Silverman v. Teamsters Local 210 Affiliated Health

• Decision Date: 01 August 2014
• Docket Number: Docket No. 13-1175-cv(XAP),Docket No. 13-392-cv(L)
• Parties: Leon Silverman, Trustee of the Union Mutual Medical Fund, Plaintiff-Appellee-Cross-Appellant, James Crowley, Trustee of the Union Mutual Medical Fund, Janet Sachs, Trustee of the Union Mutual Medical Fund, Herbert Pobiner, Trustee of the Union Mutual Medical Fund, Louis Flacks, Trustee of the Union Mutual Medical Fund, Paul Berkman, Trustee of the Union Mutual Medical Fund, Union Mutual Medical Fund, Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants, Arthur Fishbein, Trustee of the Union Mutual Medical Fund, Plaintiff-Counter-Defendant, v. Teamsters Local 210 Affiliated Health and Insurance Fund, George Miranda, in his capacity as Trustee of the Allied Welfare Fund and in his capacity as Trustee of Teamsters Local 210 Affiliated Health and Insurance, Robert Bellach, in his capacity as Trustee of Teamsters Local 210 Affiliated Health and Insurance Fund, Anthony Cerbone, in his capacity as Trustee of Teamsters Local 210 Affiliated Health and Insurance Fund, Defendants-Appellants-Cross-Appellees, Crossroads Healthcare Management, LLC, Defendant-Counter-Claimant, Allied Welfare Fund, Charles Hall, Sr., in his capacity as Trustee of the Allied Welfare Fund, Martin Keane, in his capacity as Trustee of the Allied Welfare Fund, Thomas Mackell, Jr., in his capacity as Trustee of the Allied Welfare Fund, Martin Sheer, in his capacity as Trustee of the Allied Welfare Fund and in his capacity as Trustee of Teamsters Local 210 Affiliated Health and Insurance Fund, John Does 1-6 in their capacities as Trustees of Teamsters Local 210 Affiliated Health and Insurance Fund and Crossroads Healthcare Management, LLC, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

Leon Silverman, Trustee

of the Union Mutual Medical Fund, Plaintiff-Appellee-Cross-Appellant,

James Crowley, Trustee of the Union Mutual Medical Fund,

Janet Sachs, Trustee of the Union Mutual Medical Fund,

Herbert Pobiner, Trustee of the Union Mutual Medical Fund,

Louis Flacks, Trustee of the Union Mutual Medical Fund,

Paul Berkman, Trustee of the Union Mutual Medical Fund,Union Mutual Medical Fund, Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants,Arthur Fishbein, Trusteeof the Union Mutual Medical Fund, Plaintiff-Counter-Defendant, v. Teamsters Local 210 Affiliated Health and Insurance Fund,George Miranda, in his capacity as Trustee of the Allied Welfare Fund

and in his capacity as Trustee of Teamsters Local

210 Affiliated Health and Insurance, Robert Bellach,

in his capacity as Trustee of Teamsters Local 210 Affiliated Health

and Insurance Fund, Anthony Cerbone,

in his capacity as Trustee of Teamsters Local 210

Affiliated Health and Insurance Fund, Defendants-Appellants-Cross-Appellees,

Crossroads Healthcare Management, LLC, Defendant-Counter-Claimant,

Allied Welfare Fund, Charles Hall, Sr., in his capacity

as Trustee of the Allied Welfare Fund, Martin Keane,

in his capacity as Trustee of the Allied Welfare Fund,

Thomas Mackell, Jr., in his capacity as Trustee

of the Allied Welfare Fund, Martin Sheer, in his capacity

as Trustee of the Allied Welfare Fund and in his capacity

as Trustee of Teamsters Local 210 Affiliated Health

and Insurance Fund, John Does 1-6 in their capacities

as Trustees of Teamsters Local 210 Affiliated Health

and Insurance Fund and Crossroads Healthcare Management, LLC, Defendants.^*

Docket No. 13-392-cv(L)

Docket No. 13-1175-cv(XAP)

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term, 2013

Argued: February 6, 2014

August 1, 2014

Before: JACOBS, CALABRESI, and POOLER, Circuit Judges.

The Teamsters Local 210 Affiliated Health and Insurance Fund ("210 Fund") and its trustees appeal from a final judgment of the United States District Court for the Southern District of New York (Jones, J.), awarding approximately $2.5 million to the Union Mutual Medical Fund ("UMM Fund") for unpaid ERISA plan contributions. Because the 210 Fund was not obligated to contribute funds to the UMM Fund under the terms of an ERISA plan, the district court lacked subject matter jurisdiction under ERISA over the claims on which the UMM Fund prevailed. However, because these claims can be construed as state law breach-of-contract claims, we vacate and remand for the district court to decide, in the first instance, whether to exercise supplemental jurisdiction and decide the claims under this alternative theory.

Judge Calabresi concurs in part and dissents in part in a separate opinion.

THOMAS A. THOMPSON, Law Offices of Thomas A. Thompson, Yarmouth, Maine (Roland Acevedo, Scoppetta Seiff Kretz & Abercrombie, New York, New York, on the brief), for Defendants-Appellants-Cross-Appellees.

ROBERT J. KIPNEES (Ryan J. Cooper, on the brief), Lowenstein Sandler LLP, Roseland, New Jersey, for Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants.

DENNIS JACOBS, Circuit Judge:

Under collective bargaining agreements ("CBAs") entered into by multiple employers with Teamsters Local Union No. 210 (the "Union"), the employers promised to contribute to the Teamsters Local 210 Affiliated Health and Insurance Fund ("210 Fund"), and the 210 Fund would, in turn, "unconditionally and irrevocably" transfer approximately 14 percent of the payments to another fund, the Union Mutual Medical Fund ("UMM Fund"), which provided medical benefits primarily to retired union members. Both the 210 Fund and the UMM Fund are group health plans governed by the Employee Retirement Income Security Act of 1974 ("ERISA").

In 2006, after some years in which the 210 Fund duly paid the UMM Fund in accordance with the CBAs, the 210 Fund established a new medical plan for the retirees and, no longer in need of the UMM Fund, amended the CBAs--with consent of the employers but not the UMM Fund--to reduce payments to theUMM Fund by 98 percent. The UMM Fund (and its trustees) brought this action in the United States District Court for the Southern District of New York (Jones, J.), against the 210 Fund and its trustees (collectively, "Defendants") to contest the amendment of the CBAs without its consent, to demand an accounting of all amounts received by the 210 Fund under the CBAs, and to collect the payments abated by the amendment.

The UMM Fund's Amended Complaint asserts three claims against the 210 Fund. The first two claims, which plead entitlement to money, an accounting and payment, do not indicate whether the one or both claims arise under state contract law, under a federal or state statute, or under some combination of these. The third claim asserts a violation of ERISA.

The district court construed all three claims as pleading causes of action under section 502 of ERISA, which provides a federal civil cause of action to an ERISA plan fiduciary to obtain equitable relief for harms resulting from violations of (i) "the terms of" an ERISA "plan," and (ii) ERISA. ERISA § 502(a)(3)(B), 29 U.S.C. § 1132(a)(3)(B). The district court construed the first two claims to allege that, by failing to remit the amounts owed to the UMM Fund under each CBA, the 210 Fund violated "the terms of" an ERISA "plan," andproceeded to identify the CBA as constituting the terms of an ERISA plan. The court construed the third claim as asserting a violation of ERISA, but not violation of an ERISA plan term: i.e., that the 210 Fund's reduced payments to the UMM Fund violated section 515 of ERISA, which requires an employer, or an entity acting in the interest of an employer, to fulfill its CBA plan contribution obligations (the "Section 515 claim").

The district court dismissed the Section 515 claim on the ground that the 210 Fund was neither an "employer" nor an entity acting "in the interest of an employer." Fishbein v. Miranda, 670 F. Supp. 2d 264, 277-78 (S.D.N.Y. 2009) ("Miranda I"). Two years later, the district court granted summary judgment in favor of the UMM Fund on its first two claims, concluding that each CBA "established" an ERISA "plan," and that the 210 Fund violated a plan term by reducing payments to the UMM Fund. Fishbein v. Miranda, 785 F. Supp. 2d 375, 384-85 (S.D.N.Y. 2011) ("Miranda II"). The court awarded the UMM Fund approximately $2.5 million (plus interest) in damages and fees. The 210 Fund appeals from the award, and the UMM Fund cross-appeals the dismissal of the Section 515 claim.

The Section 515 claim was properly dismissed because, as the district court explained, the 210 Fund is not an employer, and the 210 Fund's payments to the UMM Fund were not made in the interest of an employer. See Miranda I, 670 F. Supp. 2d at 277-78. Absent some type of agency or ownership relationship, or direct assumption of an employer's obligations, an entity is not considered to be acting "in the interest of" an employer for purposes of section 515. Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561, 575-76 (2d Cir. 1995).

However, the district court erred in granting summary judgment in favor of the UMM Fund on its first two claims, because the terms of each CBA were not terms of an ERISA plan. The terms of an ERISA plan, and the benefits it agrees to provide, are not set forth in a CBA; they are by definition set out in a governing trust document and the summary plan description.

Although the UMM Fund has failed to state a claim under ERISA, the first two claims in the Amended Complaint can be construed as state law breach-of-contract claims. We therefore (i) affirm the dismissal of the Section 515 claim; and (ii) vacate the grant of summary judgment in favor of the UMM Fund on the first two claims, and remand for the district court to decide in the first instance whether to exercise supplemental jurisdiction over them.

BACKGROUND

Plaintiff UMM Fund is an employee health plan established in 1978 to obtain and provide medical and insurance benefits to its participants and beneficiaries, primarily retired Union members and their spouses. The purposes and obligations of the UMM Fund are enumerated in a September 6, 1978 Trust Indenture ("UMM Fund Trust Indenture") entered into between the predecessor to the Union and a corporation that represents the interests of the retirees. The UMM Fund is an employee welfare benefit plan governed by ERISA. See 29 U.S.C. § 1002. The named plaintiffs are trustees of the UMM Fund.

Defendant 210 Fund is likewise an employee welfare benefit plan under ERISA. It was established to provide health insurance for Union members and their spouses, and is funded by contributions from employers who are party to CBAs with the Union. In April 2006, the 210 Fund assumed all the liabilities (and 80 percent of the assets) of another ERISA plan, the Allied Welfare Fund ("Allied Fund"), and began to receive contributions pursuant to a number of CBAs under which employers had previously been contributing to the Allied Fund.²

The UMM Fund receives the bulk of its funding from employer contributions pursuant to CBAs with the Union. But employers pay nothing to the UMM Fund directly. The CBAs (in nearly identical language) direct the employers to contribute funds to the Allied Fund--now the 210 Fund--and then, in turn, direct the 210 Fund to pass a portion of the contribution along to the UMM Fund:

It is hereby agreed . . . the Employer shall pay to the Allied Welfare Fund the sum of Fifty-Nine ($59.00) Dollars, each and every week for each employee who is employed within the bargaining unit[.] . . .

From and out of the contributions made to the Allied Welfare Fund as specified above, Eight Dollars per employee per week shall be unconditionally and irrevocably allocated and paid to the Union Mutual Medical Fund . . . for the benefit of retired employees of the Employer and retired employees of all other employers similarly situated and their families.

In ...