Wilson v. Perry

• Decision Date: 08 January 2007
• Docket Number: Civil Action No. 3:99CV556.
• Citation: 470 F.Supp.2d 610
• Parties: Hilton M. WILSON, et al., Plaintiffs, v. William PERRY, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

470 F.Supp.2d 610

Hilton M. WILSON, et al., Plaintiffs, v. William PERRY, et al., Defendants.

Civil Action No. 3:99CV556.

United States District Court, E.D. Virginia, Richmond Division.

January 8, 2007.

Charles Derek Smith, Annandale, VA, Nancy Spencer Hyde, Law Office Of Nancy S. Hyde, Arlington, VA, for Plaintiffs.

Kenya Parrish-Dixon, Epstein Becker & Green PC, Washington, DC, Brian Emory Pumphrey, McGuirewoods LLP, Richmond, VA, Elliot J. Mandel, Epstein Becker & Green PC, New York City, for Defendants.

MEMORANDUM OPINION

DOHNAL, United States Magistrate Judge.

This matter is before the Court on the Motion and Memorandum in Support by Independent Fiduciary on Behalf of District 6 Health and Pension Plans to Void Claims by Union and Permit and Authorize Plans to Enter Into Administration Agreements by Larry Magarik ("IF Mot. to Void") (docket entry no. 88), and the Application by District 6, IUISTHE to Recover Unpaid Retroactive Rent and Other Expenses from the District 6 Health Plan and the District 6 Pension Plan ("Union Application") (docket entry not 94). For the reasons set forth herein, the Motion to Void by the Independent Fiduciary is GRANTED and the Union Application is DENIED.

BACKGROUND AND PROCEDURAL HISTORY¹

The instant case was initially filed in this Court on August 5, 1999. Wilson v. Perry, No. 3:99cv556 (E.D.Va. Aug. 5, 1999) (docket entry no. 1). The Plaintiffs, who were employed by Econo Clean Janitorial Services, Inc. ("Econo Clean"), are cafeteria workers at a Richmond, Virginia military facility (Fort Lee), members of the District 6 International Union of Industrial Service Transport and Health Employees ("the Union"), and participants in the Union Pension and Health plans ("the Plans"). The Defendants, collectively referred to as the "Wilson Defendants," are William Perry, Jerome Vuoso, Peter Schorr, Montague Wolfson, Econo Clean, and the District 6 Realty Corporation.² William Perry was, at the time litigation commenced and remains, President of the Union. He was also the Administrator and a trustee of both Plans as well as the President and Director of the District 6 Realty Corporation until his removal from both positions as a result of the litigation. Jerome Vuoso and Peter Schorr were trustees of the Pension Plan at the time of the 1999 filing, while Mr. Vuoso and Montague Wolfson were trustees of the Health Plan. The District 6 Realty Corporation ("the Realty Corporation"), which was partly owned by the Union (twenty percent) and the Health Plan (eighty percent), was a company that was formed to purchase the building³ in which the offices of the Union and the Plans were located.⁴

In the original Complaint, the Plaintiffs alleged that the Wilson Defendants had violated their fiduciary duties in managing the Pension Plan assets by plundering the Plan under the guise of charging excessive administrative costs and committing certain acts, or failing to act, in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq. Specifically, the Plaintiffs alleged that the Wilson Defendants⁵ (except for Econo Clean) breached their fiduciary duties under 29 U.S.C. §§ 1104-1108, and that Econo Clean violated 29 U.S.C. § 1145 because it failed to make required payments pursuant to a governing collective bargaining agreement. (docket entry No. 1 at 13-18). The Plaintiffs reached a settlement with Econo Clean shortly after litigation commenced and the company was thereupon dismissed as a defendant. The Plaintiff and the remaining Wilson Defendants then resolved all remaining claims in a May 29, 2001, Consent Order ("2001 Consent Order") pursuant to the following salient terms: (1) the Health Plan was to reimburse the Pension Plan $214,922, plus interest; (2) the trustee Defendants (Perry, Vuoso, Wolfson, and Schorr) were to pay $200 to each named Plaintiff; (3) the trustee Defendants were enjoined from participating or acting as a fiduciary or service provider for either of the Plans; (4) the building and the Realty Corporation were to be placed, in a constructive trust for the benefit of the. Plans; (5) the building was to be sold at fair market value to an unrelated buyer; (6) an independent fiduciary was to be appointed to oversee both Plans and to implement the terms of the Consent Order, including terminating the Pension Plan; and (7) the Pension Plan was to purchase fiduciary liability insurance for the Independent Fiduciary. Thereafter, Ms. Sandra Torres, the Union's assistant secretary, became the Administrator of the Plans and the court appointed Michael Wolf, Esquire as the Independent Fiduciary of the Pension Plan. The case has remained open since entry of the 2001 Consent Order to ensure compliance with its terms.

In a separate action arising under ERISA, 29 U.S.C. § 1132(a)(2) and (5),⁶ the: United States Department of Labor ("DOL") filed suit on March 19, 2002, in the Southern District of New York against Perry, Vuoso, Ludovic Marcovici, Francis Winn, the Union, and the Plans alleging various violations of ERISA that were related to the Defendants' involvement with the same Plans that were the subject of the lawsuit filed in this Court. Chao v. Perry, Civil No. 02:cv2205 (S.D.N.Y. March 19, 2002). William Perry had been the Administrator and a trustee of the Plans in Wilson v. Perry but, as of the date of the 2001 Consent Order that concluded the active part of that litigation, he was prohibited from any further involvement with the Plans. Nevertheless, he was joined as a defendant in Chao because of his involvement with the Plans prior to the 2001 Consent Order. Jerome Vuoso was a trustee of both of the Plans as well, but, pursuant to the 2001 Consent Order, he was also removed from the position and prohibited from having any further involvement with either of the Plans. As with Perry, Vuoso was a defendant in Chao because of his prior involvement as a fiduciary of the Plans. At the time Chao was filed, Ludovic Marcovici was a trustee of the Health Plan, while Francis Winn was a trustee of both Plans. Winn was also the Secretary/Treasurer of the Union. According to the allegations in Chao, Perry, Vuoso, Marcovici, and Winn were considered fiduciaries pursuant to 29 U.S.C. § 1002(21)(A);⁷ Perry and Winn were also considered parties-in-interest pursuant to 29 U.S.C. § 1002(14)(H);⁸ the Union itself was considered a party-in-interest to. both Plans pursuant to 29 U.S.C. § 1002(14)0); and the Health Plan was considered a party-in-interest to the Pension Plan pursuant to 29 U.S.C. §§ 1002(9) and (14)(D) because the Pension Plan reimbursed the Health Plan for administrative expenses.

In Chao, the DOL alleged that the Defendants breached their fiduciary duties under 29 U.S.C. § 1109 for the mishandling of assets of the Plans. Specifically, the DOL asserted that Perry breached his fiduciary duties under 29 U.S.C. § 1104(a)(1)(A)-(D) by: (a) failing to diversify the Plans' assets, thereby causing the Plans to make payments to the Union for reimbursement of administrative expenses that were not incurred by the Plans; (b) failing to comply with the governing documents of the Plans; and (c) breaching his duties under 29 U.S.C. § 1106(b)(1) and (2) by engaging in prohibited transactions with parties-in-interest by causing the Plans to pay unauthorized administrative expenses to the Union, by causing the Union to fail to pay the Health Plan rent for the Union's occupancy of the building, and for issuing checks from the Plans' accounts without proper authorization. (Chao Compl. ¶¶ 23-31.) It was also asserted in Chao that Vuoso, Marcovici, and Winn breached their fiduciary duties with respect to the Health Plan under 29 U.S.C. § 1104(a)(1)(A), (B), and (D) by: (a) failing to monitor the actions of Perry's administration of the Health Plan; (b) failing to comply with the requirements of the Health Plan's governing documents; and (c), by failing to diversify and control the Plan's assets. (Id. ¶¶ 34-36.) The DOL further claimed that Vuoso and Winn breached their fiduciary duties with respect to the Pension Plan under 29 U.S.C. § 1104(a)(1)(A) and (B) in not acting in the best interests of the Plan participants and beneficiaries by: (a) failing to administer and exercise control over the Pension Plan assets; (b) failing to monitor the activities of Perry's administration of the Pension Plan; (c) and breaching their duties under 29 U.S.C. § 1105(a)(2) by failing to monitor Perry in his conduct of prohibited transactions with parties-in-interest. (Id. ¶¶ 37-38, 40). Finally, the DOL claimed that the Union, as a party-in-interest, engaged in prohibited transactions in violation of 29 U.S.C. §§ 1106(a)(1)(B)(D) by charging and receiving unauthorized payments for administrative expenses from the Plans and by failing to pay rent to the Health Plan for its occupancy of the building. (Id. ¶ 33).

The DOL settled the Chao litigation against the Defendants Vuoso, Marcovici, Winn, the District 6 Health Plan, and the District 6 Pension Plan in a September 7, 2004, Consent Judgment "(Chao 2004 Consent Judgment"). The salient terms in that Judgment were that the Defendants Vuoso, Marcovici, and Winn could not be involved in any way with any ERISA-covered employee benefit Plan thereafter; that they were to restore $45,000 to the Health Plan and $5,000 to the Pension Plan; that they would pay $10,000 in civil penalties pursuant to 29 U.S.C. § 1132(1); and that any account balance that they had maintained in the Pension Plan was to be forfeited. The DOL thereafter entered into a, settlement agreement with the remaining Defendants, Perry and the Union, in a January 25, 2006, Final Consent Judgment "(Chao Final Consent Judgment"). Pursuant to that agreement, Perry was permanently forbidden, either directly or indirectly, from being involved in any way with the Plans or any ERISA-covered plan; he was to pay $107,000 in restitution to the Plans and a percentage...