Opinion ID: 510037
Heading Depth: 2
Heading Rank: 1

Heading: Breach of Fiduciary Duty: 1973 Merger Agreement

Text: 14 The core of the Participants' argument is the contention that the Trustees agreed to the merger in 1973 without making sufficient inquiry into the financial condition of the Brewery Fund. The Participants argue that this failure and its consequences are actionable under ERISA. 15 We disagree. It is true that ERISA establishes a statutory standard of care for pension plan fiduciaries. See 29 U.S.C. Sec. 1104 (1982). But even if the alleged failure to inquire fell below that standard, it is not by itself actionable under ERISA because it occurred before January 1, 1975, the date ERISA became effective. See 29 U.S.C. Sec. 1144(b)(1) (1982); Malone v. White Motor Corp., 435 U.S. 497, 499 n. 1, 98 S.Ct. 1185, 1187 n. 1, 55 L.Ed.2d 443 (1978). Cf. New York State Teamsters Conference Pension Fund, 591 F.2d at 957 (no federal jurisdiction under pension benefit insurance provisions of ERISA because execution and repudiation of merger agreement between Brewery Fund and Teamsters Fund occurred before effective date of ERISA). 16 The Participants nevertheless contend that the initial breach of fiduciary duty in entering into the merger agreement is still actionable under ERISA because it taints subsequent and current payments of benefits to brewery workers pursuant to the agreement. We are not persuaded, however, that this continuing breach analysis brings the Participants' breach of duty claim within the coverage of ERISA. Section 1144(b)(1) expressly provides that ERISA does not supersede state law with respect to ... any act or omission which occurred[ ] before January 1, 1975. Courts have uniformly rejected the theory that pre-ERISA acts are actionable under ERISA if they generate consequences after ERISA's effective date. See Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1501-02 (9th Cir.1984); Freeman v. Jacques Orthopaedic and Joint Implant Surgery Medical Group, Inc., 721 F.2d 654, 656-57 (9th Cir.1983); Coward v. Colgate-Palmolive Co., 686 F.2d 1230, 1233-34 (7th Cir.1982), cert. denied, 460 U.S. 1070, 103 S.Ct. 1526, 75 L.Ed.2d 948 (1983); Quinn v. Country Club Soda Co., 639 F.2d 838, 840-41 (1st Cir.1981); Martin v. Bankers Trust Co., 565 F.2d 1276, 1278-79 (4th Cir.1977). Participants' theory would read ... section [1144](b)(1) out of the statute, id. at 1279; accord Coward, 686 F.2d at 1234. Accordingly, we hold that ERISA does not cover the Participants' claims based on either the alleged breach of fiduciary duty in entering into the 1973 merger agreement or the subsequent payment of benefits to brewery workers pursuant to the merged plan. 17 In light of this conclusion, we may summarily dispose of the Participants' argument that the judgments of the New York courts are preempted by ERISA. First, this argument was not raised below. Second, the argument is without merit. To the extent that the Participants base their allegations of breach of duty on the Trustees' conduct prior to execution of the merger agreement and the purportedly tainted consequences of that decision, their claim is not subject to ERISA. Accordingly, the state courts were free to apply state law, see 29 U.S.C. Sec. 1144(a), (b)(1), and their judgments are not subject to collateral attack on preemption grounds. 18