Second Circuit Holds Union Trustees Were Not Acting as Fiduciaries When They Passed Invalid Amendments to Multiemployer Plans

In Massaro v. Palladino, No. 20-1807, __F.4th__, 2021 WL 5570814 (2d Cir. Nov. 30, 2021), involving an “acrimonious dispute” between the Union and Employer Trustees of two employee benefit plans on behalf of the Laborers’ International Union of North America, Local Union No. 91 (the “Funds”), the Second Circuit considered whether the Union Trustees breached their fiduciary duties under ERISA § 404(a)(1)(D) by passing invalid amendments to the trust agreements governing the Funds. The amendments added additional qualifications for Employer and Union Trustees and created a procedure by which unqualified Trustees could petition the existing Board of Trustees to be seated only by unanimous approval.

Looking to the terms of the Trust Agreements, the Second Circuit agreed with the district court that the Union Trustees failed to comply with those Agreements. The plain and unambiguous text required that the “decision” to pass the Amendments—which added a new manner of appointing Trustees—receive a “unanimous vote.” Because the Amendments were enacted by a 4-2 vote of the existing Trustees, that decision was invalid under the terms of the Trust Agreements. However, the Second Circuit disagreed with the district court that the Union Trustees were acting in a fiduciary capacity when they passed the amendments because passing procedurally invalid amendments was not a fiduciary function within the meaning of ERISA. The court found that Janese v. Fay, 692 F.3d 221 (2d Cir. 2012) “forecloses the Employer Trustees’ breach of fiduciary duty claim premised on the passage of the Amendments: the Union Trustees “were not acting as fiduciaries when they amended the plans.”

The court vacated the district court’s judgment because it granted summary judgment to the Employer Trustees on their breach of fiduciary duty claim and did not address any alternative theories of liability. The court remanded the case to the district court for further proceedings.