AMERICAN ARBITRATION ASSOCIATION

Voluntary Labor Arbitration Tribunal

In the Matter of the Arbitration between AAA No. 54-621-0001-89

RICHARD BEIMERS, JOHN MAURICE, DONALD YOST, RONALD

GREENLAND, DENNIS CAPTAIN & MARTIN VAN DYKE,
Claimants,

and

MICHIGAN STATE BREWERS AND DISTRIBUTORS SEVERANCE

AND RETIREMENT FUND & DEAN HOLEFCA, Its Contract
Administrator,
Respondents.
________________________________________________________________

OPINION OF THE ARBITRATOR

December 9, 1989

After a Hearing Held October 19, 1989

At the offices of the American Arbitration Association in Southfield, Michigan

For the Claimants: For the Respondents:

Duane J. Beach, Esq. Fred A. Foley

Wheeler, Upham, Bryant & Uhl P.C. Rupp, Ehrlich, Foley & Serwer, P.C.
Eleventh Floor, Trust Building 1111 W. Long Lake Road, Suite 201
Grand Rapids, Michigan 49503 Troy, Michigan 48098
 Introduction

Claimants, Richard Beimers ("Beimers"), John Maurice ("Maurice"),

Donald Yost ("Yost"), Ronald Greenland ("Greenland"), Dennis Captain

("Captain"), and Martin Van Dyke ("Van Dyke"), are former participants in and

claim benefits from the Michigan State Brewers and Distributors Severance and

Retirement Fund ("Fund"), multiemployer pension plan maintained by the

Teamsters Union1 and certain employers in Michigan's beer, wine and soft drink

distribution industry. A hearing on their claims was held October 19, 1989, at

the offices of the American Arbitration Association ("AAA") in Southfield,

Michigan, at which it was announced that claimant Greenland had withdrawn

from the arbitration. Thus, nothing herein affects his rights (whatever they may

be), and hereafter the term "claimants" excludes Greenland.

In June of 1987, claimants were employed by West Side Beer

Distributing Company ("West Side") in Grand Rapids, Michigan, an employer

participating in the Fund. On June 8, 1987, West Side's Union employees

(including claimants) went on strike. Shortly thereafter, West Side replaced

some of its striking employees with non-union workers, and an election was

held under the auspices of the National Labor Relations Board to decertify the

1
Local Unions Nos. 7, 1038, 339, 486 and 580 of the National Conference of Brewery and Soft Drink Workers of
the United States of America and Canada, affiliated with the International Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America. Claimants were members of Local 7.

2
Union.2 The Union was decertified as collective bargaining representative of

West Side employees, and West Side was deemed to have withdrawn from the

Fund, as of the commencement of the strike. JX 383; IAM National Pension

Fund v Fraser Shipyards, Inc, 9 EBC 2484, 2489-2491 (D DC, 1988).

The Fund is administered by a joint labor-management Board of

Administration ("Board"), consisting of four employer representatives and four

Union representatives. 29 USC §186(c)(5)(B). Beginning in 1986, a

disagreement arose between the employer members of the Board and the Union

members, over the Fund's method of valuing vested benefits in the calculation

of withdrawal liability.4 The disagreement stemmed from the Fund's unorthodox

custom of paying participants their full, undiscounted "accrued benefit" when

they terminate covered employment.

The Fund document provides in pertinent part:

If the Plan Administrator, in his sole and absolute discretion, elects to

commence payment of benefits after a Participant has terminated covered
employment . . . , the amount of these payments shall be determined by
2
The testimony concerning events surrounding the strike/decertification vote was somewhat confusing. Compare
claimants' version, Post Hearing Brief at 2, with respondents', Post-Hearing Brief at 3. I rely upon the version of
events given by Ronald Pillow, Business Representative of Local 7, at a Board meeting held January 20, 1989, in
response to questioning by Fund counsel. JX 9 (Board Minutes 1/20/89) at 15-16. Fund counsel also was present
when the minutes of that January meeting were approved and raised no objection. JX 8 (Board Minutes 5/12/89) at
1. Mr. Pillow, as a Union representative of West Side's employees and a Board member, was in a position to know
what actually happened. He signed most of the benefit applications in evidence, on behalf of Local 7. See, for
example, JX 24. Mr. Pillow also was signatory to the Settlement Agreement. JX 29 at 22.
3
Apparently West Side is contesting the Fund's assessment of withdrawal liability. Claimant's Post Hearing Brief
at 5.
4
A discussion of the intricacies of withdrawal liability would render an already complicated opinion unintelligible
to all but pension technicians. An overview of the subject can be found in Pension Benefit Guaranty Corp v R.A.
Gray & Co, 467 US 717, 720-725; 5 EBC 1545 (1984).

3
 the vested Accrued Benefit of the Employee . . . , undiminished by the
discounted present value of said benefit . . . . JX 6 at 25, §5.6.

Following the decertification vote at West Side, claimants sought to apply for

benefits from the Fund, on the ground that they had "terminated covered

employment," within the meaning of §5.6, but were advised that, due to the

ongoing disagreement among Board members, the Fund was "frozen."

By the time Board members resolved their disagreement in October of

1988, claimants had been forced by economic circumstances to return to work

for West Side. Claimants then were told that their benefit claims were being

denied because they had returned to work in the industry. It is within this

context that the instant dispute arises.

Decision

Because I conclude that there was no lawful basis for the Fund's failure

and refusal to process claimants' benefit claims in a timely manner, decision is

for claimants.

Nature of the Arbitration

This arbitration is unusual in many respects. AAA has classified it as

arising under MPPAA, the Multiemployer Pension Plan Amendments Act of

1980, 29 USC §1381 et seq. Although the Board's internal dissension had its

genesis in the withdrawal liability imposed by MPPAA, this arbitration is over

plan benefits, not withdrawal liability. Nor is it a conventional labor arbitration,

4
because it is not brought pursuant to the terms of a collective bargaining

agreement calling for arbitration of disputes between a union and an employer.

Proper classification is important, because it determines which of AAA's several

sets of rules apply (MPPAA, Labor, Commercial, etc.), how, why, when and

where the arbitrator's decision may be enforced or contested, and even affects

the arbitrator's compensation. Perhaps most importantly, it determines the

arbitrator's very function.

If this were a MPPAA arbitration, then AAA's Multiemployer Pension

Plan Arbitration Rules for Withdrawal Liability Disputes "MPPAA Rules")

would govern. Under the MPPAA Rules, the arbitrator would possess the broad

powers granted by §38, to "grant any remedy or relief within the scope of

ERISA." The party contesting the Fund's determination would bear the heavy

burden of proof set by 29 USC §1401(a)(3). The arbitrator's decision could be

enforced or contested only in federal district court, as provided in 29 USC

§1401(b)(2) & (3). In any contest, the arbitrator's findings of fact would be

entitled to a strong presumption of correctness, 29 USC §1401(c), and his

conclusions of law would be reviewed by the court, de novo, Trustees of Iron

Workers Local 473 Pension Trust v Allied Products Corp, 872 F2d 208; 10

EBC 2576, 2579-2581 (CA 7, 1989).

If this were a conventional labor arbitration, then AAA's Voluntary Labor

5
Arbitration Rules (as amended and in effect January 1, 1988) ["Labor Rules"]

would apply. In such an arbitration, the burden of proof would be more flexible.

Elkouri & Elkouri, How Arbitration Works 3rd ed), at 277-279. The standard for

judicial review of the arbitrator's decision would be the same highly deferential

standard in either state or federal court. Port Huron Area Sch Dist v PHEA, 426

Mich 143, 150 (1986).

If this were a conventional commercial arbitration, AAA's Commercial

Arbitration Rules would apply. Typically, the claimants would have the burden

of proof under a more probable than not standard. The arbitrator's decision

could be enforced or challenged in state court under statutory arbitration

procedures. MCLA 600.5001 et seq.; MCR 3.602. Federal jurisdiction under the

U.S. Arbitration Act, 9 USC §1 et seq., would obtain only if there were

independent grounds for federal subject matter jurisdiction. General Atomic Co

v United Nuclear Corp, 655 F2d 968, 969, 970-971 (CA 9, 1981). As we shall

see, there is an underlying basis for federal jurisdiction. However, the standard

for judicial review of an arbitrator's decision in a commercial matter differs in

state and federal courts. DAIIE v Gavin, 416 Mich 407, 444 & n 11 (1982).

Strictly speaking, this is neither a conventional MPPAA, labor nor

commercial arbitration. Rather, it is a consensual arbitration to review a plan

administrator's denials of claimants' applications for pension benefits, in lieu of

6
litigation in either state or federal court under §502 of the Employee Retirement

Income Security Act of 1974 ("ERISA"), 29 USC §1132. As such, it is not even

a typical ERISA arbitration over benefits, in the sense that the statute does not

contain any express provision for the resolution of disputes at this level, through

arbitration. Compare 29 CFR §2560.503-1(b)(2) with 29 USC §1132. In a

typical ERISA matter, resort is made to arbitration at the administrative level.

Mahan v Reynolds Metals Co, 569 F Supp 482 (ED Ark, 1983). In this

particular matter, the arbitrator sits in the place of a judge to review the plan

administrator's denials. Complaint ¶12; Claimants' Post Hearing Brief at 4-5

("STANDARD OF REVIEW").

Regardless of the atypical nature of this proceeding, some rules must

apply. AAA's Commercial Rules simply are inadequate for the task at hand. In

an effort to obtain the parties' agreement, by letter dated November 8, 1989 and

filed with AAA, the arbitrator suggested adoption of the MPPAA Rules, as they

seemed the most suitable. However, he received no agreement on the point and

therefore indicated in a subsequent letter dated November 21, 1989 that he

would proceed under the Labor Rules, inasmuch as the parties had captioned

their pleadings and briefs "Labor Division." For this reason, the Labor Rules are

being applied.

7
 Standard of Review

The standard for judicial review of a plan administrator's denial of a

claim for benefits under ERISA was clarified recently by the Supreme Court in

Firestone Tire & Rubber Co v Bruch, 109 S Ct 948; 10 EBC 1873 (1989).

Under Firestone, review is de novo, unless the plan document grants the

administrator discretionary authority, in which case review is for abuse of

discretion under a reasonableness standard. De Nobel v Vitro Corp, 885 F2d

1180; 11 EBC 1569, 1576-1577 (CA 4, 1989). For the reasons just explained, I

follow Firestone.

Detail & Discussion

The Fund Document

In judging the appropriateness of a plan administrator's conduct, ERISA

makes the plan document the primary reference, at least to the extent that its

terms do not contravene ERISA itself:

[A] fiduciary shall discharge his duties with respect to a plan . . . in

accordance with the documents and instruments governing the plan
insofar as such documents and instruments are consistent with the
provisions of this title or Title IV. 29 USC §1104(a)(1).

See also 29 USC §1102. Thus, the first order of business is to analyze the

relevant provisions of the Fund document, JX 6. Unfortunately, that is not a

simple task.

The Fund dates back to 1954, and hence the governing document is a

8
collage of various amendments enacted over the intervening 35 years, in

response to collective bargaining and numerous changes in federal pension law.

Characteristically, such documents are difficult to interpret, because their

language has been pieced together from many different sources over the years.

The document governing this matter is as perplexing as any this arbitrator has

encountered.

The difficulty begins with deciphering "plan administrator." The problem

is apparent from the signature page of the Fund document:

IN WITNESS WHEREOF, the Board of Administration, . . . in its

capacity as Plan Administrator and Trustee, has caused this Agreement to
be executed on the day and year first above written acting through its
Plan Administrator.

/s/ Dean Holefca_________

DEAN HOLEFCA, Plan Administrator

JX 6 at 55.

See also JX 6 at 28, §7.1. At first glance, both the Board and Dean Holefca

appear to be Plan Administrator. The ambiguity can be resolved by resort to

ERISA and to Mr. Holefca's hearing testimony.

ERISA provides:

The term "administrator" means --

(i) the person specifically so designated by the terms of the

instrument under which the plan is operated;
(ii) if an administrator is not so designated, the plan sponsor; or

9
 (iii) in the case of a plan for which an administrator is not
designated and a plan sponsor cannot be identified, such other
person as the Secretary may by regulation prescribe.

29 USC §1002 (16)(A).

Standing alone, the statute would seem to provide little guidance, because

both the Board and Dean Holefca seem to be designated as plan administrator in

the document. At the hearing, Mr. Holefca testified that he is a contract

administrator who provides administrative services to the Fund, for a fee. 1

Pension Plan Guide (CCH) ¶¶1639, 1655. He himself does not have any

discretionary authority. The Board, he testified, is the "plan administrator"

within the meaning of ERISA, and his testimony is consistent with customary

practice. Id. at ¶¶1606, 1645. The Board is also the trustee of the Fund. JX 6 at

1; 29 USC §186(c)(5)(B); 29 USC §1103(a); 1 Pension Plan Guide (CCH)

¶¶1606, 1645.

From the foregoing, it appears that the Board is both Plan Administrator

and Trustee. In the Fund document, these terms are sometimes capitalized in

their entirety and sometimes appear with just initial capitals. In an effort to

avoid confusion, Mr. Holefca (and anyone from his office) is referred to as the

"Contract Administrator." Thus, the signature page is interpreted as though it

read "acting through its Contract Administrator. /s/ DEAN HOLEFCA,

Contract Administrator." With this understanding, we can begin to analyze the

10
relevant sections of the Fund document.

The principal provisions at issue are found in §§5.5 and 5.6:

Payment of benefits to a Participant . . . shall be in one of the following

forms: (a) in a lump sum of single payment. * * * JX 6 at 17, §5.5

Payments of benefits under this Plan shall commence at the time

determined by the Plan Administrator in its sole and absolute discretion.
Such determination shall be made in a nondiscriminatory manner. * * * If
the Plan Administrator, in its sole and absolute discretion, elects to
commence payment of benefits after a Participant has terminated covered
employment . . . , the amount of these payments shall be determined by
the vested Accrued Benefit of the Employee . . . , undiminished by the
discounted present value of said benefit. . . . JX 6 at 24-25, §5.6.

It is claimants' position that they have "terminated covered employment,"

because they no longer are covered by a collective bargaining agreement

between their employer and the Union, and that the Board abused its discretion

in denying them immediate benefits in a single lump sum. Under the plain

language of the Fund document, there can be no doubt that the Board has the

discretion to pay them benefits as requested, and hence its failure and refusal to

do so must be reviewed under Firestone's more deferential standard.

The Board purports to base its decision on an interpretation of

"terminated covered employment," which it adopted back in 1976 -- "leaves the

industry, dies, or is disabled." Respondents' Post-Hearing Brief at 9-10. In turn,

the Board purports to define "the industry" to mean "non-management

employment within the beer, wine and soft drink delivery business in the State

11
of Michigan." Id. at 10-11. Consistent with these interpretations, the Board

purportedly has adopted a policy of denying benefits to participants in claimants'

position. Id.

That the Board possesses the authority to interpret the Fund document is

beyond dispute:

The Plan Administration (sic) shall have the sole and absolute right to
interpret this instrument, including but not limited to any and all possible
ambiguities, and shall have no liability for any interpretation made in
good faith, and any such interpretation shall be at the sole and absolute
discretion of the Plan Administrator. All decisions made shall be applied
in a uniform and consistent manner. JX 6 at 38, §8.11.

The existence of this authority makes deferential review appropriate. Firestone,

10 EBC at 1879. Unfortunately for the Fund, I am unable to discern the

existence of any clear policy that has been adhered to consistently since 1976.

However, my decision does not turn upon the existence, vel non, of such

a consistent policy, or even on the application of that policy to claimants, but

rather on the Fund's failure to comply with ERISA's requirements for a

reasonable claims and review procedure. 29 USC §1133; 29 CFR §2560.503-1.

The Fund's claims and review procedure is set forth in Article XII, and the Fund

document grants the Board no discretion to disable that procedure. JX 6 at 46-

47. The Board's deliberate disabling of the procedure, in violation of ERISA,

while members engaged in their own dispute over withdrawal liability, was

inappropriate under any standard of review.

12
 The Withdrawal Liability Dispute

To understand the inappropriateness of the Board's actions, we need

additional background on the withdrawal liability dispute that paralyzed the

Board for months. When MPPAA first was enacted, the Fund's actuary valued

vested benefits under the assumption that most of them would not be paid until

participants reached age 65. However, as the beverage distribution industry

began to contract, questions arose over the effects of paying out benefits

immediately in undiscounted lump sums, instead of deferring them to age 65.

See, for example, JX 3 (Board Minutes 10/2/85).

The effects, if taken into account by the actuary in his valuation

assumptions, are dramatic. A few examples suffice to illustrate the point and to

explain why employer Board members became so upset about the payment of

benefits in undiscounted lump sums. Under the deferred method, the Fund's

liabilities would total only $1,600,000, whereas, under the immediate method,

they could total a whopping $7,000,000. JX 4 (Minutes 1/22/86) at 14. Under

the deferred method, Spadafore Distributing Company would have a withdrawal

liability of only $535, whereas, under the immediate method, its liability might

be as much as $200,000.5 JX 3 (Board Minutes 10/2/85) at 11-13.

From these examples, the source of the employer Board members'

5
The actuary made a wag that it might be as high as $200,000. He later revised his wag to $50-60,000. JX 5
(Board Minutes 5/9/86) at 9. In actuarial parlance, a “wag” is a wild ass guess.

13
concern is clear. Their concern, however well founded, provided no basis for

bringing the Fund's claims and review procedure to a halt. Their clear duty was

to Fund participants and beneficiaries, not to the employers. 29 USC

§1104(a)(1); NLRB v Amax Coal Co, 453 US 322, 2 EBC 1489 (1981).

The dissension among Board members is chronicled in the preamble to

the Settlement Agreement:

WHEREAS, on April 14, 1986, at a duly called, convened and held

meeting of the Trustees, the Trustees deadlocked on a motion duly made
and seconded by the Union Trustees dealing with actuarial assumptions
used by the Plan; and

WHEREAS, on November 24, 1986, at a duly called, convened and held

meeting of the Trustees, the Trustees deadlocked on a motion duly made
and seconded by the Employer Trustees dealing with a change in Plan
design and in the Plan document; and

WHEREAS, the Trustees thereafter initiated deadlock arbitration

proceedings in accordance with Section 302(c) of LMRA and the Plan
document; and

WHEREAS, the Trustees, mindful of their fiduciary obligations to the

Plan participants and their beneficiaries, have simultaneously pursued a
compromise settlement and resolution of the deadlock disputes and have
succeeded in doing so; and

WHEREAS, the Trustees desire to set forth the terms and conditions of
their said settlement and resolution as hereinafter more fully set forth. JX
29 at 3-4.

Disabling of the Fund's Claims and Review Procedure

On July 28, 1987, Robert J. Godfrey, a fellow Union employee at West

Side and also a participant in the Fund, then similarly situated with claimants,

14
applied for a lump sum benefit and received a check for $31,570.87, the very

next day. JX 25. Following payment of Mr. Godfrey's claim, the Board revoked

the Contract Administrator's authority to process benefit applications. When

claimants inquired about their benefits, they were told that the Fund was

"frozen" and that applications could not be processed. Under cross-examination,

the Contract Administrator admitted providing claimants with misinformation,

to discourage their applications. He further testified that employer Board

members threatened to sue him if he processed applications for lump sum

benefits.

That the Fund's claims and review procedure ground to a halt, at least

insofar as claimants are concerned, seems difficult to deny. Indeed, in a letter

dated February 3, 1988, to former West Side participant, Ronald Dressler, the

Contract Administrator wrote:

This letter is written in response to your request that I confirm our

telephone conversation last month with respect to the current status of
your benefit request.

As discussed with Mr. Holefca previously, the Management Trustees

presented a motion to the Board requiring that benefit payments no
longer be paid immediately without discount but rather be paid (1) at age
65 without discount OR (2) immediately WITH discount.

After discussing Management's motion, the matter was voted upon by

Trustee. Because the issue was deadlocked, an arbitration of
Management's motion has been scheduled for February 25th and 26th in
Chicago.

15
 As you and I discussed, the Management Trustees have presently
revoked their automatic approval for the immediate payment of
nondiscounted benefits until such time as the arbitrator renders his
decision.

Since our conversion and as a result of Management's revocation of our

authority to pay benefits on a nondiscounted basis, Mr. Holefca requested
a written opinion from Fred Foley, legal counsel for the Michigan State
Brewers Plan, as to whether or not this office has the authority to pay
benefits in view of the Management Trustees' current position. In
response so that request, Mr. Foley has provided a written opinion that
our office would be remiss if we paid benefits to any Plan participant in
view of the current circumstances.

As stated earlier, the arbitration proceedings are scheduled for the 25th
and 26th of this month. It is expected that the arbitrator's decision will be
known shortly thereafter at which time we will be able to advise you
when payment of your benefit will occur. JX 24.

The dispute among Board members was not resolved until the Settlement

Agreement was completed, October 31, 1988, by which time claimants had

been forced back to work by economic circumstances.

The Fund asserts that claimants never filed completed applications until

they returned to work for West Side, when they no longer were eligible for

benefits. Respondents' Post-Hearing Brief at 3-4. The easy answer to this

contention is that it would have been fruitless for claimants to have filed

applications any earlier, and the Contract Administrator told them so.

Concededly, a pension plan may make the filing of a formal application a

condition precedent to the payment of benefits, 26 CFR §1.401(a)-14; 29 CFR

§2560.503-1, but it cannot deliberately disable its claims and review procedure

16
and then set up the failure of that procedure as a defense. In particular, 29 CFR

§2560.503-1(b)(1) provides in pertinent part:

A claims procedure will be deemed to be reasonable only if it . . . is not

administered in a way which unduly inhibits or hampers the initiation or
processing of plan claims. . . .

Once the Fund's claims and review procedure was deliberately disabled, it

ceased to be reasonable, as a matter of law.

In the absence of a reasonable procedure, 29 CFR §2560.503-1(d)

provides:

If a reasonable procedure for filing claims has not been established by the
plan, a claim shall be deemed filed when a written or oral communication
is made by the claimant or the claimant's authorized representative which
is reasonably calculated to bring the claim to the attention of . . . the joint
board . . . administering the plan, or the person or organizational unit to
which claims for benefits under the plan customarily have been referred.

Thus, once the Fund's claims and review procedure was disabled, the Fund no

longer could insist upon formal applications, and claimants are deemed to have

applied for benefits when they first contacted the Contract Administrator.

Following that initial contact, the Fund, at minimum, was obligated to

process their claims within the time limits specified in 29 CFR §§2560.503-

1(e),(h). Because the claims and review procedure was disabled deliberately, the

Fund, at the very least, would be held to the minimum periods specified (no

extensions) -- 90 days for processing claims, 29 CFR §2560.503-1(e)(3), and 60

days for reviewing denials, 29 CFR §2560.503-1(h)(1)(i). Thus, a final decision

17
on claimants' claims was due no later than 150 days after claimants first

contacted the Contract Administrator. Section 2560.503-1(h)(1)(ii) is no help to

the Fund, because the Board did not meet between October 27, 1987 and

November 18, 1988, while members were preoccupied with their own

withdrawal liability dispute. JX 7 (Board Minutes 11/18/88) at 1.

The Board did not in fact begin processing claimants' claims until

November 18, 1988. JX 7 (Board Minutes 11/18/88) at 7. In a letter dated

October 26, 1988 and sent to all claimants, the Contract Administrator wrote:

Our office has previously received your Application for Payment of

Benefits along with the other forms necessary for withdrawal of you
accrued vested benefit from the Plan.

However, as previously indicated, we have been unable to process your

benefit because of a deadlocked issue between the Employer and Union
Trustees. It now appears that the Trustees have reached a compromise
settlement that effectively freezes the existing Plan and replaces this Plan
with a defined contribution plan with a 401(k) provision for current
participants.

The Settlement Agreement also allows our office to immediately process

benefit payments after submitting a participant's request to the Board of
Trustees for approval at their next meeting. We currently are attempting
to schedule a meeting for the week of November 7th.

It has come to our attention, however, that some employees of West Side
Beer, who previously were members of Local 580 (sic), may have elected
to return to West Side Beer as non-Union employees after submitting
their request for payment to our office. It is very important to note that,
pursuant to the Settlement Agreement and in accordance with the past
policy and practice of the Michigan State Brewers and Distributors
Severance and Retirement Fund, you MUST TERMINATE YOUR
EMPLOYMENT AND SEPARATE FROM THE BREWING

18
 INDUSTRY TO BE ELIGIBLE FOR RECEIPT OF YOUR BENEFIT
FROM THE PLAN. Therefore, if you currently are employed in the
brewing industry, in any capacity, you will not be entitled to receive your
vested benefit from this Plan until you actually leave the industry. JX 28,
emphasis in original.

Applicable Law

Not every procedural violation of ERISA gives rise to a substantive

remedy, Crocker v Southern Bell Telephone and Telegraph Co, 11 EBC 1707,

1713 (CA 4, 1989), and a plan's mere missing of an ERISA deadline does not,

in and of itself, entitle a participant to a windfall, Mass Mut Life Ins Co v

Russell, 478 US 134; 6 EBC 1733 (1985). Here, however, the disabling of the

Fund's claims and review procedure prevented claimants from effectively

applying for benefits, at a time when they qualified for them. Blau v Del Monte

Corp, 748 F2d 1348, 1353-1354; 6 EBC 1264 (CA 9, 1985). To see this, let us

examine their individual circumstances.

The Individual Claimants

All claimants testified at the hearing, except Beimers, who could not get

away from work. Fortunately, however, his application file, JX 33, was

introduced into evidence and provides useful information about his

circumstances. The essence of each claimant's testimony is set forth below, and

is accepted as true.

19
 Claimant John Maurice

Claimant Maurice went out on strike, June 8, 1987. He made many calls

to the Contract Administrator, inquiring about benefits, starting right after the

strike began. He was told repeatedly that the Fund was "frozen." Maurice's

contact with the Contract Administrator is documented by a letter dated

November 18, 1987, from the Contract Administrator, which states in pertinent

part:

In response to your request, I am enclosing a partially completed

Application for Payment of Benefits Form which you should date and
sign where indicated with the "x" if it is your intent to withdraw your
benefit from the Plan. We wish to remind you, however, that you may
ONLY withdraw your benefit from the Plan if you terminate employment
(which will result in a loss of seniority), transfer to a management
position with your employer, are permanently and totally disabled or die.
JX 32; emphasis supplied.

Maurice returned to work at West Side on May 11, 1988, due to financial need.

He completed and filed an application for benefits, with the Contract

Administrator, that same month.

Claimant Dennis Captain

Claimant Captain stopped working June 8, 1987, because of the strike.

He, too, received an application for benefits, in September of 1987. JX 35 (letter

9/18/87 from Contract Administrator). Captain claims that he filed an

application in October of 1987, but no documentation of the event was

produced. On March 29, 1988, he returned to work for West Side. He

20
completed and filed an application for benefits between April and September of

that year.

Claimant Donald Yost

Claimant Yost stopped working June 8, 1987. When the strike began, he

mentioned to his wife that he wanted severance benefits from the Fund. With

her assistance, he obtained a benefit application from the Contract Administrator

in October of 1987. He promptly completed and mailed the application to the

address on the form. In the meantime, however, the Contract Administrator

moved, and the application was returned to Yost, four weeks later by the Post

Office. Mrs. Yost telephoned the Contract Administrator during the first week

of November 1987, to get the new address, and resubmitted the application,

although no evidence of this application was produced. When Mrs. Yost

inquired as to why her husband's benefits were not forthcoming, she was told

that the Fund was "frozen."

Yost (DOB 5/16/40) attempted to find other work but was "too old to get

another job." He returned to work for West Side on January 8, 1988, because he

"needed money." Between June and September of 1988, Yost completed and

filed an application for benefits. He sustained a work related injury on

September 18, 1989, and his employment status is uncertain.

21
 Claimant Martin Van Dyke

The case of claimant Van Dyke, who has only partial use of his left arm,

is especially compelling. He, too, stopped working because of the strike, June 8,

1987. While off work, he sustained injury to his leg. Because of the strike, his

medical benefits were terminated, and he was forced to pay $15,000 for medical

treatment, out of his own pocket. In January of 1988, he learned that the Fund

was "frozen." He remained in a cast as late as February of 1988.

Faced with the loss of all the material possessions he had accumulated

over 36 years, he was forced to seek work, but couldn't find any other, because

of his age (DOB 1/5/32). In May of 1988, out of desperation, he returned to

West Side, agreeing to work "in any capacity." Van Dyke testified that if he had

received benefits from the Fund, he would not have returned to work.

In Van Dyke's case, it is not perfectly clear that 150 days elapsed between

his initial attempts to obtain benefits and his return to work at West Side, but I

do not read 29 CFR §2650.503-1 as granting pension plans a 150-day grace

period during which they may toy with participants, with impunity. There is a

distinct difference between missing a deadline inadvertently and flouting the

law. As the case of Robert Godfrey vividly illustrates (JX 24), before it was

disabled, the Fund's application procedure operated with incredible efficiency,

with claims being processed and benefits paid in a matter of days. The Fund

22
document expressly requires equality of treatment, JX 6 at 24, §5.6

("nondiscriminatory"); id. at 38, §8.11 ("uniform and consistent"), and Van

Dyke was denied equality of treatment with Godfrey. The Fund's disparate

treatment of Van Dyke cannot be sustained, even under a deferential standard of

review. Dante v Lewis, 312 F2d 345 (CA DC, 1962);6 Ricciardi v Ricciardi

Profit Sharing Plan, 7 EBC 1470, 1474 (D NJ, 1986); Dennard v Richards

Group, Inc, 681 F2d 306, 315, 3 EBC 1769 (CA 5, 1982).

Claimant Richard Beimers

Beimers was the only claimant who did not attend the hearing. However,

from his file, we may infer that he did not return to work at West Side until

sometime after September 26, 1988, because his Application for Payment of

Benefits indicates "0" hours worked during 1988, through that date; moreover,

his Application shows that West Side verified the information he supplied. JX

33. Thus, Beimers seems to have suffered longest from the Fund's fabled

"freezing." He and the other claimants are entitled to benefits, as a result.

Interest on Lump Sums

Entitlement to interest on overdue benefits is not a clear-cut issue under

ERISA. Freedman v Wallace Steel, Inc Profit Sharing Trust, Pension Plan

6
Danti frequent is named as source of the arbitrary and capricious standard of review. Fraser Shipyards, Inc. and
IAM National Pension Fund, 7 EBC 2562, 2569-2570 (Arb, 1986); aff'd and enforced 9 EBC 2484 (D DC, 1988).
To the extent that cases decided under the arbitrary and capricious standard comport with Firestone's
reasonableness standard, they are still good law. Firestone, 10 EBC at 1876 ("unreasonably, or as it came to be
said, arbitrarily and capriciously"); De Nobel, 11 EBC at 1574-1575, 1576-1577.

23
Guide (CCH) ¶23,733K (ND NY, 1987). However, in settling their differences,

Board members recognized that many benefit applications had been

unjustifiably delayed and, in the Settlement Agreement, agreed to pay interest:

The Employer Trustees will immediately approve all outstanding benefit

applications and continue to do so on a timely basis as the process of
finalizing and implementing the settlement continues. Participants whose
applications for benefits were properly completed and filed during the
pendency of the deadlock arbitration but were not processed, approved
and paid until after the date of the execution of this Agreement shall be
paid interest for the time and in the amount described in Section 2(d) of
this Agreement. JX 29 at 15, ¶6.

Thus, claimants are entitled to interest on their lump sum benefits.

The parties did not present to the arbitrator any issues regarding the

specific amounts of claimants' lump sum benefits.7 The parties shall have thirty

(30) days following receipt of this opinion, within which to confer and to agree

upon the amount of each claimant's benefit due from the Fund and upon the

amount of interest due each claimant. If the parties need additional time, they

jointly may agree to an extension by filing a stipulation with the arbitrator and

with AAA. If the parties are unable to agree upon benefits and interest within

the time specified, they shall apply to the arbitrator for resolution of all

remaining issues, so that this matter may be brought to a final conclusion.

Expenses of the Arbitration

Labor Rules §44 provides in pertinent part:

7
Letter 9/29/89 to arbitrator from claimant's counsel, cc: respondents' counsel.

24
 Expenses of the arbitration . . . shall be borne equally by the parties,
unless they agree otherwise, or unless the arbitrator, in the award,
assesses such expenses or any part thereof against any specified party or
parties.

The Fund shall bear the expenses of this arbitration. Because authority to award

attorney's fees is sparingly granted, Alyeska Pipeline Service Co v Wilderness

Society, 421 US 240 (1975); G & D Co v Durand Milling Co, 67 Mich App 253

(1976), I decline to interpret "expenses" to encompass attorney's fees. Cf.

MPPAA Rules §38 (express authority to award attorney's fees).

The Contract Administrator

In the caption of their Complaint, claimants describe Dean Holefca as the

Fund's "Trustee." As was explained at the outset, Mr. Holefca is employed as a

contract administrator and does not serve as trustee. Moreover, nowhere in their

Complaint or briefs do claimants specifically seek any relief from Mr. Holefca

himself, either personally or in his representative capacity. 29 USC §1132(d)(2).

The Complaint is really against the Fund, which can sue and be sued in its own

name. 29 USC §1132(d)(1). Thus, the Complaint is dismissed with prejudice as

to Dean Holefca.

Claimants' Theories

In both their Post-Hearing Brief, dated November 13, 1989, at 13 and in

their Post-Hearing Rebuttal Brief, dated November 29, 1989, at 2-3,

respondents object to claimants' legal theory regarding the Fund's mishandling

25
of benefit claims, as being outside the scope of the Complaint. Respondents'

objections are not well taken, for several reasons. While the theory is not

articulated in the text of the Complaint proper, it is implicit in the exhibits (e.g.,

"B"-2, ¶¶-4; "C"-1 at 1-2), and, indeed, is readily apparent from EXHIBIT "B"-

1, a letter from the Contract Administrator himself, virtually identical to JX 28.

The law is settled that attachments to a complaint are part and parcel of the

complaint and even may be controlling. Mengel Co v Nashville Paper Products

and Specialty Workers Union No. 513, 221 F2d 644, 647 (CA 6, 1955); F R Civ

P 8(f).

Even if claimants' theory were not implicit in their Complaint, a large

part of the hearing was taken up with testimony about claimants' difficulties

traversing the Fund's claims and review procedure and about being misled into

thinking that the Fund was "frozen," when in truth it was not. All of this

testimony was received without objection. F R Civ P 15(b); MCR 2.118(C).

Objections, to be sustained, must be timely, Fraser Shipyards, 7 EBC at 2568,

and respondents' objections were not voiced until long after the hearing was

over. See also Wolf v National Shopmen Pension Fund, 728 F2d 182; 5 EBC

1257 (CA 3, 1984).

Finally, respondents hardly can claim surprise over claimants' theory or

even over its adoption as the basis for decision in this matter. The Settlement

26
Agreement is a veritable mea culpa for the inexcusable delays in processing

applications and paying benefits, caused by Board members' own withdrawal

liability dispute.

The Fund's Policy on Payment of Lump Sum Benefits

The Fund's policy regarding the immediate payment of undiscounted

lump sums has been revamped by the Settlement Agreement [JX 29 at 6, ¶(d)]

and may require further revamping, once the new regulations under IRC

§411(d)(6) take effect, January 1, 1990. Thus, little would be gained by an

extensive discussion of the policy, at this time. The confusion that arose in the

past may have stemmed from the difference between the language of the Fund

document (JX at 25, §5.6 -- "terminated covered employment") and the

language in which the Fund couched its policy (JX 3 at 12 -- "separation from

the industry"). See also JX 6 at 5, §3.1. In general, termination of covered

employment and separation from the industry have different connotations.

Compare 29 CFR §2530.210(c)(3)(ii) & (iii) with 29 USC §1053(a)(3)(B)(ii).

The disparity in language may account for the Contract Administrator's remarks

in letters dated December 13, 1988 and sent to claimants:

Please note, however, that because there appear to be ambiguities in the

Trust document, the Plan's attorney has been asked to provide the Board
with a written legal opinion as to whether the Board's practice as stated
above is in conflict with the terms of the Plan document. If the Board's
policy IS found to be in conflict with the Plan document and it is
determined that you ARE entitled to the immediate payment of your

27
 benefit, our office will immediately provide you with the balance of the
forms, if any, necessary for the withdrawal of you benefit. JX 32;
emphasis supplied.

A few examples suffice to illustrate why I am unable to discern any clear

policy regarding the payment of lump sum benefits. At a Board meeting held

January 22, 1986, the Contract Administrator explained:

[I]f an employee terminates from an employer who is currently making

contributions to the Plan, the non-discounted value of his accrued vested
benefit is paid immediately, even if the employee transfers employment
to another employer in the industry, not covered by the collective
bargaining agreement. However, if while an employer was participating
in the Plan his employer withdraws, the non-discounted value of his
accrued vested benefit is not paid until death, retirement or termination
from the industry. JX 4 at 24-25.

Despite this seemingly authoritative statement by the Contract Administrator, in

their Post-Hearing Rebuttal Brief at 6, respondents assert:

In fact, one employee who leaves employment with one covered

employer and secures new employment with another employer that is "in
the industry," but not a participant in the Michigan Brewers Plan, would
be denied benefits because he had not separated from the "industry." The
requirement that a person "separate from the industry" before receiving
benefits, was not designed to apply merely to group withdrawals, but to
individual situations as well.

At the hearing, the Contact Administrator testified that the Settlement

Agreement changed the prior policy and placed participants who move into

management positions on the same footing as those who move to other

noncovered employment, yet in respondents' Post-Hearing Brief at 12 they

write:

28
 [T]he rules for determining eligibility for payment of benefits is the same
both before and after the Settlement Agreement was adopted.

I am unable to reconcile these and other inconsistencies in the Fund's purported

policy regarding the payment of lump sum benefits.

It suffices to say that claimants, when they first sought benefits from the

Fund, were in the same position as Robert Godfrey; they were unemployed8 and

hence had both terminated covered employment and separated from the

industry. If the Fund's claims and review procedure had not been deliberately

disabled, claimants would have been paid their benefits within a matter of days,

like Mr. Godfrey.

I am not unmindful of the difficulty a plan administrator may face in

determining when a strike represents only a temporary interruption of

employment and when it marks the termination of employment, but my decision

does not turn on this difficulty, which may be alleviated in the future for the

Board, by the Settlement Agreement. Nor am I unmindful of the Board's duty to

husband Fund assets.9 In this matter, however, the Fund concedes having paid at

least twelve (12) other former participants from West Side. Respondents' Post-

Hearing Brief at 5. Moreover, the Board paid out of the Fund at least

$145,927.86, to cover expenses generated by its members' own internal dispute

8
Claimants had been "discharged," according to Mr. Pillow. See footnote 2 supra.
9
Under certain circumstances, the payment of lump sum benefits is restricted by law. 29 USC §§1341a(c)(2),
(f)(1), 1421(c).

29
over withdrawal liability. JX 8 (Board Minutes 5/12/89) attachment.

Conclusion

For all the foregoing reasons, claimants are entitled to their benefits, with

interest.

Dated: December 9, 1989 ________________________

E. Frank Cornelius, Arbitrator

30