Babino v. Gesualdi
278 F. Supp. 3d 562
E.D.N.Y2017Background
- Plaintiff Michael Babino claimed entitlement to pension, annuity, welfare, and vacation benefits from multiemployer Funds administered by Local 282 trustees; Trustees rescinded welfare coverage and subtracted Oakfield hours from pension/annuity credits, alleging fraud and falsified hours.
- Oakfield Leasing and Coral Industries were found by the Court in earlier litigation to be a single employer and liable to Funds for unpaid contributions; Babino had managerial control of the companies.
- Trustees relied on an employees’ letter (signed by six workers) and investigative reports alleging Babino did not perform covered driving work and that he had manipulated driving tickets; they also relied on evidence that Coral paid some drivers in cash.
- Trustees notified Babino (April 2014), allowed an appeal, provided the administrative materials, and ultimately denied his appeal (March 2015); Babino later produced 70 driving tickets after appeal denial.
- Court found plan notice procedures deficient under 29 C.F.R. §2560.503‑1(g) so it reviewed de novo, considered most (but not all) extra‑record materials, and denied Babino’s motion to amend to add a §502(a)(3) fiduciary‑duty claim as futile.
- On de novo review, the Court concluded Babino committed intentional misrepresentations (cash payments and tainted reported hours), upheld rescission of welfare coverage, and upheld disallowance of Oakfield hours from pension/annuity; vacation claim dismissed for failure to exhaust and preemption.
Issues
| Issue | Babino’s Argument | Trustees’ Argument | Held |
|---|---|---|---|
| Whether plaintiff may amend complaint to add §502(a)(3) fiduciary‑duty claim | Proposed §502(a)(3) claim seeks equitable relief for breach of fiduciary duty and restitution | Amendment is futile and duplicative of §502(a)(1)(B) benefit claims | Denied: amendment futile because relief sought is available under §502(a)(1)(B) (duplicative) |
| Standard of review (de novo v. arbitrary & capricious) | Trustees have discretion but failed to cite plan provisions in adverse notice; plaintiff invoked DOL regs | Trustees argued discretion and substantial evidence support | De novo review applied because plan notice failed to satisfy 29 C.F.R.§2560.503‑1(g), though failure was not shown inadvertent and harmless |
| Whether welfare coverage rescission was proper (fraud / intentional misrepresentation) | Denied wrongdoing; asserted steward reports and shop records show covered work | Reliance on employees’ letter, investigator statements, and plaintiff’s deposition (cash payments) showed fraud/intentional misrepresentation | Held for Trustees: evidence (including plaintiff’s deposition admitting cash payments and employees’ statements) supported retroactive rescission under SPD fraud provisions |
| Whether pension/annuity credits for Oakfield hours must be restored (vesting/nonforfeitable) | Plaintiff argued vesting and nonforfeitability; submitted post‑appeal driving tickets and affidavits showing he drove/performed covered work | Trustees argued hours must be for "covered employment" per CBAs (drivers only) and record showed tainted reports; burden on claimant/employer to prove covered work | Held for Trustees: plaintiff failed to prove covered work by preponderance; hours properly disregarded despite vesting language because credits were not due for non‑covered work |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (deferential review if plan grants administrator discretion)
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (§502(a)(3) equitable relief is a ‘‘catchall’’ and not available where ERISA provides adequate remedy)
- Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir.) (plan failure to satisfy DOL claims‑procedure regs may require de novo review)
- Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (conflict of interest as factor when administrator both evaluates and pays claims)
- Roganti v. Metropolitan Life Ins. Co., 786 F.3d 201 (2d Cir.) (arbitrary and capricious standard explained)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden principles)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards post‑Twombly)