306 F. Supp. 3d 659
M.D. Penn.2018Background
- Local 776 withdrew from a joint pension trust in 2008 and adopted its own ERISA-covered profit-sharing Plan, effective Jan 1, 2008, with a one-year (1,000 hours) service requirement but a waiver for employees employed as of Jan 1, 2008.
- A 2009 restatement and later amendments were made; in 2012 the newly elected executive board (term 2012–2014) approved a Plan amendment drafted by Continental that mirrored the 2009 restatement and expressly waived the one-year service requirement for anyone employed on or before Sept. 1, 2012. Garofalo and Turns signed the adoption agreement on Aug. 17, 2012.
- Plaintiffs (outgoing officers/employees) left Union service Dec. 31, 2014 and requested distributions in early 2015. New trustees Thompson and Hicks denied contributions and earnings attributable to plaintiffs’ first year of covered service, asserting the 2012 amendment was invalid or could not be located.
- Plaintiffs appealed administratively, filed suit under ERISA § 502(a)(1)(B) on Oct. 2, 2015, and proceeding to bench trial; defendants counterclaimed under ERISA and LMRDA for fiduciary breaches. Trial found plaintiffs’ combined contested account balance: $161,630.94.
- The court found (by preponderance) the 2012 amendment was duly enacted at the July 2, 2012 executive-board meeting, that Plan documents unambiguously waived the one-year requirement for those employed on/before Sept. 1, 2012, and held the denial of benefits must be reviewed de novo because administrators lacked discretionary interpretation authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Denial of benefits under ERISA (first year contributions) | The 2012 Plan amendment validly waived the one-year service requirement; plaintiffs are entitled to the withheld contributions/earnings. | Trustees/administrator contend the 2012 amendment was invalid/unenacted and therefore plaintiffs are not eligible for first-year contributions. | Court: 2012 amendment was valid and unambiguous; denial reviewed de novo; plaintiffs entitled to benefits. |
| ERISA fiduciary breach by Union, Thompson, Hicks | Plaintiffs allege trustees/administrator breached duties by denying benefits and misapplying Plan documents. | Defendants say denial was based on a good-faith (though erroneous) belief the 2012 amendment was invalid. | Court: No fiduciary breach by Union, Thompson, or Hicks — decision was an erroneous interpretation but not a breach. |
| ERISA fiduciary breach by Garofalo (self-dealing) | Plaintiffs argue Garofalo violated fiduciary duty by voting to enact a waiver that benefited him as a covered employee. | Garofalo says he investigated and recommended changes to benefit participants; independent board members approved the amendment. | Court: No breach; Garofalo’s roles permissible, acted for plan interest, and neutral board members served as “referees.” |
| LMRDA counterclaim and laches | Defendants counterclaimed under LMRDA for breach of fiduciary duty. | Plaintiffs moved that counterclaim is time‑barred by laches/analogous statute of limitations; defendants did not meaningfully oppose. | Court: Counterclaim barred by laches/waived; defendant’s LMRDA claim dismissed. |
Key Cases Cited
- Dowling v. Pension Plan for Salaried Emps. of Union Pac. Corp. & Affiliates, 871 F.3d 239 (3d Cir.) (standard of review depends on plan document discretionary grant)
- Conkright v. Frommert, 559 U.S. 506 (U.S.) (de novo review absent plan-granted discretion)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S.) (ERISA review standards for benefit denials)
- In re Unisys Corp. Retiree Med. Benefits ERISA Litig., 579 F.3d 220 (3d Cir.) (fiduciary duties under ERISA framed by trust/common law)
- McMahon v. McDowell, 794 F.2d 100 (3d Cir.) (simultaneous service as employer officer and plan fiduciary is permissible; need to avoid conflicts)
- Donovan v. Bierwirth, 680 F.2d 263 (2d Cir.) (fiduciary must act with an "eye single" to participants' interests)