BEAM v. INTERNATIONAL ORGANIZATION OF MASTERS, M., & P.

MOORE, Circuit Judge:

This is an appeal from a grant of summary judgment based on a finding below that the Trustees of the Masters, Mates, and Pilots Welfare Plan, a jointly-administered labor-management trust, had not acted in an arbitrary or capricious manner in denying accidental death benefits to the widow of Russell Beam where the facts as to the circumstances surrounding his death are not in issue. Plaintiff-appellant is the widow and beneficiary of Mr. Beam. Defendants-appellees include the union, the International Organization of Masters, Mates and Pilots (IOMMP), and Trustees and Officers of the plan.

On February 12, 1971, Mr. Beam was severely burned in a fire in his motel room. He was admitted to a hospital where he died 18 days later. The death certificate listed the cause of death as "acute pancreatitis" due to "acute and chronic alcoholism" and indicated that the third degree burns which covered 25% of Mr. Beam's body were "a contributing factor."

When the death certificate, appended to Mrs. Beam's application for death benefits, was received by the trust fund on March 11, 1971, the claims officer requested the attending physician to elaborate on the role of the burns in the demise of Mr. Beam. The physician, writing on April 15, 1971, explained that Mr. Beam had suffered from chronic pancreatitis for at least 10 years, that the burns caused Mr. Beam's alcoholic intake to terminate and also produced massive body stress, and that the simultaneous occurrence of these two circumstances brought on a massive attack of acute pancreatitis. In the doctor's words:

With the death certificate and this explanation, the Trustees consulted a physician-consultant who advised that death was caused by "acute exacerbation of chronic pancreatitis". The Trustees subsequently denied Mrs. Beam's accidental death benefit claim. After the motion for summary judgment was filed, Mrs. Beam, through counsel, requested the physician who had attended her husband to write to the Trustees once more. This communication described the same circumstances mentioned above with the additional statement:

The accidental death benefit was provided for in a section of the Rules and Regulations of the Masters, Mates and Pilots Welfare Plan:

Jurisdiction was asserted in the district court by plaintiff on two grounds: (1) plaintiff claims that federal jurisdiction exists pursuant to Section 301 of the Labor Management Relations Act of 1947, 29 U.S.C. Section 185;1 and (2) plaintiff also asserts jurisdiction based on diversity since plaintiff is an Oregon resident and the situs of the trust is New York.

The district court expressed some doubts as to the jurisdictional claim based on Federal labor law but found that it was unnecessary to determine this issue since diversity jurisdiction pursuant to 28 U.S.C. Section 1332 was beyond question. The lower court was of the opinion that if a federal standard by which to test the Trustees' action existed it was substantively the same as that of the State of New York. Appellant brings the jurisdictional issue before this court in this appeal arguing that she has a claim pursuant to Section 301 or alternatively pursuant to Section 3022 and 28 U.S.C. Section 13373 and, therefore, federal substantive law controls.

We agree with the district court that federal jurisdiction is to be exercised in this case on the basis of diversity. Appellant has failed to indicate how review would be changed if jurisdiction were to be based on federal labor laws, and we have found no case describing a federal substantive standard for review of fiduciaries' determination of an individual claim brought pursuant to a jointly-administered welfare trust fund created pursuant to Section 302(c)(5) of the Labor Management Relations Act.

Appellant argues that Section 301 confers jurisdiction on the federal courts whenever a claim involving a labor management trust is involved. Smith v. Evening News Association, 371 U.S. 195, 83 S.Ct. 267, 9 L.Ed.2d 246 (1962) and subsequent lower court cases4 where jurisdiction was based on Section 301 all involve directly the collective bargaining agreement or machinery, and we must be hesitant about reading Smith as supportive of the proposition that Section 301 creates federal court jurisdiction each time a decision of Trustees involving the application of rules of a jointly-administered trust to an individual claim is challenged.

While appellant did not offer Section 302 as a jurisdictional basis below,5 on appeal she seeks support in Moglia v. Geoghegan, 403 F.2d 110 (2d Cir., 1968) where jurisdiction was predicated on the existence of a question arising under a statute of the United States, namely, Section 302 of the Labor Management Relations Act, 29 U.S.C. Section 186, making the action one of which the district court had original jurisdiction pursuant to 28 U.S.C. Section 1337. Moglia, unlike the case at bar, dealt with the failure of the employer and union to comply with the specific requirements of 29 U.S.C. § 186(c)(5) in creating the jointly-administered trust.6 The court there properly asserted federal jurisdiction to determine a question unique in the realm of national labor policy. The court in Moglia in obiter dictum suggested that the plaintiff there could bring a subsequent action in state court based on state law claims regarding fiduciary duties.7

Appellant contends that federal courts have no mandate to apply traditional trust law to Section 302 jointly administered trusts and brings up a variety of abuses argued to be unique and endemic in this labor relations field. Section 302 was originally passed as part of the Taft-Hartley Act of 1947 to curb abuses revealed during extensive Congressional investigation. See S.Rep.No.105, 80th Cong., 1st Sess. 52 (1947). Congress sought to remedy the situation where employers contributed to funds which were administered by union officials who were unaccountable either to the contributors or the union membership by amendment in 1959. 1959 U.S.Code Cong. & Admin.News, pp. 2326-2330.

The statute provides for the use of trust funds managed jointly by an equal number of union representatives and employer representatives. The legislation also provided for means of breaking deadlocks and required specific written agreements. Perhaps Congress should have gone further setting special standards of review for these trustees but this is not a determination to be made by this court today. Absent a legislative mandate to apply a special law on review of trustee actions in jointly administered trusts, we must apply what appellant has called the traditional trust law.

Whatever the jurisdictional route leading to review of the Trustees' action, the issues presented are: (1) did the actions of the Trustees violate Section 302(c)(5) of the Labor Management Relations Act; (2) did the actions of the Trustees exceed their authority; and (3) were the actions of the Trustees arbitrary and capricious, motivated by bad faith, or unsupported by the evidence before them when they made the decision.

The Masters, Mates and Pilots Welfare Plan consists of two documents: (1) an "Agreement and Declaration of Trust" and (2) "Rules and Regulations" which were adopted by the Trustees.8 Thus the plan meets the requirement of 28 U.S.C. § 186(c)(5) that there be a written agreement detailing the basis for payments. The documents referred to above give the Trustees broad discretion in determining both the structure of the eligibility requirements for beneficiaries of the trust as well as the application and interpretation of the requirements in a given instance.

In reviewing the action of the Trustees using the fiduciary standard articulated in Lowenstern v. International Association of Machinists and Aerospace Workers, 156 U.S.App.D.C. 228, 479 F.2d 1211, 1213 (1973), Danti v. Lewis, 114 U.S.App.D.C. 105, 312 F.2d 345, 348 (1962) and Kosty v. Lewis, 115 U.S.App. D.C. 343, 319 F.2d 744, 746 (1963), or Gitelson v. DuPont, 17 N.Y.2d 46, 268 N.Y.S.2d 11, 215 N.E.2d 336 (1966), we only determine whether the Trustees' decision was arbitrary or capricious, the product of bad faith, and whether or not such decision was based on substantial evidence. Mrs. Beam submitted the death certificate. The claims officer then requested additional information from the attending physician and subsequently obtained the opinion of a medical consultant who examined the death certificate and the supplementary statement of the attending physician. While another statement of the attending physician, submitted after the motion for summary judgment was made, places more emphasis on the role of the burns in the Beam death, we agree with the court below that the Trustees' action was not arbitrary, capricious, or motivated by bad faith and that a determination that the death was not caused solely by accident was supported by the evidence before the Trustees.

Appellant argues that the court should review this decision in a manner similar to review of a denial of the claim of an insurance beneficiary by an insurance policy where the contract provides coverage for bodily injuries "caused directly and independently of all other causes by accidental means" excepting "accident, injury, disability, death or other loss caused wholly or partly by disease or bodily or mental infirmity or medical or surgical treatment therefor." Silverstein v. Metropolitan Life Insurance Co., 254 N.Y. 81, 171 N.E. 914 (1930). The governing principle in cases determining insurance company liability is clear:

But review in this case is not the examination of a dispute between an insurance company with a boilerplate contract on one hand and a consumer on the other. Nor are we seeking the "proximate cause" of death. Review is limited in scope here to the review traditionally accorded fiduciaries. This has been the standard used consistently in the field of the labor-management trust funds. Accordingly where no factual dispute as to the circumstances of death existed and where the applicable law of review was clear, the district court did not err in granting summary judgment in favor of the International Organization of Masters, Mates, and Pilots.

Judgment affirmed.