Donald Bator v. District Council 4, Graphic Co ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 19-2626
DONALD BATOR, et al.,
Plaintiffs-Appellants,
v.
DISTRICT COUNCIL 4, GRAPHIC COMMUNICATIONS CONFERENCE,
IBT, et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 18-cv-1770 — John J. Tharp, Jr., Judge.
____________________
FEBRUARY 12, 2020 — DECIDED AUGUST 27, 2020
____________________
Before BAUER, KANNE, and BARRETT, Circuit Judges.
KANNE, Circuit Judge. Plaintiffs Donald Bator, Edmond W.
Moses, Christopher O’Malley, Michael Anthony Pappa, and
Rogelio Jimenez, Jr. are former members of a union, Local 458-
2 No. 19-2626
M. 1 The Union participated in an employee-benefit pension
plan administered by a Board of Trustees. In 2014, the Plain-
tiffs discovered the financial health of their pension plan was
deteriorating. Several years later, the Plaintiffs sued the Trus-
tees and the Union under the Employee Retirement Income
Security Act of 1974 (“ERISA”) for a breach of fiduciary duty.
See 29 U.S.C. § 1132(a)(2). The Plaintiffs allege the Defendants’
actions and inaction resulted in an underfunding of their pen-
sions. The district court dismissed the case for failure to state
a claim under ERISA. We affirm.
I. BACKGROUND
The Plaintiffs are current employees of Bell Litho Inc., a
graphic-communications company, and former members of
Local 458-M Graphic Communications International Union.
The Plaintiffs participated in an employee-funded benefit
plan: the Inter-Local Pension Fund of the Graphic Communi-
cations Conference of the International Brotherhood of Team-
sters. Unlike many defined-benefit plans, this pension plan is
completely funded by contributions from the members of
about sixty-nine unions; their employers do not contribute to
or participate in the plan’s governance. Instead, the plan is
governed by Trust Indenture documents and administered by
a Board of Trustees.2
The Trust Indenture documents provide that the plan’s
members must contribute a fixed amount to the plan each
1 In this opinion, we refer collectively to the Plaintiffs “District Council
4, GCC/IBT” and “Local 458-M, GCC/IBT” as “the Union” or “Local 458-
M.”
2 Trustees are chosen by participating local unions. A member of Local
458-M sits on the Board.
No. 19-2626 3
week, unless a member’s union has set a different contribu-
tion amount (we’ll have more to say about this later). In 2008,
the Plaintiffs’ union, 458-M, voted to increase its members’
contributions to the plan from 6% to 8% of their weekly
wages.
Several years later, in January 2014, the Trustees notified
plan participants that the plan’s financial health was deterio-
rating. So, the Plaintiffs and others petitioned Local 458-M to
reduce their compelled-contribution rate. The Union denied
that request.
In 2016, the collective-bargaining contract in place be-
tween Bell Litho and Local 458-M expired. During contract re-
negotiations, the Plaintiffs again requested that the Union re-
duce their required contribution rate. The Union again re-
fused and warned them that failure to contribute to the plan
could result in expulsion from the Union.
In the back-and-forth between the Union and the Plain-
tiffs, it came to light that other members of Local 458-M (who
worked for a different employer, Aurora Fast Print) were ei-
ther contributing to the pension plan at lower rates than Bell
Litho employees or not contributing at all. The Union ex-
plained that these non-contributing members were originally
part of a different union that did not participate in the plan;
when that union merged with Local 458-M, those members
were allowed to participate in the plan under different condi-
tions than the Plaintiffs.
Contract re-negotiations between Bell Litho and the Union
were ultimately unsuccessful. In November 2016, the Union
notified all Bell Litho employees that they would no longer be
governed by the Union’s collective-bargaining agreements,
4 No. 19-2626
and their contributions to the plan would become vested. As
a result, the Plaintiffs lost certain retirement benefits—includ-
ing early withdrawal at age 59, a disability benefit, and a
death benefit—available only to active contributors to the
plan.
The Plaintiffs sued the Trustees and the Union for a breach
of their fiduciary duties to the plan. Specifically, the Plaintiffs
believe the Trustees breached their fiduciary duties by not en-
forcing the terms of the Trust Indenture regarding contribu-
tions when they allowed certain members of Local 458-M to
contribute to the fund at lower rates. See 29 U.S.C.
§ 1104(a)(1)(D) (Fiduciaries of a pension plan must discharge
their duties “in accordance with the documents and instru-
ments governing the plan.”). As for the Union, the Plaintiffs
contend the Union breached its fiduciary duties under ERISA
by failing to enforce its by-laws, which they claim would have
required all members to contribute equally to the fund.
The district court dismissed Plaintiffs’ claims for failing to
allege a plausible claim. Fed. R. Civ. P. 12(b)(6). First, the court
concluded that the Trustees’ action—interpretation of the
Trust Indenture—did not amount to a breach of fiduciary
duty. Second, the court determined that the Plaintiffs’ factual
allegations about the Union’s actions did not support a claim
that the Union acted as a fiduciary. As a result, the court con-
cluded the Plaintiffs failed to allege plausible allegations
amounting to a violation of ERISA’s fiduciary-liability provi-
sions.
II. ANALYSIS
We review the district court’s dismissal for failure to state
a claim de novo, Kubiak v. City of Chicago, 810 F.3d 476, 480–81
No. 19-2626 5
(7th Cir. 2016), accepting all well-pleaded factual allegations
as true and drawing permissible inferences in the Plaintiffs’
favor. Id. We first address the Plaintiffs’ claims against the
Trustees then turn to their claims against the Union.
A. The Trustees
The Plaintiffs claim the Trustees breached their fiduciary
duties when they failed to enforce particular terms of the
Trust Indenture related to member contributions. When con-
fronted with a claim involving the interpretation of a pension
plan, we must first resolve an antecedent question: how broad
is the Trustees’ discretion to interpret the terms of the Trust
Indenture? The Trustees contend the Trust Indenture confers
broad discretion on the Trustees to interpret its terms. We
agree.
An ERISA plan can specify that the administrator has
broad discretion to interpret or apply it. See Young v. Verizon’s
Bell Atl. Cash Balance Plan, 615 F.3d 808, 818 (7th Cir. 2010).
That scope of discretion, in turn, drives our standard of re-
view: arbitrary and capricious review attaches to a broad
grant of interpretive discretion. Lacko v. United of Omaha Life
Ins. Co., 926 F.3d 432, 439 (7th Cir. 2019). Otherwise, our re-
view is plenary. Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635,
637 (7th Cir. 2005).
In determining the extent to which a pension plan grants
a trustee discretion to construe its terms, “we review the lan-
guage of the plan de novo as we would review the language of
any contract.” Id. Here, the applicable language of the Trust
Indenture says:
The Trustees shall have the discretionary authority
to construe the terms of this Trust Indenture and the
6 No. 19-2626
governing documents of merged plans described in
Article VII, and to determine eligibility for member-
ship, eligibility for benefits and all other rights, ben-
efits, privileges and obligations of membership un-
der those documents. … The interpretation by the
Trustees of these documents or any provision
thereof shall be final and conclusive, and the deter-
minations of the Trustees shall be binding upon all
members and their beneficiaries and upon all appli-
cants for membership.
We’ve previously concluded that language nearly identi-
cal to this excerpted language conferred a plan administrator
with broad interpretive discretion. Cf. Johnson v. Allsteel, Inc.,
259 F.3d 885, 890 (7th Cir. 2001); Exbom v. Cent. States, Se. &
Sw. Areas Health & Welfare Fund, 900 F.2d 1138, 1141 (7th Cir.
1990). In Exbom, the language in the trust agreement gave “the
Trustees power to construe the provisions of the Agreement
and the Plan,” and stated that the Trustees’ interpretation of
those documents “shall be binding.” 900 F.2d at 1141.
Likewise, in Johnson, we considered plan language that a
trustee “shall have discretionary authority to interpret and
construe this Plan and to determine all questions arising un-
der this Plan, including questions regarding eligibility, vest-
ing and entitlement to benefits under the Plan.” 259 F.3d at
887. We concluded this language was “sufficient to trigger
deferential review” of the administrator’s interpretation of
the plan. Id. at 890.
So too here. The Trust Indenture unambiguously states
that the Trustees have discretion to interpret its terms by spec-
ifying the Trustees “shall have the discretionary authority to
construe the terms” and “determine eligibility for … member-
ship” or “benefits.” And as in Exbom, that determination
No. 19-2626 7
“shall be binding.” Accordingly, we defer to the Trustees’ in-
terpretation of the plan’s governing instruments unless arbi-
trary and capricious. See Lacko, 926 F.3d at 439.
The Trustees’ interpretation “is not arbitrary and capri-
cious if it falls within the range of reasonable interpretations,”
Green v. UPS Health & Welfare Package for Retired Emps., 595
F.3d 734, 738 (7th Cir. 2010), or if it is “compatible with the
language and the structure of the plan document,” Estate of
Jones v. Children’s Hosp. & Health Sys. Inc. Pension Plan, 892 F.3d
919, 926 (7th Cir. 2018). But if the Trustees “def[y]” the “plan’s
plain language,” that decision is arbitrary and capricious. Id.
at 923. We turn, then, to interpreting the plan’s terms.
The Plaintiffs seek to hold the Trustees liable for a breach
of fiduciary duty. See 29 U.S.C. §§ 1109, 1132(a)(2) . To state a
claim for such a breach, the Plaintiffs must plead that: “(1) that
the defendant is a plan fiduciary; (2) that the defendant
breached its fiduciary duty; and (3) that the breach resulted in
harm to the plaintiff.” Allen v. GreatBanc Tr. Co., 835 F.3d 670,
678 (7th Cir. 2016) (quoting Kenseth v. Dean Health Plan, Inc.,
610 F.3d 452, 464 (7th Cir. 2010)). The only contested element
is whether the Trustees breached their fiduciary duty. Fidu-
ciaries of a pension plan must discharge their duties “in ac-
cordance with the documents and instruments governing the
plan.” 29 U.S.C. § 1104(a)(1)(D). The relevant governing doc-
ument here is the Trust Indenture.
The Plaintiffs first contend that the Trustees breached their
fiduciary duties by failing to enforce the terms of the Trust
Indenture. They believe the language of the trust requires the
Trustees to enforce uniform contribution rates among all par-
ticipating members of a local union. The Trustees, however,
believe the Trust Indenture permits different groups within
8 No. 19-2626
the same union to contribute at different rates. Two portions
of the Trust Indenture are relevant to resolving this dispute:
one defining membership and one defining contributions.
The Trust Indenture defines local membership as follows:
Subject to such conditions as the Trustees may estab-
lish, a Local may be a Participating Local with re-
spect to one or more segments of its membership, or un-
der separate conditions with respect to each of one or more
such segments, defined in terms of recognized indus-
tries including all occupations relating directly or in-
directly to the industry or industries with respect to
which the Local union became a Participating Local,
as determined and approved by the Trustees.
Contributions to the plan are discussed in Article IV,
which provides, in relevant part, that
any group of participating members in a Participating Lo-
cal may, by official action of its membership, and
upon prior approval of the Trustees of the Inter-Lo-
cal Pension Fund, determine that the contributions
of its members shall be greater than [the required
$5.00 per week], providing that the formula for such
greater contribution shall apply to all participating
members of the Local.
We’ll start with the excerpted-contribution section. As a re-
minder, in 2008, Local 458-M voted to increase its members
contributions to the plan from 6% to 8% of their weekly
wages. But the Plaintiffs eventually discovered that other
members within Local 458-M, who worked for a different em-
ployer, were either contributing to the pension plan at lower
percentages than Plaintiffs or not contributing at all. This
meant that members of Local 458-M were not contributing to
the plan at equal rates, which the Plaintiffs believe violates the
No. 19-2626 9
Trust Indenture’s terms that contribution rates “shall apply to
all participating members of the Local.”
One plausible reading of the contributions paragraph,
standing alone, suggests that when a group of members
within a local union increases its contribution level, that con-
tribution rate must apply to all participating members of that
union regardless of whether they belong to the specific group
that initiated the change.
But the contributions section cannot be read in isolation
from the remainder of the Trust Indenture. Instead, the Trus-
tees urge us to read the contribution section of the Trust In-
denture in conjunction with the membership section, which
permits different industry “segments” within a local union to
become fund participants under “separate conditions.” When
read in conjunction, one could reasonably interpret the terms
governing contributions to mean that different segments of a
participating local union can increase their contribution levels
so long as the formula applies to all members of that segment.
Although the Trustee’s interpretation is not the only plau-
sible interpretation of the Trust Indenture, we think the Trus-
tee’s interpretation falls comfortably within the range of rea-
sonable interpretations of the Trust Indenture and is “com-
patible with the language and the structure” of that docu-
ment. Estate of Jones, 892 F.3d at 926. And in the face of two
reasonable interpretations of the Trust Indenture, we defer to
the Trustees’ interpretation. See Johnson, 259 F.3d at 889–90
(discussing Morton v. Smith, 91 F.3d 867, 872 (7th Cir. 1996),
and stating, “We noted that the trustees had several interpre-
tations to choose from, Morton’s interpretation being only
one, and that because we were engaging in deferential review
10 No. 19-2626
we had to respect their choice to adopt a different interpreta-
tion.”).
The terms of the Trust Indenture can be reasonably inter-
preted as permitting different segments within a union to con-
tribute to the plan at different levels. So the Trustees cannot
have breached their fiduciary duties by failing to require dif-
ferent segments within Local 458-M to contribute at the same
rate. To the contrary, the Trustees discharged their duties “in
accordance with the documents and instruments governing
the plan.” 29 U.S.C. § 1104(a)(1)(D). We affirm the district
court’s dismissal of this claim.
B. The Union
The Plaintiffs also contend the Union breached its fiduci-
ary duty by failing to properly fund the plan through selective
enforcement of its members’ contribution levels to the plan.
The plan was underfunded, the Plaintiffs allege, because the
Union inconsistently enforced its by-laws, which require all
Local 458-M members to contribute to the plan at equal rates.
In order to state a claim for breach of fiduciary duty, however,
the Plaintiffs must show that the Union—in taking the actions
alleged in the complaint—functioned as a fiduciary of the
plan. Allen, 835 F.3d at 678. They cannot do so.
To be considered a fiduciary under ERISA, the Union
must: exercise discretionary authority or control over plan ad-
ministration or management, exercise authority or control
over management or disposition of the plan’s assets, dispense
investment advice, or make benefit determinations. 29 U.S.C.
§ 1002(21)(A); Brooks v. Pactiv Corp., 729 F.3d 758, 765–66 (7th
Cir. 2013). The fiduciary inquiry under § 1002(21)(A) is a func-
tional one: we look at whether the Union was “performing a
No. 19-2626 11
fiduciary function when taking the action subject to com-
plaint.” Pegram v. Herdrich, 530 U.S. 211, 226 (2000) (internal
punctuation omitted).
ERISA’s fiduciary standards distinguish between “fiduci-
ary functions,” described above, and “settlor” functions. Lock-
heed Corp. v. Spink, 517 U.S. 882, 890 (1996). When a Union is
performing a settlor function it is not acting as a fiduciary.
Beck v. PACE Int’l Union, 551 U.S. 96 (2007).
Decisions about the “payout detail of the plan” or “the
content of a plan are not themselves fiduciary acts,” Pegram,
530 U.S. at 226; nor are decisions regarding “the form or struc-
ture of the Plan.” Hughes Aircraft Co. v. Jacobson, 525 U.S. 432,
444 (1999). Likewise, where an employer or union “select[s]
levels of funding” and “decide[s] who receives pension bene-
fits and in what amounts,” they are acting in a settlor capacity,
not as a fiduciary. Johnson v. Georgia-Pac. Corp., 19 F.3d 1184,
1188 (7th Cir. 1994).
The Plaintiffs contend the Union acted as a fiduciary when
it inconsistently enforced its by-laws, which had the effect of
limiting the amount of contributions owed to the fund. The
Plaintiffs allege in their complaint that the Union’s “control
over the amount of revenue that is, or is not, contributed” to
the plan is the pertinent fiduciary act. The Plaintiffs analogize
this function with management of plan assets (a fiduciary
function) because the Union has the ability to limit the
amount of revenue paid to the plan and therefore the sum of
the assets the plan can invest. 3
3 We note that Plaintiffs cited only one case in their brief to support
this assertion, IT Corp. v. General American Life Insurance Co., 107 F.3d 1415,
1421 (9th Cir. 1997). That case does not support (or even discuss) the
12 No. 19-2626
But our case in Johnson v. Georgia-Pac. Corp. says otherwise.
When a union sets, changes, or enforces contribution rates,
the union acts as a settlor because it is “select[ing] levels of
funding” to the plan by setting the contribution rates. 19 F.3d
at 1188. So, even though we accept as true the Plaintiffs’ alle-
gation that the Union controls the amount of revenue that is
coming into the plan, this allegation is not sufficient under our
cases to state a claim that the Union acted as fiduciary. In-
stead, it demonstrates the Union acted as a settlor. And an en-
tity that is not acting as a fiduciary cannot be held liable for a
duty that belongs only to a fiduciary. We affirm the district
court’s dismissal of this claim.
The Plaintiffs additionally argue that the Union acted as a
fiduciary when it disclaimed interest in representing the
Plaintiffs’ bargaining unit. Recall, that in November 2016, Lo-
cal 458-M sent a letter to employees at Bell Litho, advising
these employees that “the Union hereby disclaims interest in
the two Local 458-M bargaining units at Bell Litho.” This dis-
claimed interest had the effect of vesting the Plaintiffs’ contri-
butions to the fund. But the Plaintiffs cite to no cases to sup-
port their conclusory assertion that this action is one of a fidu-
ciary. Arguments raised in the district court are still “waived
on appeal if they are underdeveloped, conclusory, or unsup-
ported by law.” Puffer v. Allstate Ins. Co., 675 F.3d 709, 718 (7th
Cir. 2012). We decline to address the merits of this conclusory
and unsupported argument.
We AFFIRM the judgment of the district court.
proposition that setting or enforcing contribution rates amounts to a fidu-
ciary function. The Plaintiffs did not respond to or attempt to distinguish
our case in Johnson.