Demisay v. Local 144 Nursing Home Pension Fund

• Decision Date: 15 March 1989
• Docket Number: No. 85 Civ. 6133 (JES).,85 Civ. 6133 (JES).
• Citation: 710 F. Supp. 58
• Parties: Nicholas DEMISAY, et al., Plaintiffs, v. LOCAL 144, NURSING HOME PENSION FUND, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

710 F. Supp. 58

Nicholas DEMISAY, et al., Plaintiffs, v. LOCAL 144, NURSING HOME PENSION FUND, et al., Defendants.

No. 85 Civ. 6133 (JES).

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

March 15, 1989.

Gibson, Dunn & Crutcher, New York City (Jonathan L. Sulds, David J. Reilley, M. Chinta Gaston, of counsel), for plaintiffs.

Epstein, Becker, Borsody & Green, P.C., New York City (Henry Rose, Harry N. Turk, of counsel), for defendants.

OPINION AND ORDER

SPRIZZO, District Judge:

Plaintiffs bring this action to compel the Local 144 Nursing Home Pension Fund and the New York City Nursing Home—Local 144 Welfare Fund¹ to transfer a share of their reserve funds to the Local 144 Southern New York Residential Health Care Facilities Association Pension and Welfare Funds.² Plaintiffs include the management trustees of the Southern Funds ("Southern management trustees"), the employers and management companies that are members of the Southern New York Residential Health Care Facilities Association, Inc. ("Southern employers" and "Southern management companies"), and individual employees of the Southern employers and management companies ("Southern employees"). Defendants are the Greater Funds and the individual trustees of the Greater Funds. Plaintiffs have moved for partial summary judgment on the main claim. Defendants have moved to dismiss for lack of jurisdiction and standing and have cross-moved for summary judgment on the main claim.³

BACKGROUND

The following facts, except as noted, are undisputed.

Until 1981, the Southern Employers were members of the Greater New York Health Care Facilities Association, Inc. ("Greater New York"), a multiemployer bargaining association. See Affidavit of Jonathan L. Sulds ("Sulds Aff.") at ¶ 3. As a consequence of this membership, they were parties to collective bargaining agreements between Greater New York and Local 144, Hotel, Hospital, Nursing Home and Allied Services Employees Union, SEIU, AFL-CIO ("Local 144"). See id. Under these agreements, Southern employers were obligated to contribute to the Greater Funds on behalf of their employees. See id.

The Southern employers withdrew from Greater New York in 1981. Thereafter, they negotiated and executed individual collective bargaining agreements with Local 144 pursuant to which they were obligated to continue contributing to the Greater Funds on behalf of their employees. See id. at ¶ 4.

In 1984, B.N.H. Management Associates, Inc. ("BNH") and the other Southern Employers sought to establish their own employee pension and welfare funds and entered into negotiations with Local 144 for new individual collective bargaining agreements which would accomplish that purpose. See id. at ¶ 5. Pursuant to collective bargaining agreements executed on November 30, 1984, the parties agreed to the establishment of the Southern Funds. See id. at ¶ 7.

The parties dispute what was said during the negotiations leading to these agreements as to whether a share of the Greater Fund reserves would be transferred to the Southern Funds. See id. at ¶ 6-9; Affidavit of Peter Ottley ("Ottley Aff.") at ¶ 2-8. However, the collective bargaining agreement does not contain any provision relating to such transfer, although the agreement did provide that members of or contributors to the Southern Funds could bring suit to compel a transfer and that Local 144 would "not oppose such litigation to the extent it is consistent with applicable law." See, e.g., Sulds Aff., Ex. A at 26.

During these negotiations, Local 144 sought assurances that its members would receive the same level of benefits in the Southern Funds as provided by the Greater Funds. See Sulds Aff. at ¶ 8; Ottley Aff. at ¶ 9. Therefore, the agreements provided for a continuity of benefits for covered employees so that "no employee shall lose benefits as a result of transfer of his/her coverage" from the Greater Funds to the Southern Funds. See, e.g., Sulds Aff., Ex. A at 16. In addition, under the terms of the agreements, Local 144 agreed to employers making payments to the Southern Funds only on the condition that those Funds provide the same level of benefits as had been provided under the Greater Funds. See id., Ex. A at 16-17.

The collective bargaining agreements further provided for contributions to the new funds. Each signatory employer was to contribute to the Greater Welfare Fund until the date two months prior to the operational date of the Southern Funds. See Sulds Aff. at ¶ 10; Ex. A at 20-21. In addition, pension contributions after July 1, 1984 were to be made to an escrow account. See id., Ex. A at 20-21.

Trust agreements establishing the Southern Funds were executed on October 18, 1985, and the board of trustees agreed that the Southern Funds would become operational on December 1, 1985. See id. at ¶¶ 11-12 & Exs. B, C, D. Subsequently, the board of trustees of the Southern Pension Fund agreed that the Southern Fund would fully recognize all years of credited service earned under the Greater Pension Fund by any participants who had not vested under that plan.⁴ See id. at ¶ 13 & Ex. E at 2. Furthermore, for employees vested under the Greater Pension Fund, the Southern Pension Fund would provide a pro rata portion of their ultimate pension benefit.⁵ See id. at ¶ 14 & Ex. E at 2.

DISCUSSION

Plaintiffs in this action make three claims. First, they allege that the failure of the Greater Funds' trust documents to provide for the transfer of a portion of their reserves to the Southern Funds is a structural defect in the plans violative of section 302(c)(5) of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186(c)(5) (1982). Next, they allege that the Greater Funds violate section 4234 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1414 (1982), because they do not have asset transfer rules. Finally, plaintiff employees allege that defendant trustees have breached their fiduciary obligations under section 404 of ERISA, 29 U.S.C. § 1104 (1982). The Court will address each of these claims in turn.

I. LMRA section 302(c)(5)

A. Jurisdiction

Plaintiffs in their first claim assert a violation of LMRA section 302(c)(5), 29 U.S.C. § 186(c)(5), which provides that employer payments may be made to an employee trust fund established for "the sole and exclusive benefit of the employees of such employer, and their families and dependents (or of such employees, families, and dependents jointly with the employees of other employers making similar payments, and their families and dependents)." The federal courts clearly have jurisdiction under section 302(e), 29 U.S.C. § 186(e) (1982), to enforce a trust fund's compliance with this section. See Local 50, Bakery & Confectionery Workers Union v. Local 3 Bakery & Confectionery Workers Union, 733 F.2d 229, 234 (2d Cir.1984).

Defendants' argument that there is no jurisdiction here because the Court cannot examine the reasonableness of collectively bargained provisions, see United Mine Workers of America Health & Retirement Funds v. Robinson, 455 U.S. 562, 102 S.Ct. 1226, 71 L.Ed.2d 419 (1982), is untenable on the facts of this case. Plaintiffs do not challenge the reasonableness of any collectively bargained term, but rather allege that the Greater Funds do not comply with the specific standards of section 302(c)(5). See Robinson, 455 U.S. at 573 n. 12, 102 S.Ct. at 1233 n. 12; see also infra note 13. The Court clearly has jurisdiction to review a challenge that the Greater Funds are structurally deficient under that section's "sole and exclusive benefit" standard. See Local 50, supra, 733 F.2d at 234; Alvares v. Erickson, 514 F.2d 156, 165 (9th Cir.), cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975); Teamsters Local No. 145 v. Kuba, 631 F.Supp. 1063, 1068-69 (D.Conn.1986).

B. Standing

Defendants also challenge the standing of plaintiffs to assert their section 302(c)(5) claim. Defendants contend that because the purpose of section 302(c)(5) is to protect the interests of employees, only "employees in the fund" are proper parties to assert this claim. However, although section 302 does not specifically delineate who may sue or be sued, it has been held that employees, unions, trustees and employers all have standing to sue under section 302(c)(5). See Molnar v. Wibbelt, 789 F.2d 244, 248-49 (3d Cir.1986) (quoting Copra v. Suro, 236 F.2d 107, 114 (1st Cir. 1956)).

Moreover, standing under section 302(c)(5) does not require a nexus to the fund as close as that which may be required under ERISA.⁶ See Molnar, supra, 789 F.2d at 249. Here, the Southern employers and management companies allege that unless there is a transfer of reserves to the new funds, the employers will be required either to reduce benefits or make more payments into the funds.⁷ The Court concludes that this alleged injury is sufficient to establish standing. Cf. Central Tool Co. v. Int'l Assoc. of Machinists Nat'l Pension Fund, Benefit Plan A, 811 F.2d 651, 655-56 (D.C.Cir.1987).

The standing of Southern employees is less clear, because the employers have agreed that benefit levels will remain the same.⁸ However, assuming that the Southern employers are unable to properly fund the Southern Funds in the event that a transfer of reserves is not ordered, the possibility and perhaps the likelihood that their benefit levels might be adversely affected if the employers are financially unable to honor their commitment to the union is sufficient to confer standing to challenge the refusal of the Greater Funds to make that transfer. Moreover, as former employees in a welfare fund who seek to challenge a structural defect in that fund, they also have standing on that basis as well. See Alvares, supra, 514 F.2d at 164-65.

The management trustees of the Southern Funds have also sued, but the union trustees have not, and therefore the Southern Funds themselves are not parties to this action. The Southern Fund trust documents provide...