2150 ibew

US District Court for the Eastern District of Tennessee - 488 F. Supp. 559 (E.D. Tenn. 1978) April 6, 1978488 F. Supp. 559 (1978)Bill PIERCE et al.v.NECA-IBEW WELFARE TRUST FUND.No. CIV-1-77-21.United States District Court, E. D. Tennessee, S. D.April 6, 1978.*560 S. Del Fuston, Chattanooga, Tenn., for plaintiffs.Hugh J. McCarthy, Chicago, Ill., Duggan, McDonald & Hawley, Chattanooga, Tenn., for defendant. MEMORANDUM OPINIONFRANK W. WILSON, Chief Judge.This is an action for declaratory and injunctive relief arising out of alleged violation *561 of fiduciary duties with regard to the administration of a welfare trust fund. The plaintiffs allege that by denying them certain benefits under the welfare trust fund the defendant violated the following statutes: 1) Section 302 of the Labor Management Relations Act of 1947, 29 U.S.C. § 186; and 2) the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. The parties having waived trial by jury, the lawsuit was tried before the Court sitting without a jury. The Court now enters the following findings of fact and conclusions of law based upon the full record in the lawsuit.Before considering the case on its merits, the Court notes that the plaintiffs have moved to amend their complaint. It appearing that the proposed amendments would serve to clarify the plaintiffs' position and would work no hardship or disadvantage upon the defendant and for good cause shown, the motion to amend will be granted.This lawsuit having arisen under 29 U.S.C. § 186 and 29 U.S.C. §§ 1001 et seq., the Court has jurisdiction over the action pursuant to 29 U.S.C. § 186(e) and 29 U.S.C. § 1132(e) (1).This case arises out of a dispute over the administration of a welfare trust fund, the NECA-IBEW Welfare Trust Fund, the home office of which is located in Decatur, Illinois,

Bring this lawsuit in their own behalf and in behalf of all participants of the Decatur Trust who are in the jurisdiction of Local 175, there being a total of 265 participants within the class. Appropriate class action notice having been given the Local 175 participants, only one, Jackman D. Creech, Jr., elected to opt out of the class.The plaintiffs' participation in the Decatur Trust appears to have come about as a result of a 1970 contract between the Union and the association of electrical contractor employers in the Chattanooga, Tennessee area. That association is known as the East Tennessee Chapter, Chattanooga Division, NECA, Inc. ("Chattanooga NECA") and is affiliated with the National Electrical Contractors Association ("NECA"). The 1970 contract provided that employers would make contributions to a health and welfare plan for the benefit of their employees. In *562 compliance with the contract, the Union and Chattanooga NECA established a welfare trust fund entitled the NECA-IBEW 175 Welfare Fund ("175 Fund"). The 175 Fund accumulated employer contributions until July 1, 1971 at which time the trustees thereof decided to affiliate the participants of the 175 Fund with the Decatur Trust. Consequently, on July 1, 1971 former participants in the NECA-IBEW Welfare Fund became participants in the Decatur Trust. At the time that Local 175 joined the Decatur Fund the following provision regarding the trustees' right to make changes in the benefit and eligibility requirements was a part of the plan document: "This document will be the sole document used in determining benefits to which covered individuals are eligible and may be amended from time to time by the trustees to reflect changes in benefits or eligibility requirements." (Ex. # 5, p. 5).A similar provision was contained in the Decatur Fund Trust Agreements or Plan Documents at all times relevant

Included participants from several local unions. One such local was Local No. 176, IBEW, of Joliet, Illinois ("Local 176"). On June 1, 1975 Local 176 withdrew from the Decatur Trust. As a result of that withdrawal and as a result of the Fund's continuing obligation to pay extended benefits for a period of three, six or nine months to the members of the Joliet Local after withdrawal of that local from the Fund, the Fund was required to pay some $700,000 in such extended benefits. Prior to that time the Fund had paid benefits from current revenues, no reserves having been established to pay these "extended benefits". The Trust's consultant, Mr. Richard Bloomquist of the firm of R. N. Bloomquist and Company, became concerned about the effect of possible future withdrawals upon the financial condition of the Trust. Mr. Bloomquist also became concerned about the effect of certain accounting guidelines (which were promulgated by the American Institute of Certified Public Accountants) upon the liabilities of the Trust. Accordingly, Mr. Bloomquist examined the effects that withdrawals of other locals might have upon the Fund in order to make recommendations for action to the Board.Mr. Bloomquist reported his findings to the Board at its January 15, 1976 meeting in Atlanta, Georgia. At that meeting Mr. Bloomquist, together with the Fund attorney, Mr. Hugh McCarthy, recommended adoption of an amendment to the Agreement and Declaration of Trust which became Article I, Section 4E. Mr. McCarthy reported that as of January 1, 1976 the Fund's liabilities resulting from "eligibility earned by employees" totalled approximately $7,600,000 (Minutes of January 15, 1976 NECA-IBEW Welfare Trust Fund Board of Trustees, p. 3). Mr. McCarthy further reported that after the withdrawal of Local 176 and the concomitant cessation of Local 176's employers' contributions, the Fund made payments of