164 A.D.3d 809
N.Y. App. Div.2018Background
- TONVAC established a Length of Service Award Program (LOSAP) in 2000 (retroactive to 1998) promising age- and service-based benefit payments and stating that upon termination participants would become fully vested and trust funds could not be diverted from participants' exclusive benefit.
- In May 2008 TONVAC froze contributions and benefit payouts; participants stopped receiving payments after June 2008. TONVAC terminated the LOSAP in October 2008, liquidated the trust, and used the funds for general business purposes.
- Plaintiffs (current or former TONVAC members) sued TONVAC, LOSAP fiduciaries, individual directors, and Hometown (alleged LOSAP administrator) asserting claims including breach of contract (first cause), ERISA violations (second cause), declaratory relief (third), breach of fiduciary duty (fourth), and promissory estoppel (fifth).
- At summary judgment the Supreme Court granted dismissal of multiple claims and defendants; plaintiffs appealed the judgment. The Appellate Division reviewed ERISA applicability, contract enforceability, fiduciary and estoppel claims, and Hometown’s liability.
- Court found ERISA inapplicable (participants were not ERISA "employees"); held the LOSAP was an enforceable unilateral contract creating vested rights; reinstated breach-of-contract claim against TONVAC and granted plaintiffs summary judgment on liability for that claim; other claims (declaratory relief, fiduciary duty, promissory estoppel) were dismissed as duplicative or barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ERISA applicability | LOSAP is an employee benefit plan subject to ERISA | Plaintiffs are not ERISA "employees" so ERISA does not apply | Court: ERISA does not apply; plaintiffs are not employees under ERISA (affirmed dismissal of ERISA claim) |
| Enforceability of LOSAP / vesting | LOSAP created enforceable unilateral contract; participants vested by meeting service/age conditions | LOSAP was gratuitous and unenforceable | Court: LOSAP was a unilateral contract creating vested rights; plaintiffs entitled to benefits; summary judgment for plaintiffs on liability against TONVAC (first cause reinstated) |
| Promissory estoppel | TONVAC made promises creating reliance-based claim | Existence of valid contract precludes estoppel recovery | Court: Promissory estoppel dismissed as contract governs the subject matter (affirmed) |
| Hometown liability / fiduciary duty | Hometown, as administrator, is liable for fiduciary breaches and for diversion of funds | Hometown relied on TONVAC directions under LOSAP and had no authority over termination/allocation; thus no liability | Court: Hometown entitled to summary judgment; it could rely on TONVAC and was not liable (claims against Hometown dismissed) |
Key Cases Cited
- Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (U.S. 1992) (tests whether workers are "employees" for ERISA coverage)
- Pratt v. Petroleum Prod. Mgmt., Inc. Emp. Sav. Plan & Tr., 920 F.2d 651 (10th Cir. 1990) (unilateral plan can create vested contractual rights upon performance)
- Zuckerman v. City of New York, 49 N.Y.2d 557 (N.Y. 1980) (summary judgment burden-shifting and proof standards)
- Hoeg Corp. v. Peebles Corp., 153 A.D.3d 607 (2d Dep't 2017) (promissory estoppel barred where valid contract covers the subject matter)