Feinstein v. Lewis

• Decision Date: 12 October 1979
• Docket Number: No. 79 Civ. 2204 (HFW).,79 Civ. 2204 (HFW).
• Citation: 477 F. Supp. 1256
• Parties: Barry FEINSTEIN et al., Plaintiffs, v. Albert B. LEWIS, Superintendent of Insurance of the State of New York, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

477 F. Supp. 1256

Barry FEINSTEIN et al., Plaintiffs, v. Albert B. LEWIS, Superintendent of Insurance of the State of New York, et al., Defendants.

No. 79 Civ. 2204 (HFW).

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

October 12, 1979.

Guggenheimer & Untermyer, New York City, for plaintiffs; David M. Brodsky, Joan Ross Sorkin, Ellen Doskow, Charles Fastenberg, New York City, of counsel.

Insurance Department of the State of New York, New York City by Sidney B. Glaser, Associate Counsel, New York City, for defendant Lewis.

Plan Benefits Security Division, U. S. Dept. of Labor, Washington, D. C. by Monica Gallagher, Associate Sol., Norman P. Goldberg, Counsel for Litigation, Edward A. Scallet, Atty., Washington, D. C., for defendant Marshall.

OPINION

WERKER, District Judge.

This action for injunctive and declaratory relief raises the issue of whether an employee welfare plan established pursuant to a collective bargaining agreement between a public employer and a union for the benefit of public employees is exempt from the provisions of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.¹ There being no material issues of fact, and the Court having duly considered all of the legal arguments, judgment is rendered for the defendants.

BACKGROUND

Plaintiffs are trustees of four employee welfare funds² (the "Plans") which were established in accordance with collective bargaining agreements entered into between Local Union 237 (the "Union"), affiliated with the International Brotherhood of Teamsters, and each of four employers, the Town of Babylon, the Town of Islip, the Plainview-Old Bethpage Central School District, and the Brentwood School District. All of the employees covered by the four Plans are employed by one of these towns or school districts, and the Plans are exclusively funded by contributions from the employers. Each Plan is administered by a separate board of trustees comprised of six members,³ three of whom are appointed by the Union and three of whom are appointed by the respective employer. In the event of a deadlock between the Union and employer trustees, the matter is submitted to arbitration.

In 1973, each of the Plans filed a registration statement with the Insurance Department of the State of New York pursuant to the provisions of the New York State Insurance Law. Thereafter, the Plans filed periodic reports and continued to comply with the state requirements. In 1975, however, ERISA came into effect and each of the Plans ceased complying with the Insurance Law and began complying with the reporting, disclosure and auditing provisions of ERISA.

In March 1975, plaintiffs sought an advisory opinion from the United States Department of Labor as to whether the Plans were exempt from or governed by ERISA. Plaintiffs did not receive a response to their request.

In December 1978, the New York Insurance Department notified the Plans that they had not been complying with the Insurance Law and requested that annual reports for the years 1976, 1977 and 1978 be filed "without delay." In response, plaintiffs advised the Insurance Department that the Plans had been complying with ERISA, but the Insurance Department nevertheless continued to insist upon compliance with the New York statutory scheme.

On March 7, 1979, plaintiffs again requested an advisory opinion from the Department of Labor. Plaintiffs did not receive a response, and after the commencement of this lawsuit, the request was withdrawn.

On April 10, 1979, and again on April 25, 1979, the Insurance Department informed plaintiffs that it would commence proceedings against the trustees of the Plans to fine them up to $2,500 each and/or to remove them from office.

On April 27, 1979, plaintiffs filed the instant complaint naming as defendants Albert B. Lewis, Superintendent of Insurance of the State of New York, and Ray Marshall, United States Secretary of Labor. The complaint seeks a judgment declaring Article III-A of the New York State Insurance Law illegal and inoperative as to plaintiffs, compelling defendant Marshall to enforce the provisions of ERISA and to issue regulations and advisory opinions defining the coverage of ERISA, and enjoining defendant Lewis from enforcing the provisions of Article III-A of the Insurance Law against the Plaintiffs.

On April 27, 1979, plaintiffs sought by order to show cause an order temporarily restraining defendant Lewis from commencing or maintaining any legal or administrative action to remove or fine the plaintiffs. With the consent of defendant Lewis, temporary relief was granted pending resolution of the merits of this suit.

In June 1979, the Department of Labor responded to plaintiffs' request, which had been withdrawn, for an advisory opinion. In a letter addressed to plaintiffs' counsel, the Department of Labor concluded that the subject Plans were "governmental plans" within the meaning of section 3(32) of ERISA, 29 U.S.C. § 1002(32), and therefore excluded from coverage under Title I of ERISA by virtue of section 4(b)(1), 29 U.S.C. § 1003(b)(1). The letter is reprinted at 244 Pens. Rep. (BNA), at R-3 (1979).

In July 1979, the defendant Marshall moved to dismiss the complaint as to him on the grounds of lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted.

DISCUSSION

ERISA sets forth a comprehensive scheme for the protection of employee benefit plan participants and their beneficiaries. The provisions of Title I of ERISA apply generally to "any employee benefit plan . . . established or maintained (1) by any employer . . .; or (2) by any employee organization . . .; or (3) by both." ERISA § 4(a), 29 U.S.C. § 1003(a). Specifically excluded from coverage under Title I of ERISA, however, is an employee benefit plan that is also a "governmental plan," ERISA § 4(b), 29 U.S.C. § 1003(b), which is defined as "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. . ." ERISA § 3(32), 29 U.S.C. § 1002(32).⁴

In the instant suit, it is undisputed that the Plans are employee benefit plans within the meaning of section 4(a) of ERISA, 29 U.S.C. § 1003(a), and that the employees covered by the Plans are employees of "the government of a State or political subdivision thereof, or of an agency or instrumentality of any of the foregoing." Additionally, it cannot be disputed that the New York State Insurance Law is preempted by ERISA to the extent that the state statute purports to affect employee benefit plans covered by Titles I and IV of ERISA. ERISA § 514(a), 29 U.S.C. § 1144(a).⁵ See Azzaro v. Harnett, 414 F.Supp. 473, 474 (S.D.N.Y.1976), aff'd mem., 553 F.2d 93 (2d Cir.), cert. denied, 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82 (1977). Hence, the only issue before the Court is whether the Plans are plans "established or maintained" by governmental bodies.

"The starting point in every case involving construction of a statute is the language itself." Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975) (Powell, J., concurring). As noted above, ERISA defines a "governmental plan" as "a plan established or maintained for its employees" by a governmental body or instrumentality. The use of the conjunction "or" indicates that a plan is a governmental plan if it is either established or maintained by a government body for its employees.⁶See United States v. Astolas, 487 F.2d 275, 279 (2d Cir. 1973), cert. denied, 416 U.S. 955, 94 S.Ct. 1968, 40 L.Ed.2d 305 (1974).

Plaintiffs contend that the Plans are neither established nor maintained by governmental bodies. Because the Plans were established pursuant to collective bargaining agreements between the employers and the Union rather than by statute, ordinance, constitution or other unilateral governmental action, plaintiffs claim that the Plans were not "established" by governmental bodies. And, because the Plans are administered by boards of trustees composed of both employer and Union trustees, with deadlocks to be resolved by arbitration, plaintiffs argue that the Plans are not "maintained" by the towns and school districts.

I disagree in both respects. I do not believe that Congress intended the words "established" and "maintained" to be so narrowly construed. The mere fact that a town or school district sets up a benefit plan for its employees as a consequence of negotiations and collective bargaining rather than because of some unilateral action or decision simply does not lead to the conclusion that the plan was not "established" by the town or school district. Although they did so in conjunction with the Union,⁷ the towns and school districts involved herein did nevertheless "establish" the Plans. Moreover, there can be no doubt that the Plans are "maintained" by the towns and school districts for their employees. Although the Plans are jointly administered by the Union and the employers through the boards of trustees, they are exclusively funded — and hence "maintained" — by the employers.⁸

The legislative history of ERISA provides further support for the conclusion that the Plans are governmental plans within the meaning of section 4(b), 29 U.S.C. § 1003(b). ERISA was enacted primarily to curb abuses in the administration of private employee welfare and pension plans. ERISA was preceded by the Welfare and Pension Plan Disclosure Act of 1958, 29 U.S.C. § 301 et seq., repealed, ERISA § 111, 29 U.S.C. § 1031, certain provisions of the Labor Management Relations Act, 29 U.S.C. § 141 et seq., and certain provisions of the Internal Revenue Code of 1954, 26 U.S.C. §§ 401-04, 501-03. See generally H.R.Rep. 93-533, 93d Cong., 1st Sess. (1974), U.S.Code Cong. & Admin. News, p. 4639. Because of the inadequacies of these acts in protecting the rights of private...