Hobgood et al v. Local 305, National Postal Mail Handlers Union, No. 3:2018cv00131 - Document 24 (E.D. Va. 2018)
Court Description: MEMORANDUM OPINION. Signed by District Judge Henry E. Hudson on 12/4/2018. (jsmi, )
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Hobgood et al v. Local 305, National Postal Mail Handlers Union Doc. 24 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division WILLIAM HOBGOOD,et al, Plaintiffs-Counterdefendants, Civil Action No.: 3:18cv131-HEH LOCAL 305, NATIONAL POSTAL MAIL HANDLERS UNION,et aL, Defendants-Counterplaintiffs. MEMORANDUM OPINION (Cross Motions for Summary Judgment) This is an action seeking declaratory judgment filed by two ofthree Trustees of the Postal Union Welfare Benefit Trust against Local 305, National Postal Mail Handlers Union, and Felandria Jackson, the Union President ofthat chapter. In addition to seeking similar relieffavorable to its interpretation of the language at issue, the Postal Union has filed a counterclaim^ for beach ofthe Welfare Benefit Trust Agreement("the Trust Agreement"). Distilled to its essence, the underlying controversy turns on the validity of an amendment(the "Amendment")to the Trust Agreement allegedly adopted for the benefit of members of a chapter ofthe National Postal Mail Handlers Union, Local 305 ("the Union").2 'The Plaintiffs will hereafter be referred to simply as "Plaintiffs" or "pre-Amendment Trustees" and the Union and Felandria Jackson will be referred to as "Defendants" or "Union." ^ The Trust, which forms the epicenter ofthis controversy, is an employee benefit plan governed by the Employment Retirement Income Security Act of 1974("ERISA"),29 U.S.C. § 1102(a)(1). This provision requires that all such plans be governed by a written instrument which provides a procedure for amendment and identifies the individuals empowered to make Dockets.Justia.com The Amendment, adopted by the Union Executive Board, enlarged the number of Trustees from three to five, eliminated the provision allowing the Trustees to select successors, and reduced the Trustees' terms from six years to three years. It also enabled the Union to remove Trustees for any reason. The Amendment, effective five days after its adoption by the Executive Board, also provided that at least two ofthe Trustees must be Union members and one Trustee who is otherwise unaffiliated with the Union. (Joint Stipulation of Undisputed Facts, hereafter "Stipulation," ECF No. 13; Amendment,ECF No. 13-B.) The Plaintiffs, both pre-Amendment Trustees, contend that the Amendment at issue violates the restrictive language ofthe Trust Agreement and ERISA. (Pis.' Mem. Supp. Mot. Summ.J. 7-8,ECF No.9.) Specifically, Article IV.E prohibits the Executive Board from amending the Trust Agreement in a manner that increases the duties or liabilities ofincumbent Trustees or deprives them oftheir powers to safeguard the Trust without the consent ofthe Trustees. The Union maintains that the Amendment was within the scope ofits powers under Article IV ofthe Trust Agreement.^ Article IV, Paragraph A provides that: "[t]he Union has the right at any time to amend this Trust Agreement in whole or in part, subject to this Article." (Stipulation T 18.) This case is presently before the Court on cross motions for summary judgment under Federal Rule of Civil Procedure 56, accompanied by the parties' Joint Stipulation such amendments. 29 U.S.C. § 1102(b)(3). The instrument at issue in this case is the Welfare Benefits Trust Agreement. ^ Defendant Felandria Jackson, President ofthe Local 305 Union, was the third pre-Amendment Trustee. She is also a member ofthe Executive Board ofthe Union. of Undisputed Facts. Both parties seek declaratory relief supporting their respective interpretation of Article IV ofthe Trust Agreement. Each side has thoroughly briefed their position and the Court heard oral argument on November 13, 2018. The parties agree that there are no material facts in dispute. The task at hand is narrow. Guided by the teachings of BRISA,it is purely one of squaring the December 27,2017 Amendment with the constraining language of Article IV, paragraphs A and E ofthe Trust Agreement."^ Was the Amendment permissible under the terms ofthe Trust Agreement? In reviewing cross motions for summary judgment, a district court must review each motion separately on its own merits. Norfolk S. Ry. Co. v. City ofAlexandria,608 F.3d 150, 154(4th Cir. 2010). The Court's hand is also guided by the fossilized principle that employee benefit plans are governed by the clear language oftheir governing document. White v. Provident Life & Accident Ins. Co., 114 F.3d 26,28(4th Cir. 1997). Amendments to the Trust must be in compliance with the terms ofthe Trust Agreement. Although the Amendment in question was adopted by the Union Executive Board on December 27,2017,the pre-Amendment Trustees were notified by communication dated December 29, 2017. The Amendment was effective January 1,2018. (Amendment,ECF No. 13-B.) The pre-Amendment Trustees, after consulting with counsel,"determined by unanimous consent that the purported amendment is invalid and of no effect for a number ofreasons, including the fact that it was put forward 'without ^ ERISA requires that "any modification to a plan must be implemented in conformity with the formal amendment procedures 480(4th Cir. 2017). " Ret. Comm. ofDAKAms. LLC v. Brewer, 867 F.3d 471, the entire written consent ofthe Trustees' under Article IV.E. ofthe Trust Agreement," (Meeting Minutes, ECF No. 13-C.) The pre-Amendment Trustees also note in their minutes the absence of any notification or consultation by the Union prior to its adoption. {Id.) This lawsuit followed. The Plaintiffs maintain that the Amendment,in effect, diluted the pre-Amendment Trustees' voting strength and deprived them ofthe power to safeguard the welfare plan by subjecting them to removal without cause. They contend that reducing the terms of service from six years to three years, and eliminating staggered terms of service, deprives the Trustees oftheir independence and affects the institutional continuity ofthe Trustees. In Plaintiffs' view, its effect is compounded by the Amendment's removal of the preAmendment Trustees' power to name their successors. Subjecting them to removal without cause or reason. Plaintiffs argue, would violate ERISA by depriving the Trustees ofthe power to exercise independentjudgment without fear ofretributive removal. Plaintiffs argue that in effect the Amendment alters the composition ofthe Trustees from an independent majority to a Union majority of members. Plaintiffs characterize the Amendment as purely a power grab on the part ofthe Union, intended to give the Union "more control, participation and input into the administration and oversight" ofthe Trust. (Pis.' Mem. Supp. Mot. Summ. J. 12(citing Union Answer to Interrog. No. 1).) The Union urges the Court to hew closely to the language of Article VI.E and not confer powers to the pre-Amendment Trustees not specifically delegated by the Trust Agreement. That Article, entitled "Trustees Duties and Liabilities," reads:"[n]o amendment shall be valid which increases the duties or liabilities ofthe Trustees, or 4 which deprives the Trustees of the powers under this Trust Agreement to safeguard the Trust Fund and effect the purposes ofthe Trust, without the prior consent ofthe Trustees." (Defs.' Mem. Supp. Mot. Summ. J. 5,ECF No. 17(emphasis added by Defendants).) The Union also points out that neither Article IV.A nor E,prior to the Amendment at issue,"provide[d] any express limitation on the Union's ability to remove Trustees prior to the end oftheir specified terms." {Id.) Furthermore, Article II.A.1. provides that "[wjhenever a Trustee resigns or is removed, if his term expires, or if he otherwise ceases to serve, the two remaining Trustees must appoint a successor Trustee." {Id. at 6(emphasis added by Defendants); Joint Stipulation, ECF No. 13, Ex. A. at 4.) No other provision ofthe Trust Agreement specifically addresses the power to remove a Trustee. Since all powers vested in the Trustees are conveyed by the Union via the Trust Agreement,the Union suggests that by default, the power to remove Trustees must be vested in the Union. In other words, the Trustees have only those powers conveyed to it by the Union under the Trust Agreement. The Union discounts the impact ofthe Amendments at issue on the powers and duties ofthe Trustees. It argues that the Amendments have no impact on the Trustees' core duties,"to receive, hold, manage,increase, and distribute assets to provide benefits under participating plans." (Stipulation, Ex. A.) Shortening terms ofservice, increasing membership, and eliminating staggered terms and the right to select their successors have no apparent adverse effect on a Trustees' power to safeguard the Trust fund or effect the purpose ofthe Trust. Moreover,the Amendment requiring at least two Trustees to be Union members and one to have no Union affiliation would appear to neither dilute voting strength nor violate the Trust Agreement, The closer question, however, is whether the unilateral Amendment by the Union making the Trustees removable at will and without cause dilutes their power to safeguard the assets under the Trustees' control. The Union does not dispute that one ofthe intended objectives of the Amendment was to exert greater control over the Trust— arguably undermining the purpose of an independent body guiding the stewardship ofthe participating benefit plans. (Pis.' Mem. Supp. Mot. Summ. J., Ex. 2.) Unquestionably, the prospect ofsummary removal and replacement of a Trustee who failed to adhere to the Union's wishes could arguably have a chilling effect on a Trustee's execution of their fiduciary duties.^ But would the replacement of one or more individuals deprive the Trustees of the powers to safeguard the integrity ofthe Trust and its assets? This Court thinks not. Removal and replacement may affect the identity ofthe individuals exercising that power, but not the ability of a trustee to do so. Given the apparent tension between the provisions at issue, and the finite well of guiding authority, the Court ordered supplemental briefing on the removal without cause issue. Unfortunately, aside from non-binding opinions of administrative agencies, relevantjurisprudence appears to be sparse and unilluminating. In large part this is attributed to the unique elements of trust agreements undermining the task of uniform interpretation and application. ^ This Court does not agree that depriving the Trustees ofthe power to name their successors affects the integrity of their fiduciary obligations. 6 Consequently, both parties filed memoranda focusing primarily on the authority of trusts to discharge trustees without cause.^ The preponderance of authority seems to generally support the Union's right to do so, subject to the language of the Trust Agreement. The Fourth Circuit has afforded employee benefit plans wide latitude in adopting their governing principles. Gayle v. UPS,401 P.3d 222,228(4th Cir. 2005) (quoting Curtiss-Wright Corp. v. Schoonejongen,514 U.S. 73, 78(1995)("Plan sponsors, not federal courts, are empowered by ERISA to adopt, modify or terminate welfare plans.")). Although the union has entrusted stewardship ofthe employee benefit plans to the Trustees, the Union has a continuing oversight responsibility under the Welfare Benefit Trust Agreement. As the Union points out, the Trust is funded by the Union for the benefit of its members. (Defs.' Suppl. Mem. 12.) In the final analysis, this Court must conclude that the Union holds the "whip hand." As unsettling as it may be to Plaintiffs, a thorough review of the Trust documents as well as pertinent administrative and judicial opinions yield no convincing support for Plaintiffs' interpretation of the Welfare Benefit Trust Agreement. Accordingly, this Court will award summary judgment in favor of Defendants-Counterplaintiffs and dismiss Plaintiffs-Counterdefendants' Complaint. ^ The Department of Labor opinion letters cited by the Union noted that trustees should be removable on reasonably short notice and without the necessity for adjudication by a fact-finding tribunal. (Defs.' Suppl. Mem. 3-4, ECFNo. 22.) An appropriate Order will accompany this Memorandum Opinion. Henry E. Hudson Senior United States District Judge Date: gc. H 2 ^ Richmond, VA
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