Massaro v. Palladino

Decision Date30 November 2021
Docket NumberNos. 20-1807,August Term 2020, 20-2005(XAP), 20-3221(XAP),s. 20-1807
Citation19 F.4th 197
Parties Angelo MASSARO, Douglas May, in their capacities as Employer Trustees of the Laborers’ International Union of North America, Local No. 91 Pension Fund and Welfare Fund, James Panepinto, in his capacity as putative Employer Trustee of the Laborers’ International Union of North America, Local No. 91 Pension Fund and Welfare Fund, Plaintiffs-Appellees-Cross-Appellants, v. Richard PALLADINO, Mario Neri, Randy Palladino, in their capacities as Union Trustees of the Laborers’ International Union of North America, Local No. 91 Pension Fund and Welfare Fund, Defendants-Appellants-Cross-Appellees.
CourtU.S. Court of Appeals — Second Circuit

Joshua S. Glasgow (Alan J. Bozer, James D. Donathen, Kyle Tanzer, on the briefs), Phillips Lytle LLP, Buffalo, New York, for Plaintiffs-Appellees-Cross-Appellants.

Edward J. Meehan (James V. Cole II, Kalena R. Kettering, Meredith F. Kimelblatt, on the reply brief), Groom Law Group, Chartered, Washington, DC; (Robert L. Boreanaz, Joseph L. Guza, on the opening brief), Lipsitz Green Scime Cambria, Buffalo, NY, for Defendants-Appellants-Cross-Appellees.

Before: Kearse, Lynch, and Sullivan, Circuit Judges.

Richard J. Sullivan, Circuit Judge:

This case concerns an acrimonious dispute between the trustees tasked with managing two employee benefit plans on behalf of the Laborers’ International Union of North America, Local Union No. 91. Like many plans established for union workers under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. , the two plans here – one a pension fund and the other a welfare fund (collectively, the "Funds") – provided for the selection of two sets of trustees: one from the union and the other from the multiple employers who made contributions into the plans. The Employer Trustees (Angelo Massaro, Douglas May, and James Panepinto) commenced this action in the United States District Court for the Western District of New York, alleging that the Union Trustees (Richard Palladino, Mario Neri, and Randy Palladino) breached their fiduciary duties under ERISA when they passed, by simple majority, two amendments to the trust agreements governing the Funds (the "Trust Agreements"). The district court (John L. Sinatra, Jr., J. ) granted summary judgment in favor of the Employer Trustees, concluding that the Union Trustees had breached their fiduciary duties under Section 404(a)(1)(D) of ERISA, 29 U.S.C. § 1104(a)(1)(D), because – under the terms of the Trust Agreements – the amendments were required to be passed by a unanimous vote of the Trustees.

We agree with the district court's construction of the Trust Agreements and its conclusion that the Union Trustees’ purported amendments were procedurally invalid. Nevertheless, under this Court's and the Supreme Court's precedent, we conclude that the Union Trustees did not breach their fiduciary duties in passing the invalid amendments, because trustees do not act in a fiduciary capacity under ERISA when they pass amendments to a multiemployer benefit plan. In light of the narrow grounds on which the district court granted summary judgment in favor of the Employer Trustees, we therefore vacate the district court's judgment and remand for further proceedings consistent with this Opinion.

I. BACKGROUND
A. Facts
1. The Funds and Governing Trust Agreements

The Funds at issue in this case are "multiemployer plans" under ERISA, meaning that they are maintained pursuant to a collective bargaining agreement and provide retirement and welfare benefits to the employees of contributing employers. See 29 U.S.C. § 1002(37) ; Trs. of the Loc. 138 Pension Tr. Fund v. F.W. Honerkamp Co. , 692 F.3d 127, 129 (2d Cir. 2012). Here, the Funds provide benefits to employees in and around Niagara County, New York, who work primarily in the construction industry.

Multiemployer plans like the Funds are often referred to as "Taft-Hartley" plans because they are established and maintained "pursuant to Section 302(c) of the Taft-Hartley Act of 1947 (otherwise known as the Labor Management Relations Act [or LMRA])." 32BJ N. Pension Fund v. Nutrition Mgmt. Servs. Co. , 935 F.3d 93, 96 n.3 (2d Cir. 2019) (citing 29 U.S.C. § 186(c) ). Under Section 302(c)(5)(B) of the LMRA, such plans must be "jointly administered by an equal number of employer and union trustees." Textile Workers Pension Fund v. Std. Dye & Finishing Co. , 725 F.2d 843, 846 (2d Cir. 1984). "This equal representation requirement provides an important safeguard against trust fund corruption by preventing any misuse of those funds by union officers who would otherwise have sole control over vast amounts of money contributed by the employer." Int'l Bhd. of Teamsters, Joint Council 18 v. N.Y. State Teamsters Council Health & Hosp. Fund , 903 F.2d 919, 922 (2d Cir. 1990) (internal quotation marks and alterations omitted).

In line with these requirements under the LMRA, and consistent with ERISA's mandate that all employee benefit plans (including multiemployer plans) "be established and maintained pursuant to a written instrument," 29 U.S.C. § 1102(a)(1), the Funds are governed by two effectively identical agreements that set forth requirements for the composition of the Funds, management of the Funds, and appointment of Fund Trustees. Both Trust Agreements provide that "[t]he operation and administration of the Fund[s] will be the responsibility of a Board of Trustees, composed of six [ ] Trustees, three [ ] of whom will be Employer Trustees, designated and appointed by [participating] Employers, and three [ ] of whom will be Union Trustees, designated and appointed by the" Laborers’ International Union of North America, Local Union No. 91. J. App'x at 407, 430.

Prior to 2019, Article III, Section 3 of both Trust Agreements provided in relevant part:

Section 3. Appointment and Removal of Trustees. One Employer Trustee will be appointed by each employer group signatory to Local 91 in the following manner: the Building Industry Employers Association of Niagara County, New York will appoint one Trustee, the Council of Utility Contractors Inc. will appoint one Trustee, and the Associated General Contractors of America New York State Chapter, Inc. will appoint one Trustee. The Union shall appoint three [ ] Union Trustees. The Trustees selected from their respective Employer groups and Union must have first-hand knowledge of investment strategies for the Fund, coupled with the capability to represent their employer group to advance the investment and prosperity needed for this Fund. ...
Trustees representing their respective Employer groups will be appointed by each employer group's own procedures. Any Employer Trustee may be removed from office at any time for any reason by the Employer Group that appointed him or her in the same fashion. Trustees representing the Union will be appointed by the Union, according to its own procedures. A Union Trustee may be removed from office at any time, for any reason, by the Union. ...

Id. at 408, 431.

Article X, Section 1 of the pre-2019 version of both Trust Agreements established the following procedure for amending those Agreements:

Section 1. Amendment by Trustees. The provisions of this Trust Agreement may be amended to any extent and at any time by a document in writing adopted by a majority of all of the Trustees. However, a decision of the Board of Trustees that would change (i) the total number of Trustees, or (ii) the manner in which Trustees are appointed as required in Article III, Section 3, above, will require a unanimous vote. ...

Id. at 423, 446.1

2. The 2019 Amendments to the Trust Agreements

On January 9, 2019, the Board of Trustees for the Funds convened for a board meeting. At that time, the three designated Union Trustees were Richard Palladino, Mario Neri, and Randy Palladino. The three designated Employer Trustees were Douglas May (representing the Associated General Contractors of America, New York State Chapter), Angelo Massaro (representing the Building Industry Employers’ Association of Niagara County), and Anthony Majka (representing the Council of Utility Contractors, Inc.).

At the board meeting, Union Trustee Richard Palladino introduced two identical amendments to Article III, Section 3 of the Trust Agreements (the "Amendments"). The Amendments added additional qualifications for Employer and Union Trustees and created a procedure by which Trustees who did not meet those requirements could petition the existing Board of Trustees to be seated only by unanimous approval. Employer Trustee Anthony Majka seconded Palladino's motion to introduce the Amendments, which put the Amendments to a vote. Thereafter, two of the three Employer Trustees, Angelo Massaro and Douglas May, voted against the Amendments, while Majka and all three Union Trustees voted in their favor.2 The January 9, 2019 board meeting minutes thus reflected that the Amendments "pass[ed]" by a "4-2" vote. Id. at 283.

The parties dispute the reasons for introducing these Amendments. The Employer Trustees contend that the Amendments were passed primarily for the purpose of making it more difficult for the Council of Utility Contractors to remove Anthony Majka as its appointed Employer Trustee. According to the Employer Trustees, in December 2018, the Council advised Majka that it intended to replace him with a new Trustee. The Employer Trustees contend that Majka met the new qualifications imposed by the Amendments, while his intended replacement did not. The Union Trustees, by contrast, deny any impropriety in the Amendments, claiming that their purpose simply "was to ensure that prospective individuals serving as Trustees had a vested interest in the Funds and their continued viability and success." Suppl. App'x at 68.

Whatever the reasons for introducing them, the Amendments changed Article III, Section 3 of the Trust Agreements to read as...

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