Fuchs v. Allen

• Decision Date: 29 March 2005
• Docket Number: No. 1:02 CV 1552.,1:02 CV 1552.
• Citation: 363 F.Supp.2d 407
• Parties: John FUCHS, as Executive Secretary-Treasurer of the Empire State Regional Council of Carpenters; Stephen Flynn, as the Eastern District Representative of the United Brotherhood of Carpenters and Joiners of America, and as Assistant Supervisor of Carpenters Local Union No. 229; Ronald Kent, as Trustee of and Participant in the Adirondack Carpenters Pension Fund and the Carpenters Local 1042/229 Health Care Fund; Leonardo Osborne; and Terry Middleton, Plaintiffs, v. Philip ALLEN, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, the Carpenters Local 1042/229 Health Fund, and the Local 229 Carpenters Joint Apprentice and Training Fund; Stephen Pinchook, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, the Carpenters Local 1042/229 Health Fund, and the Local 229 Carpenters Joint Apprentice and Training Fund; and Michael Trombley, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, and the Carpenters Local 1042/229 Health Fund, Defendants.
• Court: U.S. District Court — Northern District of New York

Page 407

363 F.Supp.2d 407

John FUCHS, as Executive Secretary-Treasurer of the Empire State Regional Council of Carpenters; Stephen Flynn, as the Eastern DistrictRepresentative of the United Brotherhood of Carpenters and Joiners of America, and as AssistantSupervisor of Carpenters Local Union No. 229; Ronald Kent, as Trustee of and Participant in the Adirondack Carpenters Pension Fund and the Carpenters Local 1042/229 Health Care Fund; Leonardo Osborne; and Terry Middleton, Plaintiffs, v.Philip ALLEN, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, the Carpenters Local 1042/229 Health Fund, and the Local 229 Carpenters Joint Apprentice and Training Fund; Stephen Pinchook, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, the Carpenters Local 1042/229 Health Fund, and the Local 229 Carpenters Joint Apprentice and Training Fund; and Michael Trombley, Individually, and as Trustee of the Adirondack Carpenters Pension Fund, and the Carpenters Local 1042/229 Health Fund, Defendants.

No. 1:02 CV 1552.

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

March 29, 2005.

COPYRIGHT MATERIAL OMITTED

Meyer, Suozzi, English & Klein, PC, John H. Byington, III, Esq., of Counsel, Mineola, NY, Attorneys for Plaintiffs.

Gleason, Dunn, Walsh & O'Shea, Ronald G. Dunn, Esq., of Counsel, Albany, NY, Attorneys for Defendant Allen.

Nixon, Peabody LLP, John E. Higgins, Esq., of Counsel, Albany, NY, Attorneys for Defendants Pinchook and Trombley.

MEMORANDUM-DECISION and ORDER

HURD, District Judge.

I.INTRODUCTION

On December 13, 2002, plaintiffs filed the instant complaint alleging six causes of action: (1) breaches of fiduciary duty, in violation of the Employee Retirement Income Security Act("ERISA"), 29 U.S.C. §§ 1104(a)(1)(A), (B), and (D)(First, Second, and Fifth causes of action);(2) engaging in a prohibited transaction, in violation of ERISA,29 U.S.C. § 1106(Third cause of action);(3) co-fiduciary liability for knowingly participating in and failing to remedy the breaches of fiduciary duty, in violation of ERISA,29 U.S.C. § 1105(Fourth cause of action); and (4) improper receipt and acceptance of contribution payments into funds from Local 1 employers, in violation of the Labor Management Relations Act("LMRA"), 29 U.S.C. § 186(b)(1)(Sixth cause of action).

There are several motions pending.DefendantsPhillip Allen("Allen"), Stephen Pinchook("Pinchook") and Michael Trombley("Trombley") separately, have moved for both dismissal and summary judgment on plaintiffs' causes of action relating to the Pension and Health Funds pursuant to Fed.R.Civ.P. 12 and 56.(DocketNos. 24, 33, 39, 42.)Defendants Allen and Pinchook have moved to dismiss plaintiffs' causes of action relating to the Apprentice Fund pursuant to Fed.R.Civ.P. 12.(DocketNo. 47.)Plaintiffs have cross-moved for partial summary judgment pursuant to Fed.R.Civ.P. 56.(DocketNo. 26.)

Oral argument was heard on October 10, 2003, in Utica, New York.Decision was reserved at that time.Subsequently the parties advised that a settlement was possible and requested that a decision on the motions be held pending negotiations.On March 2, 2005 the Magistrate Judge advised that there would be no settlement and that the parties were awaiting a decision.

II.FACTUAL BACKGROUND

The United Brotherhood of Carpenters and Joiners of America ("UBC") is an international labor organization with authority over several local unions and regional councils throughout North America.In late July 2001, the UBC restructured its New York regional councils by creating the Empire State Regional Council of Carpenters("Council"), which was responsible for overseeing all local unions in the state outside of New York City and certain parts of Nassau County.PlaintiffJohn Fuchs("Fuchs") was appointed the Executive Secretary-Treasurer of the Council.

As part of the restructuring effort, the UBC General President ordered several local unions consolidated, including Carpenters Local UnionNo. 229("Local 229"), which retained its designation but was merged with Carpenters Local UnionNo. 1042.Prior to the consolidation, Local 229, Local 1042, and Carpenters Local UnionNo. 278 each participated in the Adirondack Carpenters Pension Fund ("Pension Fund"), a collectively bargained, multiemployer employee benefit plan.The Pension Fund is jointly administered and managed by a Board of Trustees, appointed in equal numbers by the participating local unions and employers.Particularly, each of the three local unions had the authority to designate a Trustee, called a "Union Trustee," and the participating employers had the authority to designate three Trustees, called "Employer Trustees."Prior to the merger, Local 229 had designated Allen, and Local 1042 had designated plaintiffRonald Kent("Kent"), as Union Trustees.

Local 229 and Local 1042 also participated in the Carpenters Local 1042/229 Health Fund ("Health Fund"), which was also a collectively bargained, multiemployer employee benefit plan.It, too, permitted designation of a Union Trustee by each local union, and designation of an equal number by participating employers.Defendant Allen and plaintiff Kent were the designated Union Trustees of the Health Fund prior to the merger.

Prior to the merger of Local 1042 and Local 229, defendant Allen was the designated Union Trustee of the latter for both the Pension and Health Funds, and plaintiff Kent was the designated Union Trustee of the former for both Funds.Defendants Pinchook and Trombley, both before and after the merger, were Employer Trustees of both the Pension and Health Funds, designated by employers Glens Falls Contractors Association and Champlain Valley Builders Exchange, respectively.

Local 229 and Local 1163¹ participated in the Local 229 Carpenters Joint Apprenticeship and Training Fund ("Apprentice Fund"), a collectively bargained, multiemployer employee benefit plan.Defendant Allen is a Union Trustee, and defendant Pinchook is an Employer Trustee for the Apprentice Fund.As used herein, "the Funds" collectively refers to the Pension, Health, and Apprentice Funds.

Around January 2002, plaintiff Fuchs first expressed interest to the funds in becoming a Union Trustee.At the time, Local 229, Local 1042, and Local 278² were the participating unions in the Pension and Health Funds.The trust documents governing the two funds provided that each local union designated a Union Trustee in accordance with their bylaws and the employers obligated to contribute to the Pension Fund designated three Employer Trustees.On January 17 and 18, 2002, the trust document was amended to delete reference to Local 1042 in the definition of "union," since it had by then been dissolved and merged into Local 229.The Executive Boards of Local 229 and Local 278 were given the power to designate two and one Union Trustees, respectively.The trust document provided that all Union Trustees were to be eligible participants in the Pension Fund for at least two years prior to appointment.The Health Fund trust document provided that all Union Trustees were to be eligible participants in the Health Fund or Pension Fund for at least two years prior to appointment.Fuchs was not a participant in either Fund.

The amended trust document further provided that in the event Local 229 was placed into trusteeship, the removal or appointment of any Union Trustee was to be made by a majority vote — by secret ballot, conducted by a neutral organization — of the Pension Fund participants.

Prior to May 2002, defendant Allen had also been a Council representative, as well as Business Manager and Chief Executive Officer of Local 229.On May 7, 2002, plaintiff Fuchs terminated Allen from his Council representative position.Plaintiffs claim that the following day, defendants Allen and Pinchook removed records from the Local 229 offices.

On May 22, 2002, plaintiff Fuchs provided notice of defendant Allen's removal and the appointment of a new Council member as Union Trustee of the Apprentice Fund.The notice was made pursuant to the Council's bylaws, which authorized Fuchs to appoint and remove Trustees for the Pension, Health, and Apprentice Funds.The UBC's Constitution provided that uniform bylaws were to govern all of the Council's local unions.The Council's bylaws, in turn, mandated that the local unions were to adopt or amend bylaws consistent with its own.There is no dispute that Local 229 never had or adopted bylaws.

On May 23, 2002, the day after defendant Allen received the notice of his purported removal as an Apprentice Fund Union Trustee, the trust documents governing the Pension and Health Funds were again amended.The definition of "union" was changed to encompass Local 229, Local 278, and any other local union which entered into a collective bargaining agreement that obligated an employer to make contributions to the Funds.The amendments also provided that to be a Union Trustee, one had to be a participant in the Pension or Health fund.The Trustees refused to recognize Allen's removal and the appointment of the new Council member as an Apprentice Fund Trustee, citing the fact that he was not a participant in the Funds.

On May 31, 2002, plaintiffs claim defendant Allen called a special meeting of Local 229's real estate corporation for June 17, 2002, to amend the corporation's bylaws to transfer some or all of Local 229's rights in the corporation to another, as yet unnamed, local union.

Around this same time, plaintiffs allege that defendant Allen, with support from defendants Pinchook and Trombley, made it known to Local 229 members and employers party to the collective bargaining agreements under which contributions had to be made to the Pension and Health Funds, that he intended to establish a new local union that would compete with Local 229.He allegedly informed them that the new union would be financed, to some degree, by...