McCabe v. Trombley

• Decision Date: 10 November 1994
• Docket Number: No. 85-CV-1381.,85-CV-1381.
• Citation: 867 F. Supp. 120
• Parties: Preston C. McCABE, Individually and as President of Local 747, United Brotherhood of Carpenters and Joiners of America, Plaintiff, v. Michael TROMBLEY, Dewitt Fisk, Edward Cooligan, Joseph Costaldo, Loyal Simmons, Allen Flewelling, Loren McClean, Ronald Timmerman, William A. Lawyer, and Phillip Allen all as Trustees of Adirondack and Vicinity District Council of Carpenters Health and Welfare Fund, Defendants.
• Court: U.S. District Court — Northern District of New York

867 F. Supp. 120

Preston C. McCABE, Individually and as President of Local 747, United Brotherhood of Carpenters and Joiners of America, Plaintiff, v. Michael TROMBLEY, Dewitt Fisk, Edward Cooligan, Joseph Costaldo, Loyal Simmons, Allen Flewelling, Loren McClean, Ronald Timmerman, William A. Lawyer, and Phillip Allen all as Trustees of Adirondack and Vicinity District Council of Carpenters Health and Welfare Fund, Defendants.

No. 85-CV-1381.

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

November 10, 1994.

William H. Bogart, P.C. (Carl E.M. Worboys, of counsel), Syracuse, NY, for plaintiff.

MacKenzie, Smith, Lewis, Michell & Hughes (Nancy L. Pontius, of counsel), Rochester, NY, for defendants Trustees and Fund.

MEMORANDUM-DECISION AND ORDER

MUNSON, Senior District Judge.

This action arises out of the termination of the Adirondack and Vicinity District Council of Carpenters Health and Welfare Fund ("Welfare Fund") in November, 1985. In his amended complaint, plaintiff asserts two causes of action sounding in breach of fiduciary duty and negligence against defendant trustees of the Welfare Fund ("the trustees").¹ He seeks damages of two million dollars, attorney's fees, punitive damages, interest and the cost of bringing this suit. Presently before the court is the trustees' motion for summary judgment, and their alternative motions to preclude plaintiff from introducing expert testimony at trial and for leave to substitute counsel. Also before the court is plaintiff's cross-motion for leave to file a second amended complaint. Oral argument was heard on these motions on March 8, 1991.

I. BACKGROUND

In his sparsely worded complaint plaintiff alleges that defendant trustees violated their fiduciary obligations to plaintiff and Local 747 of the United Brotherhood of Carpenters and Joiners ("Local 747") by dissipating Fund assets and failing to provide the medical coverage for which the Fund was created. The complaint also alleges in a pendant state law claim that the trustees were negligent.

The Welfare Fund was established in 1958 pursuant to a collective bargaining agreement between the Adirondack and Vicinity District Council of the United Brotherhood of Carpenters and Joiners ("District Council") and the Northern New York Building Trades Employers Association. The District Council, composed of Local 747 and three other Locals, acted on behalf of the Locals in executing a trust agreement which set forth the responsibilities of the trustees of the fund. The trustees were authorized to make determinations as to the provisions, limitations, and conditions of payments to the Fund for life, health and disability benefits for union member participants, as well as eligibility requirements for the receipt of benefits. Payments were made through a "banking of hours" program, pursuant to which individual Locals negotiated with the multi-employer group a cents per hour contribution to the Welfare Fund for each hour a participating Local member worked. In order to qualify for health and welfare coverage for any six month period, a participant must have worked at least 400 hours in the previous six months. Any participant who worked more than 400 hours in such a period could "bank" up to 2,400 hours for protection against periods of unemployment. Local 747 negotiated a contribution of 85 cents per hour worked. Computer records listing hours worked were kept for each participating union member. Many participants banked hours, and the Welfare Fund had a substantial surplus available to cover participant needs. From 1983 to 1985, however, the surplus was dissipated by the large number of claims presented.

In 1985 the trustees attempted to terminate the banked hours program and reduce benefits. The 1980 version of the Plan handbook, in effect when the events alleged in the complaint took place, provided that the banking of hours program could be terminated under specific, limited conditions:

The trustees reserve the right to delete this entire section, effective on April 30th, of any year, if its impact upon the claim experience of the fund is more than anticipated or its operation shall jeopardize the fiscal soundness of the fund in any material way.

Plan Handbook, Exhibit ("Exh.") L attached to Document ("Doc.") 26, at 6. Apparently unable to resolve the accounting problem, the District Council decided on July 20, 1985 to terminate the Welfare Fund altogether, effective November 1, 1985. On August 10, 1985, the District Council authorized Locals to establish their own health and welfare funds and to divert the employer contributions due September 15, 1985 to their new funds.

Local 747 was aware in 1984 of the fiscal difficulties facing the Welfare Fund. Loyal Simmons, a member of Local 747 as well as a trustee for the Welfare Fund, hinted to fellow members that the Fund was in fiscal trouble and that they should set up their own health and welfare fund as a supplemental recourse. The members followed Simmons' advice, negotiating a 25 cents per hour contribution to their fund as part of the new collective bargaining agreement ratified May 17, 1985 and effective June 1, 1985. Although the Local 747 fund was designed to supplement, not replace, the existing Welfare Fund, in the aftermath of termination of the Welfare Fund the Local was forced to spend $340,000 from its fund to provide benefits to its members.

Plaintiff claims that defendant trustees withheld over $300,000 in banked hour contributions from Local 747 without providing benefits or returning the funds to the individual members who banked those hours, even though defendants returned banked funds to other Locals. Plaintiff further contends that the trustees had no authority to withdraw "the right of participation to banked hours for coverage" in that each participating member had a vested right to the value of his contribution to the Fund. Finally, plaintiff argues that the trustees never made a finding or determination that the banking of hours program impacted the claim experience of the Fund more than was anticipated, or that the program jeopardized the fiscal integrity of the Fund in a material way, as required by the Plan handbook. Thus, plaintiff concludes, the trustees violated their fiduciary duties to the members of Local 747.

In their motion for summary judgment, defendants argue that Welfare Fund participants had no vested rights with which to raise a claim, because the collective bargaining agreement in effect from 1982 to 1985 did not contain any provisions setting forth a specific level of benefits to be accorded to participating members by the Fund. Defendants further assert that plaintiff's negligence claim is preempted by ERISA, that plaintiff lacks standing to sue on behalf of Local 747, and that plaintiff has no private cause of action for damages for breach of fiduciary duty.

Plaintiff cross-moves for leave to amend the complaint, framing his role as plaintiff to include himself in an individual capacity, as President of Local 747, and as a representative of all of participants in the Fund. Defendants oppose the cross motion on the ground of futility.

II. DISCUSSION

A. Defendants' Motion for Summary Judgment

1. Summary Judgment Standards

The principles governing summary judgment are set forth in Federal Rule of Civil Procedure 56(c) and do not warrant extended discussion here. When the record reveals no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, the court may enter judgment without resort to a trial on the merits. In a triad of cases decided in 1986 the Supreme Court explicated the relative burdens on the parties when a summary judgment motion is raised, and encouraged lower courts to employ Rule 56 in pursuit of the just, speedy, and inexpensive resolution of disputes. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

With the rules embodied in these cases in mind, the court turns to the specific arguments raised by defendants in their summary judgment motion.

2. Preemption

Defendants assert that plaintiff's pendant claim for negligence is preempted by ERISA. ERISA is a comprehensive statute designed by Congress to regulate the entire field of employee benefit plans, establishing that field "as exclusively a federal concern." Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981). See also Reichelt v. Emhart Corp., 921 F.2d 425, 431 (2d Cir. 1990), cert. denied, 501 U.S. 1231, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991); Nealy v. U.S. Healthcare HMO, 844 F.Supp. 966, 970 (S.D.N.Y.1994). ERISA's civil enforcement provision, 29 U.S.C. § 1132, creates an exclusive remedial scheme which preempts state law regarding any matters that "relate to" employee benefit plans. 29 U.S.C. § 1144(a); FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 407, 112 L.Ed.2d 356 (1990). Its preemptive effect includes claims arising under state common law. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48, 107 S.Ct. 1549, 1552-1553, 95 L.Ed.2d 39 (1987).

Because the parties do not dispute that the Welfare fund is an employee benefit plan as defined by ERISA, the court turns to the issue of whether plaintiff's pendant claim of negligence is "related to" the Welfare fund for purposes of preemption. A claim under state law "relates to" an employee benefit plan, "in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983) (footnote omitted). As noted by the Supreme Court, ERISA's preemption clause is "conspicuous for its breadth." FMC Corp., 498 U.S. at 58, 111 S.Ct. at 407. Nonetheless, not every...