Citations
- 280 F. Supp. 2d 342
Full opinion text
MEMORANDUM OPINION
MARTINI, District Judge.
Presently before this Court are cross motions for summary judgment filed by the certified class action Plaintiffs, Defendants District 1199J National Union of Hospital and Health Care Employees, AFSCME, AFL-CIO (hereafter “Union Defendant”), and District 1199J New Jersey Benefit Fund and Trustees (hereafter “Benefit Fund Defendant”). Plaintiffs cross move for partial summary judgment on liability on the following grounds: (1) that the Defendant Fund breached its fiduciary duties to the Plaintiffs by failing to notify Plaintiffs of the employer’s delinquent contributions; (2) that the Defendant Fund improperly denied Plaintiffs access to COBRA coverage, “direct payment coverage,” and “unemployment continuation coverage”; and (3) that the Defendant Union breached its duty to provide fair representation to the Plaintiffs. Defendants argue that (1) the Benefit Fund gave proper notice of the termination of benefits to the Plaintiffs, and thus did not breach its fiduciary duties; (2) that the Fund did not violate COBRA; (3) that the Plaintiffs are not entitled to “direct payment coverage” or “unemployment continuation coverage” and (4) that the Union did not breach its duty of fair representation.
BACKGROUND
At all times relevant to this action, Plaintiffs were employees of United Hospital and members of the Defendant Union. Pursuant to a collective bargaining agreement, United Hospital was required to make monthly contributions to the Defendant Benefit Fund, which is a Taft-Hart-ley, multi-employer fund with approximately 35 participating employers in New Jersey. The Fund is administered by a Board of Trustees whose members are chosen by the Union and the contributing employers. At the time of the events that gave rise to the present lawsuit, Joseph Carpenter was the Director of the New Jersey 1199J Pension Fund and 1199J Benefit Fund.
According to the collective bargaining agreement, United Hospital was required to make monthly payments to the Benefit Fund. The amount owed to the Fund each month was based on the previous month’s payroll, and was due no later than thirty days following the payroll month on which the contribution was based. “By way of example, a January contribution shall be based on the payroll for the month of December and shall be made no later than the thirtieth (30th) day of January.” Plaintiffs’ Exhibit 1, at p. 43. United failed to make its payment to the Benefit Fund in December of 1996, and all payments thereafter. See Plaintiffs’ Stmt, of Facts, at ¶ 35; Defendants’ Response, at ¶ 35.
At some time in January, 1997, the Benefit Fund scheduled an arbitration, and on January 31, 1997, it received an award of $263,213.97 for United’s delinquent December contribution. See Plaintiffs’ Exhibit 21. By a letter dated February 4, 1997, and signed by Joseph Carpenter, Union members were informed that United Hospital was over sixty days in arrears in its payments to the Fund, and, consequently, member medical benefits were suspended effective December 1, 1996. See Plaintiffs’ Exhibit 8. Joseph Carpenter explained that the Fund followed a verbal delinquency policy that allows the retroactive termination of benefits if an employer becomes sixty days behind in its payments to the Fund. See Deposition of Joseph Carpenter (“Carpenter Dep.”), Plaintiffs’ Exhibit 11, at p. 82. United Hospital filed for bankruptcy on February 19,1997.
STANDARD OF REVIEW
Summary judgment may be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 ■ (1986). An issue of material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In deciding a motion for summary judgment, a Court must construe the facts and inferences in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, only disputes over those facts “that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Once the moving party has carried its initial burden of demonstrating the absence of a genuine issue of material fact, “its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushi-ta, 475 U.S. at 586, 106 S.Ct. 1348. No issue for trial exists unless the nonmoving party can adduce sufficient evidence favoring it such that a reasonable jury could return a verdict in that party’s favor. Anderson, 477 U.S. at 249, 106 S.Ct. 2505.
DISCUSSION
A. Breach of Fiduciary Duties for Insufficient Notice of Termination of Benefits
Plaintiffs assert a breach of fiduciary duty claim against the Defendant Benefit Fund in Count Two of the Fourth Amended Complaint. In particular, according to Plaintiffs, it was the duty of the Fund to notify Plaintiffs of the failure of United Hospital to make its monthly contributions prior to terminating Plaintiffs’ health benefits. The Fund’s failure to provide notice constitutes a breach of the Fund’s fiduciary duty to its members.
The Defendant Fund argues that it complied with its fiduciary duties by promptly submitting the matter of the delinquent contributions to arbitration and receiving an award. Accordingly, the Fund owed no additional obligations to the Plaintiffs with respect to the employer’s delinquencies. See Defendants’ Brief, dated September 13, 1999, at pp. 5-6. The Court recognizes that in addition to submitting the matter to arbitration, the Fund pursued the delinquent contributions against United Hospital in the bankruptcy court. In the alternative, Defendants assert that “at most [there] is an approximately 30-day delay informing members that their benefits had ceased as of November 30, 1996.” Defendants’ Brief, dated February 5, 2003, at p. 9. Despite this delay, Defendants argue that “no prejudice was caused by the Fund relying on its unwritten practice of allowing an employer an additional month in which to make a payment.” Id.
Under ERISA, “a person is a fiduciary with respect to a plan to the extent that he exercises any discretionary authority or discretionary control respecting management of such plan[.]” 29 U.S.C.A. § 1002(21)(A). A plan participant or beneficiary may bring an action for a breach of fiduciary duty against the plan, its administrators or trustees under 29 U.S.C.A. § 1132(a)(3). Bixler v. Central Penn. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1299-1300 (3d Cir.1993) (allowing for individual recovery for breach of fiduciary duties under Section 502(a)(3) of ERISA). A “prudent man standard of care” requires a fiduciary of a benefit plan to:
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; ...
(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; ...
(D) in accordance with the documents and instruments governing the plan ...
29 U.S.C.A. § 1104(a). Because the statute “does not enumerate or elaborate in any detail on the duties owed by a fiduciary to a plan beneficiary,” courts have therefore “been called upon to define the scope of a fiduciary’s responsibilities.” Pocchia v. NYNEX Corp., 81 F.3d 275, 278 (2nd Cir.), cert, denied* 519 U.S. 931, 117 S.Ct. 302, 136 L.Ed.2d 220 (1996); see also Bixler, 12 F.3d at 1299 (“Congress relied upon the common law of trusts to ‘define the general scope of [trustees’ and other fiduciaries’] authority and responsibility-’ ”)(quoting Central States, Southeast & Southwest Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 86 L.Ed.2d 447 (1985)).
In support of their argument that the Defendant Fund breached its fiduciary obligations, Plaintiffs rely on a series of cases where Courts have found that fiduciaries have a duty under ERISA to notify employees of an employer’s failure to make the monthly contributions to pension funds as mandated by the pension or trust agreement. In Rosen v. Hotel and Restaurant Employees & Bartenders Union, 687 F.2d 592 (3d Cir.1981), the Third Circuit addressed the obligations of the trustees of a union pension fund in connection with delinquent employer contributions. The Court stated that “[a]t a minimum, the fiduciary obligations of a pension fund trustee require that he notify the pensioner of his employer’s failure to contribute as required by the agreement.” Id. at 599-600. In reaching this conclusion, the Court noted that “[e]ontinued eligibility is the core of the trustee beneficiary relationship and those responsible for the administration of the fund are required to notify pensioners when their employer jeopardizes their eligibility.” Id. at 600. See also Professional Helicopter Pilots Assoc, v. Denison, 804 F.Supp. 1447, 1454-55 (M.D.Ala.1992) (finding that fiduciaries breached their obligations when they failed to make any effort to notify participants that their employer was not depositing contributions to the pension fund); Pension Benefit Guar. Corp. v. Solmsen, 671 F.Supp. 938, 946 (E.D.N.Y.1987) (finding that a fiduciary who failed to forward employee contributions to the pension trust and who failed to notify employees that their contributions had not been forwarded breached his statutory duties).
The Rosen Court cited with approval traditional trust principles, which Courts employ to inform their interpretations of ERISA fiduciary responsibilities. See Ream v. Frey, 107 F.3d 147, 153 (3d Cir. 1997)(“A fiduciary’s duties under ERISA are based on ERISA, particularly the prudent person standard as set forth in ERISA § 404, 29 U.S.C. § 1104, and on the common law of trusts.”). Under trust law, there is a:
d. Duty in the absence of a request by the beneficiary. Even if the trustee is not dealing with the beneficiary or the trustee’s own account, a trustee is under a duty to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection in dealing with a third person with respect to his interest.
Restatement (Second) of Trusts, § 173, Comment b, (1959){quoted in Rosen, 637 F.2d at 600 n. 11). The Third Circuit has expounded on the concept of materiality with respect to an ERISA fiduciary’s alleged misrepresentations or omissions. In Jordan v. Federal Express Corp., 116 F.3d 1005 (3d Cir.1997), the plaintiff claimed that the plan administrator breached its fiduciary obligations when it failed to notify plaintiff of the irrevocability of his retirement benefit election and joint annuitant designation. The Court reiterated a prior conclusion that a fiduciary’s duty to inform “ ‘entails not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence may be harmful.’ ” Id. at 1015 (