630 F.

2d 218
105 L.R.R.M. (BNA) 2613, 89 Lab.Cas. P 12,275,
2 Employee Benefits Ca 2347

SEAFARERS PENSION PLAN, Appellant,

v.
Claude M. STURGIS, Appellee.
No. 79-1841.

United States Court of Appeals,

Fourth Circuit.
Argued June 6, 1980.
Decided Sept. 8, 1980.

C. Arthur Rutter, Jr., Norfolk, Va. (John H. Klein, Breit, Rutter &
Montagna, Norfolk, Va., on brief), for appellant.
R. Arthur Jett, Norfolk, Va. (Jett, Agelasto, Berkley, Furr and Price,
Norfolk, Va., on brief), for appellee.
Before BUTZNER, Circuit Judge, HARRY PHILLIPS, Senior United
States Circuit Judge, Sixth Circuit, sitting by designation and SPROUSE,
Circuit Judge.
HARRY PHILLIPS, Senior Circuit Judge.

The defendant-appellant Seafarers Pension Plan, through its Trustees,

challenges the order of the district court awarding disability pension benefits to
plaintiff-appellee Claude M. Sturgis. The district court based its order on the
verdict of the jury that the Trustees' denial of benefits was arbitrary and
capricious. The Trustees argue they were entitled to summary judgment or a
directed verdict. We affirm.

* Appellee Sturgis worked from March 1947 to August 1972 as a dues paying
member of the Seafarers International Union (the Union). During those years,
he served as a cook, seaman or wiper on ocean going ships and various types of
tugs. On August 10, 1972, while working on a barge tug for Columbia Marine

in Cincinnati, Ohio, Sturgis suffered a leg injury that ended his seafaring career.
3

Following his injury, Sturgis underwent numerous examinations, corrective

surgery and physical therapy, all without success. In December 1972, Dr.
Gerald Brock examined Sturgis, attempted corrective surgery on the injured
leg, and concluded Sturgis would not be able to return to sea duty. In February
1973, Sturgis applied for Social Security disability benefits, which were
granted in August of that year. In December 1973, following a second
unsuccessful operation in the Marine Hospital at Staten Island, New York, the
United States Public Health Service declared Sturgis permanently unfit for
duty.

Nevertheless, Sturgis continued to believe he would be able to return to duty.1

He testified some of the physicians who examined him held out the hope that
he might eventually recover. Sturgis continued his therapeutic exercises and
ultimately showed some marginal improvement. This apparently prompted him
to take a job with Allied Towing in August 1974. Within a week, however,
Sturgis found he was unable to perform shipboard duties. At that point, he
returned to the Marine Hospital at Staten Island. There doctors told him
extensive and irreparable neurological damage was responsible for his leg's
paralysis and would prevent him from ever going back to sea.

Finally conceding the futility of his efforts, Sturgis applied to the Seafarers
Pension Plan on September 17, 1976, for a disability pension. His application
was rejected on the grounds he had had a four year break in service following
his injury and had not worked at least 90 days in 1975, the calendar year
preceding his application date.

Sturgis then filed this action in the United States District Court for the Eastern
District of Virginia. His amended complaint alleged the denial of benefits
violated 302(c)(5) of the Labor Management Relations Act (LMRA), 29
U.S.C. 186(c)(5), and other statutes. The defendant moved for summary
judgment on the ground the Trustees had been required by the terms of the Plan
itself to deny Sturgis' claim. District Judge John A. MacKenzie denied the
motion, as well as the motions for a directed verdict and for judgment
notwithstanding the verdict. He submitted the case to the jury which found for
Sturgis on the question whether the Trustees' denial of benefits was arbitrary
and capricious. Accordingly, Judge MacKenzie entered judgment awarding
Sturgis disability benefits of $250 per month.

The Trustees have appealed to this court on the ground their actions were not

arbitrary and capricious and, therefore, they were entitled to judgment as a

matter of law.
II
8

The Seafarers Pension Plan (the Plan) was created in 1961 pursuant to 302(c)
(5) of the LMRA, 29 U.S.C. 186(c)(5).2 A trust fund was established as an
entity independent of the Union to receive contributions from employers with
whom the Union had collective bargaining agreements. A Board of Trustees
composed of equal numbers of employer and union representatives administers
the fund pursuant to the provisions of the trust agreement, or Plan. The Trustees
have the power to supplement or alter the Plan's administrative regulations by
simple majority vote without consulting the Plan's beneficiaries, the members
of the Union. Additional or altered regulations are noted in the Union's
newsletter and become binding on the Trustees, who have the fiduciary duty to
administer the Plan "for the sole and exclusive benefit" of the beneficiaries. 29
U.S.C. 186(c)(5).

Under the terms of the Plan, an employee may become entitled to pension
benefits in either of at least two ways: by working until he reaches retirement
age or by becoming permanently disabled before reaching retirement age.
Sturgis' claim is for a disability pension.

10

According to regulations adopted by the Trustees:

11

An employee shall be entitled to retire on a Disability Pension if he becomes

totally and permanently disabled provided he has pension credits for at least
4,380 days of covered employment (12 years) and, provided further, he has
accumulated at least 90 days of covered employment during the calendar year
preceding his date of application and at least one (1) day of employment during
the six months period immediately preceding such application.

12

There is no dispute that Sturgis is permanently and totally disabled nor that he
worked at least 4,380 days in covered employment.3 The question is whether
the Trustees reasonably could require more in this case.

13

Trustee Carmine J. Bracco testified there were two reasons Sturgis' pension
claim was denied. First, since he was injured in 1972 and did not apply for a
pension until 1976, he had not "accumulated at least 90 days of covered
employment during the calendar year preceding his date of application and at
least one (1) day of employment during the six months period immediately

preceding such application." We shall refer to this as the ninety-and-one

requirement. Second, Sturgis had run afoul of the Plan's break in service rule
whereby an employee who works less than 90 days in covered employment for
three calendar years in a row loses all his accumulated pension credits. Thus,
although Sturgis previously had accumulated more than the requisite 4,380
days, his failure to work in covered employment during the years 1971-76 left
him without any pension credits at the time he applied.
14

Sturgis argues these two requirements, at least as applied to him, are

unreasonable. Pointing out he has been totally and permanently disabled since
1972, he argues he could not possibly have satisfied either requirement.
Requiring the impossible, even by regulations applicable to all, is inherently
unreasonable, Sturgis contends. Judge MacKenzie apparently agreed the
regulations as applied to Sturgis were sufficiently questionable to present a jury
issue.

15

The Trustees argue they acted pursuant to valid regulations that were adopted
for a legitimate purpose. Specifically, Trustee Bracco testified the ninety-andone requirement is designed to force a potential claimant to file his application
within six months from the onset of his disability. The purpose of the break in
service rule is to eliminate the so-called "intermittent seaman", the person who
works a few years and leaves the industry. Both rules allow the Trustees to
write off some potential claims, thereby increasing the accuracy with which the
actuarial advisers can estimate the Plan's liabilities.4 Accurate projections allow
the Trustees to devote more of the Plan's assets to long term investments
yielding a higher return, and the resultant increased income inures to the benefit
of the Plan's members. Thus, the Trustees argue, the two rules serve legitimate
goals. Moreover, Sturgis' case is by no means unique; both rules have been
applied in the past to deny pension benefits. All of this being so, the Trustees
conclude their actions were reasonable as a matter of law and there was nothing
for the jury to decide.

III
16

We must decide whether a reasonable jury could have found the Trustees acted
arbitrarily and capriciously in denying Sturgis' pension claim. See Riley v.
MEBA Pension Trust, 570 F.2d 406, 412-13 (2d Cir. 1977); Rehmar v. Smith,
555 F.2d 1362, 1371-72 (9th Cir. 1977); Johnson v. Botica, 537 F.2d 930, 935
(7th Cir. 1976); Gomez v. Lewis, 414 F.2d 1312 (3d Cir. 1976). If we find both
the rules themselves and their application to this case are reasonable, our
inquiry is ended. We may not second guess the Trustees' discretionary
judgments. See Roark v. Boyle, 439 F.2d 497, 499 (D.C. Cir. 1970) (Roark II ).

Applying this standard to the present case, we affirm the judgment awarding
benefits.
17

* The break in service rule itself is a reasonable, although sometimes harsh,

means of separating career seamen, for whose benefit the Plan was created,
from intermittent seamen, who spend a few years in the industry and then go on
to pursue other occupations. A seaman need work only twelve years in covered
employment before the onset of his disability in order to be eligible for a
disability pension. It is not inconceivable that some individuals might work a
few years, leave the industry for thirty, and still return to covered employment
for a sufficient number of years to become eligible for pension benefits. But for
the break in service rule, the initial few years of service would represent a
contingent liability for which the Trustees would have to account throughout
the ensuing thirty years. By following the three year cut off rule, the Trustees
are able to devote the Plan's limited funds to more beneficial purposes.

18

The problem with applying the break in service rule to the facts of this case is
that it distinguishes indirectly between individuals with identical service
records and disabilities on the basis of whether, at the time they were injured,
they happened to be working for an employer who was a signatory of the
Union's collective bargaining agreement. The Regulations provide that where
an individual is injured while working for a signatory employer, "periods of
receipt of (temporary disability benefits) . . . will continue to accrue and be
credited towards pensions." See Rueda v. Seafarers International Union, 576
F.2d 939 (1st Cir. 1978). Furthermore, such periods count as "covered
employment", of which an individual must have at least 90 days in any year of
each three year period to avoid a break in service that would cost him all his
accumulated pension credits.

19

'Covered Employment' means employment for which the Employer is obligated

to contribute to the Seafarers Welfare Plan, and for the purpose of eligibility
shall include periods of time preceding the date when the Employer became so
obligated, periods of disability to the extent specified in the Regulations, and
periods during which employees participate in the Upgrading and Certifications
Programs of the Maritime Advancement Programs, and/or the Harry Lundeberg
School of Seamanship and its successor, . . . (emphasis added).

20

By contrast, an individual who happens to be working for a non-signatory

employer at the time he is injured accumulates neither pension credits nor days
of covered employment for purposes of the break in service rule.

21

As applied to Sturgis, this distinction was critical. From 1947 to 1970, a period

21

As applied to Sturgis, this distinction was critical. From 1947 to 1970, a period
of some 23 years, Sturgis worked almost exclusively for signatory employers.
Had he been working for such an employer in 1972 at the time of his injury, he
would have continued to accrue pension credits and days of covered
employment until the U.S. Public Health Service declared him permanently
unfit for duty in December 1973. Since he applied for a disability pension in
September 1976, Sturgis would have had only a two calendar year lapse in his
employment and the break in service rule would not have barred his claim. As
it happened Sturgis was working for Columbia Marine, a non-signatory
employer at the time of his accident.5 Under the terms of the Plan, he received
no credit toward his pension nor toward the break in service rule's covered
employment requirement. His disability pension claim was barred by the break
in service rule as early as 1974.6

22

The present situation is analogous to that presented by the signatory last

employer requirement formerly imposed by the Trustees of the United Mine
Workers of America Welfare and Retirement Fund of 1950. Beginning with
Roark v. Lewis, 401 F.2d 425 (D.C. Cir. 1968) (Roark I ), the District of
Columbia Circuit heard a series of cases challenging the rule of the UMW
Trustees that a miner was not entitled to a retirement pension, regardless of how
many years he had worked for UMW signatory employers, unless he also
worked his last year in the industry for a signatory employer. As the court
pointed out in Roark I :

23

If the Fund's purpose is to pay benefits to contributing employers' employees

(whose work generated the contributions), it is difficult to see how such a
requirement promotes that purpose. It makes employees like these appellants
sacrifice an otherwise valid pension claim because they worked a relatively
short time for non-contributing operators. The contributions which signatory
operators made on their behalf did not evaporate as a result of their later
employment with non-signatories. 401 F.2d at 428.

24

Ultimately, the court held the signatory last employer requirement arbitrary and
capricious as applied to miners with substantial periods of signatory
employment. See Pete v. United Mine Workers of America Welfare &
Retirement Fund, 517 F.2d 1275 (D.C. Cir. 1975) (en banc); Teston v. Carey,
464 F.2d 765 (D.C. Cir. 1972); DePaoli v. Boyle, 447 F.2d 334 (D.C. Cir.
1971); Roark II, supra; Collins v. United Mine Workers of America Welfare &
Retirement Fund, 439 F.2d 494 (D.C. Cir. 1970).

25

We hold the jury could have concluded it was arbitrary and capricious for the
Trustees to apply the break in service rule to exclude Sturgis, an employee with

23 years of service with Union employers, solely because his last employer was
not a Union signatory. As in the cases of the miners, the contributions Sturgis'
former signatory employers had made on his behalf "did not evaporate as a
result of (his) later employment with non-signatories." Roark I, supra, 401 F.2d
at 428. Furthermore, that a potential claimant's last employer happened to have
a contractual relationship with the Union at the time of the injury indicates
nothing about whether he is an "intermittent seaman" or can be expected to
assert a claim. The jury clearly was justified in finding such an unreasoning
application of the break in service rule invalid.7
B
26

Much of what we have said about the break in service rule applies to the ninetyand-one rule as well. Doubtless the rule has a legitimate purpose, to require
potential claimants to file their applications within six months after they
become disabled. However, the jury reasonably could have concluded from the
record evidence that the Trustees applied the ninety-and-one rule arbitrarily and
capriciously to exclude Sturgis' claim solely because his last employer was not
a Union signatory.

27

The Plan's regulations regarding disability related eligibility extensions treat the
ninety-and-one rule somewhat differently than the break in service rule. A
seaman who is injured while working for a signatory employer and who meets
the ninety-and-one requirement at the time of his injury is entitled to have his
eligibility under the rule extended for a maximum of 39 weeks. He must file his
disability pension application within six months of the last day of the 39 week
extension or on the day he is declared permanently unfit for duty, whichever is
earlier. By contrast, an individual injured while working for a non-signatory
employer gets no such eligibility extension.

28

The favored disability claimant can run afoul of the ninety-and-one rule. If the
individual is not declared permanently unfit for duty before his extended
eligibility period expires, the ninety-and-one rule theoretically bars his pension
application. See Rueda v. Seafarers International Union, supra, 576 F.2d at 943
and n. 11.

29

Recognizing that the 39 week limit on the eligibility extension under the
ninety-and-one rule may put some seamen in a "Catch 22 plight", 8 the Trustees
follow an informal practice of waiving the ninety-and-one requirement for
individuals who were injured while working for signatory employers. Trustee
Bracco testified the ninety-and-one requirement may be waived for compelling
reasons such as a claimant's physical inability to work.

30

Trustee Bracco denied there were compelling reasons to waive the requirement
in Sturgis' case. Because his last employer was not a Union signatory, Sturgis
had a break in service and lost all his pension credits. Therefore, waiving the
ninety-and-one rule would have accomplished nothing.

31

Mr. Bracco's testimony shows clearly that the Trustees' mechanical application
of the break in service and ninety-and-one rules caused them to deny Sturgis'
pension claim solely because he happened to be working for a non-signatory
employer when he was injured. As previously shown, had Columbia Marine
had a collective bargaining agreement with the Union, Sturgis would not have
had a break in service. A waiver of the ninety-and-one requirement then would
have been possible and Trustee Bracco implied, likely:

32

Q. Mr. Bracco, I would like to go back to two things that were covered by
plaintiff's counsel. Plaintiff's counsel asked you concerning waivers of the 90
and 1 rule given to people who are injured or disabled.

33

Did the trustees treat persons who have been disabled since their last day of
signatory employment differently from persons who are disabled on either nonsignatory employment or otherwise?

34

A. Oh, yes.

35

Q. To give you a hypothetical, when a man is injured in covered employment

and is continuously disabled, say for two, three years, and has been
continuously disabled during that period of time and puts in a late application
for disability benefits, would our hypothetical seaman have received favorable
consideration in the application for the waiver of the 90 and 1 rule?

36

A. Yes.

37

Q. On the other hand, Mr. Bracco, the situation where the hypothetical seaman
was not injured in covered employment and, therefore, did not receive credit for
periods of disability since his last day of covered employment and also had
waited three years or four years or whatever before making application, would
the trustees have granted a waiver in that man's case?

38

A. No, he wouldn't comply with the rules. The rules permit all of the things I
have suggested, which would lead the trustees to grant the waiver.

39

It is difficult to see how this unreasoning application of the signatory/non-

39

It is difficult to see how this unreasoning application of the signatory/nonsignatory distinction bears any relationship to the ninety-and-one rule's stated
purpose of requiring timely applications. Under these circumstances we hold
that the jury could have concluded from the evidence that it was arbitrary and
capricious for the Trustees to distinguish between Sturgis and other similarly
situated pension claimants based solely on the identity of his last employer.

40

The judgment of the district court is affirmed. Sturgis' prayer for attorneys' fees
is denied.

Sturgis' belief apparently was based in part on his previous recovery from
surgery in May 1965. At that time, Sturgis testified, doctors had removed about
70 per cent of his stomach and indicated he would not be able to return to sea
duty. Six months later he had been able to go back to work

Section 302(c)(5) provides in relevant part:

(5) with respect to money or other thing of value paid to a trust fund established
by such representative, for the sole and exclusive benefit of the employees of
such employer, and their families and dependents (or of such employees,
families, and dependents jointly with the employees of other employers making
similar payments, and their families and dependents); . . . .

In fact, the record discloses Sturgis worked 4,869 days in covered employment

In fact, Trustee Bracco testified the break in service rule was adopted in 1968 at
the request of the Plan's actuaries

Sturgis claimed a Union official had asked him to take the job with Columbia
Marine in order to attempt to unionize the employees. Sturgis said he had
understood his time with Columbia would count toward his pension. Whether
the Union made any such representations, and whether they would have bound
the Plan's Trustees, is irrelevant to our analysis

Sturgis had not worked 90 days in covered employment in either 1971 or 1972

A different question would be presented were Sturgis arguing he should have

accumulated credit toward his pension for the period between his accident and
the time the Public Health Service declared him permanently unfit for duty. It
may be that signatory employers are obliged to contribute to the pension fund
for their employees who are temporarily disabled. If so, a signatory/nonsignatory distinction might be justified for purposes of accumulating pension
credits. That question is not before us and we express no opinion thereon. We

hold only that the Trustees cannot divest Sturgis of his accumulated pension
credits solely because his last employer was not a signatory
8

Rueda v. Seafarers International Union, supra, 576 F.2d at 942. As the First
Circuit pointed out, a seaman whose temporary disability status lasts more than
15 months (39 weeks plus six months) would not be found totally and
permanently disabled by the time he should have applied for his pension; yet by
waiting until found disabled he would be time barred from qualifying. Id