United States District Court, Western District of New York
May 23, 1991
TRUCKMEN'S & WAREHOUSEMEN'S ASSOCIATION OF ROCHESTER; BOULTER CARTING CO., INC.; GEORGE M. CLANCY CARTING CO., INC.; VOGEL VAN AND STORAGE OF ROCHESTER, INC.; SERVICE STORAGE INCORPORATED; B.G. COSTICH & SONS, INC.; EAST END MOVING AND STORAGE, INC.; GOTTRY CORPORATION; WEST PAGE 718 ROCHESTER STORAGE WAREHOUSES, INC.; AND MICHAEL CLANCY, INDIVIDUALLY AND AS A PARTICIPANT IN, AND BENEFICIARY OF, THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, PLAINTIFFS,
THE NEW YORK STATE CONFERENCE PENSION AND RETIREMENT FUND; IRVING WISCH, KEPLER VINCENT, T. EDWARD NOLAN, ROCCO F. DE PERNO, VICTOR MOUSSEAU, PAUL E. BUSH, AND JACK CANZONERI, AS TRUSTEES OF THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; AND AL SGAGHONE, EXECUTIVE ADMINISTRATOR OF THE NEW YORK STATE CONFERENCE PENSION AND RETIREMENT FUND, DEFENDANTS. JOHN W. MORSE, INDIVIDUALLY AND AS A PARTICIPANT IN, AND A BENEFICIARY OF, THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, PLAINTIFF, V. THE NEW YORK STATE TEAMSTER CONFERENCE PENSION AND RETIREMENT FUND; T. EDWARD NOLAN, ROCCO F. DE PERNO, CURTIS GUNDERSON, PAUL E. BUSH, AND RICHARD MULLER AS TRUSTEES OF THE NEW YORK TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND; AND AL SGAGHONE, EXECUTIVE ADMINISTRATOR OF THE NEW YORK STATE TEAMSTERS CONFERENCE PENSION AND RETIREMENT FUND, DEFENDANTS.
The opinion of the court was delivered by: Curtin, District Judge
Plaintiffs have moved this court to reconsider elements of its decision
of November 30, 1990. In that decision, this court sustained most of the
challenged provisions in the New York State Conference Pension and
Retirement Fund's ("Fund") 1979 stipulation form. Truckmen's &
Warehousemen's Ass'n of Rochester v. New York State Teamster's Conference
Pension & Retirement Fund, 751 F. Supp. 351 (W.D. N.Y.i990). Three
provisions, however, were struck down as arbitrary and
capricious. Id. at 360-61. Plaintiffs argue that three issues remain
before this decision can be reduced to judgment. Specifically, plaintiffs
(1) Paragraph 2 of the 1979 stipulation is arbitrary
and capricious to the extent it entitles the Fund to
hold employers liable for pension benefits as
opposed to pension contributions during a period of
employer delinquency in paying the required
(2) the Fund stipulated, and/or is required, to
accept contributions to fund pension credits
accruing during a dispute over a deficiency or
delinquency in the payment of a pension
(3) the court should declare the rights of the
parties and order affirmative relief.
The court will address each argument in turn.
I. INTERPRETATION OF PARAGRAPH 2
Plaintiffs argue that this court's November 30, 1990, decision is
inconsistent in its interpretation of paragraph 2. See Truckmen's, 751
F. Supp. at 358-59, 361. Paragraph 2 provides, in relevant part, that:
Failure on the part of the employer to contribute
on any of his employees as specified herein, shall
make the employer liable for all employee benefit
claims which are incurred during the period of
delinquency, damages, reimbursement to the Fund
for the Fund's attorneys' fees, auditors' fees,
court costs, disbursements and expenses incurred
by the Fund in recovering the above.
Id. at 358 (emphasis added). The court held that this paragraph was not
arbitrary and capricious because it established "an entirely permissible
set of rules designed to force delinquent employers to make the
contributions required of them under the applicable collective bargaining
agreement." Id. at 359.
Plaintiffs argue that this holding is inconsistent with language of the
decision under which the court struck down paragraph 8 as arbitrary and
capricious. Again, the language of the decision is as follows:
Paragraph 8, on the other hand, is impermissible. It provides:
The employer agrees that should he not make
contributions on 100% of all his Bargaining Unit
employees as required herein, the Pension and
Retirement Fund will not pay nor be liable or
obligated to pay any Pension and Retirement or other
benefits to all his employees involved, whether or
not contributions were made on such individuals, in
which event the employer shall pay to any or all
such employees any and all Pension and Retirement or
other benefits. . . .
Item 77, Ex. 3 (emphasis added). As discussed above,
defendants have conceded their liability to employees
for whom an employer is obligated to contribute, even
if the employer fails to make these contributions.
. . . Moreover, the Trustees have no authority under
the trust indenture to hold employers liable to
employees for unpaid pension contributions. The
Trustees may only hold employers liable to the Fund
for these contributions.
Truckmen's, 751 F. Supp. at 361.
The word plaintiffs latch onto in this long excerpt is the last one:
"contributions." Plaintiffs argue that on the one hand the court has
held, by upholding paragraph 2, that the Fund may "make the employer
liable for all employee benefit claims which are incurred during the
period of delinquency," id. at 358 (emphasis added); but on the other
hand, by striking down paragraph 8, the court held the Fund may only hold
employers liable for pension contributions.
The court understands the reason for the confusion and will endeavor to
clarify its prior decision. Paragraph 8 was struck down because it
directly contradicted the Internal Revenue Service's ("IRS") position
that the Fund was required to credit and pay an employee's pension
benefits to the
degree an employer was obligated to make contributions on that person,
even if the employer did not pay those contributions. The Fund has
repeatedly acknowledged this obligation. See, e.g., Truckmen's Item
88 (hereinafter Tr. Item ___). Paragraph 8 was also struck down
because, by purporting to make employers liable to their employees for
pension benefits in the event of an employer's delinquency in making
contributions to the Fund, it contradicted the trust instrument. The Fund
can make the employer liable to the Fund, not a third party. The
confusion arose because the court used the phrase "pension contributions"
here, Truckmen's, 751 F. Supp. at 361, rather than pension benefits, and
that usage was imprecise. The question whether employers could be held
liable for pension benefits, or only pension contributions, had no
bearing on this holding, however. The holding striking down paragraph 8
focused on who could be made liable to whom — employers can be held
liable to the Fund, only — not on the amount or type of liability
between those parties.
Paragraph 2, on the other hand, provides that "[f]ailure on the part of
the employer to contribute on any of his employees as specified herein,
shall make the employer liable for all employee benefit claims which are
incurred during the period of delinquency. . . ." Id. at 358 (emphasis
added). The court upheld this clause based on the following reasoning:
Plaintiffs object that paragraph 2 renders
employers liable for pension benefits during periods
of delinquency. Under the trust indenture, receipt
given by the Trustees for any monies or other
properties received by them shall effectively
discharge the person or persons paying or
transferring the same Item 42, Ex. 16, ¶ 12(b).
This paragraph relieves employers of liability for
pension benefits to the extent they have properly
paid therefore under the collective bargaining
agreement. Moreover, the Fund has admitted it is
liable to pay employees pension benefits for which
an employer was obligated to pay under the
collective bargaining agreement, even if that
employer did not pay the Fund. See supra. But
neither of these rules relieve employers of
liability for these same pension benefits if they
have failed to make their required payments to the
Fund. A rule holding the employer liable to the Fund
for such benefit claims is certainly not arbitrary
Id. at 359.
Plaintiffs argue by example that strict application of this rule could
lead to harsh results where a Fund audit revealed an inadvertent
shortfall in an employer's required contributions to the Fund. See Tr.
Item 80, at 5. According to plaintiffs, they could be liable for
thousands of dollars in employee benefit claims based on a negligible
shortfall in their required contributions. Id.
The court finds that the hypothetical controversy suggested by
plaintiffs is not properly before this court. The court has held that
paragraph 2 is not arbitrary and capricious. The court has also held that
"employers [are relieved] of liability for pension benefits to the extent
they have properly paid therefore under the collective bargaining
agreement." Truckmen's, 751 F. Supp. at 359. The court sees no reason to
change these holdings at this time. The exact scope of the sanctions
contemplated in paragraph 2 must await a case involving their specific
II. OBLIGATION TO ACCEPT CONTRIBUTIONS
Plaintiffs contend that defendants stipulated that they would accept
employer contributions tendered to the Fund "in the event that there is a
dispute over a deficiency or delinquency in the payment of a pension
contribution." Plaintiffs' Proposed Order, at 6. Plaintiffs further
contend that federal law prevents the Fund from turning back
contributions to an employer. See Item 86. The court finds neither
argument to be meritorious.
As for whether the Fund stipulated to accepting employer
contributions, the court notes that at the end of the stipulations put on
the record during the Sgaghone deposition, plaintiffs' counsel himself
It's understood by the parties that the
stipulations that we are entered into here today
will be reduced to writing. A stipulation will be
signed, and the parties agree that it will and can
be transformed into an order of the court for the
purposes of resolving these issues in the
Tr. Item 74, at 13. No such stipulation has ever been forwarded to this
Plaintiffs' second argument — that federal law requires the Fund
to accept employer contributions — is also unsupported. The IRS
provisions cited by plaintiffs, see Tr. Item 86, have no relationship to
this issue. As this court held in its prior decision, "[c]ompliance with
Fund rules simply must be allowed to control participation in the Fund."
Truckmen's, 751 F. Supp. at 359.
III. AFFIRMATIVE RELIEF
Finally, plaintiffs seek affirmative relief in accordance with their
requested modifications of this court's prior decision. The court finds
that, for the most part, such affirmative relief is unnecessary.
It is hereby adjudged and declared in accordance with this court's
decision of November 30, 1990, as clarified herein, that:
Plaintiffs Morse and Clancy have standing to proceed.
B. The 1979 Stipulation
1. Paragraph 1(b)
The Fund's rule requiring contributions to be made on non-union and
casual employees is not arbitrary and capricious.
Further, as a general matter the Trustees may prescribe rules in
conflict with such agreements and not exceed their authority.
2. Paragraph 1(a)
The Trustees may make any rule that is not arbitrary and capricious.
The stipulation's requirement binding employers to compliance with such
rules is not itself arbitrary and capricious.
3. Paragraph 2
The provisions of paragraph 2 are not arbitrary and capricious. They
clearly delineate a delinquent employer's obligations to the Fund.
4. Strike Clause, Paragraphs 2 and 3
The Strike Clauses of paragraphs 2 and 3 are impermissibly arbitrary
5. Paragraph 4
Paragraph 4, which permits the Fund to audit an employer's payroll
records, is not arbitrary and capricious.
6. Paragraphs 5 and 8
Paragraph 5's provisions are not arbitrary and capricious. Defendants
admit that paragraph 8, on the other hand, exceeds its authority.
7. Paragraph 10
No controversy appears to remain over paragraph 10.
8. Paragraph 11
Paragraph 11, to the extent it requires employers to collect from
employees contributions due for periods of absence, is arbitrary and
9. Paragraph 14
Paragraph 14, because it may be modified by collective bargaining
agreement, is not arbitrary and capricious.
The preliminary injunction issued in the Truckmen's case on April 9,
1982, Tr. Item 16, and amended on June 23, 1982, Tr. Item 19, is hereby
lifted. The temporary restraining order issued in the Morse case on
August 30, 1985, Morse Item 4, and extended on September 30, 1985, is
also lifted. Morse Item 6.
The Fund is directed to modify its participation agreements in
accordance with this decision and order at the earliest practicable
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