                                                                                                                           Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-26-2003

Keegan v. Steamfitter Local420
Precedential or Non-Precedential: Non-Precedential

Docket No. 02-3312




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                                                                   NOT PRECEDENTIAL

                    UNITED STATES COURT OF APPEALS
                         FOR THE THIRD CIRCUIT


                                  No. 02-3312


                              JOHN G. KEEGAN;
                             HARRY F. INSTASE;
                             PHILIP C. GARTON,

                                               Appellants

                                          v.

 STEAMFITTERS LOCAL UNION NO. 420 PENSION PLAN; WILLIAM T.
     SWEENEY; GERALD J. DIVINY, Administrators of the Steamfitters
         Local Union No. 420 Pension Plan; JOSEPH T. RAFFERTY;
JOSEPH MCMAHON; SAMUEL T. SLATTERY; JACK H. JAMES; WILLIAM
      R. SAUTTER; WILLIAM C. TRUSKEY, Steamfitters Local Union
No. 420; MECHANICAL CONTRACTORS ASSOCIATION OF EASTERN PA;
 TRUSTEES OF THE STEAMFITTERS LOCAL UNION NO. 420 PENSION
  PLAN; THE UNITED ASSOCIATION LOCAL UNION NO. 322 PENSION
     PLAN; JOSEPH WILKINS; JAMES REED; JOHN SHALOO; GARY
   FOROSISKY; JAMES FALASCA; MARVIN DAVIDSON, Trustees of the
                     U.A. Local Union 322 Pension Plan



                    Appeal from the United States District Court
                      for the Eastern District of Pennsylvania
                       (D.C. Civil Action No. 00-cv-04246)
                     District Judge: Honorable Anita B. Brody


                              Argued April 23, 2003

        Before: SCIRICA*, Chief Judge, AMBRO and WEIS, Circuit Judges

  *Judge Scirica began his term as Chief Judge on May 4, 2003

                           (Opinion filed: June 26, 2003)
                                                     Doris J. Dabrowski (Argued)
                                                     1500 Walnut Street, Suite 900
                                                     Philadelphia, PA 19102

                                                            Attorney for Appellants

                                                     Kent Cprek (Argued)
                                                     Jennings Sigmond
                                                     510 Walnut Street
                                                     The Penn Mutual Towers, 16th Fl.
                                                     Philadelphia, PA 19106-3683

                                                            Attorney for Appellees

                                                     Regina Reardon
                                                     3031 B. Walton Road
                                                     Plymouth Meeting, PA 19462

                                                            Co-counsel to Local 322 Plan
                                                            and its fiduciaries

                                                     Henry J. Donner
                                                     Jacoby & Donner
                                                     1515 Market Street, Suite 2000
                                                     Philadelphia, PA 19102

                                                            Co-counsel to Local 420 Plan
                                                            and its fiduciaries and Mechanical
                                                            Contractors Assn. of Eastern PA,
                                                            Inc.




                                            OPINION




AMBRO, Circuit Judge

       The plaintiff union members sued the defendant union pension funds (and the funds’

administrators) alleging a breach of fiduciary duty and seeking a declaratory judgment that the


                                                2
plaintiffs were entitled to pension credits they allegedly had accrued years earlier. The District

Court, after ruling on dispositive motions and conducting a bench trial, entered judgment for the

defendants. The plaintiffs appeal. We affirm.1

                                                  I.

          The plaintiffs in this suit are John Keegan, Harry Instase, and Philip Garton. The

defendants are the Steamfitters Local Union No. 420 Pension Plan (“Local 420 plan”); William

T. Sweeney, the administrator of the Local 420 plan; the Mechanical Contractors Association of

Eastern Pennsylvania; the Steamfitters Local Union No. 420 (“Local 420”); the trustees of the

Local 420 plan; the United Association Local Union No. 322 Pension Plan (“Local 322 plan”);

and the trustees of the Local 322 plan. The plaintiffs filed suit pursuant to 29 U.S.C. § 1132, the

Employee Retirement Income Security Act (“ERISA”), and claim the defendants violated

ERISA by breaching their fiduciary duties thereunder.

          At various times in the 1970s, the plaintiffs became members of Leadburners Local

Union No. 532 (“Local 532”), but subsequently also worked at times within the jurisdiction of

Plumbers and Pipefitters Local Union No. 322 (“Local 322”) and Plumbers and Steamfitters

Local Union No. 121 (“Local 121”). In 1973, Locals 420 and 322 entered into arrangements

whereby Local 322's pension plan agreed to pay Local 420's plan for all contributions Local

322's plan received from employers for work performed by members of Local 420 while in the

jurisdiction of Local 322. In 1977, Locals 420 and 121 entered into a similar agreement. (Local

121 later merged with Local 322, which assumed control of Local 121's pension assets.) Local

532 – the plaintiffs’ local – had not entered into any reciprocal agreements with other unions nor



   1
       We have jurisdiction pursuant to 28 U.S.C. § 1291.

                                                  3
did it have any pension plan of its own. Its members thus received pension benefits only through

work sufficient to vest and receive benefits under the pension plan established by another local

union and employers pursuant to the collective bargaining agreement.

       On February 1, 1984, Local 532 merged with Local 420, thus making the plaintiffs

members of Local 420. At that time, none of the plaintiffs had completed the requisite ten years

of service to vest under the Local 322 or 121 pension plans and therefore they forfeited all

service credits and benefits. At a meeting to introduce new members to Local 420, a union

representative informed those present, including the plaintiffs, that pre-1984 contributions for

those employed in Local 322's territory contributions would not be reciprocated. Thus, while

post-merger the plaintiffs received contributions for work they performed within the jurisdiction

of Local 322 pursuant to the reciprocal agreement between Locals 420 and 322, they did not

receive contributions for any work performed pre-merger while members of Local 532 but

working within the jurisdictions of 121, 322, or 420.

       In 1996, Keegan asked Bill Sweeney, the administrator of the Local 420 plan, if credits

that Keegan had accumulated prior to 1984 – while a member of Local 532 but working in

Locals 322 and 121 – could be transferred to his Local 420 pension fund. Sweeney passed the

request on to William Ford, the administrator of the Local 322 plan, including an itemization of

the hours Keegan had worked in Locals 121 and 322. On January 21, 1997, Ford sent Sweeney a

check for approximately $16,000 to cover the period between September 11, 1973, and January

1, 1984. Sweeney informed Keegan that he had received credit from Local 322. Eight months

later, Local 322 informed Sweeney that it had made a mistake, that Keegan’s break-in-service

from Local 322 after less than ten years meant he was not vested. Local 322 requested the return

of the check, which Sweeney returned to Local 322 via its attorney.

                                                 4
       The plaintiffs filed their complaint in the Eastern District of Pennsylvania on August 21,

2000, alleging that the defendants breached their duties by failing to secure payments due under

reciprocal agreements between Locals 322 and 420. They seek relief in the form of monetary

contributions to the Local 420 plan and a declaratory judgment (i) that the defendants breached

their fiduciary duty and (ii) articulating their rights under ERISA. In April 2001 both sides

moved for partial summary judgment. The District Court denied the plaintiffs’ motion and

granted in part that of the defendants. It dismissed a number of defendants, but denied their

motion for summary judgment as to the Local 420 pension plan, the Local 322 pension plan, and

Sweeney. Keegan v. Steamfitters Local Union No. 420 Pension Fund, 174 F. Supp. 2d 332 (E.D.

Pa. 2001) (Keegan I).

       On July 1, 2002, the District Court conducted a bench trial to determine the meaning of

the reciprocal agreements between the pension plans and whether Sweeney had breached his

fiduciary responsibilities under ERISA. It entered judgment in favor of all remaining defendants

on all remaining claims. Keegan v. Steamfitters Local Union No. 420 Pension Fund, 211 F.

Supp. 2d 632 (E.D. Pa. 2001) (Keegan II). The plaintiffs timely appealed.2

                                                II.

A. Fiduciary Duty to Investigate

       The plaintiffs argue that the District Court erred in concluding that Sweeney did not

breach his fiduciary duties under ERISA by failing to review or discuss with Keegan the



   2
     When reviewing an appeal from a bench trial, “[w]e accept the trial court’s finding of
historical or narrative facts unless clearly erroneous, but exercise ‘plenary review of the
trial court’s choice and interpretation of legal precepts and its application of those
precepts to the historical facts.’” Mellon Bank, N.A. v. Metro Communications, Inc., 945
F.2d 635, 642 (3d Cir. 1991) (internal citation omitted).

                                                 5
reciprocal agreements before returning the check to the Local 322 plan. According to Keegan,

although he never mentioned the reciprocal agreements in making his request, Sweeney had a

fiduciary duty to investigate and inform him about them. According to Sweeney, the opposite is

true; because Keegan only asked him about obtaining the credits, there was no reason for him to

inquire into the reciprocal agreements.

       The District Court adopted the factual basis of each sides’ position – that no one

discussed the reciprocal agreements – and agreed with Sweeney’s defense. Keegan II, 211 F.

Supp. 2d at 644 (stating that when Keegan asked Sweeney about having his pension credits

transferred from Local 322, “[h]e did not mention the reciprocal agreements”). But, exhibit 20

in the record is a November 26, 1996, letter from Sweeney to Ford that states: “Mr. Keegan is

requesting that since there was no reciprocal agreement between Local’s #322 and #532, if it

would be permissible to have those accrued pension benefit[s] transferred into his Local #420

account.” (Emphasis added). This indicates that Keegan was aware of the reciprocal

agreements, did understand that they operated to bar the automatic transfer of contributions

between Locals, did inform Sweeney of this fact, and Sweeney did act on this understanding to

inquire about an alternate avenue to secure the credits. Thus the factual finding on this point

appears to be clearly erroneous. Though we set aside this finding, we nonetheless affirm on the

alternate ground that Sweeney properly discharged his fiduciary duty by addressing the

reciprocal agreements in his inquiries on Keegan’s behalf.

       We also believe the District Court correctly concluded that Sweeney’s actions did not, as

a matter of law, constitute a breach of fiduciary duty. As noted by the District Court:

       Fiduciary status gives rise to the obligation to act “with the care, skill, prudence, and
       diligence under the circumstances then prevailing that a prudent man acting in a like
       capacity and familiar with such matters would use in the conduct of an enterprise of

                                                  6
       a like character and with like aims.”

Keegan II, 211 F. Supp. 2d at 644 (quoting 29 U.S.C. § 1104(a)(1)(B)). When an ERISA

beneficiary has requested information from an ERISA fiduciary, a fiduciary’s obligation to

convey complete and accurate information that is material to the beneficiary’s circumstances

includes “not only a negative duty not to misinform, but also an affirmative duty to inform when

the trustee knows that silence might be harmful.” Bixler v. Cent. Pennsylvania Teamsters Health

& Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993). See also Eddy v. Colonial Life Ins. Co. of

Am., 919 F.2d 747 (D.C. Cir. 1990). Even if we adopt the District Court’s finding that Sweeney

never referenced the reciprocal agreement, there was no breach of fiduciary duty because his

actions initially were successful. Keegan asked Sweeney to obtain the transfer of his pension

credits, which Sweeney did. It would not have been necessary (nor logical) for Sweeney to

explain to Keegan why the reciprocal agreements should have, but did not, bar him from

receiving the pension credits. It was only later, after officials from Local 322 explained why

Keegan had no legal entitlement to the credits – he was not vested in Local 322's plan – that

Sweeney returned the check. To find error in that action, Keegan must establish that Sweeney

had a fiduciary duty to refuse to return a check that another Local reasonably explained was

issued in error. Keegan has not done so. Accordingly, we agree with the District Court that

Sweeney’s actions complied with ERISA’s prudent man standard of care.

B. Interpretation of the Reciprocal Agreement

       The plaintiffs’ second issue on appeal concerns the District Court’s interpretation of the

reciprocal agreements between the pension plans of Local 420 and Locals 322 and 121. The

parties agree that the plans and agreements, which predated 1984, are subject to the requirements

of ERISA, and that courts should apply general principles of contract interpretation to determine

                                                7
if a plaintiff may recover benefits due under the terms of a plan. Accordingly, if the contract’s

language is unambiguous, a court may not consult extrinsic evidence to redefine its meaning.

But if the terms are ambiguous, it may hold a trial to hear evidence and resolve the ambiguity.

       In relevant part, the reciprocal agreements state:

       The Trustees of U.A. Local Union No. 322 [and 121] agree to pay the Trustees of
       U.A. Local Union No. 420 all contributions paid to them and collected by them from
       Employers for the members of U.A. Local Union No. 420 while employed within the
       territorial jurisdiction of U.A. Local No. 322 [and 121] by a contributing Employer.

Keegan I, 174 F. Supp. 2d at 335. The plaintiffs became members of Local 420 on February 1,

1984. Prior to that date they were members of Local 532, which had neither a pension plan nor

reciprocal agreements with other Locals. Nevertheless, they argue that the reciprocal

agreements entered into between Local 420 and Locals 322 and 121 apply prior to February 1,

1984, for Local 532 members, while the defendants contend that these arrangements apply only

prospectively from February 1, 1984.

       The plaintiffs construe the term “all contributions” in the agreement to mean all

contributions regardless whether workers were members of Local 420 at the time they were

earned. Under this reading, the agreement applies retroactively so that once the plaintiffs

became members of Local 420 in 1984, the hours earned while members of Local 532 working

in Local 322's territory should have been transferred to their accounts with Local 420, even

though they would not have been entitled to these credits had they remained members of Local

532. (An exception would occur if they worked sufficient hours annually in Local 322's territory

for ten years, at which point their credits would vest directly in Local 322's fund.)

       The District Court initially denied summary judgment to the plaintiffs on the ground that

the term “all contributions” was ambiguous as to retroactive application. But after the bench


                                                  8
trial, the Court concluded that the agreements were not intended to apply retroactively. In so

doing, it noted that relevant factors in interpreting an ambiguous contract include the general

practice, custom, or usage in a particular industry and that courts may consider the expectations

of the beneficiaries of the plan and the intent of the contracting parties. The Court found that

industry custom weighs strongly in favor of finding that the reciprocal agreements do not apply

retroactively. Three pension plan administrators, including Sweeney, testified that they had

never seen a reciprocal agreement applied to contributions for a time period prior to the date an

individual became a participant in a fund. An actuary testified to the administrative and

financial reasons why retroactive application would have a “devastating” effect on a fund. In

short, it would be impossible to know the plan’s future liabilities, as a sudden withdrawal to

make retroactive payments could render a fund unable to honor its outstanding debts and

obligations.

        In contrast, the plaintiffs did not offer a single example of a retroactive reciprocal

agreement to rebut the defendants’ testimony. Instead, the plaintiffs pointed to a clause in the

agreement that expressed the trustees’ desire to “keep the employees of each Pension Trust Fund

eligible for benefits if possible.” The District Court found that nothing in this statement implies

retroactivity; it merely indicates an aspiration to maintain employees’ eligibility. That the

trustees pledged to do so if possible indicates a possibility of forfeiture. Finally, the District

Court noted that the plaintiffs’ public policy argument – a prospective interpretation of the

reciprocal agreements would result in forfeiture, a result disfavored by law – was unavailing

because the plaintiffs never had a vested interest in a pension credit with the Local 322 plan.

        On appeal the plaintiffs proceed with the same strategy they waged unsuccessfully before

the District Court; i.e., they advance conclusory assertions that the reciprocal agreements, unless

                                                   9
interpreted retroactively, are contrary to various tenets of public policy. The only argument

specifically alleging error is their claim that the District Court improperly elevated industry

practice to defeat other, more conventional methods of contract interpretation.

       We are not persuaded. The plaintiffs correctly note that courts adhere to the maxim that

“evidence of trade practice and custom does not trump other canons of contract interpretation,

but rather cooperates with them.” Metric Constructors, Inc. v. Nat’l Aeronautics & Space

Admin., 169 F.3d 747, 753 (Fed. Cir. 1999). The plaintiffs focus on the first part of the

statement but ignore the second, qualifying clause. “A contracting party cannot, for example,

invoke trade practice and custom to create an ambiguity where a contract was not reasonably

susceptible of differing interpretations at the time of contracting. Trade practice evidence is not

an avenue for a party to avoid its contractual obligations by later invoking a conflicting trade

practice.” Id. at 752.

       But this aside, the plaintiffs cannot reasonably claim that the reciprocal agreements

unambiguously require retroactive application. Indeed, it is the plaintiffs who offer a strained

interpretation of the term “all contributions.” It was only after the District Court denied the

plaintiffs’ motion for summary judgment on the ground that this language was ambiguous that

the defendants offered testimony that it was unanimous industry practice for reciprocal

agreements to operate only prospectively.

       “[A] court should accept evidence of trade practice only where a party makes a showing

that it relied reasonably on a competing interpretation of the words when it entered into the

contract,” because “[w]ithout such a showing, evidence that some practitioners customarily

accomplish tasks differently from the manner called for by the contract will not overcome the

clear language of the contract.” Id. “This requirement helps insure that the evidence of trade

                                                 10
practice and custom truly reflects the intent of the contracting party, and avoids according undue

weight to that party’s purely post hoc explanations of its conduct.” Id. Yet the plaintiffs

overlook the fact that the plaintiffs are not a contracting party to the reciprocal agreements; they

are third-party beneficiaries. To that end, the two contracting parties, the administrators of the

Local 420 and 322 plans, both proffer the shared understanding that the reciprocal agreements do

not apply retroactively.

       In sum, the District Court did not err in accepting evidence of trade practice. Even if it

did, this would not amount to reversible error, as the testimony on industry custom was only one

of the stated justifications for the District Court’s holding. Ultimately, the plaintiffs have not

introduced any evidence that demonstrates they had an enforceable interest in the Local 322 fund

or that supports their interpretation of the reciprocal agreements as requiring retroactive

application.

                                              *****

       For the reasons given, we affirm the decision of the District Court.




TO THE CLERK:

       Please file the foregoing Opinion.



                                               By the Court,



                                                    /s/Thomas L. Ambro
                                               Circuit Judge



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