Careful Bus Service, Inc. v. Local 854 Health and Welfare Fund

Background

Careful Bus Service, Inc. and X-L Escort Services, Inc. were contributing employers to the Local 854 Health and Welfare Fund, a jointly trusteed, multiemployer welfare plan that provided medical benefits to participants and beneficiaries connected with the union school-bus industry. Their collective bargaining agreement required contributions to the Fund and stated that Plaintiffs agreed to be bound by the Fund’s Trust Declaration, including valid future amendments.

In March 2020, the Fund’s trustees considered adding a Termination Premium for employers that stopped contributing. The proposed premium would equal the incurred-but-not-reported medical claims attributable to the departing employer’s employees and their dependents. The proposal was approved by the three union-appointed trustees at a meeting without the employer-appointed trustees present. The employer-appointed trustees did not vote at that meeting, although their counsel later emailed that two of the three had voted in favor and one had abstained.

The Trust Declaration required amendments to be approved by a majority of all trustees voting in person or by proxy at a meeting with a quorum present. It also required that amendments be provided to the Union and the employers. The Fund later demanded $234,278 from Plaintiffs, who had switched their health coverage to the Local 210 Fund under an amendment to their collective bargaining agreement. Plaintiffs did not pay the Termination Premium and sued for declaratory judgment, fraudulent inducement, fraudulent concealment, and breach of the implied covenant of good faith and fair dealing.

Summary-Judgment Standard

Summary judgment is appropriate when the undisputed record shows that there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court considers the evidence in the light most favorable to the nonmoving party. The parties agreed that the dispute could be decided without discovery.

Declaratory Judgment

The court granted Plaintiffs’ motion for summary judgment on the claim seeking a declaration that Plaintiffs do not owe the Termination Premium. Under the Employee Retirement Income Security Act, or ERISA, a plan fiduciary may sue to collect delinquent contributions. The court characterized Plaintiffs’ action as the reverse of such a collection action and applied ordinary contract principles to determine whether Plaintiffs had agreed to be bound by the Fund’s plan documents.

The court held that Plaintiffs’ collective bargaining agreement incorporated the Trust Declaration and bound Plaintiffs to amendments that were validly adopted. But the Termination Premium amendment was not validly adopted. The undisputed evidence showed that the employer-appointed trustees did not vote during the March 31 meeting and were not present when they purportedly voted later. Therefore, at no meeting did a majority of all trustees vote as required by the Trust Declaration. The amendment was invalid and did not bind Plaintiffs.

The court also concluded that the purported amendment could not be incorporated into the collective bargaining agreement because it did not comply with the Trust Declaration’s amendment procedure. The court did not decide whether the trustees had substantive authority to add a Termination Premium, because the procedural defect alone resolved the declaratory claim. The court stated that its ruling would be the same even assuming the Fund’s evidence was admissible, the unsigned minutes and email satisfied ERISA’s writing requirements, and providing the amendment to Plaintiffs was not a required condition.

Other Claims

The court stated that the fraudulent-inducement, fraudulent-concealment, and implied-covenant claims were dismissed as moot because each sought the same practical relief—the declaration that Plaintiffs did not owe the Termination Premium—and that relief had been granted.

Attorneys’ Fees

The court denied both parties’ requests for attorneys’ fees. It held that the ERISA fee provision relied on by the Fund did not apply because the Fund had not obtained a judgment in its favor. The court also concluded that a discretionary fee award to Plaintiffs was not appropriate. The record did not show bad faith, the Fund’s ability to pay was uncertain, deterrence did not justify an award under the circumstances, and the Fund’s legal arguments were not facially meritless.

Disposition

The conclusion states that Plaintiffs’ summary judgment motion was GRANTED in part and DENIED in part. The motion was GRANTED on the declaratory-judgment claim that Plaintiffs do not owe the Termination Premium; the motion on the Complaint’s other claims was DENIED as moot; and both parties’ requests for attorneys’ fees were DENIED. The Clerk was directed to close the motion at Docket Number 16.