Heithaus v. Lewis

• Citation: 86 A.D.2d 323,450 N.Y.S.2d 32
• Parties: Leo H. HEITHAUS, et al., Petitioners, v. Albert B. LEWIS, Superintendent of Insurance of the State of New York, Respondent.
• Decision Date: 10 May 1982
• Court: New York Supreme Court Appellate Division

Page 32

450 N.Y.S.2d 32

86 A.D.2d 323

Leo H. HEITHAUS, et al., Petitioners, v. Albert B. LEWIS, Superintendent of Insurance of the State of

New York, Respondent.

Supreme Court, Appellate Division,

Second Department.

May 10, 1982.

Cohen, Weiss & Simon, New York City (Stanley M. Berman and Jani K. Rachelson, New York City, of counsel), for petitioners Heithaus, Rich, Fitchett, Cammarosano, Hart, Kennedy and Gilligan and Botein, Hayes, Sklar & Herzberg, New York City (Stanley M. Kolber and Daniel A. Ross, New York City, of counsel), for petitioners Whitehead and Linker (one brief filed).

Robert Abrams, Atty. Gen., New York City (August L. Fietkau, Asst. Atty. Gen., New York City, of counsel), for respondent.

Before MANGANO, J. P., and THOMPSON, BROWN and NIEHOFF, JJ.

MANGANO, Justice Presiding.

In this proceeding, we are asked to consider, inter alia, whether respondent, the New York State Superintendent of Insurance, acted in excess of his jurisdiction in directing petitioners to afford pension credits to certain individuals, in a fashion contrary to the duly adopted provisions of the pension plan which they administer in their fiduciary capacities. We find that the actions of the respondent were in excess of his jurisdiction.

Petitioners, as current or former trustees of the Industry and Local 338 Pension Fund (the Fund), commenced this proceeding to review a determination of respondent which sustained the specifications of a citation charging them with willfully violating and willfully failing to comply with the requirements of article III-A of the Insurance Law by refusing to grant pension credits to certain individuals. The Fund was created and has been maintained, pursuant to a trust agreement dated June 26, 1950 among Local Union No. 338, International Brotherhood of Teamsters (Local 338), various employers, who, as parties to collective bargaining agreements with Local 338, agree to make contributions to the Fund (contributing employers), and Trustees designated by Local 338 and the employers. Pursuant to the trust agreement, the trustees adopted a pension plan (Plan), which sets forth the nature and amount of retirement benefits provided by the Fund and the eligibility requirements for such benefits. The Fund is an employee welfare fund within the meaning of section 37-a of the Insurance Law. The Fund and Plan also constitute an employee pension benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (U.S.Code, tit. 29, § 1002) (ERISA). However, since the acts or omissions charged in the instant matter occurred prior to January 1, 1975, State jurisdiction over the matter is not pre-empted by ERISA (U.S.Code, tit. 29, § 1144, subd. Azzaro v. Harnett, 414 F.Supp. 473, affd. 553 F.2d 93 cert. den. 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82).

Specification "A" charged petitioners with acting in an arbitrary, capricious and discriminatory manner in refusing to extend pension credits to one William G. Clark for certain years of service prior to his employment with a contributing employer.

Briefly, Clark was employed for over 19 years as an "over-the-road" driver by Matthew's Brothers Inc. (Matthews), a milk trucking firm. Matthews did not have a collective bargaining agreement with Local 338 and consequently was not a contributing employer to the Fund. In June 1972 Matthews was acquired by Dellwood Distributors (Dellwood), a creamery and milk trucking firm, for which Matthews had previously hauled milk. Dellwood had a collective bargaining agreement with Local 338 and was a contributing employer to the Fund. At the time of the acquisition, Dellwood hired 12 Matthews' employees who had been employed as "bulk farm pick-up" drivers and mechanics. Clark, however, was given his notice by Matthews at the time of the acquisition, and was not hired by Dellwood until some 10 weeks thereafter.

As employees of Dellwood, Clark and the others were covered by the Plan. However, whereas the employees who were hired immediately were accorded pension credits for the full term of their employment with Matthews, Clark received credit for only a portion of his service with Matthews.

The Plan provides, inter alia, that employees of a contributing employer receive pension credit for periods of service (contributed service) with such employer subsequent to the date on which the employer became obligated to the Fund pursuant to a collective bargaining agreement (contribution date) (Plan art. I, §§ 7, 8, 10, 13; art. V, § 3). In addition to credit for this contributed service, employees also receive credit for work in the industry in categories covered by the collective bargaining agreement, prior to the contributing employer's contribution date (non-contributed service) (Plan art. I, § 12; art. V, § 2). Dellwood's contribution date was January 1, 1960. Thus, in addition to receiving credit for his period of employment by Dellwood, Clark also received credit for his years of employment with Matthews prior to January 1, 1960. However, the Plan also provides that for those employees whose work in categories covered by the collective bargaining agreement was with an employer which has since been acquired by the contributing employer, the contribution date becomes the date of acquisition (Plan art. I, § 10). Thus for the Matthews employees who went to Dellwood as a unit upon the acquisition, the contribution date was the acquisition date, and accordingly they received pension credit for all of their service with Matthews prior to the acquisition.

In finding that petitioners abused their authority in failing to accord Clark the same benefits as the other Matthews employees, respondent, the New York State Superintendent of Insurance, concentrated on the lack of significant difference between his position as an "over-the-road" driver and that of the other employees as "bulk farm pick-up" drivers. Nonetheless, it is clear on the record that Clark was in no way a part of the unit immediately acquired by Dellwood. Respondent sustained the specification, finding that petitioners' denial of certain pension credits to Clark did not represent a fair exercise of judgment and discretion.

Specification "B" charged petitioners with acting arbitrarily and capriciously in failing to take measures to preserve the pension credits of certain employees of the Keebler Biscuit Co. (Keebler). In April, 1970 Keebler closed one of its New York facilities, and transferred the employees (who were covered by the Plan) to a New Jersey facility. In October, 1970 as a result of a jurisdictional dispute, the International Brotherhood of...