12-2082-cv 

L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of Nassau Cnty., Inc.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2012

(Argued: December 19, 2012 Decided: March 13, 2013)

Docket No. 12-2082-cv 

 

________________________

L.I. HEAD START CHILD DEVELOPMENT SERVICES, INC., PAUL ADAMS, 

derivatively on behalf of Community Action Agencies 

Insurance Group and as class representative of all other 

persons similarly situated,

Plaintiffs-Appellees,

v.

ECONOMIC OPPORTUNITY COMMISSION OF NASSAU COUNTY, INC., ECONOMIC 

OPPORTUNITY COUNCIL OF SUFFOLK, INC., YONKERS COMMUNITY ACTION PROGRAM,

INC., JOHN L. KEARSE, STELLA B. KEARSE, Representative of the 

Estate of John L. Kearse,

Defendants-Appellants.*

________________________

Before:

CALABRESI, LYNCH, and CHIN, Circuit Judges.

 

* The Clerk of Court is directed to amend the official 

caption to conform to the above.
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Appeal from a judgment of the United States 

District Court for the Eastern District of New York (Spatt, 

J.), awarding damages against defendants-appellants 

pursuant to the Employee Retirement Income Security Act, 29 

U.S.C. § 1001 et seq., for breaching their duties as 

fiduciaries of an employee welfare benefits plan.

AFFIRMED.

 

____________________________

ALEXANDER A. MIUCCIO (Gregory J. 

Spaun, on the brief), Welby, 

Brady & Greenbatt, LLP, White 

Plains, New York, for 

Plaintiffs-Appellees.

MARK GOIDELL, Law Office of Mark E. 

Goidell, Amityville, New York, 

for Defendants-Appellants.

____________________________

 

CHIN, Circuit Judge:

In 2000, in a prior lawsuit, the district court 

entered judgment in the amount of $497,736, plus interest, 

attorneys' fees, and costs, against Community Action 

Agencies Insurance Group ("CAAIG" or the "Plan"), a welfare 

benefits plan for employees of not-for-profit antipoverty 
- 3 -

agencies, and its trustees. The judgment was entered in 

favor of one of the participating agencies, plaintiffappellee L.I. Head Start Child Development Services, Inc. 

("LIHS"), on account of CAAIG's failure to refund reserves 

that had been set aside for LIHS after LIHS withdrew from 

the Plan.

In the present case, LIHS and Paul Adams, 

derivatively on behalf of CAAIG and as representative of a 

class of LIHS employees who were Plan participants, sued 

the administrators of CAAIG, contending that they breached 

their fiduciary duties to CAAIG under the Employee 

Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 

et seq., by failing to ensure that CAAIG had sufficient 

assets with which to satisfy the judgment. Following a 

bench trial, the district court agreed and entered judgment 

against the Plan administrators. The administrators 

appeal. We affirm.
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STATEMENT OF THE CASE

A. The Facts

1. CAAIG

CAAIG was established as an ERISA welfare benefits 

plan for the purpose of providing "sickness, accident, 

life, disability and other welfare benefits" for the 

employees of not-for-profit antipoverty agencies. At all

relevant times, the participating employers consisted of 

Economic Opportunity Commission of Nassau County, Inc. 

("EOC Nassau"), Economic Opportunity Council of Suffolk, 

Inc. ("EOC Suffolk"), Yonkers Community Action Program, 

Inc. ("Yonkers CAP"), and LIHS. 

Pursuant to a trust agreement dated October 4, 

1983 (the "Trust Agreement"), the CAAIG Trust Fund (the 

"Trust") was established to effectuate the purposes of the 

Plan. Section 2 of the Trust Agreement provided that the 

participating agencies had authority to administer the 

Plan. The agencies delegated their authority to their 

respective chief executive officers, who were to act as 

trustees (the "Trustees") upon the direction of the 

agencies. 
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In exercising their powers and duties, section 3.4 

of the Trust Agreement required the Trustees to act "solely 

in the interest of the plan participants and other persons 

entitled to benefits [thereunder]," for the exclusive 

purpose of "providing benefits to participants" and 

"defraying reasonable expenses of administering the Trust," 

and "[w]ith the care, skill, prudence, and diligence" of a 

prudent person in like circumstances.

2. Employer Contributions and The Reserves

The Trust Agreement required the participating 

agencies to "make the necessary contributions to provide 

the benefits expected to become payable under this Trust." 

According to the CAAIG Health Coverage Plan, the failure of 

any participating agency to "submit the appropriate premium 

charge within the grace period of 30 days shall cause 

coverage for all claims to cease from that month forward." 

To ensure the financial integrity of the Plan, the Trustees 

maintained approximately $1 million in reserves (the "Plan 

Reserves"), which funds were "for [the] security of the 

plan and could not be distributed to any member while the 

plan was in existence."
- 6 -

At some point, Yonkers CAP and EOC Suffolk began 

experiencing difficulty paying their Plan contributions. 

By 1990, Yonkers CAP owed approximately $100,000 in 

arrears. Although the Trustees initially terminated 

Yonkers CAP's participation in the Plan, they reinstated 

Yonkers CAP on assurances that it would pay down its 

overdue contributions. After reinstatement, however, 

Yonkers CAP failed to pay down the contributions in 

arrears. Similarly, in 1990, EOC Suffolk owed the Plan 

approximately $38,000 in arrears, but the Trustees 

permitted it to remain in the Plan and pay down its 

delinquency on an "as possible" basis.

On September 1, 1992, LIHS withdrew from the Plan 

and requested the immediate return of the portion of Plan 

Reserves attributable to its past contributions (the "LIHS 

Reserves"). The Trustees refused to refund the LIHS 

Reserves.

3. The Prior Action and Depletion of Reserves

In 1993, LIHS, Anthony Macaluso (Finance Director 

of LIHS) and Paul Adams (LIHS employee formerly 

participating in the Plan) commenced a class action against 
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the Plan and its Trustees, seeking, inter alia, a refund of 

the LIHS Reserves (the "Prior Action").

At a meeting of the Board of Trustees on December 

14, 1993, the Trustees discussed the fact that the Prior 

Action exposed the Plan to a contingent liability of 

approximately $500,000, the amount of damages sought by 

LIHS and its employees. At the very same board meeting, 

the Trustees decided to write off the Yonkers CAP 

delinquency as bad debt and pay the claims of Yonkers CAP 

employees using the Plan Reserves.

Over the next several years, the Trustees depleted 

the Plan Reserves, notwithstanding the approximately

$500,000 contingent liability it faced in the Prior Action. 

In 1995 alone, the Trustees expended $611,000 of the Plan 

Reserves by recording a loss of approximately $296,000 for 

the write-off of the Yonkers CAP delinquency plus interest 

receivable, and by paying more in claims and expenses 

relative to prior years. The Plan Reserves fell below $1 

million for the first time in at least seven years. 

Despite the quickly declining reserves, however, the 

Trustees did not increase the contributions due from the 
- 8 -

agencies but collected approximately the same amounts as in 

prior years. 

On June 30, 1998, Yonkers CAP and EOC Suffolk 

withdrew from the Plan, owing $107,496 plus interest and 

$9,000, respectively. The Plan ceased operations that 

year.1 Between 1998 and March 2001, the Trustees depleted 

the Plan Reserves, setting aside only $50,000 for the 

$500,000 in contingent liability it faced in the Prior 

Action. They did not exercise their power, under section 

3.2(j) of the Trust Agreement, to "retain any funds or 

property subject to any dispute." 

In 2000, the district court entered judgment in 

the Prior Action, awarding LIHS and its employees $497,736 

for the LIHS Reserves that should have been refunded, plus 

interest, attorneys' fees, and costs, for a total award of 

$802,831.57. The Plan satisfied only a portion of the 

judgment, leaving over $700,000 plus interest unpaid.

 

1 Although the district court found that the Plan had 

ceased operations in 1998, the record suggests that the Plan was 

never legally terminated. The district court declined to make a 

finding as to whether the Plan was legally terminated.
- 9 -

B. Proceedings Below

On December 13, 2000, LIHS and Adams commenced the 

present action, principally asserting claims that EOC 

Nassau, EOC Suffolk, Yonkers CAP, and John Kearse, Chief 

Executive Officer of EOC Nassau (collectively, the 

"Administrators"), breached their fiduciary duties in 

violation of ERISA §§ 404(a) and 409(a). In the claims 

relevant to this appeal, LIHS and the Class alleged that 

the Administrators breached their fiduciary duties by: (1) 

diverting the LIHS Reserves to pay the Plan's claims and 

expenses (the "Diversion Claim"), (2) failing to adequately 

fund the Plan through contributions from the agencies (the 

"Underfunding Claim"), and (3) failing to collect overdue 

contributions from EOC Suffolk (the "EOC Suffolk 

Delinquency Claim").2

The district court conducted a bench trial on a 

number of days during the period 2004 to 2007 and issued a 

 

2 Although the EOC Suffolk Delinquency Claim was 

initially asserted as a claim under ERISA § 406, which 

proscribes certain prohibited transactions, the basis for this 

appeal is the district court's conclusion that the 

Administrators breached their fiduciary duties in violation of

ERISA § 404(a).
- 10 -

series of decisions between 2008 and 2012.3 The district 

court held that, as a preliminary matter, LIHS and the 

Class were not collaterally estopped from bringing their 

claims because the defendant-agencies were not parties in 

the Prior Action, but that certain findings of fact it had 

made in the Prior Action would be binding as "law of the 

case." See L.I. Head Start Child Dev. Servs., Inc. v. 

Econ. Opportunity Comm'n of Nassau Cnty., Inc., 558 F. 

Supp. 2d 378, 406-08 (E.D.N.Y. 2008). The district court 

dismissed a number of claims as untimely under the 

applicable statute of limitations, ERISA § 413, but found 

the Diversion Claim, Underfunding Claim, and the EOC 

Suffolk Delinquency Claim timely. See id. at 391-406. It 

held that LIHS and the Class had standing to sue under 

ERISA §§ 502(a)(2) and 515, and that the Administrators 

 

3 The Administrators' notice of appeal indicates the 

appeal is from the "final judgment entered in this action on the 

25th day of April, 2012, and from each part thereof," which 

implemented the district court's Memoranda of Decision and 

Orders entered October 20, 2011 and April 24, 2012, awarding 

damages and attorneys' fees to LIHS and the Class. In light of 

Rule 3(c)(4) of the Federal Rules of Appellate Procedure and the 

issues raised on appeal, we construe this appeal as also being 

taken from the district court's Memoranda of Decision and Orders

entered June 3, 2008, July 8, 2009, May 28, 2010, October 20, 

2011, and April 24, 2012. 
- 11 -

were fiduciaries within the meaning of ERISA, and thus,

subject to liability. See L.I. Head Start Child Dev. 

Servs., Inc. v. Econ. Opportunity Comm'n of Nassau Cnty.,

Inc., 634 F. Supp. 2d 290, 298-99 (E.D.N.Y. 2009).

Proceeding to the merits of the three claims it 

found timely, first, the district court dismissed the 

Diversion Claim. It reasoned that the Trustees, in 

refusing to refund the LIHS Reserves, reasonably relied on 

two trust amendments dated October 6, 1983 and August 7, 

1986, which provided that the voluntary withdrawal or 

termination of any member of the Plan shall result in 

forfeiture of all monetary participation in the Trust and 

that the Plan Reserves must remain in the Trust to be used 

or distributed for Trust purposes. See id. at 308-10. The 

district court held that while the trust amendments were 

held void in the Prior Action, this ruling in 2000 could 

not have informed the Trustees' reliance on the amendments 

in the 1990s when they refused to refund the LIHS Reserves. 

See id.

Second, the district court found that the 

Administrators breached their duties as to the Underfunding 
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Claim, i.e., that the agencies failed to make the necessary 

contributions to adequately fund the Plan, and the 

Administrators, as fiduciaries, failed to enforce the 

agencies' contractual obligations to make the 

contributions. See id. at 311-12.

Third, the district court found the Administrators 

liable for the EOC Suffolk Delinquency Claim, concluding, 

inter alia, that the Administrators breached their 

fiduciary duties by failing to collect the delinquency and 

permitting EOC Suffolk to remain in the Plan. See id. at 

313. 

On the parties' subsequent cross-motions for 

reconsideration, the district court reaffirmed its previous 

rulings, except to acknowledge that it had erred in relying 

in part on ERISA § 515 to conclude that the plaintiffs had 

standing. See L.I. Head Start Child Dev. Servs., Inc. v. 

Econ. Opportunity Comm'n of Nassau Cnty., Inc., No. 00 Civ. 

7394, 2010 WL 8816299, at *8 (E.D.N.Y. May 28, 2010). The 

district court nevertheless upheld its previous conclusion 

that plaintiffs had standing pursuant to § 502(a)(2), an 

independent basis for standing. See id. at *11.
- 13 -

After a full damages hearing, the district court 

ordered the Administrators to pay $832,945, allocated among 

the defendant-agencies, plus prejudgment interest.4 See 

L.I. Head Start Child Dev. Servs., Inc. v. Econ. 

Opportunity Comm'n of Nassau Cnty., Inc., 820 F. Supp. 2d 

410, 427-28 (E.D.N.Y. 2011). In determining the damages 

amount, the district court relied on the testimony of 

plaintiffs' expert witness, Anthony Macaluso, and accepted 

his assumptions and methodology as reliable. See id. at 

419, 427. Lastly, the district court awarded $490,807.53 

in attorneys' fees to the plaintiffs. See L.I. Head Start 

Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of 

Nassau Cnty., Inc., 865 F. Supp. 2d 284, 297-98 (E.D.N.Y. 

2012).

This appeal followed.

DISCUSSION

On appeal, the Administrators principally argue 

that: (1) LIHS and the Class lack standing under ERISA 

 

4 Although the district court held that the Estate of 

John Kearse was liable for damages attributable to Kearse, it 

did not specify how much of the total damages amount should be 

allocated to him.
- 14 -

§ 502(a)(2); (2) the claims are time-barred under ERISA 

§ 413; (3) the agencies are not fiduciaries under ERISA 

§ 3(21)(A); and (4) the Administrators did not breach their 

fiduciary duties under ERISA § 409(a). We review the 

district court's findings of fact after a bench trial for 

clear error and its conclusions of law de novo. See United 

States v. Coppola, 85 F.3d 1015, 1019 (2d Cir. 1996).

A. Standing

1. Applicable Law

ERISA § 502(a)(2) confers standing on "a 

participant, beneficiary or fiduciary" to seek relief under 

ERISA § 409. 29 U.S.C. § 1132(a)(2). ERISA § 409(a) in 

turn provides: 

Any person who is a fiduciary with respect to 

a plan who breaches any of the 

responsibilities, obligations, or duties 

imposed upon fiduciaries by this subchapter 

shall be personally liable to make good to 

such plan any losses to the plan resulting 

from each such breach. 

29 U.S.C. § 1109. 

"[C]laims [pursuant to § 409(a)] may not be made 

for individual relief, but instead are 'brought in a 

representative capacity on behalf of the plan.'" Coan v. 
- 15 -

Kaufman, 457 F.3d 250, 257 (2d Cir. 2006) (quoting Mass. 

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 

(1985)). Standing is conferred upon certain classes of 

plaintiffs whose "common interest . . . is in the financial 

integrity of the plan" to seek remedies against the "misuse 

of plan assets." Russell, 473 U.S. at 142 & n.9. "[T]he 

basic standing issue is whether the plaintiff is within the 

zone of interests ERISA was intended to protect." Mullins 

v. Pfizer, Inc., 23 F.3d 663, 668 (2d Cir. 1994) (citation 

and internal quotation marks omitted) (emphasis in 

original). 

A "participant" within the meaning of § 502(a)(2) 

is "any employee or former employee of an employer, . . . 

who is or may become eligible to receive a benefit of any 

type from an employee benefit plan." 29 U.S.C. § 1002(7). 

"[T]he term participant is naturally read to mean either 

employees in, or reasonably expected to be in, currently 

covered employment, or former employees . . . who have a 

colorable claim to vested benefits." Firestone Tire & 

Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989) (citations 

and internal quotation marks omitted). For a claimant to 
- 16 -

establish that he or she "may become eligible" for 

benefits, the claimant "must have a colorable claim that 

[ ] he or she will prevail in a suit for benefits." Id. 

The existence of standing is a question of law we 

review de novo. Cent. States Se. & Sw. Areas Health & 

Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 

181, 197 (2d Cir. 2005); Shain v. Ellison, 356 F.3d 211, 

214 (2d Cir. 2004) (citation omitted).

2. Application

First, the Administrators argue that the 

plaintiffs' claims are not derivative in nature because the 

relief they seek -- recoupment of losses to the Plan, which 

may ultimately be used to satisfy the judgment in the Prior 

Action -- does not inure to the Plan. We disagree. 

The district court found that LIHS and the Class 

were asserting claims in a derivative capacity for the 

benefit of the Plan as a whole. In their verified 

consolidated amended complaint, the plaintiffs sought 

recoupment of funds the Trustees should have collected to 

keep the Plan financially solvent after paying its claims 

and expenses. LIHS and the Class asserted these claims on 
- 17 -

the Plan's behalf, and prayed for relief inuring to the 

Plan. This relief, of course, surely would have benefitted 

the Plan. It is of no moment that recovery inuring to the 

Plan may ultimately benefit particular participants. See 

LaRue v. DeWolff, Boberg & Assocs., Inc. 552 U.S. 248, 256 

(2008) (ERISA § 502(a)(2) authorizes "recovery for 

fiduciary breaches that impair the value of plan assets in 

a participant's individual account"); accord Pfahler v. 

Nat'l Latex Prods. Co., 517 F.3d 816, 826 (6th Cir. 2007) 

("[T]he fact that damages awarded to the Plan may provide 

plaintiffs with an indirect benefit, the payment of their 

claims, does not convert their derivative suit into an 

action for individual relief.").

Second, the Administrators argue that the members 

of the Class lack standing because they were seeking only a 

refund of past contributions rather than asserting a "claim 

for benefits." The argument fails, however, because the 

Class is not asserting a "claim for benefits" under ERISA 

§ 502(a)(1)(B), but rather, a claim for recovery of "losses 

to the plan" caused by the fiduciaries' breach of duties 

under ERISA §§ 502(a)(2) and 409(a). See LaRue, 552 U.S. 
- 18 -

at 259 (Roberts, C.J., concurring) (distinguishing a "claim 

for benefits" under § 502(a)(1)(B) from a claim for breach 

of fiduciary duty under § 502(a)(2)). "Benefits" as used 

to define "participants" is not limited to plan benefits 

but encompasses "a benefit of any type." 29 U.S.C. 

§ 1002(7). Furthermore, ERISA §§ 502(a)(2) and 409(a) 

require a fiduciary who breaches his duties "to make good 

to [the] plan any losses to the plan resulting from [the]

breach, and to restore to such plan any profits [made by 

the fiduciary through use of plan assets]." Id. § 1109(a). 

Thus, the Class members are "participants." 

Section 502(a)(2) confers standing on a 

"participant" to seek relief under § 409(a). Id.

§ 1132(a)(2). Because the Class members are employees of 

LIHS entitled to receive "a benefit of any type" from the 

Plan, they are "participants" with standing under 

§ 502(a)(2). 

 As to LIHS, the Administrators argue that it lacks 

standing because it is no longer a fiduciary of the Plan. 

There is no dispute that LIHS was a fiduciary during its 

participation in the Plan; rather, the Administrators argue 
- 19 -

that LIHS lost its fiduciary status by withdrawing from the 

Plan. 

The Administrators rely on Chemung Canal Trust Co. 

v. Sovran Bank/Maryland, 939 F.2d 12, 14-15 (2d Cir. 1991), 

for the proposition that a former fiduciary lacks standing 

under ERISA § 502(a). The circumstances in Chemung, 

however, are distinguishable. There, we held that a former 

fiduciary -- whose interests were adverse to those of the 

plan -- lacked standing where it "no longer [had] an 

interest in protecting a plan to which it [was] now a 

complete stranger." Chemung, 939 F.2d at 15. Here, far 

from being a complete stranger to the Plan, the district 

court found that LIHS had a continuing interest in 

protecting the Plan assets, which consisted in part of the 

funds LIHS had contributed to the Plan during its 

participation. Accordingly, we conclude that LIHS has 

standing under ERISA § 502(a) as a fiduciary of the Plan. 

Our conclusion is consistent with ERISA's remedial scheme 

designed to "remove jurisdictional and procedural obstacles 

which in the past appear to have hampered effective 
- 20 -

enforcement of fiduciary responsibilities." Mullins, 23 

F.3d at 668 (quotation omitted).5

B. Statute of Limitations

1. Applicable Law

ERISA § 413 provides the applicable statute of 

limitations for claims asserting a breach of fiduciary 

duty:

the earlier of -- (1) six years after (A) the 

date of the last action which constituted a 

part of the breach or violation, or . . . (2) 

three years after the earliest date on which 

the plaintiff had actual knowledge of the 

breach or violation.

29 U.S.C. § 1113.

Under the three-year limitations period in 

subsection (2), actual knowledge is strictly construed and 

constructive knowledge will not suffice. See Caputo v. 

Pfizer, Inc., 267 F.3d 181, 193-94 (2d Cir. 2001). "While 

 

5 We also reject the Administrators' argument that LIHS 

and the Class lack constitutional standing because they have not 

suffered an injury-in-fact. See Lujan v. Defenders of Wildlife, 

504 U.S. 555, 560-61 (1992) (constitutional standing requires 

injury-in-fact, causation, and redressability). As discussed, 

LIHS and the Class have asserted their claims in a derivative 

capacity, to recover for injuries to the Plan caused by the

Administrators' breach of their fiduciary duties. This is 

injury-in-fact sufficient for constitutional standing.
- 21 -

a plaintiff need not have knowledge of the relevant law, he 

must have knowledge of all facts necessary to constitute a 

claim." Id. at 193 (internal citation omitted). 

"We review the question of the application of the 

relevant statute of limitations . . . de novo." Novella v. 

Westchester Cnty., 661 F.3d 128, 143 (2d Cir. 2011). 

2. Application

a. Underfunding Claim

The Administrators argue that the Underfunding 

Claim is time-barred under the three-year limitations 

period because counsel for LIHS and the Class, Alexander 

Miuccio, acquired actual knowledge of the relevant facts 

sometime between 1993 and 1996 during discovery in the 

Prior Action, and such knowledge should be attributed to 

his clients based on their agency relationship. 

The district court held that any actual knowledge 

Miuccio possessed should not be imputed to LIHS and the 

Class because this is a class action, relying on Stieberger 

v. Sullivan, 738 F. Supp. 716 (S.D.N.Y. 1990), Schwab v. 

Philip Morris USA, Inc., No 04 Civ. 1945, 2005 WL 2467766 

(E.D.N.Y. Oct. 6, 2005), and Crimi v. PAS Industries, Inc., 
- 22 -

No. 93 Civ. 6394, 1995 WL 272580 (S.D.N.Y. May 9, 1995), 

where knowledge was not imputed in class action contexts 

because the large number of plaintiffs often rendered the 

attorney-client relationship more tenuous. 

We conclude that the three-year limitations period 

does not bar the Underfunding Claim. Even assuming 

Miuccio's knowledge can be attributed to LIHS and the 

Class, he did not possess all of the material facts giving 

rise to the Underfunding Claim. Miuccio conceded before 

the district court that during the Prior Action, he 

acquired knowledge of the facts giving rise to the 

Diversion Claim and the EOC Suffolk Delinquency Claim. As 

to the Underfunding Claim, however, he repeatedly 

represented that it was not until sometime between 2000 and 

2004 -- when he received the Plan's financial statements 

during supplemental proceedings following entry of judgment 

in the Prior Action -- that he learned that the Plan was 

underfunded and the Administrators could have breached 

their fiduciary duties in this regard. The district court 

accepted this representation, and we have no basis to 
- 23 -

second-guess that decision.6 This action was commenced on 

December 13, 2000, within three years of the time Miuccio 

learned all of the material facts giving rise to the 

Underfunding Claim.7

Alternatively, the Administrators argue that the 

Underfunding Claim is barred by the six-year limitations 

period because it accrued on September 1, 1992, when LIHS

learned that the LIHS Reserves would not be refunded. The 

district court, however, found that the Administrators' 

failure to adequately fund the Plan occurred between 1995 

and March 2001, a finding that is not clearly erroneous. 

The district court reasonably distinguished between the 

earlier failure to refund money contributed by LIHS and the 

 

6 The district court referred to "diversion" in 

discussing both the Diversion Claim and the Underfunding Claim. 

Based on our reading of the district court's decisions and the 

record as a whole, we understand Miuccio's representations to 

relate only to the Underfunding Claim.

7 The Administrators offer an alternate basis for the 

application of the three-year bar. They argue that Macaluso and 

Phyllis Simmons (former Chief Executive Officer of LIHS) knew 

sometime between 1993 and 1995 that the Plan would not refund 

the LIHS Reserves, and that is when the limitations period began 

to run. This argument fails. The fact purportedly known by 

Macaluso and Simmons relate to the Diversion Claim, not to the 

Underfunding Claim. Moreover, any knowledge possessed by 

Macaluso in the Prior Action cannot be attributed to the Class 

in this case, of which he is not a member.
- 24 -

subsequent, distinct decision not to increase contributions 

to the fund to maintain adequate reserves to cover the 

contingent liability represented by LIHS's Prior Action to 

recover that money. 

The six-year limitations period runs from the 

"date of the last action which constituted a part of the 

breach." 29 U.S.C. § 1113(1)(A) (emphasis added). Because 

the last action constituting the Administrators' failure to 

adequately fund the Plan occurred in March 2001, and this 

action was commenced on December 13, 2000, the Underfunding 

Claim is timely. 

b. EOC Suffolk Delinquency Claim

The Administrators argue that the EOC Suffolk 

Delinquency Claim accrued in 1990, and that, therefore, it 

is barred by the six-year limitations period. As discussed 

above, the six-year limitations period runs from the date 

of the last action constituting a part of the breach. The 

district court found that the Trustees' failure to collect

EOC Suffolk's delinquency continued until at least August 

31, 1996, when $9,000 still remained on the Plan's books. 
- 25 -

Thus, the EOC Suffolk Delinquency Claim is timely under the 

six-year limitations period.8 

C. Fiduciary Status of the Agencies

1. Applicable Law

ERISA § 3(21)(A) imposes fiduciary status on (1) 

"those who exercise discretionary authority [with regard to 

the management or administration of the plan], regardless 

of whether such authority was ever granted" and (2) those 

"who have actually been granted discretionary authority, 

regardless of whether such authority is ever exercised." 

Bouboulis v. Transp. Workers Union of Am., 442 F.3d 55, 63 

(2d Cir. 2006) (citation and internal quotation marks 

omitted).

We review de novo the question of whether a party 

is an ERISA fiduciary. See LoPresti v. Terwilliger, 126 

F.3d 34, 39 (2d Cir. 1997).

 

8 As the Administrators have not developed an argument 

in their briefs that the EOC Suffolk Delinquency Claim is barred 

by the three-year limitations period, they have waived any such 

argument. See Tolbert v. Queens Coll., 242 F.3d 58, 75 (2d Cir. 

2001). Furthermore, we do not reach the Administrators' 

argument that the Diversion Claim is time-barred because we 

affirm the district court's judgment on the basis of the 

Underfunding and EOC Suffolk Delinquency Claims, as explained 

below.
- 26 -

2. Application

The agencies argue that they are not fiduciaries 

of the Plan because the Trust Agreement assigned only 

ministerial functions to them and assigned discretionary 

authority to the Trustees. We reject this argument. The 

district court correctly found that the Trust Agreement 

granted the agencies ultimate discretionary authority to 

administer the Plan. Section 2 of the Trust Agreement 

expressly provided that the Plan would be administered by 

the agencies, and that the Trustees would act upon the 

agencies' direction. Even if the agencies never exercised 

this discretion, the Trust Agreement's grant of actual 

discretionary authority to them is sufficient to find that 

the agencies are fiduciaries under ERISA § 3(21)(A). See 

Bouboulis, 442 F.3d at 63.

D. Breach of Fiduciary Duty

1. Applicable Law

ERISA § 409(a) imposes liability on a fiduciary 

who breaches his duties under ERISA § 404(a)(1), which 

requires a fiduciary to "discharge his duties with respect 

to a plan solely in the interest of the participants and 
- 27 -

beneficiaries and (a) for the exclusive purpose of: (i) 

providing benefits to participants and their beneficiaries; 

and (ii) defraying reasonable expenses of administering the 

plan" with the care, skill, prudence, and diligence of a 

prudent man under similar circumstances and in accordance 

with the documents and instruments governing the plan. 29 

U.S.C. § 1104(a). Under ERISA § 405, a fiduciary "shall be 

liable for a breach of fiduciary responsibility of another 

fiduciary with respect to the same plan" in certain 

circumstances. Id. § 1105. The Administrators concede 

that the breach of a contractual obligation in the Plan 

documents constitutes a breach of their fiduciary duties 

under § 404(a)(1). 

2. Application

We conclude that the Administrators breached their 

fiduciary duties with respect to the Underfunding Claim. 

The district court found that the Plan was underfunded. 

This finding of fact was not clearly erroneous. The 

district court found that beginning in 1995, the Plan 

lacked sufficient funds to pay its claims and expenses. 

The court accepted expert testimony from Macaluso that the 
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judgment in the Prior Action was an administrative expense 

of the Plan. This testimony accurately reflected the law. 

A plan must pay its legitimate liabilities. Payments to 

satisfy judgments for expenses incurred or debts owed by 

the Plan are appropriately considered administrative 

expenses of the Plan. The district court thus correctly

rejected the Administrators' contention that all of the 

Plan's claims and expenses were paid throughout its 

existence, and instead, concluded that the Administrators 

were obliged to increase the contributions due from the 

agencies. 

Section 3.1 of the Trust Agreement required the 

agencies to "make the necessary contributions to provide 

the benefits expected to become payable under this Trust." 

The agencies failed to make the necessary contributions due 

to the Plan, thus violating the Trust Agreement. 

Similarly, the Administrators had a fiduciary duty to 

ensure that the agencies satisfied their payment 

obligations to the Plan. See Diduck v. Kaszycki & Sons 

Contractors, Inc., 874 F.2d 912, 916 (2d Cir. 1989) ("Under 

ERISA, trustees have a fiduciary duty to 'act to ensure 
- 29 -

that a plan receives all funds to which it is entitled, so 

that those funds can be used on behalf of participants and 

beneficiaries.'" (quoting Cent. States, Se. & Sw. Areas 

Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 571 

(1985))); Frulla v. CRA Holdings, Inc., 596 F. Supp. 2d 

275, 284 (D. Conn. 2009) (fiduciaries have an obligation to 

ensure that plan sponsors satisfy their funding obligations 

to the plan). 

Third, the Administrators violated section 3.4 of 

the Trust Agreement, which required them to discharge their 

fiduciary duties for the exclusive purpose of providing 

benefits and "defraying reasonable expenses of 

administering the Trust." During the same board meeting at 

which they discussed the $500,000 contingent liability in 

the Prior Action, the Trustees decided to use the Plan 

Reserves to write off a delinquency owed by Yonkers CAP and 

to pay the claims of Yonkers CAP employees. Although the 

Trustees had the power to "retain any funds or property 

subject to any dispute," as provided in section 3.2(j) of 

the Trust Agreement, they failed to retain enough funds to 
- 30 -

cover the $500,000 contingent liability, setting aside only 

$50,000. 

Between 1993, when the Prior Action was commenced,

and March 2001, the Trustees dissipated the Plan Reserves, 

allowing the reserves to fall below $1 million and 

eventually depleting the funds altogether. At the same 

time, they failed to increase the contributions payable by 

the agencies to replenish the Plan Reserves and ensure the 

financial integrity of the Plan. Even following the entry 

of the $802,831.57 judgment in the Prior Action, the 

agencies failed to fulfill their obligation to make 

adequate contributions, and the Administrators as 

fiduciaries failed to enforce the agencies' contractual 

obligations to do so, consequently leaving the judgment 

unsatisfied. Accordingly, we agree with the district court 

that the Administrators breached their fiduciary duties 

with respect to the Underfunding Claim.9 

 

9 The Administrators argue that Kearse's liability

should be limited to breaches having occurred prior to October 

5, 1996, when he resigned as trustee. We reject this argument, 

as the parties jointly stipulated that Kearse continued acting 

as a fiduciary until June 30, 1998, by which time the fiduciary 

breaches had already occurred. The parties also stipulated that 

the Trustees had delegated their authority to administer and 
- 31 -

As to the EOC Suffolk Delinquency Claim, the 

district court found that the CAAIG Health Coverage Plan 

required the Administrators to terminate EOC Suffolk from 

the Plan upon its failure to pay its contributions within 

the thirty-day grace period. The district court concluded 

that by failing to collect the delinquency and permitting 

EOC Suffolk to remain in the Plan without meeting its 

obligations, the Administrators breached their duties to 

administer the Plan in accordance with plan documents and 

act solely in the interest of plan participants and 

beneficiaries. We agree. See Diduck, 874 F.2d at 916 

(trustees have a fiduciary duty to ensure that a plan 

receives all funds to which it is entitled).

The Administrators argue that the Trustees could 

have reasonably concluded that the cost of pursuing the 

$9,000 debt was not justified. They offer no evidence, 

however, that the Trustees actually weighed the costs and 

benefits of pursuing the debt and made a considered 

decision in this regard. Moreover, they cannot dispute 

 

operate the Plan to Kearse. Therefore, Kearse's liability is 

not limited, and we affirm the district court's judgment in that 

regard. 
- 32 -

that the Trustees could have terminated EOC Suffolk from 

the Plan before it elected to withdraw in 1998, thereby 

mitigating further losses to the Plan caused by EOC 

Suffolk's participation. Accordingly, we conclude that the 

Administrators breached their fiduciary duties with respect 

to the EOC Suffolk Delinquency Claim.10

CONCLUSION

Accordingly, the judgment of the district court is 

AFFIRMED.

 

10 As to the Administrators' remaining arguments that 

their fiduciary duty breaches did not cause a loss to the Plan, 

the amount of damages was not established with reasonable 

certainty, the agencies could not satisfy a judgment using funds 

obtained through government grants, and the district court erred 

in awarding attorneys' fees, we affirm for substantially the 

reasons set forth by the district court in its Memoranda of 

Decision and Orders entered October 20, 2011 and April 24, 2012. 

See L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity 

Comm'n of Nassau Cnty., Inc., 865 F. Supp. 2d 284 (E.D.N.Y. 

2012); L.I. Head Start Child Dev. Servs., Inc. v. Econ. 

Opportunity Comm'n of Nassau Cnty., Inc., 820 F. Supp. 2d 410 

(E.D.N.Y. 2011).