The opinion of the court was delivered by: EUGENE H. NICKERSON
NICKERSON, District Judge:
Defendant National Organization of Industrial Trade Unions Insurance Trust Fund (the Fund) moves pursuant to Local Civil Rule 3(j) to reargue a motion decided by this court on November 30, 1992, granting partial summary judgment to plaintiff Karl Ritzer (now deceased). The court assumes familiarity with its previous memorandum and order. Ritzer v. Nat'l Org. of Indus. Trade Unions Fund, 807 F. Supp. 257, 262 (E.D.N.Y. 1992).
In its earlier opinion the court noted that the Fund, an employee welfare benefit plan organized under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq., had been named as defendant in eleven cases filed since 1990 in the Eastern District of New York, and in at least two cases in the Southern District of New York. In the six months since that decision was issued, the Fund has been named as defendant or third party defendant in five additional cases in this district. Lutheran Medical Center v. Nazi, 92 CV 6009 (Weinstein, J.); Capizzi v. Verdi, 93 CV 452 (Spatt, J.); De Angelis v. Verdi, 93 CV 453 (Spatt, J.); Rich v. Employees Health, 93 CV 584 (Spatt, J.); Ledwith Oil Co, Inc. v. National Org. of Indus. Trade Unions Fund, 93 CV 1694 (Nickerson, J.). See also Protocare of Metro. New York v. National Org. of Indus. Trade Unions Fund, 92 CV 5581 (Stanton, J.) (S.D.N.Y.).
This court held in its previous opinion that the Fund had arbitrarily and capriciously denied Ritzer's claim for medical benefits based on an "unannounced or inadequately publicized in terrorem rule" designed to discourage "selective participation." Ritzer v. National Org. of Indus. Trade Unions, 807 F. Supp. 257, 262 (E.D.N.Y. 1992). Under the rule the Fund may, in its apparently uncabined discretion, deny pending health benefit claims made by eligible plan participants if the Fund determines that the participant's employer has insured one or more ineligible employees or has neglected to insure every eligible employee.
The court suggested that such a rule, whether well publicized or not, did not appear to serve a rational purpose and, therefore, would be arbitrary and capricious regardless of its implementation. But "if such an unconstrained rule serves any rational purpose, and the court doubts that it does, it can only serve as an inducement to employers strictly to obey the Fund's eligibility rules. . . . To serve as an inducement, the Fund must clearly inform employers of the rule." Id. at 261-62 (emphasis added).
The court further observes that the Fund failed to satisfy statutory and regulatory requirements governing the disclosure of material information to ERISA plan participants. A central feature of ERISA is that plan participants must receive a summary plan description, written in a manner calculated to be understood by the average plan participant, that describes, among other things, circumstances which may result in the loss of benefits that, otherwise, a plan participant might reasonably expect to receive. 29 U.S.C. §§ 1022(a)(1), 1022(b); 29 C.F.R. § 2520.102-3(k)(1). The plan administrator must provide each participant with notice of all "material modifications" within 210 days after the close of the plan year in which the modification was adopted. 29 U.S.C. § 1022(a)(2); 29 C.F.R. § 2520.104b-3(a).
Thus, "to deny Ritzer's claim based on an unannounced or inadequately publicized in terrorem rule serves no rational purpose." 807 F. Supp. at 262. Moreover, the inadequately disclosed rule violates statutory and regulatory requirements that are designed to apprise ERISA plan participants of the risk that they may be required personally to pay the often substantial cost of medical treatment.
The Fund urges reconsideration on six grounds. Most of these can be disposed of without extended discussion.
The Fund contends, first, that the Fund explained the selective participation policy to Consolidated National Services (Consolidated), the employer's representative and agent in matters relating to the Fund, and that under the law of agency and the Labor-Management Relations Act of 1947, 29 U.S.C. §§ 141 et seq., knowledge of an employer's agent is imputed to the employer.
The Fund misconstrues the central holding of this court's opinion. The court held, in substance, that when an ERISA plan adopts a rule which gives its administrator extraordinary power retroactively to deny health benefit claims, and where the only rational purpose of that rule is to frighten participating employers into strict compliance with the rule, the Fund must clearly and plainly inform participating employers of that rule.
To inform only a central processing agent (such as Consolidated) of such a rule, and to fail to inform directly the employers that will bear the burden of non-compliance constitutes an arbitrary and capricious implementation of the rule. Thus, the Fund's showing that it explained the rule to Consolidated is not material as such action does not induce compliance by participating employers.
Moreover, this contention ignores ERISA's disclosure requirements. Congress has provided that the summary plan description, together with a summary description of material modifications, is to be the principal means by which plan participants are informed of existing and modified rules regarding, among other things, the denial of claims. The Fund may not circumvent this statutory requirement by providing that information solely to the employer's agent.
The Fund contends, second, that the employer is bound by the "selective participation" rule because the employer agreed to be bound by all rules without respect to ...