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United States District Court, S.D. New York

December 16, 2004.


The opinion of the court was delivered by: GEORGE DANIELS, District Judge


Retired employees and their beneficiaries bring suit against their union under the Employee Retirement Income Security Act of 1974 ("ERISA") asserting claims for wrongful reduction of life insurance benefits, breach of fiduciary duty and failure to provide information summaries. Defendants moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons stated below, defendants' motion is granted in part and denied in part.


  Plaintiffs are the retirees or beneficiaries of retirees of the International Ladies' Garment Workers' Union ("ILGWU") and its alleged successor-in-interest, the Union of Needletrades, Industrial & Textile Employees ("UNITE") (collectively, the "Union").*fn1 Plaintiffs bring suit challenging UNITE's decision to reduce plaintiffs' individual life insurance benefit to $50,000.00 and its subsequent decision to further reduce the benefit to $5,000.*fn2 Plaintiffs allege that these reductions are in violation of the statutory provisions of ERISA.*fn3

  Defendant ILGWU began providing life insurance to its current employees in 1938.*fn4 The ILGWU recruited and retained employees "by offering them a competitive employment package, in particular one which emphasized retirement security." Complaint at 22, ¶ 122. Plaintiffs claim that although the ILGWU offered low salaries, it compensated its employees through its life insurance benefits. Although neither the ILGWU nor UNITE adopted a separate formal plan instrument establishing the life insurance plan, plaintiffs allege that the benefit was informally created and established through letters, insurance contracts and booklets sent to employees. The 1958 Summary Plan Description ("SPD"), provides that:

[w]hile this is not part of the ILGWU Staff Retirement Fund Plan, the ILGWU has agreed to the following:
After a member is retired, there shall be continued for his benefit the employees' group life insurance policy which is in effect on his retirement date.
Complaint at 23, ¶ 123. Plaintiffs also rely on language in letters sent by the Union to retirees that allegedly promised continuous and unreduced life insurance. Plaintiffs claim that through these documents, the ILGWU established a welfare benefit plan enforceable under ERISA.

  Plaintiffs refer to this offered plan as the ILGWU Retiree Life Insurance Plan and subsequently, the UNITE Retiree Life Insurance Plan (collectively, "Retiree Life Insurance Plan"). Plaintiffs claim that it provided to retirees and beneficiaries, after 15 years of service, "a vested right to receive unreduced retiree life insurance coverage, in the amount that he or she had at the time of retirement, at no additional cost to him or her, commencing when the retiree started receiving retirement benefits following the employee's employment" with the ILGWU. Complaint at 23, ¶ 125.

  Plaintiffs additionally argue that life insurance benefits for a subclass of plaintiffs were offered in 1996, when the Union, in a letter dated May 16, 1998 from its President, presented these plaintiffs with a choice between: (A) better dental benefits and life insurance during active employment and no life insurance benefit after retirement; or (B) lower dental benefits and life insurance coverage that continued into retirement, provided that the employee completed 15 or more years of employment.*fn5 Each plaintiff given the choice selected Option B. Plaintiffs claim, therefore, that they were promised unreduced life insurance benefits that would vest once they completed 15 or more years of employment.

  Defendants contend that despite these documents, the life insurance benefits for all plaintiffs were governed by the summary plan descriptions ("SPDs") distributed by the ILGWU in 1990 and again in 1994. These SPDs purportedly established the formal guidelines governing the life insurance benefits offered by the Union. Plaintiffs assert, however, that the language in the SPDs support their contention that the SPDs extended to current employees the same life insurance benefits that were available to retirees prior to the SPDs' creation.

  Defendants argue that the 1990 and 1994 SPDs contained reservation of rights clauses that preserved their right to reduce or terminate plaintiffs' life insurance benefits. Plaintiffs assert, however, that these SPDs were not distributed to retirees at all and were not "systematically distributed" to current staff. Furthermore, plaintiffs contend that the reservation of rights clause in the 1994 SPD applied only to "staff benefits" and not retiree benefits.

  Plaintiffs submitted a claim contesting the first reduction. Defendants denied that claim. Plaintiffs appealed that denial. Defendants also denied the appeal. Plaintiffs filed suit asserting: declaratory relief pursuant to 28 U.S.C. § 2201 and ERISA § 502(a)(3) against all defendants; recovery of benefits pursuant to ERISA § 502(a)(1)(B) against defendants Retiree Life Insurance Plan and Life/Dental Plan B; breach of fiduciary duty pursuant to ERISA §§ 404, 405, and 502(A)(3) against defendants Raynor, Romney, Clark, Jr., Lee, UNITE, Staff Health Benefits Plan and UNITE Health Benefits Committee; equitable estoppel against all defendants; failure to provide SPDs under ERISA § 104 and failure to provide notice of elimination of benefits under ERISA § 204(h) against all defendants; and breach of fiduciary duty pursuant to ERISA §§ 404, 405 and 502(a)(3) against defendants Raynor, Romney, Clark, Jr., Lee, UNITE, Staff Health Benefits Plan, and UNITE Health Benefits Committee.

  Defendants moved to dismiss. Defendants argue that plaintiffs cannot point to language in any document in support of plaintiffs' allegation that they were promised unreduced life insurance benefits. Moreover, defendants contend that the reservation of rights clauses in the 1990 and 1994 SPDs, whereby defendants maintained their right to modify or alter plaintiffs' life insurance benefit, support a finding that vested unreduced life insurance benefits were never promised. Defendants contend that even if plaintiffs could point to language that could be interpreted as promising unreduced lifetime life insurance benefits, defendant UNITE did not assume this responsibility upon its merger with the ILGWU. Defendants further maintain that plaintiffs' second and third causes of action for recovery of benefits and breach of fiduciary duty are barred under the relevant statute of limitations. Defendants also move to dismiss plaintiffs' fifth and sixth causes of action for failure to distribute the SPDs and breach of fiduciary duties for failure to state a claim.


  Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss a complaint where the complaint "fail[s] . . . to state a claim upon which relief can be granted[.]" FED. R. CIV. P. 12(b)(6). In reviewing a motion to dismiss, this Court accepts the allegations in the complaint as true and draws all reasonable inferences in favor of the non-moving party. See Patel v. Searles, 305 F.3d 130, 134-35 (2d Cir. 2002). A motion to dismiss will only be granted if the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. See Citibank, N.A. v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir. 1992). In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a district court must limit itself to facts stated in the complaint, or in documents attached to the complaint as exhibits or incorporated in the complaint by reference. See Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991); see also Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 71 (2d Cir. 1998) (in evaluating motions to dismiss, a court must limit its review to the allegations contained within the four corner's of the complaint).

  A. Contractual Vesting Claim for Retirees

  There are two types of employee benefit plans covered by ERISA: pension plans and welfare plans. See 29 U.S.C. §§ 1002(1) & (2)(A). The vesting of these plans under ERISA is different depending on the type of plan at issue. Pension plans are subject to statutory vesting requirements that regulate minimum standards for accrual of benefits and provide for scheduled vesting. See 29 U.S.C. §§ 1053-1054. Welfare benefit plans, however, are specifically exempted from the automatic vesting requirement. See 29 U.S.C. 1051(1). An employer, therefore, can amend or terminate welfare benefit plans at any time. See American Fed'n of Grain Millers, AFFL-CIO v. Int'l Multifoods Corp., 116 F.3d 976, 979 (2d Cir. 1997) (citations omitted). A life insurance benefit plan, like the one at issue, is classified as a welfare plan under ERISA and is not subject to the automatic vesting requirement. See 29 U.S.C. § 1002(1). Despite being exempt from automatic vesting, "if any employer promises vested benefits, that promise will be enforced." Id. at 980. In order to state a contractual vesting claim, plaintiffs must "point to written language capable of reasonably being interpreted as creating a promise on the part of the employer to vest the recipient's benefits." Id. (internal citations and quotations omitted) (quoting Schonholz v. Long Island Jewish Medical Center, 87 F.3d 72, 78 (2d Cir. 1996).

  Although neither the ILGWU nor UNITE adopted a formal plan instrument detailing the alleged life insurance benefit, plaintiffs contend that the Union's promise is well documented in SPDs issued in 1958, 1990 and 1994,*fn6 letters sent to retirees from the Staff Benefits Coordinator of the ILGWU Staff Retirement Fund,*fn7 letters from the Staff Benefits Coordinator of Unite's Staff Retirement Plan,*fn8 and attachments of plan summaries that were sent to retirees.*fn9

  Employers are bound by promises made in SPDs, which Congress intended to be a primary source of information regarding plan benefits. See 29 U.S.C.A. § 1022; see also Joyce v. Curtiss-Wright Corp., 171 F.3d 130, 135-36 (2d Cir. 1999). The earliest SPD offered by plaintiffs was issued in 1958. Plaintiffs do not claim that the 1958 SPD offered vested life insurance benefits, but rather, present the 1958 SPD as an illustration of defendants' future promise. In a section titled "Life Insurance Benefits," the 1958 SPD provides that "[w]hile this is not part of the ILGWU Staff Retirement Fund Plan, the ILGWU has agreed to the following: After a member is retired, there shall be continued for his benefit the employees' group life insurance policy which is in effect on his retirement date." Complaint, Exhibit C, pg. 46. The 1958 SPD, however, also contains a provision which defendants claim reserves their right to modify or reduce plaintiffs' benefit. The clause provides that "[i]nsofar as feasible, such policies should approximate the annual earnings of each classification of eligible staff member." Id. Although this feasibility provision arguably reserves some right to the defendants, these rights are unclearly defined and the provision falls far short of clearly reserving defendants' right to modify or amend any promised benefit. The provision most certainly cannot be held to vitiate plaintiffs' claims of a vested benefit. See e.g., Abbruscato v. Empire Blue Cross and Blue Shield 274 F.3d 90, 99-100 (2d Cir. 2001) (holding that a provision whereby "[t]he company also reserves its right to amend each of the Plans at any time," and further that "[t]he company expects and intends to continue the Plan in your Benefits Program indefinitely, but reserves its right to end each of the Plans, if necessary," supports a finding that the company did not intend to vest life insurance benefits).

  In 1990 and again in 1994, the ILGWU issued SPDs that allegedly outlined the offered life insurance benefits for retirees. Both SPDs promised that "after 15 years of service, the participant became entitled to unreduced, life insurance coverage at the level in place at the time of retirement, at no additional cost to the retiree." Complaint at 25, ¶ 131. These SPDs clearly set forth the life insurance benefits due to then current members of the Union and exclusively govern the Union's obligations under ERISA plans. See Moore v. Metropolitan Life Insurance Company, 856 F.2d 488, 492 (2d Cir. 1988).*fn10 The 1990 SPD provides that the employee's "life insurance coverage will continue at no premium cost to [the employee] if [they] have completed 15 years of employment and started receiving retirement benefits immediately following [their] employment with the ILGWU or an affiliate. The amount of [their] coverage remains the same as it was on the day before [their] retirement began." This provision could be reasonably interpreted as providing vested lifetime life insurance benefits at the particular level outlined in the SPD, as long as the retiree has met the requirements set forth above. See Abbruscato v. Empire Blue Cross and Blue Shield, 274 F.3d 90, 98 (finding vesting language that stated "[y]our life insurance benefits may be extended to you for your lifetime . . . depending on your age and years of service. You will be eligible for retiree insurance benefits if you normally qualify or if you would qualify by adding five years to your age and five years to your service under [the program]"); see also Devlin v. Empire Blue Cross and Blue Shield, 274 F.3d 76, 85 (2d Cir. 2001) (finding vesting where SPD promised that life insurance benefits "will remain at [the annual salary level] for the remainder of their lives."); see also Joyce v. Curtiss-Wright Corp., 171 F.3d 130 (2d Cir. 1999) (rejecting contractual vesting argument where document did not include "language that affirmatively operates to create the promise of vesting" but noting that a promise of benefits for one's lifetime gives rise to a triable fact issue, citing Bidlack v. Wheelabrator Corp. 993 F.2d at 605-08); see also American Federation of Grain Millers v. International Multifoods Corp., 116 F.3d 976 (2d Cir. 1997) (finding that no vesting where "statements simply indicate who would pay the costs of the plan" but "in no way indicate that Multifoods would continue to pay the cost of the plan for the retirees' lifetime."). Defendants claim, however, that the presence of a reservation of rights clause in the 1990 SPD vitiates a finding that the language cited can be reasonably interpreted as making a promise. The 1990 SPD contains a disclaimer which provides


[t]he benefits listed in this booklet are not meant to be exhaustive. Accordingly, any of the benefits set forth, except accrued and vested pension benefits, may be changed or discontinued by the Union as it sees fit.
In Abbruscato, 274 F.3d at 100, the Second Circuit found that when an SPD contains both language that can reasonably be interpreted as creating a promise to vest benefits as well as a reservation of rights clause, "the language contained in [the SPD] is not susceptible to an interpretation that promises vested lifetime life insurance benefits." Id. The ILGWU, in the 1990 SPD, reserved its right to change or discontinue any of the benefits within that SPD. That language, therefore, is not susceptible to an interpretation that promises vested lifetime life insurance benefits.

  In 1994, the ILGWU issued another SPD outlining the current benefits offered to employees. The 1994 SPD provides


[y]our life insurance coverage will continue at no premium cost to you if you completed 15 years of employment and started receiving retirement benefits immediately following your employment with the ILGWU or an affiliate, unless it is determined that prior to such retirement, the employee committed an act of gross misconduct as that term is used in 29 USC § 1653 (c) of ERISA. . . . The amount of your coverage remains the same as it was on the day before your retirement began. Up to ten prior years of ILGWU membership are counted toward the 15 year employment requirement.
This benefit, like the life insurance benefit offered in 1990, became available after the employee completed 15 years of employment and started receiving retirement benefits immediately following their employment with the ILGWU. Like the 1990 SPD, the 1994 SPD can be reasonably interpreted as providing vested lifetime life insurance benefits at the specific level outlined in the SPD, as long as the retiree has met the necessary requirements. Defendants similarly argue, however, that the 1994 SPD contains a reservation of rights clause that vitiates plaintiffs' contention that defendants promised vested benefits. The 1994 SPD provides that


[t]he staff benefits set forth in this booklet describe the Union's current practices only. Staff benefits are subject to change or termination by the Union, unilaterally and without notice, except for pension benefits which have accrued and vested.
The 1994 SPD, however, reserves for the ILGWU an entirely different right from that reserved in the 1990 SPD: the right to change or terminate "staff benefits" unilaterally and without notice. Unlike the reservation of rights clause in the 1990 SPD which applied to all benefits, the 1994 SPD specifically reserved for the ILGWU the right to terminate or change staff benefits. Although defendants argue that staff benefits include retiree benefits, the record presented is insufficient to support this conclusion. Defendants motion to dismiss retirees' contractual vesting claims is therefore denied.

  B. Contractual Vesting Claim for Plan B Participants

  Plaintiffs who were current employees of UNITE in 1996 base their contractual vesting claim on a letter sent by UNITE's President on May 16, 1996. This letter purportedly provided current employees of UNITE with the opportunity to receive unreduced life insurance benefits. Specifically, the letter provided current employees with the option to select between "Life/Dental Plan A" or "Life/Dental Plan B." Plan A


provides a higher level of dental benefits. However, your Union Labor Life Insurance benefit is changed to provide insurance only while you are actively employed at a level of coverage equal to two times your annual salary for employees under age 60. . . . The significant change in this life insurance benefit is that coverage will not continue after retirement.
Plan B, which was selected by all of the plaintiffs who were given the option,


provides a lower level of dental benefits, however, your Union Labor Life Insurance coverage . . . remains the same and will continue into retirement if you have 15 or more years of employment at retirement age and start receiving retirement benefits immediately following employment with UNITE.
Complaint at 26, ¶ 137. The letter further provided that [e]mployees keep the current level of their life insurance. The coverage continues into retirement unreduced at no premium cost, if the employee completes 15 or more years of employment at retirement age and starts receiving retirement benefits immediately following employment with UNITE.
 Id. at 27, ¶ 138. Defendants argue that the 1996 letter does not promise "anything more than what had been promised previously." Defendants' Brief at 14. Defendants contend that the 1994 SPD, and not the 1996 letter, governed the terms of the employees' life insurance benefits. As the 1994 SPD contained a reservation of rights clause that applied to current staff, defendants argue that plaintiffs' contractual vesting claim based on the 1996 letter should likewise be dismissed for failure to state a claim.

  Defendants' argument is without merit. Although the level of life insurance benefit promised in the 1996 letter is similar to that promised in the 1994 SPD, the promise made in the 1996 letter is separate and distinct from the promise made in the 1994 SPD. Employees in 1996 who elected Plan B did so believing that they would be receiving a promise of continuous life insurance in lieu of better dental benefits. Plaintiffs in their complaint seek a finding that the 1996 letter established an informal ERISA regulated welfare benefit plan covering current employees that was separate from the plan established in the 1994 SPD. However, that question is not before the Court on this motion to dismiss. It is sufficient, at this juncture, to find that plaintiffs have sufficiently alleged a contractual vesting claim.

  In their motion, defendants seek to dismiss plaintiffs' first (contractual vesting claim), second (equitable relief), third (breach of fiduciary duty) and fourth (equitable estoppel) causes of action on the basis that plaintiffs failed to allege a contractual vesting claim. As plaintiffs have sufficiently alleged a contractual vesting claim, defendants motion to dismiss these claims is denied. B. Recovery of Benefits

  Plaintiffs also bring suit under section 502(a)(1)(B) of ERISA seeking to "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a). As ERISA does not prescribe a statute of limitations for violations of section 502(a)(1)(B), the appropriate statute of limitations is six years, the limitations period specified in the most analogous state statute. See Miles v. New York State Teamsters Conference Pension and Ret. Fund, 698 F.2d 593, 598 (2d Cir. 1983) (holding that the six-year limitations proscribed by Section 213 of the New York Civil Practice Law and Rules applies in ERISA actions). "An ERISA claim accrues upon a clear repudiation by the plan that is known, or should be known, to the plaintiff — regardless of whether the plaintiff has filed a formal application for benefits." See Carey v. International Brotherhood of Electrical Workers Local 363 Pension Plan 201 F.3d 44, 47 (2d Cir. 1999). The statute of limitations begins when a plaintiff "discovers, or with reasonable diligence should discover, the injury that gives rise to his claim." Id. at 48.

  Defendants argue that under this criteria, plaintiffs' claim for recovery of benefits are untimely. Defendants maintain that plaintiffs were made aware of their repudiation of plaintiffs' benefits in the 1990 and 1994 SPDs, which contained reservation of rights clauses, as well as in the 1995 Merger Agreement, which "contemplated the continuance of life insurance benefits for only three years after the Consolidation." Defendants' Brief at 17. These arguments are without merit. Although the 1990 SPD contained a reservation of rights clause, the 1994 SPD, which amended the 1990 SPD, contained a reservation of rights clause that referred only to "staff benefits," which arguably excludes plaintiffs who were retirees when the 1994 SPDs was distributed. The 1995 Merger Agreement, furthermore, lacks language to place plaintiffs on notice of the defendants' repudiation of their life insurance benefits. Plaintiffs' further allegation that these documents were not "distributed systematically" to active staff, and not distributed at all to retirees, also does not support a finding that plaintiffs were put on notice of defendants' repudiation in either 1994 or 1995. The 1994 SPD and the 1995 Merger Agreement did not provide a "clear repudiation" of plaintiffs' right to life insurance benefits.*fn11 See Martin v. Construction Laborer's Pension Trust for Southern CA., 947 F.2d 1381, 1386 (9th Cir. 1991) (finding that in cases where the application or interpretation of terms in a benefits plan are unclear, plaintiffs have no cause for complaint until they are refused benefits to which they have some colorable claim because it cannot be known earlier how the instrument will be interpreted by the trustees) (quoting Cowan v. Keystone Employee Profit Sharing Fund, 586 F.2d 888 (1st Cir. 1978).

  Plaintiffs argue that the their ERISA claim actually began to accrue in early 2003, upon the denial of the plaintiffs' administrative claims. This claim is also without merit given the Second Circuit's finding in Carey, 201 F.3d 44 (finding that ERISA claims do not begin to accrue when plaintiffs file a formal application for benefits). Under the facts alleged in their complaint, plaintiffs were not given clear notice of the defendants' intent to repudiate their claims until November 2001, when UNITE first informed plaintiffs of defendants' intention to reduce the life insurance benefit. Defendants motion to dismiss plaintiffs first claim under the statute of limitations is therefore denied.

  C. Breach of Fiduciary Duty Claims

  In their third cause of action, plaintiffs allege that defendants "informed [plaintiffs] orally and in writing" promising them unreduced life insurance through the course of their retirement. Complaint at 33, ¶ 163. Plaintiffs claim that defendants breached their fiduciary duty in violation of sections 502(a)(3), 404 and 405 of ERISA by failing to "inform Plaintiffs . . . that the Defendants reserved the right to reduce or terminate the retiree life insurance, or that the Defendants even purported to reserve such right." Id. at 33, ¶ 165. "By these material misrepresentations and related acts and omission, the Defendants, and each of them, breached their fiduciary duties to Plaintiffs and their spouses or parents." Id. at 33, ¶ 166.

  Defendants argue that these claims are also barred by the statute of limitations. Unlike plaintiffs' claims under section 502(a)(1)(B), breach of fiduciary duty claims are governed by section 413 of ERISA which provides that:

[n]o action may be commenced under this subchapter 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, after the earlier of (1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation; except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.
29 U.S.C. § 1113. "This section thus creates a general six year statute of limitations, shortened to three years in cases where the plaintiff has actual knowledge, and potentially extended to six years from the date of discovery in cases involving fraud or concealment." Kurz v. Philadelphia Electric Co., 96 F.3d 1544, 1551 (3d Cir. 1996).

  Plaintiffs do not contest defendants' argument that in order for plaintiffs fiduciary duty claims to survive, plaintiffs's claims must fall under section 413's discovery rule. The discovery rule allows claims to be filed six years after the date of discovery but requires plaintiffs to allege facts sufficient to establish common law fraud. See Kirk v. Liberty Mutual Insurance Co., 28 F.Supp.2d 696, 700 (D. Conn. 1998) (internal citations omitted). Accordingly, plaintiffs must establish (1) that a material false representation or omission of an existing fact was intentionally and knowingly made; (2) that he or she reasonably relied on the misrepresentation or omission; and (3) that he or she suffered damages as a result of the misrepresentation or omission. See id. at 700 (citing Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d 270, 276 (2d Cir. 1992)). In order to properly plead fraud, plaintiffs must satisfy the pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure. Under Rule 9(b), "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." To comply with this rule, plaintiffs must "allege specifically when and where the misrepresentations-took place, the content of those misrepresentations, and the identity of the person or persons making them." Kirk, 28 F.Supp.2d at 700 (quoting Butula v. Agashiwala, 916 F.Supp. 314, 321 (S.D.N.Y. 1996). Moreover, plaintiffs must explain how the misrepresentations were fraudulent and plead with particularity the events which "give rise to a strong inference that the defendant had an intent to defraud, knowledge of falsity, or a reckless disregard for the truth." Connecticut Nat. Bank v. Fluor Corp., 808 F.2d 957, 962 (2d Cir. 1987).

  Plaintiffs' allegations are sufficient to invoke section 413's discovery rule. In providing examples of letters sent to plaintiffs from defendants UNITE and the ILGWU promising continued life insurance benefits, plaintiffs have identified the content of defendants' misrepresentations, the identity of those making the misrepresentations as well as the location where those misrepresentations took place. Plaintiffs have sufficiently plead that defendants made these representations knowingly and with intent. Furthermore, plaintiffs have alleged that they reasonably relied on these misrepresentations and that they were injured as a result of them. Defendants' motion to dismiss plaintiffs' breach of fiduciary duty claims are therefore denied.

  D. Assumption of Liabilities

  On July 1, 1995 defendant ILGWU as well as ACTWU, a non-party union, signed a merger agreement with defendant UNITE. According to defendant UNITE, under the terms of this agreement, the merger was not a full consolidation but rather an asset purchase agreement whereby UNITE purchased only certain liabilities. Specifically, UNITE argues that any liability for vested life insurance benefits became UNITE's responsibility for only three years. After three years, UNITE reserved the right to modify or terminate these benefits. Section 6 of the merger agreement states


It is the intention of the parties that persons employed by the Constituent Unions prior to July 1, 1995, should continue to be covered by the current staff benefit programs of their respective Constituent Unions, such as health insurance and life insurance. For approximately three (3) years those plans will be maintained including, but not limited to, the amount of employer and employee contributions thereto, consistent with legal requirements. During this period a study will be made of these benefit programs which will consider cost, finances, and other relevant matters. It is the intention of the parties to continue to maintain the existing Staff Retirement Funds of the Constituent Unions as separate funds, so as not to adversely affect either the Funds or their participants.
UNITE contends that they "assumed liabilities with respect to staff and retiree welfare plans of the ILGWU and ACTWU to a limited extent — that is, it agreed only to "maintain" the then "current" plans for approximately three years. UNITE did not assume any liabilities that had accrued prior to the Consolidation with respect to the plans."*fn12 Defendants' Brief at 8.

  Apparently, UNITE's argument is that they were liable for any life insurance benefits for only three years. At the end of those three years, UNITE could cancel or reduce these benefits, but, if the benefits were vested, then the responsibility for paying them reverted back to the ILGWU. This theory, however, relies upon the belief that the merger agreement was not a full consolidation, but rather an asset purchase agreement, an argument which lacks merit. The language of the merger agreement calls for a full consolidation of the two unions. Under the terms of the agreement, the ILGWU "hereby enter[s] into this agreement to unite their separate organizations into a consolidated organization to be known as" UNITE. Merger Agreement, Complaint Exhibit A at 4. Furthermore, the merger agreement called for officers of the ILGWU, the president, the Secretary Treasurer, and the Executive Vice-Presidents to becomes officers in UNITE. See Merger Agreement at 6-7. Moreover, local unions that were formed under the ILGWU became chartered under UNITE. "Each chartered body of . . . the ILGWU . . . shall retain its charter as of the date of its original issue and become, by virtue of the consolidation, a chartered body of UNITE." Id. at 14. UNITE's attempt to characterize this merger as an asset purchase agreement that relieves them of any responsibility concerning any vested life insurance benefits is further belied by Section 9 of the merger agreement which states, in relevant part,

UNITE shall, on and after the effective date of the merger, assume and be responsible for all the debts, liabilities, contract obligations, and other obligations of the ILGWU and the ACTWU, except with respect to the property and assets which remain with the ILGWU under subparagraphs C, D and F of this paragraph 9. . . . The debts, liabilities, contractual and other obligations assumed hereunder shall, on the effective date of the merger, attach to UNITE to the same extent as if the said debts, liabilities, contractual and other obligations were its original undertakings.
Under Section 9, therefore, any liabilities of the ILGWU would also become UNITE's liability.

  Plaintiff has sufficiently alleged that the responsibility for maintaining and paying plaintiffs' vested life insurance benefits became UNITE's after the merger agreement was signed. Defendants' motion to dismiss plaintiffs' claims against defendant UNITE is therefore denied.

  E. Failure to Distribute SPDs

  Plaintiffs allege that defendants failed to distribute either the 1990 and the 1994 SPD to the retirees in violation of ERISA § 104(b)(1), 29 U.S.C. § 1024(b)(1). ERISA § 104(b)(1) requires a plan administrator to provide every participant with an updated SPD every five years unless no amendments have been made to the plan during that time. See 29 U.S.C. § 1024(b)(1); see also Campanella v. Mason Tenders' District Council Pension Plan, 299 F.Supp.2d 274, 292 (S.D.N.Y. 2004). The imposition of penalties for violating § 104(b)(1) is left to the discretion of the district court and relies on the following factors: 1) the administrator's bad faith or intentional conduct; 2) the length of the delay; 3) the number of requests made; 4) the extent and importance of the documents withheld; and 5) the existence of any prejudice to the participant or beneficiary. See Devlin, 274 F.3d at 90; see also McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 320 F.3d 151, 163 (2d Cir. 2003).

  Defendants contend that UNITE did not assume the ILGWU's liabilities that accrued prior to the effective date of the consolidation and, as a result, the failure to properly distribute either the SPDs or notice of elimination of benefits was the ILGWU's responsibility and not UNITE's. Second, defendants argue that plaintiffs failed to show that they have suffered prejudice from any alleged violation. Plaintiffs, however, have sufficiently alleged that defendant UNITE is the successor-in-interest to the ILGWU. Defendant UNITE's attempt to argue that its merger with the ILGWU excluded the specific responsibility of ensuring the proper distribution of a past SPDs is without merit. Quite simply, viewing plaintiffs allegations as true for the purposes of this motion, defendants failed to provide retirees with the disputed SPDs. Despite this finding, plaintiffs' claim must be dismissed. Plaintiffs insufficiently allege the prejudice they endured as a result of defendants' failure. Furthermore, plaintiffs' complaint is devoid of any allegations of aggravating factors such as bad faith or intentional conduct. See McDonald 320 F.3d at 163 (finding no violation of ERISA § 104(b)(1) absent allegations of prejudice or bad faith). Defendants' motion to dismiss this claim is thereby granted and plaintiffs' failure to distribute claim is dismissed.

  Plaintiffs also allege that defendants failed to provide notice of the reduction of their life insurance benefits as mandated by ERISA § 204(h)(1), 29 U.S.C. § 1054(h)(1). Defendants argue that plaintiffs' claims under ERISA § 204(h)(1) should be dismissed because that section applies only to pension plans and not welfare plans. ERISA § 204(h)(1) provides that a defined benefit plan "may not be amended so as to provide for a significant reduction in the rate of future benefit accrual, unless, after adoption of the plan amendment and no less than 15 days before the effective date of the plan amendment, the plan administrator provides a written notice, setting forth the plan amendment and its effective date, to [plan participants and certain other parties]." 29 U.S.C. 1054(h)(1). A "defined benefit plan" is "a pension plan other than an individual account plan." 29 U.S.C § 1002(35). A defined benefit plan "provides monthly payments to a participant upon retirement calculated according to a formula based on such factors as the employee's time in service and pay rate." Employee Trs. of the Eighth Dist. Elec. Pension Fund v. Employer Trs. of the Eighth Dist. Elec. Pension Fund, 959 F.2d 176, 177-78 (10th Cir. 1992). Defined benefit plans, therefore, have no individual accounts. Rather, all contributions are made to one fund and a participant's monthly annuity or benefit is based on a formula which accounts for compensation and years of service. See In re Lefkowitz 767 F.Supp 501, 510, n. 16(S.D.N.Y. 1991). As the life insurance plan in question is a welfare plan and not a pension plan, defendants' motion to dismiss is granted and plaintiffs' claim is dismissed.

  F. Violation of Fiduciary Duties

  In their sixth cause of action, plaintiffs allege another breach of fiduciary duty claim based on their belief that "representatives of the ILGWU, which retained certain assets after the merger, including specifically its real property, offered to UNITE to use [those] assets to fund the Retiree Life Plan." Plaintiffs' Brief at 21. Specifically, plaintiffs allege that "[b]y their actions in failing to accept the offer of additional funding for the Plans by the ILGWU, and by related acts and omissions, the Defendants, and each of them, breached their fiduciary duties to Plaintiffs and their spouses or parents." Complaint at 37, ¶ 185. Without citing any caselaw, defendants argue that plaintiffs' claim must be dismissed as a matter of law because plaintiffs' allegations, even if true, do not amount to a fiduciary breach claim.

  Similar to their other fiduciary breach claims, plaintiffs' claim that defendants' actions violated ERISA § 404(a)(1) as well as ERISA § 405. Section 404, in relevant part, provides:

a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and — (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan; (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.
Section 405, in relevant part, provides:
In addition to any liability which he may have under any other provisions of this part, a fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances: if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach . . ., if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.
  When deciding if a plan trustee has met its fiduciary obligations, this Court must "inquire `whether the individual trustees, at the time they engaged in the challenged transactions, employed the appropriate methods to investigate the merits of the investment and to structure the investment.'" Katsaros v. Cody, 774 F.2d 270, 279 (2d Cir. 1984). As discovery has not yet been conducted, it would be inappropriate to dismiss plaintiffs' claim at this time. Plaintiffs' allegations adequately give defendants fair notice of their claims, and are sufficient to withstand a motion to dismiss. See Bona v. Barasch, 2003 WL 1395932, *23 (citing Salahuddin v. Cuomo, 861 F.2d 40, 42 (2d Cir. 1988), for the proposition that dismissal is usually reserved for those cases in which the complaint is so confused, ambiguous, vague, or otherwise unintelligible that its true substance, if any, is well disguised). Defendants' motion to dismiss plaintiffs' sixth cause of action is therefore denied.


  For the reasons stated above, defendants' motion to dismiss plaintiffs' claims under ERISA § 104(b)(1), 29 U.S.C. § 1024(b)(1) for failure to distribute the 1990 and 1994 SPDs is granted. Plaintiffs' claim under ERISA § 204(h)(1), 29 U.S.C. § 1054(h)(1) for failure to provide notice of reduction is also granted. Defendants' motion to dismiss plaintiffs' other claims is denied.


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