US v. INTERN. BROTH. OF TEAMSTERS, ETC.

• Decision Date: 28 December 1990
• Docket Number: No. 88 CIV. 4486 (DNE).,88 CIV. 4486 (DNE).
• Citation: 753 F. Supp. 1181
• Parties: UNITED STATES of America, Plaintiff, v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, et al., Defendants. IN re APPLICATION XVI OF the INDEPENDENT ADMINISTRATOR.
• Court: U.S. District Court — Southern District of New York

753 F. Supp. 1181

UNITED STATES of America, Plaintiff, v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA, AFL-CIO, et al., Defendants.

IN re APPLICATION XVI OF the INDEPENDENT ADMINISTRATOR.

No. 88 CIV. 4486 (DNE).

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

December 28, 1990.

Charles M. Carberry, Investigations Officer of the International Broth. of Teamsters, New York City (Robert W. Gaffey, of counsel), for defendant International Broth. of Teamsters.

Otto G. Obermaier, U.S. Atty. S.D. New York (Peter C. Sprung, Asst. U.S. Atty., of counsel), for U.S.

Stillman, Friedman & Shaw, New York City, Edward M. Shaw, (Arnold & Kadjan, Chicago, Ill., John J. Toomey, of counsel), for Dominic Senese.

MEMORANDUM & ORDER

EDELSTEIN, District Judge:

This memorandum emanates from the voluntary settlement in the action commenced by the plaintiffs United States of America (the "Government") against the defendants International Brotherhood of Teamsters (the "IBT") and the IBT's General Executive Board (the "GEB") embodied in the voluntary consent order entered March 14, 1989 (the "Consent Decree"). The remedial provisions in the Consent Decree provided for three Court-appointed officials, the Independent Administrator to oversee the remedial provisions, an Investigations Officer to bring charges against corrupt IBT members, and an Election Officer to oversee the electoral process leading up to and including the 1991 election for International Officers (collectively, the "Court Officers"). The goal of the Consent Decree is to rid the IBT of the hideous influence of organized crime through the election and prosecution provisions.

I. Background

Application XVI of the Independent Administrator submits for this Court's review his November 29, 1990 supplemental opinion (annexed as exhibit 1) to his opinion of July 12, 1990. The July 12, 1990 opinion of the Independent Administrator decided disciplinary charges against Dominic Senese, Joseph Talerico, and James Cozzo, and was submitted for this Court's review by way of Application XII. In the July 12, 1990 opinion, the Independent Administrator found that the Investigations Officer had met his burden and demonstrated just cause that the charges against Senese, Talerico and Cozzo had been proved. Application XII was affirmed in all respects by the August 27, 1990 Opinion and Order of this Court, 745 F.Supp. 908 (S.D.N.Y.1990), except this Court remanded the question of whether the penalties of lifetime suspension from the IBT imposed on Senese, Talerico, and Cozzo included the termination of their health and welfare benefits. The facts and circumstances surrounding the charges against Senese, Talerico, and Cozzo are fully set out in the August 27, 1990 Opinion, supra, familiarity with which is assumed.

The supplemental opinion only considered the termination of Senese's health and welfare benefits: Talerico and Cozzo had no known health and welfare benefits. With respect to Senese, the Independent Administrator determined that (1) the Consent Decree is no bar to his terminating health and welfare benefits; (2) he lacks jurisdiction over Senese's three health and welfare plans; (3) that while he has the power to prevent Senese from receiving any payments from his health and welfare plans he would not order such; and (4) he would bar Senese's former local from making post-expulsion payments into the plans for Senese's benefit. Further, the Independent Administrator invalidated certain severance disbursements made by Local 703 to Senese, specifically (i) a sixty (60) week severance allowance; and (ii) transference to Senese of full title of his IBT-owned automobile.

In his objections to the supplemental opinion, Senese argues (i) that the Independent Administrator is barred from terminating health and welfare benefits by the ERISA state-law preemption; (ii) the Consent Decree prevents the termination of these health and welfare benefits; and (iii) this Court should review this penalty determination Independent Administrator de novo. The Government objects solely to the decision of the Independent Administrator not to prohibit Senese from receiving any payments from his health and welfare plans. The Investigations Officer concurs with the supplemental opinion in all respects.

The supplemental opinion of the Independent Administrator is affirmed in all respects.

II. Discussion

A. The Consent Decree Permits the Termination of Health and Welfare Benefits

Senese argues that the determination of the Independent Administrator that ¶¶ M.18 and O.20 of the Consent Decree do not prevent him from imposing a penalty involving health and welfare benefits was arbitrary and capricious. This contention is twofold. First, he argues that ¶ M.18—a catchall reservation of rights provision— specifically prevents any termination of health and welfare benefits.¹ Second, Senese argues that ¶ O.20 limits the penalties that may be imposed by the Independent Administrator.² Senese's argument is without merit and must be dismissed.

These arguments to this Court are essentially the same as those rejected by the Independent Administrator. With respect to ¶ M.18, the Independent Administrator correctly noted that the only rational interpretation was that the specific disciplinary authority of the Independent Administrator to impose punishment listed at ¶ F.12.(C) controlled the general reservations of rights provision of ¶ M.18. For example, under Senese's proposed interpretation of these provisions, ¶ M.18(e) would preclude the Independent Administrator from suspending or debarring a sanctioned IBT officer. Such reasoning is illogical and directly contravenes the explicit and implicit terms of the Consent Decree.

Senese's proposed reading of ¶ O.20 is similarly mistaken. Paragraph O.20 specifically applies only to those individuals who were defendants in the underlying RICO action. This provision has no relevance to penalties imposed against Senese.

As a result, Senese has not demonstrated that this determination of the Independent Administrator was arbitrary or capricious.

B. ERISA State Law Pre-Emption

Senese argues that the Independent Administrator has no power to interfere with any aspect of Senese's health and welfare plans because ERISA pre-empts state law. Specifically, Senese contends that the Independent Administrator's disciplinary power derives from the Consent Decree, which is a contract. As a result, Senese argues that an ERISA plan may not in any way be impaired by authority deriving from state law contractual terms. This argument is without reason.

Unlike ERISA pension benefits, ERISA health and welfare benefits are subject to alienage. Guidry v. Sheet Metal Workers National Pension Fund, ___ U.S. ___, 110 S.Ct. 680, 685, 107 L.Ed.2d 782 (1990); Mackey v. Lanier Collections Agency & Service, Inc., 486 U.S. 825, 836, 108 S.Ct. 2182, 2188, 100 L.Ed.2d 836 (1988). As a result, the question of ERISA pre-emption is inapplicable to this issue. Moreover, Senese's attempt to characterize the Consent Decree—entered under the federal RICO statute—as analogous to a state law contract is absurd. As a result, Senese has not demonstrated that this determination of the Independent Administrator was arbitrary or capricious.

C. Standard of Review of the Independent Administrator

Senese argues that this Court review these determinations of the Independent Administrator de novo because this matter involves questions of ERISA and an interpretation of the Consent Decree. This contention is meaningless and calls upon the Court to ignore the numerous determinations in this case. See United States v. International Brotherhood of Teamsters, 905 F.2d 610, 616 (2d Cir.1990, aff'g March 13, 1990 Opinion and Order, 743 F.Supp. 155, 159-60 (S.D.N.Y.1990); November 2, 1989 Memorandum and Order, 725 F.Supp. 162, 169 (S.D.N.Y.1989); January 17, 1990 Memorandum and Order, 728 F.Supp. 1032, 1048-57 (S.D.N.Y.1990), aff'd 907 F.2d 277 (2d Cir.1990); Local 27 v. Carberry, et al., July 20, 1990 at 3-4, 1990 WL 108348 (S.D. N.Y.1990); Joint Council 73 et al. v. Carberry et al., 741 F.Supp. 491, 493 (S.D.N.Y. 1990); August 27, 1990 Opinion and Order, 745 F.Supp. 908, 911; September 18, 1990 Opinion and Order, 745 F.Supp. 189, 191-92.

Paragraph F.12.(C) of the Consent Decree mandates that the Independent Administrator must decide disciplinary hearings using a "just cause" standard. Consent Decree at 9. Paragraph K.16 provides that this Court shall review actions of the Independent Administrator using the "same standard of review applicable to review of final federal agency action under the Administrative Procedure Act." Consent Decree at 25. This Court may only overturn the findings of the Independent Administrator when it finds that they are, on the basis of all the evidence, "arbitrary or capricious." This Court and the Court of Appeals have interpreted ¶ K.16 to mean that decisions of the Independent Administrator "are entitled to great deference." 905 F.2d at 616 (2d Cir.1990) aff'g March 13, 1990 Opinion and Order, 743 F.Supp. 155 (S.D.N.Y.1990).

Senese's argument is without merit and must be dismissed.

D. Further Sanctions

The Government challenges the determination of the Independent Administrator not to prevent Senese from receiving payments that may be made to him from his health and welfare plans because of contributions already made into those plans. In his supplemental opinion, the Independent Administrator deemed it "impractical, and perhaps unworkable, to prohibit Senese from drawing any payment from these plans ..." The Government disagrees.

The Independent Administrator determined not to prevent Senese from receiving these payments. Essentially because these health and welfare plans are so intricate and complex, the Independent Administrator decided not to prevent Senese from receiving such benefits because it would create problems foreseeable and...