The opinion of the court was delivered by: PATRICIA V. TRUMBULL
On October 25, 1994, plaintiff's and defendants' cross-motions for summary judgment came on for hearing. Pursuant to court order, the parties submitted additional briefing. The motion came under submission on January 26, 1995.
Plaintiff Kenneth Schendel sued Pipe Trades District Council No. 36 Pension Plan and the Trustees of the Plan [hereinafter collectively "defendants"] in an effort to obtain an additional 6.5 years of credit toward calculating his retirement benefits. The defendants denied Mr. Schendel's request on the basis that a "break in service" in Mr. Schendel's employment caused a forfeiture of 6.5 years of service.
The issue before the court is whether the defendants abused their discretion in applying a break in service rule to Mr. Schendel when that rule is not stated in the current plan. For the reasons set forth below, the court GRANTS plaintiff's motion for summary judgment and DENIES defendants' motion for summary judgment.
The material facts are not in dispute. Defendants' Plan ("the Plan") provides retirement benefits to members of plumbing trade unions. The Plan is an employee benefit plan within the meaning of Section 3(2)(A) of the Employee Retirement Income Security Act ("ERISA"), 19 U.S.C. § 1002(2)(A). The Plan was originally adopted in 1954 and since then has been amended numerous times.
The Plan participants' monthly retirement benefits are determined by the number of years of credited service in the union. Mr. Schendel earned six and one half years of service between 1954 and 1961. From July 1, 1961 through December 31, 1966, Mr. Schendel had a break in service during which time he did not earn any service years toward retirement. This break amounted to five and one half calendar years or six Plan years.
Mr. Schendel returned to active membership with the union earning 22.95 years of benefits between January 1, 1967 and September 25, 1990, when he retired. Shortly after Mr. Schendel retired, he applied for benefits. In December 1990, the Plan Administrator determined that Mr. Schendel was not entitled to credit for his 6.5 years of service between 1954 and 1961. The Board denied Mr. Schendel's appeal on October 25, 1991.
Mr. Schendel's claim for his pre-1961 service is based on defendants' 1987 Plan which was in effect at the time of his retirement. Pursuant to the 1987 Plan, credited service may be lost due to a break in service only under the following circumstance:
An employee who has not yet qualified for a pension, and who fails to be credited with at least eighty (80) hours in each of two (2) consecutive Plan Years, shall suffer a break in service.
Such break in service shall become permanent and the employee's previously accumulated non-vested years of Credited Service shall not thereafter be taken into account, if his consecutive one (1) year breaks-in-service, i.e., failure to be credited with 80 hours in any Plan Year, thereafter equal or exceed the greater of five or the aggregate number of years of service credited prior to the break.
(emphasis added). If the 1987 Plan applies, Mr. Schendel is entitled to credit for his pre-1961 service because Mr. Schendel had a break in service of only 6 years, which was less than his total accumulated service of 6.5 years.
However, the defendants applied a break in service rule from an earlier plan. According to the Plan Administrator, Mirth Lundal, "the break in service provision outlined in the current plan was not in effect at the time of [Mr. Schendel's] break in service. The Plan booklet issued in 1964 indicates that . . . non-vested credit was forfeited if an employee failed to work at least 80 hours under an applicable collective Bargaining Contract or agreement in each of two consecutive plan years. The only exceptions listed to the break in service provision were disability or military service." 3/6/91 letter to Mr. Schendel attached as exhibit 11 to Joint Statement.
On appeal, the Board of Trustees confirmed denial of the 6.5 service credits, informing Mr. Schendel: "The basis of the Board of Trustees' action is that it is within their discretion to apply the pre-ERISA break in service rules which were in effect under the Plan at the time your break in service caused a permanent forfeiture of your pension benefit credit."
Although not raised by the Plan Administrator or the Board of Trustees, defendants also now assert Mr. Schendel is precluded from recovery because he is barred by the statute of limitations, by laches and by undue delay.
II. Standard of Review For Summary Judgment
The purpose of summary judgment is to avoid a trial when there is no genuine factual issue and the moving party is entitled to judgment as a matter of law. Bloom v. General Truck Drivers, Office, Food & Warehouse Union, 783 F.2d 1356, 1358 (9th Cir. 1986). Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). There is a "genuine" issue of material fact only when there is sufficient evidence such that a reasonable juror could find for the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
Entry of summary judgment is mandated against a party if, after adequate time for discovery and upon motion, the party fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). This court, however, must draw all justifiable inferences in favor of the non-moving parties, including questions of credibility and of the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520, 115 L. Ed. 2d 447, 111 S. Ct. 2419 (1991). The court will consider the cross motions for summary judgment now before it with these standards in mind.
A. Statute of Limitations, Laches, Undue Delay
The issue is when Mr. Schendel's cause of action accrued. Under ERISA, the court looks to state law in determining the statute of limitations. Flanagan v. Inland Empire Electrical Workers Pension Plan and Trust, 3 F.3d 1246, 1251-52 (9th Cir. 1993). The time period in California is four years. Cal. Code Civ. Proc. § 337.
An ERISA cause of action accrues upon "a clear and continuing repudiation" of a claim. Martin v. Construction Laborer's Pension Trust, 947 F.2d 1381, 1384 (9th Cir. 1991). Relying on Martin, defendants assert Mr. Schendel's claim was clearly repudiated more than four years before he filed suit. However, Martin supports the plaintiff's position.
In Martin, the plaintiff was informed by the Pension Committee in 1979 that several prior years of service were not counted toward his retirement due to a break in service. The Committee informed the plaintiff he could appeal to the Appeals Committee. The plaintiff appealed to the Appeals Committee which rejected ...