Cummings v. City of N.Y.

• Decision Date: 29 September 2017
• Docket Number: No. 13–CV–1303 (RA),13–CV–1303 (RA)
• Parties: Cynthia CUMMINGS, Raglan George, Jr., Betty Powell, Carolyn Cox, Luz Santiago, Gina Rusch, Andre Lake, and Cynthia McCright, as Trustees of the District Council 1707, Local 95 Head Start Employees Welfare Fund, Plaintiffs, v. The CITY OF NEW YORK and The New York City Administration for Children's Services, Ronald E. Richter, Commissioner, Defendants.
• Court: U.S. District Court — Southern District of New York

302 F.Supp.3d 511

Cynthia CUMMINGS, Raglan George, Jr., Betty Powell, Carolyn Cox, Luz Santiago, Gina Rusch, Andre Lake, and Cynthia McCright, as Trustees of the District Council 1707, Local 95 Head Start Employees Welfare Fund, Plaintiffs,

v.The CITY OF NEW YORK and The New York City Administration for Children's Services, Ronald E. Richter, Commissioner, Defendants.

No. 13–CV–1303 (RA)

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

Signed September 29, 2017

James William Versocki, John H. Byington, III, Archer, Byington, Glennon & Levine, LLP, Melville, NY, Barbara A. Jaccoma, Brooklyn, NY, for Plaintiffs.

Christopher Matthew Bletsch, Susan Ann Marie Turk, New York City Law Department, Michael S. Adler, Christina Chung, NYC Law Department, Office of the Corporation Counsel, Rachel Brothman Kane, Cooley LLP, New York, NY, for Defendants.

OPINION & ORDER

RONNIE ABRAMS, United States District JudgePlaintiffs are the Trustees of the District Council 1707, Local 95 Head Start Employees Welfare Fund (the "Local 95 Fund" or the "Fund"), a multiemployer plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"). Plaintiffs allege that Defendants, the City of New York and the New York City Administration for Children's Services ("ACS"), failed to make approximately $15 million in contributions to the Fund between 2009 and 2012. They assert a claim under Section 515 of ERISA as well as various state law claims. Defendants, who now move for summary judgment, argue that they were not obligated to make the contributions at issue. Because the Court agrees with Defendants that they are entitled to judgment as a matter of law on all claims, Defendants' motion is granted.

BACKGROUND¹

Head Start is a federal program that makes grants to local governments and non-profit organizations for the purpose of providing child development services to economically disadvantaged children and families. Defs.' 56.1 ¶ 3, ECF No. 75; Pls.' 56.1 ¶ 3, ECF No. 92. The City of New York has operated a Head Start program since the 1960s, Defs.' 56.1 ¶ 4; Pls.' 56.1 ¶ 4, and ACS has administered the program since 1997, Defs.' 56.1 ¶ 5; Pls.' 56.1 ¶ 5.² The program is funded at least in part by federal grants. See Defs.' 56.1 ¶ 6; Pls.' 56.1 ¶ 6. ACS does not provide Head Start services directly; instead, it contracts with non-profit organizations (the "Delegate Agencies") to provide the services. Defs.' 56.1 ¶ 8; Pls.' 56.1 ¶ 8.

The Fund was formed on September 13, 1994 pursuant to an Agreement and Declaration of Trust (the "Trust Agreement") between District Council 1707, Head Start Local 95, Community and Social Agency Employees Union, AFSCME, AFL–CIO ("Local 95"), the New York City Head Start Sponsoring Board Council (the "HSSBC"), and various trustees. Kane Decl. Ex. 15 ("Trust Agreement"), ECF No. 79; see also Defs.' 56.1 ¶ 28; Pls.' 56.1 ¶ 28. Local 95 is the exclusive collective bargaining representative for Head Start employees. Byington Aff. Ex. 2 at 2, ECF No. 94; see also Defs.' 56.1 ¶ 11; Pls.' 56.1 ¶ 11. The HSSBC is an employer association that acts as the collective bargaining agent for the Delegate Agencies. Defs.' 56.1 ¶ 15; Pls.' 56.1 ¶ 15.

The issue in this case is whether Defendants were obligated to pay the Fund for Head Start employees' hospitalization insurance. It is undisputed that the City did so for many years. See Defs.' Mem. at 1, ECF No. 76. Defendants, however, contend that when the City stopped covering the full amount of the insurance costs in 2009, it was within its rights to do so. See id. at 1–2.

The hospitalization contract that covered Head Start employees during the relevant period was originally issued by Blue Cross and Blue Shield of Greater New York to the Day Care Council Local 205 D.C. 1707 Welfare Fund (the "Local 205 Fund") in 1978. Byington Aff. Ex. 15 ("BC/BS Contract"). The application for the policy indicated that the "Amount of Employer Contribution" for premiums would be 100%. Id. at FND–000505. On May 6, 1997, counsel for the Local 95 Fund wrote to ACS to discuss the possibility of taking over administration of the hospitalization coverage. Kane Decl. Ex. 16. The letter explained that the Local 205 Fund had been administering the coverage for "at least twenty years" and was "independently collect[ing] data regarding hires and terminations from each Head Start agency and report[ing] it to Blue Cross for billing." Id. The letter suggested that the Local 205 Fund had been performing this service "pursuant to a contract between the [Local 205 Fund] and the City." Id. A draft of the purported contract was attached to the letter. Id. ; see also Kane Decl. Ex. 17 ("1979 Draft Contract").

The term of the draft contract was February 1, 1979 to January 31, 1980. 1979 Draft Contract ¶ 1. It contemplated that the City would pay for the Head Start employees' hospitalization premiums, and required the Local 205 Fund to reimburse the City for "[a]ll refunds or return of premiums paid or credited by Blue Cross." Id. ¶ 5. It made clear that "the source of the funds for the payments ... [was] a federal grant to the City for the operation of Head Start programs," and capped the amount that the City would pay for premiums at $536,250. Id. ¶ 7(B). The draft contract also provided that the City would pay the lesser of 1.5% of the premiums paid or $8,045 to the Local 205 Fund each year as an administrative fee. Id. ¶ 4.

The May 6, 1997 letter stated that the draft contract was "the only one available." Kane Deck Ex. 16. Thus, the Local 95 Fund asked ACS for "[a] copy of the latest hospitalization administration contract between the [Local 205 Fund] and ACS" as well as "[i]nformation regarding the process through which the contract is renewed." Id. Despite this request, the parties agree that the Local 95 Fund never received "a single, integrated and executed hospitalization administration contract between the City and the Local 205 Fund," Pls.' 56.1 ¶ 62, and that there is no evidence that the 1979 draft contract was ever signed, Defs.' 56.1 ¶ 59; Pls.' 56.1 ¶ 59.

On July 31, 1997, Local 95 and the Local 95 Fund sent a letter to ACS jointly requesting that administration of the hospitalization coverage be "transferred" to the Local 95 Fund. Kane Decl. Ex. 19. On August 12, 1997, the HSSBC informed ACS that the subject of the potential transfer had been raised during "the most recent collective bargaining negotiations session" and that the HSSBC had not agreed to the transfer at the time. Kane Decl. Ex. 20. The HSSBC asked ACS to "hold the Union's request in abeyance" until the matter could be resolved through collective bargaining. Id. On August 26, 1997, ACS sent a letter to the HSSBC regarding "the recent request by the [Local 95 Fund] to transfer administration of the Head Start Blue Cross Hospitalization contract ... from Local 205 to Local 95." Kane Decl. Ex. 21. ACS stated that it did "not have a problem with this request, and [was] prepared to approve it since payment for these benefits [was already going] to District Council 1707." Id. The letter made clear, however, that ACS would only instruct the City's Central Insurance Program to begin directing payments to the Local 95 Fund "upon receipt of [the HSSBC's] agreement." Id.

In January 1998, Local 95 and the HSSBC entered into a Tentative Memorandum of Agreement that provided that "the administration of the Blue Cross\Blue Shield coverage" would be transferred from the Local 205 Fund to the Local 95 Fund "as soon as practicable following the ratification of the 1996–2000 Agreement." Kane Decl. Ex. 22 ¶ 6. The transfer appears to have occurred sometime in the summer of 1998. See Kane Decl. Ex. 23. The Local 95 Fund took over administration of the hospitalization policy and assumed $2,804,387.19 in liabilities to ACS for "reserves attributable to favorable claims experience the [Local 205 Fund] ... accumulated during the length of the [Local 205 Fund's] administration of the Contract." Id.

In or around 1998, the City began directing payments for hospitalization premiums and an administrative fee of approximately 1.5% of the premiums to the Local 95 Fund. Defs.' 56.1 ¶ 73; Pls.' 56.1 ¶ 73. The City prepared annual "Contract Registrations" in connection with the payments it made to the Fund. See, e.g., Kane Decl. Ex. 25 ("July 2007 Contract Registration"). Each Contract Registration was assigned a contract number, and Local 95 was described as a "vendor." See, e.g., id. at NYC CUMMINGS 025275, 025277–81. The Contract Registrations certified that the "advice of award of contract" was made "in accordance with the provisions of the appropriate sections of the NYC Charter" and that the "award [was] a proper expenditure and the liability [was] charged to the proper fund or funds." See, e.g., id. at NYC CUMMINGS 025281. The Contract Registrations also included memoranda prepared by the City indicating that the payments made to the Fund were "neither procurements nor subject to the [City's] Procurement Policy Board Rules." See, e.g., id. at NYC CUMMINGS 025276. The Fund invoiced the City on a monthly basis, Defs.' 56.1 ¶ 75; Pls.' 56.1 ¶ 75; see generally Byington Aff. Ex. 36, and payment appears to have been made without incident for many years.

The Fund operated pursuant to the terms of its Trust Agreement, which was amended several times. Defs.' 56.1 ¶ 29; Pls.' 56.1 ¶ 29; see generally Trust Agreement. Under the 2003 amendments, which remained in effect throughout the relevant period, each "Employer" was required to "contribute to the Fund the amount required pursuant to the Collective Bargaining Agreement, and/or if applicable, Participation Agreement, under which it is covered at such time." Trust Agreement § 4.1.³ The Trust Agreement defined "Employer" as "any Agency or Program that is obligated under the terms of a Collective Bargaining Agreement ... to make contributions into this Fund on behalf of its Employees." Id. § 3.3.⁴ In light of the...