L.I. Head Start Child Development Serv. V. Kearse

• Decision Date: 15 May 2000
• Docket Number: No. CV 93-1443 ADS.,CV 93-1443 ADS.
• Citation: 96 F.Supp.2d 209
• Parties: L.I. HEAD START CHILD DEVELOPMENT SERVICES, INC., Anthony Macaluso and Paul Adams, Individually on their own behalf and on behalf of all other persons similarly situated, Plaintiffs, v. John L. KEARSE and Alphonso Anderson, as Trustees of the Community Action Agencies Insurance Group, and Community Actions Agencies Insurance Group, Defendant.
• Court: U.S. District Court — Eastern District of New York

96 F.Supp.2d 209

L.I. HEAD START CHILD DEVELOPMENT SERVICES, INC., Anthony Macaluso and Paul Adams, Individually on their own behalf and on behalf of all other persons similarly situated, Plaintiffs, v. John L. KEARSE and Alphonso Anderson, as Trustees of the Community Action Agencies Insurance Group, and Community Actions Agencies Insurance Group, Defendant.

No. CV 93-1443 ADS.

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

May 15, 2000.

COPYRIGHT MATERIAL OMITTED

Altieri, Kushner, Miuccio & Frind, P.C., New York City (Alexander A. Miuccio, Barry L. Mendelson, of counsel), for the plaintiffs.

Frank & Breslow, L.L.P, Farmingdale, N.Y. (Allen B. Breslow, Ralph A. Somma, of counsel), for the defendants.

ORDER

SPATT, District Judge.

I. BACKGROUND

After a non-jury trial on January 26, 27 and 28, February 12 and 19, April 9 and 30, and September 17, 1999, the Court, on March 3, 2000, held that "[t]he provisions of the applicable ERISA statute, 29 U.S.C. §§ 1103(c)(1) and 1104(a)(1)(A) require the defendants to return to Head Start the sum of $497,736, the portion of surplus reserves segregated for and attributable to them," L.I. Head Start Child Development Services Inc. v. Kearse, 86 F.Supp.2d 143, 153 (E.D.N.Y.2000).

Presently before the Court are three motions. First, the defendants move pursuant to Rule 59 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.") for an order granting reconsideration of the Court's March 3, 2000 decision insofar as the defendants claim that the Court overlooked the financial stability of CAAIG. Second, the plaintiffs move pursuant to Fed. R.Civ.P. 59 for an order granting reconsideration of that portion of the Court's March 3, 2000 decision denying prejudgment interest to the plaintiffs from September 1, 1992. Finally, the plaintiffs move for an award of attorneys' fees and costs.

II. DISCUSSION

A. Standard of Review: Motion For Reconsideration

Motions for reargument are governed by Rule 6.3 (formerly Rule 3[j]) of the Local Rules of the United States Courts for the Southern and Eastern Districts of New York. Local Rule 6.3 provides as follows:

A notice of motion for reargument shall be served within ten (10) days after the docketing of the court's determination of the original motion. There shall be served with the notice of motion a memorandum setting forth concisely the matters or controlling decisions which counsel believes the court has overlooked. No oral argument shall be heard unless the court grants the motion and specifically directs that the matter shall be reargued orally. No affidavits shall be filed by any party unless directed by the court.

The standard for granting a motion for reconsideration "is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transportation, Inc., 70 F.3d 255, 256-57 (2d Cir.1995) (citations omitted). The high burden imposed on the moving party has been established "in order to dissuade repetitive arguments on issues that have already been considered fully by the Court." (Ruiz v. Commissioner of the D.O.T. of City of New York, 687 F.Supp. 888, 890 [S.D.N.Y.1988], modified on other grounds, 934 F.2d 450 [2d Cir.1991]). Granting such a motion means that a Court must find that it overlooked "matters or controlling decisions" which, if it had considered such issues, "would have mandated a different result." Durant v. Traditional Investments, Ltd., 88 CV 9048, 1990 WL 269854 (S.D.N.Y. April 25, 1990).

1. The Defendants' Motion for Reconsideration

The defendants move for reconsideration of the Court's prior order holding that "the record does not demonstrate that a transfer of $497,736, representing Head Start reserve funds, would threaten the financial well being of the CAAIG Trust." The defendants submit that the Court overlooked Defendants' Exhibit U which demonstrated that the net assets available for benefits in the CAAIG Fund for the year ended August 31, 1997 were $335,298. As a result, the defendants argue that execution of the Court's order will cause the CAAIG Fund to transfer all remaining assets to the detriment of the remaining CAAIG Fund participants.

Another review of the Court's prior order and the record leads the Court to the view that the defendants' motion for reconsideration should be denied.

The defendants rely upon the Second Circuit's decision in Ganton Technologies, Inc. v. National Industrial Group Pension Plan, 76 F.3d 462 (2d Cir.1996). First, it is not clear that the rationale in the Ganton case mandates that the issue as to whether the CAAIG Fund has the financial stability to pay the judgment in this matter is a crucial element in this case. As mentioned in the Court's prior order, the Ganton case involved a pension fund rather than a health benefit fund. This distinction was noted by the Second Circuit in Trapani v. Consolidated Edison Employees' Mut. Aid Soc'y, Inc., 891 F.2d 48 (2d Cir.1989). In a pension plan, the Court has the critical policy consideration of protecting the future long range actuarial projections of its members. Pension fund members plan their retirement and future financial well-being on the proceeds of a pension. With regard to a health benefit fund, members of the plan have only unvested future interests that may arise if health benefits become necessary. In addition, while it would undoubtedly pose a financial burden, remaining members of a health benefit fund can always purchase other health insurance if the fund becomes depleted.

Second, the Ganton case involved a pooled pension fund. Here, by contrast, the Court has previously determined that the "CAAIG was not a pooled fund and that each of the contributing employer's funds were segregated." This is an important distinction because unlike the remaining employees in Ganton, the remaining employees of the CAAIG Fund, have no interest or right to the L.I. Head Start reserves. In other words, unlike Ganton, the plaintiffs in this case are only seeking the return of their segregated contributions paid on their behalf, not expended for benefits, and retained by the defendants for the benefit of other groups that have nothing to do with these separate contributions. As such, the Court has serious doubts as to the applicability of the Ganton rationale.

Third, even if the Court were to find that Ganton applied and mandated a finding that the Court determine the financial stability of the CAAIG Fund, the Court finds that if this issue is relevant, there is no evidence in the record demonstrating the present financial condition of the fund. The defendants reliance on Exhibit U is misplaced. Exhibit U dates back three years and does not reflect on the present condition of the Fund. More importantly, the Court is of the view that the present financial stability of CAAIG is not relevant as public policy considerations suggest that the more appropriate date to focus on is September 1, 1992 — the date that L.I. Head Start withdrew from the Fund and was entitled to the return of its reserve funds.

To preclude a return of the reserve funds left in CAAIG in 1992 because of the possibility that the CAAIG Fund, as it presently stands, may not have the financial ability to repay the funds, would essentially reward the defendants for the misuse of the segregated funds for the past eight years. The Court agrees with the plaintiffs that "[t]he departing employees would suffer a gross injustice if the trustees are adjudged by this Court to be guilty of violating ERISA's `Exclusive Benefits' rule, but are relieved of the transfer Order simply because the trustees wrongfully spent the reserves belonging to the departing employees of L.I. Head Start and, consequently, cannot comply with the Order." In other words, if the Court were to take into account the defendants present financial condition, it would send an inappropriate message that when faced with a request for funds from a segregated participant of a health benefit fund, when there is depletion of the fund assets the fund can claim financial instability as a defense to the return of the segregated funds. Surely, public policy considerations mandate avoidance of this type of behavior. Thus, the Court finds that if the Ganton rationale applied, the appropriate date to examine the financial stability of CAAIG would be September 1, 1992 and not the date of the Court's order or an arbitrary date such as the date proposed by the defendants. See Exhibit U.

For these reasons, the Court denies the defendants' motion for reconsideration of the Court's prior order and finds that it did not overlook the financial well being of CAAIG.

2. The Plaintiffs' Motion for Reconsideration

The plaintiffs seek reconsideration of that portion of the Court's March 3, 2000 Order which denied to the plaintiffs prejudgment interest on the sum of $497,736. The plaintiffs contend that the Court overlooked the contents of the amended complaint and the applicable law relating to prejudgment interest in ERISA cases. The Court's prior decision stated "as the plaintiffs' complaint does not request prejudgment interest and because the $497,736 figure consists of $156,916 in interest earned by CAAIG allocable to Head Start, the Court will not address that issue."

The Court finds that it overlooked the second paragraph of the plaintiffs' amended complaint which seeks, in relevant part, a judgment "[o]rdering defendants to transfer the assets and reserves, plus interest thereon...." While the amended complaint did not specify whether it was seeking prejudgment or post-judgment interest, the Court finds that because post-judgment interest is statutorily mandated and added to the judgment whether or not ordered by the District Court, see 28 U.S.C. § 1961, it can be implied that the amended complaint addresses...