Drink v. Ulrich

Background

These related civil actions concerned alleged misconduct by John Ulrich during his tenure as a Union business agent and vice president and as a trustee of the Health Fund. Ulrich proceeded without a lawyer when the motions at issue were filed. The Union and the Health Fund Plaintiffs each moved for summary judgment, which is a request for judgment without a trial because the moving party contends that no genuine dispute exists over facts that matter to the outcome.

The Union provided Ulrich with an iPhone, iPad, and laptop for Union business. The Union terminated him as a business agent in February 2016 and removed him as vice president in May 2016, citing misconduct that included his refusal to return the equipment. The Union stated that it spent $1,500.30 to replace the laptop and $498.59 to replace the iPad. The opinion states that the Union paid $325.86 for the Union cell phone, resulting in claimed damages of $2,324.75.

The Health Fund provided health-insurance benefits to Union members. Crossroads Healthcare Management had served as the Health Fund’s third-party administrator. The opinion states that, between 2013 and 2016, Ulrich and other Union and Health Fund officials solicited and received thousands of dollars in bribes from a Crossroads employee in exchange for keeping Crossroads as the administrator. Ulrich later pleaded guilty to conspiring to solicit and receive bribe payments to influence the operation of an employee benefit plan. After Crossroads was replaced with MagnaCare, the Health Fund estimated that it would have saved $1,007,228.78 in fees between January 1, 2013, and July 1, 2016, if MagnaCare had been selected earlier.

Claims and analysis

The Union asserted claims under Section 301 of the Labor Management Relations Act, the New York Labor and Management Improper Practices Act, and New York common law. The claims addressed in the Union’s motion concerned Ulrich’s failure to return Union property. The Health Fund Plaintiffs asserted claims under the Employee Retirement Income Security Act, or ERISA, for breach of fiduciary duty. Their motion addressed the claim concerning Ulrich’s bribes from Crossroads.

The court first held that the Union could seek damages from Ulrich under Section 301 for violating the International Brotherhood of Teamsters Constitution. The court considered statutory restrictions on damages against individual union members, but found persuasive decisions concluding that those restrictions do not immunize an individual union official from liability for his own breach of a union constitution. The court then found no factual dispute that Ulrich failed to return the Union property and that this violation damaged the Union by $2,324.75. It granted the Union summary judgment on that Labor Management Relations Act claim for that amount.

The court also granted the Union summary judgment on its New York labor-law claim. It reasoned that the undisputed failure to return the property amounted, practically speaking, to theft and subordinated the Union’s interests to Ulrich’s personal interests. The court granted judgment on that claim for $2,324.75 as well. It explained that the New York statute did not provide for attorneys’ fees separately from damages, although it could allow fees to be paid from damages awarded or assets recovered. The court left discussion of any fee request for a later conference.

As to the Health Fund Plaintiffs’ ERISA claim, the court held that Ulrich violated ERISA Section 406(b) by soliciting kickbacks from a party dealing with the benefit plan. The court relied in part on Ulrich’s sworn admissions in his guilty plea and rejected the suggestion that his later denial created a genuine factual dispute. The court further held that ERISA Section 409(a) made Ulrich personally liable for losses caused by the fiduciary breach, including restoration of profits made through use of plan assets. It granted summary judgment to the Health Fund Plaintiffs on the bribery-related ERISA claim and identified $1,007,228.78 as the Health Fund’s estimated loss.

The court did not address the Health Fund Plaintiffs’ separate ERISA claim under Section 404(a), because it found that they were entitled to summary judgment under Section 406(b). The court agreed that the Health Fund Plaintiffs could seek disgorgement of the bribes themselves, but stated that they had not submitted evidence showing the amount Ulrich received. The court left that issue for further discussion.

Disposition

The court granted the Union’s Motion for Summary Judgment and the Health Fund Plaintiffs’ Motion for Summary Judgment. It directed the Clerk to enter judgment for the Union on its claim concerning violation of the International Brotherhood of Teamsters Constitution based on failure to return Union property, and for the Health Fund Plaintiffs on their fiduciary-duty claim based on Ulrich’s extortion of bribes from a vendor. The opinion also scheduled a later status conference concerning resolution of the cases and any further evidence relating to disgorgement or attorneys’ fees.

Judge

The opinion was written and signed by Kenneth M. Karas, United States District Judge.