Court Opinion

ID: 5876697
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:03:13.202525+00
Date Added: 2024-06-11T08:44:52.660615
License: Public Domain

Bloom, J. (dissenting).
Plaintiffs and intervenor-plaintiffs (collectively, plaintiffs) are trustees of employee welfare funds established by unions of municipal employees under collective agreements with the City of New York or with agencies and authorities which perform functions normally performed by the city. The action is against the State Superintendent of Insurance and seeks a declaration that plaintiffs are not bound by the reporting and other provisions of Insurance Law, article III A..1
Plaintiffs comprise part of the 114 employee welfare funds2 created by the city, its agencies and authorities and the munici*12pal unions with which they have collective bargaining relationships. The agreements provide for a lump-sum payment by the employers into each of the funds, based upon the number of employees involved. From that point onward, the employers have no further relationship with these funds other than periodic reports made to the city Comptroller pursuant to a regulation adopted by him. The funds are administered solely by trustees designated by the unions involved, who have adopted the trust indentures pursuant to which payments from the funds are made.
In 1956, as a result of investigations prompted largely by the murder in 1953 of Tommy Lewis, a leader of the Building Services Employees International Union, then Governor Harriman proposed to the Legislature the act which, after substantial amendment, ultimately became Insurance Law article III-A. That article authorized the regulation and supervision of employee welfare funds. It defined such funds as “any trust fund or other fund established or maintained jointly by one or more employers together with one or more labor organizations, whether directly or through trustees, to provide employee benefits, by the purchase of insurance or annuity contracts or otherwise” (Insurance Law § 37-a [1]). Employee benefits are defined as “including, but not limited to, medical, surgical or hospital care or benefits, benefits in the event of sickness, accident, disability or death, benefits in the event of unemployment, or retirement benefits” (§ 37-a [2]). Every such fund is required to register with the Superintendent of Insurance (§ 37-b [1]) and to file annual reports with the Superintendent (§ 37-g). The Superintendent is authorized to conduct examinations of each employee benefit fund “as often as he deems necessary, and he shall do so at least once in every five years” (§ 37-c [1]).
Despite the disjunctive language contained in the definitions of “employee welfare fund” it was made evident during the debate on the measure that its passage or defeat hinged on whether it would subject unilaterally administered funds, particularly those administered solely by employers, to its jurisdiction. That the act ultimately adopted was limited solely to funds administered both by employers or their representatives and unions is made abundantly clear in the Governor’s memorandum of approval. In it he referred to his special message to the Legislature of February 22, 1956 (1956 NY Legis Ann, at 429) and added (at 482):
“It should be clearly understood by the people of our State that there have been abuses not only in jointly administered funds *13but also in funds which are unilaterally administered by employers[3] Regulation and supervision should embrace both the unilaterally administered funds and the jointly administered funds. It is a gross neglect of responsibility that the Legislature has failed to include unilaterally administered funds in the measure.
“The bill passed by the Legislature deals only with jointly administered funds. On the other hand, the bill recommended by me covered all funds”.
Nevertheless, he approved the bill as a step necessary to the comprehensive legislation required to protect the employees entitled to benefits under all welfare funds (1956 NY Legis Ann, at 482, 483).
The Department of Insurance, apparently troubled by the disjunctive use of the words “established or maintained” in the statutory definition of “employee welfare funds” (§ 37-a [1]), requested an interpretation from the Attorney-General. The Attorney-General noted in his opinion that, in the preparation thereof, he had had a transcript of the debate in the Senate when the measure was before it as well as a copy of the Governor’s memorandum of approval. Both, he stated “are clear on the point that this legislation was not intended to apply to employee welfare funds which are unilaterally administered by a labor organization or organizations or by an employer or employers”. He continued:
“In my opinion, an employee welfare fund should be regarded as ‘established’ within the meaning of and subject to the law as it is written if the fund itself was or is actually created, brought into being, constituted, founded or set up by joint or bilateral action of one or more employers and one or more labor organizations. It is my further opinion that a fund should be regarded as ‘maintained’ within the meaning of and subject to the law as it is written if the fund is actually carried on, receives financial contributions from, is operated or managed as an established institution through joint or bilateral action of one or more employers and one or more labor organizations.
“The law, in my opinion, relates to actual establishment or actual maintenance and not to an agreement which may have been entered into by ‘one or more employers together with one or more labor organizations’, but which requires only one or the other of these parties to establish and maintain the fund. It is for *14this reason that I have used the words joint or bilateral action’ in the above discussion and have placed the emphasis on actual joint or bilateral establishment and on actual joint or bilateral maintenance. These constructions are consistent with the intention of the Legislature as expressed in the debate and with the Governor’s understanding of the legislation when he approved it (see McKinney’s ‘Statutes’ §§ 2, 92 and 95).
“In accordance with the above opinion, I suggest that the language of your proposed instructions, describing funds which are jointly established or jointly maintained, should read as follows:
“ ‘A fund will be regarded as having been jointly “established” if the fund itself was or is actually created, brought into being, constituted, founded, or set up by joint or bilateral action of one or more employers and one or more labor organizations, whether directly or through trustees as defined in the law. A fund, even though not jointly “established” will be regarded as jointly “maintained”, if it is actually carried on, receives financial contributions from, is operated or managed as an established institution through joint or bilateral action of one or more employers and one or more labor organizations, whether directly or through trustees as defined in the law.’ ” (1956 Opns Atty Gen 187-190.)
Undaunted by what he conceived to be the frustration, in 1956, of his plan for all-embracing legislation regulating both bilaterally and unilaterally administered employee pension plans, Governor Harriman returned to do battle both in his 1957 and 1958 annual messages to the Legislature. On both occasions, he made reference to the failure to embody in Insurance Law article III-A and Banking Law article II-A, regulation and supervision of funds administered solely by unions or solely by employers (1957 NY Legis Ann, at 379; 1958 NY Legis Ann, at 348). The language of his 1958 message is singularly pertinent. After noting the improvements in the administration of the funds regulated, he went on to say (at 357): “Yet, a significant gap in the law remains to be filled. It is estimated that approximately 3,500 funds administered unilaterally either by employers or labor organizations remain outside the scrutiny of the law. These funds have assets of approximately $12 billion (more than 90 per cent of all funds and plan assets) and six million covered employees. They are growing rapidly. Those held by banks alone increased by $1.35 billion during the year, bringing the total held by them to nearly $10 billion. I urge once again that this gap he sealed.” (Emphasis added.)
*15On each occasion the messages were supplemented by measures which failed of enactment.
On November 12, 1964, the Health and Welfare Fund of the Patrolmen’s Benevolent Association of the City of New York filed a registration statement with the Department of Insurance, presumptively pursuant to Insurance Law § 37-b (1). Although that fund is not a party to this action it was created pursuant to collective agreement between the city and the PBA in the same manner as were the plaintiffs and is administered in the same fashion. An interoffice communication in the Department of Insurance, dated December 10,1964, noted “that this is a unilateral fund and should not have been registered with this Department”. Apparently, the PBA was so notified for, by letter dated December 16, 1965, it requested that its registration be canceled. By letter dated December 21,1965, it was notified that it had been “deregistered”.
In 1974, the Congress enacted the Employee Retirement Income Security Act ([ERISA] 29 USC ch 18, § 1001 et seq.).4 Prior to the commencement of the 1980 legislative session the Insurance Department addressed a memorandum to Governor’s counsel (now a Justice of the Appellate Division, Second Department) Richard Brown setting forth one of its legislative proposals. The purpose of the proposal was: “[t]o extend regulatory authority of the Insurance and Banking Departments to public employee welfare funds which are administered unilaterally by labor organizations as to which there has been no pre-emption by the Federal Employee Retirement Income Security Act of 1974”.
The memorandum went on to note: “The State, however, does not have jurisdiction over any unilaterally administered employee welfare fund under the provisions of Article 3-A of the Insurance Law or Article 2-A of the Banking Law. Neither the Federal nor the State government supervises governmental employee welfare funds unilaterally administered by one or more labor unions”. The proposed measure annexed to the *16memorandum broadened the term “employee welfare funds” as defined in Insurance Law § 37-a to encompass any trust fund or other fund financed by any government or public employer.
The bill proposed by the Insurance Department failed of passage.
In 1981 the Superintendent of Insurance submitted his annual report for the year ending December 31, 1980. In it he again noted: “[t]he State * * * does not have jurisdiction over any unilaterally administered employee welfare fund under provisions of Article 3-A of the Insurance Law or Article 2-A of the Banking Law”. Again, he recommended adoption of the amendment rejected at the 1980 legislative session. Supplementing the request of the Superintendent of Insurance was a report of the Commission of Investigation, dated March 1981 entitled “a trust betrayed: fraud, breach of fiduciary duty, and waste at the teamsters local 237 welfare fund”. The report went on to depict how one William Wallach, a long-time friend and relative by marriage of the chairman of the board of trustees of the Local 237 Welfare Fund, had been selected as the fund’s insurance broker and consultant. It added that, acting together with Calvin Winick, another insurance broker, “Wallach defrauded the fund of over $3 million from 1972 through 1980”.
Despite the urgings of the Insurance Department and the report of the Commission of Investigation the Legislature rejected the proposed amendment. Following defeat of the proposed amendment by the Legislature, the Superintendent, by letter dated May 10,1982, sent to all of the funds financed by the city or other public employers, including these plaintiffs, demanded that they register in accordance with Insurance Law § 37-b, under threat of criminal and civil sanctions.
For an unbroken period of 26 years, everyone in authority recognized that Insurance Law article III-A had no application to plaintiffs and to welfare funds unilaterally administered by other municipal unions. The Senate so indicated in its debate on the measure. The Governor complained about what he conceived to be the deficiency in his memorandum of approval. The Attorney-General rendered his opinion indicating that municipal unions were not within the ambit of the legislation. In 1957 and again in 1958, the Governor sought, unsuccessfully, to have article III-A amended to include unilaterally administered funds. The PBA, which registered erroneously, was deregistered by the Insurance Department because it was not subject to article III-A. The Insurance Department in 1980 submitted a memorandum to Governor’s counsel acknowledging the inappli*17cability of article III-A to plaintiffs and other municipal unions. In that year it submitted legislation to broaden its powers and to submit plaintiffs and other funds unilaterally administered by municipal unions to its regulatory and supervisory power. When that endeavor failed, it submitted its annual report for the year ending December 31,1980 emphasizing its lack of power and the need therefor. In 1981, it again submitted the legislation rejected in 1980. This time its plea was supplemented by the report of the State Commission of Investigation. When this final assault failed, it sought by administrative fiat to accomplish that which it had failed to accomplish by the orderly processes of government.
I am aware that the mere passage of time will not preclude defendant from urging a hew interpretation of the statute. As a governmental agency, estoppel is not available against it in the exercise of its governmental function (D’Angelo v Triborough Bridge & Tunnel Auth., 65 NY2d 714; Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; Granada Bldgs. v City of Kingston, 58 NY2d 705; Matter of Hamptons Hosp. & Med. Center v Moore, 52 NY2d 88). However, we are convinced that defendant’s initial reading and interpretation of the statute was the correct one. In the matter before us, the municipal authorities neither established nor maintained the funds. Their sole function was and is to finance them. Once that is done, their task is complete, save as the city Comptroller may seek to insure that these disbursements by the municipal authorities have reached their intended beneficiaries. The funds are administered unilaterally. The fact that the funds may not be regulated or supervised under ERISA or Insurance Law article III-A does not create a vacuum into which defendant may step in the absence of legislative authority.
Accordingly, I am in agreement with the conclusion reached by Special Term and would affirm.
Murphy, P. J., Sullivan and Milonas, JJ., concur with Ellerin, J.; Bloom, J., dissents in an opinion.
Order and judgment (one paper), Supreme Court, New York County, entered on May 8,1984, modified, on the law, without costs and without disbursements, the motion denied and defendant’s cross motion for summary judgment granted and a declaration made that the Insurance Department of the State of New York has regulatory jurisdiction over the plaintiffs’ and intervenor-plaintiffs’ funds under Insurance Law article III-A, § 37-a, and otherwise affirmed.

. The counterpart statute involving corporate trustees of employee welfare funds (Banking Law, art II-A, § 60 et seq.) is not here involved.

. Although it plays no part in this proceeding it is worthy of mention that these funds performed a major function in enabling the city to stave off bankruptcy during the fiscal crisis which commenced circa 1975. By agreement with the Municipal Assistance Corporation (Big Mac) they purchased large blocks of Big Mac bonds when the city’s bonds were not saleable on the open market. While these investments proved profitable to the funds, they were a godsend to the city.

. In passing, it is worthy of note that Governor Harriman made no specific reference to funds such as those here in question, which are administered solely by union representatives.

. Much argument has been spent on the preemptive effect of 29 USC § 1144. In certain areas, notably regulation and supervision of employee benefit plans, that section has been construed to grant primary jurisdiction to the Federal authorities. (Standard Oil Co. v Agsalud, 633 F2d 760, affd 454 US 801.) In other areas, the doctrine of preemption has not been applied (Delta Air Lines v Kramarsky, 650 F2d 1287, affd in part 463 US 85; National Bank v International Brotherhood of Elec. Workers, 69 AD2d 679, appeal dismissed 48 NY2d 752). Since we do not deem it germane to our conclusion, we do not deal with it further other than to note that it is questionable as to whether the plaintiff funds are “governmental plans” within the meaning of the exemption contained in 29 USC § 1003 (b) (1).