Tapley v. Locals 302 and 612

When reviewing trustees’ construction of a retirement plan term that frustrates the availability of earned retirement benefits, courts may “identify and reject any interpretation that is arbitrary, misfocused and contrary to the intent of those responsible for its terms.”

James Tapley and Michael Chapman had careers as skilled mechanics in Alaska. As members of the International Union of Operating Engineers, Tapley and Chapman opted for early retirement at the age of fifty-one. Under their collectively bargained pension plan, participants that take early retirement must completely refrain from “Post-Retirement Service of 51 or more hours during any calendar month” or lose their retirement income. After reviewing the jobs that Tapley and Chapman had taken after retiring, the Trustees of the retirement plan (“Trustees”) decided to revoke their income. The Trustees used a “duties and skills” test that reviewed current job descriptions and dispatch cards describing assignments and identifying similarities between the jobs “in terms of duties, skills, and general competencies.” The district court affirmed the Trustees’ conclusion. Tapley and Chapman jointly filed an appeal in the District Court of Alaska. The Ninth Circuit held that the Trustees’ “construction of the Plan terms conflicts with the plain language, render[ed] the term “job classification” meaningless, and contravenes the purpose of the Plan.” The panel also pointed out instances where the Trustees had emphasized similar duties between Tapley’s pre- and post-retirement work while ignoring fundamental differences. The panel held that Trustees had abused their discretion. The court returned the matter to the Trustees for reevaluation in a manner consistent with the court’s opinion on an open record. REVERSED.