Trapani v. Consolidated Edison Emp. Mut. Aid Soc.

• Decision Date: 16 August 1988
• Docket Number: No. 85 Civ. 2690 (JAR).,85 Civ. 2690 (JAR).
• Parties: Anthony TRAPANI, Mary Hogan and Guy Ahearn, individually on their own behalf and on behalf of all persons similarly situated, Plaintiffs, v. CONSOLIDATED EDISON EMPLOYEES' MUTUAL AID SOCIETY, INC., and Paul R. Westerkamp, Defendants.
• Court: U.S. District Court — Southern District of New York

693 F. Supp. 1509

Anthony TRAPANI, Mary Hogan and Guy Ahearn, individually on their own behalf and on behalf of all persons similarly situated, Plaintiffs, v. CONSOLIDATED EDISON EMPLOYEES' MUTUAL AID SOCIETY, INC., and Paul R. Westerkamp, Defendants.

No. 85 Civ. 2690 (JAR).

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

August 16, 1988.

Norman Rothfeld, New York City, for plaintiffs.

Stuart Bochner, Bochner & Berg, New York City, for defendants.

MEMORANDUM OPINION

RESTANI, Judge, Sitting by Designation:

This case involves claims under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. (1982 & Supp. IV 1986) against a membership corporation, Consolidated Edison Employees' Mutual Aid Society, Inc. (Mutual Aid), and its administrative officer, Paul R. Westerkamp. Plaintiffs bring this action on behalf of Consolidated Edison (Con Ed) employees represented by Local 3 of the International Brotherhood of Electrical Workers (Local 3), seeking an aliquot share of the assets of Mutual Aid as well as all of the assets of a special emergency loan fund — Staten Island Relief Fund — established and administered by Mutual Aid for the benefit of Local 3 members.

Background

The background to this action is set forth in greater detail in an earlier decision by Judge Geottel on this matter. Anthony Trapani v. Consolidated Edison Employees' Mutual Aid Society, Inc., 651 F.Supp. 400, 401-03 (SDNY Jan. 14, 1987). Briefly, they are as follows. Prior to the summer of 1983, membership in Mutual Aid included certain Con Ed employees represented by two unions, Local 3, as well as Local 1-2 of the Utility Workers Union of America (Local 1-2).¹ Mutual Aid received employee dues and matching employer contributions and provided health and welfare benefits pursuant to each local's collective bargaining agreements with Con Ed. After a strike in the summer of 1983, Local 1-2 and Local 3 each emerged with new agreements providing, inter alia, for new health and welfare vehicles that replaced Mutual Aid. The administration of benefits for Local 3 was taken over by Con Ed directly. Control over Local 1-2's benefits was eventually transferred to a trust jointly controlled by Local 1-2 and Con Ed (the Trust Fund).

As a result of these changes several disputes arose regarding the finances of Mutual Aid. Differences among Local 1-2, Con Ed and Mutual Aid were resolved through a settlement agreement to which Local 3 was not a party. Defendants' Exhibit B. Plaintiffs' claim for an equitable distribution of the assets of Mutual Aid, made in September, 1983, was not resolved, and is the basis for the present action.

In ruling on plaintiffs' motion for summary judgment, Judge Geottel found that Mutual Aid is an employee welfare benefit plan subject to ERISA requirements, and that ERISA proscribes its "retention, for the benefit of Local 1-2, of benefit assets attributable to Local 3."² 651 F.Supp. at 406. (citing 29 U.S.C. § 1103(c)(1), applying Local 50, Bakery & Confect. Workers Union, AFL-CIO v. Local 3, Bakery & Confect. Workers Union, AFL-CIO, 733 F.2d 229 (2d Cir.1984) and distinguishing O'Hare v. General Marine Transport Corp., 740 F.2d 160 (2d Cir.1984), cert. denied, 469 U.S. 1212, 105 S.Ct. 1181, 84 L.Ed.2d 329 (1985)). The court did not grant summary judgment to plaintiffs, however, finding that:

several issues remain which concern whether Mutual Aid did in fact retain such assets in violation of section 1103(c)(1), and, if so, how much. These remaining issues include: the date on which plaintiffs' membership in Mutual Aid ceased; the amount of Mutual Aid's benefit assets on that date; the size of the total membership and of plaintiff class on that date; and whether any benefits were paid to plaintiffs after that date, and if so, how much.

651 F.Supp. at 406 (footnote and citations omitted).

In addition, the court refused to grant summary judgment to plaintiff with respect to the Staten Island Relief Fund, noting that:

Defendant's state, and plaintiffs do not deny, that the S.I. Relief Fund continues to be administered by Mutual Aid in the same manner as before the 1983 agreements. Plaintiffs' complaint is that the continued management by Mutual Aid of a fund which is intended for their benefit is an effrontery, since they are no longer members of Mutual Aid. Other than their indignation, however, plaintiffs offer no reason why their present arrangement should be disturbed.

651 F.Supp. at 406.

Discussion

A trial was held to determine the issues left open in the court's earlier decision. As to the date on which plaintiffs' membership in Mutual Aid ceased, plaintiffs argue that they never ceased to be members because they did not receive notice of non-payment of dues. Plaintiffs provided no evidence which convinces the court that notice, or lack thereof, of failure to pay dues has any relevance to this case. See 651 F.Supp. at 405 n. 5. Plaintiffs ceased to make contributions to the benefits plan in the summer of 1983.³ On September 1, 1983 plaintiffs' attorney wrote a letter stating that plaintiffs had ceased being members because of a new union contract. The contract itself provided for a new benefits plan and states that benefits will be provided from the day of return to work. Plaintiffs' first witness, James McCarner, stated that the strike ended "around Labor Day." Certainly plaintiffs' membership must be considered to have ceased sometime in early fall 1983 at the latest.

In determining plaintiffs' aliquot share of the Mutual Aid general funds, the court must determine the size of total membership in Mutual Aid, and of plaintiffs' class. It is undisputed that at the time of plaintiffs' cessation of membership there were 575 Local 3 members of Mutual Aid. In addition, the parties agree that there were between 15,000 and 15,025 Local 1-2 members,⁴ and 4,500 management employees. The only issue of contention between the parties as to this issue is whether these management employees, who were limited members of Mutual Aid should be included in the calculation of the size of total membership. Plaintiffs argue that management members should be entirely excluded, thereby increasing plaintiffs' proportional rights to the assets of Mutual Aid, while defendant argues the opposite — that management members should be entirely included, thereby decreasing plaintiffs' proportional rights. Under the facts of this case, neither position seems entirely reasonable.

Management members accounted for 22 percent of the total number of all members in Mutual Aid (4,500/20,100). Due at least in part to limited benefits rights, however, management members tended to contribute only about 8 percent of total member dues as well as to receive about 8 percent of total expenditures paid on behalf of all members.⁵ Plaintiffs' Exhibit 2. Working only with the actual number of management members, without also taking into account the differing degree management members financial participation, could result in an arbitrary allocation of assets in this case. If management members are to be excluded from the determination of the total membership in Mutual Aid, as plaintiff urges, then assets attributable to the participation of those same management members should similarly be excluded from the determination of the total assets available. Thus, for purposes of determining plaintiffs' aliquot share of assets attributable to regular members, the court finds that plaintiffs constituted 3.69 percent of all regular members of Mutual Aid (575/15,575). An appropriate adjustment of assets is discussed infra.

Next, the court must determine the amount of assets available as of the date of plaintiffs' cessation of membership, and attributable to all regular members. Three financial statements were introduced at trial: Main Hurdman's audited year end 1982, and year end 1983 statements, and the controller's June 30, 1983 statement. The last statement before membership ceased was the June 30, 1983 controller's statement. Plaintiffs' Exhibit 16. That statement was made within a few months of termination. Although it was unaudited it was not seriously challenged. It was also consistent with the other two audited statements which showed a general increasing trend in assets. The controller's statement shows a balance in the general fund of $3,381,004.91 at the end of June, 1983. That balance represents funds remaining after contributions and expenditures, by and on behalf of, regular and limited members.⁶ Accordingly, it should be reduced by 8 percent, to factor out the economic participation of limited members. See discussion supra. The resulting balance of $3,110,524.52 ($3,381,004.91 reduced by 8%) represents the balance attributable to all regular members.

The final issue which the court set forth for resolution was whether benefits were paid to plaintiffs after they ceased to be members of Mutual Aid. Defendants did not address in their post trial brief whether doctor bills stemming from the period before plaintiffs ceased to be members were paid on behalf of plaintiffs after August 1983. Theoretically, this could reduce the recovery. If any record would show how much was paid on account of the past independent services for Local 3 members, such records were not produced, and defendant Westerkamp indicated no such records were maintained. It has been established, however, that most of the depletion of assets after August, 1983 was on account of Local 1-2 employees as they received continuing benefits until August, 1984, and contributions were not made to the pool during the August 1983-1984 time period. Of course, Local 1-2 members also caused the accrual of bills for independent services prior to August 1983. As there were various forms of benefits plus continuing benefits for Local 1-2 members, payments for past independent services on account of Local 3 members likely would not offset much of plaintiffs share. As it was defendants who...