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CAMPANELLA v. MASON TENDERS' DISTRICT COUNCIL

January 21, 2004.

NICOLA AND PIETRO CAMPANELLA, Individually and on behalf of all others similarly situated, Plaintiffs, against MASON TENDERS' DISTRICT COUNCIL PENSION PLAN, and THE BOARD OF TRUSTEES OF THE MASON TENDERS' DISTRICT COUNCIL PENSION PLAN, Personally and in its capacity as plan administrator, Defendants


The opinion of the court was delivered by: VICTOR MARRERO, District Judge

DECISION AND ORDER

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 the Page 2 Campanellas' motion is denied.

I. FACTS AND PROCEEDINGS

  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.").) Page 3 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 Page 4 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 Page 5 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.

  II. DISCUSSION

 A. STANDARD OF REVIEW

  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 Page 6 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 Page 7

  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 responsibilities.

  The Part under which the claims are brought is significant because the ERISA statute of limitations in § 413 Page 8 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) Page 9 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 Page 10 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.

 C. EXHAUSTION

  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 Page 11 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. 1997).

  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. Page 12 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

 D. THE ACCRUAL RANGES

  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). Page 13

  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 Page 14 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 Plan.

  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 for Page 15 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 ...


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