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MCHUGH v. TEAMSTERS PENSION TRUST FUND OF PHILADEL

July 2, 1986

EDWARD L. McHUGH, JAMES C. McHUGH, GERARD J. McHUGH, CHRISTINA McHUGH, individually and as Administratrix of the Estate of ROBERT C. McHUGH, Deceased, McHUGH BROTHERS EQUIPMENT CORPORATION, McHUGH BROTHERS CRANE RENTALS, INC.
v.
TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, TEAMSTERS HEALTH AND WELFARE FUND OF PHILADELPHIA AND VICINITY, GENERAL TEAMSTERS, CHAUFFEURS, HELPERS AND YARDMEN, LOCAL UNION NO. 470



The opinion of the court was delivered by: LUONGO

 In 1983, defendant Teamsters Pension Trust Fund denied plaintiff Edward L. McHugh's application for early retirement benefits. Plaintiffs subsequently brought this action seeking a determination that Edward L., James, Gerard and Christina *fn1" McHugh are eligible to receive benefits from the Teamsters Pension Trust and Health and Welfare Funds. In the alternative, plaintiffs McHugh Brothers Equipment Corporation and McHugh Brothers Crane Rentals, Inc. seek reimbursement for all contributions made to the Funds on behalf of the individual plaintiffs. Presently before me are cross-motions for summary judgment filed by the plaintiffs and by the defendant Funds. For the reasons stated below, the Funds' motion for summary judgment will be granted and plaintiffs' motion will be denied.

 I. Factual Background

 The parties have submitted over 100 exhibits in support of their motions. From those exhibits I have elicited the following background facts, which I believe are not in serious dispute. *fn2"

 Edward P. McHugh, the father of Edward L., James, Gerard and Robert McHugh, founded Bucks County Construction Company (Bucks County) in approximately 1928. In 1968, Bucks County was succeeded by McHugh Brothers Crane Rentals, Inc. (Crane Rentals). McHugh Brothers Equipment Corporation (Equipment Corporation) and McHugh Brothers Heavy Hauling (Heavy Hauling) are wholly owned subsidiaries of Crane Rentals. Edward L., James, Gerard and Robert McHugh, together with their sister Adelaide Mary McHugh, acquired ownership of the various McHugh entities by inheritance from their parents. They have held stock in one or more McHugh companies since 1968. At least since 1973, each of the McHughs has owned a 20% interest in Crane Rentals, the parent company.

 Edward L. McHugh has worked for the McHugh companies since 1945 and has been the maintenance shop supervisor since 1962. His salary was paid by Bucks County until 1968 and since then has been paid by Equipment Corporation. He has been Vice-President and Director of one or more McHugh companies since 1969.

 James McHugh has worked for the McHugh companies on a full-time basis since 1952. He has handled a variety of responsibilities, including field and office work, sales, and bidding and planning jobs. Since 1970, he has spent the majority of his time operating Heavy Hauling and the New Hope and Ivyland Railroad, which Heavy Hauling leases. Since 1976, he has also been responsible for the financial affairs of the McHugh companies. James McHugh was Secretary/Treasurer and Director of Bucks County from 1961 until 1968 and of Crane Rentals and Equipment Corporation from 1968 or 1969 to 1973. He has been President of Heavy Hauling since 1971.

 Gerard McHugh started working for Bucks County in 1962. He acted as office manager from 1967 to 1971, first for Bucks County and then for Crane Rentals. He went to work for Equipment Corporation in 1971. His responsibilities included inspecting cranes for the Department of Labor, doing electrical work, taking care of billing and paperwork relating to vehicle licenses, and driving the companies' 96 wheel trailer. At various times between 1969 or 1970 and 1982, Gerard McHugh has acted as Assistant Secretary/Treasurer or Vice-President and Director of Equipment Corporation and Crane Rentals. Since May 17, 1982 he has been the President of the two companies.

 Robert McHugh began to work for a McHugh company at some time before 1962. At Bucks County he dispatched equipment. After 1968, he worked as operations manager of one or more McHugh companies. Robert McHugh was President and Director of one or more McHugh companies from 1969 until his death in 1982.

 In the course of their work for the McHugh companies, all of the McHugh brothers have at various times and to various extents driven trucks and performed other teamster work. In 1964, they joined General Teamsters, Chauffeurs, Helpers and Yardmen, Local Union No. 470. At that time Bucks County was a member of the Contractors Association of Eastern Pennsylvania and was covered by a collective bargaining agreement, known as the Five County Agreement, between the Contractors Association and Local 470. Bucks County and, after 1968, Crane Rentals were members of the Contractors Association and covered by successive Five County Agreements until 1977. Although Crane Rentals has dealt directly with Local 470 since 1977, the collective bargaining agreements between Crane Rentals and Local 470 have been basically the same as the contemporaneous Five County Agreements.

 Throughout the relevant time period, the applicable Five County Agreements and shop agreements have required employers to contribute to the Teamsters Pension Trust and Health and Welfare Funds for hours worked by covered employees. The Pension Trust and Health and Welfare Funds are multiemployer trust funds established in the 1950s. Under the declarations of trust for both Funds, the trustees *fn3" have the power to establish the policies and rules governing the Funds and to promulgate written benefit plans. The plans promulgated by the trustees pursuant to their authority have consistently provided that an individual, in order to participate in the Funds, must be an employee whose employment is covered by a collective bargaining agreement. For example, the Pension Plan in effect when the McHughs joined Local 470 provided that "an individual shall be considered in employment with an Employer while carried on the records of the Employer as an Employee in active employment in the collective bargaining unit which at the time of reference was represented by the Union. . . ." Teamsters Pension Plan of Philadelphia and Vicinity at Art. I, § K(1) (effective Jan. 1, 1963). A pension plan description distributed to members in or about January of 1976 stated that "the Plan is maintained for the exclusive benefit of those employees who are in collective bargaining units which are covered by written collective bargaining agreement(s). . . ." Teamsters Pension Plan of Philadelphia and Vicinity Summary Plan Description at i (effective Jan. 1, 1976). See also id. at 3. The Pension Plans in effect for each year in which the McHughs contributed to the Funds contained comparable provisions. Similarly, benefit booklets distributed by the Health and Welfare Fund throughout the relevant time period have made clear that eligibility for benefits is contingent on being a member of a class of employees covered by a collective bargaining agreement.

 The McHugh companies made contributions to both Funds on behalf of the four McHugh brothers from approximately 1965 until 1983. Edward L. McHugh applied for early retirement pension benefits in 1981. The Pension Fund administrator denied his application and, after a hearing, a panel of Fund trustees affirmed the denial. In a written decision issued in April of 1983, the panel held that Edward McHugh as an owner, officer and supervisor of the McHugh companies was an employer, not an employee covered by a collective bargaining agreement. Since the Pension Fund is solely for the benefit of employees, the panel concluded that Edward McHugh was ineligible to receive a pension.

 Apparently, all of the McHughs were subsequently informed that they could not qualify for benefits from either the Pension Fund or the Health and Welfare Fund. They thereupon instituted this lawsuit.

 II. The Parties' Contentions

 The Funds argue that they are entitled to summary judgment because under § 302(c)(5) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c)(5), an employer-funded pension or health and welfare plan must be for the exclusive benefit of employees. They rely on the definition of "employee" in 29 U.S.C. § 152(3), which specifically excludes "any individual employed as a supervisor." They also point to the documents governing the Funds, which define the class of beneficiaries as those employees covered by a collective bargaining agreement. According to defendants, the McHughs are employers and supervisory personnel, not collective bargaining unit employees, and are thus not entitled to receive benefits from the Funds.

 Plaintiffs, in support of their cross-motion for summary judgment, insist that the LMRA does not prohibit an employer and a union from agreeing to include management personnel in a collective bargaining unit. They contend that the McHughs, even if supervisors, are eligible for benefits because they are members of Local 470, perform bargaining unit work, and are not specifically excluded from coverage by the Funds' governing documents or the applicable collective bargaining agreements. Plaintiffs also contend that Local 470 agreed to treat the McHughs as covered employees, and that the Funds therefore lack standing to contest their eligibility and are estopped from denying them benefits. Finally, if the individual plaintiffs are found ineligible, Crane Rentals and Equipment Corporation seek reimbursement for all contributions made to the Funds on behalf of the McHughs.

 III. Discussion

 A. Standard of Review

 A plaintiff who challenges a denial of benefits by the trustees of an employee benefit plan must establish that the trustees' decision was arbitrary and capricious. Gaines v. Amalgamated Insurance Fund, 753 F.2d 288, 289 (3d Cir. 1985); Adams v. New Jersey Brewery Employees' Pension Trust Fund, 670 F.2d 387, 397-98 (3d Cir. 1982). The trustees' interpretation of plan provisions "should be upheld even if the court disagrees with it, so long as the interpretation is ...


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