Zarringhalam v. United Food

Decision Date30 November 2012
Docket NumberNo. 11–CV–2913 (JFB)(WDW).,11–CV–2913 (JFB)(WDW).
PartiesFeredun ZARRINGHALAM, Plaintiff, v. UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION LOCAL 1500 WELFARE FUND, Defendant.
CourtU.S. District Court — Eastern District of New York

OPINION TEXT STARTS HERE

Thomas J. Stock of Thomas J. Stock & Associates, Mineola, NY, for plaintiff.

Judith P. Broach and Michael H. Isaac of Broach & Stulberg LLP, New York, NY, for defendant.

memorandum and order

JOSEPH F. BIANCO, District Judge.

Plaintiff Feredun Zarringhalam (plaintiff or “Zarringhalam”) brought this action in the District Court of the County of Nassau, First District, against United Food and Commercial Workers International Union Local 1500 Welfare Fund (defendant or “Fund”). Defendant timely removed the action to this Court. Now before the Court are the parties' cross-motions for summary judgment. The parties' arguments are as follows.

Plaintiff, a participant in a group welfare benefits plan (the “Plan”) maintained by defendant, argues that defendant breached its contractual obligation to pay for plaintiff's medical expenses that plaintiff incurred from injuries sustained during a tripping accident. Defendant subsequently moved for summary judgment, raising three challenges to plaintiff's claim: (1) plaintiff's breach-of-contract action sounds in state law and is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq.; (2) plaintiff failed to exhaust the Plan's administrative remedies, making dismissal of his claim warranted; and (3) the Fund's trustees' discretionary decision concerning the allotment of benefits to plaintiff was neither arbitrary nor capricious because the Plan's terms expressly state that payment for third party-caused injuries is not available under the Plan unless the injured participant executes a subrogation agreement, which plaintiff never did.

Plaintiff cross-moved for summary judgment, asserting the following arguments: (1) even if plaintiff's claims are preempted by ERISA, such preemption does not require a dismissal of his breach of contract claim; (2) plaintiff's action should be evaluated under state or federal common law, regardless of ERISA's applicability; (3) plaintiff was not required to exhaust the Fund's administrative procedures because no technical denial of benefits occurred in his case, and thus, the Fund's appeal process requirements were never triggered; (4) the lack of a subrogation agreement requirement under ERISA negates the enforceability of the Plan's subrogation provision; and (5) the Fund breached its contractual agreement with plaintiff.

After careful consideration of the parties' arguments, and for the reasons set forth herein, the Court grants summary judgment in favor of the defendant. It accordingly denies plaintiff's cross-motion for summary judgment.

I. Facts

The Court derives the facts below from the parties' affidavits and exhibits, and from defendant's Rule 56.1 Statement of Facts (incorporated by the plaintiff into his cross-motion for summary judgment). A court considering a motion for summary judgment shall construe the facts in the light most favorable to the non-moving party. See Capobianco v. City of New York, 422 F.3d 47, 50 (2d Cir.2005). Unless otherwise noted, where defendant's 56.1 Statement is cited, that fact is undisputed or the opposing party has pointed to no evidence in the record to contradict it.

A. The Fund

The Fund was established by an Agreement and Declaration of Trust (the “Trust Agreement”); its purpose is to provide welfare benefits to Plan participants by virtue of their employment with contributors to the Fund. (Def.'s Statement of Material Facts Pursuant to Rule 56.1 (“Def.'s 56.1”) ¶¶ 1–3.) The Fund provides an “employee benefit plan” governed by ERISA.1 The Fund's assets are derived from two main sources of income. The first and predominant means is the aforementioned employer contributions made pursuant to collective bargaining agreements with a labor organization, specifically, United Food and Commercial Workers Local 1500 (the Union). ( Id. ¶¶ 1–2.) The second source of income consists of investing contributions not immediately needed for the payment of benefits or administrative costs. ( Id. ¶ 2.) Employees are not responsible for providing income or cost of coverage to the Fund. (Maria Maloney Affidavit (“Maloney Aff.”) ¶¶ 6–7.)

A Board of Trustees (“Board” or Trustees), equally composed of Union and contributing employers' appointees, administers the Fund in accordance with § 302(c)(5) of the Taft–Hartley Act, 29 U.S.C. § 186(c)(5). (Def.'s 56.1 ¶ 3.) Pursuant to section 4, Article V of the Trust Agreement, these Trustees “have complete discretionary authority to interpret and construe all terms and provisions of ... the Plan ... including, but not limited to questions relating to eligibility, [and] entitlement to benefits.” ( Id.)

The Board establishes and maintains several benefit plans, one for full-time employees and two for part-time employees. ( Id. ¶ 5.) These benefit plans are self-insured, i.e., benefit claims and administrative expenses paid by the Fund are done so out of available Fund assets. ( Id. ¶ 4.) The Fund does not purchase insurance to cover those benefits it becomes obligated to pay, and bears any risk of loss on such claims alone. ( Id.) All of the Fund's benefit plans contain provisions excluding coverage for injuries or illnesses for which a third party is liable, to be addressed in greater detail below.

B. The Special Part–Time Plan

The benefit plan that is the focus of this dispute is the “Special Part-time Plan” in which plaintiff participated. (Def.'s 56.1 ¶ 5.) The terms of this particular Plan are set forth in the Fund's “Summary Plan Description” (“SPD”), a copy of which is provided to each new part-time employee working for a contributing employer approximately one month before that employee's eligibility for Plan participation begins. ( Id.) Updated SPDs also are sent to all part-time Plan participants when ERISA so requires.2 (Maloney Aff. ¶ 10.) The SPD sets forth the Fund's appeal procedures for employees. (Def.'s 56.1 ¶ 10.) Key provisions of the SPD for purposes of this action are set forth as follows.

The SPD establishes that the Trustees have authority to administer the different benefit plans. It states: “Notwithstanding any other provision of this Plan, the Board of Trustees is responsible for interpreting the Plan and for making determinations under the Plan.” (Maloney Aff. Ex. B, at 59.)

The SPD also addresses subrogation procedures should a participant's injuries arise from a third party's actions. This section of the SPD, entitled “Involving Third–Party Liability,” states: “Under the terms of the Plan, no benefits are payable if a third party may be liable for your medical expenses.” ( Id. at 69.) It further provides that [t]he Plan may pay such expenses provided that you agree, in writing, to reimburse the Plan, in full, from any settlement, judgment, or other payment that you obtain from the liable third party.” ( Id.) The SPD states that [n]o benefits will be provided unless you and your attorney (if any) sign the [subrogation] form.” ( Id. at 70.) In short, the SPD makes clear that a plan participant may not recover twice for one injury, i.e., one time from the third party-cause of the injury, and one time from the Fund.

C. Zarringhalam's Injury and Receipt of his Claims

On March 4, 2009, Zarringhalam tripped on a raised sidewalk flag, allegedly sustaining injuries to his wrist. (Def.'s 56.1 ¶ 14; Maloney Aff. Ex. G.) Zarringhalam sent a claim for his physical injury to Maloney Associates, Inc. (“Maloney Associates”), a third-party administrative service provider to the Fund, on May 7, 11, 13, 15, 20, 26, and June 8 and 22, 2009. (Def.'s 56.1 ¶ 12.) On May 19, June 9, 18, 25, and July 16, 2009, Maloney Associates sent Explanations of Benefits (“EOBs”) to Zarringhalam. ( Id.) The EOBs listed plaintiff's claim as “pending;” printed on the reverse side of the EOBs was a description of the Fund's appeal procedures. ( Id.) Each of the EOBs requested additional information as to Zarringhalam's claim, stating:

Before we can consider these charges, we will need to know how, when and where this injury occurred. Please write a brief explanation about your injury and send it to Maloney Associates, Inc., 211 Broadway, Lynbrook, N.Y. 11563. Be sure to include your name, identification number and an answer to the questions above, as specified in your Summary Plan Description.

(Def.'s 56.1 ¶ 12; Maloney Aff. Ex. C.)

During this same period, Maloney Associates had one of its benefit analysts send a letter to Zarringhalam informing him that processing of his claims would require additional information concerning the how, when, and where as to his injuries. (Def.'s 56.1 ¶ 13.) This letter initially was sent on May 12, 2009, (Maloney Aff. Ex. D), with a subsequent copy stamped Second Request being sent on July 3, 2009, (Maloney Aff. Ex. E), and an additional copy stamped Third Request being sent on August 20, 2009, (Maloney Aff. Ex. F). These letters further clarified that processing of plaintiff's claim remained pending until receipt of the specified information. (Def.'s 56.1 ¶ 13.) Maloney Associates did not receive a response from plaintiff concerning the EOBs or letters. ( Id. ¶ 17.)

D. Zarringhalam's Response to the EOBs

On August 27, 2009, attorney Thomas J. Stock informed Maloney Associates that his firm was representing plaintiff. (Def.'s 56.1 ¶ 14; Maloney Aff. Ex. G.) His letter included the following information as to plaintiff's injury: “Zarringhalam was injuredon March 4, 2009 in front of 4361 Bedford Avenue, Brooklyn, New York when he tripped on a raised sidewalk flag.” (Def.'s 56.1 ¶ 14; Maloney Aff. Ex. G.) The letter concluded with a demand for payment of plaintiff's outstanding claim. (Def.'s 56.1 ¶ 14; Maloney Aff. Ex. G.)

Maloney Associates responded on September...

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