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Peterson v. Petry

October 10, 2007

JACK W. PETERSON JR., DONALD NELSON, INDIVIDUALLY, AS TRUSTEES, AND IN A REPRESENTATIVE CAPACITY FOR THE CONSTRUCTION INDUSTRY WELFARE FUND OF CENTRAL ILLINOIS, PLAINTIFFS,
v.
JOHN T. PETRY, TRUSTEE, EDWARD J. HYNDS, JR., TRUSTEE, BRUCE E. SEMLOW, TRUSTEE, AND CHRIS BUTLER, TRUSTEE, DEFENDANTS.



The opinion of the court was delivered by: Michael P. McCUSKEY Chief U.S. District Judge

OPINION

On May 12, 2006, Plaintiffs Jack Peterson and Donald Nelson, individually and as trustees of the Construction Industry Welfare Fund of Central Illinois filed their First Amended Complaint (#8). Plaintiffs bring their claim pursuant to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et. seq.*fn1 On July 30, 2007, Defendants John Petry, Edward Hynds, Bruce Semlow, and Chris Butler filed a Motion for Summary Judgment (#39). Also on July 30, 2007, Plaintiffs filed a Motion for Summary Judgment (#41). For the reasons that follow, Defendants' Motion for Summary Judgment is GRANTED and Plaintiffs' Motion for Summary Judgment is DENIED.*fn2

FACTS

The Construction Industry Welfare Fund of Central Illinois (CIWF) is a multi-employer welfare benefit plan which was established to provide health benefits to its participants. A Board of Trustees comprised of three employer appointed trustees and three union appointed trustees administers the CIWF. Defendants Petry, Hynds, and Semlow are employer trustees with the CIWF and Defendant Butler is a union trustee with the CIWF. Plaintiffs Peterson and Nelson were the remaining two union trustees on the CIWF board. Peterson and Nelson were appointed by the Carpenters' Local Unions.

On January 31, 2005, the Board of Trustees met and Nelson made a motion to increase the hourly contribution rate by one dollar. Nelson and Michael Dummitt, Defendant Peterson's predecessor as union trustee, voted in favor of the motion while Butler, Semlow, and Petry opposed the motion. Dummitt then made a motion to increase the rate by eighty cents per hour. Dummitt, Nelson, Semlow, and Petry voted in favor of the eighty cent increase, while Butler voted against it. The following year, the Board of Trustees held their regularly scheduled meeting on January 27, 2006. All of the trustees were present with the exception of Hynds. Peterson and Nelson sought to increase the contribution rate by another dollar. After debating the issue, the majority of the trustees determined that an increase by that large of an amount was not necessary. As a result, Petry made a motion to increase the rate of contributions in the amount of twenty cents, from $5.00 per hour to $5.20 per hour, effective May 1, 2006. The increase was approved by a majority vote with Peterson abstaining and Nelson opposing the motion. Petry, Butler, and Semlow indicate in their affidavits that they believed that Plaintiffs' opposition to the motion was a breach of their fiduciary duties to the CIWF. Petry, Butler, and Semlow base this assertion on their belief that the Central Illinois Carpenters' Fund charged higher contribution rates than the CIWF and it would be easier for the Carpenters' Local Unions to convince their members to transition from the CIWF to the Central Illinois Carpenters' Fund if the contribution rates were comparable.

Prior to March 29, 2006, Peterson and Nelson made statements to Defendants that the Carpenters' Local Unions were considering leaving the CIWF and were petitioning other unions contributing to the CIWF to withdraw from the CIWF. As a result of these representations, Butler, who served as Chairman of the Board at the time, and Petry, who served as Secretary of the Board, asked Jill Kunkel, the CIWF Plan Administrator, to contact legal counsel for CIWF to determine how to remove the Carpenters' Local Unions' trustees and to draft any required documents to be presented at the next regularly scheduled trustees' meeting. As a result, legal counsel for CIWF drafted Amendment #3 to the Trust Agreement which states:

This Trust Fund shall at all times be administered by Trustees, even in number, one-half of whom shall be representatives of the Employees ("Union Trustees") and one-half of whom shall be representatives of the Employers ("Employer Trustees"). There are presently six (6) Trustees.

The authority to appoint all three of the Employer Trustees in vested in the Central Illinois Builders of A.G.C.

The authority to appoint one Union Trustee each is vested in the following Unions:

* Operative Plasterers' and Cement Masons' International Association, Local 143;

* Bricklayers, Stone Masons, Marble Masons, Tile Layers and Terrazzo Workers Local #8-chapter 17 [Bricklayers];

* International Brotherhood of Painters and Allied Trades - Local #363 [Painters].

Amendment 3 did not by its terms remove any trustees, but granted the authority to appoint a union trustee to the Bricklayers and Painters.

On March 29, 2006, a regularly scheduled meeting of the Board of Trustees took place. All trustees including Plaintiffs were present and participated in the meeting. Amendment #3 was presented at the meeting. Petry, Semlow, Hynds, and Butler voted in favor of the amendment while Peterson and Petry opposed the amendment. As a result, Amendment #3 was passed and made part of the Trust Agreement. The effective date of the amendment was 12:00 a.m. on May 1, 2006. On April 20, 2006, Kunkel received Letters of Appointment from the Bricklayers and Painters appointing Allen Wells and Daniel McCall as trustees of the CIWF effective May 1, 2006.

The Board of Trustees was to have its next scheduled meeting on April 28, 2006, but this meeting was canceled. The time and date of this meeting was discussed at the meeting held on March 29, 2006, at which Plaintiffs were present. Kunkel sent a letter to all trustees, including Plaintiffs, stating that the April meeting was canceled and would be rescheduled for early May. Nelson contacted Kunkel on May 1, 2006, to determine the date of the next board meeting, and Kunkel informed Nelson that the date of the next meeting had not been set.

A special meeting of the Board of Trustees was held on May 10, 2006. Butler, Petry, Hynds, and Semlow were present for the meeting. Also present at the meeting were McCall, the trustee appointed by the Bricklayers, and Wells, the trustee appointed by the Painters. Peterson and Nelson were not invited to the meeting. Butler, Semlow, Petry, and Hynds indicate in affidavits that Plaintiffs were not invited because the instant case had been filed by Peterson and Nelson at the time and because Defendants did not believe Plaintiffs were entitled to be present at the meeting. During the meeting, Kunkel presented the Letters of Appointment for McCall and Wells. Hynds made a motion to formally accept the letters naming the new trustees appointed by the Bricklayers and the Painters. The motion was approved by Butler, Petry, Hynds, and Semlow. In March 2007, the Executive Boards of the Bricklayers and the Painters executed resolutions confirming the prior appointments of McCall and Wells and confirming the removal of Plaintiffs as trustees. On April 27, 2007, Kunkel notified Butler, Peterson, Nelson, Petry, Hynds, Semlow, Wells, and McCall by letter of these actions.

Plaintiffs' claim, brought pursuant to ERISA,*fn3 is that Defendants breached their fiduciary duties as trustees of the CIWF because Defendants were not authorized by the Trust Agreement to dismiss Plaintiffs as trustees. The CIWF is organized pursuant to the Trust Agreement of the CIWF and the Plan of Benefits. Paragraph 39 of the Trust Agreement provides:

Any action taken by the Trustees pursuant to this Trust Agreement and Declaration of Trust shall be by majority vote of the Trustees attending a regular meeting of the Trustees. A quorum for any such meeting shall be at least (2) Employer Trustees and at least (2) Union Trustees, except as provided in Paragraph 36. Any and all actions taken at such regular meeting shall have the same force and effect as if taken by unanimous approval.

As concerns construction of the Trust Agreement, paragraph 25 states:

The Trustees jointly shall have power to construe the provisions of this Trust Agreement and Declaration of Trust and the terms used herein and any construction adopted by the Trustees in good faith shall be binding upon the Unions, the Employers, and all persons covered by the Trust Agreement and Plan of Benefits, provided that any construction made, as aforesaid, which shall be in contravention of or inconsistent with the existing collective bargaining agreements between the parties hereto, shall not be binding upon the Employers, or their respective associations, or the Unions.

Paragraph 54 of the Trust Agreement provides that it can be amended at any time by a majority vote of the trustees with the exception of amendments that: (1) divert CIWF assets for purposes not allowed by paragraph 12 of the Trust Agreement; (2) create an unequal number of union and employer trustees; (3) alter the method of voting set forth in the Trust Agreement; or (4) are ...


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