L.I. Head Start Child Development Services, Inc. v. Economic Opportunity Commission of Nassau County, Inc.
710 F.3d 57
2d Cir.2013Background
- LIHS and a class sued the Plan Administrators under ERISA §§ 404(a) and 409(a) for breaches of fiduciary duties related to the CAAIG Trust.
- Trustees depleted Plan Reserves beginning in 1993 to cover a contingent liability and Yonkers CAP delinquency, without increasing agency contributions.
- LIHS withdrew from the Plan in 1992; LIHS Reserves were not refunded, creating a prior actionable liability.
- Between 1998 and 2001, Yonkers CAP and EOC Suffolk withdrew; the Plan ceased operations and reserves dwindled to protect against the Prior Action liability.
- District court held the Administrators liable on three timely claims: Diversion, Underfunding, and EOC Suffolk Delinquency, and awarded damages and attorneys’ fees.
- On appeal, the Administrators challenge standing, statute of limitations, fiduciary status, and breach findings; the panel affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under ERISA § 502(a)(2) | Class and LIHS have plan-wide injury; seeks plan relief. | Not all plaintiffs have proper standing; arguments about derivative vs. individual relief. | Class and LIHS have standing; derivative claims permitted and LIHS remains a fiduciary with standing. |
| Statute of limitations | Underfunding claim timely based on late discovery; three-year period commenced when facts were learned. | Limitations either three-year or six-year bar; knowledge attributed to plaintiffs. | Underfunding timely (discovery rule applied); EOC Suffolk Delinquency timely; others not necessary to resolve. |
| Fiduciary status of agencies | Trust Agreement gave agencies discretionary authority to administer the Plan; thus fiduciaries. | Agencies only had ministerial duties; not fiduciaries. | Agencies are fiduciaries under ERISA § 3(21)(A). |
| Breach of fiduciary duties—Underfunding | Administrators failed to ensure adequate funding and to enforce agency contributions. | No breach or causation shown; funds were expended elsewhere. | Administrators breached duties by allowing underfunding and failing to enforce funding obligations. |
| Breach of fiduciary duties—EOC Suffolk Delinquency | Administrators failed to collect delinquency and allow continued participation of EOC Suffolk. | Costs of collection justified; discretion exercised. | Breach established; failure to terminate or collect delinquency violated fiduciary duties. |
Key Cases Cited
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (U.S. 2008) (delineates remedial scope of §502(a)(2))
- Mullins v. Pfizer, Inc., 23 F.3d 663 (2d Cir. 1994) (standing in fiduciary breach actions)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (defining 'participant' and benefits scope)
- Diduck v. Kaszycki & Sons Contractors, Inc., 874 F.2d 912 (2d Cir. 1989) (trustee duties to ensure plan funds)
- Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181 (2d Cir. 2005) (fiduciary duties and plan asset integrity)
- Caputo v. Pfizer, Inc., 267 F.3d 181 (2d Cir. 2001) (three-year limitations for fiduciary claims (actual knowledge))
- Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12 (2d Cir. 1991) (standing of former fiduciaries)
- Bouboulis v. Transp. Workers Union of Am., 442 F.3d 55 (2d Cir. 2006) (ERISA fiduciary status under § 3(21)(A))