Jackson v. TRUCK DRIVERS'UNION LOCAL 42, Civil Action No. 92-10242-PBS.

• Decision Date: 07 August 1996
• Docket Number: Civil Action No. 92-10242-PBS.
• Citation: 933 F. Supp. 1124
• Parties: Kenneth R. JACKSON, Jr., Plaintiff, v. TRUCK DRIVERS' UNION LOCAL 42 HEALTH AND WELFARE FUND, et al., Defendants.
• Court: U.S. District Court — District of Massachusetts

933 F. Supp. 1124

Kenneth R. JACKSON, Jr., Plaintiff, v. TRUCK DRIVERS' UNION LOCAL 42 HEALTH AND WELFARE FUND, et al., Defendants.

Civil Action No. 92-10242-PBS.

United States District Court, D. Massachusetts.

August 7, 1996.

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G. Rosalyn Johnson, Lynn, MA, for Kenneth A. Jackson, Jr.

Gary S. Witlen, Paula J. Caira, International Brotherhood of Teamsters, Washington, DC, Kathryn M. Noonan, Law Office of Kathryn Noonan, Newton, MA, for International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America.

Gabriel O. Dumont, Jr., Law Offices of Gabriel Dumont, Boston, MA, for Truck Drivers, Chauffeurs & Helpers Union, Local 42, Tyrrell Consultants, Inc.

John D. Burke, Gabriel O. Dumont, Jr., Law Offices of Gabriel Dumont, Boston, MA, for Philip Morin.

John D. Burke, Law Offices of Gabriel Dumont, Boston, MA, for Truck Drivers' Union Local 42 Health & Welfare Fund.

Lawrence P. Higgins, Arlington, MA, for International Union, Health and Welfare Fund, Local 42.

David J. Hatem, Burns & Levinson, Boston, MA, for Ulico Casualty Co. Harold Owen Beede, G. Rosalyn Johnson, P.C., Lynn, MA, for John J. Tyrrell, Jr.

John J. Tyrrell, Jr., Rockport, MA, pro se.

John F. Farraher, Grady & Dwyer, Boston, MA, Lawrence P. Higgins, Arlington, MA, Matthew E. Dwyer, Dwyer & Jenkins, Boston, MA, for New England Teamster and Baking Industry Health & Welfare Fund, Robert T. Marshall, Sandra Crane.

MEMORANDUM AND ORDER

SARIS, District Judge.

I. Introduction

Although he had always paid his health care premiums, plaintiff, Kenneth Jackson, Jr., a beneficiary of the Truck Drivers' Union Local 42 Health and Welfare Fund ("Local 42 Fund"), was denied medical benefits for a kidney transplant, renal dialysis, and related dental expenses, when the Local 42 Fund was terminated without satisfying its outstanding obligations.

As a result, Jackson brought the present action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. against the Local 42 Fund; its trustees, Philip Morin and Laurence Moran; the transferee trust, the New England Teamster and Baking Industry Health and Welfare Fund (the "Bakers' Fund");¹ its fund manager, Sandra Crane; and Robert J. Marshall, its Trustee and Chairman of the Board. He seeks payment of his medical benefits, late charges, costs and attorneys fees. The Local 42 Fund Trustees have moved for summary judgment (Docket Nos. 108 & 143) as to all counts of Jackson's complaint.² Jackson has filed his own motion for summary judgment as to Count I. After hearing, the Court DENIES Defendants' motion and ALLOWS Plaintiff's motion.

In summary, the Court holds that plaintiff has presented sufficient admissible evidence to create genuine issues of material fact on his claims that the Local 42 Trustees breached their fiduciary duties by mismanaging fund assets, terminating the fund without paying outstanding obligations in violation of the trust provisions, and making misrepresentations to plaintiff, a plan beneficiary. Further, the Court holds that an aggrieved beneficiary has standing to sue the trustees of a defunct employee benefit plan for restitution of benefits due under a plan, the termination of which was implemented in violation of the trustees' fiduciary duty. Finally, the Court concludes it has equitable power to revive a defunct plan to collect or hold assets owed to plan beneficiaries and/or impose a constructive trust over plan assets improperly transferred to another benefit plan, if the first plan was terminated in a manner which violated the trust provisions.

II. Background

This case has a protracted and complex factual and procedural history. In the interest of brevity, therefore, the Court relates only those facts pertinent to the present motions.

A. The Local 42 Fund

The Local 42 Fund was a trust created in 1972 pursuant to collective bargaining agreements between Truck Drivers' Union Local 42 of the International Brotherhood of Teamsters, Chauffeurs and Warehousemen of America and various employers. Dumont Aff. Ex. 1 (Local 42 Fund Declaration of Trust, at 1). The trust directs the eight Trustees "to provide such benefits, by means of insurance policies or otherwise, as the Trustees in their sole discretion may deem fit and prudent for employees and/or their dependents covering medical, surgical, and hospital care," as well as other enumerated benefits. Id. art. II, § 4(b). In addition, the trust instrument states that "the administration of the Fund shall conform to the applicable requirements of ERISA," id. amend. no. 1, and there is no dispute that the Local 42 Fund was an "employee welfare benefit plan" within the purview of ERISA. 29 U.S.C. § 1002(1).³

The trust permits the Trustees to "exercise every right, discretion and privilege pertaining or incident to Trust management as provided for or permitted by law." Declaration of Trust, art. II, § 1. In addition to this general authorization, the trust specifically enabled the Trustees to "delegate any of their ministerial powers or duties to any one or more of the remaining Trustees, or to any agent, administrator or employee engaged by the Trustees collectively." Id., art. II, § 10.

Exercising this power to delegate, the Trustees hired several parties to aid their administration of the Local 42 Fund. From the inception of the plan in 1970 until March 1988, John Donaghey, president of the Don-Well company, acted as a collection agent of employer contributions. John Tyrrell, Jr., president of Tyrrell Consultants, Inc. ("TCI") acted as a claims agent from 1970 until 1988, at which time Tyrrell took on full responsibility as the third-party administrator of the plan. From March 1, 1982, until September 30, 1986, the plan was fully-insured by the Union Labor Life Insurance Company ("ULLICO"), which provided medical and hospitalization coverage for eligible plan members and dependents.

B. The Fund Falters

The following facts are culled from a Department of Labor ("DOL") investigative report dated September 13, 1990, and cited by both parties in various pleadings submitted to the Court. See Def. Trustees' Memo in Supp. of Mot. for Summ.J. app. F; Pl.'s Reply to Def. Trustees' Opp. to Substitute, ex. 1. Apparently, the parties do not dispute the accuracy of its factual findings, and the Court accepts as uncontested the facts related therein. Fed.R.Evid. 803(8) (public records exception to hearsay rule).

Beginning in 1982, the Trustees authorized an insurance payment procedure whereby TCI made the monthly premium payments to ULLICO.⁴ TCI was usually 1-4 months late in paying these premiums, and ULLICO sent seven delinquency notices to TCI regarding late payments from 1984 to 1986.⁵ After adjusting for inflation, the DOL concluded that delinquency charges and lost interest resulting from the late payments caused a total loss to the Local 42 Fund of $87,438. DOL Report at 7. According to the DOL Report, "cash flow" problems were discussed at trustee meetings held on June 14 and 28, 1985. Trustee Morin stated that he was aware of the ULLICO late charges but did not know the cause while Trustee Moran stated that he remained ignorant of the late charges and that Tyrrell never brought them to his attention. Id. at 8. In addition, an accounting audit of the fund by R. Morella of Watchmaker & Company showed that TCI had been overpaid a total of $32,890 over plan years 1986-89. Id. at 9.⁶ The Trustees were informed of these overpayments by management letters from Morella. Id.

At a trustee meeting held on December 30, 1986, Tyrrell distributed a memorandum to the Local 42 Fund Trustees recommending that the fund convert from being fully-insured to self-insured status with stop-loss coverage.⁷ A virtually simultaneous letter from ULLICO to the Trustees, dated January 16, 1987, terminated the policy effective retroactively September 30, 1986, for non-payment of premiums and monies owed ULLICO.⁸ At the December 1986 meeting, Tyrrell also recommended that fund administration be consolidated and either Don-Well or TCI be terminated. At a trustee meeting held February 13, 1987, the Trustees adopted Tyrrell's self-insurance plan, effective March 1, 1987. At a March 11, 1988 meeting of the Trustees, TCI was made the sole administrator of the Local 42 Fund.

The Local 42 Fund's financial difficulties did not abate after it became self-insured. Although the record is somewhat sparse on details, there is evidence that from 1987 to 1990 the trust's liabilities outpaced its available reserves for paying claims. By February 1991, the plan had amassed approximately $1.2 million in unpaid claims. Crane Dep. at 104. At that time, the Local 42 Fund again became fully insured through CNA insurance company. Morin Aff. ¶ 3; Pl. Reply to Def. Trustees' Opp. to Substitute, Ex. 4. Plan administration then also was transferred from TCI to Efficient Management Systems, Inc. Id. Due to increases in the cost of premiums, however, the Trustees anticipated in 1992 that the Local 42 Fund could not afford to continue to insure fully through CNA. Morin Aff. ¶ 6.

It also bears noting that the Local 42 Fund was operating with an insufficient number of Trustees at this time. Although the trust instrument requires eight trustees to be appointed and requires at least four trustees (two employer and two employee) to constitute a quorum for conducting business, retiring trustees were not replaced over the years. As a result, it appears that only Trustees Morin and Moran were involved in the majority of the business decisions detailed above. DOL Report at 11. The trust was amended on July 21, 1991, to provide for only two trustees (one employer and one employee trustee) by a so-called "unanimous vote," but only one signature (i.e., Moran) appears below the amendment. Dumont Aff. app. At the time of this "unanimous" amendment, the trust...