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October 20, 1983


The opinion of the court was delivered by: Parsons, District Judge.


This case comes before me for ruling on defendants' motion for summary judgment and the motion of co-defendant, Peter Shannon & Co., to dismiss for failure to state a claim on which relief can be granted.

The first motion to be considered is the motion for summary judgment. Defendants move pursuant to Rule 56(b), Fed.R. Civ.P., for summary judgment on the ground that claims asserted by plaintiff are barred by the doctrine of res judicata by reason of a consent decree which earlier was entered in a related action Donovan v. Nave, No. 82 C 2210 (N.D.Ill. 1983).


On April 9, 1982 a suit was filed by Raymond Donovan, Secretary of Labor, against certain individuals: (1) Guy Nave, (2) Marjorie Hickey, (3) Adolph Nielsen, and (4) Elmer Kirchwehn, against (5) the Chicago Truck Drivers Helpers & Warehouse Workers Union (Independent), hereafter the CTDH & WWU (I), or "the union", (6) the union's Pension Plan and (7) the union's Health & Welfare Plan.

The Secretary's action alleged that the trustees of the union's Pension Plan had breached their fiduciary duties by contracting with the Union for provision of administrative services to the Pension Plan, by failing to consider contracting with service providers other than the Union, and by causing the Plan to engage in transfers of Plan assets to the Union and to union employees in violation of ERISA. Against Nave alone the action alleged that he determined on behalf of the Union the amount to be charged to the Plan for services rendered it by the Union. Then as a Plan trustee he participated in Plan meetings in which the Board approved the Union's proposals for compensation. This allegedly was acting upon behalf of both the Union and the Plan whose interests were adverse.

As to Hickey & Kirchwehm, Welfare Plan trustees, the Secretary's action alleged that they failed in their fiduciary duties to Welfare Plan participants and beneficiaries by maintaining a similar arrangement with the Union to provide services to the Welfare Plan, by failing to consider alternate service providers, by causing the Welfare Plan to engage in transactions resulting in the furnishing of services and facilities to the Plan by the Union, parties of adverse interests, and by causing the Welfare Plan to transfer Plan assets to the Union. All alleged acts would be in violation of ERISA.

The Secretary's complaint sought equitable and restitutionary relief as follows: that the court (1) enjoin the defendants and persons acting in concert with them from engaging in acts in violation of their fiduciary duties under ERISA, (2) appoint an independent receiver with control over administrative services for the Plan, (3) enjoin the defendant trustees, Nave, Hickey, Nielsen, and Kirchwehm and their successors from exercising control over these administrative services during the period of the independent receiver's services, (4) order the defendant trustees to use plan assets to compensate service providers retained by the court's independent receiver, (5) order Nave and Nielson to make good to the Pension Plan all losses that had resulted from their fiduciary violations (6) order defendants Hickey and Kirchwehm to make good to the Welfare Plan all losses resulting from their fiduciary violations and, (7) order the Union to restore to the plan the excess amounts paid by the plans to the Union in violations of ERISA.

Nine months later on January 18, 1983, plaintiff Picardi filed the instant action against the same defendants named in the 1982 Secretary's action, but also against additional union employees, Mike Keegan, John H. King, Walter Mullady, Raymond Emerick, J. Donald Ryan, Ed Fenner, Barney Keegan, Ed Kaminski, Louis Matassa, Al Hayes, Bernie Benard, Pete Androuis, Fred Boudreau, Mike Campbell, Jim Cogley, Arthur Costello, Tony Lullotta, Louis Depaulos, Edwin Fenner, Edward Glavin, John Johnson, Joe Montalto, Bob Nowak, and Ray Seaman, as well as against an accounting firm, one Peter Shannon and Company.

Recently the Secretary of Labor mailed a copy of a proposed consent decree to be entered in his case and a notice of the consent decree hearing to Mr. Charles Pressman, Plaintiff Picardi's attorney in this case. This mailing came six working days before the consent decree hearing. The defendants in the first case also served copies of the same decree on Mr. Pressman three working days before the hearing. On March 8, 1983 Judge Perry approved the consent decree and dismissed the Secretary's lawsuit with prejudice.

The Picardi case which was filed some seven weeks before the consent decree was signed in the Donovan case arises out of the same and additional facts.

Plaintiff Picardi is a member of the Union and a beneficiary of the pension and welfare plans. His is a class action brought on behalf of all the union members and plan beneficiaries. He charges (1) that the Union and other defendants appropriated unreasonable sums of money for the administration of the Plans in violation of ERISA, (2) that the defendants conspired to cause the Plans to pay these illegal and unreasonable charges, (3) that payments by both Plans to the Union's business agents were illegal under ERISA, (4) that Peter Shannon and Company, the accountants, breached its own fiduciary duty to the Plans in violation of ERISA, (5) that each of the defendants participated in or failed to rectify breaches of fiduciary obligations by other defendants, all in violation of ERISA, (6) that Union officials violated fiduciary obligations imposed on them by § 501(b) of the LMDRA, (7) that the defendants engaged in acts in violation of Title 18 U.S.C. § 664 — relating to embezzlement from pension and welfare funds, acts which are unlawful under the Racketeer Influence and Corrupt Organization Act (RICO), 18 U.S.C. § 1961, et seq., (8) that the defendants further had engaged in acts in violation of Title 18 U.S.C. § 1341 — relating to mail fraud — also unlawful under RICO, (9) that the defendants had breached common law fiduciary duties, and (10) that Shannon had negligently prepared studies for representing the value of services rendered by the Union to the plans. Count eleven then reasserts all above mentioned causes of action derivatively on behalf of the Plans themselves.

Plaintiff Picardi in this case also seeks equitable relief, including (1) injunctions to prevent the Union from providing services to the Plans and from paying money to the defendants in connection with those services, (2) removal of Shannon as auditor, (3) an accounting of funds of the present and prior Plans, (4) an order directing defendants to exhaust their private or insurance funds before requiring the Union to pay judgments, (5) an order directing plaintiff's attorneys to procure an alternate service provider under the supervision of this court, and (6) an injunction to prevent Shannon and Co. hereafter from performing services for the Plans and authorizing Plaintiff Picardi's attorneys to supervise the procurement of some other independent auditing services for the Plans.

In this case, however, the plaintiff goes on to seek money damages for the full amount to be found to be due for each violation of ERISA and common law duties, as well as punitive damages under RICO of three times the actual amount of damages, the cost of the suit and reasonable attorneys' fees.


The question with respect to the defendants' motion for summary judgment is whether the consent decree in Donovan v. Nave operates as a res judicata bar to the Picardi case. This question requires an examination of the principles of res judicata and collateral estoppel. According to Cromwell v. County of Sac., 94 U.S. 351, 24 L.Ed. 195 (1876) the judgment in a prior suit if rendered on the merits is res judicata in a subsequent action between the same parties on the same claim or cause of action and operates as an absolute bar not only to every ground of recovery or defense actually presented in the prior action but also to every ground which might have been presented. ...

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