970 in Miami Beach, Florida. Clayton testified that,

although he had written a letter to the Board explaining

why plaintiffs should be treated as a new group, the

Board did not have the letter before it at this meeting

because the letter had not been brought to Florida.

Tr.Tr., Vol. III, at 130. Clayton testified that, at this

meeting, several of the trustees began to understand his

argument that Continental had really only set up a

central dispatch system, that plaintiffs had not actually

been transferred to the Clay Street plant and that

plaintiffs were indeed [1106] a new group. Jd., at 138. He

further testified, however, that, at the suggestion of

William Mosley, an employer trustee, the Board

requested a letter from Local 449 confirming the facts

that had been outlined by Clayton. Jd., at 131-32. The

basis for Mosley’s suggestion was that plaintiffs were

then members of Local 449. According to Clayton, the

Teamsters Plan’s office was to contact Local 449 to

request Local 449 to submit such a letter. However, it

does not appear that any request for information

concerning plaintiffs’ status was ever made to Local 449,

nor was any such written information received by the

Teamsters Plan.

_ The minutes of the February-March meeting of the

Board of Trustees state that:

“The Trustees again discussed the inclusion in the

Pension Fund of a group of employees of

47a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Continental Can Company who had been transferred

from one plant to another. See Minutes of

September 18-20, 1969 and January 12, 1970. Since

these employees were formerly members of Local

449 and were now members of Local 375, the

Trustees tabled further review pending receipt of a

letter from Local 449 describing the circumstances

in this matter.” Plaintiffs’ Exhibit 8.”'

It appears that the Board’s meetings were run

informally, and that technically there was no pending

motion which [1107] was ‘‘tabled.’’ Tabor testified that

the Board was willing to receive and consider new

information concerning plaintiffs’ status, and that in

doing so it was acting out of ‘‘courtesy”’ to Clayton. He

further testified that the Board never formally altered its

position, taken at the September meeting, that plaintiffs

were not a new group. See, Tr.Tr., Vol. III, at 279-83.

In March, 1970 certain negotiations involving the

Teamsters were held in Washington, D.C. The

negotiations were attended by Clayton, Mosley and

Wells, among others. Clayton testified that, at the end of

a negotiating session, he was seated in a hotel lobby with

Mosley and Wells. According to Clayton, he suggested

that, inasmuch as the Board of Trustees had indicated a

desire to receive further information concerning plaintiffs

from Local 449, Wells could explain the matter to

Mosley. Clayton testified that Wells did in fact explain

that there had been no physical transfer of plaintiffs

from one plant to another, that upon such explanation

Mosley agreed with Clayton that plaintiffs were indeed a

new group, and that Mosley stated that he would take

care of the matter. Tr.Tr., Vol. III, at 134-35.

*' The minutes’ statement that plaintiffs ‘“‘were formerly members of

Local 449 and were now members of Local 375”’ is erroneous.

Ka “4 2

ye ne

48a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11. 1982.

Neither Mosley nor Clayton raised the matter at the

next meeting of the Board. However, Clayton testified

that he believed that Mosley could have arranged with

Tabor to have plaintiffs treated as a new group and that

no formal action by the Board was necessary. Tr.Tr.,

{1108] Vol. III, at 136, 255. Thus, Clayton thought that

the matter had been finally resolved. Tabor testified that

he did have authority to grant applications for treatment

of employees as a new group, if he felt the application

was routine. Jd, at 295, 308. However, Tabor also

testified that he did not discuss Continental’s application

to treat plaintiffs as a new group with Mosley at any

time after the Board’s February-March meeting. Jd., at

301. The Board took no further action on Continental’s

application, nor was any discussion held with respect

thereto, until Miles retired in 1976.

Clayton had no further conversations with any of the

plaintiffs concerning their pension rights until 1976.

However, Walker testified that in January, 1971 he and

Buckinroth attended a meeting concerning certain

operational problems at the Shawnee Road plant.

According to Walker, Moriarty asked Buckinroth about

plaintiffs’ pension rights. Walker testified that

Buckinroth replied that he didn’t know about the status

of plaintiffs’ pensions and that he would have to “check

it.” Tr.Tr., Vol. III, at 343; Vol. IV, at 29-30.

Miles retired from Continental January 9, 1976. He

had submitted an application for pension benefits to the

Teamsters Plan several months prior to his retirement.

Mosley, who by then had become Administrator of the

cae y >:

49a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Teamsters Plan, sent a letter to Miles dated January 14,

1976 indicating that Miles was not eligible to receive

[1109] a pension from the Teamsters Plan. Plaintiff's

Exhibit 9. Mosley’s letter states in part that “‘you [Miles]

only have credit for the years 1969 through 1975, giving

you a total of 6 years and 5 tenths. This is less than the

15 years required by the Plan.” Miles testified that he

thereupon telephoned Walker, who had just become

President of Local 449 in December, 1975, but Walker

told Miles that the pension arrangements had been ‘“‘Mr.

Clayton’s deal.” Tr.Tr., Vol. II, at 176.” Miles also

testified that he contacted Clayton in April, 1976.

Clayton was still a member of the Teamsters Plan’s

Board of Trustees at that time. Apparently, he had

already learned from Local 375 that Miles’s application

had been rejected,” and had sent a letter to Continental

requesting its assistance. Plaintiff's Exhibit 11.%* Miles

testified that Clayton [1110] told him that he, Clayton,

“would see what he could do.”’ Tr.Tr., Vol. II, at 250.

Clayton testified that he requested the Board of

Trustees to resolve Miles’s application at three separate

meetings in 1976. However, a number of trustees who

** Walker did not give any testimony concerning conversations with

Miles following Miles’s rejection.

* Clayton testified that he had learned that Miles’s application for a

pension had been rejected in March, 1976 while he was in Florida.

Tr.Tr., Vol. III, at 143.

* Plaintiffs’ Exhibit 11 is a letter dated March 5, 1976 addressed to

Continental and bears the signature “Stanley Clayton."’ Clayton

testified that the signature was not his and that he did not recall

writing this letter. However, it seems likely that the letter was

dictated by Clayton and signed in his name by his secretary. See,

Tr.Tr., Vol. III, at 144-146.

50a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

were members of the Board in 1969 and 1970 when the

matter had been handled initially were no longer on the

Board and had been replaced by new trustees. According

to Clayton, the Board merely referred back to the

minutes of its September, 1969 meeting and therefore

concluded that plaintiffs were not entitled to be treated

as a new group. Tr.Tr., Vol. III, at 152, 237-38. Although

Clayton testified that he could not remember whether

the Board also referred to the minutes of the meetings

held in January and February-March, 1970, he also

testified that in 1976 he explained to the Board that the

matter had been discussed in 1969 and 1970 for several

months. Jbid. Tabor was still an actuarial consultant for

the Board in 1976 and presumably would have been

present at the meetings in which Miles’s application was

discussed. However, Tabor did not testify concerning

events occurring after Miles had retired.

Clayton also discussed the matter with Mosley after

Miles’s application had been rejected. According to

Clayton, Mosley stated that he could not remember any

of the details concerning the arrangements that had been

made in 1969 and 1970. Tr.Tr., Vol. III, at 150. Clayton

[1111] further testified that Mosley subsequently

contacted him and said that he had only been able to

locate the minutes from the Board’s meetings in

September, 1969 and January and February-March, 1970

but that, if Clayton could obtain any other information,

he would handle the matter. Jbid. Clayton testified that

he replied to. Mosley that he could not provide any

further information. Jbid. Apparently, Clayton also sent

5la

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

a second letter dated May 7, 1976 to Continental

requesting that it contact Mosley. Plaintiff's Exhibit

2.

The Board took no further action with respect to

Miles’s pension application. Moreover, the Board did not

attempt to obtain any information (other than what was

reflected in its own minutes for the years 1969 and 1970)

relating to whether plaintiffs should be treated as a new

group at any time after Miles’s retirement. Miles was

eventually granted a pension by Continental but this

grant does not appear to affect his rights with respect to

the Teamsters Plan. See, Plaintiffs’ Exhibit 10. He

testified that he would have received a pension of

approximately $511 per month if his application for

benefits based on service credit had been granted by the

Teamsters Plan. Tr.Tr., Vol. II, at 181. The Teamsters

Plan has not disputed the amount of the pension [1112]

to which Miles would be entitled.

Subject Matter Jurisdiction

Section 502(a) of ERISA provides that ‘‘{a] civil action

may be brought— (1) by a participant or beneficiary—

* * * (B) to recover benefits due to him under the terms

of his plan, to enforce his rights under the terms of the

plan, or to clarify his rights to future benefits under the

terms of the plan ***.’’ 29 U.S.C. §1132(a). Federal

district courts are granted jurisdiction over actions

pursuant to section 502(a) by section 502(e) of ERISA.

29 U.S.C. §1132(e)1). The Teamsters Plan is a proper

defendant under section 502(d)(1) of ERISA. 29 U.S.C.

“This letter also appears to have been dictated by Clayton and

signed in his name by his secretary. See note 24, supra.

52a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

$1132(d)\(1). Defendants argue that I lack subject matter

jurisdiction over this action because plaintiffs’ claims

under section 1132(a) arose prior to January 1, 1975, the

effective date of said section.” Thus, defendants argue

that plaintiffs have failed to state any claim for [1113]

relief under section 1132 and that I may not exercise

pendent jurisdiction over plaintiffs’ fraud claims. Of

course, plaintiffs bear the burden of establishing that I

may exercise jurisdiction over this action.”

It is generally held that a cause of action under

ERISA accrues at the time the trustees of a pension plan

deny an application for benefits and that ERISA is

applicable to a cause of action based on a denial of

benefits which occurs after ERISA'’s effective date. Paris

v. Profit Sharing Plan, Etc., 637 F.2d 357, 361 (5th Cir.)

cert. denied, US. , 102 S.Ct. 140 (1981); Reiherzer

v. Shannon, 581 F.2d 1266, 1272 (7th Cir. 1978); Oates v.

** As noted in my Memorandum and Order entered June 14, 1979, at

2, n.2, there is a split of authority whether section 1132(a) is effective

as of the date of ERISA's enactment (September 2, 1974) or as of the

date provided by section 514 of ERISA, 29 U.S.C. §1144 (January 1,

1975). In the present case, the parties have agreed that the effective

date of section 1132 is January 1, 1975. Moreover, as | also noted in

my June 14, 1979 Memorandum and Order, plaintiffs’ claims either

the effective date of section 1132 is January 1, 1975 or September 2,

1974.

*" In my Memorandum and Order filed February 25, 1980, I concluded

that plaintiffs had at least made a sufficient showing of jurisdiction

to withstand defendants’ motion for summary judgment. However

53a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Teamsters Affiliates Pension, 482 F.Supp. 481, 484, n.7

(D.D.C. 1979); Morgan v. Laborers Pension Trust Fund

for N.Cal., 433 F.Supp. 518, 522-23 (N.D. Cal. 1977). This

holding is premised on the notion that a claim against a

trustee based on a denial of benefits does not accrue

until there has been ‘‘a clear and continuing repudiation

of the right to trust benefits."’ Kostv v. [1114] Lewis, 319

F.2d 744, 750 (D.C.Cir. 1963), cert. denied, 375 U.S. 964

(1964). See, Morgan v. Laborers Pension Trust Fund for

N.Cal., supra, at 523. In the present case, Miles’s

application was denied by the Teamsters Plan’s trustees

in January, 1976—a full year after the effective date of

ERISA. Nevertheless, defendants agrue that the denial

of Miles’s application was based on events occurring in

1969 and 1970. However, I find that there was no ‘‘clear

and continuing repudiation” of plaintiffs’ rights to

receive pension benefits based on past service credit until

Miles's application for benefits was rejected.

The only formal action taken by the Board with regard

to plaintiffs’ pension rights in 1969 and 1970 was, of

course, its rejection of Continental's application to treat

them as a new group at its September, 1969 meeting.

However, because the Board’s meetings were run in an

informal manner, I do not place significant weight on the

fact that the Board voted to reject the application.

Rather, the Board's entire course of conduct in 1969 and

1970 is far more probative on the question whether

plaintiffs’ entitlement to receive past service credit was

clearly repudiated.

54a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

At the September, 1969 meeting of the Board, Clayton

indicated his view that plaintiffs were in fact a new

group and offered to obtain additional information for

the Board. At the Board’s meeting in January, 1970,

Clayton again argued that plaintiffs should be treated

[1115] as a new group. Clayton agreed, at the Board's

request, to send a letter describing the situation in

greater detail. Finally, at the February-March meeting,

Clayton persuaded a number of trustees that plaintiffs

were in fact a new group. In order to confirm the

information which had been orally provided by Clayton,

the Board requested that Local 449 send it a letter.

Thus, the Board demonstrated repeated willingness to

receive and consider additional information concerning

plaintiffs’ status. Moreover, the Board’s own minutes for

the February-March meeting state that ‘“‘the Trustees

tabled further review pending receipt of a letter from

Local 449***.’’ The minutes clearly indicate that

plaintiffs’ status was still under consideration and that

further consideration of the matter was contemplated by

the Board. Tabor testified that the Board would not have

actually re-opened its decision not to grant plaintiffs new

group status unless a letter had been received. See,

Tr.Tr., Vol. III, at 316-18. This testimony suggests that

there was no formal reconsideration or re-opening of the

Board’s decision in the absence of a letter. However,

Tabor’s testimony does not imply or suggest that the

Board’s decision was final in the sense that it could not

be reversed or that the Board was not actually

considering plaintiffs’ status in light of Clayton’s

arguments. Regardless of any formal and technical re-

55a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

opening of the decision to deny new group status to

plaintiffs, the Board was in actuality still [1116]

considering plaintiffs’ status even after it had voted in

September, 1969 not to treat them as a new group.

Viewed in its entirety, the Board’s conduct demonstrates

that it had not clearly repudiated plaintiffs’ entitlement

to be treated as a new group under the Teamsters Plan.

It is also significant that in 1969 and 1970 plaintiffs

were never told in unambiguous terms that they would

not be treated as a new group. Clayton testified that he

informed both Moriarty and Stuermer that in its

September, 1969 meeting the Board of Trustees had

rejected Continental’s application to accord new group

status. Moriarty denied that such a conversation with

Clayton had occurred, but his testimony was not

credible. Stuermer also denied that Clayton told him that

Continental’s application had been rejected, but it seems

probable that he merely misunderstood Clayton.”

However, according to Clayton’s own testimony, Clayton

assured both Moriarty and Stuermer that the matter was

56a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvir, U.S.D.J.,

Dated March 11, 1982.

so notify plaintiffs. Because plaintiffs were not told

plainly and unambiguously that they would not be

treated as a new group and/or that they would not

receive past service credit, there was no clear and

continuing repudiation of plaintiffs’ rights to receive past

service credit until Miles’s application for pension benefits

was denied in 1976.”

Application of ERISA to the claims set forth by

plaintiffs in this action is not inconsistent with section

514(b\1) of ERISA, which states that ‘“‘[tJhis section

shall not apply with respect to any cause of action which

arose, or any act or omission which occurred, before

January 1, 1975.’’ 29 U.S.C. $1144(b)(1). Plaintiffs’ first

six causes of action are all based on or arise out of the

repudiation of their right to receive past service credits

but such repudiation was not clearly accomplished until

1976. A claim based on a denial of [1118] pension

benefits after January 1, 1975 states a cause of action

under ERISA, even though the claim may also involve or

stem from conduct or action which occurred prior to said

date. Woodfork v. Marine Cooks & Stewards Union, 642

service credit. For-purposes of determining the applicability of ERISA,

the pertinent issue is whether plaintiffs’ rights to receive benefits

were clearly and continuously repudiated prior to ERISA's effective

date. No such repudiation occurred until 1976. Moreover, plaintiffs’

reliance on information received from Clayton was entirely

reasonable, inasmuch as Clayton was the President of their former

local union as well as a member of the Board of Trustees.

57a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

over plaintiffs’ common law fraud claim. Mine Workers

v. Gibbs, 383 U.S. 715 (1966).

Statute of Limitations

The Teamsters Plan has also raised a defense that

plaintiffs’ claims under ERISA are barred by the

appropriate statute of limitations. Because ERISA does

not evpressly prescribe a limitations period for actions

under section 1132,% I must look to the most clearly

*The Teamsters Plan has suggested that plaintiffs’ claims are

untimely under section 413 of ERISA, which provides:

“No action may be commenced under this subchapter [29

U.S.C. §§1001-1144] with respect to a fiduciary's breach of any

responsibility, or obligation under this part [29 U.S.C. §§1101-

1114], or with repect to a violation of this part after the earlier

of—

(1) six years after (A) the date of the last action which

constituted a part of the breach or violation, or (B) in the

case of an omission, the latest date on which the fiduciary

could have cured the breach or violation, or

(2) three years after the earliest date (A) on which the

plaintiff had actual knowledge of the breach or violation, or

(B) on which a report from which he could reasonably be

expected to have obtained knowledge of such breach or

violation was filed with the Secretary under this subchapter

***." 29 U.S.C. §1113.

This is an action ‘‘to recover benefits due to [plaintiffs}'' under the

Teamsters Plan pursuant to 29 U.S.C. §§1132(a)1)B) rather then an

action ‘‘with respect to a fiduciary’s breach of any responsibility,

duty or obligation” under 29 U.S.C. §§1101-1114. Thus, by its own

terms, section 413 is inapplicable in the current action.

Moreover, even if section 413 is applicable herein, both the six-year

period set out in section 413(1) and the three-year period set out in

section 413(2) must be measured from the denial of Miles’s

application in 1976. Under either subsection, plaintiffs’ claims are

58a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

analogous [1119] state statute of limitations. Board of

Regents v. Tomanio, 446 U.S. 478, 483-84 (1980);

Johnson v. Railway Express Agency, 421 U.S. 454, 462

(1975).

Section 213 of New York's Civil Practice Law and

Rules (“‘CPLR’’) provides that:

“The following actions must be commenced within

six years:

1. an action for which no limitation is specifically

prescribed by law;

2. an action upon a contractural obligation or

liability express or implied * * *.”’

The Teamsters Plan concedes that section 213 provides

the state statute of limitations most analogous to an

action [1120] under ERISA but points out that the

limitations period must be measured from the time the

cause of action accrued. CPLR §$203(a). As previously

discussed, plaintiffs’ claims under ERISA did not accrue

until Miles’s application was denied in 1976. Because the

initial Complaint in this action was filed in 1977,

plaintiffs’ claims under ERISA are timely.

Plaintiffs’ Second and Fifth Causes of Action

The captioned causes of action allege that the

Teamsters Plan’s refusal to grant them credit for service

in the employ of Continental prior to 1969 is arbitrary

and capricious. It is clear that, if plaintiffs are deemed to

be a new group as that term is applied under the

Teamster’s Plan, they are entitled to past service

59a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

credit."' Thus, the only question presented with regard to

these causes of action is whether plaintiffs were a new

group at the time they began participating in the

Teamsters Plan. The same basic question can be framed

as whether the “Applicable Effective Date’’ is the time

at which the consolidated trucking division was created,

as plaintiffs contend, or some other date prior thereto.

The Board's decision that plaintiffs are not entitled to

be treated as a new group must be accorded substantial

[1121] deference; plaintiffs may succeed on causes of

"The Teamsters Plan does not dispute that plaintiffs have continued

in the employ of Continental for at least five years following their

participation in the plan, as required by the new group rule.

™* Defendants’ Exhibits 1 and 2, which were received at trial, are the

Teamsters Plan's Trust Indenture as adopted January 1, 1954 and as

amended through January 1, 1976. Counsel were instructed to retain

exhibits during the course of the trial and to submit their exhibits to

the court along with their proposed findings of fact and conclusions

of law. In a letter to me deted July 15, 1981, Peter P. Paravati,

counsel for the Teamsters Plan, has indicated that he does not have

the original copies of the Trust Indenture that were received in

evidence. He has therefore provided “replacement” copies of the

exhibits ‘‘in the event that [the originals] are not found.'’ However,

Paravati has not obtained the other parties’ consent by stipulation to

my receipt of these documents in place of the original exhibits.

Moreover, his letter does not indicate (by means of the notation ‘‘cc”’)

that counsel for the other parties were sent copies of the letter or

that he has notified counsel in some other fashion that he has

submitted documents that were not received in evidence.

It appears, however, that Paravati's failure to submit the original

exhibits and/or to obtain the other parties’ consent to my receipt of

“replacements” is insignificant from an evidentiary point of view. The

Teamsters Plan apparently relies on exhibits 1 and 2 only t» show

that the Board of Trustees has discretion to interpret the terms of

the plan. Plaintiffs do not deny that the Board has such discretion,

but allege that the Board has exercised its discretion in an arbitrary

and capricious fashion.

Bike

60a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

action two and five only upon a showing that the

Board's decision is arbitrary and capricious. Peckham v.

Board of Trustees, Etc., 653 F.2d 424, 426 (10th Cir.

1981); Paris v. Profit Sharing Plan, Etc., supra, at 362;

Riley v. MEBA Pension Trust, 570 F.2d 406, 410 (2d Cir.

1977); Morgan v. Laborers Pension Trust Fund for

N.Cal, supra, at 524. An act is said to be arbitrary and

capricious if it is done ‘without [1122] adequate

determining principle or * * * reason or judgment."’ First

National Bank of Fayetteville v. Smith, 365 F.Supp. 898,

903 (W.D.Ark. 1973), rev'd on other grounds, 508 F.2d

1371 (8th Cir. 1974), cert. denied 421 U.S. 930 (1975). See

also, Danti v. Lewis, 312 F.2d 345, 348 (D.C.Cir. 1962).

Viewed in its entirety, the evidence in the case clearly

demonstrates that plaintiffs comprised a new group as

that term is applied with respect to the Teamsters Plan.

Indeed, the evidence that plaintiffs were such within the

meaning of the plan is almost overwhelming. Both

Clayton and Walker testified that, in their respective

opinions, plaintiffs were entitled to be treated as a new

group. See, e.g., Tr.Tr., Vol. III, at 187-90 (Clayton); Vol.

IV, at 35 (Walker). Clayton's testimony in this regard

was particularly emphatic. Moreover, his opinion is

entitled to considerable weight because of his position as

a member of the Teamsters Plan’s Board of Trustees for

some ten years.

Clayton's and Walker's opinions are supported a

substantial amount of circumstantial evidence. In

January, 1970, Local 449 and Continental executed a

new participation agreement requiring Continental to

make contributions to the Teamsters Plan on behalf of

‘=

6la

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

employees of “Continental Can Co., Inc. #490, Clay St.,

Tonawanda, N.Y.” (Plaintiffs’ Exhibit 19.) The new

agreement was signed by Buckinroth on behalf of Local

449 and the Teamsters [1123] Plan and by Continental.

According to Walker's testimony, the only reason that

such a participation agreement would have been

executed was that a new group of employees had been

taken into the plan. Tr.Tr., Vol. IV, at 27-28.

As noted supra, Moriarty received benefits from the

Teamsters Health and Hospital Fund in connection with

the injuries he sustained in September, 1969. Under the

Teamsters’ health plan, a new employee coming into the

plan is not eligible to receive health benefits in a particular

calendar quarter unless he has had contributions made

on his behalf to the Health and Hospital Fund for 36

days in the previous quarter. See, Tr.Tr., Vol III, at 217-

18, 333. On the other hand, an employee coming into the

Teamsters’ Health and Hospital Fund as a member of a

new group receives immediate coverage as long as he has

been employed by the company for a particular amount

of time. Jbid. According to Clayton, if Moriarty had been

a new employee rather than a member of a new group

under the Health and Hospital Fund, he would not have

been eligible to receive hospitalization benefits in

September, 1969. Tr.Tr., Vol. III, at 228. Thus, the fact

that Moriarty did receive benefits demonstrates that he

was treated as a member of a new group under the

Health and Hospital Fund.” Such treatment by the

“Tabor also testified that one “might assume” that plaintiffs had

been treated as a new group by the Health and Hospita! Fund. Tr.Tr.,

Vol. ILI, at 333-34.

mS

of

62a

Appendix — Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Health and [1124] Hospital Fund implies that plaintiffs

were also a new group for purpose of the Teamsters

Plan. While such an inference is by no means compelled,

it is reasonable based on the close identity between the

two plans. Both were administered at the same office in

Utica by Tabor and Stucko. Certainly, there is no

indication that the new group rule was or is to be applied

differently under the two.

It is also significant that, although plaintiffs were

required to join Local 449 after the merger, Local 449

was not required to bring plaintiffs into the Teamsters

Plan. For example, Clayton testified that Local 449 could

have negotiated a separate pension agreement with

Continental on behalf of plaintiffs. Tr.Tr., Vol. III, at

168, 187, 197-98. The fact that plaintiffs were not

strictly required to join the Teamsters Plan but that

some other pension agreement could have been reached

on their behalf strongly suggests that plaintiffs were a

new group under the Teamsters Plan. Moreover, the

intent of the new group rule is to encourage additional

bargaining units to join the Teamsters Plan; this aim

was clearly furthered by plaintiffs’ entry into the

Teamsters Plan.

Tabor's testimony provides the only significant

evidence that plaintiffs were not entitled to new group

status. See, e.g., Tr.Tr., Vol. III, at 292-93. According to

him, the crucial factor for determining plaintiffs’

entitlement to such status was whether the Continental

[1125] unit by which they were employed first became a

“participating employer” in the Teamsters Plan at the

63a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

time plaintiffs joined the Teamsters Plan.” Jd. at 300.

According to Tabor, one Continental plant might be a

“participating employer’’ whereas another Continental

plant might not. Jbid. Tabor’s testimony suggests that

the Clay Street plant was a “participating employer’

within the meaning of Section 1 of the Teamsters Plan

prior to the merger and that, because plaintiffs were

transferred into the Clay Street plant, they were not

entitled to be treated as a new group.

However, Tabor’s testimony is clearly based on the

erroneous assumption that plaintiffs were merely

transferred to the Clay Street plant. For example, he

testified that at the time of the merger, he had believed

that plaintiffs had been transferred from one plant to

another, not that a merger of several plants had

occurred. Tr.Tr., Vol. III, at 318-19. The consolidation of

Continental's trucking operations did not, however,

entail the transfer of plaintiffs to the Clay Street plant.

The evidence conclusively demonstrates that Continental

in fact created an altogether new division denominated

plant number 490 and [1126] composed of drivers from

64a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfuin, U.S.D.J.,

Dated March 11, 1982.

employed by a totally new Participating Employer—i.e.,

plant number 490. Because plaintiffs were employed in

plant number 490 at the time it first became obligated to

make contributions to the Teamsters Plan (upon the

execution of Plaintiff's Exhibit 19 in January, 1970),

they are entitled to be treated as a new group. Tabor

himself conceded that, if Continental had in fact merged

two formerly separate divisions and if the new division

had entered into a collective bargaining agreement

requiring it to make contributions to the Teamsters Plan

on behalf of its employees, the employees would be

entitled to receive credit for past service. Tr.Tr., Vol. III,

at 334-35.

Plaintiffs have also demonstrated that the Board’s

decision not to treat them as a new group was arbitrary

and capricious. Clearly, the Board’s decision was based

on an erroneous belief that plaintiffs had been transferred

to the Clay Street plant. This mistaken belief is

demonstrated by Tabor’s testimony as well as the

Board’s own minutes. See, Plaintiffs’ Exhibit 6 (‘The

Company [Continental] [1127] had transferred five

employees from another plant into the Buffalo plant.”’)

Continental’s letter dated September 9, 1969 to the

Board (Plaintiffs’ Exhibit 4) does not adequately describe

the merger that had occurred. However, neither does the

letter indicate that plaintiffs were simply transferred

from one plant to another; indeed, the word “transfer”

appears nowhere in the text of the letter. More

importantly, Clayton testified that he explained to the

Board that there had actually been a merger of several

plants. Clayton’s testimony concerning his efforts at

65a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

three separate meetings of the Board to persuade it that

plaintiffs were indeed a new group is essentially un-

challenged and is bolstered by the minutes of the

Board's meetings.

Thus it is clear that, even at the Board’s September,

1969 meeting when plaintiffs’ pension rights were first

discussed, the Board was aware that there was some

factual dispute concerning plaintiffs’ eligibility to be

treated as a new group. The Board nevertheless sent a

letter to Continental October 15, 1969 denying

Continental's request to have plaintiffs treated as a new

group without even waiting for Clayton to provide

additional information to it, as he had promised to do.

When Clayton again raised the question whether

plaintiffs should be treated as a new group at its

meetings in January and February-March, 1970, the

Board indicated that it required some further written

description of the circumstances surrounding the merger.

Yet the Board totally failed to take any affirmative

action, [1128] such as contacting Local 449, to obtain the

required information. The Board also failed to notify any

of the plaintiffs or their collective bargaining

representative, Local 449, that Continental's application

had been rejected or that the Board required further

information.

Moreover, when Miles applied for a pension in 1976,

the Board took virtually no action to determine whether

plaintiffs should be treated as a new group. There is no

apparent reason why the Board could not have made

such a determination in 1976. Rather than doing so, the

66a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S_D.J.,

Dated March 11, 1982.

Board simply relied on the vote taken at its meeting in

September, 1969 despite the fact that, as shown by the

Board’s own minutes for the February-March, 1970

meeting, the matter was still under consideration after

1969. Furthermore, Clayton attempted to have the Board

resolve Miles’s application at three meetings in 1976 and

informed the Board that the matter had been considered

at several meetings in 1969. In view of the Board’s own

minutes and Clayton’s continued efforts to have

plaintiffs treated as a new group, it was incumbent upon

the Board to do more than simply refer to its earlier

vote. The Board could and should have initiated an

inquiry into the circumstances surrounding Continental’s

consolidation of its trucking operations in 1969.

The Board’s entire course of conduct with regard to

plaintiffs’ entry into the Teamsters Plan indicates an

extremely cavalier attitude on its part. There is no

substantial question that under the actual circumstances

[1129] of the merger as proven at trial plaintiffs were

indeed a new group under the Teamsters Plan. In

denying plaintiffs credit for past service, the Board was

not acting in its discretion to interpret and apply the

rules of the Teamsters Plan in a rational manner. Rather,

the Board based its decision on an _ erroneous

understanding of facts after having been repeatedly told

by Clayton that its understanding was erroneous and

without taking any affirmative steps to determine the

true facts. It exhibited such conduct not only in 1969

and 1970 when plaintiffs first joined the Teamsters Plan

but also in 1976 when Miles applied to receive pension

benefits. In such circumstances, the Board’s decision to

Boar

67a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

deny plaintiffs past service credit cannot be said to have

an adequate basis in principle or reason. I therefore

conclude that the Board's decision was arbitrary and

capricious and that plaintiffs are entitled to judgment on

their second and fifth causes of action.

Plaintiffs’ Third and Sixth Causes of Action

These claims for relief allege that the Teamsters Plan’s

Board of Trustees agreed to allow them credit for past

service. This allegation is apparently based on Clayton's

testimony that at the February-March, 1970 meeting of

the Board he persuaded a number of trustees that

plaintiffs were in fact a new group.

According to Clayton's testimony, a majority of

trustees (i.e., Dixon, Ryann, Durkin and Clayton himself)

[1130] at the February-March meeting of the Board

expressed an opinion that plaintiffs were a new group.

However, no formal action was taken by the Board to

accept plaintiffs as a new group at this or any

subsequent meeting. Instead, the Board, at Mosley's

suggestion, indicated a desire to receive further

information from Local 449. The Board’s actions at the

February-March meeting are simply too tentative to

support a finding that it agreed to allow plaintiffs credit

for past service. If such a commitment had been made,

the Board would not have required any further

information. Moreover, as Tabor testified, the Board

never formally reconsidered its September, 1969 vote

that plaintiffs would not be treated as a new group.

Thus, the Board's actions at the February-March

68a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

meeting cannot be said to constitute an agreement to

grant plaintiffs past service credits. Plaintiffs’ third and

sixth causes of action must therefore be dismissed.*

Plaintiffs’ First and Fourth Causes of Action

In their first and fourth claims for relief, plaintiffs

allege that they are entitled to receive past service [1131]

credits based on an agreement among the plaintiffs,

Local 375, Local 449 and Continental prior to the merger

that plaintiffs would be accepted into the Teamsters

Plan as a new group and would receive past service

credit upon fulfilling the five-year requirement. See,

Second Amended Complaint, paragraphs 21, 23 and 43.

Such claims have been asserted only against the

Teamsters Plan.

These causes of action provide no basis for relief. There

is no significant evidence that the Teamsters Plan itself

ever agreed to treat plaintiffs as a new group or to award

69a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

group. See, discussion with respect to the third and sixth

causes of action, supra. Nor is there any indication that

an agreement by or between the other parties would be

binding upon the Teamsters Plan. Therefore, plaintiffs’

first and fourth claims for relief must be dismissed.

Plaintiffs’ Seventh Cause of Action

This cause of action alleges that Clayton and

Buckinroth fraudulently represented to plaintiffs that

[1132] they would receive past service credit under the

Teamsters Plan.* The essential elements of a cause of

action for actual fraud are: misrepresentation of a

material fact; falsity of such representation; scienter;

reliance; and damages. Mallis v. Bankers Trust Co., 615

F.2d 68, 80 (2d Cir. 1980), cert. denied, 449 U.S. 1123

(1981); Camelot Group, Ltd. v. W.A. Krueger Co., 486

F.Supp. 1221, 1228, n.21 (S.D.N.Y. 1980); Jo Ann Homes

at Bellmore, Inc. v. Dworetz, 25 N.Y. 2d 112, 119, 302

N.Y.S.2d 799, 803 (1969); Meese v. Miller, 436 N.Y.S.2d

496, 499 (4th Dept. 1981); Brown v. Lockwood, 432

N.Y.S.2d 186, 193 (2d Dept. 1980). A false promise

concerning employment benefits may provide the basis

for a claim for fraud. See, e.g., Aspesi v. Shahinian

Acoustics, Ltd., 443 N.Y.S.2d 242 (2d Dept. 1981).

70a

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Plaintiffs bear the burden of establishing each element

of their claim by ‘‘clear and convincing”’ evidence. [1133]

Ajax Hardware Mfg. v. Industrial Plants Corp., 569 F.2d

181, 186 (2d Cir. 1977); Simcuski v. Saeli, 44 N.Y.2d 442,

452, 406 N.Y.S.2d 259, 265 (1978); Stephenson v. Lord,

421 N.Y.S.2d 730, 731 (3d Dept. 1979). “Clear and

convincing”’ evidence is generally taken to mean a clear

preponderance of proof. The burden of proof in fraud

cases is ‘far more demanding’’ than that imposed in

ordinary civil actions. JoAnn Homes at Bellmore, Inc. v.

Dworetz, supra, 25 N.Y.2d at 121, 302 N.Y.S.2d at 805.

See also, Ajax Hardware Mfg. v. Industrial Plants Corp.,

supra, at 186. Plaintiffs have failed to sustain their

burden with respect to the seventh cause of action.”

Prior to the occurrence of the merger, plaintiffs were

apparently told that some arrangement would be made

whereby they would not lose pension credit for time spent

under the Continental plan. Such assurances were given

by Buckinroth at the meeting held immediately prior to

the merger and by Clayton during conversations with

Moriarty. Buckinroth and Clayton did not expressly

state that plaintiffs would definitely receive past service

credit, but only that some arrangement would be made in

the future. [1134] Moreover, plaintiffs knew that no

definite conclusion concerning their pension rights had

been reached prior to the merger. There is no significant

evidence tending to show that Buckinroth’s and

Clayton’s assurances prior to the merger were

fraudulent. Rather, Buckinroth’s and Clayton's

” Defendants have suggested that the seventh cause of action is

time-barred. However, I prefer to dispose of such claim on its merits.

Tla

Appendix—Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

statements were made in the genuine belief that the

Teamsters Plan would in fact grant past service credit to

plaintiffs. Certainly, their assurances had a substantial

basis in that Continental was establishing a new division

and plaintiffs would therefore be entitled to be treated as

a new group. In short, Buckinroth and Clayton had no

reason to believe prior to the merger that the Teamsters

Plan would not grant past service credits to plaintiffs

and their assurances to plaintiffs were made in the good

faith belief that the Teamsters Plan would grant such.

Any statement made by or on behalf of Clayton, Local

375 or Local 449 following the merger cannot realistically

form the basis for plaintiffs’ fraud claim. With respect to

such statements, the element of reliance is wholly

lacking. Even if such statement could provide a basis for

a cause of action based on fraud, there is no evidence

that any representative or agent of Local 449 ever

represented to plaintiffs after the merger that they

would be granted past service credit. While there is

evidence that Clayton did make such assurances after

the merger had taken place, such evidence is insufficient

to [1135] sustain a cause of action for fraud. For

example, Miles’s testimony that Clayton told him in

several telephone conversations after the merger that

plaintiffs’ pension rights were “being taken care of'’ does

not indicate that false representations had been made by

Clayton. Rather, such a statement reflects the fact that

and the Board were still attempting to resolve

* pension rights, an effort which continued until

’s meeting in February-March, 1970. Stuermer

that Clayton told him that he would be sent

i

t

F

72a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

“a paper” resolving the pension matter. According to

Clayton, however, Stuermer simply misunderstood

Clayton's statements. In most respects, Clayton's

testimony was highly credible, and Clayton’s account of

his telephone conversation with Stuermer is entirely

plausible. Moriarty provided testimony concerning

statements made by Clayton, but his testimony was so

vague and contradictory in this regard as to be of little

weight. Moriarty also denied having discussed plaintiffs’

pension rights with Clayton in connection with his claim

for benefits arising out of the 1969 accident.

Furthermore, it appears that even after the Board of

Trustees voted to reject Continental's application to

treat plaintiffs as a new group, Clayton believed in good

faith that the matter could be straightened out and that

plaintiffs would ultimately be given past service credit.

Thus, plaintiffs have failed to demonstrate that actual

fraud was committed by Local 375, Local 449 or [1136]

Clayton in connection with the merger. Their seventh

cause of action may also be interpreted as stating a

claim for constructive fraud, however. Constructive fraud

involves breach of a fiduciary duty which is deemed

fraudulent due to the violation of some confidence or

injury to some public or private interest worthy of

special protection under the law. Brown v. Lockwood,

supra, at 13. Sze also, Gordon v. Bialystoker Ctr. g Bikor

Cholim, Inc., 45 N.Y.2d 692, 698-99, 412 N.Y.S.2d 593,

596-97 (1978); Roman v. City of New York, 442 N.Y.S.2d

945, 947 (S.Ct., Queens Co. 1981). In order to support a

claim for constructive fraud, a plaintiff need not prove

scienter on the part of defendant but must demonstrate

73a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

that the defendant breached some fiduciary or

confidential relationship. Brown v. Lockwood, supra, at

193-94.

I assume arguendo that the doctrine of constructive

fraud applies to the relationship between a labor union

and its members. Nevertheless, I cannot conclude that

either Local 375, Local 449 or Clayton breached any

fiduciary duty to plaintiffs. Prior to the merger, said

defendants quite reasonably believed that plaintiffs

would be treated as a new group. Local 449 apparently

did not even learn that plaintiffs had not been granted

such status until March, 1970 when Mosley, Clayton and

Wells discussed the matter in Washington. At that time,

Wells provided certain information to Mosley. Local 449

was not asked to take any further action, nor would it

have had reason [1137] to believe that any further steps

by it were required. Clayton appears to have been remiss

in certain aspects (eg., his own testimony

notwithstanding, he failed to provide a letter to the

Board as requested at its January, 1970 meeting) but he

conducted his relations with respect to plaintiffs in an

honest and diligent manner. His belief after his

conversation with Mosley and Wells in March, 1970 that

plaintiffs’ pension rights would be properly resolved

appears to have been entirely reasonable.

Therefore, plaintiffs have failed to prove either actual

or constructive fraud on the part of defendants Local

449, Local 375, or Clayton.

74a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J.,

Dated March 11, 1982.

Relief

Miles is entitled to judgment based on the second

cause of action set forth in the Second Amended

Complaint. Therefore, it is hereby ORDERED that the

Teamster Plan shall award Miles a pension based on

service commencing March 19, 1953 through the date of

his retirement, January 9, 1976. It is further ORDERED

that Miles shall be entitled to judgment in the amount of

$37,814, plus benefits of $511 per month which may

accrue between the time of entry of my Findings of Fact,

Conclusions of Law, and Order and entry of final

judgment pursuant hereto, together with interest.”

[1138] Moriarty, Darlick, Stuermer and Zastrow are

entitled to judgment based on the fifth cause of action

set forth in the Second Amended Complaint. Therefore,

is is hereby ORDERED that the Teamsters Plan shall

award said plaintiffs credit for service in the employ of

Continental as members of Local 375 prior to July 1,

1969, to wit: Moriarty shall be entitled to credit for

“Said amount represents the amount of Miles'’s monthly pension

75a

Appendix— Findings of Fact, Conclusions of Law

and Order of Elfvin, U.S.D.J..

Dated March 11, 1982.

service beginning February, 1953 until July 1, 1969, as

well as for the length of service ultimately rendered

thereafter; Darlak shall be entitled to credit for service

beginning September, 1960 until July 1, 1969 as well as

for the length of service ultimately rendered thereafter;

Stuermer shall be entitled to credit for service beginning

November, 1961 until July 1, 1969 [1139] as well as for

the length of service ultimately rendered thereafter;

Zastrow shall be entitled to credit for service beginning

May, 1956 until July 1, 1969 as well as for the length of

service ultimately rendered thereafter.

Plaintiffs may also be entitled to an award of

attorney's fees under 29 U.S.C. $1132 (g). However, their

claim for such an award shall be dismissed unless an

appropriate motion, together with supporting affidavits,

is filed within thirty days after entry of these Findings

of Fact, Conclusions of Law, and Order.

It is further ORDERED that defendants shall be

entitled to judgment dismissing plaintiffs’ first, third,

fourth, sixth and seventh causes of action.”

Dated: Buffalo, N. Y.

March 11, 1982

JOHN T. ELFVIN

U.S.D.J.

76a

Order of the United States Court of Appeals

for the Second Circuit Denying Petition

for Rehearing Filed March 29, 1983

UNITED STATES COURT OF APPEALS

Second Circuit

(United States Court of Appeals)

(Filed Mar 29 1983)

(Illegible)

At a stated term of the United States Court of

Appeals, in and for the Second Circuit, held at the

United States Courthouse, in the City of New York, on

the twenty-ninth day of March, one thousand nine

hundred and eighty-three.

HAROLD MILES, et al,

Plaintiffs-Appellees,

Vv.

THE NEW YORK STATE TEAMSTERS CONFERENCE

PENSION AND RETIREMENT FUND EMPLOYEE

PENSION BENEFIT PLAN,

Defendant-Appellant,

ERVIN WALKER, etc., .

Defendants.

No. 82-7274.

A petition. for rehearing containing a suggestion that

the action be reheard in banc having been filed herein by

counsel for the plaintiffs-appellees, Harold Miles, et ai.,

77a

Appendix—Order of the United States Court of Appeals

for the Second Circuit Denying Petition

for Rehearing Filed March 29, 1983.

Upon consideration by the panel that heard the appeal,

it is

Ordered that said petition for rehearing is DENIED.

It is further noted that the suggestion for rehearing in

banc has been transmitted to the judges of the court in

regular active service and to any other judge on the

panel that heard the appeal and that no such judge has

requested that a vote be taken thereon.

A. DANIEL FUSARO, Clerk

by Francis X. GINDHART,

Chief Deputy Clerk

78a

[1047] Plaintiffs’ Exhibit 19—Reason and

Retirement Fund Stipulation

PENSION AND RETIREMENT FUND STIPULATION

NEW YORK STATE TEAMSTERS CONFFERENCE

PENSION & RETIREMENT FUND

DATE June 26 1970

EFFECTIVE 7-1 1969

1. The employer agrees to contribute the sum of $.25

per hour paid to any and all of his employees covered by

the Union Agreement not to exceed $10.00 per week to

the N.Y.S.Teamsters Conference Pension & Retirement

Fund on or before the 10th day of the month following

that month in which said monies accrued.

EFFECTIVE 19

2. The above rates shall be $ —— per hour and $ ——

per week.

3. Any and all increases negotiated between the

employer and the N.Y.S.Teamsters Conference Pension

and Retirement Fund and or the Local Union hereafter

over and above the rates specified herein shall

automatically supercede the rates specified herein.

4. Failure on the part of the employer regularly to

contribute as specified hereinabove shall make him liable

for all claims, damages, attorney fees, court costs, etc., plus

all arrears in payments, plus 10% penalty and the Union

shall not be bound by any arbitration on no strike provisions

in the Labor Agreement. In the event an employer is in

reimburse all employees for all time lost during stoppage.

The late payment of arrears by any employer shall not

release or exculpate him from his liability to pay all

79a

Appendix— Plaintiffs’ Exhibit 19—Pension and

Retirement Fund Stipulation.

claims arising during the period when he was in arrears as

determined solely by the Trustees.

5. The N.Y.S.T.Conference Pension & Retirement

Fund may at any time check the payroll records of any

and all employees of the employer covered by this

agreement at a time mutually agreed upon at no charge

to the employer, but in the event it is found that the

employer had not been complying with the Pension &

Retirement Fund provisions of the Agreement, the

Employer shall pay the full cost of all checking of its

books that may be necessary by the Fund Officials and

in addition shall be responsible for any and all claims

that were not covered and must pay whatever

discrepancies may exist to the Fund plus 10% penalties.

The employer shall pay reasonable attorney fees for

collecting any payments in arrears. During the life of

this Agreement it is agreed that upon becoming a

member of the N.Y.S.Teamsters Conference Pension &

Retirement Fund and making the payments to said Fund

as provided for herein, the Employer shall be relieved of

any and all responsibility of providing Pension benefits

other than those provided by the Fund.

[1048] 6. The employer agrees to furnish such

information as may be necessary from time to time

concerning its employees as will enable the Pension fund

to carry out its duties to furnish adequate coverage for

such employees.

7. Should any of the provisions of the Collective

Bargaining Agreements be dec'ared to be in violation of

the Labor-Management Relations Act of 1947, as

amended or any other State or Federal Statute or

80a

Appendix—Plaintiffs' Exhibit 19—Pension and

Retirement Fund Stipulation.

regulation, such declaration shall in no way impair the

effectiveness or continuity of the provisions of this

contract which establish Pension & Retirement benefits

and provide for the payment of contributions by the

employer to such fund, and such provisions are hereby

expressly declared to be saved from such illegality.

8. There shall be no deductions from equipment rental

on owner-operators by virtue of contributions made to

the Pension & Retirement Fund, regardless of whether

the equipment rental is at the minimum rate or more.

9. Ifa regular employee is absent because of illness or

off-the-job injury and notifies the employer of such

absence, the Employer shall continue to make the

required contributions for a period of four (4) weeks. If

regular employee is injured on the job, the employer

shall continue to pay the required contributions until

such employee returns to work; however, such

contributions shall not be paid for a period of more than

twelve (12) months.

10. If an employee is granted a leave of absence, the

employer shall collect from said employee, prior to the

leave of absence being effective, sufficient monies to pay

the required contributions into the Pension Fund during

the period of absence.

11. Payments to the Fund must be paid by the

employer during employee's vacation periods.

12. The employer may contribute to the

N.Y.S.Teamsters Conference Pension & Retirement Fund

for employees working outside the jurisdiction of the

Collective Bargaining Agreement in the amounts

8la

Appendix — Plaintiffs’ Exhibit 19—Pension and

Retirement Fund Stipulation.

indicated above. However, if these employees are

included, the employer agrees to make contributions on

all employees in this category subject to the same

conditions and on the same basis as is provided in this

Stipulation, and the employer also agrees to continue to

make contributions on all of these employees for as long

as there shall be a Collective Bargaining Agreement or

Agreements between the employer and the Union subject

to any and all rules and regulations or decisions covering

this group that are issued by the Board of Trustees.

13. The employer agrees that should he not make

contributions on 100% of all his non-union employees as

required herein, the N.Y.S.Teamsters Conference Pension

and Retirement Fund will not pay nor be liable or

obligated to pay any pension or retirement or other

benefits to all his non-union employees whatsoever,

whether or not contributions were made on such

individuals, in which event the employer shall pay to any

or all such non-union employees any and all pension and

retirement or other benefits that such employee or

employees may have been entitled to or are later entitled

to until such time that the Pension Board of ]1049]

Trustees once again extends coverage to this group and

only under terms decided solely by the Board of Trustees

of the N.Y.S.Teamsters Conference Pension &

Retirement Fund.

14. This memorandum shall become effective as of the

date of execution thereof and the payments above

provided shall be payable from on or after 7-1-69. This

Agreement shall continue in full force and effect for the

82a

Appendix—Plaintiffs' Exhibit 19—Pension and

Retirement Fund Stipulation.

same term as the Labor Agreement and shall continue in

force and effect for the life of all future Agreements

replacing the present Labor Agreement with the

exception that any and all conditions for contributions

over and above those specified herein shall be applicable.

N.Y.S.T.CONFERENCE PENSION

& RETIREMENT FUND &

TEAMSTERS LOCAL #449

City Buffalo, N.Y.

By W.D. BUCKINROTH

Title B.A.

CONTINENTAL CAN CO., INC. #490

NAME OF COMPANY

Address Clay St., Tonawanda, N.Y.

By C. MICHAEL MURPHY

Title Asst. Mgr.