Opinion
No. 03 CV 1581 (JG).
April 7, 2005
ROBERT J. BACH, New York, New York, Attorney for Plaintiff.
MYRON D. RUMELD, Proskauer Rose LLP, New York, NY, Attorneys for Defendants.
MEMORANDUM AND ORDER
Plaintiff Abraham Wilkins brings this action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., seeking recovery of pension benefits. During the years 1956 though 1965 and 1985 (the "relevant years"), Wilkins worked for several employers who were obligated to contribute to the Masons Tenders' District Council Pension Fund (the "Pension Fund" or "Fund") on behalf of an employee who performed work covered by certain collective bargaining agreements ("CBAs") within the geographic jurisdiction of the Fund. These employers reported less income to the Fund than Wilkins earned while working for them. In such situations, the Fund places the burden on the employee to prove, by the submission of pay stubs, that the unreported income reflected covered work that should have been reported to the Fund. The Trustees of the Fund (the "Trustees") denied Wilkins's claim because he could not provide the requisite evidence. Wilkins alleges that this denial violated his rights under ERISA. Further, Wilkins claims that the Trustees breached their fiduciary duty to him by (1) improperly shifting to Wilkins the burden of keeping records to determine eligibility for benefits; (2) failing to conduct audits of contributing employers; (3) failing to maintain and secure the records of audits that were taken; and (4) failing to inform Fund participants that they should preserve their records of employment. Wilkins and the defendants have made cross-motions for summary judgment. For the reasons set forth below, defendants' motion is granted in its entirety, and Wilkins's motion is denied.
BACKGROUND
A. Relevant Employment History
Wilkins was born on October 16, 1927. From the 1950s to the 1980s, he worked in the construction industry for at least fourteen different employers. Wilkins was a member of four local unions: Construction General Building Laborers' Local 47 (the predecessor to Construction General Building Laborers' Local 79), the Cement and Concrete Workers Union Local 20, the General Building Laborers' Local 66, and the Excavators Union Local 731. During the relevant years, Wilkins worked for seven employers who were signatories to CBAs with the Mason Tenders' District Council of Greater New York and Long Island (the "MTDC"). These employers were obligated to contribute to the Pension Fund on behalf of employees who performed work covered by these CBAs.
As set forth in the accompanying chart, there are discrepancies between the amounts Wilkins earned from each of these employers and the amounts these employers reported to the Pension Fund:
Year Employer Earnings Reported Wages
1956 Arfal Foundations $1,360.27 $936.34
1956 Ralph Amore $639.00 $292.50
1956 Well-Mixed Concrete Co. $1,609.00 $199.00
1957 Well-Mixed Concrete Co. $3,502.78 $326.55
1957 Anthony Cutripi $102.00 $102.00
1957 Concrete Plank Co. $84.00 $84.00
1957 Caristo Constr. Corp. $157.20 $157.20
1958 Well-Mixed Concrete Co. $4,200.00 $417.29
1959 Well-Mixed Concrete Co. $4,800.00 $324.30
1960 Well-Mixed Concrete Co. $4,799.60 $386.90
1961 Well-Mixed Concrete Co. $4,800.00 $109.20
1962 Well-Mixed Concrete Co. $4,800.00 $1,146.00
1963 Well-Mixed Concrete Co. $4,800.00 $766.35
1964 Well-Mixed Concrete Co. $4,800.00 $239.50
1965 Well-Mixed Concrete Co. $4,800.00 $980.00
1985 Alicer Contracting Co. $14,030.69 $0.00
Some of the work Wilkins performed for his primary employer during this period — Well-Mixed Concrete Co. — was performed for unions unaffiliated with the Pension Fund. Thus, his employers presumably contributed to other benefit funds on Wilkins's behalf in connection with such work.
B. The Pension Fund
The MTDC is an umbrella organization of affiliated local unions. It sponsors several ERISA-governed employee benefit plans, including the Pension Fund. The Fund pays benefits to employees who perform work covered by collective bargaining agreements between the MTDC and contributing employers. The Plan is administered by a Board of Trustees (the "Trustees") who determine claims for benefits. The Board of Trustees has "the exclusive right, power, and authority, in its sole and absolute discretion, to administer, apply and interpret the Plan and any other Plan documents. . . . [T]he Board of Trustees shall have the sole and absolute discretionary authority to: (1) take all actions and make all decisions with respect to the eligibility for, and the amount of, benefits payable under the Plan. . . ." Virga Aff. Ex. A., Pension Fund Plan, at 37.
The Fund's policy for crediting hours of employment where an employer has allegedly failed to contribute on the participant's behalf places the burden on the employee to establish that he was engaged in covered work. To meet this burden, the employee must provide pay stubs which show the wage the employee was receiving and the hours worked, unless the Fund audited the employer during the relevant period and the audit revealed that the work at issue was covered work.
The "Policy on Crediting Hours of Employment in Delinquent Employer Contribution Situations," reads, in pertinent part:
In the event that a Contributing Employer fails to contribute to the Fund on behalf of a Participant for hours allegedly worked in Covered Employment, the Participant may seek to obtain credit for such hours. . . . In order to receive credit for hours worked under these circumstances, the Participant must establish to the satisfaction of the Fund's Director that (i) the alleged hours actually were worked, and (ii) such hours were worked in "Covered Employment," in the manner set forth in Sections I and II, below.
I. A participant may establish that the alleged hours were actually worked by submitting to the Fund's Director:
(a) original pay stubs specifying the hours worked during the relevant period(s). . . .
(b) records of Social Security earnings . . . demonstrating that the Participant worked the claimed number of hours during the relevant period(s). . . .
II. A participant may establish that the alleged hours were worked in "Covered Employment" by submitting . . . pay stubs [indicating the wage the participant was earning during the relevant period].
. . .
If a participant does not have pay stubs . . . but has submitted to the Funds Office records of Social Security earnings, then the Fund Office will check its records to determine whether the employer was a Contributing Employer during the relevant period(s) and whether an audit during the relevant period(s) demonstrates that the claimed number of hours were worked in Covered Employment during the relevant period(s).
C. Wilkins's Applications for Pension Benefits
On December 14, 1998, Wilkins filed an application to receive pension benefits from the Fund. On February 23, 1999, he was advised by letter that he was entitled to a lump-sum payment of $429.21, which he received about a month later. In March 2001, Wilkins met with John Virga, the Director of the Fund, requesting additional benefits based upon work performed during the years 1951 through 1965 and 1985. In a letter dated June 13, 2001, Virga stated that though Wilkins had worked for employers who were obligated to contribute to the Fund, Wilkins was not entitled to additional pension benefits. Wilkins, Virga wrote, did not provide the requisite proof — pay stubs — to prove that he worked in covered employment, and the Fund had not conducted a payroll audit that would support his claim. Virga Aff. Ex. C. Wilkins had never been informed that he had to keep pay stubs, and any stubs that he once had were lost over the years.
The Fund became effective as of July 1, 1955, and thus no benefits were available for any prior year.
An audit was conducted for one of the relevant employers — Alicer Contracting Co. — in 1985. The audit listed Mason Tenders who were performing covered work. Wilkins name was not included in the audit. Bach Aff. Exs. 15-16.
Wilkins appealed the denial of benefits to the Fund's Board of Trustees. The appeal was denied on October 9, 2002 for failure to "submit adequate proof of entitlement" to additional pension credits, "in accordance with the Fund's policy with regard to granting of credit in situations where employer contributions have not been received by the Fund." Virga Aff. Ex. I, letter from Roberta Karen Chevlowe to Robert Bach dated October 9, 2002. The Trustees refused Wilkins's offer to supply an affidavit in support of his claim:
The Trustees are not willing to accept an affidavit from Mr. Wilkins attesting to the fact that the work at issue was performed in covered employment for purposes of the Fund, particularly in light of the fact that some of the employers were signatories to agreements with both the Cement and Concrete Workers Union and the Mason Tenders' District Council and, thus, it is entirely possible that the earnings were for work in the jurisdiction of the Cement and Concrete Workers Union (for which [Wilkins] would not be entitled to credit under the Fund).
Virga Aff. Ex. I (emphasis in original).
This action followed.
DISCUSSION
A. The Rule 56 StandardUnder Rule 56 of the Federal Rules of Civil Procedure, the moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The substantive law governing the case identifies the facts that are material, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is warranted only if "the evidence is such that a reasonable jury could [not] return a verdict for the nonmoving party," id., and "the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation marks omitted). Once the moving party has met its burden, however, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [T]he non-moving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Id. at 586-87 (quoting Fed.R.Civ.P. 56(e), emphasis in original).
B. Determination of Benefits
Pursuant to 29 U.S.C. § 1132(a)(1)(B), Wilkins challenges the Trustees determination of his pension benefits.
That section reads, in pertinent part, as follows: "A civil action may be brought — (1) by a participant or beneficiary — . . . (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
1. Standard of Review
The threshold question is what standard of review applies to the Trustees' determination of Wilkins's pension benefits. A denial of benefits challenged under § 1132(a)(1)(B) "is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where a plan gives its administrator broad discretionary authority to determine eligibility, the administrator's determination will not be disturbed unless it is "arbitrary and capricious." See Pagan v. NYNEX Pension Plan, 52 F.3d. 438, 441 (2d Cir. 1995). Under this standard, a decision to deny benefits may be overturned only if it is "without reason, unsupported by substantial evidence or erroneous as a matter of law." Id. at 442 (internal quotation omitted). Further, where there are competing, reasonable interpretations of a pension plan, the court must defer to the administrator's interpretation. Id.
Here, the Board of Trustees has been granted broad discretion to determine benefits. See Virga Aff. Ex. A at 37 ("The Board of Trustees shall have the exclusive right, power, and authority, in its sole and absolute discretion, to administer, apply and interpret the Plan. . . ."). Accordingly, the Trustees' determination here will be reviewed under an "arbitrary and capricious" standard. While Wilkins agrees that this is the proper standard of review, he argues that the Trustees' determination is wrong as a matter of law.
2. The Denial of Benefits
One of the principal purposes of ERISA was to "mak[e] sure that if a worker has been promised a defined pension benefit upon retirement — and if he has fulfilled whatever conditions are required to obtain a vested benefit — he will actually receive it." Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 569-70 (1985) (internal quotation omitted). In line with this purpose, trustees have a duty to preserve and maintain trust assets, which encompasses determining "what property forms the subject-matter of the trust and who are the beneficiaries." Id. at 572 (internal quotation and alterations omitted). Trustees thus have a duty to both preserve the trust against non-meritorious claims and to provide benefits to proper beneficiaries. Here, because of a lack of evidence, these two goals are in tension.
Because multi-employer plans are so large, they rely principally on employer self-reporting to determine the extent of an employer's liability. Id. at 562. Employers have an incentive, though, to underreport employee work-hours to the fund because it will reduce an employer's liability. Id. at 567. In an effort to police such underreporting, some multi-employer pension funds, including the Fund here, utilize random auditing of employers. Cf. id. at 570-71, 581 (upholding pension fund's ability to conduct audits as a "necessary or appropriate" power for carrying out the purposes of the trust).
The Pension Fund has over 2,000 contributing employers. Virga Supplemental Aff.
Because of this reliance on employer self-reporting, problems arise when there is a discrepancy between the amount an employee has earned working for an employer and the amount the employer has reported to that fund on behalf of that employee. Here, Wilkins has established that over the course of 11 years he performed work for seven employers obligated to contribute to the Fund on his behalf for covered employment performed within the Fund's geographic jurisdiction. These employers reported less earnings to the Fund than Wilkins received. Wilkins contends that this discrepancy reflects employer underreporting for covered employment, but he does not have the type of proof that the Fund requires — pay stubs — to support his contention.
Wilkins argues, essentially, that under ERISA, any discrepancy between the actual wages an employee earns and the amount reported to the Fund should presumptively reflect covered employment, with the burden on the Fund to prove otherwise. Wilkins points to no authority for this proposition. While a fund could establish such a presumption, the Mason Tenders Fund has not, and that choice is neither arbitrary nor capricious. Indeed, Wilkins's work history demonstrates why a Fund might reasonably reject such a presumption. Wilkins has conceded that when he worked for Well-Mixed Concrete, his primary employer during the relevant period, he performed work for unions that were unaffiliated with the Fund. At least some of his earnings, therefore, indisputably do not reflect covered employment. That fact could be extremely difficult to prove, and thus a presumption in Wilkins's favor could inappropriately deplete trust assets.
I reject Wilkins's assertion that under ERISA, the burden of proof must be on the Fund. ERISA places no requirement on a multi-employer fund to audit every employer. The Fund's practice of conducting random audits is a permissible manner for a trust to preserve fund assets. See Central, 570-71. Nor does ERISA require a fund to maintain data on every employer concerning work performed by every employee, regardless of whether that employee is engaged in covered employment.
ERISA could not, of course, place any requirements on the Fund for the years 1956 through 1965, which comprise 10 of the 11 years of work at issue here. ERISA was enacted in 1974.
In addition to preserving a fund's assets, though, a trustee has a duty to provide benefits for those workers who engaged in covered employment. The Fund's solution for the situation where an employer has been delinquent in reporting (and no audit has been performed) is to require the employee to preserve pay stubs. This paints employees like Wilkins into a very tight corner. Most employees will not save pay stubs for decades, as a matter of course, on the off-chance that the stubs might be required one day in order to claim pension benefits.
Defendants state in their papers that a participant may establish that he worked in covered employment by submitting other documentation (besides pay stubs). Nothing in the policy suggests that this is accurate, and the footnote expanding on this statement suggests that this "other documentation" would be required in addition to pay stubs in certain situations. Defs.' Mem. in Support at 3, 3 n. 2; see also Virga Aff. Ex. I, letter from Chevlowe to Bach dated October 9, 2002 ("In accordance with the Fund's policy, Wilkins was required to submit to the Fund . . . pay stubs reflecting the hours he worked and the applicable hourly wage.").
Thus, while I agree with the Fund that it need not presume that an employee was engaged in covered work when there is a discrepancy between his earnings and the amount reported to the Fund, I find that the Fund's requirement that pay stubs are the only acceptable proof an employee can submit is arbitrary and capricious. If an employee can provide other evidence that could support his contention that he engaged in covered work, the Fund should consider it. Here, for example, the Trustees refused to accept an affidavit from Wilkins: "The Trustees are not willing to accept an affidavit from Mr. Wilkins attesting to the fact that the work at issue was performed in covered employment for purposes of the Fund." Virga Aff. Ex. I. The Trustees have a duty to Wilkins as a participant in the Fund to provide benefits to him if he worked in covered employment. See Central States, 472 U.S. at 576-77 ("[t]he trustees' duty . . . is to provide specific benefits to those who are entitled to them in accordance with the terms of a plan."). If Wilkins can provide relevant evidence, by affidavit or other means, then the Trustees have a duty to consider the evidence in good faith, especially in light of the Fund's past history of underreporting by employers.
See e.g., United States v. Mason Tenders District Council of Greater New York, 205 F. Supp. 2d 183, 185 (S.D.N.Y. 2002) (explaining that the MTDC entered into a consent decree as a result of an alleged pattern of organized corruption, where criminals controlled local union activity with the cooperation of corrupt employers) (citing Mason Tenders District Council of Greater New York v. LIUNA, 884 F. Supp. 823, 827 (S.D.N.Y. 1995) (the government alleged that, among other things, MTDC officials "repeatedly extorted payoffs from employers in exchange for [their] condoning the employers' . . . failure to make payments to the Trust Funds in accordance with collective bargaining agreements.").
Following oral argument on these motions, I received a letter from the Fund's counsel stating that the Fund expected to adopt a "clarification" to the policy at issue in this case, which would state in part that while pay stubs would presumptively establish whether an employee worked in covered employment, "a participant is free to offer whatever evidence or arguments he has in order to satisfy [the policy's] requirements, and such evidence and arguments will be considered by the Fund's Director." Letter from Myron Rumeld to Judge Gleeson dated February 24, 2005. In addition, the letter states that the policy's requirements, in particular the need for retaining pay stubs, would be reflected on forthcoming annual benefit statements to participants.
The Fund's counsel has represented that the Trustees have since adopted the policy clarification.
While this clarification — which I find renders the policy reasonable — was not in effect during Wilkins's application for benefits, I find that this does not entitle him to any relief here. Having thoroughly reviewed the record, I find that other than the rejected affidavit, Wilkins was afforded the opportunity to submit any evidence that he had to the Fund, and such evidence was carefully considered. While Wilkins characterizes the rejected affidavit as one that would "substantiate my covered employment," Wilkins Affirmation ¶ 29, this affidavit apparently consisted of Wilkins's testimony that he believed that he worked in covered employment. See Wilkins Aff. Ex. 9, Letter from Robert J. Bach to Roberta Chevelowe dated July 9, 2002 ("[W]e have no further evidence that we are able to submit other than an affidavit from Mr. Wilkins that he worked in covered employment for the periods in question."). If there were any lingering doubts that Wilkins was deprived of an inclusive review of all evidence related to his employment, these proceedings afforded Wilkins the opportunity to present any further evidence that he had, and he submitted a five-page affirmation with exhibits on his behalf. The core of Wilkins's argument here is not that he was denied a full review of the evidence, but that he unfairly bore the burden of proof. As discussed above, a policy that places the burden on an employee in Wilkins's circumstances is both permissible under ERISA and reasonable. In sum, Wilkins was afforded the type of review that the Fund's "clarified" policy will provide, and the Fund was required to do no more. Accordingly, the Fund's motion for summary judgment on this claim is granted, and Wilkins's motion for summary judgment is denied.
3. Breach of Fiduciary Duty
Wilkins argues that the Fund breached its fiduciary duty to him by: (1) improperly shifting to Wilkins the burden of keeping records to determine eligibility for benefits; (2) failing to conduct audits of contributing employers to determine if participants were engaged in covered employment or improperly excluded from covered employment; (3) failing to maintain and secure the records of audits that were taken; and (4) failure to inform Fund participants to maintain and secure records of employment. I find that the Fund did not breach any duty to Wilkins.
Breach of fiduciary claims that implicitly challenge the denial of benefits are subject to an arbitrary and capricious standard where a plan gives an administrator discretionary authority. See Varity Corp. v. Howe, 516 U.S. 489, 514-515 (1996). For the reasons stated above, defendants' motion for summary judgment on the first two claims — improperly shifting the burden to Wilkins and failing to conduct audits of contributing employers — is granted. Wilkins's third claim, regarding the securing of audit records, is apparently based upon a statement that the Fund's administrators did not know whether or not audits were conducted for specific employers during the years 1956 through 1965. In a letter to plaintiff's counsel dated June 25, 2002, defendants' counsel wrote, in part:
You have asked whether the Fund's statement that it does not have any audits on file for Well-Mixed for the relevant period (1956 through 1965) means that Well-Mixed was not audited, or, alternatively, that the audit records are no longer in existence. The definitive answer to your question is unknown by the Fund's current personnel. We note that the Fund Office has audit reports on file for other employers going back as far as 1958. Accordingly, that may (but does not necessarily) indicate that Well-Mixed was not audited during the relevant period. We also not that the fact that the Fund Office has audit records dating back as far as 1958 does not mean that all contributing employers were audited in 1958; it only means that 1958 was the earliest year for which audits have been located.
Bach Aff. Ex. 16.
Wilkins's counsel speculates that there may have been relevant audits that were lost or destroyed, see Pl.'s Opp'n at 4-6, which would suggest to him a breach of fiduciary duty, but there is no factual support for such speculation, and "metaphysical doubt" is insufficient to defeat a motion for summary judgment. Matsushita, 475 U.S. at 586. More importantly, even were such records lost by the Fund, Wilkins has cited no authority, and I have found none, for the proposition that the Fund had a duty to maintain every audit report conducted since its inception in 1955. In large part, this claim is a recast of Wilkins's assertion that the Fund was responsible for auditing every employer for the past fifty years. Such a claim failed as a challenge to the denial of benefits, and it fails as a claim for breach of fiduciary duty.
The fourth claim — that the Fund had a duty to provide notice of its policy — presents a closer question. ERISA requires all funds to publish a Summary Plan Description ("SPD") that apprises participants of their rights and obligations under the plan. 29 C.F.R. § 2520.102-2. The SPD must set forth, among other things (1) the plan's requirements respecting eligibility for participation and for benefits, including a statement describing "any other conditions [besides retirement age] which must be met before a participant will be eligible to receive benefits." 29 C.F.R. § 2520.102-3(j). On the basis of this description of benefits, the SPD must clearly identify circumstances which may result in "disqualification, ineligibility, or denial . . . of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide." Id. at § 2520.102-3(l). The Fund argues that it was not obligated to inform participants of the policy at issue here as it was not a plan term, but "merely a statement as to how the Pension Fund administers claims for benefits." See Reply Mem. in Support of Defs.' Motion at 6. The regulations are susceptible to defendants' narrow interpretation, and accordingly, under the deferential standard of review, I find that its failure to publish the policy is not a breach of fiduciary duty. However, given the Trustees' mandate "to provide specific benefits to those who are entitled to them," Central States, 472 U.S. at 576-77, defendants' interpretation is a cramped one. Whether the policy is a "plan term" or not, a participant in Wilkins's position — who believes he is entitled to benefits for work performed but cannot prove it — may find his reasonable expectations upset because he did not have prior notice of "how the Pension Fund administers claims for benefits."
In any event, even had I found a breach of duty, it would not entitle Wilkins to money damages. See Great West Life Annuity Insurance Co. v. Knudson, 534 U.S. 204, 215 (2002) (ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), provides for "appropriate equitable relief," and claims for money damages for breach of fiduciary duty are unavailable for an individual plaintiff). Here, the equitable relief requested by Wilkins has largely been adopted by the Fund. Wilkins requested, in part, that the Fund "advise the affected participants of the Fund that they will have to retain necessary records to demonstrate covered employment, specifying the records that the Fund will accept." Based on defendants' counsel's representations that the policy's requirements, in particular the need for retaining pay stubs, will be reflected on forthcoming annual benefit statements to participants, the Fund will provide such notice in the future.
By letter dated March 8, 2005, Wilkins's counsel, in response to defendants' counsel's February 24, 2005 letter, argues that the policy "clarification" be included in the Summary Plan Description under 29 C.F.R. 2520.102-3. Having granted defendants' motion in its entirety, I need not address this point.
CONCLUSION
The defendants' motion for summary judgment is granted in its entirety; Wilkins's motion is denied; and the action is dismissed. The Clerk of the Court is respectfully directed to close the case.So Ordered.