Forys v. SWIFT INDEPENDENT PACKING CO.

• Decision Date: 23 May 1986
• Docket Number: Civ. No. 85-3205.
• Citation: 634 F. Supp. 963
• Parties: Leonard FORYS and Janet Forys, Plaintiffs, v. SWIFT INDEPENDENT PACKING COMPANY, Self-Insurers Benefit Services, a Corporation, Ryan Insurance Group, a Corporation, Beth Elkin and United Food and Commercial Worker's International Union, AFL-CIO and CLC, a Voluntary Unincorporated Association, Defendants.
• Court: U.S. District Court — Southern District of Illinois

634 F. Supp. 963

Leonard FORYS and Janet Forys, Plaintiffs, v. SWIFT INDEPENDENT PACKING COMPANY, Self-Insurers Benefit Services, a Corporation, Ryan Insurance Group, a Corporation, Beth Elkin and United Food and Commercial Worker's International Union, AFL-CIO and CLC, a Voluntary Unincorporated Association, Defendants.

Civ. No. 85-3205.

United States District Court, S.D. Illinois, East St. Louis Division.

May 23, 1986.

John J. Kurowski, Belleville, Ill., for plaintiffs.

Donald J. Dahlmann, Walker & Williams, Belleville, Ill., Lawrence J. Casazza, Vedder, Price, Kaufman & Kammholz, Chicago, Ill., Sharon A. Jarosz Knapp, Carr, Korein, Kunin, Schlichter and Brennan, East St. Louis, Ill., Irving M. King, Wesley G.S. Kennedy, Cotton, Watt, Jones & King, Chicago, Ill., for defendants.

MEMORANDUM AND ORDER

FOREMAN, Chief Judge:

This matter is before the Court on defendant United Food and Commercial Worker's International Union's (Union) motion to dismiss or strike (Document No. 29). Plaintiffs are employees of co-defendant Swift Independent Packing Company (Swift) and beneficiaries of Swift's health insurance plan which is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

Between September 6, 1982 and January 26, 1984 plaintiffs incurred medical, hospital, surgical, and doctor bills on behalf of their now-deceased daughter, totaling $591,083.26. The Swift plan covered $551,211.24 of these expenses, leaving unpaid a balance of $39,872.02. The plaintiffs allege in Counts II and III of their amended complaint that by virtue of the Union's discretionary responsibilities over the Swift health plan, it is a fiduciary as defined by ERISA, and that the Union breached its fiduciary duties owed to the plaintiffs. Plaintiffs further demand punitive damages, damages for emotional distress, a jury trial, and attorney's fees.

The Union denies that its responsibilities regarding Swift's health plan confer a fiduciary status as contemplated by ERISA, 29 U.S.C. § 1002(21)(A)(iii). The Union further submits that even if it is a proper defendant, ERISA allows neither punitive damages or damages for emotional distress, nor does it require that a jury trial be afforded the plaintiffs. The Union mistakenly has moved to dismiss Count I in addition to Counts II and III. Since the plaintiffs have not named the Union as a defendant in Count I the Court has disregarded the argument relating to this Count.

Section 3(21) of ERISA defines a fiduciary. In relevant part, action 3(21) provides:

(A) Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under Section 1105(c)(1)(B) of this title.

29 U.S.C. § 1002(21). The plaintiffs contend that the Union is a fiduciary as a result of subsection (iii). Thus, the Union herein is a fiduciary with respect to a plan to the extent it has any discretionary authority or discretionary responsibility in the administration of the plan.

Section 11 of Swift's health insurance plan provides that section 42 of the Master Agreement between Swift and the Union governs the claims handling procedure in situations such as the one presented here. Three paragraphs of section 42 of the Master Agreement are pertinent in the instant case:

1 The company will designate a representative ... at each plant who will be available for consultation with beneficiaries or a Local Union representative ... with respect to the disposition of claims.

2 In the event the beneficiary or the Local Union representative is not satisfied with the outcome of the consultation, the Local Union representative may refer the matter to the International Union for discussion with the Director of the Industrial Relations Department of the Company....

3 In the event no decision is reached in the above step, the International Union may submit the matter to the Arbitrator, whose decision shall be final and binding on all parties above.

Once the Union receives a benefit complaint from its Local, section 42 of the agreement requires that the Union discuss the matter with Swift's Director of Industrial Relations. One of two courses of action follow these conferences. (1) The union will agree with Swift's position or it will reach a compromise, on behalf of the employee, with Swift. The matter is pursued no further or; (2) The union will disagree with Swift or be unable to compromise. When this happens, section 42 vests the Union with the sole power to refer the matter, on behalf of the employee, to binding arbitration if it so chooses.

In the instant case, the Union chose not to refer the case to the arbitrator, thus effectively and permanently denying plaintiffs' claim. After the Union's conference with Swift's Director of Industrial Relations, the denial of the claim was final upon the Union's determination that it would not seek arbitration. Once the Union made that choice, the denial became permanent; whereas, if the claim had been placed before the arbitrator it had an undetermined chance of being granted. The plaintiffs contend that by exercising its discretion in the claims handling procedure, the Union...