United States District Court, N.D. Illinois
March 19, 2004.
CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION (INDEPENDENT) HEALTH AND WELFARE FUND, Plaintiff,
LOCAL 710, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, as successor to the Chicago Truck Drivers, Helpers and Warehouse Workers Union and CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION (INDEPENDENT) PENSION FUND, Defendants
The opinion of the court was delivered by: RONALD GUZMAN, District Judge
MEMORANDUM OPINION AND ORDER
Before this Court are issues regarding the capacity in which Plaintiff
Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent)
Health and Welfare Fund ("Health and Welfare Fund") has sued Defendants
Local 710, International Brotherhood of Teamsters ("Local 710") and
Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent)
Pension Fund ("Pension Fund") and related jurisdictional issues. For the
reasons set forth below, the Court holds that the Health and Welfare Fund
brings this action in its fiduciary capacity and jurisdiction exists.
Plaintiff has sued defendants pursuant to the Employee Retirement
Security Act of 1974, § 2 et seq., 29 U.S.C.A. § 1001 et seq. ("ERISA"),
and seeks a declaratory judgment regarding the proper distribution of
demutualization compensation that resulted from the Principal Financial
Group's conversion from a mutual insurance company into a public stock
company. The Health and Welfare Fund seeks a declaration from the Court
that the demutualization compensation is a plan asset and should revert
to the plan participants. Defendants, of course, disagree.
Before analyzing the parties' motions for summary judgment, the Court
paused to determine whether Plaintiff was suing as a fiduciary of the
employee-participants or as an employer. On September 4, 2003, the Court
sua sponte raised the issue of whether federal jurisdiction exists in
this case. The Court's concern was that the Health and Welfare Fund, an
employer, brought the declaratory action, but the Health and Welfare Fund
will benefit should the Court rule in favor of Defendants. Further, the
Health and Welfare Fund had not specified in the case's caption that it
was bringing the action as a trustee for the employee-participants,
i.e., acting in its fiduciary capacity. The parties presented arguments
at a hearing on October 27, 2003 and briefed the issue of whether
Plaintiff is the proper plaintiff and whether any conflict of interest
"[T]he federal courts are obliged to police the constitutional and
statutory limitations on their jurisdiction." Kanzelberger v.
Kanzelberger, 782 F.2d 774, 777 (7th Cir. 1986). Thus, a court may, and
must, raise sua sponte the question of whether jurisdiction is proper.
Shockley v. Jones, 823 F.2d 1068, 1072 (7th Cir. 1987) ("It is always
proper for a federal court to raise the issue of its own subject matter
under Rule 12(b)(1)."); see FED. R. CIV. P. 12(h)(3) ("Whenever it appears
by suggestion of the parties or otherwise that the court lacks
jurisdiction of the subject matter, the court shall dismiss the
In ERISA cases where a party may have a conflict of interest, the
threshold question is whether the party is acting as a fiduciary when
filing the complaint with the Court. Pegram v. Herdrich, 530 U.S. 211,
226 (2000). Generally, fiduciary duties under ERISA are defined by
function, rather than form. See 29 U.S.C. § 1002(21)(A); Mertens v. Hewitt
Assocs., 508 U.S. 248, 262 (1993) ("ERISA . . . defines `fiduciary' not
in terms of formal trusteeship, but in functional terms of control and
authority over the plan. . . .") (emphasis in original). Therefore, any
party exercising control or authority over the plan's assets is an ERISA
fiduciary. Mertens, 508 U.S. at 251.
The Health and Welfare Fund did not formally designate itself as a
fiduciary for the employee-participants when it filed its Complaint with
the Court. Despite this oversight, the Health and Welfare Fund has now
represented in its submissions and at oral arguments that it has control
and authority over the plan's assets; thus, it is a fiduciary.
Where a conflict of interest may exist, it is clear that an ERISA
fiduciary must act solely in the best interest of its participants when
making fiduciary decisions. Id. at 225. Conflicts of interest may arise,
but ERISA does not preclude a party from serving as a trustee and as an
employer. Ches v. Archer, 827 F. Supp. 159, 170 (W.D.N.Y. 1993) (finding
a "conflict of interest attendant on the assumption of the dual capacity
does not, in and of itself, constitute a violation of ERISA and that an
officer/trustee in such a situation is allowed to justify one's
determinations by demonstrating that they comport
with ERISA's substantive requirements").
The Health and Welfare Fund has an obvious conflict of interest. Should
the Court rule in favor of the employee-participants, represented by the
Health and Welfare Fund, the Health and Welfare Fund will actually lose
money. However, if the Court rules in favor of Defendants, the Health and
Welfare Fund stands to gain monetarily from the reversion of the
demutualization compensation. Notwithstanding its obvious conflict of
interest, the Health and Welfare Fund is permitted by law to serve as a
fiduciary for the employee-participants. However, the Court emphasizes
that while acting in its fiduciary capacity, the Health and Welfare Fund
is required to act in the best interest of the employee-participants.
Furthermore, the Court recognizes that a trustee is the proper party to
enforce fiduciary obligations regarding ERISA matters relating
employee-participants. See Koch Refining v. Farmers Union Cent. Exch.,
831 F.2d 1339, 1351 (7th Cir. 1987) (finding that trustees are best
positioned to bring fiduciary matters "`for the protection of the entire
community of interests in the corporation-creditors as well as
stockholders'") (quoting Pepper v. Litton, 308 U.S. 295, 307 (1939)).
However, the Court does not believe it efficient to mandate Plaintiff
to alter its complaint. The Health and Welfare Fund asserted that it was
acting in a fiduciary capacity both at the oral hearing and in its
related brief. (Pretrial Conf. Tr. at 2, 12; Pl.'s Resp. Defs.' Mem.
Supp. Jurisdiction at 1.) Although Plaintiff brought the action on behalf
of the Health and Welfare Fund and not as a trustee for the
employee-participants of the Health and Welfare Fund, the Court finds
that Plaintiffs repeated assertions are sufficient to show its position
as fiduciary for the employee-participants of the plan. As a
result, the Court finds it unnecessary to join the employee-participants
of the Health and Welfare Fund. Local 710's motion to add a third party
complaint, counterclaim, and cross-claim is deemed moot.
Finally, jurisdiction cannot exist unless the constitutional standing
requirements of a case or controversy under Article III are met. Citizens
for a Better Environment v. Steel Co., 230 F.3d 923, 927-28 (7th Cir.
2000). To establish a case or controversy:
First, the party must have suffered an injury in fact
consisting of an invasion of a legally protected
interest which is (a) concrete and particularized and
(b) actual or imminent. . . . Second, there must be a
causal connection between the injury and the conduct
complained of. . . . Third, it must be likely, as
opposed to merely speculative, that the injury will be
redressed by a favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555
, 560-61 (1992) (quotations
and citations omitted). When declaratory relief is sought, the alleged
controversy must be immediate and real. Norfolk S. Ry. Co. v. Guthrie,
233 F.3d 532
, 534 (7th Cir. 2000).
The Health and Welfare Fund complains that the money should revert to
the employee-participants. According to Plaintiff, without a declaratory
judgment from the Court, it is likely that the demutualization
compensation distribution to the participants/beneficiaries would lead to
lawsuits filed against the trustees by the employers. The Court finds
this alleged controversy immediate and real, arising from a legally
protected interest. Next, the Court recognizes that there is a causal
connection between the injury to the participants and the distribution of
the demutualization compensation. Finally, it is likely that the Health
and Welfare Fund's employee-participants will be redressed should the
Court find in its favor. Accordingly, because a case or controversy
exists, this Court has proper subject matter jurisdiction. The motions
for summary judgment are thus reinstated and will be ruled upon by
the Court by mail.
For the foregoing reasons, this Court holds that the Health and Welfare
Fund is acting as a fiduciary, and jurisdiction is proper.
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