Opinion ID: 398231
Heading Depth: 1
Heading Rank: 3

Heading: Standing and Intervention

Text: 27 In this appeal the correctness of the district court's holding that neither plaintiff had standing to represent the interests of the Affiliated and Allied Funds is contested, as is its ruling that after judgment these two funds should not be permitted to intervene as parties plaintiff. These procedural questions are important because Bell was found by the district court to have breached his fiduciary duties with respect to these two funds, as well as two others, both under ERISA (for the period following its enactment-January 1, 1975) and under the common law of Maryland (for the period prior thereto). The questions are so interrelated that they will be considered together. We begin with a description of the various funds that Local 311 established and maintained over the operative period. 28 Originally, Local 311 sponsored two employee benefit funds, one for health and welfare, the Teamsters Affiliated Health and Welfare Fund of Maryland (Affiliated Fund), and the other for retirement, the Allied Pension Fund of Maryland (Allied Fund). When DaLesio became a trustee of these funds in 1963, Bell became a consultant, and the proof showed that he was paid a consultant's fee, based upon a percentage of the employers' contributions to the fund, secretly received a commission from the insurers who sold coverage to the funds, and agreed to represent their interests in an adversarial capacity. 29 About three years later, in response to pressure from tank-haul motor carriers to have employer representation on the funds, Local 311 created two new, much smaller employee benefit plans for tank-haul employees. These were known as the Local 311 Health and Welfare Fund and the Local 311 Pension Fund. These new funds inherited not only some of the Allied and Affiliated Fund participants but also, as the district court found, the pattern of administration, set up by the trustees of those funds in conjunction with Bell, 496 F.Supp. at 1372. At the time that suit was brought, plaintiff Brink was a participant and beneficiary of the Local 311 Health and Welfare Fund and the Local 311 Pension Fund. He had no association with the Affiliated Fund or the Allied Fund at that time. Plaintiff Brink became disabled after suit was filed, and he was forced to retire. Thus he ceased membership and participation in the Local 311 Health and Welfare Fund but he continued to be a beneficiary of the Local 311 Pension Fund. Effective September 1, 1978, the Local 311 Health and Welfare Fund was merged back into the Affiliated Fund but the Local 311 Pension Fund was not merged back into the Allied Fund. 30 Plaintiff Eline, who intervened as a party plaintiff in April, 1980 was then a participant and beneficiary of the Local 311 Pension Fund, and as a result of the merger of the Local 311 Health and Welfare Fund into the Affiliated Fund which had taken place in 1978, he was also a participant and beneficiary of the latter. He has not, however, ever been a participant and beneficiary of the Allied Fund. 31
32 The district court ruled that neither plaintiff had standing to assert any claims of Allied and Affiliated Funds against DaLesio and Bell, because neither was a participant in those funds at the time that suit was instituted. Accordingly the district court awarded judgment only for breaches of fiduciary duty to the Local 311 funds, even though its findings regarding Bell's breaches of duty applied as well to the Allied and Affiliated Funds. It should be noted that the issue of standing was one raised by the district court and not by defendants and the issue of standing was decided only when the district court decided the case on the merits. It should be further noted that because the issue of standing was not resolved until after trial, evidence concerning breaches of trust with respect to the Affiliated and Allied Funds was admitted in the course of the trial. 33 We think that the district court was correct in its ruling that neither plaintiff had standing to litigate claims of the Allied Fund, but we conclude, contrary to the district court's holding, that Eline had standing to assert claims of the Affiliated Fund both under ERISA and under the common law. Eline was a participant and beneficiary of the Affiliated Fund at the time that he intervened in the suit, and he remained such until the case was decided. The crucial time for determining standing was the time of intervention and not, as the district court thought, the time that suit was originally instituted. Eline's suit was not for money damages for himself but recovery for the fund of which he was a beneficiary for the benefit of all participants and beneficiaries. 34 The applicable provision of ERISA, 29 U.S.C. § 1132(a)(2), permits a beneficiary to sue on behalf of a plan to enforce the liability imposed on a fiduciary by 29 U.S.C. § 1109 for losses to the plan resulting from a breach of fiduciary duty. ERISA is, of course, a remedial statute and should be given a liberal construction in order to carry out the vitally important public policies of protecting the integrity of employee benefit plan assets and of deterring fiduciary violations. Marshall v. Snyder, 430 F.Supp. 1224, 1231 (E.D.N.Y.1977), aff'd, 572 F.2d 894 (2d Cir. 1978). While, as the district court pointed out, 496 F.Supp. at 1372, a number of cases have denied standing to sue under ERISA, standing has never been denied to a participant in and beneficiary of a fund who, moreover, seeks to recover funds for the plan rather than for himself. To deny standing to one in such circumstances who seeks such relief would, in our view, contravene the very language of § 1132(a)(2). 35 The only conceivable basis for denying such standing is the fact that most if not all of the alleged breaches of fiduciary duty occurred before the plaintiff obtained a direct interest in the fund. But we reject this as a reason for denying standing under ERISA. This may be a good reason for denying standing in a derivative stockholders' suit, see Fed.R.Civ.P. 23.1, but it should play no part in a suit under § 1132(a)(2). Congress has not expressly adopted such a limitation on the right to sue under ERISA, the rationale of Rule 23.1 to prohibit champertous litigation and strike suits is inapposite to suits under § 1132(a)(2), and the adoption of such a limitation would frustrate the broad remedial objectives of ERISA. 36 Similarly, we think that Eline had standing under the common law to assert breaches of trust occurring prior to the time that ERISA was enacted. As the district court recognized, 496 F.Supp. at 1374, the general rule is that ... a beneficiary or one suing on his behalf can maintain a suit against the trustee to enforce the trust or to enjoin or obtain redress for a breach of trust. Restatement (Second) of Trusts § 200 (1959). Maryland recognizes that a beneficiary of a trust has standing to enforce a trust. Tarbert v. Rollins, 130 Md. 413, 100 A. 637 (1917). We have stated that, at the time of intervention, Eline was a participant and beneficiary of the Affiliated Fund. As a beneficiary, Eline thus had standing to enforce defendants' fiduciary duties to the fund and to seek redress for any breach thereof. We think that it makes no difference that the breaches of trust occurred before Eline became a beneficiary. 37
38 Because we conclude that Eline did have standing to assert the claims of the Affiliated Fund for breach of trust, we need not consider whether the district court abused its discretion in denying leave to the Affiliated Fund to intervene after judgment was rendered. We confine our consideration to the denial of permission to the Allied Fund to intervene after judgment. A cardinal consideration of whether to permit intervention is the timeliness of the application therefor. See Fed.R.Civ.P. 24. While a district court has wide discretion in concluding that an application for intervention is timely or untimely, we are constrained to hold that that discretion was abused with respect to the application of the Allied Fund. We reach this conclusion for the reasons which follow. 39 While as the district court said in denying intervention, the Allied Fund did not seek to intervene before judgment even though it recognized problems of the plaintiffs' standing, 88 F.R.D. at 612, the lateness of its application is completely explainable. Standing was made an issue by the district court and not by the defendants, and the issue of standing was not decided until the case was decided on the merits. In this case, plaintiffs sued in a representational capacity, and in a class action the members of the class which are represented have the right to rely on their representatives until the court rules otherwise. United Airlines v. McDonald, 432 U.S. 385, 97 S.Ct. 2464, 53 L.Ed.2d 423 (1977); American Pipe and Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974). Thus it can hardly be said that the Allied Fund's petition for leave to intervene was not timely under the circumstances. 40 Unquestionably, if its petition was timely, Allied Fund had a right to intervene under the requirements of Rule 24(a), since its rights were being litigated. This, too, is an important fact in the equation of a proper exercise of discretion. Because intervention was of right, the timeliness requirement of Rule 24 should not be as strictly enforced as in a case where intervention is only permissive. 41 Finally, we think that defendants would not be prejudiced by the grant of leave to intervene. Defendants would not be prejudiced because the suit was tried as if Allied Fund's rights would be adjudicated on their merits; the issue of standing was not decided until the district court issued its opinion on the merits. Presumably all of the evidence against defendants and all of evidence in their defense is already part of the record. If the denial of intervention is upheld, on the other hand, Allied Fund may well be prejudiced. As a minimum it would be required to file a new lawsuit and to retry issues that, in the view of the district court, have already been thoroughly litigated. More significant may be its inability to defend itself successfully against pleas of limitations or laches in the new suit by reason of the fact that it relied on plaintiffs to vindicate its rights. 42 Under all of the special circumstances of this case, we think that the timeliness requirement of Rule 24(a) was amply met; and notwithstanding the general policy to discourage postjudgment intervention, Black v. Central Motor Lines, Inc., 500 F.2d 407, 408 (4th Cir. 1974), this is a case where the district court exceeded its permissible discretion in denying intervention. 43 We therefore vacate the portion of the district court's judgment denying standing to plaintiff Eline to litigate and redress the rights of the Affiliated Fund against defendants and the request of the Allied Fund to intervene and protect its rights. We remand the case to the district court for further proceedings in this regard and empower the district court to receive further evidence on the merits of the claims if it be so advised.