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April 10, 2001


The opinion of the court was delivered by: Raggi, District Judge.


Plaintiff Charles Flynn sues his former employer, Local 30 of the International Union of Operating Engineers, AFL-CIO ("Local 30" or "the Local"); Michael Hach, the former head of Local 30; Frank Hanley, the head of Local 30's parent union, the International Union of Operating Engineers ("the International"); and the Boards of Trustees of Local 30's pension and annuity funds ("the Trustees") for denying him benefits to which he claims he is entitled under the Employee Retirement and Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. (1994). Flynn also asserts supplementary state law claims against Local 30.

All defendants move for summary judgment. Plaintiff opposes the motion and cross moves for summary judgment against the Trustees on a cause of action not pleaded explicitly in his complaint: equitable restitution of contributions made by Local 30 on his behalf to its pension and annuity funds. The Trustees' opposition to the cross-motion is fairly interpreted as a request for summary judgment in their favor on any restitution claim. Having carefully reviewed the submissions of the parties and heard oral argument, the court hereby denies plaintiffs motion for partial summary judgment, grants summary judgment in favor of defendants on all federal claims, and dismisses the state law claims as preempted by federal law.

Factual Background

The following facts are either undisputed or viewed in the light most favorable to plaintiff. See Nadel v. Play-By-Play Toys & Novelties, 208 F.3d 368, 380 (2d Cir. 2000).

1. Flynn's Employment at Local 30 from 1971 to 1977 and His Participation in the Local's Pension Plans

From 1971 until 1977, plaintiff Charles P. Flynn worked full-time as a salaried business agent for Local 30 reporting to business manager William Treacy. As a business agent, Flynn was eligible to participate in Local 30's pension and annuity plans, both of which are governed by ERISA. See 29 U.S.C. § 1002(2)(A) (defining "pension plan" to include funds that provide deferred income or retirement income to employees); see also Annuity Trust Fund Agreement § 4.02(a) (requiring Annuity Fund to be operated in compliance with ERISA); Pension Fund Trust Agreement § 4.02(a) (same).

While employed as a business agent for Local 30, Flynn also edited the Local's newspaper, The Recorder, a sporadic publication consisting mainly of signed articles by union officials. For this work, plaintiff was paid a stipend of $400 per issue in addition to his regular salary.

2. Flynn's 1977 Employment by the International

Sometime in late 1976 or early 1977, the International offered Flynn a full-time position as a representative. In this capacity, plaintiff would provide service and assistance to various local unions, among them Local 30. As an International representative, Flynn would be supervised by a regional director who would, in turn, report to the general president of the International.

Flynn asserts that he was initially reluctant to accept the International position because (1) the salary was less than what he was earning as a business agent, and (2) the International benefit plan was not as favorable as those maintained by Local 30. He discussed the matter with William Treacy, who was Flynn's close friend as well as his supervisor at Local 30 and Chairman of the defendant Boards of Trustees. Treacy proposed to Flynn that the Local "keep him on the payroll" even after he went to the International. Treacy Dep. at 58. Flynn rejected the offer suggesting instead that the Local continue making contributions on his behalf to its benefit funds. Treacy agreed and submits that he discussed the arrangement with Local 30's then-counsel, Bob Brady, and International regional director Howard Dalton, both of whom consented to the proposal. Flynn insists that he would not have accepted a job at the International without the assurance of continued contributions to the Local 30 pension plans.

From 1977 to July 1992, Flynn worked as an International representative. For the first five of those years, he continued to edit The Recorder for Local 30, receiving the usual $400 stipend per issue. Local 30's tax records reveal that Flynn was paid a total of $800 in 1978 for this work, $1200 in 1979, $1600 in 1980, $1200 in 1981, and $800 in 1982. Thereafter, Flynn had little involvement with The Recorder, except to write occasional signed articles as an International representative.

In 1985, when William Treacy retired as Local 30's business manager, he discussed Flynn's benefit arrangement with his successor, defendant Michael Hach. Hach agreed that Local 30 would continue making contributions to the pension funds on Flynn's behalf.

3. Local 30 Ceases Making Benefit Contributions for Flynn

In the late summer of 1991, auditors reviewing Local 30's books and records questioned the propriety of the benefit contributions being made on behalf of Flynn and two other former Local employees. Mark Soroka, counsel to both the Local and its pension plans, reviewed the trust agreements as well as the applicable law and advised Michael Hach that Local 30 should cease further contributions on behalf of the three former employees. Hach received the same advice from Peter Bernstein, the Local's actuary. In September 1991, Hach notified Flynn that he was stopping future Local benefit contributions for him. Hach assured Flynn that the action was prospective and that he would be entitled to benefits based on all contributions to date.

4. The International Directs Local Unions to Make No Further Contributions on Behalf of Non-Employees

Sometime after his discussions with the auditors, Hach informed International president Frank Hanley of the history of Local 30 benefit payments for Flynn and the two other employees. Hanley opposed the payments, voicing concern that they (1) created the erroneous impression that the Local retained some influence over these International employees, (2) gave rise to a possible conflict of interest for the International employees on whose behalf local benefit contributions were being made, and (3) adversely affected the morale of those International employees who were not receiving benefit contributions from any local union.

On April 8, 1992, Hanley asked all International employees to advise him if local unions were making contributions on their behalf to local pension plans. Of sixty persons queried, five, including Flynn, replied affirmatively. On April 29, 1992, Hanley directed all local unions to cease making further payments to local benefit plans for International employees.

5. Flynn is Terminated

In 1991, Flynn had begun working with fellow International representative James Thomas to organize a staff union at the International. Like Flynn, Thomas had been the beneficiary of pension plan contributions by a former local union employer, in his case, Local 542. In late 1991, the new staff union forced a reluctant Hanley to negotiate an employment contract for its members. Thereafter, in April 1992, at about the same time that Hanley took his stand against local union benefit contributions for International employees, Flynn recalls being instructed to stop his unionizing activities. Two months later, on July 17, 1992, the International fired Flynn.

Flynn filed a complaint with the National Labor Relations Board, asserting that his union activities were the cause of his termination. Plaintiff's counsel advises that the matter was settled in February, 1999.

6. Government Investigations into Local 30 and Its Benefit Plans

In 1992, the United States Department of Labor's Office of Labor-Management Standards commenced a criminal investigation into various practices at Local 30. Although no formal charges were ever filed, the following year the Department's Pension and Welfare Benefits Administration decided, to audit the Local's benefit plans. At the same time, the Internal Revenue Service audited the pension fund of Local 542.*fn1

7. Local 30's Internal Investigation

In May 1994, attorney Mark Soroka reported to the defendant Trustees on the results of his year-long internal investigation into the propriety of the benefit contributions made by Local 30 on behalf of Flynn and other International employees. Soroka concluded that the payments were not authorized by either the Local's bylaws or the International's constitution since the International employees were no longer responsible to the Local's business manager. He recommended that the Local seek to recoup from the benefit funds the contributions erroneously made for these employees.

In June 1994, Hanley echoed these sentiments in a letter to the Labor Department in which he stated that all questioned contributions should be refunded to the local unions and any benefit credits accruing from these improper payments should be rescinded.*fn2 Hanley has acknowledged that he encouraged the Labor Department to declare the contributions illegal because Flynn and Thomas were asserting rights to the benefit contributions.

8. Labor Department Orders the Trustees to Recalculate Flynn's Benefits

In January 1995, the Labor Department notified defendant Trustees in writing that they "may have violated several provisions of ERISA." See Plaintiffs Exh. 23. Specifically, the letter cited violations (1) in the allocation of shared administrative expenses among the Local's benefit funds; (2) in an annual trustees' trip to a resort location; and (3) in the "acceptance of [Local 30's] contributions and credit of accrued benefits on behalf of ineligible participants," including plaintiff Flynn. Id. In subsequent correspondence, the Labor Department explained that the contributions at issue violated section 302 of the Labor-Management Relations Act, 29 U.S.C. § 186 (1994), since they were made on behalf of persons who were not common law employees of the Local. See Defendants' Exh. F. The Trustees were ordered to "recalculate the pension and annuity credits for the three individuals on whose behalf pension and annuity contributions were improperly made" or face an enforcement action. Id. After affording the Trustees some time to comment on these findings, the Labor Department reiterated the corrective measures it expected the Trustees to take:

Your letter [of March 1995] indicates that pension and annuity credits will be recalculated for the three individuals on whose behalf pension and annuity contributions were improperly made. Recalculations are to cover the entire time period that such individuals were ineligible to accrue benefits. Please advise the Department when these actions have been completed.

Plaintiffs Exh. 67.

About this same time, the Internal Revenue Service advised the trustees of Local 542's pension plan that that local's practice of making contributions on behalf of its former employees now on the International payroll was a ground for revoking the plan's tax exempt status. It proposed settlement discussions to explore corrective actions, emphasizing that "[n]one of the ...

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