Carson v. Local 1588, Intern. Longshoremen's Ass'n, 90 Civ. 5618 (LBS).

• Decision Date: 01 August 1991
• Docket Number: No. 90 Civ. 5618 (LBS).,90 Civ. 5618 (LBS).
• Citation: 769 F. Supp. 141
• Parties: Donald CARSON and Peggy Carson, Plaintiffs, v. LOCAL 1588, INTERNATIONAL LONGSHOREMEN'S ASSOCIATION, its Officers, Executive Board and Trustees et al., Defendants.
• Court: U.S. District Court — Southern District of New York

769 F. Supp. 141

Donald CARSON and Peggy Carson, Plaintiffs, v. LOCAL 1588, INTERNATIONAL LONGSHOREMEN'S ASSOCIATION, its Officers, Executive Board and Trustees et al., Defendants.

No. 90 Civ. 5618 (LBS).

United States District Court, S.D. New York.

August 1, 1991.

Frederic J. Gross, Mount Ephraim, N.J., for plaintiffs.

Schnneider, Cohen, Solomon, Leder & Montalbano (Edward A. Cohen, David Grossman, of counsel), Cranford, N.J., for defendant Local 1588, et al.

Otto G. Obermaier, U.S. Atty., S.D.N.Y. (Chad Vignola, Ping Moy, of counsel), New York City.

OPINION

SAND, District Judge.

Plaintiff Donald Carson was the business agent and later the elected secretary-treasurer of defendant Local 1588. Local 1588 is a small union with a membership today of less than 300 workers, primarily from the cargo and shipping industries, and assets worth approximately $176,000. Carson was the only full time officer employed by the union for the entirety of the approximately fifteen years he served. In 1988 Carson was indicted and convicted on a variety of criminal charges and left his position at Local 1588. The present motion involves Carson's right to receive a pension from Local 1588 under relevant portions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. (1988). In this case, which is consolidated with United States v. Local 1804-1, et al., Carson moves for summary judgment under Fed.R.Civ.P. 56(c). For the reasons discussed below, Carson's motion for summary judgment is denied.

I. FACTS

Donald Carson's involvement with Local 1588 began in the mid-1970's and continued until 1988. In 1972, shortly before Carson's tenure began, Local 1588 adopted a Constitution and By-Laws. Article IX.E of the 1972 Constitution and By-Laws provided in pertinent part:

All elected officers and Business Agents who have served twelve (12) uninterrupted years of service to the Local Union shall receive a pension until their demise from the Local Union of forty (40%) per cent of their last year's base pay.... After death, half of his pension goes to his widow until she remarries or dies.

See Exhibit D of Appendix to Defendant's Brief in Opposition to the Motion for Summary Judgment ("Defendant's Brief"). In 1979, Local 1588 amended its Constitution and By-Laws but did not alter the original pension provisions. See Exhibit E of Appendix to Defendant's Brief. After Carson was convicted on the criminal charges he became disqualified by federal law from holding any position as an officer or employee of any labor union and resigned his position at Local 1588.

After leaving Local 1588, Carson made an application for a pension under the provisions of Article IX.E of the 1979 Constitution and By-Laws. Initially, Local 1588 granted Carson's application and began paying him a monthly pension of $1,387.67. In 1989 and early 1990, after having paid approximately $9,280.00, Local 1588 ceased to provide Carson with any pension payments after concluding that the payments were not proper. See Exhibit A of Declaration of Frederic J. Gross in Support of Plaintiff's Motion for Summary Judgment.

Carson, thereafter, filed a lawsuit in the District of New Jersey seeking to compel Local 1588, its officers, executive board, and trustees to resume paying the $1,387.67 monthly pension, and to guarantee that upon his demise payments would be made at half the rate to his wife, Peggy Carson. Local 1588 obtained a stay in the New Jersey action pending the outcome of a motion to consolidate this case with U.S.A. v. Local 1804-1, et al., 90 Civ. 963 (LBS), in which Donald Carson is a named defendant. This Court granted the consolidation of the cases and the defendants filed an Answer and Counterclaim, which subsequently has been amended.

II. DISCUSSION

A. Applicability of ERISA to Top-Hat Pensions

Donald Carson moves for summary judgment claiming that Local 1588 promised him a pension, began payment of its obligation and presently is illegally withholding payments due. Summary judgment may be granted if there is "no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the burden of demonstrating "the absence of any material factual issue genuinely in dispute." Heyman v. Commerce & Indus. Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir.1975). In determining whether there is a genuine factual issue, a court must resolve all ambiguities and draw all inferences against the moving party. United States v. Diebold Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); see also Advisory Committee Notes to the 1963 Amendments to Rule 56.

The fundamental question on this motion is the applicability of various provisions of the ERISA statutory scheme. Congress enacted ERISA to protect certain employees from abuses in the administration and investment of private retirement plans and employee welfare plans. In essence, ERISA establishes minimum standards for the vesting of benefits, funding of plans, overseeing fiduciary responsibilities, reporting to the government and making disclosures to participants. See generally H.R.Rep. No. 93-533, 93rd Cong.2d Sess., reprinted in 1974 U.S.Code Cong. & Ad. News 4639; see also Donovan v. Dillingham, 688 F.2d 1367, 1370 (11th Cir.1982) (en banc). Yet, the ERISA framework does not include in its protection all retirement arrangements nor do all provisions of the statute apply equally to each covered plan.

In order for ERISA protection to attach there must be a pension plan, as defined under ERISA.¹ At oral argument there was extensive discussion about whether Local 1588 had actually established a pension plan. Disagreement existed over whether the pension provisions in the 1972 and 1979 Constitutions and By-Laws, which have the same language, are self-executing or require the ratification of the union membership. Local 1588 was given two weeks to locate documents that were seized by the United States government in connection with the U.S.A. v. Local 1804-1 case that allegedly prove that Article IX(E) of the 1979 Constitution and By-Laws was not self-executing.² In a letter dated April 22, 1991, Local 1588 stated it was unable to locate the relevant documents and withdrew its argument that Article IX(E) was not ratified and approved. Consequently, Local 1588 has conceded that a pension plan was established, as defined under ERISA.³

The next question is what type of plan was established, and consequently, which provisions of ERISA apply. There is no dispute among the parties that Article IX(E) is a "top-hat" pension plan, which is defined under ERISA as:

"a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees."

29 U.S.C. § 1081(a)(3). At issue is the scope of the non-forfeiture and non-alienation provisions of ERISA and their applicability to the Local 1588 top-hat pension plan. See 29 U.S.C. §§ 1051-61. In general, the ERISA scheme staunchly protects employees by providing that non-forfeiture and non-alienation rules apply to all covered employer pension plans.⁴ It is only in a few specifically enumerated instances that a pension plan is exempt from non-forfeiture and non-alienation rules. The top-hat pension is one of the listed exemptions. See 29 U.S.C. § 1051(2).⁵ As a result, the Court concludes that the non-forfeiture and non-alienation rules do not apply to this case.

Even assuming that the non-forfeiture and non-alienation provisions of ERISA are inapplicable to the Article IX(E) pension plan, there is still a question as to what legal significance attaches to this exemption. Presumably, when the strict non-forfeiture and non-alienation principles surrounding ERISA are not applicable, a pension benefit is forfeitable. Yet the statute is silent as to what must be proven, if anything, before a court may conclude that a particular top hat, or other exempt pension plan, should be forfeited. The question in this case is whether Carson's top-hat pension is subject to forfeiture based on alleged violations of portions of ERISA by Local 1588 while Carson managed the union, or whether some protection against forfeiture continues since even top-hat pensions are covered by the ERISA scheme, which is generally protective of employee pensions. Resolution of this difficult question requires some analysis of other portions of ERISA and a review of the case law on the non-forfeiture and non-alienation provisions of ERISA.

While Congress sought to give some protection to top-hat pension plans, which apply to top management and other highly compensated employees, the comprehensive ERISA framework is aimed primarily at the rank and file employee. This orientation toward lower echelon employees is well documented in the statutory language and legislative history of ERISA. As a general rule, under ERISA, employers may not deny payments under a pension plan to employees (non-forfeiture and non-alienation provisions §§ 1051-1061); they must fund pension plans which exist as separate and distinct legal entities from the employer's business (funding coverage §§ 1081-1086); and they must meet certain minimum fiduciary duties (fiduciary responsibilities §§ 1101-1114) and report and disclose details about the pension plan to beneficiaries and the public (report and disclosure §§ 1021-1031). In short, these provisions are quite protective and courts have only in rare instances granted exceptions based on equitable principles. In contrast to the above, top-hat pension plans are exempt from all of these ERISA requirements with the exception of the reporting and disclosure provisions.

Based on the different treatment accorded top-hat pension plans by the ERISA framework and allegations that Carson twice breached his fiduciary duties, Local 1588 urges that Carson's pension should be...