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CARNER v. MGS - 576 5TH AVE. INC.

August 18, 1997

THOMAS CARNER, Plaintiff, against MGS - 576 5TH AVENUE INC, PARTENOPE WEST COAST INC., MGS 782 LEX INC., MGS OUTLET, INC., MGS MIDDLE NECK, INC., MARAOLO-SHORT HILLS, INC., MARAOLO-CHERRY CREEK, INC., MARAOLO-GRANT STREET, INC., and MARAOLO BEVERLY CENTER, INC., Defendants and Third-Party Plaintiffs, -against- EMPIRE BLUE CROSS BLUE SHIELD, Third-Party Defendant.


The opinion of the court was delivered by: MOTLEY

Plaintiff Thomas Carner commenced this action on December 2, 1993, alleging violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), 29 U.S.C. §§ 1161 et seq., arising out of his termination from employment by the defendants. Specifically, plaintiff alleges that defendants (1) failed to notify him of his COBRA right to continued health insurance coverage under defendants' Plan at his own expense; (2) failed to provide him in a timely manner with a copy of the Plan after his request; (3) failed to notify him of his COBRA right to convert his group health coverage to an individual policy; and (4) breached their fiduciary duties under ERISA. The case was originally before Judge Cote but was transferred to the undersigned in September, 1996. Plaintiff incurred substantial medical expenses as a result of several hospitalizations and claims that all of the defendants should be responsible for the payment of these bills due to their failure to give him the required statutory notices.

 All of the defendants, with the exception of MGS 782 Lex, Inc., ("MGS Lex"), moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure on the ground that they were not plaintiff's employer within the meaning of ERISA. Judge Cote granted the motion to dismiss as to MGS 576 Fifth Avenue Inc., finding that plaintiff had failed to establish its legal existence, and denied the motion as to all the other defendants on the condition that if defendants could prove that the stores ceased to exist prior to plaintiff's termination, complaints against these defendants would also be dismissed.

 Defendants assert that notice was properly given to plaintiff when he was advised orally of his continuation rights during the meeting at which plaintiff was fired. Defendants further allege that Empire Blue Cross/Blue Shield ("Blue Cross") was advised that plaintiff had left the group and that it was Blue Cross' obligation, as the Plan administrator, to provide notice to the plaintiff. Blue Cross asserts that defendants, as plaintiff's employer, were the Plan administrator and, therefore, were obligated to give the required statutory notice. Blue Cross further argues that even if it is deemed the Plan administrator with the responsibility to give notice, it was not properly or timely notified by defendants that plaintiff had left the Plan.

 A bench trial was held before the court on January 15 and 16, 1997. Based on the stipulations of facts between the parties, the trial testimony and exhibits, the court makes the following Findings of Facts and Conclusions of Law in favor of plaintiff.

 FINDINGS OF FACTS

 I. THE PARTIES

 1. Plaintiff Thomas Carner currently resides in Albuquerque, New Mexico. He was an employee of some of the defendants from 1978 to 1984 and from 1986 to 1992. (Trial Transcript at 31-33, 54) ("Tr. at ...").

 2. Defendant MGS Lex is a New York Corporation with its offices at 576 Fifth Avenue, New York, NY ("Fifth Avenue office"). It does business in this district selling imported shoes and other apparel at various locations in New York City. (Tr. at 26). In 1991-1992, MGS Lex had approximately 20 or more full time employees. (Tr. at 26). 100% of MGS Lex stock is owned by Harnafin S.A., a foreign corporation. (Tr. at 26).

 3. Defendant MGS 551 Madison Avenue, Inc., ("MGS 551") is a New York Corporation and is a leasehold company with no assets or employees. (Tr. at 125). MGS 551 is wholly owned by MGS Lex. (Tr. at 26).

 4. Defendant Partenope West Coast, Inc., ("Partenope") is a California corporation that sells shoes in California and of its 10,000 shares, 9,000 are owned by GAP SPA, a foreign corporation, and 1,000 are owned by Massimo Ruggiero, ("Ruggiero"), an officer of the defendants. (Tr. at 26).

 5. Defendant Maraolo Cherry Creek, Inc., ("Cherry Creek"), is a Colorado corporation that sells shoes in Colorado and of its 100 shares, 90 are owned by GAP SPA and 10 are owned by Ruggiero. (Tr. at 27).

 6. Defendant Maraolo Beverly Center, Inc., ("Beverly Center"), is a California corporation that sells shoes in California and of its 100 shares, 90 are owned by GAP SPA and 10 are owned by Ruggiero. (Tr. at 27).

 7. Defendant Maraolo Factory Outlet, Inc., ("Factory Outlet"), is a Florida corporation that sells shoes in Florida and of its 100 shares, 90 are owned by GAP SPA and 10 are owned by Ruggiero. (Tr. at 27-28).

 8. Defendant Maraolo Short Hills, Inc., ("Short Hills"), is a New Jersey corporation that sells shoes in New Jersey and of its 100 shares, 80 are owned by GAP SPA and 20 are owned by MGS Lex. (Tr. at 28).

 9. MGS Middle Neck, ("Middle Neck"), is a New York corporation that sells shoes in New York and of its 100 shares, 80 are owned by GAP SPA and 20 are owned by MGS Lex. (Tr. at 28).

 10. Defendant Maraolo Grant Street, ("Grant Street"), is a Pennsylvania corporation that sells shoes in Pennsylvania and of its 100 shares, 80 are owned by GAP SPA and 20 are owned by MGS Lex. (Tr. at 29).

 11. Defendants Partenope, Cherry Creek, Beverly Center, Factory Outlet, Short Hills, Middle Neck, and Grant Street maintained their books and records at the Fifth Avenue office and filed their federal corporate tax returns using the Fifth Avenue office address. (Tr. at 26, 27, 28).

 12. Alex Aingorn ("Aingorn") is the president and Ruggiero is the vice-president of the following companies; MGS Lex, Short Hills, MGS 551, and Middle Neck. (Tr. at 29).

 13. Ruggiero is the president and Aingorn is the vice-president of the following companies; Partenope, Cherry Creek, Grant Street, Beverly Center, and Factory Outlet. (Tr. at 29).

 14. The following corporations are no longer in existence: Middle Neck merged into MGS Lex at the end of fiscal year March 31, 1993; and Cherry Creek and Grant Street closed during tax year ending March 31, 1992. (Tr. at 28, 124-125).

 15. Third Party Defendant Blue Cross is a not-for-profit health services corporation organized and existing under Article 43 of the New York State Insurance Law with its principal place of business at 622 Third Avenue, New York, New York. (Tr. at 29).

 II. THE DISPUTE

 16. Carner was an employee of some of the defendant shoe stores in various states from 1978 through 1984 and from 1986 through 1992. (Tr. at 31-33, 54). From 1984 to 1986, plaintiff did not work for any company which sold shoes under the Maraolo name. (Tr. at 52). Carner never managed nor worked for the Middle Neck, Grant Street or MGS 551 companies. (Tr. at 126).

 17. In 1986, plaintiff was re-employed by Partenope and was sent to San Francisco, California to supervise construction, develop the market on the west coast, and manage the new San Francisco, Maraolo store. (Tr. at 31-32).

 18. Four years later, in 1990, Carner was transferred to Denver, Colorado to work as manager for the new store Maraolo of Cherry Creek. (Tr. at 32-33, 34). In April or May, 1991, Carner was transferred to New Jersey to temporarily manage the Maraolo Short Hills store. (Tr. at 33).

 19. Personnel policies were set by Ruggiero, the officer responsible for the day to day operation of the stores (Tr. at 34) and Aingorn, chief financial officer of the stores. (Tr. at 36). Managers were responsible for implementing policies, i.e. informing employees of company policy, procedures and benefits, severance pay and/or vacation pay. (Tr. at 63, 128-129).

 20. As manager of various stores, plaintiff would discuss with Ruggiero, the hiring or firing of an employee, hours of employment, wages, and insurance benefits. (Tr. at 35-36). Plaintiff would discuss these matters with newly hired employees and would advise terminated employees as to whether they would receive vacation pay, severance pay or benefits. (Tr. at 63-64). Additionally, as manager, plaintiff would submit daily ledger reports, listings ...


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