Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

CEMENT AND CONCRETE WORKERS PENSION v. ULICO CASUALTY

September 13, 2005.

CEMENT AND CONCRETE WORKERS DISTRICT COUNCIL PENSION FUND, and FRANK AGNELLO, BARRY KAPLAN, MAURICE FOLEY, ALFRED G. GEROSA, LAWRENCE LANE, and MICHAEL MELNICK in their fiduciary capacity as the Trustees of the Cement and Concrete Workers District Council Pension Fund Plaintiffs,
v.
ULICO CASUALTY COMPANY Defendant.



The opinion of the court was delivered by: NICHOLAS G. GARAUFIS, District Judge

MEMORANDUM & ORDER

On June 2, 2005, Magistrate Judge Pohorelsky issued a Report and Recommendation ("Report") recommending that this court grant defendant Ulico Casualty Company's ("Ulico") motion for summary judgment in this action. The plaintiffs submitted a timely statement of objections to the Report, thereby requiring this court to make a de novo review of all portions of the Report to which the plaintiffs specifically objected. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). Having so reviewed Judge Pohorelsky's Report, I adopt his recommendations in their entirety and grant summary judgment to Ulico as to all of the plaintiffs' claims.

I. Factual Background

  The story of this $10 million insurance coverage dispute begins with the 1997 filing of a civil action for increased pension benefits by Calogero Carollo, a longtime participant of the Cement and Concrete Workers Pension Fund Plan ("the Plan"). Carollo, who had worked in employment capacities covered by the Plan from 1969 to 1975 and 1977 to 1996, sued the Plan and its Trustees, claiming inter alia that the Plan violated ERISA's minimum accrual rate provisions by extending disproportionately lower pensions to participants who had less than 25 years of continuous covered employment.*fn1 Judge Eugene Nickerson agreed with Carollo that the "[t]he Plan fails to satisfy the Act's minimum accrual rates" and that "[t]he Plan's variable rate of accrual conditioned on a temporary break in service violates the Act," and thus determined that Carollo was entitled to summary judgment as to those claims. Carollo v. Cement and Concrete Workers District Council Pension Plan, 964 F. Supp. 677, 683-84 (E.D.N.Y. 1997). The action then settled prior to the entry of judgment for Carollo, thus leaving to the Trustees the question of how to respond to the court's determination that the Plan that they were charged with administering did not comply with ERISA's requirements.

  By October 15, 1998, the Trustees had arrived at a decision, albeit one that would spawn two further lawsuits, including this one. As described in a letter submitted on that date to the IRS, the Trustees proposed, in light of the Carollo decision, "to amend the Plan to provide for a single benefit formula, based on a single compensation base . . . effective for all Plan participants who have credited service on or after January 1, 1997." (Baldo Aff. Ex. A at 1.) The Trustees also argued in this IRS submission that "it would be inequitable, especially because of the financial hardship that would be imposed upon the Plan, to apply the proposed amendment or the Proposed Ruling to participants who retired before January 1, 1997," and that "a retroactive amendment of the Plan to include both active and retired participants would be both unsound and unaffordable." (Id. at 9.) The IRS agreed with Judge Nickerson's assessment that the Plan, as constituted up to that point, did not meet ERISA's minimum accrual standards. The IRS also determined that the proposed amendment would satisfy ERISA's accrual rules "[f]or active participants on January 1, 1997." (Baldo Aff. Ex. B at 4.) (emphasis supplied) The IRS letter did not draw any conclusions as to the Trustees' proposal to leave the Plan unamended with respect to participants who had retired on or before December 31, 1996, however.

  The Trustees then adopted the amended Plan described in their IRS submission on February 2, 1999. This amended Plan increased future pension benefit disbursements only for Plan participants who had retired on or after January 1, 1997, leaving participants who had retired prior to this date subject to the same diminished pension benefit accrual rate that Carollo had challenged. Unsurprisingly, this state of affairs displeased some of the pre-1997 retirees, and on December 24, 1999, Aurelio La Fata, Vincenzo Gambino and Giuseppe Mazzone initiated a class action suit ("the La Fata complaint") on behalf of all Plan participants who had retired prior to 1997 with less than 25 years of continuous service. Invoking the court's jurisdiction under Section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1), the La Fata plaintiffs sought "declaratory, injunctive and equitable relief, to require [the Plan and the Plan Trustees] to change the effective date of their Plan amendment to April 1, 1976." (La Fata Compl. ¶ 1.) The complaint further described the "questions of law common to all members of the class" as "whether the terms of the Plan, as amended in 1999, comply with the Carollo Decision and with ERISA's minimum standards, and how to reform the Plan retroactive to April 1, 1976, to bring it into compliance with such standards." (Id. ¶ 38(c).) Specifically, the plaintiffs brought claims for relief stemming from the amended Plan's alleged failure to comply with the minimum benefit accrual standards set forth in ERISA Section 204(b) [Claims One, Two and Seven], the anti-retroactivity provisions of § 204(g), [Claims Three and Five] and the anti-forfeiture provisions of § 204(h) [Claims Four and Six]. None of these sections address the fiduciary duties owed by a Plan Trustee, and none of the claims based on these ERISA sections expressly allege a breach of fiduciary duty by any of the Plan Trustees. The complaint also contains an eight-part prayer for relief requesting that the court declare the amended plan to be in violation of ERISA's minimum accrual standards, order the defendants to amend the plan retroactive to April 1, 1976, and adjust the pension benefits received by all class plaintiffs accordingly. This prayer for relief likewise did not allege that the Trustees committed any breach of their fiduciary duties, and did not request that the Trustees be found liable to the Plan or the individual participants.

  Recognizing that the Plan faced liability actuarially valued at between $25.1 million and $30.1 million based on the relief sought in the La Fata complaint, a sum that threatened the very existence of the Plan, the Trustees entered into a settlement agreement with the class plaintiffs which was approved by this court on January 9, 2002. The Plan and Plan Trustees then, as required by the terms of the settlement agreement, sought indemnification from present defendant Ulico Casualty Co. for the costs of the La Fata litigation and settlement agreement under the terms of a $10 million liability insurance policy ("the Policy"). Ulico refused to indemnify the Plan or the Plan Trustees, asserting (1) that the conduct complained of in the La Fata complaint did not constitute a "wrongful act" within the meaning of the policy, (2) that coverage was not available because the Plan Trustees had known that the Plan was improper prior to the effective date of the policy, and (3) that claims for pension benefits are not covered under the policy. The present battle over the scope of the Ulico insurance policy soon followed.

  II. Summary Judgment Standard

  A motion for summary judgment should be granted only 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 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of establishing the absence of a genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Once the moving party has met this burden, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The nonmovant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (internal quotations and citations omitted); see Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Rather, the opponent can only create a genuine issue of material fact by citing competent, admissible evidence. Glasso v. Eisman, Zucker, Klein & Ruttenberg, 310 F. Supp. 2d 569, 574 (S.D.N.Y. 2004) (citing Sarno v. Douglas Elliman-Gibbons & Ives, 183 F.3d 155, 160 (2d Cir. 1999)). When deciding a motion for summary judgment, the court must view the evidence in the light most favorable to the non-moving party and must draw all permissible inferences from the submitted affidavits, exhibits, interrogatory answers, and depositions in favor of that party. See Anderson, 477 U.S. at 255; Vann v. City of New York, 72 F.3d 1040, 1048-49 (2d Cir. 1995).

  In reviewing the Report, I am mindful that "summary judgment frequently is denied in [insurance disputes] because issues of fact are present concerning whether the injury or activity involved is within the scope of the insurance policy." 10B Wright Miller & Kane, Federal Practice and Procedure § 2730.1 (3d ed. 1998) (collecting cases). However, summary judgment nonetheless may be granted in contract disputes, including insurance cases, where the contract is plain and unambiguous and there is no genuine dispute of fact as to any issue external to the contract. Brass v. Am. Film Techs., Inc., 987 F.2d 142, 148-49 (2d Cir. 1993). A contract is unambiguous when it is not "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993).

  III. Judge Pohorelsky's Report and Recommendation

  After hearing oral argument, Judge Pohorelsky issued a Report recommending that Ulico's motion for summary judgment be granted. He first found that because the La Fata complaint "does not allege any breaches of fiduciary duties by the trustees or the plan, or indeed any conduct by the trustees that constitutes a breach of fiduciary duties, there is no wrongful act within the meaning of the policy for which the trustees or the plan are entitled to indemnity." (Report at 6.) This conclusion was based on three subsidiary findings: (1) under the Ulico policy, a Wrongful Act must occur "in the discharge of [the Trustees'] fiduciary duties";*fn2 (2) the Trustees could not have breached a fiduciary duty in amending the pension plan, because the Supreme Court has explicitly held that amending a pension plan is not a fiduciary act within the meaning of ERISA, thus abrogating prior Second Circuit cases holding that amending a multi-employer pension plan, such as the one at issue here, is a fiduciary act; and (3) that the Trustees' conduct did not violate any additional fiduciary obligations imposed by the Trust Agreement.

  Judge Pohorelsky also found that in any event, the provision limiting coverage to instances where "the Insureds had no knowledge of such wrongful act prior to the effective date of the Policy" bars the plaintiffs from achieving any recovery under the contract. See Section I, Coverage A.*fn3 Interpreting this provision, in accordance with the parties' joint understanding, as barring coverage for "wrongful acts committed by the trustees with knowledge that they are wrongful," Judge Pohorelsky concluded that the Trustees "knew at the time Judge Nickerson issued the Carollo opinion in 1997 that the plan had violated ERISA since its inception in 1976 . . . well before April 1, 1999, the effective date of the policy." (Report at 12-13.)

  Having decided each of these issues in Ulico's favor, Judge Pohorelsky declined to address Ulico's further contention that the exclusion outlined in Section IV(a) of the insurance policy provides an independently sufficient bar to coverage.*fn4 IV. Discussion

  The plaintiffs now raise four principal objections to the Report. First, the plaintiffs assert that Judge Pohorelsky should have permitted them to develop a more complete factual record during discovery. In particular, they complain they were not permitted to conduct depositions or obtain "documents relating to the drafting history of the Policy, or documents revealing in particular the intention behind the Policy's definition of `Wrongful Act,' or the intended scope of the exclusions on which Ulico has relied in denying Plaintiffs' coverage request." (Pl. Obj. at 2.) Second, they contend that Judge Pohorelsky improperly construed both the Ulico policy and the contours of the La Fata complaint in favor of the insurer, an approach which they describe as contrary to New York law. Third, they assert that the Report erred in concluding that the Trustees did not breach any fiduciary duty to the Plan in knowingly administering a pension plan that violated ERISA's minimum accrual rate requirements. Finally, the plaintiffs take issue with the Report's conclusion that the policy exclusion for known prior wrongful acts ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.