Booth v. Security Mutual Life Insurance Company
Decision Date | 31 October 1957 |
Docket Number | Civ. A. No. 806-56. |
Citation | 155 F. Supp. 755 |
Court | U.S. District Court — District of New Jersey |
Parties | Isola BOOTH, Mattie Miles, and Jessie Posey, Plaintiffs, v. SECURITY MUTUAL LIFE INSURANCE COMPANY et al., Defendants. |
COPYRIGHT MATERIAL OMITTED
Stryker, Tams & Horner, Newark, N. J., for defendant, Security Mut. Life Ins. Co.
Van Riper & Belmont, Newark, N. J., for defendants, Louis Saperstein and Harlew Agency.
Harold Krieger, Jersey City, N. J., Benjamin H. Chodash, Jersey City, N. J., for defendant, Winfield Chasmar.
This is a diversity class suit brought by three members of a California local of the Laundry Workers' International Union to recover for alleged breaches of trust aggregating approximately $1,000,000. The suit is brought against Louis Saperstein, an insurance agent, and Eugene James, one of the officers of the International Union, both of whom are alleged to have profited directly from such diversions of trust funds. In addition, the complaint names as defendants, Saperstein's Harlew Agency, the Security Mutual Life Insurance Company, which wrote group insurance for the Trust Fund of the International Union, as administered by a Board of Trustees, three from the employers, three from the Union, and also one Chasmar, both individually and as sole Trustee of such fund resident in New Jersey. Defendants, Security Mutual Life Insurance Company and Chasmar, have moved for summary judgment on the complaint, Fed.Rules Civ.Proc. rule 56, 28 U.S.C.
It appears undisputedly from the affidavits filed on such motion that these same plaintiffs have also brought similar class suits for the same purpose against the other Trustees of such Trust Fund in the courts to whose jurisdiction they are respectively subject. Specifically, such suits have been brought in the state courts of California against Trustees, Goldstein and Dooley, and others, and in the United States District Court for the Northern District of Illinois, Eastern Division, against Toomey, another Trustee, and as well against James and the Merchants National Bank of Chicago. Since it was discussed by all concerned on the above motion in this cause, perhaps it should be added that, after the complaint herein was filed, a suit was brought in the New Jersey state courts against Saperstein by all the Trustees of the above Trust Fund, and that thereafter indictments were found by the Essex County Grand Jury against both Saperstein and James, largely upon the above alleged basis. But, so far as appears, this suit by the above Trustees, instituted several months after the complaint herein was filed, and some two years after the findings of the Sub-Committee of the United States Senate were published in that regard,1 is the only court action taken by the Trustees, and this against Saperstein alone, to protect the above Trust Fund from the above alleged breaches of trust, and to regain for its benefit the losses claimed to have resulted therefrom. However, previous to the filing of the complaint, the Trust Fund Trustees herein exchanged general releases with the Security Mutual Life Insurance Company with particular regard to the matters alleged in the above complaint, that Company having therewith paid the Trustees $125,000.
In other words, no matter how strong the affidavits may be as to the facts, if contrary facts are properly pleaded on the other side, an issue of fact is created which requires the trial court to deny the motion for summary judgment. This court therefore turns to, and must presently accept as true, the factual allegations of the complaint as properly pleaded therein.
The complaint charges that of the more than $3,250,000 of insurance premiums paid out of the Trust Fund for this employee group insurance, more than $2,500,000 was paid to defendant, Saperstein, in his capacity as agent for defendant, Security Mutual, and that out of this sum Saperstein retained $912,000, which he failed to transmit to Security Mutual. After reciting the various means used by Saperstein to accomplish this, the complaint charges that "defendant Chasmar knew, or in the exercise of reasonable diligence should have known, of all this" and that, despite that, "Chasmar, in breach of his fiduciary obligations, took no action with respect to such facts." The complaint further charges Chasmar with similar breach of his fiduciary obligations in permitting Saperstein to retain out of the above funds more than $573,000, which James deposited in the above Chicago bank, and then withdrew for the benefit of persons unknown. The complaint further charges that defendant, Security Mutual, gave defendant, Saperstein, excessive commissions, excessive service fees, and at his instance made excessive payments to Union welfare deputies, out of moneys which should have gone to the credit of the Trust Fund, all aggregating many hundreds of thousands of dollars. All of the above the complaint alleges that the defendant, Security Mutual Life Insurance Company, and defendant Chasmar, knew or should have known.
The complaint further alleges that defendant, Security Mutual Life Insurance Company, knowingly "assisted in" the above conspiracy. Plaintiffs frankly admit that their complaint is based upon the findings of the above Senate reports and, in addition, upon those of the so-called "A.F.L.-C.I.O. Report", same being the report of the Union Ethical Practices Committee of A.F.L.-C.I.O., which itself reviewed the above Senate reports. Plaintiffs also admit, in fact claim, in their affidavits, presently undisputed to that extent, that as mere run-of-the-mine members of this Union local they have no personal knowledge of the details of this alleged conspiracy, particularly since their Union paper never contained any allusion to all these facts, or to this investigation by the United States Senate, and this despite the fact that the above named Byers was not only their International Union President but the head of their Union paper. The complaint accordingly asks for full discovery from all defendants, for an accounting by them, and other appropriate relief.
Turning to defendants' motions, they contend, first, that plaintiffs have no right to sue, second, that neither of these defendants is responsible for what occurred in fact.
As to the right of plaintiffs to sue, it is first claimed that these members of the local Laundry Workers' Union are not proper representatives of the Union and its welfare Trust Fund, since the Union contains many thousands of workers scattered all over the United States. This claim, however, is a two-edged sword. For the very fact that all the plaintiffs total many thousands, and that they are scattered all over the United States, is the very reason why the three plaintiffs here do "fairly insure the adequate representation of all", when the "persons constituting a class are so numerous as to make it impracticable to bring them all before the court." F. R.C.P. Class Actions 23(a). The only other factors of importance in determining whether a party is a proper class representative is whether his interest is coextensive with that of the class as a whole, is not antagonistic to the class, and whether he has adequate counsel to insure proper vigor of prosecution. 3 Moore's Federal Practice, § 2307. On none of these other points can defendants properly raise any serious question. Plaintiffs' status as proper class plaintiffs is clear.
It will be noted that in Section 3 there is retained in the employees "such rights as are otherwise herein in this agreement provided for." The agreement provides for the taking out of insurance, with insurance payments thereunder directly to these employees and their beneficiaries. These plaintiffs and those whom they represent thus have a direct interest in the Trust Fund they now seek to protect...
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