Derogatis v. Bd. of Trs. of the Welfare Fund of the Int'l Union of Operating Eng'rs Local 15, 15a, 15C 15D, AFL-CIO
| Decision Date | 13 June 2019 |
| Docket Number | No. 14 Civ. 8863 (CM),14 Civ. 8863 (CM) |
| Parties | Emily DEROGATIS, Plaintiff, v. BOARD OF TRUSTEES OF the WELFARE FUND OF the INTERNATIONAL UNION OF OPERATING ENGINEERS LOCAL 15, 15A, 15C & 15D, AFL-CIO; James T. Callahan, Trustee; Thomas A. Callahan, Trustee; Francis DiMenna, Trustee; and John Brunetti, Trustee, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Robert Lawrence Liebross, Law Office of Robert L. Liebross, New York, NY, Edgar Pauk, Law Office of Edgar Pauk, Brooklyn, NY, for Plaintiff.
James Michael Steinberg, Brady McGuire & Steinberg, P.C., Hastings-on-Hudson, NY, for Defendants.
DECISION AND ORDER DENYING THE WELFARE FUND'S MOTION FOR SUMMARY JUDGMENT AND DEROGATIS' CROSS-MOTION FOR SUMMARY JUDGMENT
On remand from the Second Circuit, this Court must decide whether the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. ("ERISA"), allows Plaintiff Emily DeRogatis to "surcharge" the trustees of one ERISA plan for a breach of trust that caused her to lose benefits under another, related plan.
Until recently, monetary compensation was unavailable in an action alleging a violation of section 502(a)(3) of ERISA because such claims were legal rather than equitable in nature. Mertens v. Hewitt Assocs. , 508 U.S. 248, 255, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). In 2011, however, the United States Supreme Court ruled that beneficiaries suing fiduciaries under section 502(a)(3) could in certain circumstances obtain monetary compensation in the form of an equitable "surcharge." CIGNA Corp. v. Amara , 563 U.S. 421, 442, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011) (Amara ). Before Amara , surcharge was available only in cases in which the trustees were unjustly enriched or caused a loss to the trust res. Id. In Amara , however, the Supreme Court held that the "surcharge remedy extend[s] to a breach of trust committed by a fiduciary encompassing any violation of a duty imposed upon that fiduciary"—even if the trustees were not personally enriched thereby or the trust did not lose assets. Id.
In this very sad case, operating engineer Frank DeRogatis was diagnosed with terminal cancer
. After his diagnosis, Plaintiff Emily DeRogatis received erroneous information about the possible termination of her husband's healthcare benefits from a claims specialist employed by Frank's healthcare plan—the Welfare Fund of the International Union of Operating Engineers Local 15, 15A, 15C & 15D, AFL-CIO (the "Welfare Fund"). Fearing a loss of medical benefits at a time when her husband was hospitalized and dying, she declined to submit an early retirement election that Frank had signed in order to maximize the pension benefit that she would receive after his death. As a result, Emily was not eligible for augmented survivor's benefits under the terms of his pension plan—the Central Pension Fund of the International Union of Operating Engineers and Participating Employers (the "Pension Plan").
After Frank's death, Emily brought lawsuits against the Welfare Fund and the Pension Plan,1 in a quest to obtain the augmented benefit that would have been available to her had she submitted Frank's early retirement papers. This Court granted summary judgment in favor of defendants, and DeRogatis appealed. The Court of Appeals affirmed this Court's award of summary judgment in favor of the Pension Plan—the terms of which clearly barred giving Emily the augmented benefit—but concluded that there were genuine issues of material fact about the potential liability of the Welfare Fund for a breach of fiduciary duty based on the actions of its employees. Specifically, the Second Circuit concluded that there were genuine issues of material fact about (i ) whether the trustees were acting as fiduciaries to DeRogatis when a Welfare Fund employee provided erroneous advice to Emily; and, if they were, (ii ) whether the trustees breached those fiduciary duties through a combination of a misleading summary plan description ("SPD") and the erroneous advice. However, the Court of Appeals observed that the Welfare Fund could still obtain summary judgment if it established on remand that DeRogatis was not entitled to equitable relief under the circumstances—an issue that neither party had briefed before this Court in connection with the motions for summary judgment.
Presently before the Court is the Welfare Fund's renewed motion for summary judgment, on the grounds that DeRogatis has no claim for an equitable remedy under the circumstances of this case. Also before the Court is DeRogatis' cross-motion for summary judgment on the issue of whether the Welfare Fund breached its fiduciary duty.
For the reasons that follow, both motions are denied.
The Court assumes familiarity with the facts of the case from the Court's previous decisions, DeRogatis v. Bd. of Trs. of the Cent. Pension Fund of the Int'l Union of Operating Eng'rs , No. 13-cv-8788, 2015 WL 1923544 (S.D.N.Y. Apr. 2, 2015) (DeRogatis I ); DeRogatis v. Bd. of Trs. of the Cent. Pension Fund of the Int'l Union of Operating Eng'rs, 167 F. Supp. 3d 574 (S.D.N.Y. 2016) (DeRogatis II ); DeRogatis v. Bd. of Trs. of the Cent. Pension Fund of the Int'l Union of Operating Eng'rs & Participating Emp'rs , No. 13-cv-8788, 2016 WL 5805283 (S.D.N.Y. Sept. 19, 2016) (DeRogatis III ), and the Second Circuit's decision, In re DeRogatis , 904 F.3d 174 (2d Cir. 2018) (DeRogatis IV ). A brief overview of the facts, taken from these decisions, is provided below. For purposes of the Welfare Fund's current summary judgment motion, the facts are taken in the light most favorable to DeRogatis.
Frank DeRogatis was an operating engineer and member of the International Union of Operating Engineers Local 15 ("Local 15"). The Union provides its members with both medical (welfare) and pension benefits. Medical benefits are administered locally, through the Welfare Fund's New York City-based office. Pension benefits are administered centrally, through the Pension Plan's Washington, D.C. based-office. The two plans have no formal affiliation with each other, except that they both serve Local 15 members.
As the Pension Plan's Washington, D.C. office is not readily accessible to New York City-based members of the Local 15, employees of the Welfare Fund occasionally provide advice related to pension benefits under the Pension Plan. That is what happened in this case.
After Frank DeRogatis was diagnosed with terminal cancer
in January 2011, he and his wife Emily met with Patrick Keenan, an office administrator for the Welfare Fund, to learn about Frank's post-retirement options for health benefits and pension benefits. Based on what Keenan told him, Frank then filled out and signed the paperwork to apply for early retirement. He did this because, under the terms of the Pension Plan, the surviving spouse of a retired Local 15 member would receive a higher monthly benefit than the surviving spouse of a member who died while employed. To put numbers on the difference: if Frank died while employed, Emily was entitled to a Preretirement Annuity of $ 787 per month; if he died after retiring, Emily could qualify for a Joint Annuity (the "100% Joint Annuity"), which would pay her as much as $ 1,076 per month. So by retiring, at age 61 instead of waiting until age 62, Frank could leave Emily with a pension benefit worth almost $ 300 more each month.
When Frank was hospitalized with pneumonia
in late July 2011, Emily brought the signed retirement paperwork to the local Welfare Fund office for filing. However, before she submitted the paperwork, claims specialist Richard Lopez told her that the DeRogatises would lose their health benefits if Frank retired before reaching the age of 62. This was not correct. What Lopez should have said was that Frank would stop accruing additional health benefits (which were credited to Local 15 members every four months based on hours worked) if he retired early—although since he was dying, not working, this would hardly have mattered. Taking early retirement would not have left Frank without health insurance benefits.
But Emily thought that submitting the early retirement paperwork would jeopardize Frank's access to health insurance. So she did not submit it. Instead, she applied for a short-term disability benefit from the Welfare Fund.
Frank died less than two months later, in September 2011.
In strict accordance with the terms of the Pension Plan, Emily began receiving the lower, $ 787/month Preretirement Annuity. Emily tried to submit Frank's signed retirement papers after his death and contested the Pension Plan's determination. After several unsuccessful rounds of administrative appeals, Emily brought parallel ERISA cases in this Court against both the Pension Plan (13-cv-8788) and the Welfare Fund (14-cv-8863).
A. Procedural History
After discovery, the Court granted summary judgment to the Pension Plan defendants, finding as a matter of undisputed fact that the Pension Plan had not acted arbitrarily or capriciously or breached any fiduciary duty in denying DeRogatis' request for an augmented survivor's benefit after her husband's death.
DeRogatis I , 2015 WL 1923544, at *7–*8 ; DeRogatis III , 2016 WL 5805283, at *9.
The Court also granted summary judgment to the Welfare Plan. I concluded that a plan administrator could not be held liable for unintentional misrepresentations made about the plan's operation by Lopez, who was a purely "ministerial" agent and not a fiduciary. DeRogatis II , 167 F. Supp. 3d at 582.
DeRogatis appealed. The Second Circuit affirmed the grant of summary judgment to the Pension Plan, but overturned the grant of summary judgment to the Welfare Plan. DeRogatis IV , 904 F.3d at 180. Citing Estate of Becker v. Eastman Kodak Co. , 120 F.3d 5, 10 (2d Cir. 1997), the panel ruled that "a plan administrator ... may be liable for fiduciary breach based on a combination of unclear summary plan descriptions and...
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