GOMEZ v. LEWIS

OPINION OF THE COURT

STALEY, Circuit Judge.

This is an appeal from the grant of summary judgment to appellees by the District Court for the Western District of Pennsylvania. Appellant, Floyd Gomez, had instituted this action to review a decision by appellees, John L. Lewis, Josephine Roche and Henry Schmidt,1 Trustees of the United Mine Workers of America Welfare and Retirement Fund, that he was ineligible for the pension benefits for which he had applied.

The facts were stipulated by the parties in the district court and cannot be disputed here. Appellant is now 71 years of age, having been born in Puerto Rico on March 14, 1898. He came to the United States as a young man and in 1934 began to work in the bituminous coal industry as a miner and loader in the Western Pennsylvania area. He worked in various mines until 1944 when he acquired a partnership interest in a mining company.2 This company employed from 8 to 22 men between 1944 and 1957. And even though he was one of three partners in the mining operation, appellant worked at the mine as a miner, loader, or tippleman and was a dues-paying member of the United Mine Workers of America. In 1957 appellant sold his interest in the mining company but continued to work at the mine until 1962 when he retired from the coal industry. On April 25, 1963, appellant applied to the United Mine Workers of America Welfare and Retirement Fund (hereinafter "Fund") for pension benefits. His application was denied for failure to meet the requirement of 20 years service as an employee in the coal industry within the 30 years immediately preceding the application for pension It was not until 1966 that the instant action was brought to compel the trustees of the Fund to award appellant a pension with benefits retroactive to 1963.

The Fund involved in this case was created by the terms of the Trust Indenture contained in the National Bituminous Coal Wage Agreement of 1950, executed by and between the United Mine Workers of America, a labor union, and operators of bituminous coal mines throughout the United States. The trust indenture was drawn to conform with § 302(c) (5) of the Taft-Hartley Act,3 which required such funds to be in the form of trusts and be "for the sole and exclusive benefit of the employees of such employer, and their families and dependents." The Fund is financed from payments by signatory bituminous coal operators of a royalty on each ton of coal produced for use or for sale. Accordingly, the group of potential trust fund beneficiaries can only be drawn from the ranks of employees of signatory operators to the Coal Wage Agreement of 1950.

Responsibility for administration of the Fund was placed in a board of trustees consisting of one representative of the United Mine Workers of America, one representative of the coal operators, and one neutral selected by the other two. By the terms of the agreement, full authority was given to the trustees "with respect to questions of coverage and eligibility." It is stipulated that this authority gives broad discretionary powers to the trustees with regard to the administration of the Fund, including the power to change those regulations from time to time, and the power to interpret the regulations so adopted to determine who meets them and who does not. Given such broad authority, it is well settled that the trustees' decisions are subject to judicial correction only in cases where it can be shown that they have acted arbitrarily and capriciously towards those to whom their trust obligations run. Kosty v. Lewis, 115 U.S. App.D.C. 343, 319 F.2d 744, 747 (1963); Danti v. Lewis, 114 U.S.App.D.C. 105, 312 F.2d 345, 348 (1962); Pavlovscak v. Lewis, 190 F.Supp. 205, 209 (W.D.Pa., 1960), aff'd per curiam, 295 F.2d 39 (C.A.3, 1961). And since we are of the view that appellant was clearly ineligible for pension benefits under the regulations in existence when he applied for a pension in 1963,4 the only contention of any substance here is that the trustees acted arbitrarily and capriciously in 1960 by not giving appellant sufficient notice of a forthcoming change in the regulations so that he could have had an opportunity to elect to retire before the new regulation took effect.

It appears that prior to 1960, the trustees, in computing the required 20 years of employee service in the coal industry, gave credit for periods of self-employment to coal miners who operated small coal mines. But it seems that in 1960 the trustees began to doubt the propriety of equating the status of an entrepreneur with that of an employee, see Kennet v. United Mine Workers of America. 183 F.Supp. 315, 318 (D.C.D.C., 1960), since the Taft-Hartley Act requires that funds paid into the Trust be used "for the sole and exclusive benefit of the employees of such employer, and their families and dependents." (Emphasis added.) It is stipulated that in order to comply with the terms of the Taft-Hartley Act, the trustees adopted a resolution on April 11, 1960, providing that no credit for coal industry service would be granted for periods that an individual was connected with the ownership, operation or management of a mine.5 This change of policy in the administration of the Fund was publicized in a letter to the members of the United Mine Workers of America dated June 28, 1960, and it became effective two days later on July 1, 1960.

Conceding that the two-day interval between receipt of notice and the taking effect of the regulation was an insufficient period for appellant to have applied for a pension, the question is whether the trustees acted arbitrarily and capriciously by not allowing a longer period of time before the regulation became effective. In arguing that they did, appellant relies heavily upon the authority of Kosty v. Lewis, 115 U.S. App.D.C. 343, 319 F.2d 744 (1963). There, the regulations in effect prior to January 29, 1953, stated that the minimum 20 years of employee coal industry service could have accrued during any period prior to the application for benefits. On January 29 the trustees changed the regulations to require that the 20 years' minimum service must have accrued within the 30 years immediately preceding the filing of an application. No notice of any kind was given to industry employees prior to the change. If Kosty had retired before the change, he would have been eligible for pension benefits. When he retired after the change, his application for benefits was denied. The court held that the manner in which the trustees altered the regulations was arbitrary in that no grace period was afforded employees like Kosty to elect to retire and qualify for a pension before they became ineligible.

Aside from the factual differences between this case and Kosty,6 we are not persuaded that the finding of arbitrary and capricious conduct reached there is called for here. In the first place, although the amendment to the regulations became effective on July 1, 1960, appellant did not retire until about two years later, on June 9, 1962, and he did not apply for a pension until almost three years later, on April 25, 1963. In the second place, appellant has stipulated that the trustees amended the pension requirements in order to comply with provisions of the Taft-Hartley Act. And although we need not pass on the legality of the pre-1960 requirements, we think it was at least reasonable for the trustees to conclude in 1960 that they were violating the Act by accrediting miners with employee service when they were, in fact, entrepreneurs. This decision having been made, did the trustees then have an obligation to commit what to them would have been further violations of the Act by affording all who might qualify under the pre-1960 requirements a sufficient period to come forward? We think not. In our view the trustees' fiduciary duty to the nation's miners does not require them to do that which they reasonably believe to be unlawful. Furthermore, it cannot be overemphasized that due to the nature of this Fund, dependent as it is on the fluctuations of the coal industry for income, great flexibility is needed for its management. Pursuant to their full authority to make and interpret regulations, the trustees amended the pension eligibility requirements in 1960, and provided that the change would be effective two days after notice thereof. The district court granted summary judgment for the trustees because it found that they were neither arbitrary nor capricious in acting as they did. We are in agreement that the district court did not err.

Accordingly, the judgment of the district court will be affirmed.