Howard E. Johannssen; Marvin E. Long; Donna Fisher v.  District No. 1 - Pacific Coast District, Meba Pension Plan

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 HOWARD E. JOHANNSSEN; MARVIN E.
LONG; DONNA FISHER,
Plaintiffs-Appellees,
v. No. 01-1608 
DISTRICT NO. 1 - PACIFIC COAST
DISTRICT, MEBA PENSION PLAN,
Defendant-Appellant. 
 HOWARD E. JOHANNSSEN; MARVIN E.
LONG; DONNA FISHER,
Plaintiffs-Appellees,
v. No. 01-1986 
DISTRICT NO. 1 - PACIFIC COAST
DISTRICT, MEBA PENSION PLAN,
Defendant-Appellant. 
 HOWARD E. JOHANNSSEN; MARVIN E.
LONG; DONNA FISHER,
Plaintiffs-Appellants,
v. No. 01-2041 
DISTRICT NO. 1 - PACIFIC COAST
DISTRICT, MEBA PENSION PLAN,
Defendant-Appellee. 
Appeals from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-96-2355-AMD)

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Argued: January 24, 2002
Decided: May 20, 2002
Before WILLIAMS and TRAXLER, Circuit Judges, and
Cynthia Holcomb HALL, Senior Circuit Judge of the
United States Court of Appeals for the Ninth Circuit,
sitting by designation.
Affirmed in part and remanded in part by published opinion. Senior
Judge Hall wrote the opinion, in which Judge Williams and Judge
Traxler joined.
COUNSEL
ARGUED: Christine Ann Williams, GORDON, FEINBLATT,
ROTHMAN, HOFFBERGER & HOLLANDER, L.L.C., Baltimore,
Maryland, for Appellant. Cyril Vincent Smith, ZUCKERMAN
SPAEDER, L.L.P., Baltimore, Maryland, for Appellees. ON BRIEF:
Deborah S. Richardson, ZUCKERMAN SPAEDER, L.L.P., Balti-
more, Maryland; Carole J. Yanofsky, ZUCKERMAN SPAEDER,
L.L.P., Washington, D.C., for Appellees.
OPINION
HALL, Senior Circuit Judge:
This appeal concerns pension benefits claimed by three union
employees who claim eligibility for past service credits pursuant to a
controversial 1992 amendment to a union staff pension plan. The
claims were denied by the plan administrator who refused to recog-
nize the validity of the amendment on the ground that it was adopted
by an improper body. The employees filed suit under 29 U.S.C.
§ 1132(a)(1)(B) and were granted an interlocutory judgment declaring
that the 1992 amendment was valid after a three day bench trial. Upon
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remand, a second plan administrator granted each of the employees
less past service credits than they claimed, and they filed an amended
complaint seeking the difference. The district court then granted the
employees’ motion for summary judgment in a published opinion
including findings of fact and conclusions of law as to the validity of
the amendment, and awarded the employees all of the past service
credit they claimed. The pension plan timely appeals the validity of
the amendment, the awards granted under it, and the award of attor-
neys’ fees. The employees cross-appeal on the calculation of attor-
neys’ fees. We affirm as to most issues but remand for recalculation
of attorneys’ fees and interest on the lump sum distributions awarded
to the plaintiffs.
I.
The much litigated facts serving as background to this case have
been the subject of numerous decisions, including two opinions by the
district court below. See Johannssen v. District No. 1-Pacific Coast
Dist., 1997 WL 580827 (D.Md. 1987) ("Johannssen I."); Johannssen
v. District No. 1—Pacific Coast Dist., 136 F.Supp.2d 480 (D.Md.
2001) ("Johannssen II."); United States v. DeFries, 129 F.3d 1293
(D.C. Cir. 1997). Because much of the story has been adequately
described elsewhere, we limit ourselves to a summary description.
Plaintiff-Appellees Howard E. Johannssen, Marvin E. Long, and
Donna C. Fisher (collectively the "Plaintiffs"), are three former
employees of District No.1—MEBA/NMU ("MEBA/NMU"), a union
formed by the merger of District No. 1-Pacific Coast District, MEBA
("PCD"), and the National Maritime Union ("NMU"). The two found-
ing unions represented licensed merchant mariners and unlicenced
seamen, respectively. In order to maintain this division of bargaining
units, MEBA/NMU was structured with two divisions—the Licensed
Division and the Unlicensed Division—whose membership corre-
sponded to the old PCD and NMU. Today, MEBA/NMU is no longer
in existence and the Licensed Division has once again become PCD.
For simplicity of exposition, the organization representing licensed
merchant mariners will be called PCD throughout the opinion except
as necessary to note instances in which its one-time status as a divi-
sion of MEBA/NMU is particularly relevant.
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Nominally, the Defendant-Appellant is the District No. 1—Pacific
Coast District, Marine Engineers Beneficial Association Pension Plan
(the "Plan"), though it is alleged that the Plan represents the interests
of the current leadership of PCD in important respects. The Plan pro-
vides pension benefits to employees who are part of the union staff.
Johannssen, Long, and Fisher claim 52 years past service credit under
the terms governing the Plan for years worked before they became
employees of MEBA/NMU.
A. Employment History
From April 1968 until March 1977, Johannssen worked for the
Federal Aviation Administration ("FAA") in New York. While at the
FAA, Johannssen became involved in union organizing, and in 1974
began efforts to form a new union on behalf of PCD and the Profes-
sional Air Traffic Controllers Organization ("PATCO"). In 1977,
Johannssen resigned from the FAA and was elected president of the
newly formed Professional Airways System Specialists ("PASS"), a
union that was sponsored by PCD and PATCO, and that became an
affiliate of PCD in 1982. Before moving from the FAA, Johannssen
was repeatedly promised by senior PCD officials that he would be
awarded pension credit for his time at the FAA and PASS (which had
no pension plan) as an inducement to become a full-time union orga-
nizer. To pay for costs of relocation associated with his move to the
union, Johannssen thereafter withdrew his employee contributions to
the federal pension plan maintained by the FAA, forfeiting the
employer contributions to that plan. Between the time he left the FAA
in 1977 and 1989, Johannssen accrued no pension benefits as a mem-
ber of PASS. In May 1989 he became a member of the Plan and con-
tinued to be so until he terminated his employment in 1994.
Long’s history is similar to Johannssen’s. From 1967 to 1977 he
worked as an air traffic controller at the FAA. In 1977 he resigned to
work full time as an organizer for PATCO. Like Johannssen, he was
promised pension credit from PCD for his years at the FAA and
"cashed out" his contributions to the FAA plan. From January 1977
through December 1983, he worked at PATCO organizing unions for
the benefit and under the sponsorship of PCD. While Long was at
PATCO, he was a participant in the Plan and accrued approximately
four years of service. However, PATCO went on strike and was even-
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tually bankrupted in 1984, causing Long to lose the service credit he
had accrued because he was not yet vested in the Plan. From 1983 to
1991, Long was employed by PASS and did not participate in the
Plan. He was again promised by PCD officials that he would receive
pension credit in the Plan. In 1991 he resumed participation in the
Plan.
From 1971 to 1980, Fisher was employed by Boeing and its sub-
sidiaries. From 1973 to 1980, she was also an officer of the Florida
Association of Professional Employees ("FAPE"), a subordinate body
of PCD. During this period she did not participate in a pension plan.
From 1980 to at least the time of trial, Fisher has been an employee
of PCD or MEBA/NMU, and has participated in the Plan. After
beginning her employment with PCD and an affiliated union called
the Federation of Public Employees ("FOPE"), Fisher sought pension
credit for eight years of prior service at FAPE. In response, her super-
visor told her that she would receive a salary increase only half as
large as other employees at FOPE, and that this would be offered to
PCD as a way of paying part of the cost of her past service credits.
Fisher has since worked under that arrangement.
B. The Plan
The Plan is a defined benefit pension plan created on January 1,
1972 for the benefit of employees of PCD, through a contract between
it and the John Hancock Mutual Life Insurance Company ("John Han-
cock"). The Plan is governed by Group Annuity Contract No. 1623
(the "Plan Document") issued by John Hancock. The Plan Document
contains several provisions relevant to amendment of the Plan. At all
relevant times, Article I, Section 20 provided in part: "The Employer
shall have the right to amend the Plan in any respect, at any time by
an instrument in writing, duly executed by the Employer. . . ." Plain-
tiffs’ Summ. J. Mot. Ex. 12 at I-25.0. In October 1992, when the
amendment at issue was adopted, the "Employer" was defined as "the
District No. 1 MEBA/NMU and its affiliated organizations listed
below." Plaintiffs’ Summ. J. Mot. Ex. 12 at I-1.0. Thereafter followed
a list of eight associated organizations. A different provision, Article
III, Section 8, provided that the "Contract," which is a synonym for
the Plan Document, "may be modified at any time by written agree-
ment between the John Hancock and the Contract Holder." Plaintiffs’
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Summ. J. Mot. Ex. 12 at III-3.0. It then described conditions under
which John Hancock could alter the Plan Document. The term "Con-
tract Holder" was not defined in the Plan Document. However, a copy
of the contract dated February 27, 1974 included a cover page identi-
fying PCD as the Contract Holder at that time.
From 1986 to 1996, the plan administrator was Lucille Hart. Hart
reported to the president of the PCD, and for a period after the merger
with NMU to the president of MEBA/NMU. At the time of the dis-
pute, Hart was once again reporting to the leadership of the former PCD.1
Hart was responsible for all benefits decisions and appeals. Her pow-
ers were defined in part by Article I, Section 15 of the Plan Document
which stated "Except as herein otherwise expressly provided, the Plan
Administrators shall have the exclusive right to interpret the Plan and
decide any matters arising thereunder in connection with the adminis-
tration of the Plan." Plaintiffs’ Summ. J. Mot. Ex. 12 at I-24.0
C. The Merger
In 1987 PCD and NMU combined pursuant to a merger agreement
and referendums in both unions. The president of PCD at the time,
Eugene DeFries, was a leader of the merger movement and he became
the president of the new MEBA/NMU. He also became a member of
the District Executive Committee (the "DEC") which was created to
govern the new MEBA/NMU and, according to the merger agree-
ment, to "assume responsibility for all matters of whatever nature
whatsoever pending before" each of the merged unions as well as
hold all assets and liabilities of the unions. Plaintiffs’ Summ. J. Mot.
Ex. 15 at 4. (Agreement of Merger). The 1991 Constitution for
MEBA/NMU provides that the Divisions would be governed by the
1In addition to the Plan for the benefit of union employees, Hart also
administered pension plans for union members. In 1991, the Fourth Cir-
cuit determined that the leadership of PCD had the right to appoint to
Board of Trustees for these plans. See Licensed Division District No. 1
MEBA/NMU, AFL-CIO v. DeFries, 943 F.2d 474 (4th Cir. 1991).
Although that decision did not directly concern the Plan (that is, the staff
plan), the lines of authority for the Plan thereafter became an issue of
contention and Hart began reporting to the leadership of PCD on Plan
issues as well as on the plans for union members.
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DEC. Plaintiffs’ Summ. J. Mot. Ex. 16 at 7 (1991 Constitution of
MEBA/NMU).
At some point after the merger, however, it came to light that the
merger was connected with corrupt practices, and that DeFries and
several of his associates, including his successor as president of
MEBA/NMU, Alexander "Doc" Cullison, were involved in violations
of federal law. In 1993, 16 former officers of PCD and MEBA/NMU
were indicted by a grand jury for a number of offenses, including
election fraud related to the 1987 merger and embezzlement. The
charges of election fraud related to the solicitation of open marked
and unmarked election ballots from union members. In July 1995,
DeFries and several others were convicted on all counts.2 See United
States v. DeFries, 909 F.Supp. 13, 15 (D.D.C. 1995) (ordering forfei-
tures under RICO in consequence of convictions). Meanwhile, the
growing corruption scandal, as well as efforts by the DEC to merge
the pension plan covering PCD’s members with the allegedly under-
funded NMU pension plan, led to a revolt in the ranks of the PCD,
which replaced DeFries and his cronies with a new slate of PCD lead-
ers in 1990, approved a resolution withdrawing recognition of
MEBA/NMU in January 1992, seized control of certain union assets
including the hiring halls, and engaged in a series of legal disputes
with MEBA/NMU.
The dissolution of MEBA/NMU followed, although there is dis-
pute as to the actual date of its termination. On June 4, 1993, repre-
sentatives of the disputing parties signed a so-called Interim
Settlement Agreement ("ISA") which terminated the merger by its
terms. Despite this agreement, the Plan claims that the merger was
actually terminated or avoided in 1992 as the result of a referendum
among union members conducted under judicial supervision. How-
ever, much of the evidence pertaining to this referendum was
excluded at trial, and, as the district court noted, the multitude of law-
suits fomented by the corruption scandal—including the suit during
the course of which the referendum was held—failed to achieve a
clear and unambiguous restoration of the status quo ante.
2The remaining defendants subsequently pleaded guilty to various
charges including mail fraud in connection with the 1987 merger.
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D. The 1992 Amendment
Though never implicated in any wrongdoing, Johannssen was a
member of the DEC and all three Plaintiff’s were considered to be
part of the DeFries "faction" by the leadership of PCD. In October
1992, when the future of that faction was very much in doubt, the
DEC voted to amend the Plan’s provisions governing service credit,
or the number years which count in determining pensions payable.
Specifically, the DEC passed a resolution (the "1992 Amendment")
amending the Plan to add text reading:
Notwithstanding anything to the contrary, Service shall be
granted to all Participants for each year of Service as an
employee or officer of (i) [PASS]; (ii) [PATCO] or its sub-
ordinate bodies; (iii) [POID] or its subordinate bodies; (iv)
service with a contracted employer of District No.1-
MEBA/NMU or one of its affiliates; (v) and the American
Federation of Government Employees (AFGE) or its subor-
dinate bodies; provided that the participant has not received
service credit with respect to any other pension plan in
which the participant is entitled to an accrued benefit.
The purpose of the 1992 Amendment was to provide pension benefits
to the Plaintiffs and it was tailored to their employment histories.
After the resolution was adopted, Cullison, who was then president
of MEBA/NMU, informed both John Hancock and Hart, by letter
dated December 1, 1992, that MEBA/NMU had voted to amend the
Plan to grant prior service credits to certain participants. Cullison also
provided John Hancock with the text of the 1992 Amendment and
instructed it to prepare the required documents for incorporation of
the amendment into the Plan Document. At that time neither Hart nor
John Hancock objected, and an amendment was prepared by John
Hancock and signed by Cullison. However, Hart subsequently refused
to recognize the validity of the 1992 Amendment. In January 1993,
sometime after Cullison had returned the signed amendment to John
Hancock, Hart contacted Charles Harootunian of John Hancock and
demanded that the amendment be disregarded. Harootunian’s hand-
written notes of this conversation state that Hart requested that the
amendment be disregarded because of "internal politics." Plaintiffs’
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Summ. J. Mot. Ex. 36. John Hancock notified the District of Colum-
bia Insurance Commission, asking that the 1992 Amendment be
removed from its files and deemed rescinded.
E. Proceedings Below
After receiving their 1993 pension statements, the Plaintiffs con-
tacted the Plan to determine why they had not received their past ser-
vice credits. In a letter dated March 30, 1994, Hart notified Fisher that
she was not entitled to additional service credit because FAPE "was
not and is not a participating Employer in the Staff plan." Plaintiffs’
Summ. J. Mot. Ex. 39. In a follow up letter, Hart advised Fisher that
the 1992 Amendment was not part of the plan. Hart also notified
Johannssen and Fisher that they were not entitled to any service credit
because the 1992 Amendment "is not, and was not at any time, part
of the Staff Plan." Plaintiffs’ Summ. J. Mot. Ex’s. 37 & 38.
In 1996, the Plaintiffs filed joint suit to force the plan administrator
to enforce the terms of the 1992 Amendment. Both sides’ Motions for
Summary Judgment on the validity of the 1992 Amendment were
denied in a published opinion filed August 8, 1997, and a 3-day bench
trial followed. In March, 1999, the district court issued an Interlocu-
tory Declaratory Judgment holding the 1992 Amendment valid and
ordering the plan administrator to determine the Plaintiff’s eligibility
for past service credits pursuant to it.
The plan administrator, by that time Allen Szymczak, sent his
determinations to Plaintiffs on July 1, 1999. Johannssen and Long
were each given 12 years credit and Fisher was given no credit. Past
credit for Johannssen and Long was denied for the years they worked
at the FAA because they had participated in the FAA’s pension plan
and because the FAA was not technically a contracted employer of
MEBA/NMU’s but rather of its predecessor. Additionally, their years
as officers of affiliated unions were not credited because Szymczak
determined that the plan required 1,000 paid hours of union work to
obtain annual pension credit and Johannssen and Long were not paid
as officers. Fisher was also denied credit based on the 1,000 paid
hours requirement. After exhausting internal appeals, Plaintiffs filed
an amended complaint seeking the difference and both sides again
moved for summary judgment.
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On March 29, 2001, the district court filed an order and judgment
which included a statement of findings of fact and conclusions of law
as to the validity of the 1992 Amendment. It also found that Szym-
czak had abused his discretion in interpreting the 1992 Amendment
and granted Plaintiffs most of the past service credits they sought. On
July 10, 2001, the district court issued an Amended Order specifying
an award in the amount of $2,233,571.21. The same day it also issued
an order granting attorneys’ fees to the Plaintiffs in the amount of
$243,789.98. This appeal followed.
II.
A. Standard of Review
The Plan denies the validity of the 1992 Amendment on the ground
that the DEC was not authorized under the Plan Document to amend
its terms. It would thus have us affirm Hart’s decision denying the
Plaintiffs any past service credits. Before we can reach that question,
however, we must tackle the thorny question of the appropriate stan-
dard of review for the district court and ourselves.
The district court treated the validity of the 1992 Amendment as a
legal issue for plenary or de novo review. The Plan argues that this
was error because Hart’s decision not to recognize the 1992 Amend-
ment was within the scope of discretionary powers conferred on her
by the Plan Document. It claims that Hart, in rejecting the amend-
ment, was essentially interpreting the terms "Employer" and "Con-
tract Holder" as they applied to those sections of the Plan Document
which set out who may amend the Plan. Under this framing of the
issue, Hart’s instruction to John Hancock to disregard the 1992
Amendment was allegedly based on her finding that neither of these
terms applied to the DEC and that it consequently had no power to
unilaterally amend the Plan. Because the Plan frames Hart’s actions
as based on her power of interpretation, it argues that the district court
was limited to reviewing her actions for abuse of discretion under
Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989).
In the paradigmatic action under 29 U.S.C. § 1132(a)(1)(B), review
of a plan administrator’s benefits determination is governed by the
framework established in Firestone. In that seminal case, the Supreme
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Court noted that "although it is a comprehensive and reticulated stat-
ute, ERISA does not set out the appropriate standard of review." Id.,
489 U.S. at 108-9 (internal quotations omitted). The Supreme Court
therefore filled in the gap using trust principles to establish the gen-
eral rule that benefits determinations based on plan interpretations are
to be reviewed de novo as courts construe the terms of trust agree-
ments without deference to either party’s interpretation. 489 U.S. at
112. However, a deferential "abuse of discretion" review is used when
the benefit plan gives the administrator "discretionary authority to
determine eligibility for benefits or to construe the terms of the plan"
because a trustee may be given discretionary power to construe
ambiguous terms of a trust. Id. at 111, 115.
Thus, a reviewing court must initially decide de novo whether the
plan’s language grants the administrator discretion and whether the
administrator acted within the scope of that discretion. Feder v. The
Paul Revere Life Ins. Co., 228 F.3d 518, 522 (4th Cir. 2000); Haley
v. The Paul Revere Life Ins. Co., 77 F.3d 84, 89 (4th Cir. 1996). If
the reviewing court determines that the language of the plan does
grant discretion in a particular area, it reviews decisions taken under
that grant for abuse thereof. Id. In all other cases review is de novo.
While there is no dispute that Hart was given broad authority in the
Plan Document to interpret the Plan and decide matters of administra-
tion under it, we do not believe that trust principles or the rule in Fire-
stone extend so far as to require judicial deference in this case. Hart’s
actions exceeded the scope of her discretionary authority. For one
thing, we are highly skeptical as a factual matter that the process that
she engaged in was one of plan interpretation. There is little or no evi-
dence that Hart made any undertaking to interpret the terms of the
Plan Document at all. The record shows that Hart did not scrutinize
or even pay much attention to the use and meaning of the terms "Em-
ployer" and "Contract Holder" in the Plan Document. Rather, Hart
testified that it was her belief prior to the internal strife at the union
that MEBA/NMU did have authority under the terms of the Plan Doc-
ument to make unilateral amendments. In deciding to ignore the 1992
Amendment, Hart seems simply to have concluded—based on the
advise of counsel for the insurgent faction at PCD as well as this Cir-
cuit’s 1991 opinion concerned with a separate benefit plan for union
members—that MEBA/NMU no longer represented the union and
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could not therefore control the Plan. Although PCD now argues that
this conclusion depends in part on finding PCD to be the "Contract
Holder" (an undefined term in the Plan Document), it ultimately
hinges on a determination as to whether MEBA/NMU was the legal
successor to PCD as the plan sponsor and whether the merger was
somehow legally avoided prior to passing the 1992 Amendment.3
Such legal questions are appropriate terrain for the courts, not plan
administrators, and when eligibility determinations turn on questions
of law we have not hesitated to apply a de novo standard of review.
See Gauer v. Connors, 953 F.2d 97, 99 (4th Cir. 1991).
Moreover, even if we did accept that Hart was nominally engaged
in interpreting the terms of the pension plan, we would still not accept
the Plan’s claim for deferential review in this context. This Circuit has
stated that the deferential standard reflects our recognition of the
greater institutional competence plan administrators possess relative
to our own within their area of expertise. See Berry v. Ciba-Geigy
Corp., 761 F.2d 1003, 1006 (4th Cir. 1985); Richards v. United Mine
Workers of America Health and Retirement Funds, 851 F.2d 122, 123
(4th Cir. 1988); Quesinberry v. Life Ins. Co. of North America, 987
F.2d 1017, 1022 (4th Cir. 1993) (en banc). "The standard exists
to ensure that administrative responsibility rests with those whose
experience is daily and continual, not with judges whose exposure is
episodic and occasional." Berry, 761 F.2d at 1006. A plan administra-
tor’s area of competence is in the application of plan terms to the fac-
tual circumstances of particular claims and the day to day
administration of the plan. It is not in the determination of which con-
tending slates of leaders representing different entities is entitled to
speak as legal successor to the status of "Contract Holder."
The Supreme Court’s guidance in Firestone does not require a con-
trary result. In that case, the Court was writing against the background
of a widespread practice in federal courts of applying the arbitrary
and capricious standard to benefits decisions regardless of whether
the plan specifically conferred discretion to interpret the plan to its
3Indeed, we think it telling in this regard that the Plan was unable to
articulate a coherent interpretation of the Plan Document giving PCD
rather than MEBA/NMU the authority to amend the Plan to either us or
the district court below.
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administrator(s) or not. As Firestone recognized, that practice devel-
oped in part in response to the Congressional purpose in passing
ERISA to promote internal resolution of claims and encourage infor-
mal and non-adversarial proceedings. See Firestone, 489 U.S. at 114-
115; see also Berry, 761 F.2d at 1007; Grossmuller v. International
Union, UAW Local 318, 715 F.2d 853, 857 (3d Cir. 1983). While rec-
ognizing this policy, Firestone, 489 U.S. at 115, the Supreme Court
nevertheless found it outweighed by other considerations, namely: 1)
the Congressional intent that the courts be guided by trust law princi-
ples in developing federal common law under ERISA, 2) the principle
that the duties and powers of a trustee may be determined by a court’s
plenary review of a trust document, and 3) the duty to impose a stan-
dard that would at least preserve the pre-existing level of employee
protection in light of Congress’ purpose to promote the interests of
employees and their beneficiaries in benefits plans. See Firestone,
489 U.S. at 110-12. However, because the Court found that it was to
be guided by trust law, it also held that deference is to be given when
it is required in accordance with the trust principle that a trustee may
be given discretion to interpret terms of the trust. Id. at 111.
None of these policies provides justification for granting deference
here. Employee protection is furthered by more, rather than less scru-
tiny of conflicts in which both sides have mixed and partisan motives.
The Congressional policy favoring internal resolution of benefits
claims can not reasonably be interpreted to require us to give defer-
ence to the plan administrator as one of the parties in a conflict in
which it is essentially a direct participant. As for principles of trust
law, the rule that a court will respect the discretion conferred on a
plan administrator as trustee can not apply when the issue is whether
the plan administrator can frustrate the authority of the entity claiming
the power to control the terms of that very discretion.4 In such a case,
the discretionary powers given to a trustee run up against the duty to
obey powers of control reserved by the trust settlor. See Restatement
(Second) of Trusts §§ 185, 330 (1959) (describing a trustee’s duty
4Nor are we convinced that it was the intent of the plan sponsor, origi-
nally PCD, to permit such a result. There is no obvious rationale provid-
ing a basis to conclude that the plan sponsor would so want to limit its
own explicitly reserved authority, and every reason to think that it would
not do so.
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with respect to a person reserving the power of control or revocation).
While a plan administrator can, and indeed may be obligated to resist
a benefits award that she believes to be the product of an illegitimate
attempt to amend the plan, the proper resolution of such a conflict
must remain with the courts sitting in their plenary capacity, and the
parties’ recourse is to apply to the courts for instructions. See Fire-
stone, 489 U.S. at 112; Restatement (Second) of Trusts § 185 com-
ment e (1959).
Other authorities cited by the Plan, Curtiss-Wright Corp. v.
Schoonejongen, 514 U.S. 73, 115 (1995), and Hutchins v. Champion
Int’l Corp., 110 F.3d 1341 (8th Cir. 1997), are similarly unavailing
to its position. In Curtiss-Wright the Supreme Court recognized the
importance of requiring pension plans to have written procedures for
amending plan provisions and identifying the persons with authority
to make such amendments. 514 U.S. at 82. In this regard the Court
recognized that "having an amendment procedure enables plan
administrators . . . to have a mechanism for sorting out, from among
the occasional corporate communications that pass through their
offices and that conflict with existing plan terms, the bona fide
amendments from those that are not." Id. The Court further recog-
nized that "plan administrators may have a statutory responsibility to
do this sorting out." Id. However, as the district court correctly noted,
this falls far short of conferring a blanket authority to ignore amend-
ments which are at least ostensibly made in conformance with the
procedure provided for in the Plan Document and protecting that
authority behind a shield of judicial deference. Curtiss-Wright speaks
to a plan administrator’s duty to run the plan in accordance with its
documents (including amendment procedures) not to the scope of a
grant of discretion.
Hutchins dealt with the authority of a plan administrator to amend
a disability plan in order to exclude benefit payments to incarcerated
criminals. 110 F.3d at 1343. The relevant plan provision reserved the
right of plan amendment to the employer’s board of directors, but
added that "any amendment which is not a substantive amendment
shall be made on behalf of [the employer] by the [plan administra-
tor]." Id. The Eighth Circuit granted deference to the plan administra-
tor’s determination that his amendment was not a substantive one,
finding his interpretation of the word "substantive" reasonable. Id. at
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1344-45. Hutchins is distinguishable because the plan administrator
in that case was merely interpreting the scope of its own powers, not
attempting to limit those reserved for the employer. It thus does not
involve the conflict of powers in a trust that compels us in this case
to adjudicate the issue without granting deference to one of the sides.
Finally, even apart from the general question of the applicability of
the rule in Firestone to this context, we would still apply de novo
review in this case due to the plan administrator’s palpable conflict
of interest. Though Firestone directs abuse of discretion review of
plan interpretations made under expressly granted discretionary
power, it also cautioned that where a conflict of interest is manifest,
such a conflict should be factored into the judicial review process.
489 U.S. at 115; see also Booth v. Wal-Mart Stores Inc., 201 F.3d
335, 341 (4th Cir. 2000); Doe v. Group Hospitalization & Medical,
3 F.3d 80, 86-87 (4th Cir. 1993). In this case, Hart had a clear conflict
of interest because she considered herself to be responsible to the
management of PCD, which has demonstrated through the course of
this litigation that it considers this issue as an extension of its bitter
campaign against MEBA/NMU. Moreover, Hart imported PCD’s
conflict into her determination by relying entirely on the opinion from
PCD and its counsel that MEBA/NMU was not authorized to amend
the Plan. Thus, we would in any event reduce the degree of deference
to the extent necessary to neutralize the untoward influence of PCD
on her decision. Doe, 3 F.3d at 87. Given the source of that decision,
our review, once again, is de novo.
B. Validity of the 1992 Amendment
Having determined that the district court applied the correct stan-
dard of review, we must now review its substantive finding that the
DEC validly amended the Plan Document. In doing so, we review the
district court’s interpretation of plan documents de novo since con-
tract interpretation is a question of law. See Hendricks v. Central
Reserve Life Insurance Co., 39 F.3d 507, 512 (4th Cir. 1994). To the
extent that the district court relied on an evaluation of evidence
extrinsic to the contract, our review of the findings of fact based on
that evidence is for clear error. Id. A district court conducting de novo
review may at its discretion review evidence that was not before the
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plan administrator when doing so is necessary to interpret the terms
of a plan. Quesinberry, 987 F.2d at 1027.
As we have noted above, Article I, Section 20 of the Plan Docu-
ment reserves for the "Employer" the right to amend the Plan by a
duly executed instrument in writing. When the 1992 Amendment was
adopted, the "Employer" was defined as "MEBA/NMU and its affili-
ated organizations listed below." While this set of provisions clearly
associates MEBA/NMU with the term "Employer," it leaves ambigu-
ous whether MEBA/NMU could amend the Plan unilaterally through
the DEC, or whether it was required to act in concert with the listed
affiliated organizations.5 The term "Employer" has multiple functions
in the much amended Plan Document and there are several instances
in which its use seems to shift between singular and plural.6
The district court resolved that ambiguity by use of extrinsic evi-
dence. It noted that prior to the 1998 trial, the Plan itself argued at the
summary judgment stage that one organization had the power to
amend the Plan and framed its argument in terms of whether that
union was PCD or MEBA/NMU. It further found, based on Ms.
Hart’s own testimony, that she had formerly construed the provisions
of the Plan to vest sole authority to amend the Plan in a single union
which could act without the vote, concurrence, or input of any affili-
ated unions. In line with that understanding, the district court
observed that the historical record showed that a single entity had
5Section 402(b)(3) of ERISA, 29 U.S.C. § 1102(b)(3), requires that
plans provide for a procedure for amending the provisions of the plan
and identifying the persons who have authority to authorize such amend-
ments. The terms of § 402(b)(3) are indifferent to the level of detail in
an amendment or identification procedure. Curtiss-Wright, 514 U.S. at
80. The parties have not challenged the adequacy of the amendment pro-
cedure provided in this case.
6For example, "Employee" is defined in the Plan Document as "an
individual in the employ of the Employer" suggesting use of the term to
describe the multiple entity including all unions. Plaintiffs’ Summ. J.
Mot. Ex. 12. Other sections use the singular meaning, such as Article III,
Section 11 which states "neither the Contract Holder, any Employer nor
any Plan Administrator shall be considered the agent of John Hancock
for any purpose under this Contract." Id.
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always amended the Plan without the participation of the affiliated
unions listed in Article I, Section 20, detailing several examples in
which either PCD or MEBA/NMU, depending on whether it was
before or after the merger, had unilaterally adopted amendments.7
Based on these findings, the district court concluded that the first
entity listed in the definition section under "Employer," i.e.
MEBA/NMU in 1992, was actually the "Employer" for amendment
purposes.
The Plan does not challenge this interpretation directly, but rather
makes a collateral attack by contending that it was error for the dis-
trict court to additionally interpret the term "Contract Holder" as a
mere linguistic device synonymous to "Employer" and used to avoid
confusion when the term "any Employer" was used in the same para-
graph. It will be recalled that Article III, Section 8 of the Plan Docu-
ment permitted the "Contract" to be modified by written agreement
between the John Hancock and the "Contract Holder." Although the
Plan’s claims about the import of this language are murky to say the
least, they can be read to claim that PCD was in fact the "Contract
Holder" in 1992, and that the evidence that a single entity historically
made amendments without the participation of the affiliated unions
should be interpreted to reflect the fact that they were made pursuant
to the powers of the "Contract Holder" rather than the "Employer."
We agree that the district court erred in interpreting the term "Con-
tract Holder" as a mere linguistic device used as an alternative where
use of the term "Employer" would have been confusing. As the Plan
correctly points out, such an interpretation would make certain provi-
sions of the Plan Document duplicative. For example, Article III, Sec-
tion 4 provides:
7For example, in 1988 the DEC voted to add employees of the pre-
merger NMU as participants of the plan and give them past service credit
in the Plan for vesting and participation purposes. Plaintiffs’ Summ. J.
Mot. Ex. 17 (December 22, 1988 resolution of the DEC). In a second
post-merger case, the DEC added a new participating employer, the
National Air Traffic Controllers Association ("NATCA") to the Plan.
Plaintiffs’ Summ. J. Mot. Ex. 19. In both cases, Hart promptly recog-
nized the decisions of the DEC as binding and effective.
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The Contract Holder, any Plan Administrator, any
Employer, any Participant, and any payee shall furnish all
information and proofs which the John Hancock may rea-
sonably require in the administration of this Contract.
Plaintiffs’ Summ. J. Mot. Ex. 12 at III-1.0. Under the district court’s
reading, this section would redundantly place an obligation on any of
the entities listed under the definition of Employer and also on all of
the entities together as a group. In addition, we note that the term
"Contract Holder" appeared in the original Plan Document when the
Plan was a single employer plan and before the term "Employer" was
used to describe a compound entity. Based on these facts, we find that
"Contract Holder" is not a mere synonym for "Employer" but rather
is an appellation that was originally given to PCD in 1972 as the plan
sponsor.8
Nevertheless, this does not help the Plan because its challenge is
not ultimately to the interpretation of "Contract Holder" but rather to
the district court’s finding that the 1992 Amendment was validly
adopted by MEBA/NMU through the DEC. This challenge still fails
for three reasons.
First, the district court did not merely find that a single entity had
always amended the Plan. It specifically found that MEBA/NMU was
understood to be the entity authorized to adopt amendments post-
merger, as it had done so on at least the two occasions described
above. While this does not preclude the possibility that MEBA/NMU
was acting as "Contract Holder" rather than "Employer," it does pre-
clude the Plan’s implicit argument that PCD, which was the undis-
puted "Contract Holder" before the merger, continued in this status
after the merger.9 The historical practice of the Plan shows that
829 U.S.C. § 1002(16)(B) defines "plan sponsor" as the entity by
which the plan is "established or maintained."
9As noted above, "Contract Holder" is not a defined term in the Plan
Document. However, the cover sheet to the original contract with John
Hancock lists PCD as the Contract Holder along with the date and the
contract number. Appellant’s brief may be read to argue that this fact sig-
nifies that PCD was the original Contract Holder and still maintained this
status in 1992.
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MEBA/NMU gained the power to amend the plan in 1988 as either
the "Employer," "Contract Holder," or both.
Second, we agree based on our reading of the Plan Document as
a whole that the intent of its drafters was to allow MEBA/NMU to
exercise its amendment power as "Employer," not merely "Contract
Holder." The Plan Document consists of three "Articles," each con-
taining multiple sections. Article I, which contains the definition for
"Employer" and grants amendment power to that entity, is entitled
"the Plan." This article contains sections on matters having to do with
the terms of Plan eligibility, credits, vesting, and the like. Article III,
which is termed "General Provisions," primarily covers matters of
mutual rights and responsibilities of John Hancock and the "Contract
Holder." The term "Employer" and "Plan" are consistently used in
Article I, whereas "Contract Holder" and "Contract" are consistently
used in Article III. The Plan Document also defines the term "Plan"
as "the pension plan funded under this Contract as defined in Article
I." This structure demonstrates an intent to vest the power to amend
the terms of benefit eligibility primarily in the "Employer."
Correspondingly, when read in toto, it is clear that Article III, Sec-
tion 8 is intended primarily for the benefit of John Hancock rather
than as a reservation of amendment power in the Contract Holder.
That section refers to modifications of the "Contract" and specifies
that they will be made by written agreement between John Hancock
and the Contract Holder. The section further specifies that "The John
Hancock shall have the right to modify this Contract in any respect
upon written notice to the Contract Holder," identifies the office hold-
ers at John Hancock who have the authority to take action on its
behalf, and discusses John Hancock’s right to modify the purchase
rates of pension benefits. Plaintiffs’ Summ. J. Mot. Ex. 12 at III-3.0.
In light of these limitations, we find that the drafters intended that
Plan amendments be adopted pursuant to the "Employer’s" Article I
powers, and that those powers were conferred upon MEBA/NMU
when it was substituted for PCD on the first line of the "Employer"
definition consistent with the general transfer of powers from PCD to
MEBA/NMU during the merger.
Third, the evidence shows that following the merger, MEBA/NMU
was both the "Employer" and the "Contract Holder." The Agreement
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of merger made MEBA/NMU the legal successor to PCD by merging
NMU into PCD and changing its name to MEBA/NMU. Pursuant to
the merger and MEBA/NMU’s constitution, all of the assets and lia-
bilities of PCD were held by MEBA/NMU and the newly created
Licensed Division was governed by, and subordinate to, the DEC.
Consistent with this fact, the Plan’s mandatory annual filings with the
IRS, Department of Labor, and the federal Pension Benefit Guaranty
Corporation identified MEBA/NMU as the "plan sponsor" for the
years 1989 through 1992. When PCD was originally identified as the
"Contract Holder" on the cover sheet to the 1974 version of the Plan
Document, it was so labeled in its capacity as plan sponsor.
Despite this evidence of the Plan Document’s history and structure,
the Plan has throughout this litigation searched for some equitable or
doctrinal peg on which to hang its hope that we would find the 1992
Amendment void ab initio by reason of fraud and wrongdoing in con-
nection with the 1988 merger. On appeal before us it attempts to artic-
ulate a theory that PCD somehow reverted to its former status as
"Contract Holder" as a result of such fraud. Even aside from the fact
that this argument would not reach MEBA/NMU’s status as "Em-
ployer," we find that the Plan has failed to articulate or provide evi-
dence for any theory that would allow us to effectively undo the 1988
merger in the context of an ERISA benefits action.
III.
Having affirmed the validity of the 1992 Amendment, we must
next consider its application. After trial on the prior issue, the district
court issued an interlocutory order declaring the 1992 Amendment
valid and remanded Szymczak to apply the Amendment to determine
the amount of service to be credited to each of the Plaintiffs. Szym-
czak found that Johannssen and Long were each entitled to 12 years
past service credit rather than the 21 and 23 years that they claimed
respectively. He also found that Fisher was not entitled to any past
service credit when she had requested 8 years. The Plaintiffs then
returned to district court and obtained summary judgment. The district
court found Szymczak’s benefits determination to be an abuse of dis-
cretion, and granted Johannssen, Long, and Fisher the 21, 23, and 8
years of past service credit, that they respectively claimed. The Plan
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challenges the district court’s finding that Szymczak abused his dis-
cretion.
We review the district court’s decision de novo, employing the
same standards properly applied by it. Bernstein v. CapitalCare, Inc.,
70 F.3d 783, 787 (4th Cir. 1995).
To repeat, the 1992 Amendment reads as follows:
Notwithstanding anything to the contrary, Service shall be
granted to all Participants for each year of Service as an
employee or officer of (i) [PASS]; (ii) [PATCO] or its sub-
ordinate bodies; (iii) [POID] or its subordinate bodies; (iv)
service with a contracted employer of District No. 1-
MEBA/NMU or one of its affiliates; (v) and the American
Federation of Government Employees (AFGE) or its subor-
dinate bodies; provided that the participant has not received
service credit with respect to any other pension plan in
which the participant is entitled to an accrued benefit.
Szymczak read this language to provide less past service credit
than the Plaintiffs believe is their due, for three reasons. First he read
the proviso to the amendment to exclude credit for years in which a
Participant had accrued pension credits in another plan even if the
Participant never received and was not entitled to any payment based
on that credit.10 Second, he read item (iv.) above to exclude service
with the FAA and Boeing, which were technically contract employers
with PCD as the predecessor union to MEBA/NMU rather than
MEBA/NMU itself. Finally, Szymczak imposed a "1,000 hours" paid
service rule to eliminate any years of past service credit in which a
Participant was not employed by a covered entity or received less
than 1,000 hours compensation at minimum wage. Szymczak derived
this rule from reading several provisions together. Although he did
not believe that the term "Service" in the 1992 Amendment was a
defined term in the Plan Document,11 Szymczak read it as consistent
10This reading effectively eliminated Johannssen and Long’s claims for
pension credit for the nine years they each worked at the FAA.
11In fact, this proved to be an error. Rather than the version of the Plan
Document in effect in 1992, Szymczak interpreted a 1996 restatement of
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with the term "Year of Vesting Service" which he believed required
1000 "Hours of Service." "Hour[s] of Service" were defined as
"hour(s) for which an Employee is paid or entitled to payment."12
Thus, Szymczak read "year of Service" in the 1992 Amendment as
equivalent to a "Year of Service" or 1000 hours of paid employ.13
This time around, review of the plan administrator’s decision is, in
fact, governed by the standard established in Firestone since Szym-
czak’s benefits determination was the product of an interpretation of
the 1992 Amendment. Moreover, it is also guided by Booth v. Wal-
Mart Stores Inc., 201 F.3d 335, 340-43 (4th Cir. 2000). In Booth, this
Circuit set out 8 non-exclusive factors that a court may consider to
determine the reasonableness of a fiduciary’s discretionary decision
under ERISA:
(1) the language of the plan;
(2) the purposes and goals of the plan;
the Plan Document. In that restatement, the term "Service" was appar-
ently undefined. However, in the correct document the term was defined.
The correct document defines "Service" by reference to the term "Year
of Service" with respect to periods after January 1, 1976. For periods
prior to that time, "Service" is not defined in this manner, but rather is
determined in accordance with the terms of the prior plan.
12The term "Year of Vesting Service" was not in fact a term of the Plan
Document in 1992, but was rather a term used in the 1996 restatement
incorrectly used by Szymczak. In 1992, the correct term was "Year of
Service." Like "Year of Vesting Service," the term "Year of Service" was
also defined in terms of 1000 "Hours of Service." However, as noted in
the previous footnote, the term "Year of Service" was only connected
with the term "Service" in the correct version of the Plan Document for
plan years beginning in 1976. The bulk of the past service credits that
were excluded by Szymczak by use of the "1,000 hours" rule was for
years prior to 1976.
13This requirement redundantly excluded past service credit to Johann-
ssen and Long for the unpaid union organizing they performed while still
employees at the FAA and also eliminated all past service credit claimed
by Fisher who had been unpaid at FAPE.
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(3) the adequacy of the materials considered to make the
decision and the degree to which they support it;
(4) whether the fiduciary’s interpretation was consistent
with other provisions in the plan and with earlier interpreta-
tions of the plan;
(5) whether the decisionmaking process was reasoned and
principled;
(6) whether the decision was consistent with the proce-
dural and substantive requirements of ERISA;
(7) any external standard relevant to exercise of discretion;
and
(8) the fiduciary’s motives and any conflict of interest it
may have.
Id., at 342-43. Conflict of interest may serve both to reduce the degree
of deference a court will grant to a discretionary decision of a fidu-
ciary and as a factor in the reasonableness inquiry. Id. at 343 n.2.
Applying Booth, the district court first determined that Szymczak
was seized of a conflict of interest. We agree. Much like Hart before
him, Szymczak relied heavily on biased information in making his
determination. Specifically, he relied on defense counsel to select
documents from trial and other sources to be used in interpreting the
1992 Amendment. In so doing, he imported PCD’s interest into his
deliberation process, making its conflict his own. Also like Hart, a
conflict of interest was present for Szymczak because he was aligned
with the leadership of PCD and the litigation position of the Plan that
the 1992 Amendment was invalid as an extension of criminal activi-
ties associated with the "DeFries faction."14 Szymczak himself indi-
14We do not say that the fact that Szymczak reported to PCD was alone
sufficient to establish a conflict of interest. In general, the fact that a plan
fiduciary is employed by or serves at the will of the plan sponsor will not
be deemed to create a conflict of interest automatically raising a pre-
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cated that he was indeed seized of this conflict through statements at
deposition espousing the Plan’s position that the 1992 Amendment
was an invalid exercise tied to criminal activities in MEBA/NMU.
Def. Cross Mot. Summ. J. Memo. Ex. G. at 173, 186.15 Although
Szymczak also said that he had no "personal" belief as to the validity
of the 1992 Amendment, this attempt to distinguish personal belief
from his position as plan administrator was merely a self-serving
device to protect his decision from scrutiny, and as such creates no
genuine issue of fact as to his conflict.
Having correctly determined that there was a conflict of interest,
the district court then methodically applied the factors in Booth detail-
ing a litany of undisputed facts demonstrating the invalidity of Szym-
czak’s three reasons for denying part of the past service credit
demanded by the Plaintiffs. We are in complete agreement with the
district court’s well reasoned and written opinion on this issue. See
Johannssen II., 136 F.Supp.2d at 504-510. Therefore rather than
repeat the district court’s full analysis, we shall merely summarize the
main points below.
First, as to the proviso denying service credit for any year in which
the Participant received credit in another plan and was entitled to an
accrued benefit, the district court found that Szymczak disregarded
the clear meaning of the word "benefit." Szymczak interpreted the
proviso to mean that Plaintiffs were not entitled to credit for years in
sumption of bias. See De Nobel v. Vitro Corp., 885 F.2d 1180, 1191-92
(4th Cir. 1989). However, given the manifest treatment of this litigation
by the Plan as an extension of the course of litigation against
MEBA/NMU by PCD and Szymczak’s identification with that position,
it is clear that Szymczak’s relationship with PCD was sufficient in this
case to create a conflict of interest.
15Szymczak also signaled his conflict in his determination letter of
November 19, 1999, in which he explained to Plaintiffs that past credit
would be denied in part based on the distinction between employees of
(pre-merger) PCD and those of MEBA/NMU and its affiliates, a distinc-
tion which he noted, was "central to this litigation" along with the ques-
tion of who had the right to amend the Plan. Defendant’s Cross Mot.
Summ. J. Ex. D. at 2.
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which they had "accrued a vested benefit" from the FAA. However,
Johannssen and Long were not entitled to any benefit from their par-
ticipation in the federal pension plan maintained by the FAA. When
each left the FAA, he withdrew his employee contribution to his
account, thereby incurring a tax liability (which each paid) and for-
feiting any right to the employer contribution. Thus, neither received
any "benefit." They received only their deferred salary.
Second, Szymczak also disregarded the language of the 1992
Amendment in his interpretation of "service with a contracted
employer of District No. 1-MEBA/NMU or one of its affiliates" (item
iv.), and decision to apply the 1,000 hour rule because each effec-
tively nullified clauses of the 1992 Amendment. Szymczak inter-
preted item iv. to refer only to contracted employers of the merged
union entity rather than that entity and its predecessors. In doing so,
Szymczak effectively nullified the clause itself since no one would
obtain credit under his interpretation. Szymczak’s notes indicate that
he knew that his narrow interpretation was made possible by what
was at most a scrivener’s error not indicative of the intent of the
drafters. Plaintiffs’ Summ. J. Mot. Ex. 17. As to the 1,000 "Hours of
Service" requirement, this effectively read service "as an officer" out
of the amendment because it relied on provisions relevant to "Employ-
ees."16 Moreover, even as to "Employees" this requirement did not
apply for years prior to 1976, a fact Szymczak would have known had
he read the correct version of the Plan Document.17
The district court also found that Szymczak considered inadequate
materials, that his interpretation was inconsistent with prior and sub-
sequent interpretations of the Plan, and that his decision making was
neither "reasoned" nor principled. See id. at 507-508. Though the rea-
sons should already be largely clear from what has been said above,
readers are referred to the district court’s opinion for greater detail.
We affirm the district court’s finding that Szymczak abused his dis-
16If one were paid by the union for 1,000 hours or more, one would
be entitled to credit as an "Employee." If one worked as an unpaid offi-
cer, as these union’s officers often did during the relevant period, the
Amendment would not apply on Szymczak’s interpretation.
17Szymczak reviewed the Plan Document in effect in 1996 rather than
1992 (see supra nn. 11, 12).
25 JOHANNSSEN v. DISTRICT NO. 1

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cretion and thus preserve its award of past service credit to the Plain-
tiffs.18
IV.
The Plan also challenges the district court’s award of lump sum
distributions to the Plaintiffs and award of pre-judgment interest. The
Plan allows participants to receive their pension payments as lump
sum distributions. The district court calculated that such lump sum
distributions would have been due and payable to Johannssen and
Long in April 1996 and to Fisher in September 1995 and ordered the
payment of prejudgment interest from those dates. The Plan asserts
that this determination was erroneous because such payments are not
available under the terms of the Plan until a participant has reached
the age of 55. The district court did fail to consider retirement age and
thus granted the lump sums too early. Johannssen was born 1/2/43
and Long was born 1/4/43, making them 55 on 1/2/98 and 1/4/98
respectively. Fisher’s date of birth is not contained in the record. We
therefore remand for the district court to recalculate the Plaintiffs’
monetary awards consistent with the correct dates for lump sum dis-
tributions.
V.
Finally, both sides challenge the district court’s award of attorneys’
fees. The Plan challenges its decision to award any attorneys’ fees and
we review this determination for abuse of discretion. See Denzler v.
Guestech, Inc., 80 F.3d 97, 104 (4th Cir. 1996). While it disputes the
court’s application of each of the factors that it must consider in mak-
ing such a determination, it primarily challenges the finding that it
acted in bad faith. Such a finding is reviewed for clear error. Hyatt
v. Shalala, 6 F.3d 250, 255 (4th Cir. 1993). Attorneys for the Plain-
tiffs challenge the amount of the award of fees on the ground that the
district court erred by awarding fees at historical rather than current
18The Plan has not challenged either the substance of the district
court’s independent reading of the 1992 Amendment or its discretion to
determine the proper award of past service credits based on the record
before it rather than remanding for yet another benefits determination by
the plan administrator.
26 JOHANNSSEN v. DISTRICT NO. 1

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rates. They also claim that it abused its discretion by failing to grant
their claim for an enhancement due to rare and exceptional results.
The reasonableness of the amount of a district court’s fee award is
reviewed for abuse of discretion. However, questions of law that arise
in the course of such a determination are reviewed de novo. See e.g.,
Smyth v. Rivero, 282 F.3d 268, 274 (4th Cir. 2002); Alexander v.
Boyd, 113 F.3d 1373, 1381 (4th Cir. 1997).
ERISA provides that a "court in its discretion may allow a reason-
able attorney’s fee and costs of action to either party." 29 U.S.C.
§ 1132(g)(1). The Fourth Circuit has established 5 factors which a
court must consider in exercising this discretion. Reinking v. Philadel-
phia American Life Ins. Co., 910 F.2d 1210, 1217-1218 (4th Cir.
1990). These are:
(1) degree of opposing parties’ culpability or bad faith;
(2) ability of opposing parties to satisfy an award of attor-
neys’ fees;
(3) whether an award of attorneys’ fees against the oppos-
ing parties would deter other persons acting under similar
circumstances;
(4) whether the parties requesting attorneys’ fees sought to
benefit all participants and beneficiaries of an ERISA plan
or to resolve a significant legal question regarding ERISA
itself; and
(5) the relative merits of the parties’ positions.
Id.; Quesinberry, 987 F.2d at 1028.
The 5 factors are general guidelines only, and some may not be rel-
evant in some contexts. Quesinberry, 987 F.2d at 1028. However, the
district court is required to address all 5 in order to ensure an adequate
basis for review. See id.
In applying the first factor, the district court found that the Plan
exercised bad faith in applying the 1992 Amendment in a biased man-
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ner reflecting the on-going political fight and litigation between PCD
and MEBA/NMU. The Plan challenges this finding with the novel
argument that it lacked a factual basis because the underlying dispute
was decided on summary judgment. The Plan essentially argues that
the legal requirement that all evidence of the non-movant must be
believed and all justifiable inferences drawn in its favor when ruling
on a motion for summary judgment must be imported into the fees
analysis by using it to define the factual record on which the fees
determination must be made. Since the plan administrator claimed in
his deposition that he acted impartially in determining the amount of
past service credit to grant, the Plan argues that the district court was
not permitted to find bad faith. There is no precedent for such a posi-
tion, and we reject it. Indeed, it would be extremely anomalous to find
that a plan administrator who is found to have so clearly abused his
discretion as to lose at summary judgment is thereby shielded from
a finding of bad faith. The facts presented through affidavits and
depositions certainly contain evidence of a deliberate attempt to inter-
pret the 1992 Amendment so as to minimize the grant of credits and
it was not clear error to find bad faith.
As to Reinking factors two, three, and five, the district court found:
1) that the Plan had the ability to pay attorneys’ fees because it had
assets of more than $11 million and the demonstrated ability to levy
additional contributions of close to $1 million as needed,19 2) that the
award of fees would deter other plans from stonewalling on benefits
issues and indeed deter Szymczak from continuing to disfavor other
union employees perceived to be loyal to the vanquished former
MEBA/NMU leadership in the aftermath of the merger dissolution,
see Petition for Attorneys’ Fees, Ex. 2, Smith Aff. ¶ 3 (describing rep-
resentation of employees or union officials who were denied medical
insurance coverage as part of the political infighting in the
MEBA/NMU dissolution), and 3) that the merits of the underlying
case had favored Plaintiffs. While the Plan disputes these findings, we
find that they were neither unreasonable nor clearly erroneous.
19The district court also found that the Plaintiffs had limited financial
resources based on modest annual incomes. All three apparently fell into
arrears on an agreement to pay litigation expenses on a monthly basis.
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As to the question whether Plaintiffs sought to benefit all partici-
pants in the Plan or resolve a significant legal question, the district
court held in the affirmative, finding that Plaintiffs obtained a ruling
below that equitable principles cannot justify a refusal to enforce the
terms of a written plan provision. Since this was an issue raised by
the Plan as an affirmative defense rather than by Plaintiffs, we are
skeptical as to the district court’s finding on this factor. However, in
ruling on the ultimate issue we must bear in mind that the five factors
are only guidelines and none is determinative. Four clearly weighed
in favor of awarding attorneys’ fees and no factor provided a reason
not to do so. Viewing the district court’s consideration of the factors
in toto, we find no abuse of discretion.
Turning to Plaintiffs’ claims, their argument that the court was
required to calculate a reasonable fee rate based on current rather than
historical rates does point to an error although it misstates its nature.
In Daly v. Hill, 790 F.2d 1071, 1081 (4th Cir. 1986), this Circuit
established that a court must consider the effect of delay in payment
(due to lengthy litigation or otherwise) on the calculation of a reason-
able fee. The trial court retains discretion to determine the particular
method for accounting for the lost time-value of money due to delay
in payment. For example, it may apply a fee rate based on an assess-
ment of an attorney’s reasonable rate under current market conditions
rather than the rates that were appropriate at the time the service was
rendered, or alternatively can use historical rates plus some reason-
able rate of interest. However, consideration of the effect of time on
the value of the fee is mandatory as part of a consideration of what
is reasonably compensatory. Id.
The district court did not follow this requirement. It refused to do
so because it found that the length of the litigation and consequent
delay in the payment of fees to Plaintiffs’ attorneys were not attribut-
able principally to the Plan but rather the complexity of the case.20 It
20The district court also noted that Plaintiffs’ attorneys had agreed to
a retainer agreement with them that was to provide them with a portion
of the fees necessary to prosecute the case. The court did not explain how
this was relevant to the issue of delay other than the somewhat mysteri-
ous statement that "it was not insignificant that the clients agreed to sup-
port the litigation to the extent that they did."
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also reasoned that it was necessary to compensate for the lost time-
value of money in this case because the rule in Daly did not apply to
ERISA cases. Daly involved a suit for violation of civil rights under
42 U.S.C. § 1983. Unlike plaintiffs bringing suit under civil rights
statutes, ERISA plaintiffs are not generally "private attorneys general"
seeking primarily injunctive relief that vindicates important public
rights. Peacock v. Thomas, 39 F.3d 493, 506 (1996), rev’d on other
grounds, 516 U.S. 349 (1996). Relying on this distinction in Peacock,
the district court concluded it was not required to compensate for
delay in this case since incentives in the form of attorneys’ fees are
less necessary for ERISA plaintiffs than for those raising civil rights
claims.
While such considerations may be relevant to the decision to award
attorneys’ fees or the reasonableness of an hourly rate under the test
in Johnson v. Georgia Highway Express, 488 F.2d 714, 717-719 (5th
Cir. 1974), they are not apposite to the issue of delay. As this Circuit
noted in Daly, "delay necessarily erodes the value of a fee that would
have been reasonable if paid at the time services were rendered." 790
F.2d at 1080. Consequently, an award based on historic rates which
does not take into account the lost value when a payment is delayed
will not be a fully compensatory fee. Id. The culpability of the losing
party for the delay and the policy reasons for encouraging suits where
damage awards may be low and issues of broad public concern are
at stake simply do not speak to this fact. We therefore hold that the
district court erred in adopting historic rates without considering the
effect of delay of payment on the value of the fee.
Plaintiffs also argue that the district court abused its discretion by
failing to grant their request for an enhancement. Grants of an
enhancement are both discretionary and rare, and the applicant bears
the burden of proof of an exceptional result. See Blum v. Stenson, 465
U.S. 886, 897-98 (1984); Pennsylvania v. Delaware Valley Citizen’s
Council For Clear Air, 478 U.S. 546, 565-66 (1986). Plaintiffs base
their claim for an enhancement primarily on the degree of their suc-
cess in obtaining the credits sought and the magnitude of their award.
However, the results obtained are initially factored into the lodestar
calculation of a reasonable fee and hours expended under the test set
out in Johnson, and thus are not generally a sufficient basis for an
enhancement unless "exceptional." Blum, 465 U.S. at 899-900. Here,
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though the Plaintiffs argue that the judgment was outside the "heart-
land" of usual ERISA cases, they do not provide sufficient evidence
for either this claim or the implicit proposition on which it is based
that the average ERISA case provides the proper basis for comparison
for a case of this nature where a large number of past service credits
are at issue.
VI.
For the foregoing reasons, the district court’s finding that the
amendment constituted a valid addition to the Plan Document is
AFFIRMED. The court’s finding that the plan administrator abused
his discretion in applying the Amendment is also AFFIRMED and its
award of past service credits is REMANDED solely to determine the
correct monetary award in light of the requirement of the Plan that
lump sums not be paid out until the attainment of 55 years of age. The
district court’s grant of attorneys’ fees is also AFFIRMED in part and
REMANDED in part for the district court to determine the correct
award in light of the lost time value of the fees due to delay in pay-
ment.
AFFIRMED IN PART AND REMANDED IN PART
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