821 F.

2d 461

Thomas J. REDMOND, Jr., Appellant,

v.
BURLINGTON NORTHERN RAILROAD COMPANY
PENSION PLAN;
Burlington Northern Railroad Company, a corporation; and
The First Trust Company of St. Paul as trustee for the
Burlington Northern Railroad Company Pension Plan,
Appellees.
No. 86-5446.

United States Court of Appeals,

Eighth Circuit.
Submitted May 13, 1987.
Decided June 8, 1987.
Rehearing Denied July 15, 1987.

Wayne H. Olson, Minneapolis, Minn., for appellant.

Michael H. Streater, St. Paul, Minn., for appellees.
Before FAGG, WOLLMAN and TIMBERS,* Circuit Judges.
TIMBERS, Circuit Judge.

Appellant Thomas J. Redmond ("appellant") appeals from a judgment entered

September 29, 1986 in the District of Minnesota, Diana E. Murphy, District
Judge, which granted summary judgment to appellees Burlington Northern
Railroad Company ("the railroad" or "Burlington Northern") and others
(collectively "appellees")1 with respect to appellant's claim in this breach of
contract action that appellees miscalculated the amount of his pension benefits.

Appellant was employed by the railroad or its corporate predecessors or

subsidiaries from September 1945 until he resigned in March 1957 to attend a
seminary ("first period of service"). He worked again for the railroad from
February 1960 until his early retirement in December 1982 ("second period of

service").2 Appellees calculated appellant's pension benefits based only on his

second period of service. Under appellees' interpretation of the railroad's
pension plans, appellant's "break in service" from March 1957 to February
1960 made him ineligible for benefits resulting from his first period of service.
3

In the instant action, appellant sought to compel appellees to include his first
period of service in calculating the amount of his pension benefits.3

The district court, in granting summary judgment to appellees, held that

appellees properly had excluded appellant's first period of service and that there
were no genuine issues of material fact.

On appeal, appellant claims, first, that, under a correct interpretation of the

railroad's pension plans, he is entitled to benefits for all his years of service;
second, that appellees' interpretation of the plans does not comply with Sec.
203(b)(1)(F) of the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. Sec. 1053(b)(1)(F) (1982); third, that there is a genuine
issue of material fact as to whether appellees' allegedly nonuniform application
of the pension plans' break in service rules constituted arbitrary treatment of
appellant; and, fourth, that appellant was denied effective discovery with
respect to his claim of arbitrary treatment.

We hold, first, that appellees' interpretation of the pension plans was neither
arbitrary nor capricious and therefore must be sustained if the result of that
interpretation does not violate ERISA; second, that appellees' interpretation of
the pension plans complies with ERISA; third, that appellant's claim of
arbitrary treatment raises no genuine issues of material fact; and, fourth, that
appellant's claim of denial of discovery is without merit.

We affirm.

I.
8

We summarize only those facts believed necessary to an understanding of the

issues raised on appeal.

During his first period of service, appellant worked as a union employee in

various clerical and stenographic positions. Since the railroad's pension plans
applied only to "salaried" employees--i.e., non-union employees--appellant did
not participate in those plans during his first period of service. He therefore had
accrued no pension benefits by the time he resigned in 1957.

10

On his return to the railroad in 1960, appellant again worked as a union

employee until April 1, 1964, when he became a salaried employee. He
participated in the railroad's pension plans as a salaried employee in various
stenographic and secretarial positions until he retired on December 31, 1982.

11

The issues on the instant appeal turn primarily on the break in service rules of
the respective versions of the railroad's pension plans in effect while appellant
was a salaried employee. During that period, appellant participated in the Great
Northern Pension Plan as amended January 1, 1951 ("the 1951 Plan") and as
amended September 1, 1969 ("the 1969 Plan"); he also participated in the
Burlington Northern Pension Plan effective March 2, 1970 ("the 1970 Plan"),
which was amended effective December 31, 1975 ("the 1975 Plan"), January 1,
1979 ("the 1979 Plan"), January 1, 1981 ("the January 1981 Plan"), and
September 14, 1981 ("the September 1981 Plan").

12

The plan in effect in April 1964--the 1951 Plan--provided that benefits were to
be calculated based on each participant's period of "continuous service" as an
"employee". "Employee" was defined as "anyone ... regularly employed" by the
railroad. Since that definition did not distinguish between union and salaried
employees, appellant became entitled to benefits for his previous years of
"continuous service" as a union employee when he became a participant in the
1951 Plan on April 1, 1964. "Continuous service" was defined as
"uninterrupted service as an Employee". Regarding breaks in service, the 1951
Plan provided in pertinent part that "termination of service prior to retirement
shall be deemed a break in continuous service and upon re-employment the
former Participant shall be treated as a new Employee."

13

The 1969 and 1970 Plans contained the same provisions regarding "continuous
service" and "break[s] in continuous service" as did the 1951 Plan, with one
exception: the 1969 and 1970 Plans applied retroactively a new rule that
resignation followed by reinstatement within one year did not constitute an
"interruption of continuous service".

14

The railroad amended the 1970 Plan to create the 1975 Plan in order to comply
with ERISA. Under the 1975 Plan the benefits were based on each participant's
"credited service". Under Article III of the Plan, the method for calculating the
amount of "credited service" differed depending on whether the service was
performed before or after the effective date of the 1975 Plan:

"Section 3.2 Credited Service:

15
***
16

17

(a) Credited Service Prior to the Effective Date: For a Participant as of the
Effective Date, who had been covered under the prior provisions of the Plan,
the Participant's last period of continuous employment with the Employer prior
to the Effective Date shall be counted as Credited Service, including such
periods of Authorized Leave of Absence, and other periods, credited under the
provisions of the Plan in effect prior to the Effective Date.

18

(b) Credited Service From and After the Effective Date: All service as an
Employee shall be Credited Service. In addition, service described in Section
3.4 shall be Credited Service. In the event a Participant ceases to be an
Employee but remains in the employ of an Employer, he shall receive no
Credited Service until he is again an Employee.

19

Section 3.3 Restoration of Credited Service: If, after the Effective Date, a
former Employee re-enters the service of an Employer, or resumes service as an
Employee, he shall again become a Participant after completing 1,000 hours of
service within a consecutive twelve-month period with an Employer or
Employers and such 1,000 hour period of service shall be counted as one year
of Credited Service, and the number of years of Credited Service that were
creditable under the Plan to such former Employee shall be restored."

20

Both the 1979 and January 1981 Plans contained provisions nearly identical to
those in the 1975 Plan with respect to the determination of the amount of
credited service.

21

Under the plan in effect at the time appellant retired--the September 1981 Plan-pension benefits were based on a participant's "years of credited service".
Article 2(9) of the Plan provided in relevant part that years of credited service
"shall include [a participant's] credited service under the [January 1981 Plan]".

22

The railroad informed appellant on the date of his retirement that his pension
benefits would be calculated on the basis of his second period of service.

23

In letters to appellant dated January 13 and March 14, 1984, the Chairman of
the railroad's pension committee explained the railroad's interpretation of the
pension plans and its reasons for not including appellant's first period of service
in calculating his pension benefits. According to the railroad, each Plan in
which appellant participated contained provisions making appellant ineligible
for benefits based on his years of service preceding his break in service. Since
each successive plan preserved the service credited immediately prior to the
effective date, the railroad examined all the plans in which appellant

participated in reaching its conclusion. The September 1981 Plan incorporated

the method of calculation set forth in the January 1981 Plan. The January 1981
Plan, as well as the 1975 and 1979 Plans, provided that a participant's "last
period of continuous employment" shall be counted as "credited service".
Under the railroad's interpretation, appellant's first period of service was not
part of his last period of continuous service because appellant had a three year
break in service between his first and second periods of service. With respect to
the plans preceding the 1975 Plan, the letters of January 13 and March 14, 1984
stated that appellant's break in service in excess of one year constituted a "break
in continuous service" and therefore on his re-employment in 1960 he was
"treated as a new Employee."
24

Appellant commenced the instant action in January 1985. Jurisdiction was

based on 26 U.S.C. Secs. 401, 411 (1982), 28 U.S.C. Sec. 1331 (1982), and 29
U.S.C. Sec. 1132(a) and (e) (1982). In May 1985, the district court ordered that
all discovery be completed by March 3, 1986. In May 1986, the railroad filed a
motion for summary judgment on behalf of all appellees. Appellant opposed the
motion and cross moved for summary judgment.

25

In a report filed July 31, 1986, Magistrate Bernard P. Becker recommended that
summary judgment be granted to appellees. Appellant filed objections to the
magistrate's report on August 15, 1986.

26

In a memorandum opinion filed September 29, 1986, the district court, after
reviewing the record de novo and making an independent determination,
ordered that appellee's motion be granted. Judgment was entered the same day.
This appeal followed.

27

For the reasons set forth below, we affirm the judgment of the district court.

II.
A.
28

In this Circuit it is well established that "[c]laimants for benefits under private
pension plans may obtain judicial review of denials of their claims under
section 502 of ERISA [29 U.S.C. Sec. 1132]. Federal courts may overturn a
decision of private pension fund fiduciaries only if the decision is arbitrary,
capricious or an abuse of discretion." Lawrence v. Westerhaus, 780 F.2d 1321,
1322 (8th Cir.1985). Accord, Bueneman v. Central States, Southeast and
Southwest Areas Pension Fund, 575 F.2d 1208, 1209 (8th Cir.1978).

29

Appellant makes four arguments to support his claim that appellees'

interpretation of the pension plan was arbitrary or capricious. Each argument is
based on language in the pension plans. We find none to be persuasive.

30

Appellant's first argument is based on section 3.4 of the 1975 Plan which
provided in relevant part:

31

"Section 3.4 Other Service of Periods Counted as Credited Service: Credited

Service shall also include the following:

***
32
33

(c) Uninterrupted service before or after the Effective Date [December 31,
1975] prior to becoming a Participant:

1. In the employ of an Employer other than as [a salaried employee], or

34
35In the employ of a wholly-owned subsidiary of an Employer other than as [a
2.
salaried employee], or
36Railroad service for the benefit of and with the consent or at the direction of an
3.
Employer; ...."
37

Appellant argues that, since the term "[u]ninterrupted service" is not defined by
the 1975 Plan (or by any succeeding plan), appellees acted arbitrarily and
capriciously in concluding that appellant's first and second periods of service
were not "[u]ninterrupted" by his three-year break in service. This argument is
without merit. Webster's Third New International Dictionary defines
"uninterrupted" as "continuous".4 Appellees concluded that two periods of
service interrupted by a break in service of three years are not continuous. That
conclusion was neither arbitrary nor capricious; rather, it appears to have been
compelled by the unambiguous language of the Plan.

38

Appellant's second argument is based on the version of section 3.4 set forth in
the 1979 Plan. The 1979 Plan's version of section 3.4(c) changes
"Uninterrupted service" to "Uninterrupted periods of service" (emphasis
added). Appellant argues that, since he has two uninterrupted "periods" of
service, he is entitled to benefits for both, despite his break in service. We
disagree. Such an interpretation of section 3.4(c) would be inconsistent with
section 3.2(a) of the 1979 Plan, which provides that "the Participant's last
period of continuous employment with the Employer prior to the Effective Date
shall be counted as "Credited Service". A more reasonable interpretation of

section 3.4(c)--the interpretation adopted by appellees--is that the plural form of

"period" refers to the list of items to be included as credited service under all
the subdivisions of section 3.4(c); that is, a single participant could have a
period of service each as a union employee (section 3.4(c)(1)), in the employ of
a subsidiary of the railroad (section 3.4(c)(2)), and in railroad service for the
benefit of and with, or at, the direction of the railroad (section 3.4(c)(3)). It is
not an arbitrary or capricious interpretation of section 3.4(c) to conclude that
such "periods" of service count as credited service as long as, in the aggregate,
they are "uninterrupted".
39

As his third argument, appellant asserts that he is entitled to benefits for his
first period of service under section 3.3 of the 1975 Plan:

40
"Section
3.3 Restoration of Credited Service: If, after the effective date, a former
Employee re-enters the service of [the railroad] ... he shall again become a
Participant after completing 1,000 hours of service within a consecutive twelvemonth period with [the railroad] ... and the number of years of Credited Service that
were creditable under the Plan to such former Employee shall be restored."
41

Appellant argues that his first period of service should constitute credited
service since, during his second period of service, he completed in excess of
1,000 hours of service within a consecutive twelve-month period. Appellant's
argument fails for two reasons. First, by its terms section 3.3 applies only if the
former employee re-enters service "after the effective date" (December 31,
1975). Since appellant's second period of service began in 1960, he cannot seek
the protection of section 3.3. Second, appellant had no benefits to "restore"
since, when he left the railroad after his first period of service, he had accrued
no benefits.

42

Finally, appellant argues that section 3.2(a) of the Plans of 1975, 1979, and
January 1981 entitle him to benefits. That section, which we have quoted in full
above, provides that credited service "shall include" the last period of
continuous service. Since the section does not exclude periods of service before
a break in service, so appellant's argument goes, appellees' interpretation is
arbitrary and capricious. Appellant's argument, while evincing a certain
ingenuity, rests on a tortured reading of the Plans. We reject the argument.

43

Accordingly, we hold that appellees' interpretation of the pension plans was

neither arbitrary nor capricious and therefore must be upheld if its result does
not violate ERISA.

B.

44

Section 203(b)(1)(F) of ERISA provides in relevant part:

45

"(1) In computing the period of service under the [pension] plan ... all of an
employee's years of service with the employer ... shall be taken into account,
except that the following may be disregarded:

***
46
47

(F) years of service before this part [29 U.S.C. Sec. 1051 et seq.] first applies to
the plan if such service would have been disregarded under the rules of the plan
with regard to breaks in service, as in effect on the applicable date; ...."

48

29 U.S.C. Sec. 1053(b)(1)(F) (emphasis added). In other words, ERISA

provides that all years of service count towards benefits unless the pre-ERISA
plan contains rules excluding years of service preceding a break in service. As
shown above, all of the railroad's plans--both before and after the effective date
of ERISA--had break in service rules which precluded benefits for appellant's
first period of service.

49

Appellant makes several arguments, however, to support his claim that Sec.
1053(b)(1)(F) is inapplicable to the railroad's pension plans and therefore that
appellees' interpretation of the plans violates the general rule of inclusion stated
in Sec. 1053(b)(1).

50

First, appellant argues that Sec. 1053(b)(1)(F) is applicable only if the postERISA plans specifically incorporate the break in service rules of the preERISA plans. Appellant interprets Sec. 1053(b)(1)(F) to require a specific
statement of incorporation in the plan such as: "Breaks in service occurring
prior to ERISA shall be governed by the rule as to such breaks contained in the
pre-ERISA plan." Appellant's argument finds no support in the language of the
statute, its legislative history, or the case law on which appellant relies.

51

Clearly, the language of Sec. 1053(b)(1)(F) does not require a specific

statement of incorporation. It merely permits application of pre-ERISA break in
service rules to post-ERISA plans. Appellant's argument would be meritorious,
therefore, only if the legislative history provided support for the interpretive
gloss he invites us to apply. It does not. The only relevant history is found in
H.R. Conf. Rep. No. 93-1280, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code
Cong. & Ad. News 5052 (emphasis added):

"For years beginning prior to the effective date of the vesting provisions, a plan may
52

apply the break-in-service rules provided under the plan as in effect from time to
time."
53

The Conference Report, in accordance with the statutory language, says

nothing more than application of a pre-ERISA rule may be allowed. See Ponce
v. Construction Laborers Pension Trust, 628 F.2d 537, 541 (9th Cir.1980)
("ERISA specifically permits a pension plan to give effect to a break in service
that occurred prior to January 1, 1976.") (dictum) (emphasis added) (citing 29
U.S.C. Sec. 1053(b)(1)(F)).

54

Appellant places primary reliance on Snyder v. Titus, 513 F.Supp. 926

(E.D.Va.1981), to support his specific incorporation argument. There, a
participant in the employer's 1959 pension plan had incurred two breaks in
service before 1959. Under the 1959 plan, the participant was not entitled to
benefits for his service preceding his breaks in service. The first post-ERISA
plan--the one in effect at the time the participant retired--explicitly defined
break in service as a certain disruption in service occurring after the effective
date of the 1959 plan. Snyder, supra, 513 F.Supp. at 931. The employer sought
to apply the provisions of the 1959 plan to deny benefits to the participant for
his service preceding his break in service. The court, in granting summary
judgment in favor of the participant, stated:

55
"[T]he
Court concludes that nothing ... prohibits a plan from expressly providing
that a break in service in years prior to the effective date of ERISA shall be governed
by the rule in effect at the time of the alleged hiatus from covered employment.
Indeed, the Court believes that it was the intent of Congress in Sec. 1053(b)(1)(F) to
permit the adoption of such express provisions in post-ERISA pension plans. The
Court does not believe that Congress intended to permit this in the manner attempted
by the Trustees here--by positing that a gap exists and then filling the gap by
interpretation harkening back to a pre-ERISA plan. The break in service rule must be
expressly stated so that there is no room for an arbitrary and capricious interpretation
as to which rule governs a particular period of employment. Otherwise, trustees
would be able, as in this case, to dig up break in service rules from old and discarded
plans to deny pension applications, thus disappointing the reasonable expectations of
pensioners....
56

Because the 1976 plan does not expressly provide that pre-1959 breaks in
service shall be governed by the rule in the 1959 plan, the Court concludes that
Sec. 1053(b)(1)(F) does not permit the Trustees to disregard defendant's years
of covered employment prior to 1954 and in 1957 under their interpretation of
the 1959 break in service rule."

57

Snyder, supra, 513 F.Supp. at 937 (footnote omitted) (emphasis in original).

58

We do not believe that the analysis in Snyder compels the result urged by
appellant in the instant case. True, the final sentence quoted above might
appear to require a specific statement of incorporation. Other language in the
opinion, however, supports the proposition that Sec. 1053(b)(1)(F) is satisfied
if the post-ERISA plans explicitly state a break in service rule for pre-ERISA
breaks that has the same effect as the rule stated in the pre-ERISA plans.
Snyder, supra, 513 F.Supp. at 937 ("The break in service rule must be expressly
stated"). Unlike the instant case, the post-ERISA plan in Snyder treated the
participant's pre-ERISA breaks in service differently than they had been treated
in the pre-ERISA plan.

59

We hold that Sec. 1053(b)(1)(F) does not require the specific statement of
incorporation urged by appellant.

60

Second, appellant argues that, even if Sec. 1053(b)(1)(F) does not require a
specific statement of incorporation, the railroad's pension plans do not pass
muster under the statute because the pre-ERISA and post-ERISA pension plans
state different rules regarding breaks in service. This argument is without merit.
As stated above, appellant's break in service bars benefits for his first period of
service under each of the railroad's pension plans. True, the pre-ERISA and
post-ERISA plans use different language in their break in service rules. The
result of those rules vis-a-vis appellant, however, is the same under each of the
plans. We do not read Sec. 1053(b)(1)(F) to require anything more.

61

Nor are we persuaded by appellant's argument that Sec. 1053(b)(1)(F) does not
apply since the post-ERISA plans contain different rules for pre-ERISA and
post-ERISA breaks in service. Rather, that was precisely what Congress had in
mind when it enacted Sec. 1053(b)(1)(F). See Snyder, supra, 513 F.Supp. at
937; see also Dudo v. Schaffer, 551 F.Supp. 1330, 1340 (E.D.Pa.1982), aff'd
mem., 720 F.2d 661 (3d Cir.1983).

62

Finally, appellant argues that the word "uninterrupted" in section 3.4(c) of the
1975, 1979, and January 1981 Plans cannot be given its ordinary dictionary
meaning of "continuous" because then section 3.4(c) would violate Sec.
1053(b)(3)(B). That section of ERISA, which sets forth the so-called "rule of
parity", requires that an employee's years of service before any one-year break
in service be taken into account if the number of consecutive one-year breaks
are less than the aggregate number of years of service prior to the break.
Appellant does not argue that appellees' interpretation of the plans violates the

rule of parity, nor could he since Sec. 1053(b)(3)(B) applies only to postERISA breaks in service. E.g., Haeberle v. Board of Trustees, 624 F.2d 1132,
1137 (2d Cir.1980); Dudo, supra, 551 F.Supp. at 1340. Rather, appellant argues
that "uninterrupted" cannot mean "continuous" since some noncontinuous
service should be credited under the rule of parity. We are not persuaded. While
we agree that language in post-ERISA plans should be read, when possible, to
comply with ERISA, such a reading in the instant case has no bearing on the
result: whether or not service is "uninterrupted" by breaks in service covered by
the rule of parity, appellant is not entitled to benefits for his service preceding a
three-year pre-ERISA break in service.
63

Accordingly, we hold that appellees' interpretation of the pension plans, and the
result under that interpretation, comply with ERISA.

C.
64

Appellant's remaining claims need not detain us long.

65

Appellant claims that there is a genuine issue of material fact as to whether the
railroad's pension committee abused its discretion in denying him benefits for
his first period of service because the plans' break in service rules were not
applied uniformly. Specifically appellant directs our attention to a decision by
the railroad's board of directors--overruling the pension committee--to grant
pension benefits to H.R. Hudgers, who retired in 1978, for his period of service
preceding his break in service. Another employee--Taul Watanbe--apparently
was granted similar treatment. We agree with the magistrate and the district
court that these two isolated incidents, at least one of which did not result from
any action by the pension committee, do not raise a genuine issue as to whether
the pension committee acted arbitrarily.

66

We hold that the district court correctly disposed of the case by summary
judgment.

67

Appellant also claims that he was denied effective discovery and as a result was
unable fully to develop his claim of arbitrary treatment. Appellant complains of
"delays" by appellees and their "refusal to allow copying to facilitate
examination of the limited documents that were finally made available". While
we agree that a party must have an adequate opportunity to develop his claims
through discovery before summary judgment is appropriate, appellant's claim
rings hollow. Not once during 14 months of discovery did appellant request an
order to compel discovery or for an extension of time. Cf. Celotex Corp. v.

Catrett, 106 S.Ct. 2548, 2554-55 (1986) (premature summary judgment

motions can be dealt with by applying under Fed.R.Civ.P. 56(f) for additional
time to conduct necessary discovery).
68

We hold that appellant's claim that he was denied effective discovery is without
merit.

III.
To summarize:
69

We hold that appellees' interpretation of the railroad's pension plans so as to

deny appellant pension benefits for his first period of service was neither
arbitrary nor capricious. We also hold that that interpretation complies in every
respect with Sec. 203(b)(1)(F) of ERISA. We further hold that there is no
genuine issue of material fact as to whether the railroad's pension committee
acted arbitrarily in denying appellant benefits. Finally, we hold that appellant's
claim that he was denied effective discovery is without merit.

70

Affirmed.

Of the Second Circuit, by designation

The other appellees are Burlington Northern Railroad Company Pension Plan
("BPP") and The First Trust Company of St. Paul ("First Trust"), which is the
trustee of BPP

Appellant was employed by the Northern Pacific Railway Company ("Northern

Pacific") from September 1, 1945 to April 30, 1946; by the Yellowstone
National Park Company ("Yellowstone") from June to September 1946; by the
Great Northern Railway Company ("Great Northern") from October 16, 1946
to March 18, 1957; and by Great Northern and Burlington Northern from
February 16, 1960 to December 31, 1982. Northern Pacific, Yellowstone, and
Great Northern all are either subsidiaries or corporate predecessors of
Burlington Northern. Throughout this opinion, the term "the railroad" refers
either to all four entities or to the entity or entities which employed appellant
during the period of time relevant to this opinion

We set forth in the margin the monthly benefits owed to appellant based only
on his second period of service, compared to the monthly benefits owed based
on both his first and second periods of service:

Second Period
of Service
(22 years, 11
months)
-------------January 1, 1983
to March 16, 1987
After March 16, 1987

$534.21
$217.40

First and
Second Periods
of Service
(34 years, 5
months)
--------------$837.00
$361.20

Appellant argues that "uninterrupted" cannot be given its ordinary dictionary

meaning because under such an interpretation the 1975 Plan would violate
ERISA. We address this argument below in Subdivision B of Section II of this
opinion