Empire State Bus Corp. v. Local 854 Health and Welfare Fund

Background

Empire State Bus Corp., Allied Transit Corp., and Empire Charter Service, Inc. operated school-bus services and employed unionized bus drivers and special-needs escorts. Their collective bargaining agreements with International Brotherhood of Teamsters Local 553 required contributions to the Local 854 Health and Welfare Fund, a multiemployer health-benefit plan. The agreements incorporated the Fund’s Agreement and Declaration of Trust.

The agreements expired, and the opinion describes them as having expired in November 2019. In March 2020, the Fund’s trustees considered an amendment that would impose a termination premium on former contributing employers. The premium would equal medical expenses incurred while an employer contributed to the Fund but reported afterward. Three union trustees voted for the proposal at a March 31, 2020 meeting. The three employer trustees did not vote at that meeting; an April 1 email reported that two employer trustees voted for the proposal and that the third did not participate or vote.

After the companies’ employees voted to leave Teamsters Local 553 and join Amalgamated Transit Workers Local 854, the Fund demanded a $239,892 termination premium. The companies refused to pay. The Fund later declared them in default and threatened to take steps to collect the amount, including filing suit. The companies brought this declaratory-judgment action, asking the court to declare that the proposed amendment was not validly adopted and that they did not owe the premium.

Summary-judgment ruling

The court granted the companies’ motion for summary judgment. Summary judgment is a decision without a trial when the evidence shows no genuine dispute over facts that could affect the result and one side is entitled to judgment under the law.

The court held that the Trust Agreement required an amendment to be approved by a majority of all trustees voting in person or by proxy at a meeting where a quorum was present. The Fund did not claim that a majority of all trustees voted for the proposal at a meeting. Instead, the employer trustees’ votes were communicated by email the day after the meeting. Because the amendment procedure was not followed, the court held that the proposed amendment was never validly adopted.

The court rejected the Fund’s arguments that the pandemic circumstances, the trustees’ apparent understanding that the amendment was valid, or the participation of one company principal as an employer trustee excused the failure to follow the required procedure. The court explained that formal amendment procedures serve to ensure that plan changes receive the required approval and are clearly recognized.

The court also held that the companies would not be bound by the proposed amendment even if it had been properly adopted. The collective bargaining agreements had expired several months before the Fund claimed that the Trust Agreement was amended. Under the court’s reading of federal benefits law and the governing contract principles, continued contributions to the Fund did not by themselves show that the companies agreed to be bound by a new payment obligation adopted after the agreements expired. The court further concluded that the limited exception for provisions essential to a plan’s administration did not apply because the termination premium was more like an interest or liquidated-damages payment provision than an audit right.

The court therefore declared that the Trust Agreement was not properly amended to include the proposed termination premium and that the companies were not liable for the premium. The court did not reach the companies’ alternative arguments that the proposed amendment violated the Labor Management Relations Act or was invalid under the Trust Agreement and the collective bargaining agreements.

Attorney’s-fee ruling

The court denied the companies’ request for attorney’s fees under 29 U.S.C. § 1132(g)(1). That provision authorizes discretionary fees in an action brought by a plan participant, beneficiary, or fiduciary. The court held that employers do not fall within those categories and rejected the companies’ argument that the declaratory-judgment “mirror image” approach to federal jurisdiction changed the fee analysis.

Disposition

The court’s conclusion states: “The motion is GRANTED IN PART AND DENIED IN PART.” Summary judgment was granted in favor of the companies, and their request for attorney’s fees was denied. The clerk was directed to close the motion docket entry.