ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA C.A. No. 76-456
Before Adams, Van Dusen and Rosenn, Circuit Judges.
We are confronted in this case with two questions regarding employee-union joint pension funds established under the Taft-Hartley Act. First, it is necessary to determine whether certain alleged deficiencies in a pension plan represent "structural defects" over which a federal court may exercise supervision. Second, we must adjudge the circumstances under which a pension plan may divest beneficiaries of pension eligibility without violating the Taft-Hartley requirement that plans be operated for the "sole and exclusive benefit" of employees.
Edmund Knauss, the appellant, is a retired butcher. Born in 1908, he began work in 1936 for Oswald & Hess Co., a Pittsburgh meat packing firm. His employment with Oswald & Hess continued until the firm's bankruptcy in 1962.
In 1957, Local 424 of the Amalgamated Meat Cutters, in cooperation with Oswald & Hess and other meat packers, instituted a multi-employer pension fund pursuant to § 302(c)(5) of the Taft-Hartley Act.*fn1 Under the terms of the 1957 Fund, participating employers contributed a stipulated amount per year for each employee to fund pension benefits. As an employee of Oswald & Hess, Knauss became a member of the plan, and from 1957 to 1962 payments were made to the pension fund on his behalf.
The 1957 Fund provided that benefits were to be granted on retirement at age 65 to an employee who had worked a total of twenty or more uninterrupted years for any employer contributing to the plan.*fn2 This twenty year requisite could be fulfilled (a) by years worked for an employer prior to the commencement of employer contributions to the plan, denominated "past service credits," and (b) by employment during which contributions were made, denominated "future service credits." Thus, a portion of the benefits to workers employed at the commencement of the plan may be funded out of payments other than those made on their behalf. However, a break in covered employment of more than one year would cancel all credits for years served before the break, whether those years preceded or followed commencement of employer contributions.
After Oswald & Hess Co. went bankrupt, Knauss applied to the union hall for work with other employers participating in the Local 424 Plan.*fn3 When he failed to obtain such employment, he left Pittsburgh for the West Coast. After holding several non-union jobs there, Knauss returned to Pittsburgh in 1966. In May, 1966, Knauss found work at the Northside Packing Plant in Pittsburgh, another employer which contributed to the Local 424 Fund. Knauss continued to work at Northside until 1972, when he was laid off.
In the meantime, on January 12, 1970, the Local 424 Fund merged into the Amalgamated Meatcutters' National Pension Fund (the National Fund). By the terms of the merger, the assets of the Local 424 Plan were transferred to the National Fund and the Local Fund went out of existence. In return, the Local Fund's beneficiaries became participants in the National Fund. The merger agreement provided that benefits to former participants in the plan of Local 424 would be governed by the National Fund's standards except that the amount of benefits provided to individuals originally covered by Local 424 would be 75% Of those otherwise available to participants in the National Fund.
Under the National Fund's rules, a minimum of ten years of employment with a covered employer was a prerequisite to collecting pension benefits. Like the Local 424 Fund, the National Fund recognized both "past" and "future" service credits to satisfy the prerequisite, but, with some exceptions to be discussed, the National Plan denied credit for employment which occurred prior to a break of more than two years in covered service. DP Upon being laid off by Northside in 1972, Knauss applied to the National Fund for pension benefits. His claim was denied, despite the fact that his employers had contributed to Amalgamated funds on Knauss' behalf for a total of 11 years, and despite the fact that he had registered a total of 32 years of employment with covered employers. The National Fund's administrators determined that only the six years of service following his break in employment could be credited to Knauss' account, and that his remaining twenty-six years of service were to be disregarded.
After attempting unsuccessfully to have this decision reversed administratively, Knauss brought suit against the National Fund and its trustees in the district court under § 302(e)*fn4 of the Taft-Hartley Act. He claimed that the provision denying credits for contributions prior to a break in service was arbitrary and capricious, and therefore violated the requirement of § 302(c)(5) that joint employer-union pension plans be operated for the "sole and exclusive benefit" of employees.
Following a non-jury trial, the district court entered judgment against Knauss. The trial judge determined that he had jurisdiction of the claim under § 302(e). However, despite a belief that the break-in-service clause was "unfair," the trial judge held that because there was no proof that the break-in-service provision affected more than a single ...