N.Y.S. Nurses Ass'n Benefits Fund v. Nyack Hosp.

• Decision Date: 19 August 2022
• Docket Number: Docket Nos. 20-378,20-425,August Term, 2020
• Citation: 46 F.4th 97
• Parties: NEW YORK STATE NURSES ASSOCIATION BENEFITS FUND, THROUGH the Chairperson of the Board of Trustees, Dennis BUCHANAN, and the Secretary of the Board of Trustees, Nancy Kaleda, Plaintiff–Appellant-Cross-Appellee, v. The NYACK HOSPITAL, Defendant-Appellee-Cross-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

46 F.4th 97

NEW YORK STATE NURSES ASSOCIATION BENEFITS FUND, THROUGH the Chairperson of the Board of Trustees, Dennis BUCHANAN, and the Secretary of the Board of Trustees, Nancy Kaleda, Plaintiff–Appellant-Cross-Appellee,

v.The NYACK HOSPITAL, Defendant-Appellee-Cross-Appellant.

Docket Nos. 20-378

20-425

August Term, 2020

United States Court of Appeals, Second Circuit.

Argued: February 22, 2021

Decided: August 19, 2022

Jay P. Warren (Kyle P. Flaherty, on the brief), Bryan Cave Leighton Paisner LLP, New York, NY, for New York State Nurses Association Benefits Fund.

John Houston Pope (James S. Frank, on the brief) Epstein Becker & Green, New York, NY, for the Nyack Hospital.

Before: Carney and Nardini, Circuit Judges, and Liman, District Judge.^*

Judge Carney dissents in part in a separate opinion.

Liman, District Judge:

New York State Nurses Association Benefits Fund (the "Fund" or the "Plan") appeals from an order of the district court (Briccetti, J. ), granting in part and denying in part its motion for summary judgment and determining the scope of the payroll records of Nyack Hospital ("Nyack" or the "Hospital") to which the Fund was entitled in connection with an audit of Nyack. The district court held that the Fund was entitled to only the payroll records of persons identified by Nyack as potential Plan beneficiaries, i.e., registered nurses ("RNs"), and not to the records of other employees to determine whether they should have been classified as Plan beneficiaries. The Fund appeals, arguing that the district court erred in narrowing the audit and holding that Nyack was required under an agreement governing the Fund (defined herein as the Trust Agreement) to provide only the payroll records of persons Nyack identified as RNs. Nyack cross-appeals, arguing that the district court authorized an audit that was too broad and that the Fund is entitled to audit only the records of those employees Nyack has identified as members of the collective bargaining unit. For the following reasons, the decision of the district court is AFFIRMED IN PART and REVERSED IN PART.

BACKGROUND

The following facts are taken from the summary judgment record and were undisputed in the district court. They are taken as undisputed for purposes of this appeal.

I. The Parties’ Agreement

The Fund is a multiemployer fringe benefit fund governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"). The Fund provides health and welfare benefits to employees of hospitals that are parties to collective bargaining agreements ("CBAs") with the New York State Nurses Association ("NYSNA"). The Fund is governed by the Second Amended and Restated Agreement and Declaration of Trust Establishing the New York State Nurses Association Benefits Fund (the "Trust Agreement").

Nyack is a hospital serving the Rockland County area. It has approximately 1,400 full- and part-time employees. It is a party to a CBA with NYSNA that covers certain of its employees and was signed on October 5, 2016.¹ The CBA "covers all full-time, regular part-time and per diem registered professional nurses employed by [Nyack], including every person lawfully authorized by permit to practice as a registered professional nurse" with certain exclusions set forth in the CBA. A-150. Three other unions also have CBAs with Nyack; these CBAs cover other groups of its employees.

Several provisions of the CBA are relevant here. Section 9 of the CBA makes regular full-time and part-time employees eligible for coverage under the Fund. Per diem employees and temporary employees are not eligible for health benefits.² No persons other than those represented by NYSNA are eligible for participation in the Fund. Section 9 of the CBA also requires Nyack to "contribute to the [Fund] an annual sum paid in monthly increments uniformly required by the Fund to provide health and welfare benefits for covered employees." Section 9.01(A)(4) of the CBA requires Nyack to provide to the Fund trustees (the "Trustees") "such documentation with respect to the Employees covered by the ... Fund as may reasonably be necessary to establish the validity of claims made on the ... Fund or the number of and identity of such Employees for whom contributions were made during the term of this [CBA]." A-171. The CBA also provides that (1) the Fund Trustees have "[t]he sole and exclusive authority ... to determine the benefits to be provided to ... Fund participants and to make changes thereto"; (2) the Fund "shall be held and administered under the terms and provisions of the existing Trust Fund Agreement and any amendments thereof"; and (3) nothing in the CBA is to be construed to be inconsistent with the provisions of the Trust Agreement, "except as otherwise specified in the Acknowledgment of Trust Agreement provided by the ... Fund Trustees." A-173.

The Trust Agreement sets forth the rights of the Trustees and certain corresponding obligations of employers who are bound by it. Nyack agreed "to be bound by the [Trust Agreement], as amended from time to time." A-232. It did so in an acknowledgment of Trust Agreement [A-171] (the "Acknowledgment"), which the CBA required it to sign.

There are no qualifications or amendments to the Trust Agreement. Article V of the Trust Agreement requires Nyack (like other Employers), to "contribute to the Fund the amount required by the collective bargaining agreement" between NYSNA and Nyack including Employee Contributions "consistent with the employee premium option adopted by [Nyack] and [NYSNA] in bargaining." A-119. The rate of "Employer Contributions" is governed by the CBA.

The Trust Agreement gives the Trustees of the Fund broad authority. They have discretion to interpret the terms of the Trust Agreement: "The Trustees shall have power to construe the provisions of this Agreement and Declaration of Trust and the terms used herein and any construction adopted by the Trustees in good faith shall be binding upon [NYSNA], [Nyack], and the Employees and their families and dependents." A-113. The Trustees are authorized to "do all acts, whether or not expressly authorized herein, which the Trustees may deem necessary or proper for the protection of the property held hereunder" or "necessary to accomplish the general objective of enabling the Employees to obtain welfare benefits in the most efficient and economical manner." A-114.

Finally, what gives rise to this case is the Trust Agreement's audit provision. The Trust Agreement permits the Trustees to conduct an audit in connection with Employer Contributions and Employee Contributions:

5. Report on Employer Contributions. The Employers shall make all reports on Employer Contributions and Employee Contributions required by the Trustees. The Trustees may, at such times and places as may be appropriate, have an audit made by independent certified public accountants of the payroll and wage records of any Employer in connection with the said Employer Contributions, Employee Contributions, and/or reports.

A-121–A-122.

II. The Audit Request

In the district court, the Fund submitted the affidavit of its Chief Operating Officer, Christopher Rosetti. Rosetti averred that the Trustees were required "to assure the financial integrity of the fund" and that, as an officer of the Fund, he was responsible for ensuring "that every eligible participant receives" all documents, reports, and other communications mandated by ERISA. A-78–A-79. "[T]his responsibility extends to every person eligible to participate in the Fund – not just those people who are already actively participating in the Fund or who are being reported on by the contributing employers." A-79.

To help the Trustees discharge their fiduciary duties, the Fund—like other multiemployer fringe benefit funds—engages in payroll auditing (also known as compliance auditing). Payroll auditing is used to determine whether employers are making the required contributions on behalf of all eligible participants in the Fund. "[M]any multiemployer benefit funds rely on employer self-reporting – meaning, the employers themselves report to the funds the extent of their own contribution obligations to the fund." A-80. The Fund and its Trustees "monitor this self-reporting by periodically auditing the participating employers’ payroll and wage records to make sure that the employers’ reporting [is] accurate and that all contributions [are] properly remitted." Id. According to Rosetti,

[t]he funds need to monitor the employers’ reports and contributions because, e.g., an employers’ [sic] failure to report all covered employees may prevent funds from notifying participants and beneficiaries of their rights under the fund, an employer's failure to contribute for an eligible employee may negatively impact the financial integrity of the fund, and because the fund's and the employers’ interests are not completely aligned (i.e., it would be advantageous for an employer to underreport the number of its covered employees because that would reduce the amount of contributions that the employer owes to the fund).

A-80.

Every year, the Fund's accounting department selects six of the numerous employers that employ Fund beneficiaries for a payroll audit. The auditors perform the audit according to "agreed-upon procedures" ("AUP"), by which the Fund dictates the scope of the audit and then works with the auditors to determine the sample size and the procedures. A-79–A-80.

On May 12, 2016, the Fund sent a letter to Nyack notifying it that the Fund's auditors intended to review Nyack's payroll and related data. The audit would be the Fund's first audit of Nyack, which had joined the Fund in 2014. On May 13, 2016, the Fund emailed Nyack a set of AUPs with a request list, which asked for, among other items, "the May 2015 payroll register(s) for [Nyack] (should be inclusive of all employees, not just the NYSNA group)," "a detail listing of all employees hired during the year ended December 31, 2015 (should be...