Opinion ID: 776632
Heading Depth: 2
Heading Rank: 1

Heading: Plaintiffs' ERISA Claims for Breach of Fiduciary Duty

Text: 16 Sections 514(a) and (b) of ERISA provide that, as of January 1, 1975, ERISA preempts state law concerning employee benefit plans, except that such preemption shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975. 29 U.S.C. §§ 1144(a), 1144(b)(1). Thus conduct that occurred before the effective date of ERISA is not actionable under that statute. See, e.g., Malone v. White Motor Corp., 435 U.S. 497, 499 n. 1, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978); Baum, 853 F.2d at 1075. Plaintiffs acknowledge this rule, but argue that it does not apply to their case because they are not challenging defendant's pre-ERISA conduct, i.e. the conduct that led to the delayed effective date of the Merger Agreement, but only defendant's post-ERISA refusal to take into consideration the wrongfulness of that conduct when determining plaintiffs' eligibility for Teamsters Plan benefits. In other words, plaintiffs claim merely to seek review of defendant's 1992 denial of their respective applications for Teamsters Plan benefits. 17 Plaintiffs' argument ignores the text of the Amended Complaint, which explains that [p]laintiffs seek a declaration that by its contumacious conduct in breaching the Merger Agreement, the Board of Trustees waived its right to a delayed effective date of the Merger Agreement, and that, therefore, the merger became effective upon its execution on August 7, 1973. Am. Compl., ¶ 4. This clear statement of intent indicates that plaintiffs brought their suit to do more than simply challenge defendant's 1992 eligibility decision as erroneous or invalid; rather, they sought to obtain Teamsters Plan benefits for themselves and those similarly situated 2 by establishing a new effective date for the Merger Agreement, based on the wrongfulness of defendant's contumacious efforts to repudiate that Agreement — efforts that began in 1974. See also Mem. Law in Support of Plaintiffs' Motion for Partial Summ. J., at 1 (The motion seeks to establish that the effective date of the merger between the Brewery and the Teamsters Pension Funds was February 11, 1974, rather than December 1, 1976.). Accordingly, plaintiffs' action does arise from pre-ERISA conduct and seeks redress for the continuing consequences of that conduct. 18 We have previously held that ERISA will not apply where a denial of benefits after January 1, 1975, was merely the `inexorable consequence' of a pre-1975 `act or omission.' Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1189 (2d Cir.1996) (quoting Lamontagne v. Pension Plan of the United Wire, Metal & Mach. Pension Fund, 869 F.2d 153, 155-56 (2d Cir.1989)). Plaintiffs argue that defendant's decision to deny them Teamsters Plan benefits was discretionary and thus not an inexorable consequence of defendant's pre-ERISA conduct. Plaintiffs contend that defendant had the authority, if not the responsibility, to consider that plaintiffs would otherwise have qualified for Teamsters Plan benefits under the terms of the Merger Agreement but for the delay in the effective date caused by defendant's own wrongful conduct. 19 Plaintiffs cite Jiras v. Pension Plan, Make-Up Artist & Hairstylists Local 798, 170 F.3d 162, 166 (2d Cir.1999), which distinguished the Lamontagne and Nowak cases on the ground that the benefits-eligibility decision at issue in that case involved an exercise of discretion, after 1975, to resolve disputed factual and legal questions and was not dictated by the application of undisputed law to undisputed facts. Unlike in Jiras, however, there is no interpretative dispute over the conditions of eligibility for Teamsters Fund benefits. The Merger Agreement clearly and unequivocally provides that to be eligible for such benefits, the applicant must have had contributions made on his or her behalf after the effective date of the Merger Agreement. That effective date, in turn, was long ago determined by the New York Supreme Court to be December 1, 1976, in a decision that was affirmed by the Appellate Division. Subsequent courts have recognized this decision as imposing an effective date of December 1, 1976. See, e.g., Baum, 853 F.2d at 1073; Geib v. New York State Teamsters Conference Pension & Ret. Fund, 758 F.2d 973, 974 (3d Cir.1985); Miele v. Pension Plan of New York State Teamsters Conference Pension & Ret. Fund, 72 F.Supp.2d 88, 92 (E.D.N.Y.1999); New York State Teamsters Conference Pension and Ret. Fund v. Hoh, 561 F.Supp. 679, 681 (N.D.N.Y.1982). It is uncontested that no contributions were made to the Teamsters Fund on plaintiffs' behalf after December 1, 1976, and thus, by the terms of the Merger Agreement, plaintiffs were not eligible for benefits. With the effective date of the Merger Agreement defined by various courts, defendant simply did not possess the discretion to grant Teamsters Plan benefits to plaintiffs and those similarly situated, without also incurring potential fiduciary liability to valid participants in the Teamsters Plan for ignoring the terms of the Merger Agreement. Although we appreciate plaintiffs' frustration, the fact is that defendant's pre-ERISA conduct led to a delayed effective date for the Merger Agreement, and the denial of plaintiffs' application for Teamsters Plan benefits is simply the inexorable consequence of that conduct, and thus beyond the reach of ERISA. 20 As a fallback argument, plaintiffs contend that defendant has a continuing obligation to cure the present effects of its past fiduciary breaches, even where those breaches occurred prior to the effective date of ERISA. According to plaintiffs, defendant's continuing refusal to grant them increased Teamsters Plan benefits constitutes a new, post-ERISA violation of fiduciary duty. Plaintiffs' argument, however, is foreclosed by Baum, in which participants in the Teamsters Plan sued members of the Board of Trustees for the alleged breach of fiduciary duty of entering into the Merger Agreement without first making adequate inquiries into the financial soundness of the Brewery Fund. See Baum, 853 F.2d at 1075. In that case, the participants argued that even though the original fiduciary breach ( i.e. the execution of the Merger Agreement) occurred before ERISA, it taint[ed] subsequent and current payments of benefits to brewery workers pursuant to the agreement. Id. We rejected this continuing breach argument, finding that it would render meaningless the limitation on preemption imposed by section 514(b) of ERISA, 29 U.S.C. § 1144(b). See Baum, 853 F.2d at 1075. The same is true in the case at hand, because the continuing breach argument advanced by plaintiffs, if accepted, would allow plaintiffs to obtain redress under ERISA for pre-ERISA conduct, something squarely prohibited by § 514(b). While plaintiffs continue to suffer the consequences of that conduct to this day, it is nevertheless beyond the reach of ERISA. 21