United States District Court, N.D. New York
February 7, 2005.
I.B.E.W. LOCAL NO. 241 PENSION PLAN, and its Trustees, ARNOLD DATES, DAVID CARR, BILL EMMONS, MATTHEW LABOSKY, THOMAS STEBBINS, JR., and MICHAEL TALARSKI, by and on behalf of themselves, individually, and the I.B.E.W. LOCAL NO. 241 PENSION PLAN, Plaintiffs,
FIRST ALLMERICA FINANCIAL LIFE INSURANCE CO. and DOES 10, Defendants. FIRST ALLMERICA FINANCIAL LIFE INSURANCE CO., Third-Party Plaintiff, v. PHILIP KISH, JOHN AUGUSTINE, JR., DANIEL BROWN, DAVID SUTHERLAND, RICHARD GREEN, DAVID HUNTER and RICHARD ROES 1-20, Third Party Defendants.
The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge
MEMORANDUM DECISION AND ORDER
Plaintiff I.B.E.W. Local No. 241 Pension Plan ("the Plan or Fund") is a
multiemployer, defined pension fund within the meaning of the Employment
Retirement Income and Security Act ("ERISA"). The individual plaintiffs
are the Plan's current Trustees and fiduciaries. The Plan generally pays
an eligible participant monthly retirement benefits, or an annuity, based
upon the participants credited service earned while working for certain
employers signatory to collective bargaining agreement with the
International Brotherhood of Electrical Workers Union No. 241.
Plaintiff retained defendant First Allmerica Financial Life Insurance
Co. ("Allmerica") in 1976, to render actuarial and record keeping
services to the Plan, including mathematical determinations, based on
approved actuarial cost methods and appropriate funding assumptions.
Following the terms of the Plan as adopted by the Trustees, Allmerica
disbursed and distributed assets from the Fund to participants and
beneficiaries pursuant thereto. Allmerica had no discretion in performing
its duties, but was directed to follow the
directives of the Plan and the Trustees. In any situation in which
Allmerica thought that the Plan was not clear, it would seek an
interpretation from a Plan fiduciary to clear up the ambiguity.
The Plan relied upon Allmerica's expertise, skill and knowledge to
calculate and distribute the lump sum benefits. Allmerica's technical
proficiency was not probed proceeding any payments being made to plan
participants. Plaintiff did check for obvious errors without recalculating
the lump sum benefits or questioning the methods used by Allmerica in
making its calculations.
In the mid 1980's, the Plan added a lump sum payment distribution
option as an alternative to its annuity benefits. The dispute in this case
centers on the correct method used in calculating the correct amount to
be paid to employees opting to retire with the lump sum benefit.
Allmerica contends that at the time the lump sum retirement benefit
became available to retiring employees, the Plan did not contain a
restated document setting forth the method for computing the amount of
the lump sum benefit payable to the retiring employee. In the absence of
this document, Allmerica calculated the retirement amount based on
Allmerica's standard procedures and rates for the purpose of reviewing
the calculations with the Plan's Trustees and obtaining their approval
thereof. Allmerica states that Walter Wolslegel, of Allmerica defined
benefit group pension unit, spoke with Charles French, the Plan's
Administrator, on two occasions in 1986 concerning the calculations, and
French specifically agreed to the use of the early retirement factor and
an immediate rate, and then authorized distribution of all pension
funds. Allmerica then used the same method to
compute the actual equivalent of the lump sum value of early retirement
benefits for some other retiring employees because no new instructions
were presented by Charles French.
Plaintiffs assert, however, that Allmerica wrongly computed the early
lump sum retirement benefits to be made to six retiring Plan
participants. The Plan required that lump sum distributions be computed as
the actuarial equivalent of the normal retirement benefit. For the six
early retirees it serviced, Allmerica computed the lump sum distribution
as the actuarial equivalent of the early retirement benefit. This
misapplication creates an inaccurate benefit amount because the early
retirement benefits are subsidized to encourage the election of early
retirement benefits. The Plan has early retirement annuities under
actuarially more generous terms then the normal retirement annuities.
Allmerica's use of the early retirement instead of the normal retirement
accounts in its computations caused the six retiring participants to
receive $268, 264.44 more in pension payments than permitted by the
As a result of Allmerica's conduct, the Plan has instituted this
lawsuit alleging that Allmerica is a fiduciary under ERISA
29 U.S.C. § 1132, and that it breached its fiduciary duties by digressing
from the terms of the Plan in its calculations of the lump sum value of
the six individuals' early retirement benefits and disbursing
overpayments to them totaling $268,264.44. The complaint also contains
state law causes of action for breach of contract, actuarial malpractice
and negligence. Recompense sought is compensatory and punitive damages,
equitable relief attorney's fees and costs.
Allmerica is the Third Party Plaintiff in an action it commenced
against the six recipients of the alleged $264,264.44 for indemnification
and/or contribution for the full
amount of any and all sums that may be adjudged against Allmerica
resulting from the case at bar.
Currently before the court a motion by the Defendant and Third Party
Plaintiff for summary judgment pursuant to Rule 56 of the Federal Rules
of Civil Procedure. Plaintiff has entered opposition to this motion.
Rule 56 of the Federal Rules of Civil Procedure permits summary
judgment where the evidence demonstrates that "there is no genuine issue
of any material fact and the moving party is entitled to judgment as a
matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247,
106 S. Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). Summary judgment is properly
regarded as an integral part of the Federal Rules as a whole, which are
designed "to secure the just, speedy and inexpensive determination of
every action." Celotex Corp. v. Catreet, 477 U.S. 317, 326, 106 S. Ct. 2548,
2554, 91 Ed.2d 265 (1991) (quoting Federal Rule of Civil Procedure 1). In
determining whether there is a genuine issue of material fact a court
must resolve all ambiguities and draw inferences against the moving
party. United States v. Diebold, 369 U.S. 654, 655, 82 S. Ct. 993, 994,
8 L. Ed.2d 176 (1962) (per curiam). An issue of credibility is
insufficient to preclude the granting of summary judgment. Neither side
can rely on conclusory allegations or statements in affidavits. The
disputed issue of fact must be supported by evidence that would allow a
"rational trier of fact to find for the nonmoving party." Mashusita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587,
106 S. Ct. 1348, 1356, 89 L. Ed.2d 538 (1986). Unsupported allegations
will not suffice to create a triable issue of fact. Goenga v. March of
Dimes Birth Defects Foundation, 51 F.3d 14, 18 (2d Cir. 1995). Nor will
factual disputes that are irrelevant to the disposition of the suit under
governing law preclude the entry of summary judgment. Anderson,
477 U.S. at 247, 106 S. Ct. at 2509.
First Cause of Action ERISA Breach of Fiduciary Duty
Although professional service providers are not normally considered to
be fiduciaries when they render only routine professional services, their
status may change if they "exercise discretionary authority or control
over the plan's management or authority or control over its assets.
Mertens v. Hewitt Associates, 948 F.2d 607, 610 (9th Cir. 1991), aff'd,
508 U.S. 248, 113 S. Ct. 2063, 2066, 128 L. Ed.2d 161 (1993).
Enrolled actuaries are considered "professionals" under federal and
state law. Concrete Pipe and Products of California, Inc. v. Construction
Laborers Pension Trust for Southern California, 508 U.S. 602, 632-35,
113 S.Ct. 2264, 124 L. Ed.2d 539 (1993) ("actuaries are trained
professionals" who take part in a "recognized professional discipline"),
Gereosa v. Savasta & Company, 329 F.2d 317, 319 (2d Cir. 2003) ("ERISA
requires the administrator of each plan annually to obtain an `actuarial
statement,' which is in essence an analysis of the plan's financial
condition by a professional actuary").
The definition of a "fiduciary" 29 U.S.C. § 1002(21)(A), states in
relevant part: "[A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or discretionary
control respecting management of such plan or exercises any authority or
control respecting management or disposition of its assets (ii) he
investment advice for a fee or other compensation, direct or indirect,
with respect to any moneys or other property of such plan, or has any
authority or responsibility to do so or (iii) he has any discretionary
authority or discretionary responsibility in the administration of such
plan." Determining fiduciary status requires examination of the function
performed, "fiduciary status exists with an activity enumerated in the
statute over which the entity exercises discretion or control." Blatt v.
Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987). Whether a
professional service provider has or has not exercised such an unusual
degree of influence over a plan as to become a fiduciary involves factual
determinations. Landry v. Air Line Pilots Association, 901 F.2d 404, 418
(5th Cir.), cert. denied, 489 U.S. 895, 111 S. Ct. 244, 112 L. Ed.2d 203
In the instant case, Allmerica maintains that the use of its standard
procedures and rates in making the calculation that caused the overpayment
to six lump sum retirees, was justified because this procedure was agreed
to by the Fund Administrator, Charles French. when he spoke on two
occasions with Allmerica's Walter Wolslegel in October 1986, regarding
these calculations. Therefore, its action cannot be considered the act of
a fiduciary. (Letter dated Oct. 18, 2001, from Allmerica's counsel Megan
A. McCabe, Esq. to Union's counsel).
In Charles French's affidavit concerning this same incident, he states
that he was the Fund Administrator at the time in question, that he had
no authority to make decisions about the amount, type, or nature of
benefits payable from the Fund; only the Fund's Board of Trustees could
authorize or approve the use of early retirement factors or immediate
rates in calculating lump sum and they did not do so; no representative
from Allmerica or related
entities request authorization from anyone at the Fund to use early
retirement factors or immediate rates in calculating lump sum benefits;
he did not talk to Walter Wolsegel on two occasions in October 1986,
regarding the calculations of lump sum benefits, and did not agree with
him about any proposed use of other methodologies for the calculation of
lump sum benefits. (French Aff. p. 2).
Allmerica further claims that if their calculations were incorrect, it
does not make it a fiduciary because the Trustees should have discovered
this as part of the mandatory review of Allmerica' figures that is
required under the ERISA "prudent man" statute 29 U.S.C. 1104(a)(1)(B).
The Fund states that the Trustees were without expertise in actuarial
techniques and, thus, unable to estimate the cumulative effect of
actuarial methods. They relied on Allmerica's expertise in calculating
and distributing lump sum retirement benefits, and checked Allmerica's
for obvious errors. The miscalculations were only discovered when the
Allmerica's actuarial successor brought it to the Trustee's attention.
It can readily be seen that the facts pertaining to these two critical
issues are in sharp dispute, and the first cause of action cannot be
resolved in a summary judgment motion.
Material issues of fact are also contained in the Fund's state law
causes of action for Breach of Contract, Actuarial Malpractice and
Negligence. The trial will necessarily include presentation of evidence
bearing directly upon the state as well as the federal claims and both
will be considered at that time.
The Plan's remaining cause of action, a federal law claim for
attorney's fees under ERISA 29 U.S.C. § 1132(g)(1), will not be
considered by the court at this time because it is premature, no decision
on the merits of the case having yet been made.
Accordingly, Defendant and Third Party Plaintiff First Allmerica's
motion for summary judgment is DENIED, and Plaintiff the Fund's motion
for attorney's fees is DISMISSED, without prejudice.
IT IS SO ORDERED
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