The opinion of the court was delivered by: VICTOR MARRERO, District Judge
Plaintiffs Nicola and his brother Pietro Campanella (the "Campanellas")
are retired participants in the Mason Tenders' District Council Pension
Plan (the "Plan"). The Campanellas bring this action on their own
behalf, and on behalf of all other Plan participants, against the Plan
and the Board of Trustees of the Plan (the "Trustees" and collectively
with the Plan, the "Defendants") pursuant to the Employee Retirement
Income Security Act of 1974, 29 U.S.C. § 1001 et seq, ("ERISA"). They
allege numerous violations of ERISA by the Plan and the Trustees. The
parties have filed cross-motions for summary judgment. For the reasons
discussed below, the Defendants' motion is granted in its entirety and
Campanellas' motion is denied.
Pietro Campanella worked in covered employment under the Plan in 1982
and 1983 and again from 1986 until 1992, when he became unable to work
after being injured in a job-related accident. Following his injury,
Pietro Campanella applied for and received workers' compensation benefits
under the Plan and a Social Security Disability Award. He then applied
for a disability pension from the Plan.
The Director of the Mason Tenders' District Council Pension Fund (the
"Pension Fund"), Paul Ragone ("Ragone"), denied Pietro Campanella's claim
for a disability pension because he determined that Campanella had failed
to satisfy the Plan's eight-year vesting requirement. Under the Plan as
then in effect, a participant who does not have a vested benefit ceases
to be a participant upon a break in service, and forfeits any credit
earned for service worked before that break if "the number of consecutive
1-year Breaks in Service equals or exceeds . . . [the] years of credit
for service earned by the Participant prior to the Break in Service."
(Mason Tenders' District Council Pension Fund (the "1989 Plan") §
II(1)(A), dated Jan. 1, 1989, attached as Exh. D to Affidavit of John J.
Virga dated May 13, 2003 ("Virga Aff.").)
Ragone determined that Pietro Campanella had only seven years of
credited service because he had worked in covered service from 1986
through 1992 and his two consecutive one-year breaks in service in 1984
and 1985 were longer than the one and one-quarter years of service he
worked in 1982 and 1983.
Pietro Campanella appealed this ruling to the Trustees, who denied the
appeal in 1994. Pietro Campanella then hired his present counsel, Edgar
Pauk ("Pauk"), to represent him in this dispute. Pauk argued to John
Virga ("Virga"), who replaced Ragone as Director of the Pension Fund,
that under the terms of the Plan, Campanella should receive credit for
service based on his receipt of workers' compensation benefits. The
Trustees ultimately agreed in 1997 to grant Pietro Campanella service
credit for the year 1993 based on his receipt of workers' compensation,
and consequently Pietro Campanella qualified for a disability pension
based on eight years of service.
Nicola Campanella worked in covered employment under the Plan from 1986
through 1992, when he became unable to work after suffering an injury in
a job-related accident. Like his brother, Nicola Campanella applied for
and received workers' compensation benefits and a Social Security
Disability Award. Nicola Campanella then applied for a disability pension
from the Plan. Ragone denied the pension request because Nicola
Campanella had only accrued seven years of credited service under
the plan between 1986 and 1992. In 1994, the Trustees upheld the denial
of Nicola Campanella's claim for a pension.
Nicola Campanella then retained Pauk, who had successfully obtained a
disability pension from the fund under virtually identical circumstances
for Pietro Campanella. In 1998, the Plan granted Nicola Campanella a
disability pension based on eight years of credited service, including
one year of workmens' compensation.
Later in 1998, Pauk wrote separate letters to Virga on behalf of Pietro
Campanella and Nicola Campanella challenging several aspects of the Plan
as being in violation of ERISA, and seeking greater pensions for the
Campanellas. Virga failed to respond to the Campanellas' claims. The
Campanellas filed an appeal to the Trustees, who denied their claims.
Correspondence between Pauk and Virga continued for several years.
In 2002, the Campanellas filed this action on their own behalf and on
behalf of all other Plan participants. The Campanellas assert eight
claims for relief against the Plan and the Trustees. The first four
claims allege statutory violations of ERISA. The Campanellas claim that:
the Plan's ranges of accrual of service credit violate ERISA §
204(b)(4)(B), 29 U.S.C. § 1054(b)(4)(B); the Plan's freeze of
accrual rates for breaks in service violates ERISA § 204(b)(1)(B),
29 U.S.C. § 1054(b)(1)(B); the accrual rate freeze violates ERISA's
minimum vesting standards under ERISA §§ 203(a) and 3(19),
29 U.S.C. § 1053(a) and 1002(19); and the Plan's policy of not:
allowing service credit for workers' compensation benefits violates ERISA
§ 204(b)(4)(A), 29 U.S.C. § 1054(b)(4)(A). In their remaining
claims, the Campanellas allege violations of the Plan's terms, seek
interest on the delayed payment of benefits, and request penalties
against the Trustees.
The Campanellas move for summary judgment on liability, and Defendants
cross-move for summary judgment.
A court may enter summary judgment in favor of a party when "there is
no genuine issue as to any material fact" and "the moving party is
entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). See
also, Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Sabatino v. Flik
Int'l Corp., 286 F. Supp.2d 327 (2003).
B. STATUTE OF LIMITATIONS
Defendants argue that the Campanellas' first four claims are barred
under ERISA's statute of limitations for breach of
fiduciary duty claims set forth in ERISA § 413,
29 U.S.C. § 1113.*fn1 Defendants characterize the Campanellas' first
four claims as claims for breach of fiduciary duty because, Defendants
argue, the claims "challenge the Trustees' actions implementing such
provisions." (Memorandum of Law in Support of Defendants' Motion for
Summary Judgment, dated May 14, 2003 (Def. MSJ), at 4.) Defendants assert
that because the provisions of the Plan that the Campanellas challenge in
their first four claims had been in effect for more than six years when
the Campanellas brought this action, those claims are time-barred under
ERISA § 413.*fn2
Defendants mischaracterize the Campanella's claims. Claims for breach
of fiduciary duty to which the statute of limitations in ERISA 5 413
apply typically involve claims for violations of the fiduciary duties
enunciated in ERISA § 404, 29 U.S.C. § 1104. Section 404 sets
forth a prudent person standard of care to which fiduciaries must adhere
in their management of employee benefit plans.*fn3 The Campanellas'
claims here are not brought under ERISA § 404 or any other section in
Part Four of Subchapter One of ERISA, which governs fiduciary
The Part under which the claims are brought is significant because the
ERISA statute of limitations in § 413
applies only to claims "with respect to a fiduciary's breach of any
responsibility, duty or obligation under this part, or with respect to a
violation of this part," 29 U.S.C. § 1113 (emphasis added). In Wright
v. Southwestern Bell Telephone Co., 925 F.2d 1288, 1290 (10th Cir.
1991), the Tenth Circuit held that 29 U.S.C. § 1113 was "only
applicable to actions arising out of violations of the portion of [ERISA]
addressing fiduciary responsibilities, 29 U.S.C. § 1101-12." The
Circuit Court noted that the plaintiff's claims did "not involve
fiduciary responsibilities regarding financial solvency or accountability
as contemplated by [29 U.S.C.] section 1113." Id.; see also, Carollo v.
Cement and Concrete Workers District Council Pension Plan, 964 F. Supp. 677,
688 (E.D.N.Y. 1997)(holding that statute of limitations in ERISA § 413
applies only to claims for breach of fiduciary duty and distinguishing
claims brought pursuant to 29 U.S.C. § 1132 (a)(3)).
The "part" referred to in ERISA § 413, 29 U.S.C. § 1113, is
Part Four of Subchapter I of ERISA, titled "Fiduciary Responsibility."
The Campanellas' first four claims are brought under 29 U.S.C. § 1132
for alleged violations of 29 U.S.C. § 1054 (b)(4)(B), 1054(b)(1)(B),
1053(a), and 1054(b)(4)(A), which are all located within Part Two of
Subchapter I, Participation and Vesting. Section 1132(a)(3)
allows any plan participant or beneficiary to bring a civil action "(A)
to enjoin any act or practice which violates any provision of this
sub-chapter . . . or (B) to obtain other appropriate equitable relief (i)
to redress such violations or (ii) to enforce any provisions of this
subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3)
(emphasis added). The Campanellas do not allege that the Trustees
mismanaged the Plan's assets or failed to follow the terms of the Plan.
Instead, they allege that the Plan itself violates ERISA. The statute of
limitations in ERISA § 413, 29 U.S.C. § 1113, does not apply to
these claims. See Laurenzano v. Blue Cross and Blue Shield of
Massachusetts. Inc. Retirement Home Trust, 134 F. Supp.2d 189, 205 (D.
Mass. 2001)(declining to apply 29 U.S.C. § 1113 statute of
limitations to ERISA claims brought under 29 U.S.C. § 1132 (a)(3)
that are not for breach of fiduciary duty).
Because ERISA does not provide a statute of limitations for the type of
claims that the Campanellas bring in their first four causes of action,
this Court must adopt the most closely analogous New York State statute
of limitations. See Miles v. New York State Teamsters Conference
Pension and Ret. Fund Employee Pension Benefit Plan, 698 F.2d 593,
598 (2d Cir. 1983). The Second Circuit has held that the six-year
statute of limitations period under New York Civil Practice Law and
Rules ("C.P.L.R.") § 213 applies to claims brought under
29 U.S.C. § 1132. Id.; see also Carollo, 964 F. Supp. at 688-89
(applying statute of limitations in C.P.L.R. § 213 to an action
seeking reformation of a benefits plan). Under this rule, "[a]
plaintiff's ERISA cause of action accrues, and the six-year limitations
period begins to run, `when there has been a repudiation by the fiduciary
which is clear and made known to the beneficiaries.'" Id. (emphasis in
original)(quoting Valle v. Joint Plumbing Indus. Bd., 623 F.2d 196, 202
n.10 (2d Cir. 1980)). The Court does not need to determine exactly when
the statute of limitations began to run for the Campanellas, because
statute of limitations is an affirmative defense and therefore the
defendant must put forth a prima facie case that it has expired. See
Overall v. Estate of Klotz, 52 F.3d 398, 403 (2d Cir. 1995); Katt v. City
of New York, 151 F. Supp.2d 313, 348 (S.D.N.Y. 2001); Lewis v.
Rosenfeld, 138 F. Supp.2d 466, 473 (S.D.N.Y. 2001). Here, Defendants have
made no effort to establish that the six-year statute of limitations in
C.P.L.R. § 213 has expired.
Defendants argue that the Campanellas' first cause of action
that the Plan's accrual ranges violate ERISA §§ 204(b)(4)(B) and (C),
29 U.S.C. § 1054 (b)(4)(B) and (C) should be dismissed
because the Campanellas failed to exhaust
their administrative remedies. The Second Circuit requires that a
plaintiff bringing an ERISA claim for denial of specific benefits under an
employee benefits plan exhaust his or her administrative remedies before
pursuing the claim in court. Kennedy v. Empire Blue Cross and Blue,
989 F.2d 588, 594 (2d Cir. 1993). But the Second Circuit has not yet
addressed whether it requires exhaustion of claims generally alleging
statutory ERISA violations. Defendants note that the Seventh and Eleventh
Circuits require exhaustion of remedies as regards statutory claims, and
urge this Court to follow those decisions. See Robyns v. Reliance
Standard Life Ins. Co., 130 F.3d 1231, 1235 (7th Cir. 1997); Counts v.
American Gen. Life and Accident Ins. Co., 111 F.3d 105, 109 (11th Cir.
But Defendants neglect to indicate that the Third, Fourth, Fifth,
Sixth, Ninth and Tenth Circuits have expressly stated that exhaustion is
not a prerequisite to actions asserting statute-based ERISA claims. See,
e.g., Smith v. Snydor, 184 F.3d 356, 363-65 (4th Cir. 1999); De Pace v.
Matsushita Elec. Corp., 257 F. Supp.2d 543, 557 (E.D.N.Y.
2003)(collecting cases). Furthermore, several district courts in the
Second Circuit have declined to require exhaustion of statute-based ERISA
claims. See De Pace, 257 F. Supp.2d at 557; Gray v. Biggs, 1998 WL 386177
at *7 (S.D.N.Y.
July 7, 1998). The Court is persuaded by the reasoning of many of these
courts, the premise of which is that although plan fiduciaries may have
expertise in interpreting the terms of a particular plan, it is primarily
the role of the judiciary to engage in statutory interpretation. See De
Pace, 257 F. Supp.2d at 557.
Because the Campanellas' claims are not barred by any statute of
limitations or exhaustion requirement, the Court now turns to the merits
of their claims.*fn4
ERISA § 204(b)(4)(B), 29 U.S.C. § 1054 (b)(4)(B), and
29 C.F.R. § 2530.204-2 (c) govern the accrual of pension credit for
employees who work in covered service on something less than a full-time
basis. To comply with ERISA, a plan must provide to an employee who works
at least 1000 hours of covered service in a year with at least "a ratable
portion of the accrued benefit to which he would be entitled under the
plan if his customary employment were full time." 29 U.S.C. § 1054
(b)(4)(B); 29 C.F.R. § 2530.204-2(c)(1).
A plan may provide an employee with credit for the exact percentage of
a full year based on the hours the employee worked during the year. This
method requires an employer to calculate the exact number of hours of
credited service that the employee worked during the year and then
determine the exact ratable portion of a full year of credited service.
Alternatively, a plan may create ranges of service. See
29 C.F.R. § 2530.204-2(c)(4)(ii). Under this system, all employees
who work more than 1000 hours in a year but less than a full year fall
within one of several bands of hours. Although the employees within the
same band may have worked slightly different amounts during the year, all
employees within the same band receive the same percentage credit of a
full year of service. As long as each band credits employees within that
band with at least a ratable portion of the credit that they actually
earned during the year, the plan complies with ERISA. For example, if a
plan requires 2000 hours for a full year of credit, the plan may give
credit for 60 percent of a year to all employees who work between 1001
and 1200 hours in one year. See 29 C.F.R. § 2530.204-2(c)(4)(ii).
Because 1200 is 60 percent of 2000, all employees in this band would
receive no less than a ratable portion of credit for the
hours they had worked during the year.*fn5
The Plan at issue uses the range method for calculating credit for
partial years of service. Under the Plan, "one unit shall be credited for
each 150 hours [of credited service] during any Plan Year. Credit will
not be alowed for fractions of a unit nor will an Employee be allowed
more than ten units in any Plan Year." (Mason Tenders' District Council
Pension Fund, as restated effective January 1, 1989, at 7, attached as
Exhibits to the Affidavits of Pietro and Nicola Campanella and the
Affirmation of Edgar Pauk in Support of Plaintiffs' Motion for Summary
Judgment, dated May 14, 2003, at 189.) Consequently, an employee who
works 1500 hours receives credit for a full year of service under the
The Campanellas argue that the Plan violates ERISA because the Plan's
ranges do not provide at least a ratable portion of a full year of credit
for partial years of service. They argue that the Plan requires 1500
hours of service for a full year of participation, and therefore it must
not require an employee to work more than 1351 hours to receive credit
a full year of service. An employee who works 1350 hours in a year
has worked 90 percent of 1500 hours. Thus, the Campanellas assert, any
employee who works more than 1350 hours but less than 1500 hours must
receive something more than 90 percent credit and must receive no less
than a ratable percentage of the hours they have actually ...