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DIDUCK v. KASZYCKI & SONS CONTR.

March 28, 1990

HARRY J. DIDUCK, INDIVIDUALLY AND AS A PARTICIPANT IN THE LOCAL 95 INSURANCE TRUST FUND AND THE LOCAL 95 PENSION FUND, AND ON BEHALF OF ALL OTHER PERSONS WHO ARE, WILL BE, OR HAVE AT ANY TIME SINCE JANUARY 1, 1980 BEEN PARTICIPANTS OR BENEFICIARIES IN THE FUNDS, SIMILARLY SITUATED, PLAINTIFF,
v.
KASZYCKI & SONS CONTRACTORS, INC.; WILLIAM KASZYCKI; JOHN SENYSHYN; TRUMP-EQUITABLE FIFTH AVENUE COMPANY; TRUMP ORGANIZATION, INC.; DONALD J. TRUMP D/B/A THE TRUMP ORGANIZATION; THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES AND THE TRUSTEES OF THE HOUSE WRECKERS UNION LOCAL 95 INSURANCE TRUST FUND AND OF THE HOUSE WRECKERS UNION LOCAL 95 PENSION FUND, DEFENDANTS.



The opinion of the court was delivered by: Stewart, District Judge:

  MEMORANDUM DECISION

Plaintiff Harry J. Diduck brought this action to recover monies allegedly owed to certain union employee benefit funds of which Diduck is a beneficiary. Defendants Trump-Equitable Fifth Avenue Company, the Trump Organization, Inc., Donald J. Trump, Donald J. Trump d/b/a The Trump Organization, and the Equitable Life Assurance Society of the United States (the "Trump Defendants") move pursuant to Rule 56(b) of the Federal Rules of Civil Procedure for summary judgment dismissing plaintiff's causes of action against them. Defendant John Senyshyn moves pursuant to Fed.R.Civ.P. 56(b) for an order granting him partial summary judgment as to plaintiff's third and fourth causes of action. Plaintiff cross-moves for leave to file a second amended complaint pursuant to Fed.R.Civ.P. 15 and to have the action certified as a class action pursuant to Fed.R.Civ.P. 23.

Factual Background

The factual background to this action has been recited by both this court in Diduck v. Kaszycki, No. 83 Civ. 6346 (S.D.N.Y. July 18, 1988) (the "July 18th Decision"), and the Second Circuit in Diduck v. Kaszycki, 874 F.2d 912 (2d Cir. 1989). We will therefore only briefly summarize the relevant facts.

The Trump defendants hired William Kaszycki and his company Kaszycki and Sons Contractors, Inc. ("Kaszycki Corporation" and collectively the "Kaszycki defendants") to demolish the Bonwit Teller Building in midtown Manhattan pursuant to a written agreement signed January 30, 1980. To obtain workers for the demolition Kaszycki entered into a collective bargaining agreement on behalf of the Kaszycki Corporation with the House Wreckers Local 95 (the "Union") for the period from January 1, 1980 through June 30, 1981. The Trump defendants were not signatories to this agreement.

During the course of the demolition project the Kaszycki Corporation employed a number of non-union laborers from Poland ("Polish workers") who were paid less than the Union workers. Under the terms of the collective bargaining agreement, Kaszycki Corporation was obligated to make contributions of specified amounts into the Union's pension and insurance funds (the "Funds"). These contributions were calculated from percentages of the total wages of both the Union and non-union workers. To facilitate this calculation the collective bargaining agreement provided that the Union's shop steward and the Kaszycki Corporation file weekly reports listing the workers on the job, the numbers of hours worked and their wages.

Defendant Senyshyn served as the Union's shop steward beginning in March 25, 1980 and filed three weekly reports. It is alleged that during his tenure as shop steward he submitted false shop steward reports in which he failed to document the use of the non-union Polish laborers. Indeed, throughout the demolition project neither the shop steward's nor the Kaszycki Corporation's weekly reports listed the Polish workers.

In June of 1980 the Union notified the Trump defendants that contributions to the Funds were in arrears because of the financial insolvency of the Kaszycki Corporation. In response to a threatened work stoppage by the Union, the Trump defendants made a number of payments to the Funds on behalf of the Kaszycki Corporation and advised Kaszycki by letter of his responsibilities for the Fund payments and his responsibilities under the demolition project agreement. However, neither Kaszycki nor the Trump defendants made any contributions to the Funds on behalf of the Polish workers.

On August 25, 1983, Diduck sued Kaszycki, the Kaszycki Corporation and Senyshyn to recover an estimated $600,000 owed to the Funds for the Polish workers. On June 24, 1984, Diduck filed a motion to amend his complaint, which we granted on August 9, 1984, and added the Trump defendants and the Trustees as nominal defendants. The amended complaint sought relief derivatively and as a class action.*fn1

In our July 18th Decision we granted Senyshyn's and the Trump defendants' motions for summary judgment and denied the plaintiff's motion for class certification. We held that Diduck lacked standing to sue derivatively because the trustees of the Funds had not breached a fiduciary duty, that Diduck could not maintain an action under RICO because no criminal enterprise existed and that the statute of limitations under ERISA barred his claims against Senyshyn. This decision was reversed and remanded by the Second Circuit which mandated that on remand the amended complaint's second, third, fourth, fifth, sixth and seventh claims remained for consideration on the merits by this court. Diduck, 874 F.2d at 920. The instant motions followed.

Discussion

Plaintiff's Renewed Motion for Class Certification

In our July 18, 1988 Memorandum Decision we held that since any recovery from the action would go to the Funds, the instant action was a derivative suit. Accordingly, we denied plaintiff's motion for class certification. Diduck v. Kaszycki & Sons Contractors, Inc., No. 83 Civ. 6346, slip op. at 4 (S.D.N.Y. July 18, 1988).

Plaintiff now argues that in light of our reversal by the Second Circuit the issue of class certification should now be reconsidered. Defendants argue that we are barred from reconsidering the issue on "law of the case" grounds.

We begin by briefly summarizing "law of the case" principles. Under the "law of the case" doctrine when an appellate court has decided an issue, the trial court is under a duty at a later stage in the litigation to follow the appellate court's ruling on that issue. United States v. Cirami, 563 F.2d 26, 32 (2d Cir. 1977). However, upon remand the trial court may consider matters not expressly or implicitly part of the decision of the higher court. Id. at 33. Further, in a circumstance

  in which the mandate of the appellate court does
  not address a particular issue, the appellate
  judgment, on this issue, does not establish law
  of the case. . . . It remains, however, that the
  issue was decided by the district court in an
  earlier case and was not disapproved by the
  appellate court. It is, therefore, the law of the
  case, but within the more flexible branch of the
  doctrine applicable to successive ruling of the
  trial courts.

1B J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice ¶ 0.404[4-3] (2d ed. 1988).

The "law of the case" applicable to successive rulings of the same court is a discretionary doctrine which "merely expresses the general practice of refusing to open what has been decided." Lasky v. American Broadcasting Companies, Inc., 631 F. Supp. 962, 964 (S.D.N.Y. 1986) (quoting United States v. Birney, 686 F.2d 102, 107 (2d Cir. 1982)). Therefore, pursuant to the more "flexible branch" of the doctrine, a court may reconsider its own prior rulings when convinced that its previous ruling was substantially erroneous or when reconsideration is necessary to avoid injustice. See Moll v. U.S. Life Title Insurance Co. of New York, 700 F. Supp. 1284, 1286 (S.D.N.Y. 1988). The jurisprudential concerns underlying the "law of the case" doctrine counsel against reconsideration of issues absent compelling circumstances such as an intervening change of law, the availability of new evidence, the need to correct a clear error, or to prevent manifest injustice. See Wilder v. Bernstein, 645 F. Supp. 1292, 1310 (S.D.N.Y. 1986), aff'd, 848 F.2d 1338 (2d Cir. 1988). We believe the law of the case doctrine applicable to successive rulings is the correct approach here since the Second Circuit did not and was not required to rule on the issue of class certification.

It is our view that our original denial of class certification was generally correct in the first instance. When it reversed this court's summary judgment determinations, the Second Circuit did not explicitly address our denial of class certification. Indeed, plaintiff did not specifically raise the issue as one that he wished to appeal.*fn2 However, in spite of the fact that the Second Circuit expressly recognized that the complaint originally sought relief derivatively and as a class action, Diduck, 874 F.2d at 916, the decision nevertheless is replete with references to the instant action as a derivative one. See, e.g., Diduck, 874 F.2d at 920. Indeed, in explicit reference to our holding denying class certification Judge Van Graafeiland's dissent expressly stated that he "and his colleagues" agreed with our holding that plaintiff was suing solely in a derivative capacity. Diduck, 874 F.2d at 923 (Van Graafeiland, J., dissenting). Thus, even if the Second Circuit was not required to reach the issue of our denial of class certification, we note that its decision implicitly approved of our holding.

Second, as we stated in our previous decision, "[o]ne of the few things that plaintiff, Trump defendants and the Funds agree on is that any recovery from this action will go to the Funds and not to the plaintiff." Accordingly, as we also stated in our earlier decision, "the suit clearly has been brought derivatively" on behalf of the Funds.*fn3 Moreover, "enforcement of contributions obligations is the function, at least in the first instance, of the trustees." Struble v. N.J. Brewery Employees' Welfare Trust Fund, 732 F.2d 325, 337 (3d Cir. 1984) (construing section 502(g)(2)).*fn4 We are persuaded by the Struble court's analysis concluding that beneficiaries do not have a direct action for damages for unpaid contributions. Id. at 338.*fn5 This approach is consistent with the Second Circuit's determination that an individual beneficiary or participant has standing to bring a civil action under ERISA only to recover benefits due him or her, to enforce personal rights, or seek injunctive or equitable relief.*fn6 See Alfarone v. Bernie Wolff Construction Corp., 788 F.2d 76, 79 (2d Cir. 1986) (construing 29 U.S.C. § 1132(a)(1)(B) and 1132(a)(3)), cert. denied, 479 U.S. 915, 107 S.Ct. 316, 93 L.Ed.2d 289 (1986).*fn7 Therefore, plaintiff's instant ERISA damage claims for unpaid contributions may only be brought derivatively. See Struble, 732 F.2d at 337 (beneficiaries do not have a direct action for damages for unpaid contributions).

Consequently, since plaintiff seeks to vindicate rights accruing to the Funds, he has no individual standing to sue for unpaid contributions under ERISA. Thus, he also has no right to bring a class action. See Akerman v. Oryx Communication, Inc., 609 F. Supp. 363, 376 (S.D.N.Y.) (predicate to plaintiff's right to represent a class is eligibility to sue in own right), aff'd, 810 F.2d 336 (2d Cir. 1984). In sum, we affirm our previous holding that plaintiff's claim for unpaid contributions must be brought derivatively. We also affirm our previous holding denying class certification as to those claims brought derivatively.

RICO

We also agree with Judge Van Graafeiland that since any relief obtained will accrue solely to the Funds and that the primary right to seek redress for damages to the Funds belonged to the Trustees, plaintiff lacks individual standing to bring his RICO claim. See Diduck, 874 F.2d at 924 (Van Graafeiland, J., dissenting); cf. Rand v. Anaconda-Ericsson, Inc., 794 F.2d 843, 849 (2d Cir. 1986) (shareholders cannot bring RICO claim in their own names if legal injury was to corporation), cert. denied, 479 U.S. 987, 107 S.Ct. 579, 93 L.Ed.2d 582 (1986); Warren v. Manufacturers National Bank of Detroit, 759 F.2d 542, 544 (6th Cir. 1985) (RICO action to redress injuries to corporation cannot be maintained by shareholder in own name but must be brought derivatively); Sound Video Unlimited, Inc. v. Video Shack Inc., 700 F. Supp. 127, 136 (S.D.N Y 1988) (shareholders cannot bring a RICO action in their individual capacity to redress injuries inflicted upon their corporation); Nordberg v. ...


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