Court Opinion

ID: 8969780
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:26:28.481878+00
Date Added: 2024-06-11T17:10:24.653064
License: Public Domain

VAN GRAAFEILAND, Circuit Judge,
dissenting:
I dissent. A brief elaboration on the facts is an appropriate starting point for my statement of reasons.
William Kaszycki, himself a former immigrant from Poland, either arranged for a group of Polish workers to come to the United States on tourist visas, see 8 U.S.C. § 1101(a)(15)(B), or hired them after they arrived. In either event, as temporary visitors for pleasure, the Poles were prohibited from engaging in any employment. 8 C.F.R. § 214.1(e); see Wei v. Robinson, 246 F.2d 739, 743 (7th Cir.), cert. denied, 355 U.S. 879, 78 S.Ct. 144, 2 L.Ed.2d 109 (1957); Matter of New York State Labor Relations Board v. Le Crepe, 78 Misc.2d 171, 173, 355 N.Y.S.2d 515 (1973).
On January 29, 1980, Kaszycki and his wholly owned company, Kaszycki & Sons Contractors, Inc., signed a contract with the Trump-Equitable Fifth Avenue Company (“T-E”) to demolish the Bonwit Teller building on Fifth Avenue. Kaszycki hired Zbigniew Goryn as supervisor of the job and Bodgan Krawezynski as timekeeper, and these three men hired the members of the so-called “Polish Brigade” to work on the project. However, the Company kept no employment records for these employees. It is not clear whether this was done to mislead the Immigration and Naturalization Service, the Department of Labor or the House Wreckers Union. In any event, according to information in the record, Kaszycki subsequently was indicted on charges of importing Polish aliens, shielding them while they worked illegally, and exploiting them by failing to pay them their full wages. These charges were disposed of by a plea bargain agreement calling for substantial fines and two months in jail.
In addition, the Department of Labor sued Kaszycki and his Company for violating the Fair Labor Standards Act by failing to pay the Polish workers their wages, and secured a $570,000 judgment against them. See Donovan v. Kaszycki & Sons Contractors, Inc., 599 F.Supp. 860 (S.D.N.Y.1984).
The House Wreckers Union did not catch up with Kaszycki until late March of 1980, when a collective bargaining agreement was signed. Although the agreement provided that membership in the Union was required as a condition of employment, the Company books did not disclose the existence of the Polish workers, and few, if any, of them became Union members.
Moreover, as is evident from the $570,-000 judgment obtained in Donovan v. Kaszycki, supra, 599 F.Supp. 860, few, if any, of the Polish workers were paid in full. Indeed, it appears likely that the default in payments to these workers is what brought the Union onto the scene. In March 1980, the Polish workers staged a two-day strike because of Kaszycki’s failure to pay their wages. Kaszycki succeeded in getting them back to work with promises that he failed to keep and with payment checks that bounced. Within a few days thereafter the Union was on the job.
For reasons that are unclear, the Union evidenced no interest in the non-member Polish workers. It did, however, actively represent the Union employees. On several occasions when Kaszycki failed to make payments into the Union’s Pension and Insurance Funds on behalf of the Union members, the Union contacted T-E and threatened to close down the job if the payments were not made promptly. In order to keep the job going, T-E satisfied the delinquencies on behalf of Kaszycki, notifying Kaszycki on each occasion that T-E *921expected reimbursement from Kaszycki and his Company. Neither Kaszycki nor T-E made any payments to the Funds on behalf of the Polish workers, and the Funds did not demand any such payments.
Because Kaszycki continued to default in salary payments to the Polish workers, a number of them turned to a lawyer for help. To put pressure on T-E, the lawyer twice filed mechanics liens against the project on behalf of several Polish workers. The pressure worked — T-E paid the delinquencies represented by the liens, again on Kaszycki’s behalf, and they were discharged.
Plaintiff, Harry Diduck, now brings this derivative action seeking recovery on behalf of the two Funds from all of the above-captioned defendants except the unnamed Trustees of the Funds, whom he describes as “nominal defendants” only. My colleagues try to make these unidentified trustees into something more than “nominal defendants” by stating that T-E was willing to pay the Kaszycki Corporation’s obligations and that the trustees of the Funds were negligent in “failing to even investigate the possibility of suing Trump-Equitable, despite its willingness to pay the Kaszycki Corporation’s obligations.” This attempt must fail. Unless we are prepared to treat payment by one with a gun at his back as a “willing” payment, the T-E defendants were not “willing” payors.
For the reasons set forth in the paragraphs that follow, I agree with Judge Stewart that ERISA imposed no legal liability on the T-E defendants to make the Fund payments at issue herein. It follows that the unnamed Trustees then in office could not be held negligent for failing to investigate the possibility of suing them. I emphasize this absence of legal liability because it is determinative not only of a basic issue in the case, but also of Diduck’s right to bring this derivative action on behalf of the Funds without first having made a demand for suit upon the incumbent trustees, a matter that will be discussed at a later point in this opinion.
ERISA
Section 515 of ERISA, 18 U.S.C. § 1145, was enacted for the purpose of creating federal statutory duties out of already existing contractual obligations. The statute provides in substance that an employer who is obligated to contribute to a multiem-ployer plan under the terms of the plan or a collective bargaining agreement shall make such payments in accordance with the terms of the plan or the agreement. In other words, if a company is not an employer under the collective bargaining agreement or the trust indentures, it is not an employer under section 515. International Brotherhood of Painters and Allied Trades Union v. George A. Kracher, Inc., 856 F.2d 1546, 1547-50 (D.C.Cir.1988); Massachusetts Laborers’ Health and Welfare Fund Laborers Local 938 Joint Health & Welfare Trust Fund v. B.R. Starnes Co., 827 F.2d 1454, 1456-57 (11th Cir.1987); Xaros v. U.S. Fidelity and Guaranty Co., 820 F.2d 1176, 1178-80 (11th Cir.1987).
The T-E defendants, either collectively or individually, were not the contractually obligated employers of the Polish workers within the meaning of section 515. The Collective Bargaining Agreement names Kaszycki & Sons, Contractors as the “Employer” and requires that the “Employer” shall make payments to the Insurance Trust Fund and Pension Trust Fund. The Indenture of the Insurance Trust Fund and the Agreement and Declaration of Trust for the Pension Fund identify the contractors with whom House Wreckers Union Local 95 has executed collective bargaining agreements as the “Employers”. Not one of the T-E defendants is mentioned anywhere in the three pertinent documents.
My colleagues state “Judge Stewart noted, for example, that the Trump defendants may be liable under the joint employer doctrine.” I do not find this to be so. Judge Stewart pointed out that the joint employer doctrine was developed in NLRA cases and has been applied sparingly in suits arising under ERISA. He then rejected as a mat*922ter of law plaintiff’s contention that the T-E defendants were joint employers. In my opinion, the NLRA doctrine of joint employer should play no role whatever in the instant case.
Although Laborers Health and Welfare Trust Fund v. Advanced Lightweight Concrete Co., 484 U.S. 539, 108 S.Ct. 830, 98 L.Ed.2d 936 (1988), involved a claim for fund contributions coming due after the expiration of collective bargaining agreements, the Supreme Court’s opinion in that case outlines the path we should follow here. The Court held that the district court correctly denied recovery under section 515 and correctly refused to exercise jurisdiction over the claim of an unfair labor practice. The Court referred to a statement in the legislative history of section 515 that “[fjailure of employers to make promised contributions in a timely fashion imposes a variety of costs on plans,” id., 108 S.Ct. at 834, and said that this history “explains that Congress added these strict remedies to give employers a strong incentive to honor their contractual obligations_” Id. at 835. The Court emphasized that the text of section 515 “omits any reference to a noncontractual obligation imposed by the NLRA.” Id. at 834.
Most of the lower courts have interpreted section 515 in the same manner. The consensus of those courts is that ERISA does not require employers to provide their employees with pension or insurance plan benefits and the obligation to do so is imposed, if at all, by and pursuant to contract. Accordingly, whether a defendant is a joint employer under the FLSA is of no controlling significance in a section 515 case. Indeed, the issue of joint employment should be resolved in the first instance by the NLRB, not the court. See International Brotherhood of Painters and Allied Trades Union v. George A. Kracher, Inc., supra, 856 F.2d at 1549; Massachusetts Laborers’ Health and Welfare Fund v. Starrett Paving Corp., 845 F.2d 23, 25-26 (1st Cir.1988); Xaros v. U.S. Fidelity and Guaranty Company, supra, 820 F.2d at 1178-80.
Assuming for the argument only that the issue of joint employer status was properly before the district court, I agree with Judge Stewart that the T-E defendants were not joint employers of the Polish workers hired by Kaszycki. The Department of Labor, which made a thorough investigation and then sued Kaszycki alone, obviously did not think that any of the T-E defendants were joint employers with Kaszycki. Neither did Judge Sprizzo who heard the Labor Department’s case and held that “Trump did not take over the responsibility for paying the non-union employees.” Donovan v. Kaszycki, supra, 599 F.Supp. at 866. Neither did the grand jury which indicted Kaszycki alone.
There was no overlap in either ownership or management between the T-E defendants and Kaszycki & Sons. Thomas Ma-cari, T-E’s vice president in overall charge of the Bonwit Teller project, swore that he did not hire the Polish workers, did not lay off or terminate any of them and did not supervise their work. Ample support for this testimony can be found in the fact that the Polish workers could not speak English and Macari could not speak Polish. Insofar as the relationship between Macari and Kaszycki was concerned, one former employee of Kaszycki made the cogent observation that they were always fighting. Indeed, the lawyer who filed the mechanics liens said that the T-E people asked him to consider joining T-E in a suit against Kasz-ycki. It is undisputed that neither Macari nor any of the T-E defendants ever saw Kaszycki’s contracts with its union. The testimony also is undisputed that T-E advanced money that Kaszycki owed the Funds and other creditors in order to avoid “work stoppages that would have delayed the ultimate opening of Trump Tower at a cost of millions of dollars.” Clearly, Di-duck did not satisfy the tests for joint employment applied by this Court in Clinton’s Ditch Cooperative Co. v. NLRB, 778 F.2d 132, 138 (2d Cir.1985), cert. denied, *923479 U.S. 814, 107 S.Ct. 67, 93 L.Ed.2d 25 (1986) and International House v. NLRB, 676 F.2d 906, 913 (2d Cir.1982), in both of which cases, incidently, the original decision on the issue was made by the Board.
THE PRE-SUIT DEMAND
Judge Stewart held, and my colleagues and I agree, that Diduck is suing derivatively on behalf of the Funds. Congress has placed the power to collect “promised contributions” under ERISA in the hands of fund trustees. See Alfarone v. Bernie Wolff Constr. Corp., 788 F.2d 76, 79-80 (2d Cir.), cert. denied, 479 U.S. 915, 107 S.Ct. 316, 93 L.Ed.2d 289 (1986); Struble v. New Jersey Brewery Employees’ Welfare Trust Fund, 732 F.2d 325, 337-38 (3d Cir.1984). Because the right to sue for promised contributions belongs to the trustees, fund participants such as Diduck cannot exercise the right derivatively without first giving the trustees the opportunity to compel payment. “A derivative action ‘in essence is nothing more than a suit by a beneficiary of a fiduciary to enforce a right running to the fiduciary as such.’ ” Wright, Law of Federal Courts, 487 (4th ed. 1983) (quoting Goldstein v. Groesbeck, 142 F.2d 422, 425 (2d Cir.), cert. denied, 323 U.S. 737, 65 S.Ct. 36, 89 L.Ed. 590 (1944)). Before a participant such as Diduck can sue an employer for promised fund contributions, he must show either that he made a demand upon the trustees for suit or that such a demand would have been futile.
The case of Katsaros v. Cody, 744 F.2d 270, 280 (2d Cir.), cert. denied, 469 U.S. 1072, 105 S.Ct. 565, 83 L.Ed.2d 506 (1984), relied upon by Diduck, is not binding authority to the contrary. Katsaros antedated Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 570 and n. 10, 105 S.Ct. 2833, 2840 and n. 10, 86 L.Ed.2d 447 (1985), and was an equitable action seeking removal of all trustees. This Court’s decision in Lewis v. Graves, 701 F.2d 245, 247 (2d Cir.1983), states the correct rule, which is as above stated.
Diduck alleges that his causes of action “are brought as derivative causes of action pursuant to Rule 23.1 of the FRCP on behalf on the Funds.” Rule 23.1 provides in substance that, in a derivative action brought thereunder, the complaint must be verified and must allege “with particularity” the efforts made by the plaintiff to induce suit by the [trustees] and the reasons for the plaintiff’s failure to obtain the desired action or for not making the effort to secure it. Similar demand requirements were developed under the common law of trusts and they are applicable not only in ERISA cases, Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., supra, 472 U.S. at 570-72, 105 S.Ct. at 2840-41, but also in non-ERISA derivative actions brought by trust beneficiaries. See, e.g., Riviera Congress Associates v. Yassky, 18 N.Y.2d 540, 547, 277 N.Y.S.2d 386, 223 N.E.2d 876 (1966); Western Railroad Co. v. Nolan, 48 N.Y. 513, 517-18 (1872); Levy v. Carver Federal Savings and Loan Ass’n, 18 A.D.2d 1062-63, 239 N.Y.S.2d 384 (1963). Moreover, where, as here, there are multiple trustees, the common law requirement of pre-suit demand applies when a derivative action is brought against a single errant trustee as well as when it is brought against a wrongdoing third party. Backer v. Levy, 82 F.2d 270, 274 (2d Cir.1936); Smith v. David Stevenson Brewing Co., 117 A.D. 690, 694-95 (1907). This is because the faithful trustees have the primary right, indeed the primary duty, to proceed against their wrongdoing colleague. See Matter of Rothko, 43 N.Y.2d 305, 320, 401 N.Y.S.2d 449, 372 N.E.2d 291 (1977); Parker v. Rogerson, 49 A.D.2d 689, 690, 370 N.Y.S.2d 753 (1975) (mem.).
Management of Local 95’s Pension Fund was placed in the hands of six Trustees, three representing the Union, two representing the Wrecking Contractors Association of New York, Inc. and one representing the Non Association Employers. Concurrence by a majority was necessary for any action taken, and, in case of a deadlock, provision was made for arbitration. *924The Trust Fund Indenture provided for four Trustees, two being named by the Union and two by the Association. A majority vote was required for all action taken, and, again, provision was made for arbitration in the event of a deadlock. The basic reason for requiring a demand upon these Trustees is that it gives them an opportunity to continue in their normal status as conductors of the trust affairs. See Lewis v. Graves, supra, 701 F.2d at 247; Struble v. New Jersey Brewery Employees’ Welfare Trust Fund, supra, 732 F.2d at 337. It follows that, to be efficacious for this purpose, the demand must be made upon the Trustees who are in office at the time suit is brought. Brody v. Chemical Bank, 517 F.2d 932, 934 (2d Cir.1975).
Diduck’s complaint was not verified as required by Rule 23.1. It does not allege the making of a demand upon incumbent trustees, some of whom may not even have been trustees at the time complained of. See Velez v. Feinstein, 87 A.D.2d 309, 316, 451 N.Y.S.2d 110, motion for leave to appeal denied in part and dismissed in part 57 N.Y.2d 605, 454 N.Y.S.2d 1031, 440 N.E. 2d 1342 and 57 N.Y.2d 737, 454 N.Y.S.2d 987, 440 N.E.2d 1334 (1982). Neither does it allege “with particularity” why a demand would have been futile. Diduck’s qualifications as a representative of the two trusts are at best questionable. He has been at loggerheads with Union officials for twenty-five years. He did not endear himself to the membership by his previous suit against the Union seeking $1 million in damages. He has published correspondence in which he described a Union official as a “FAKER and LIAR”. He admittedly is carrying on a personal vendetta against Senyshyn.
If Diduck were making an individual claim against Senyshyn seeking recovery for only his own personal loss, a prior demand would have been unnecessary. However, when Diduck attempts to leapfrog over nine trustees and assert a claim on their behalf against both the T-E defendants and Senyshyn, he disregards not only the provisions of Rule 23.1 but also longstanding principles of trust law. If we permit this blatant disregard of established law, we extend an open invitation to all litigious trust members to proceed in the same manner. I am not prepared to do this.
THE RICO CLAIM
As my colleagues correctly note, Beauford v. Helmsley, 843 F.2d 103 (2d Cir.1988), the case on which Judge Stewart relied in dismissing the RICO claims, was reversed by an en banc court, 865 F.2d 1386 (2d Cir.1989). This does not mean, however, that the RICO cause of action must be reinstated. The rule is well established that “[i]f a third person commits a tort with respect to trust property, the beneficiaries cannot maintain a suit in equity against him, as long as the trustee is ready and willing to proceed against him.” IV Scott, The Law of Trusts (3d ed. 1967) at 2336. Assuming for the argument only that the T-E defendants and Senyshyn did violate civil RICO, 18 U.S.C. § 1964, the victims of their wrongful acts were the Funds, and the primary right to seek redress for the Funds’ damages belonged to the Funds’ Trustees. See Warren v. Manufacturers National Bank, 759 F.2d 542, 545 (6th Cir.1985); Nordberg v. Lord, Day & Lord, 107 F.R.D. 692, 698-700 (S.D.N.Y.1985). Compliance with the pre-suit demand requirements of Rule 23.1 and the common law therefore is as essential in Diduck’s RICO cause of action as it is in his ERISA claim.
Putting aside for the moment the question of inadequate demand, I find no merit in Diduck’s substantive contention that the T-E defendants committed a RICO violation. In substance, Diduck alleges upon information and belief that Kaszycki and Senyshyn devised a scheme to defraud the Funds by concealing the number of covered employees employed by the Kaszycki corporation. Diduck does not say why Sen-yshyn, a trustee of the Funds, would enter into such a scheme. Nevertheless, the complaint alleges that the T-E defendants *925knowingly and willingly conspired with Kaszycki and Senyshyn or knowingly aided and abetted them in carrying out their scheme. To support this allegation, Diduck alleges upon information and belief that the T-E defendants “understood the scope of the Collective Agreement” and conspired to hide the number of covered employees by sending the Funds payment checks “purporting to constitute the contributions owed to the Funds by Kaszycki Corporation by virtue of the Collective Agreement. ...” Plaintiff has shown no factual basis for this charge. Although in theory at least the “nominal” trustees, particularly the five representing the Union, should have favored recovery by the Funds, evidence that they were misled by the T-E defendants is conspicuous only by its absence.
What the record does show is that the Kaszycki Corporation kept its own books and that the T-E defendants had nothing to do with preparing or forwarding the periodic work reports to the Union. The undisputed sworn testimony is that neither Ma-cari or any of the T-E defendants had ever seen the Collective Bargaining Agreement. They got the figures for the payments made by them from the Employer Ledger maintained by Kaszycki, a ledger that was available at all times for inspection by the Funds. Both the pertinent ledger page and copies of the checks are exhibits in the record. Diduck has not advanced one iota of proof to indicate that the T-E defendants knew or had reason to know that these figures did not accurately represent the amount owed. Moreover, as pointed out above, the T-E defendants were not obligated either to make additional payments or to see that they were made by Kaszycki. No relationship, fiduciary or otherwise, existed between the T-E defendants and the House Wreckers Union or its Trust Funds.
When a defendant moves for summary judgment, a plaintiff may not rest on the allegations of his pleadings, particularly where as here, they are upon information and belief and unverified. Indeed, even on a Rule 9(b) motion, unverified pleadings on information and belief are not regarded with particular favor. See Di Vittorio v. Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir.1987). In response to a defendant’s summary judgment motion, the plaintiff must show by affidavit or equally probative evidence the existence of specific facts creating a genuine issue for trial. Where, as here, there are multiple defendants, each defendant is entitled to know why trial as to him may proceed. Id. Surmise, conjecture and conclusory allegations are not enough; plaintiff must make an affirmative showing that his version of events is not fanciful. United States v. Potamkin Cadillac Corp., 689 F.2d 379, 381 (2d Cir.1982). Insofar as the T-E defendants are concerned, plaintiff has failed to satisfy this burden.
For all of the reasons above stated, I would affirm.