Gualandi v. Adams
| Decision Date | 01 October 2004 |
| Docket Number | No. 02-7809.,02-7809. |
| Citation | 385 F.3d 236 |
| Parties | Anna GUALANDI and Claudia Travers, Plaintiffs-Appellants, v. Gloria ADAMS, J.J. Newman Co., Inc., John Newman, also known as Jack Newman, U.S.I. Administrators, U.S.I. Insurance Corp., Donald Hanft, Bruce Lavalle, Cornelius Mahoney, Bruce Meirowitz, Shoreham-Wading River Teachers Association and Jeffrey Wasserman, Defendants-Cross-Claimants-Cross-Defendants-Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Appeal from the United States District Court for the Eastern District of New York, Jacob Mishler, J.
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Edward R. Hopkins, Smithtown, NY, for Plaintiffs-Appellants.
Hanan B. Kolko, Meyer, Suozzi, English & Klein, P.C., New York, NY, for Defendants-Appellees Donald Hanft, Bruce Lavalle, Cornelius Mahoney, Bruce Meirowitz, Shoreham-Wading River Teachers Association and Jeffrey Wasserman.
Andrew Crabtree, Melville, NY (Thomas Schulz, Schulz and Associates, Melville, New York, of counsel), for Defendants-Appellees Gloria Adams, J.J. Newman Co., Inc., John Newman, a/k/a Jack Newman, U.S.I. Administrators and U.S.I. Insurance Corp.
Before: CARDAMONE, JACOBS, and B.D. PARKER, Circuit Judges.
Plaintiffs appeal from an order entered on June 21, 2002 in the United States District Court for the Eastern District of New York (Mishler, J.) that dismissed their ERISA complaint against defendants. We have to resolve on this appeal a dispute between plaintiffs public school teachers and the defendant labor union to which they belong, as well as various other defendants associated with their employee benefit plan. The issue before us is whether the employee benefit plan — which defendants set up and administered using funds from the public school district in which plaintiffs were employed — was subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), Pub.L. No. 93-406, 88 Stat. 829 (). Basing jurisdiction for their suit on ERISA, plaintiffs allege in their complaint that in administering the benefit plan defendants violated certain ERISA provisions. Ruling that it lacked subject matter jurisdiction, the district court dismissed plaintiffs' complaint on the ground that ERISA excludes governmental plans from the scope of the Act. See 29 U.S.C. § 1003(b)(1). We affirm.
Plaintiff Anna Gualandi is a New York public school teacher in the Shoreham-Wading River Central School District (School District). Plaintiff Claudia Travers was a public school teacher in the same district until she retired (plaintiffs or appellants). Both plaintiffs have been members of a labor union called the Shoreham-Wading River Teachers Association (SWRTA or union), and have participated in an employee benefit plan called the SWRTA Out-of-Pocket Reimbursement Fund (Plan).
Defendants are the union and its officers, as well as insurance broker J.J. Newman Co., Inc. (Newman), its agents, and various affiliated corporations, all of which entities and individuals have been involved with administering the Plan. Plaintiffs contend defendants' actions with regard to the Plan violated various provisions of ERISA. In particular, they allege defendants violated §§ 104(b)(4), 404(a)(1)(C), and 406(a)(1)(B) of ERISA, 29 U.S.C. §§ 1024(b)(4), 1104(a)(1)(C), 1106(a)(1)(B) (2000), by withholding information from the Plan's participants, breaching their fiduciary duties, and engaging in prohibited transactions with the Plan's funds.
The Plan, which is the subject of this litigation, is an out-of-pocket reimbursement fund for the benefit of the public school teachers employed in the School District. It was designed to work as follows: when a teacher is attended by a medical provider and the statement for the services rendered is not already covered by one of the numerous policies that insure the teachers, the teacher must pay herself for the medical services rendered. She may then seek reimbursement for her out-of-pocket expense from the Plan at issue in this litigation. The Plan was created by using excess insurance payments from the School District that had been accumulating in a bank account since the 1980s. These excess payments were made under the terms of a series of collective bargaining agreements between the School District and the union. The agreements required the School District to provide medical, dental, optical, life and superimposed major medical insurance to its employees by paying a fixed yearly amount per teacher to insurance broker Newman. In some years, the School District's payments exceeded the total cost of the premiums due for the insurance coverage provided. Newman set aside the excess money in a separate account, which by 1996 amounted to $267,000.
In 1996 a dispute arose because the School District refused to contribute a fixed amount sum to the extent that it exceeded the actual cost of the premiums. The School District and the union ultimately resolved the dispute through a settlement agreement. That agreement provided that the School District would now be required to pay only the actual amount of the insurance premiums, not the fixed yearly amount per teacher that it was paying before. The settlement agreement further stated
1. The [School] District agrees to forward by December 1, 1996, $60,000 to the SWRTA Insurance Fund Account.
2. The [School] District relinquishes any and all claims to any funds previously accumulated in the SWRTA Insurance Fund Account including the above $60,000 payment. [SWRTA] relinquishes any and all claims to funds previously due to the SWRTA Insurance Fund in excess of the $60,000 for the 1995-96 school year. The [School] District will provide any approvals necessary for SWRTA to set up a SWRTA Benefit Trust.
The union used the $60,000 specified in the agreement and the money from excess payments already in the account to set up the out-of-pocket reimbursement fund, the Plan at issue in this case.
Subsequently, plaintiffs instituted the instant suit based on the manner in which defendants had administered the Plan. When the matter came before Judge Mishler he found the money used by defendants to set up and run the Plan was government funds, which made the Plan a governmental plan not covered by ERISA. Accordingly, the district court dismissed plaintiffs' complaint for lack of subject matter jurisdiction. From the order of dismissal, plaintiffs appeal.
ERISA is the sole basis plaintiffs assert for federal jurisdiction over their claims, and the district court dismissed because it determined such jurisdiction was lacking. It held the School District had funded the out-of-pocket reimbursement fund, and it concluded this funding was enough to exclude the Plan from ERISA's coverage as a "governmental plan." On appeal, plaintiffs attack the district court's factual finding and its legal conclusion. They also argue the district court erroneously failed to grant their request for additional discovery.
We go first to our standard of review. In reviewing a district court's determination of whether it has subject matter jurisdiction, we review factual findings for clear error and legal conclusions de novo. London v. Polishook, 189 F.3d 196, 198 (2d Cir.1999). "A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948); Bronx Household of Faith v. Bd. of Educ., 331 F.3d 342, 348 (2d Cir.2003). We turn next to the merits.
The district court found the School District funded the Plan based on evidence that all of the money originally came from the School District and was specifically earmarked for an employee benefit plan. Plaintiffs concede the School District was the original source of the money, but nonetheless insist that the union, not the School District, actually funded the Plan. In plaintiffs' view, the School District gave the money to the union "with no strings attached," and the union then chose to use it for the Plan. Plaintiffs maintain it was clearly erroneous for the district court to find otherwise.
The trial court based its finding on three pieces of evidence: (1) the affidavit of one William Cala, the School District's superintendent at the time of the 1996 settlement agreement between the School District and the union; (2) the language of the settlement agreement; and (3) the language of the collective bargaining agreements. In the affidavit, Cala states he negotiated the settlement agreement on behalf of the School District and it was his understanding that the money turned over to the union under the agreement could be used only to purchase additional insurance for School District employees. The court found this testimony supported by the language of the settlement agreement, which provided that the School District forward $60,000 to the "SWRTA [union] Insurance Fund Account" and for the School District to grant "any approvals necessary for SWRTA [the union] to set up a [union] Benefit Trust." In addition, the collective bargaining agreements provided that the insurance money paid by the School District "shall be spent for the insurance plans so designated."
Plaintiffs contend the district court should not have considered the Cala affidavit because it contains legal conclusions. Yet, even assuming that to be the case, the district court did not rely on any legal conclusions in the affidavit. Instead, it looked to Cala's statements as evidence of how he and the School District understood the terms of the settlement agreement.
Appellants also assert the affidavit constituted parol evidence that should not have been considered because the...
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