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Martinez v. Dist. 1199J National Union of Hospital and Health Care Employees

September 9, 2003

LUCY MARTINEZ, ET AL., INDIVIDUALLY, AND ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
DISTRICT 1199J NATIONAL UNION OF HOSPITAL AND HEALTH CARE EMPLOYEES, AFSCME, AFL-CIO; DISTRICT 1199J NEW JERSEY BENEFIT FUND; DISTRICT 1199J NEW JERSEY PENSION FUND FOR HOSPITAL AND HEALTH CARE; PREFERRED CHOICE MANAGEMENT SYSTEMS, INC., D/B/A MAGNACARE; SANTO M. SACCO; BRENDAN FARRELLY; STEVEN SCHILSKY; VICTOR GARCIA; JOSEPH FRANKLIN; MYRTLE HARTSFIELD; CAROLYN KEYS; JOHN DOE DEFENDANTS 1 THROUGH 20, THE TRUSTEES OF THE DISTRICT 1199J NEW JERSEY PENSION FUND FOR HOSPITAL AND HEALTH CARE EMPLOYEES; JOHN DANDRIDGE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Martini, District Judge

FOR PUBLICATION

MEMORANDUM OPINION

Presently before this Court are cross motions for summary judgment filed by the certified class action Plaintiffs, Defendants District 1199J National Union of Hospital and Health Care Employees, AFSCME, AFL-CIO (hereafter "Union Defendant"), and District 1199J New Jersey Benefit Fund and Trustees (hereafter "Benefit Fund Defendant"). Plaintiffs cross move for partial summary judgment on liability on the following grounds: (1) that the Defendant Fund breached its fiduciary duties to the Plaintiffs by failing to notify Plaintiffs of the employer's delinquent contributions; (2) that the Defendant Fund improperly denied Plaintiffs access to COBRA coverage, "direct payment coverage," and "unemployment continuation coverage"; and (3) that the Defendant Union breached its duty to provide fair representation to the Plaintiffs. Defendants argue that (1) the Benefit Fund gave proper notice of the termination of benefits to the Plaintiffs, and thus did not breach its fiduciary duties; (2) that the Fund did not violate COBRA; (3) that the Plaintiffs are not entitled to "direct payment coverage" or "unemployment continuation coverage" and (4) that the Union did not breach its duty of fair representation.

BACKGROUND

At all times relevant to this action, Plaintiffs were employees of United Hospital and members of the Defendant Union. Pursuant to a collective bargaining agreement, United Hospital was required to make monthly contributions to the Defendant Benefit Fund, which is a Taft-Hartley, multi-employer fund with approximately 35 participating employers in New Jersey. The Fund is administered by a Board of Trustees whose members are chosen by the Union and the contributing employers. At the time of the events that gave rise to the present lawsuit, Joseph Carpenter was the Director of the New Jersey 1199J Pension Fund and 1199J Benefit Fund.

According to the collective bargaining agreement, United Hospital was required to make monthly payments to the Benefit Fund. The amount owed to the Fund each month was based on the previous month's payroll, and was due no later than thirty days following the payroll month on which the contribution was based. "By way of example, a January contribution shall be based on the payroll for the month of December and shall be made no later than the thirtieth (30th) day of January." Plaintiffs' Exhibit 1, at p. 43. United failed to make its payment to the Benefit Fund in December of 1996, and all payments thereafter. See Plaintiffs' Stmt. of Facts, at ¶ 35; Defendants' Response, at ¶ 35.

At some time in January, 1997, the Benefit Fund scheduled an arbitration, and on January 31, 1997, it received an award of $263,213.97 for United's delinquent December contribution. *fn1 See Plaintiffs' Exhibit 21. By a letter dated February 4, 1997, and signed by Joseph Carpenter, Union members were informed that United Hospital was over sixty days in arrears in its payments to the Fund, and, consequently, member medical benefits were suspended effective December 1, 1996. See Plaintiffs' Exhibit 8. Joseph Carpenter explained that the Fund followed a verbal delinquency policy that allows the retroactive termination of benefits if an employer becomes sixty days behind in its payments to the Fund. See Deposition of Joseph Carpenter ("Carpenter Dep."), Plaintiffs' Exhibit 11, at p. 82. United Hospital filed for bankruptcy on February 19, 1997.

STANDARD OF REVIEW

Summary judgment may be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Celetox Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue of material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In deciding a motion for summary judgment, a Court must construe the facts and inferences in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, only disputes over those facts "that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Once the moving party has carried its initial burden of demonstrating the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. No issue for trial exists unless the nonmoving party can adduce sufficient evidence favoring it such that a reasonable jury could return a verdict in that party's favor. Anderson, 477 U.S. at 249.

DISCUSSION

A. Breach of Fiduciary Duties for Insufficient Notice of Termination of Benefits

Plaintiffs assert a breach of fiduciary duty claim against the Defendant Benefit Fund in Count Two of the Fourth Amended Complaint. In particular, according to Plaintiffs, it was the duty of the Fund to notify Plaintiffs of the failure of United Hospital to make its monthly contributions prior to terminating Plaintiffs' health benefits. The Fund's failure to provide notice constitutes a breach of the Fund's fiduciary duty to its members.

The Defendant Fund argues that it complied with its fiduciary duties by promptly submitting the matter of the delinquent contributions to arbitration and receiving an award. Accordingly, the Fund owed no additional obligations to the Plaintiffs with respect to the employer's delinquencies. See Defendants' Brief, dated September 13, 1999, at pp. 5-6. The Court recognizes that in addition to submitting the matter to arbitration, the Fund pursued the delinquent contributions against United Hospital in the bankruptcy court. In the alternative, Defendants assert that "at most [there] is an approximately 30-day delay informing members that their benefits had ceased as of November 30, 1996." Defendants' Brief, dated February 5, 2003, at p. 9. Despite this delay, Defendants argue that "no prejudice was caused by the Fund relying on its unwritten practice of allowing an employer an additional month in which to make a payment." Id.

Under ERISA, "a person is a fiduciary with respect to a plan to the extent that he exercises any discretionary authority or discretionary control respecting management of such plan[.]" 29 U.S.C.A. § 1002(21)(A). *fn2 A plan participant or beneficiary may bring an action for a breach of fiduciary duty against the plan, its administrators or trustees under 29 U.S.C.A. § 1132 (a)(3). Bixler v. Central Penn. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1299-1300 (3d Cir. 1993) (allowing for individual recovery for breach of fiduciary duties under Section 502(a)(3) of ERISA). A "prudent man standard of care" requires a fiduciary of a benefit plan to:

discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and -

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; . . .

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an ...


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