John O'Rourke v. No. California Electrical , 934 F.3d 993 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOHN J. O’ROURKE, No. 17-17419
Plaintiff-Appellant,
D.C. No.
v. 3:16-cv-02007-
WHO
NORTHERN CALIFORNIA ELECTRICAL
WORKERS PENSION PLAN; BOARD OF
TRUSTEES OF THE NORTHERN OPINION
CALIFORNIA ELECTRICAL WORKERS
PENSION TRUST,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
William Horsley Orrick, District Judge, Presiding
Argued and Submitted March 15, 2019
San Francisco, California
Filed August 16, 2019
Before: J. Clifford Wallace, Eugene E. Siler, *
and M. Margaret McKeown, Circuit Judges.
Opinion by Judge Wallace
*
The Honorable Eugene E. Siler, United States Circuit Judge for
the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
2 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
SUMMARY **
ERISA
The panel affirmed the district court’s grant of summary
judgment in an ERISA action challenging the denial of
plaintiff’s request for early retirement benefits.
Plaintiff accrued benefits through a multiemployer
ERISA plan during his work as an electrician. When he left
this position to work for an electrical workers’ union as an
administrator, he sought early retirement benefits from the
plan. The plan’s board of trustees decided that plaintiff’s
union work fell within the plan’s definition of “prohibited
employment,” and so no benefits were due for any month in
which he engaged in that work.
Reviewing the denial of benefits for an abuse of
discretion, the panel held that any procedural irregularities
in the actions of the board were minor and, at most, weighed
only slightly and weakly in favor of holding that an abuse of
discretion occurred. The panel held that the board did not
abuse its discretion in interpreting the plan’s definition of
prohibited employment to include plaintiff’s union work
because the board’s interpretation did not clearly conflict
with the plan’s plain language, did not render any other plan
provision nugatory, and did not lack a rational nexus to the
plan’s purpose.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 3
COUNSEL
Teresa S. Renaker (argued) and Margo Hasselman
Greenough, Renaker Hasselman Scott LLP, San Francisco,
California, for Plaintiff-Appellant.
Clarissa A. Kang (argued), R. Bradford Huss, and Angel L.
Garrett, Trucker Huss, APC, San Francisco, California, for
Defendants-Appellees.
OPINION
WALLACE, Circuit Judge:
John O’Rourke is an electrician who accrued benefits
through a multiemployer ERISA pension plan and was a
member of the plan’s board of trustees (Board). After
O’Rourke left this position to work for an electrical workers’
union as an administrator, he sought early retirement
benefits from the plan. The Board denied his request.
O’Rourke then filed this action for judicial review of the
denial, and the district court entered summary judgment in
the Board’s favor. We have jurisdiction over O’Rourke’s
appeal from that judgment under 28 U.S.C. § 1291, and we
affirm.
I.
A.
The Northern California Electrical Workers Pension
Plan (Plan) is a multiemployer plan governed by the
Employee Retirement Income Security Act (ERISA). See
29 U.S.C. § 1002(37)(A). The Plan is funded through the
Northern California Electrical Workers Pension Trust
4 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
(Trust), to which participating employers contribute, and is
administered by the six-member Board, containing three
labor representatives and three management representatives.
The Plan provides its participants with three types of benefit
— (1) normal pension, (2) early pension, and (3) disability
pension — payable as a monthly annuity when participants
attain certain Plan-defined eligibility requirements. The Plan
provides that the Board shall resolve “[a]ny dispute as to
eligibility, type, amount or duration of benefits,” Plan Art.
IX, § A, and grants the Board “the exclusive power and
discretion to interpret the provisions of the Plan and any
rules issued under the Plan, and to determine all questions
arising under the Plan including eligibility for benefits,” Plan
Art. XIII, § A.
Relevant to this appeal, the Plan provides that
participants become eligible for early retirement and an early
pension at age fifty-five, if they have also accumulated ten
or more years of covered employment. Plan Art. III,
§ (B)(1). However, no benefit payments are made for either
normal pensions or early pensions “for any month in which
the Participant works in Prohibited Employment.” Plan Art.
III, § G(1). For participants who have not yet reached the age
of sixty-five, the Plan defines “Prohibited Employment” as
“the performance of services in any capacity in the Electrical
Industry.” Plan Art. III, § G(3)(a). In turn, “Electrical
Industry” is defined as “all branches of the Electrical Trade
in the United States.” Plan. Art. I. “Electrical Trade” is not
defined.
B.
John O’Rourke is a participant in the Plan who began
working as an electrician in 1979. In 1999, he was elected
business manager of his local union, the International
Brotherhood of Electrical Workers (IBEW) Local 6. As
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 5
business manager, O’Rourke served as a Plan trustee on the
Board.
In September 2010, O’Rourke proposed that the Board
adopt a change in the Plan’s suspension of benefits rules to
exempt work for unions from the definition of prohibited
employment. O’Rourke recommended that the Plan Counsel
review the Plan and Trust and determine “what changes, if
any, are required to accomplish this.” The Board concurred
with that recommendation, but no further action was taken
at that time. O’Rourke then left his Local 6 and Board
position to join IBEW as an International Field
Representative, followed by service as Vice President for the
IBEW Ninth District. O’Rourke applied for an early
retirement pension from the Plan in June 2014, in
anticipation of his upcoming fifty-fifth birthday. It is
undisputed that once O’Rourke turned fifty-five, he met all
other eligibility requirements for the early pension, aside
from the suspension of benefits provision. It is also
undisputed that O’Rourke’s work for IBEW did not include
traditional work as an electrician, such as wiring, repair,
installation, and maintenance.
Meanwhile, Plan Counsel investigated the matter as
requested. In March 2014, Plan Counsel submitted a
memorandum to the Board opining that no changes to the
Plan were necessary because the Plan’s prohibited
employment did not include work for a union. The Board
considered the opinion at a meeting the following week,
where two trustees expressed “strong disagreement with the
legal opinion,” indicating that “employment for Local 6, or
any other IBEW for that matter, [should be] considered
‘covered employment’ . . . subject to suspension of
benefits.” The Board did not resolve the matter at that
6 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
meeting; instead it requested that Plan Counsel conduct
further research on the matter.
Plan Counsel submitted a second memorandum in
August 2014. After reviewing past Board meeting minutes,
Plan Counsel concluded that the Board had previously
defined prohibited employment “broadly to include work
that may not specifically bear upon or utilize skills and
experience obtained by work in the electrical trade.” Plan
Counsel therefore opined that the Board should not adopt
any policy of categorical exemption, and instead make each
determination based on “all the facts and circumstances that
may be submitted regarding the nature of the work in
question.”
The Board discussed the second memorandum and
O’Rourke’s application at its next meeting, resolved to defer
decision pending further information from O’Rourke, and
requested an explanation from him “as to why he believes
the work he is performing for [IBEW] is not prohibited under
the Plan.” O’Rourke responded by letter, explaining that his
duties were “purely administrative” and did “not require,
directly or indirectly, the use of the same skills employed by
electricians in an electrical trade or craft.”
The Trustees discussed O’Rourke’s response via email
in anticipation of their next meeting in December, with one
trustee stating that O’Rourke’s application was “a loser
barring an amendment to the plan.” At the next meeting, the
Board again discussed O’Rourke’s application and was
again unable to reach consensus. Plan Counsel then opined
that the suspension of benefits provision was ambiguous and
suggested clarifying its meaning so that the Board could
reach consensus, to which the Board agreed.
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 7
The following month, in January 2015, O’Rourke’s
counsel sent a demand letter to the Board stating O’Rourke’s
position that any interpretation of the Plan to include his
IBEW employment would be an abuse of discretion.
Trustees discussed the letter via email, with one trustee
stating that O’Rourke’s description of his work as
“administrative” was not outcome determinative, with a
personal reference to O’Rourke’s time as a trustee:
First, to use the term “administrative”, as if
it’s [sic] use in and of itself it [sic] would
render his benefits payable, fails to address
how the Trustees have interpreted the Plan in
the past. Time and time again, Plan
participants sought to have their benefits paid
while working in and [sic] administrative
capacity. Mr. O’Rourke should know that
better than anyone since it was he that
championed that determination.
Plan Counsel also stated that “management has not relented
on the issue.”
The Board met again in March 2015, and this time
agreed to deny O’Rourke’s application. In a letter to
O’Rourke’s attorney, the Board explained that O’Rourke’s
IBEW employment fell within prohibited employment
because it entailed “the performance of services of some
capacity in the Electrical Industry,” and no exception
applied. O’Rourke appealed that decision. The Board met
again in August and denied the appeal. The Board explained
that it agreed there was no factual dispute over O’Rourke’s
IBEW duties or that the Plan defined “Electrical Industry”
as “Electrical Trade,” but that under its interpretation of
8 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
“trade,” O’Rourke’s work came within the prohibited
employment definition.
O’Rourke filed this action against the Plan and the Board
in April 2016. O’Rourke alleged that he was entitled to an
early pension and claimed benefits pursuant to ERISA. See
29 U.S.C. § 1132(a)(1)(B). The parties cross-moved for
summary judgment and the district court granted the Board’s
motion and denied O’Rourke’s motion. The district court
reasoned that the Board did not abuse its discretion by
interpreting the Plan to include O’Rourke’s IBEW position
as prohibited employment because both parties’
interpretations were reasonable. O’Rourke timely appealed.
II.
“Where an ERISA Plan grants discretionary authority to
determine eligibility for benefits or to construe the terms of
the plan, a plan administrator’s interpretation of a plan is
reviewed for abuse of discretion.” Lehman v. Nelson, 862
F.3d 1203, 1216 (9th Cir. 2017) (quoting Tapley v. Locals
302 & 612 of Int’l Union of Operating Eng’rs-Emp’rs Const.
Indus. Ret. Plan, 728 F.3d 1134, 1139 (9th Cir. 2013)). “We
review the district court’s application of this standard and the
district court’s . . . summary judgment de novo.” Id.III.
O’Rourke argues that the Board incorrectly interpreted
the Plan to deny his application for benefits. The Plan
contains an express discretion provision, Plan Art. XIII, § A,
and therefore our review is for abuse of discretion. Lehman,
862 F.3d at 1216. Before we address the merits of this
argument, however, we must decide how alleged procedural
irregularities affect our analysis.
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 9
A.
O’Rourke contends that the Board acted “as an adversary
bent on denying his claim,” see Friedrich v. Intel Corp., 181
F.3d 1105, 1110 (9th Cir. 1999) (internal quotation marks
omitted), rather than as a neutral arbiter acting in the Plan’s
best interests. According to him, we should view the Board’s
decision with suspicion, making it easier for us to conclude
the Board abused its discretion.
We previously addressed the issue of procedural
irregularity in Abatie v. Alta Health and Life Insurance, 458
F.3d 955 (9th Cir. 2006) (en banc). In that case, we explained
that ERISA provides “for only two alternatives[: w]hen a
plan confers discretion, abuse of discretion review applies;
when it does not, de novo review applies.” Id. at 965. Thus,
procedural irregularity does not alter the standard of review
except in “situations in which procedural irregularities are so
substantial” as to make doing so necessary, such as “[w]hen
an administrator engages in wholesale and flagrant
violations of the procedural requirements of ERISA, and
thus acts in utter disregard of the underlying purpose of the
plan as well.” Id. at 971. O’Rourke agrees that this case does
not present such a situation, and thus abuse of discretion
review applies.
The question remains, however, whether any procedural
irregularities here affect the abuse of discretion review itself.
In Abatie, we rejected a “sliding scale” approach to this
problem, where the greater the irregularity, the lesser the
plaintiff’s burden. Id. at 967–68. Instead, we explained that
a “procedural irregularity, like a conflict of interest, is a
matter to be weighed in deciding whether an administrator’s
decision was an abuse of discretion.” Id. at 972. Thus,
“[w]hen an administrator can show that it has engaged in an
ongoing, good faith exchange of information between the
10 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
administrator and the claimant, the court should give the
administrator’s decision broad deference notwithstanding a
minor irregularity.” Id. (internal quotation marks and
citation omitted). But when “[a] more serious procedural
irregularity” has occurred, it “may weigh more heavily.” Id.at 972–73. We did not provide more guidance on the issue
beyond these statements, explaining that abuse of discretion
review is inherently “indefinite” and requires case-by-case
analysis. Id. at 969.
In this case, as the district court concluded, the Plan is
ambiguous and both sides present plausible interpretations
of the Plan language. If we were to accept O’Rourke’s
assertions that the Board acted as an adversary against him,
we might accordingly hold that an abuse of discretion
occurred where we otherwise might not. We must therefore
first decide how much weight to place on the alleged
procedural irregularities in this case before proceeding.
O’Rourke emphasizes four events as procedurally
irregular: (1) emails and meeting minutes showing “political
hostility” and personal animus towards him; (2) shifting
rationales for the denial; (3) the rejection of Plan Counsel’s
2014 opinion; and (4) the Board’s position reversal from the
2010 resolution. We address each in turn.
First, the record does not support O’Rourke’s assertion
that certain trustees harbored personal hostility towards him.
The meeting minutes and emails reflect that certain trustees
strongly disagreed with O’Rourke’s interpretation of the
Plan, but nothing in the record rises to the level of animus.
For instance, calling an argument a “loser” is usually a
reflection on the argument’s merits, not its proponent’s, as
seems to be the case in the December email. Similarly,
saying that O’Rourke should have known the Board would
interpret the Plan in a way that did not favor him was
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 11
irrelevant to the merits of O’Rourke’s demand letter, as an
applicant’s knowledge or intent under the Plan does not
affect their eligibility for benefits. Thus, we disagree with
O’Rourke’s argument that the Board acted based on animus
rather than in the Plan’s best interests.
Second, the Board did not shift its rationales for denying
the claim. O’Rourke argues that the Board initially denied
his application because prohibited employment included
some employment that did not require an electrician’s skills,
but later denied his appeal because unions provide support
to workers in the electrical trade. There is no discrepancy. In
denying the application, the Board explained that it was
relying on a broad definition of “industry” which included
services for IBEW. In denying the appeal, the Board
explained that it was relying on a broad definition of “trade,”
which again included services for IBEW. The Plan defines
“Electrical Industry” as “all branches of the Electrical Trade
in the United States.” Plan. Art. I. Thus, the definition of
“industry” in the first decision and “trade” in the second
decision is consistent with the Plan and the Board’s position
throughout its decision-making and this litigation.
Third, while disregarding the advice of counsel might
weigh in favor of holding that an abuse of discretion
occurred in a different case, here the record reflects that all
parties agreed the Plan was ambiguous and the disagreement
was in good faith. In its first memorandum to the Board, Plan
Counsel opined that the Plan’s prohibited employment
definition related to work involving the skills used by an
electrician. However, in the second memorandum, Plan
Counsel acknowledged that Plan Counsel had not reviewed
previous determinations made by the Board when that
opinion was reached, and that the Board had previously
interpreted prohibited employment “more broadly to include
12 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
work that may not specifically bear upon or utilize skills and
experience obtained by work in the electrical trade.” Plan
Counsel accordingly revised the original opinion in light of
the new information and recommended a case-by-case
analysis based on the totality of the circumstances
“regarding the nature of the work in question.” Thus, while
O’Rourke is correct that the Board did not follow Plan
Counsel’s recommendation, a full picture of the record
shows that this fact weighs only slightly against the Board,
if at all.
Fourth, the Board’s change in position from 2010 to
2014 demonstrates only a change in opinion, not a
procedural irregularity. O’Rourke does not argue on appeal,
nor could he, that the 2010 resolution to ask Plan Counsel to
determine what changes were necessary to exempt union
service from prohibited employment constituted binding
action. The motion was necessarily tentative because it
required further action. Instead, the change in position shows
that the Board was once in favor of allowing early pension
benefits for IBEW workers, and it then changed its mind.
Such a change, in conjunction with other evidence showing
disregard of the Plan’s terms, could be evidence of bad faith.
But the only other evidence in the record supporting bad
faith is the Board’s rejection of Plan Counsel’s opinion. As
explained above, the Board’s rejection of Plan Counsel’s
opinion does not show bad faith under the circumstances.
Thus, the Board’s change in position weighs only minimally
in favor of holding that an abuse of discretion occurred here.
Finally, we point out that the Board kept O’Rourke
informed at all stages of its decision-making and that none
of the putative irregularities prevented the administrative
record from being fully developed or prevented the Board or
a court from knowing all relevant facts. This record does not
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 13
reflect that the Board attempted to keep O’Rourke in the dark
or use procedural devices to prevent him from receiving
benefits.
Thus, O’Rourke’s procedural irregularity argument
demonstrates at best only that the current Board held a
different interpretation of the Plan from O’Rourke and from
past Boards, and that it appeared unwilling to change that
interpretation on counsel’s advice or O’Rourke’s arguments.
While this could perhaps indicate some stubbornness beyond
the platonic ideal of an open-minded plan administrator, it
does not reveal serious procedural irregularities that would
weigh heavily against the Board. At most, the Board’s
actions weigh only slightly and weakly in favor of holding
that an abuse of discretion occurred here.
B.
Having concluded that any procedural irregularities were
minor, we turn to the Board’s interpretation of the Plan itself.
The Plan defines “Prohibited Employment” as “the
performance of services in any capacity in the Electrical
Industry.” Plan Art. III, § G(3)(a). O’Rourke argues that by
defining “Electrical Industry” to mean “all branches of the
Electrical Trade in the United States,” the Plan limits
prohibited employment to work involving the skills of an
electrician. The Board responds that it does not matter
whether the work involves an electrician’s skills, so long as
it involves any type of livelihood related to electrical work,
including administrative work. The question in this appeal is
thus whether the Board abused its discretion by interpreting
“performance of services in any capacity in the Electrical
Industry” to include working for IBEW; i.e., in an
administrative capacity for an electrical workers’ union. To
answer that question, we ask whether the Board’s
interpretation is unreasonable, “closely read[ing] contested
14 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
terms and appl[ying] contract principles derived from state
law, guided by the policies expressed in ERISA and other
federal labor laws.” Tapley, 728 F.3d at 1140 (internal
quotation marks and alterations omitted) (quoting
Richardson v. Pension Plan of Bethlehem Steel Corp., 112
F.3d 982, 985 (9th Cir. 1997)). We will accept the Board’s
interpretation unless it is “not grounded on any reasonable
basis.” Id. at 1139 (emphasis in original) (quoting Oster v.
Barco of Cal. Emps.’ Ret. Plan, 869 F.2d 1215, 1218 (9th
Cir. 1988)). “The [Board’s] interpretation need not be the
one this court would have reached, but only an interpretation
which has rational justifications.” Id. at 1139–40 (quoting
Smith v. CMTA-IAM Pension Trust, 654 F.2d 650, 655 (9th
Cir. 1981)).
In Tapley, we described three ways in which a Plan
administrator’s interpretation might fail this test. First, it is
an abuse of discretion to “construe provisions of a plan in a
way that clearly conflicts with the plain language of the
Plan.” Id. at 1140 (alteration omitted) (quoting Johnson v.
Trs. of W. Conf. of Teamsters Pension Tr. Fund, 879 F.2d
651, 654 (9th Cir. 1989)). Second, it is an abuse of discretion
to interpret a provision in a way that “renders nugatory other
provisions of the Plan.” Id. (internal quotation marks and
alterations omitted) (quoting Richardson, 112 F.3d at 985).
Third, it is an abuse of discretion to give an interpretation
that “lacks any rational nexus to the primary purpose of the
Plan.” Id. (quotation marks omitted) (quoting Burditt v. W.
Growers Pension Plan, 636 F. Supp. 1491, 1498 (C.D. Cal.
1986)). These three types of abuse correspond more or less
to basic principles of contract interpretation; i.e., (1) to
interpret provisions based on their plain meaning, (2) to
interpret provisions in context with other provisions, and
(3) to interpret provisions to reach a reasonable outcome that
accords with the expectations of the agreeing parties.
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 15
O’Rourke argues that all three Tapley errors are present
here and require us to reject the Board’s interpretation. We
disagree with each of his arguments.
First, the Board’s interpretation does not clearly conflict
with the Plan’s plain language. O’Rourke makes a strong
argument for why the best interpretation of “trade” in the
Plan is working as an electrician. However, he fails to
exclude the Board’s interpretation as a reasonable
possibility. The operative language in the Plan is very broad:
it defines prohibited employment as “the performance of
services in any capacity in the Electrical Industry.” Plan Art.
III, § G(3)(a) (emphasis added). Interpreting “industry” to
mean “trade,” and “trade” to mean “line of work,” it is
reasonable to conclude that providing administrative support
to electricians is the “performance of services in [some]
capacity in the Electrical [line of work].” After all, modern
electrical work on large projects often cannot be performed
alone; it relies on teams working together that include
electricians, supervisors, and administrators. O’Rourke’s
union work for IBEW, while admittedly further afield from
direct administrative support to electricians, is still focused
on supporting electricians, and therefore reasonably within
the electrical line of work.
Second, the Board’s interpretation does not render any
other Plan provision nugatory. O’Rourke argues that the
Board’s interpretation of “Electrical Industry” in Plan
Article III renders nugatory its definition in Plan Article I.
However, this argument assumes that “Electrical Trade” in
Article I has the meaning O’Rourke assigns to it. As
explained above, while plausible, that is not necessarily the
case because the Board’s interpretation of “trade” is
reasonable. While “trade” means “industry” under the
Board’s interpretation, that circularity does not make the
16 O’ROURKE V. N. CAL. ELEC. WORKERS PENSION
Article I definition superfluous. Definitions sections in
contracts necessarily contain some redundancy. That is
inherent in the nature of definitions because they explain
what other obligations mean, rather than creating additional
obligations themselves. Thus, when a term appears in the
definition of another term, it is reasonable for the terms to be
synonymous. The situation here might be different if the
Board’s definition of “industry” in Article III rendered
nugatory “trade” in another operative section of the plan, but
that is not the case here.
Third, the Board’s interpretation does not lack a rational
nexus to the Plan’s purpose. O’Rourke argues that the
purpose behind the Plan’s suspension of early retirement
benefits is to prevent retirees who already have incomes
from competing with younger workers in the same line of
work, and that he is not doing so. Thus, O’Rourke argues, he
is not competing with anyone else participating in the Plan
and the Board’s interpretation fails to advance the Plan’s
purpose. O’Rourke’s argument makes sense when
considering his identified purpose. However, the Board
articulated additional purposes in its denial letters, including
that the Plan should “avoid providing an incentive for
experienced electricians to leave fieldwork for an
administrative position in the industry and the substantial
benefit costs that would go with it.” The Board thus
explained that preserving assets for retirement through a
broad interpretation of prohibited employment was
consistent with the Plan’s purposes, and that explanation was
reasonable.
In sum, none of the three situations we identified in
Tapley are present here. We therefore conclude that the
Board’s interpretation of the Plan was reasonable. The
O’ROURKE V. N. CAL. ELEC. WORKERS PENSION 17
district court correctly entered summary judgment in the
Board’s favor.
AFFIRMED.