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CICATELLO v. BREWERY WORKERS PENSION FUND

June 17, 1977.

August CICATELLO and John Lomeo, on behalf of themselves and the entire class of persons similarly situated, and Albert Yaeger and Edward Przepasniak, on behalf of themselves and the entire class of persons similarly situated, Plaintiffs,
v.
BREWERY WORKERS PENSION FUND and Elmer R. Sidden, J. Lee Thynne, Enea Borra, Frank J. Fink, Valentine J. Frank, John Hoh, George Pfleiderer, Edward Siegmann, David Conroy and George L. Walsh, or their successors, as Trustees of the Brewery Workers Pension Fund, and New York State Teamsters Conference Pension and Retirement Fund, and Rocco De Perno, Stanley Clayton, William Moseley, Paul Bush, Victor Mousseau, Kapler Vincent, Lyle Dixon and Irving Wisch, as Trustees of the New York State Teamsters Conference Pension and Retirement Fund, Defendants.



The opinion of the court was delivered by: CURTIN

CURTIN, Chief Judge.

This case had its genesis in the 1973 agreement by the defendants, the New York State Teamsters Conference Pension and Retirement Fund [Teamsters Fund] and the Brewery Workers Pension Fund [Brewery Workers Fund], to merge the Brewery Workers Fund into the Teamsters Fund.

Subsequent to that agreement, the Teamsters Fund had second thoughts, apparently prompted in large measure by the difficulties encountered by Rheingold Breweries, a large New York brewery operation. *fn1" The Teamsters Fund notified the Brewery Workers Fund in February of 1974 that it would not proceed with the merger. Thereupon, the Brewery Workers Fund sued in State Supreme Court for specific performance of the contract.

 The New York State Supreme Court, Queens County, granted the Brewery Workers summary judgment on April 29, 1975, and directed the Teamsters Fund to specifically perform the contract. That decision was unanimously upheld by the Appellate Division, Second Department.Brewery Workers Pension Fund v. New York State Teamsters Conference Pension and Retirement Fund, 49 A.D.2d 755, 374 N.Y.S.2d 590 (App.Div.2d Dept., 1975). Leave to appeal was denied by the Appellate Division on November 18, 1975, and by the Court of Appeals on February 11, 1976, 38 N.Y.2d 709, 382 N.Y.S.2d 1028, 346 N.E.2d 558 (1976).

 The named plaintiffs and the class they purport to represent are employees and retired employees of trucking, brewing and allied industries whose employers are parties to collective bargaining agreements making contributions on behalf of these employees to the Teamsters Fund. The retired plaintiffs are receiving benefits under the fund and the plaintiffs who are presently employed will receive benefits under the fund upon their retirement.

 These plaintiffs, claiming that they had no knowledge of any of the state proceedings just outlined, brought this action on January 11, 1977, seeking preliminary and permanent injunctive relief enjoining the merger of the two pension funds, declaratory relief declaring the merger invalid, and attorneys' fees. Jurisdiction is claimed under § 502 of the Employee Retirement Security Income Act of 1974 [ERISA], 29 U.S.C. § 1132, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202.

 I. JURISDICTION AND PLAINTIFFS' ALLEGATIONS

 The Declaratory Judgment Act is not an independent grant of jurisdiction, Warner-Jenkinson Co. v. Allied Chemical Corp., 567 F.2d 184, slip op. at 2875 (S.D.N.Y. 1977); Arthur v. Nyquist, 415 F. Supp. 904, 909 n. 3 (W.D.N.Y.1976), so plaintiffs' claim must rest on the jurisdictional basis provided in ERISA. In addition, although plaintiff does not mention it in his papers, this court also has jurisdiction under 28 U.S.C. § 1331, since this action is brought under a federal statute and the amount in controversy exceeds $10,000.

 Plaintiffs allege essentially five causes of action in their amended complaint. Briefly stated, they are that the defendants failed to comply with § 3001(a) of ERISA, 29 U.S.C. § 1201(a), by not notifying each employee of the Teamsters Fund of the proposed merger, that the merger violates § 208 of ERISA, 29 U.S.C. § 1058, because the benefits to the members of the plaintiffs' class under the merger are not equal to or greater than the benefits they would have been entitled to under the pre-merger Teamsters Fund plan, that the merger violates § 302 of ERISA, 29 U.S.C. § 1082, in that the merged fund will not meet the minimum funding standards set by ERISA, that the defendants have violated § 4043 of ERISA, 29 U.S.C. § 1343, which requires that certain "reportable events," such as this merger, be reported to the Pension Benefit Guarantee Corporation [PBGC], and that the merger is not in the best interests of the Teamsters Fund participants, and thus violative of that plan, because the Teamsters Fund would be assuming liabilities in excess of its assets.

 In response, the defendant Brewery Workers Fund argues that the merger has already been completed, that the plaintiffs have not shown the proper grounds for preliminary injunctive relief, and that the plaintiffs' complaint should be dismissed for failure to state a claim upon which relief can be granted. The defendant Teamsters Fund, in its answering affidavit, merely states that it has opposed the merger of the two funds. It submits an affidavit of the Teamsters Fund administrator, which apparently was filed as an answer to the Brewery Workers' show cause order brought in January of 1977 in State Supreme Court to enforce the previous state court judgment, that supports the claims of the plaintiffs.

 On March 22, 1977, the court heard oral argument from both the plaintiffs and the Brewery Workers Fund. The Teamsters Fund chose not to appear and to rely on its answering affidavit. At the oral argument, the Brewery Workers Fund dropped venue and jurisdictional objections it had raised in its answering papers.

 II. THE MERGER

 The August 1973 agreement between the two funds provided that the merger would follow immediately upon ratification of the contract by the Brewery Workers' employees, which ratification occurred in late 1973, and upon approval of the merger by the Internal Revenue Service "under the applicable sections of the Internal Revenue Code for the purposes of tax deduction and exemption." (Agreement at Art. IX). The I.R.S. approval was subsequently granted in a letter dated September 28, 1976. After receiving the I.R.S. approval of the merger, the individual Brewery Workers Fund trustees resigned effective December 1, 1976, and transferred all assets and properties of the Brewery Workers Fund over to the Teamsters Fund effective December 1, 1976, by instrument dated November 19, 1976. The Teamsters Fund has, however, continued to refuse to comply with the contract and with the directives of the state court. The Teamsters Fund trustees did not accept the Brewery Workers Fund's assets, have not accepted Brewery Workers employees' contributions to the merged fund, and have not paid any benefits to Brewery Workers employees. It is the contention of the Teamsters Fund in this court that the merger is not yet a reality.

 However, since this action was instituted, the Brewery Workers have obtained a State Supreme Court decision ruling that the merger was effective December 1, 1976 and ordering the Teamsters Fund to accept the assets and property that the Brewery Workers' trustees assigned to them, to accept contributions from Brewery Workers' employers to the fund, to pay benefits due to Brewery Workers' employees, and to comply with other provisions of the contract. Brewery Workers Pension Fund v. New York State Teamsters Conference Pension and Retirement Fund, No. 9997/74 (Sup.Ct., Queens Co., March 28, 1977).

 Plaintiffs allege that the Brewery Workers Fund has some $22 million in assets, but that it is currently operating at a deficit because payment of retirement benefits and administrative expenses exceed the income from contributions to the tune of about $4 million per year. Plaintiffs argue that the merger of the two funds will cause the Teamsters Fund to incur substantial liabilities to the present participants of the Brewery Fund which will jeopardize the payment of present benefits to members of the plaintiffs' class. In support of their motion for preliminary injunctive relief, the plaintiffs have filed an affidavit from Mr. Sol Tabor, the consulting actuary for the Teamsters Fund. He states in his affidavit that it is his opinion that the merger of the Brewery Workers Fund into the Teamsters Fund "will be to the detriment of the current [Teamsters Fund] Plan participants and beneficiaries." (Affidavit at 2). He goes on to say in his short affidavit that it is unlikely that the forty-year amortization period required by § 302 of ERISA, 29 U.S.C. § 1082, could be met if the two funds are merged and that the Teamsters Fund may have to apply to the Secretary of Labor to reduce pension benefits in the future.

 III.PLAINTIFFS' ALLEGATIONS

 This court will take up each of the plaintiffs' claims one at a time, although not necessarily in ...


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