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THE NEW YORK v. ESTATE OF DEPERNO

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK


March 5, 1993

THE NEW YORK STATE TEAMSTERS COUNCIL HEALTH AND HOSPITAL FUND, AND EVERETT L. CAMPBELL, JAMES M. CARLTON, JAMES A. HOOD, VICTOR C. OLIVADOTI, JOHN PRYSHLAK, NICHOLAS ROBILOTTO and ERVIN WALKER, AS TRUSTEES OF THE NEW YORK STATE TEAMSTERS COUNCIL HEALTH AND HOSPITAL FUND, Plaintiffs,
v.
THE ESTATE OF ROCCO F. DePERNO, ROCCO A. DePERNO, and PATRICIA DePERNO, Defendants.

Hurd

The opinion of the court was delivered by: DAVID N. HURD

DAVID N. HURD

United States Magistrate Judge

 MEMORANDUM-DECISION and ORDER

 I. Introduction.

 This action was commenced on October 4, 1988, by plaintiffs alleging violations of the Employee Retirement Income Security Act ("ERISA"), §§ 404(a)(1)(A)(i), 404(a)(1)(B), 406(a)(1)(C)&(D), 406(b)(1)&(2); codified at 29 U.S.C. §§ 1104(a)(1)(A)(i) & 1104(a)(1)(B), 1106(a)(1)(C)&(D), and 1106(b)(1)&(2), during the period of October 1981, through March 1986. They seek damages pursuant to ERISA § 409(a) (29 U.S.C. § 1109(a)).

 The first cause of action is against defendants The Estate of Rocco F. DePerno ("Trustee DePerno") and Rocco A. DePerno ("Attorney DePerno"), alleging violations of ERISA § 404(a)(1)(A)(i) (29 U.S.C. § 1104 (a)(1)(A)(i)), arising out of an alleged breach of their fiduciary duties, when several cooks were hired from Attorney DePerno's restaurant to work as maintenance men at the administrative office of the New York State Teamsters Council Health and Hospital Fund ("Fund").

 The second cause of action has been discontinued.

 The third cause of action is against Attorney DePerno and Patricia A. DePerno ("Mrs. DePerno"), alleging that they participated in Trustee DePerno's breach of his fiduciary duties under ERISA § 404(a)(1) (29 U.S.C. § 1104(a)(1)). See Plaintiffs' First Cause of Action.

 The fourth cause of action is against Trustee DePerno and Attorney DePerno, alleging violations of ERISA § 406(a)(1)(C)&(D) (29 U.S.C. § 1106(a)(1)(C)&(D)) by causing the Fund to engage in a prohibited transaction.

 The fifth cause of action is against Attorney DePerno and Mrs. DePerno, alleging violations of ERISA § 406(a)(1)(C)&(D) (29 U.S.C. § 1106(a)(1)(C)&(D)) as parties in interest by causing the Fund to engage in a prohibited transaction.

 The sixth cause of action against Trustee DePerno and Attorney DePerno, alleges violations of ERISA § 406(b)(1)&(2) (29 U.S.C. § 1106(b)(1)&(2)) as fiduciaries in dealing with the assets of the plan in their own interest on behalf of parties whose interests were adverse to the Fund.

  Defendants have denied the material allegations of the complaint and asserted the Statute of Limitations as an affirmative defense to all claims arising prior to October 4, 1985.

 The court conducted a four day bench trial at Utica, New York. Post trial briefs were filed by the parties. The following Memorandum-Decision and Order constitutes the court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

 II. Parties.

 Plaintiff, the Fund, is an employee benefit fund organized under Section 302(c)(5) of the Taft-Hartley Act, 29 U.S.C. § 186(c)(5). The Fund is an employee benefit plan as defined in ERISA § 402(1) (29 U.S.C. § 1102(1)), and is therefore subject to ERISA. The Fund provides health and welfare benefits to Teamster-represented employees, dependents, and retirees in New York State and elsewhere.

 The Fund is governed by the Board of Trustees ("Trustees") which consists of an equal number of union and employer members, and is run on a day-to-day basis by an Executive Administrator who reports to the Trustees. The individual plaintiffs are past or present members of the Trustees. The Fund along with the Pension and Retirement Fund ("Pension Fund") have their headquarters in aid office building located at 7 Rutger Park, Utica, New York. The building is owned jointly by the two Funds, and the Funds share equally in the expenses of maintaining the building. Among other things, the two Funds split the cost of maintenance employees' salaries and benefits.

 Trustee DePerno served as a trustee of the Fund from the time of the Fund's inception in approximately 1954 until his death on October 7, 1986. Trustee DePerno was the senior member of the Trustees. In addition to his role as a trustee of the Fund, Trustee DePerno was also a trustee of numerous other Teamster funds, including the Pension Fund; the Local 182 Health and Welfare Trust Fund; the New York State Group Legal Fund; the Milk Plant Employee Health and Welfare Trust Fund; and the Upstate Teamsters Pension and Retirement Fund. Trustee DePerno was also the president of Teamsters Local 182 in Utica, New York, for approximately fifty years. Finally, for many years he was the president of the New York State Teamsters Joint Council 18, a group of Teamster locals in Central New York state.

 Attorney DePerno, a lawyer who has been practicing law for more than twenty years, was Trustee DePerno's son. In 1972 or 1973, Attorney DePerno became counsel to the Pension Fund, and in 1977 or 1978, he became counsel to the Fund. Attorney DePerno remained counsel to the Fund throughout the time period relevant to this lawsuit. In addition, Attorney DePerno served as counsel to numerous other Teamster entities, including the Upstate Teamsters Pension and Retirement Fund; the Teamsters Local 182 Health and Welfare Trust Fund; the Milk Plant Employees Health and Welfare Trust Fund; the New York State Teamsters Group Legal Fund; Joint Council 18; the Joint Council 18 Federal Credit Union; Teamsters Local 182 in Utica; and several other Teamsters' locals in upstate New York. In addition, from approximately 1980 to December 1987, Attorney DePerno owned a restaurant known as the Sea Shell Inn ("Inn").

 Mrs. DePerno is Attorney DePerno's wife, and was Trustee DePerno's daughter-in-law. She participated with her husband in operating the Inn.

 The Inn was a seasonal restaurant in Verona Beach, New York. During the time period in question, the restaurant was generally open for business from March or April through September or October of each year. The restaurant was destroyed by fire in December 1987.

 III. FACTS. The suit alleges that for five consecutive years, from 1981 through 1986, two cooks from the Inn were employed in the winter as maintenance men at the Health and Hospital Fund and Pension Fund building, in violation of ERISA. n1 The following chart summarizes the evidence in the record regarding the employment of the Inn cooks by the Inn and the Fund: DATES OF EMPLOYMENT BY COOK INN FUND Charles DeCosty 4/19/81 to 9/20/81 9/29/81 to 3/5/82 4/82 to 9/30/82 10/11/82 to 3/10/83 4/1/83 to 9/30/83 10/17/83 to 3/30/84 4/1/84 to 5/84 Joseph Longo 1981 12/29/81 to 3/24/82 1982 10/4/82 to 3/11/83 3/15/83 to 9/30/83 10/17/83 to 3/7/84 4/15/84 to 5/84 William Dyer 5/15/84 to 9/30/84 10/15/84 to 3/22/85 4/10/85 to 9/30/85 10/9/85 to 4/3/86 4/10/86 to John VandenBosch 6/28/84 to 9/84 10/16/84 to 3/28/85 4/10/85 to 9/30/85 10/8/85 to 4/4/86 4/15/86 - 8/87

19930305

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