Summary
denying plaintiffs' motion for class certification
Summary of this case from Martinez v. BaraschOpinion
01 Civ. 2289 (MBM).
June 11, 2004
THOMAS M. KENNEDY, ESQ., SUSAN M. JENNIK, ESQ., New York, NY, (Attorneys for Individual Plaintiffs).
J. BRUCE MAFFEO, ESQ., ROLAND ACEVEDO, ESQ., New York, NY, (Attorneys for Plaintiff Miranda).
MICHAEL B. HIMMEL, ESQ., ROBERT J. KIPNEES, ESQ., Woodbridge, NJ, (Attorneys for Defendants George Barasch, Linda Barasch Glazer, Richard Glazer and Financial Administrators, Inc.).
KATHERINE H. PARKER, ESQ., MYRON D. RUMELD, ESQ., NEAL SCHELBERG, ESQ., New York, NY, (Attorneys for Defendants Trustees of the Allied Welfare Fund and Trustees of the Vacation Fringe Benefit Fund).
PETER ALTIERI, ESQ., JOHN HARRIS, ESQ., J. WILLIAM COOK, ESQ., New York, NY, (Attorneys for Defendants Trustees of the Union Mutual Fund Pension Plan).
DANIEL RIESEL, ESQ., STEVEN RUSSO, ESQ., HILARY SEMEL, ESQ., New York, NY, (Attorneys for Defendants Stephen Barasch and Churchill Administrators, Inc.).
JAY P. WARREN, ESQ., New York, NY, (Attorney for Defendants Allied Trades Council; John Morro, Individually and as President of ATC; and Jack Siebel, Reginald Rosado and James Crowley, as Officers of ATC).
OPINION ORDER
Plaintiffs Jose Martinez and Haywantie Singh ("the Individual Plaintiffs") are former members of the Allied Trades Council ("ATC") and participants in related employee benefit funds, including the Union Mutual Fund Pension Plan, the Allied Welfare Fund, and the Vacation Fringe Benefit Fund (collectively as "the Employee Benefit Funds"). Plaintiff George Miranda is a Trustee of the Employee Benefit Funds. Plaintiffs assert two claims against defendants George Barasch, Stephen Barasch, Linda Barasch Glazer, and Richard Glazer ("the Barasch Family"), the Trustees of the Employee Benefit Funds, Financial Administrators, Inc. ("Financial"), and Churchill Administrators, Inc. ("Churchill") arising under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et. seq., for breaches of fiduciary duties. The Individual Plaintiffs also assert a claim against the Officers of ATC arising under the Labor-Management Reporting and Disclosure Act ("LMDRA"), 29 U.S.C. § 401, et. seq., for breach of fiduciary duties. Individual Plaintiffs have moved to certify a class on behalf of all participants in and beneficiaries of the Employee Benefit Funds and members of ATC. For the reasons set forth below, Individual Plaintiffs' motion is denied.
I.
Individual Plaintiffs are residents of New York, and are or were "employees," as that term is defined in Section 2(5) of the LMRDA, 29 U.S.C. § 152 (5); "members," as that term is defined in Section 3(o) of the LMRDA, 29 U.S.C. § 402(o), of a labor organization, ATC; and "participants," as that term is defined in Section 3(7) of ERISA, 29 U.S.C. § 1002(7), in the Employee Benefit Funds. (Fourth Amended Complaint ("FAC") ¶¶ 4, 15, 16) They bring this action for and on behalf of themselves and other "participants" of the Employee Benefit Funds within the meaning of Section 3(7) of ERISA, 29 U.S.C. § 1002(7). (Id.)Plaintiff George Miranda is the principal officer of the International Brotherhood of Teamsters, Local Union 815 ("Local 815"), a labor organization as that term is defined in Sections 2(5) and 3(i) of the LMRDA, 29 U.S.C. § 152(5), 402(i). (Id. at ¶ 5) Miranda has been designated by Local 815 as a Trustee of each of the Employee Benefit Funds since January of 2000. (Id.)
Defendant John Morro is President of ATC, a "labor organization" as that term is defined in Sections 2(5) and 3(i) of the LMRDA, 29 U.S.C. § 152(5), 402(i). (Id. at ¶ 6) Defendants Jack Siebel, Reginald Rosado, and James Crowley (collectively "the ATC Defendants") are officers and members of the Executive Council of ATC. (Id.)
Defendants Stephen Barasch and Linda Barasch Glazer are the children of George Barasch. (Id. at ¶ 7) Richard Glazer is married to Linda Barasch Glazer. (Id.) Defendant Stephen Barasch administers defendant Churchill and, together with the rest of the Barasch Family, controls Churchill. (Id. at ¶ 11) Defendants Richard Glazer and Linda Barasch Glazer administer defendant Financial and, together with the rest of the Barasch Family, control Financial. (Id. at ¶ 12) The Barasch Family also exercises discretionary authority or control over the management and/or disposition of the assets of the Employee Benefit Funds as well as ATC. (Id. at ¶¶ 13, 18)
Defendants Gerald Herskowitz, Louis Kaplan, Stephen Camadeco, Rudolph Pascucci, Bruce Rogers and Anthony Guigliano serve as Trustees of the Allied Welfare Fund, which is a multi-employer, collectively-bargained employee benefit plan within the meaning of Section 302 of the LMRDA, 29 U.S.C. § 186, that provides health and related benefits to plan participants and their beneficiaries. (Id. at ¶ 8) The Allied Welfare Fund is also an "employee welfare benefit plan" as that term is defined in Section 3(1) of ERISA, 29 U.S.C. § 1002(1). (Id.)
Defendants Harvey Rosen, Bruce Rogers, Gerald Herskowitz, Herman Wolfson, Stephen Camadeco and James Crowley serve as Trustees of the Vacation Fringe Benefit Fund, which is a multi-employer, collectively-bargained employee benefit plan within the meaning of Section 302 of the LMRDA, 29 U.S.C. § 186, that provides vacation and related benefits to plan participants and their beneficiaries. (Id. at ¶ 9) The Vacation Fringe Benefit Fund is also an "employee welfare benefit plan" as that term is defined in Section 3(1) of ERISA, 29 U.S.C. § 1002(1). (Id.)
Defendants Irving Hans, Irving Kroop, Donald Merino, Harold Banner and Bertram Gelfand serve as Trustees of the Union Mutual Fund Pension Plan, which is a multi-employer, collectively-bargained employee benefit plan within the meaning of Section 302 of the LMRDA, 29 U.S.C. § 186, that provides vacation and related benefits to plan participants and their beneficiaries. (Id. at ¶ 10) The Union Mutual Fund Pension Plan is also an "employee welfare benefit plan" as that term is defined in Section 3(1) of ERISA, 29 U.S.C. § 1002(1). (Id.)
Defendant Churchill Administrators, Inc. is a corporation incorporated in New Jersey with its principal place of business also in New Jersey. (Id. at ¶ 11) Churchill exercises discretionary authority or control over the management and/or disposition of the assets of the Employee Benefit Funds. (Id. at ¶ 13)
Defendant Financial Administrators, Inc. is a corporation incorporated in New Jersey with its principal place of business also in New Jersey. (Id. at ¶ 12) Financial exercises discretionary authority or control over the management and/or disposition of the assets of the Employee Benefit Funds. (Id. at ¶ 13)
This action arises under Sections 404, 405 and 406 of ERISA, 29 U.S.C. § 1104, 1105, 1106, and Section 501 of the LMRDA, 29 U.S.C. § 501. (Id. at ¶ 2) Jurisdiction is present pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 501(b) and 1132(a). (Id.) Venue in this court is proper under 28 U.S.C. § 1391 because a substantial part of the events giving rise to this action occurred in this district. (Id. at ¶ 3)
II.
This court has issued two prior opinions in this action, see Bona v. Barasch, No. 01 CIV. 2289, 2003 WL 1395932 (S.D.N.Y. Mar 20, 2003) and Bona v. Barasch, No. 01 CIV. 2289, 2003 WL 21222531 (S.D.N.Y. May 27, 2003), in which the facts of this case are set forth more fully and with which familiarity is assumed.
Plaintiffs assert two claims against defendants George Barasch, Stephen Barasch, Linda Barasch Glazer, and Richard Glazer ("the Barasch Family"), the Trustees of the Employee Benefit Funds, Financial Administrators, Inc. ("Financial"), and Churchill Administrators, Inc. ("Churchill") arising under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et. seq. (FAC ¶ 1) Plaintiffs claim first that Financial, Churchill, the Trustees of the Employee Benefit Funds, and the Barasch Family (collectively "the ERISA Defendants") breached their fiduciary duties in violation of Sections 404 and 405 of ERISA, 29 U.S.C. § 1104(a)(1), 1105(a)(1). Plaintiffs allege that the ERISA Defendants failed to act solely in the interest of the participants and beneficiaries of the Employment Benefit Funds; to administer the funds for the exclusive purpose of providing benefits to the participants and beneficiaries; "to exercise the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims"; and "to diversify the investments of the plan so as to maximize the gain or minimize the risk of large losses of fund assets." (Id. at 54) Plaintiffs further allege that Financial, Churchill and the Barasch Family are liable for defendant Trustees' conduct because they did not "make reasonable efforts under the circumstances to remedy the defendant Trustees' breaches of fiduciary duty, despite their knowledge of such breach." (Id. at ¶ 56)
Plaintiffs next claim that the ERISA Defendants have violated Section 406 of ERISA, 29 U.S.C. § 1106, by causing "the sale or exchange of property between the Employee Benefit Funds and parties in interest"; "the Employee Benefit Funds to use their assets to furnish goods and services from the Employee Benefit Funds to parties in interest"; "and "the Employee Benefit Funds to transfer assets of the Employee Benefit Funds to parties in interest." (Id. at ¶ 57) Plaintiffs allege that defendants Churchill, Financial and the Barasch Family were fiduciaries of the Employee Benefit Funds who dealt with the assets of the funds in their own interest and for their own account, and who improperly diverted assets of the funds to the prejudice of the funds and the interests of the funds' participants and beneficiaries. (Id. at ¶ 58) Plaintiffs further allege that defendant Trustees accepted fees, gifts, loans and other things of value from the Barasch Family in exchange for awarding long-term administrative services contracts to entities controlled by the Barasch Family, including Churchill and Financial. (Id. at ¶ 59)
Plaintiffs seek to remedy these misdeeds by permanently enjoining "Defendant Trustees and fiduciaries from serving in a fiduciary capacity in a labor organization or employee benefit plan or as a party in interest to any employee benefit plan." (Id. at Prayer for Relief, ¶ 1) Plaintiffs also seek judgment against Defendant Trustees for "damages sustained as a result of the breaches of fiduciary duty by Defendants." (Id.)
Individual Plaintiffs assert a third claim for breach of fiduciary duties against defendants Morro, Siebel, Rosado and Crowley as officers of ATC. (Id. at ¶¶ 63-77) This third claim is brought only on behalf of Individual Plaintiffs, and therefore is not included in Individual Plaintiffs' motion for class certification.
III.
Rule 23(a) of the Federal Rules of Civil Procedure lists four prerequisites for class certification:
(1) the class is so numerous that joinder is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
These four prerequisites are commonly referred to as (1) numerosity, (2) commonality, (3) typicality, and (4) adequate representation. If an action satisfies these four prerequisites, it may be certified as a class action provided it meets one of three additional requirements set forth under Rule 23(b). One of these requirements is that "the prosecution of separate actions by or against individual members of the class would create a risk of . . . adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests." Fed.R.Civ.P. 23(b)(1)(B).
Plaintiffs contend that all four prerequisites under Rule 23(a) are satisfied here and that the additional requirement in Rule 23(b)(1)(B) is also satisfied. Defendants do not dispute numerosity or commonality, but they do dispute typicality, adequate representation, and whether the requirements at 23(b) (1)(B) are met.
A. Adequacy of Representation
"[A]dequacy of representation is measured by two standards. First, class counsel must be `qualified, experienced and generally able' to conduct the litigation. Second, the class members must not have interests that are `antagonistic' to one another." Drexel Burnham Lambert Group, Inc. v. Drexel Burnham Lambert Group, 960 F.2d 285, 291 (2d Cir. 1992). In Kamean v.Local 363, 109 F.R.D. 391 (S.D.N.Y. 1986), appeal dismissed, 833 F.2d 1002 (2d Cir. 1986), cert. denied, 481 U.S. 1024 (1987), the Court held:
It is axiomatic that no party can fairly or adequately represent the interests of the absent class, if he is also motivated by interests adverse to the class as a whole. Accordingly, to satisfy this requirement, the named plaintiffs must demonstrate that neither they nor their attorneys are subject to extraneous influences that would create a conflict. Sources of potential conflict are not confined to pecuniary interests. Lawsuits fueled by the spite or hostility of an unduly antagonistic litigant or by some other ulterior motive or irrational purpose unrelated to the claims alleged in the complaint may also prevent class certification.Id. at 395. In short, the class action device may not be used simply for the personal purposes of a named plaintiff. See Chateau de Ville Productions, Inc. v. Tams-Witmark Music Library, Inc., 586 F.2d 962, 965-66 (2d Cir. 1978).
In Kamean, the named plaintiffs were former members of the defendant union, two of the named plaintiffs belonged "to a rival union having a recent history of antagonism towards, and competition with, the defendant union," and an organization controlled by the rival union was paying the entire cost of the lawsuit, including all legal fees. 109 F.R.D. at 395-96. The Court found that the loyalty of the two named plaintiffs to the rival union directly conflicted with the interests of the class members who retained their affiliation with the defendant union because the two named plaintiffs had no stake in the continued economic viability of the defendant union or in its ability to survive a protracted and costly lawsuit. Id. The Court held that there was little doubt that the plaintiffs would prosecute their claims vigorously, but that fair representation cannot be inferred merely from vigorous representation. Id. The Court was especially concerned about the powerful incentive of the two named plaintiffs associated with a rival union to dismember the defendant union and divide it from its affiliated contractors, as this incentive "would inevitably compromise their duty to seek and obtain for the absent class members the most favorable resolution of [the] dispute." Id. The Court was further concerned by the access the rival union would have to information about the defendant union's employers and records through pre-trial discovery. Id. at 396. Additionally, the Court was concerned about the "considerable, inappropriate control" the third-party organization would exercise over the litigation "as holder of the purse strings." Id. The Court held that the threat of the third-party organization withdrawing financing at any time "necessarily would compromise the independence of class counsel or, at a minimum, influence counsel to consider serving the policies of the [third-party organization] and, conceivably, the interests of the [rival union] as well as or instead of those of the class they purport to represent." Id. In light of all these concerns, the Court denied the plaintiffs' motion for class certification. Id. at 397.
The facts here are substantially similar to the facts inKamean. Defendants argue that Individual Plaintiffs will not adequately represent the class because they are pawns recruited for this litigation by ATC's rival union, UNITE. (Defendants Memorandum of Law in Opposition to the Individual Plaintiffs' Motion for Class Certification ("Def. Opp.") 17) According to John Gillis, a Vice-President of UNITE, in "early 2000, Duane Reade increased the number of new stores in the New York Metropolitan Area," and UNITE "sought to represent Duane Reade employees at those new stores" through UNITE's affiliated local union, Local 340A. (Kipnees' Dec., Ex. D at ¶¶ 1, 12-13) UNITE was competing against ATC for representation of the employees at the new Duane Reade stores. (Id. at ¶ 15) In 2001, UNITE extended its campaign to employees at Duane Reade stores who were already covered by an existing ATC contract. (Id. at ¶ 28) "The competition between UNITE and ATC to represent employees at the Duane Reade stores spawned numerous unfair labor practice charges by both ATC and UNITE against each other." (Id. at ¶¶ 20-38)
The competition between UNITE and ATC also seems to have spawned this litigation. According to Gillis: "Representatives of UNITE initiated contact with the named plaintiffs concerning perceived problems with the administration of the ATC Funds and ATC and their willingness to be plaintiffs in the [instant] Action." (Id. at ¶ 42) "Representatives of UNITE suggested to the named plaintiffs in the [instant] Action that they retain Kennedy, Schwartz Cure, P.C. ("the Kennedy firm") to represent them in an action to recover damages for ATC and for the ATC Funds because they believed that something was wrong." (Id. at ¶ 41) "Plaintiffs only learned about the allegations in the Complaint and all of its subsequent amended forms through the Kennedy firm." (Id. at ¶ 43) The Kennedy firm has represented UNITE and its affiliates, and UNITE is paying the attorneys fees and litigation expenses of plaintiffs in the instant action. (Id. at ¶¶ 44, 47) Most importantly, "UNITE's interest in the litigation stems from its expressed interest in representing the employees currently represented by ATC, and its interests in remedying the perceived defects in the administration of the ATC Funds and ATC." (Id. at ¶ 48)
Defendants argue that Individual Plaintiffs' association with UNITE renders them antagonistic to the other members of the class, who continue to support ATC. (Def. Opp. 4-7) A representative of UNITE contacted Singh about three years ago at the store where she was working to inform her that UNITE was forming a new union. (Kipnees' Dec., Ex. A at 14:7-24; 16:1-3) A couple months after the initial contact, the UNITE representative mentioned this lawsuit to Singh and arranged for her to meet with Thomas Kennedy of the Kennedy firm, which was recommended by UNITE to handle this litigation. (Id. at 16:8-20; 19:18-24; 23:21-25; 24:1-8; 26:14-25) Except for defendant Morro, Singh is unfamiliar with all defendants and knows of them only through the Kennedy firm. (Id. at 59-74) Singh is no longer employed by Duane Reade. (Id. at 53:11-16) Martinez is currently not a member of any union, but he intends to join UNITE. (Kipnees' Dec., Ex. B at 31:19-25; 32:1-2, 21-25; 33:1-5) Martinez believes that UNITE agreed to pay the litigation expenses in this action because in the future all the Duane Reade employees are going to join UNITE. (Id. at 43:23-25; 44:1-15) He is nearly as unfamiliar with defendants as Singh and equally reliant on counsel for not only legal but also factual information pertaining to this litigation. (Id. at 63-70, 73-86)
The testimony of Singh, Martinez and Gillis strongly suggests that the Kennedy firm is beholden to UNITE. The inappropriate influence and control over litigation counsel from the threat of the third-party organization withdrawing financing at any time that so concerned the Court in Kamean is even more real here. Whereas the third-party benefactor in Kamean was affiliated with the rival union, here the third-party benefactor is the rival union itself. This dynamic creates an enormous incentive for the Kennedy firm to give greater consideration to UNITE than to the class, and UNITE's interests are indisputably antagonistic to the interests of those class members who still support of ATC. Given UNITE's long-standing desire to draw Duane Reade employees away from ATC, UNITE has a strong motive to use this litigation to destroy ATC, instead of reaching the best resolution for the class — and, just as in Kamean, holding the purse strings to this litigation affords UNITE the means to do just that. This fact disables the Kennedy firm, as counsel for Individual Plaintiffs, from conducting this litigation in the sole and best interests of the class. Therefore, Individual Plaintiffs do not meet the first standard for the requirement of adequate representation. See Drexel, 960 F.2d at 291.
Individual Plaintiffs attempt to distinguish Kamean by relying on Pension Benefit Guaranty Corp. v. LTV Corp., 122 F.R.D. 436 (S.D.N.Y. 1988), where the Court granted a motion for class certification although a third party was paying the litigation expenses. However, the third party in LTV Corp., unlike in Kamean and unlike here, was not a rival union, nor was the third-party antagonistic to the class in any way. Id. at 440. In fact, in LTV Corp., the third party initiated the suit and the individual plaintiffs intervened. Id. at 438.
Further, Individual Plaintiffs are, or at least may become, little more than instruments of UNITE. Martinez intends to join UNITE and even perceives UNITE's financial support of this litigation as a precursor to the transition of ATC members to UNITE. Singh and Martinez were hand-picked by UNITE for this litigation, were effectively assigned counsel by UNITE for this litigation, and have been coached by UNITE via its representatives and its counsel at the Kennedy firm throughout this litigation. Indeed, UNITE readily concedes, through Gillis, that Individual Plaintiffs know of the factual allegations in this litigation only through UNITE's chosen counsel; Individual Plaintiffs have confirmed as much in their own depositions. Ignorance of a representative plaintiff alone is not sufficient to attack the adequacy of representation. Baffa v. D.L.J. Securities Corp., 222 F.3d 52, 61 (2d Cir. 2000). However, Individual Plaintiffs' ignorance of the parties, the legal claims and even the facts further demonstrates that they are little more than pawns in a battle between rival unions, rather than plaintiffs seeking redress for injuries to an entire class of persons. Singh appears to be a follower of UNITE and Martinez an advocate of UNITE; these Individual Plaintiffs' interests are antagonistic to the interests of those ATC members still supportive of ATC. This litigation fairly brims with ulterior motives — to gain access to ATC's records, to induce ATC members to join UNITE, and perhaps even to destroy ATC through protracted litigation. Such motives are wholly unrelated to the claims in this litigation, contrary to the interests of the class as whole, and unsuitable for the class action device. See Chateau de Ville, 586 F.2d at 965-66. Therefore, Individual Plaintiffs do not meet the second standard for the requirement of adequate representation. See Drexel, 960 F.2d at 291.
Individual Plaintiffs, again attempting to distinguishKamean, argue that they have no interest in destroying ATC and that the class action claims are not brought against ATC. This argument fails for two reasons. First, the class action claims are against the Barasch Family, and ATC was founded by the Barasch family and continues in some respects to be administered by the Barasch family. (FAC ¶¶ 18, 54) Individual Plaintiffs, in their class action claims, seek to enjoin the Barasch family permanently "from serving in a fiduciary capacity in a labor organization or employee benefit plan or as a party in interest to any employee benefit plan." (Id. at Prayer for Relief, ¶ 1) The permanent removal of the Barasch family likely would have some negative effect on ATC, in which case the class action claims do impact ATC. The Court must also consider Individual Plaintiffs' personal claim in determining whether their interests are antagonistic to the class as all three claims will be pursued in the same litigation, and this third individual claim is brought solely against the officers of ATC. Second, even assuming that Individual Plaintiffs do not have any interest in destroying ATC, they nevertheless serve the interests of UNITE, which are contrary to the interests of the class as a whole, and such interests as gaining access to ATC's records and dividing ATC from its affiliated contractors are inappropriate for a class action. See 109 F.R.D. at 395-96.
B. Typicality, Rule 23(b)(1)(B), and Defendants' Other Arguments Opposing Class Certification
Because I have found that Individual Plaintiffs have failed to establish adequate representation under Rule 23(a), I need not consider defendants' other arguments opposing class certification. Individual Plaintiffs have failed to establish at least one of the four elements set forth under Rule 23(a).
* * *
For the reasons set forth above, plaintiffs' motion for class certification is denied.
SO ORDERED.