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DIETZ v. CAHILL

August 7, 1996

CHARLES DIETZ, THOMAS ROTH, and PAUL ALFORD, as Employer Trustees for the Roofers Local Union No. 22 Pension Fund, on behalf of the Pension Fund, Plaintiffs,
v.
PATRICK CAHILL, ROBERT EADE, and EDWARD VAN PUTTE, individually and as Union Trustees of Roofers Local Union No. 22 Pension Fund, THOMAS O'CONNELL, individually and in his fiduciary capacity as counsel to the Roofers Local Union No. 22 Pension Fund, JOSEPH BIANCHI, individually and in his fiduciary capacity as former manager of the Roofers Local Union No. 22 Pension Fund, Defendants.



The opinion of the court was delivered by: LARIMER

 Plaintiffs, three members of a six-person Board of Trustees ("the Board") of the Roofers Local Union No. 22 Pension Fund ("the Fund"), commenced this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. ยง 1001 et seq. Plaintiffs seek injunctive relief to halt the payment of pension benefits to defendant Thomas O'Connell, and to recoup on behalf of the Fund the amount of benefits that have been paid to O'Connell to date.

 The claims against all the defendants have been dismissed pursuant to a stipulation of settlement, with the exception of the claims against O'Connell, the sole remaining defendant. Both plaintiffs and O'Connell have moved for summary judgment.

 FACTUAL BACKGROUND

 The Fund is a multi-employer pension plan that provides pension benefits to employees who are represented by the Local Union No. 22 of United Slate, Tile and Composition Roofers, Damp and Waterproof Workers' Association ("the Union"). The Fund is administered by a Board of Trustees composed of six trustees, three of whom are nominated by the employers whose employees are beneficiaries of the Fund ("the Employer Trustees"), and three of whom are nominated by the Union ("the Union Trustees").

 The complaint alleges that in early 1994, the Employer Trustees discovered that O'Connell, who had been the Fund's attorney for a number of years, had been receiving pension benefits from the Fund since 1989. The Employer Trustees objected to O'Connell receiving a pension, on the ground that he was not qualified to receive a pension under the terms of the trust agreement ("the Agreement") which created the Fund.

 In response to the Employer Trustees' complaints, the Union Trustees claimed that O'Connell was eligible to receive a pension and that his pension had been properly approved at a January 5, 1989 Board meeting at which the three Union Trustees voted in favor of awarding the pension and one Employer Trustee voted against it. The Union Trustees refused to agree to cease O'Connell's benefits.

 On December 30, 1994, the Employer Trustees filed the complaint in this action. The original defendants were the three Union Trustees, O'Connell, and Joseph Bianchi, who was the Fund manager in 1989. The complaint alleges that defendants have violated their fiduciary duties under ERISA.

 DISCUSSION

 I. O'Connell's Eligibility for Benefits

 Under the terms of the Agreement, pension benefits may be paid only to "employees," who are defined as "all of the employees of an employer," i.e., employees of construction contractors who participate in the Fund, as well as "all salaried employees" of the Union for whom the Union makes contributions to the fund.

 Plaintiffs allege that O'Connell is ineligible to receive pension benefits because he was not an employee of a contractor or a salaried employee of the Union. Although plaintiffs do not concede at this point that the Union made contributions to the Fund on O'Connell's behalf, they contend that even if the Union had done so, that alone would not qualify him to receive benefits; non-employees cannot receive benefits, regardless of whether contributions have been made on their behalf.

 O'Connell does not dispute that the Agreement limits eligibility for benefits to employees, as that term is defined in the Agreement. He contends, however, that he falls within the second category of "employees," i.e., salaried employees of the Union. He claims that he became a salaried employee of the Union in 1959, when he was made the Union's Assistant Business Agent. James Cahill, *fn1" one of the Union Trustees, makes the same assertion in an affidavit.

 As stated, however, the Agreement refers not simply to "employees" of the Union, but to "salaried employees." O'Connell, though, has presented no evidence that he was ever a salaried Union employee. In fact, all the evidence in the record tends to show that he was not.

 O'Connell states that he was compensated for his services to the Union in two ways: first, through contributions made by the Union to the Fund on his behalf; and second, through fees paid to him by the Union for legal services, which O'Connell billed at a reduced rate in consideration of those contributions.

 Neither of these types of compensation, however, rendered O'Connell a salaried employee of the Union. First, it is self-evident that the Fund contributions could not constitute a "salary" so as to make O'Connell eligible to receive benefits. If contributions were all that were required, there would be no need for the Agreement to refer to "salaried employees" in the first place; the Agreement would simply have said that anyone on whose behalf the Union made contributions would be eligible to receive benefits.

 Since the Agreement requires both that the person be a salaried Union employee and that contributions be made on his behalf, then, to contend that contributions themselves constitute a salary is to engage in purely circular reasoning. Contributions are to be made for salaried employees; if a person is not salaried, no amount of contributions can supply that deficiency. To say that the contributions render a person salaried, then, would effectively read the term "salaried" completely out of the Agreement.

 The Union's payment of reduced legal fees to O'Connell also does not constitute a salary. There is no evidence that O'Connell was paid a fixed amount at regular intervals. On the contrary, his fees, like any ordinary legal fees, were based on the particular work that he performed for the Union. Absent some clear evidence that such an arrangement was intended to be included within the Agreement's definition of "salaried" employment, I find as a matter of law that O'Connell was not a salaried employee for purposes of the Agreement. "The term 'salaried employee,' ... means an employee who is paid a fixed amount of money on a periodic basis (the period being longer than an hour)." White v. E & F Distrib. Co. Employee's Pension Plan, Springfield Marine Bank, 922 F. Supp. 132, 138 (C.D.Ill. 1996) ("the common understanding [is] that pay comes in three forms, hourly, ...


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