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BONA v. BARASCH

May 22, 2003

LISA BONA, ET AL., PLAINTIFFS, AGAINST GEORGE BARASCH, ET AL., DEFENDANTS.


The opinion of the court was delivered by: Michael Mukasey, Chief Judge, District.

OPINION AND ORDER

Plaintiffs in this case are George Miranda and participants in several employee benefit funds open to members of the Allied Trades Council, a union. Defendants are trustees of the funds, companies and persons who provide services to those funds, a related private foundation, and persons who control those entities. Plaintiffs claim, inter alia, that defendants have manipulated contracts between service providers and the employee benefit funds in order to enrich themselves, and have failed to manage the funds prudently.

Based on these allegations, plaintiffs have claimed breach of fiduciary duty and self-dealing under the Employee Retirement Income Act of 1974 ("ERISA"). In addition, Individual Plaintiffs*fn1 allege that certain defendants constitute a racketeering enterprise within the meaning of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and that their activities constitute a pattern of racketeering activity within the meaning of that statute. Finally, Individual Plaintiffs seek permission to file a claim pursuant to the Labor Management Reporting Disclosure Act (the "LMRDA") against certain defendants for breach of fiduciary duties to the union.

Defendants responded to these claims with a motion to dismiss the complaint on various grounds.*fn2 In a previous opinion, familiarity with which is assumed, I dismissed the RICO claims in their entirety for lack of standing. Further, I dismissed two named plaintiffs' ERISA claims and the ERISA claims against the trustees of the Union Mutual Medical Fund for lack of standing. The ERISA claims were also dismissed for lack of standing to the extent that plaintiffs seek monetary relief on their own behalf. Finally, I concluded that the ERISA claims are time-barred except insofar as they arise from the renewal of service contracts within six years of the complaint. At the same time, I granted plaintiffs' application for leave to file a claim under LMRDA § 501 and denied defendants' motion to strike plaintiffs' jury demand. See Bona v. Barasch, No. 01 Civ. 2289, 2003 WL 1395932 (S.D.N.Y. Mar. 20, 2003). After the motion to dismiss was decided, I permitted plaintiffs to amend their complaint to include ERISA claims against Financial Administrators, Inc. ("Financial") and Churchill Administrators, Inc. ("Churchill").*fn3 (See Order of Apr. 15, 2003)

Before the omnibus motion to dismiss was even fully submitted, plaintiffs filed this motion for partial summary judgment on the ERISA claims. They asked court to declare that the trustees of the Union Mutual Medical Fund, the Allied Welfare Fund, the Vacation Fund, and the Union Mutual Fund Pension Plan ("Benefit Fund Trustees") have breached their fiduciary obligations under ERISA; to enjoin enforcement of the service agreements in place between the Benefit Funds and Barasch-controlled entities including Churchill, Financial, and Barton, Babcock & Blair; to remove the trustees from any position of fiduciary responsibility for any ERISA funds; and to enjoin the Barasch Family*fn4 as well as the entities they control from serving as service providers to any ERISA plan. Plaintiffs request also that the court order an inquest into the damages assessable against the Benefit Fund Trustees and order prompt discovery on the issue of the ERISA fiduciary status of the other defendants.*fn5 In short, plaintiffs ask the court to decide, based solely on the agreements between the trustees and the service providers and without the benefit of further factual development, that defendants violated ERISA §§ 404(a) and 406(a).*fn6

Because the claims against the trustees of the Union Mutual Medical Fund have been dismissed, and plaintiffs have not stated an ERISA claim against Barton, Babcock & Blair, the motion for summary judgment will be construed to apply only to the trustees of the three remaining funds, the Barasch Family, Churchill, and Financial. Moreover, because plaintiffs Bona and Thomas have been dismissed from this action, the motion will be construed to be brought on behalf of the other individual plaintiffs and Miranda only. The substance of the motion remains unchanged. For the reasons set forth below, the motion is denied.

I.

Because plaintiffs move for partial summary judgment before the parties have conducted discovery, the factual record is sparse.*fn7 It is undisputed that administrative service agreements (collectively "the agreements") existed between the Vacation Fringe Benefit Fund ("Vacation Fund") and Churchill, the Allied Welfare Fund ("Welfare Fund") and Churchill, and the Union Mutual Fund Pension Plan and Financial.*fn8 The content of these agreements is also undisputed. To the extent that specific provisions of the agreements are relevant, they are described below.

Aside from the content of the agreements, little else has been established. Plaintiffs' Rule 56.1 Statement, which is supposed to be a "short and concise statement of the material facts as to which the moving party contends there is no genuine issue to be tried," S.D.N.Y. & E.D.N.Y. R. 56.1(a), merely restates the legal conclusions of Marc Gertner, a purported expert on ERISA. In his Declaration, Gertner opines that the agreements, on their face, violate ERISA because, inter alia, the agreements are unduly long in duration, and the agreements give excessive discretion to service providers. (See Gertner Decl.)

The Second Circuit, like other circuits, has held that expert testimony on the law is unnecessary and should be excluded. United States v. Duncan, 42 F.3d 97, 101 (2d Cir. 1994); Marx & Co., Inc. v. Diners' Club Inc., 550 F.2d 505, 509-10 (2d Cir. 1977). The Gertner Declaration is essentially a brief without citations. As Gertner himself admits, he has no special knowledge of the facts and circumstances surrounding the agreements; instead, he simply offers a legal opinion as to whether individual provisions in the agreements constitute per se violations of ERISA. (See Parker Aff. Ex. A, Gertner Dep. at 99-102, 117) Because it is not admissible evidence, Gertner's expert testimony, along with Frederic Singerman's expert testimony — which is essentially an opposition brief without citations — will not be considered as evidence.

II.

Once the dueling expert opinions are put aside, the issues presented are straightforward. Plaintiffs claim that they are entitled to summary judgment because certain provisions in the agreements constitute per se violations of ERISA. According to plaintiffs, the agreements are facially unlawful in two ways. First, plaintiffs claim that the duration of the agreements is too long and that the agreements do not contain an express provision allowing the trustees to terminate the agreements on short notice. Second, plaintiffs claim that the agreements delegate the trustees' non-delegable fiduciary responsibilities to Churchill and Financial.*fn9 Defendants retort that the relevant provisions are not per se violations of the statute, and that, in any event, plaintiffs are not entitled to the onerous relief they seek.

Partial summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Fed.R.Civ.P. 56(d) (allowing parties to move for an order specifying the facts that appear without controversy even when that order would not fully adjudicate the case). The movant for partial summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion" and identifying which materials "demonstrate the absence of genuine issues of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once this burden has been met, the burden shifts to the non-movant who "must set forth facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Although a plaintiff may move for summary judgment "at any time after the ...


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