Opinion
02 Civ. 4200 (HB)
November 15, 2003
OPINION ORDER
Defendant moves and plaintiff cross-moves for summary judgment. For the following reasons, defendant's motion is denied and plaintiff's cross-motion is granted.
I. BACKGROUND
A. Facts
The Building Service 32B-J Pension Fund ("Fund") is a multi-employer pension trust fund within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), whose participating members work in the building-services industry in and around New York City. Alfred Veltri, who is currently eighty-two years old, entered covered employment as of April 1957, where he worked as an elevator operator and doorman, until December 1969. See Bach Aff. Exs. 1 2. He-returned to the industry in June 1980 where he worked continuously until his retirement in 1992. He worked as an elevator operator and doorman at 885 Park Avenue until February 1981 and as a doorman at 61 West 62nd Street from February 1981 until May 1992. See Bach Aff. Exs. 1 2.
The apartment building where he worked was and has been under contract with Local 32B-J (or its predecessor) at least since April 1, 1957, and was obligated to contribute to the Fund effective November 1, 1959.
From April 1957 until December 1969, Veltri worked as an elevator operator and doorman. While his application for pension benefits lists the place of employment as 1088 Park Avenue, see Bach Aff. Ex. 1, the place of employment according to his affidavit and the Social Security Administration's itemized statement of earnings for him was 1090 Park Avenue. See Bach Aff. Ex. 2; Veltri Aff. ¶¶ 2-4.
On March 27, 1992, a few months prior to his expected retirement, Veltri submitted an application for a retirement pension to the Fund for which he sought benefits for his service from 1957 to 1969 and from 1980 to 1992. On August 11, 1992, the Fund informed him in writing that he would receive a pension of $209.00 per month from April 1, 1992, to June 1, 1992 and $212.00 thereafter. As required, Veltri and his wife countersigned this notice.
The Plan calculates benefits based on a fiscal year that runs from July 1 to June 30.
On May 5, 1993, Veltri wrote to the Fund inquiring why his pension was only $212.00 and why he was not credited with his years of work between 1957 and 1969. On May 25, 1993, the Fund responded that his employment prior to 1970 was not credited due to the Fund's break-in-service rule, which caused him to lose all credit prior to the break. This letter, which was signed by Kevin Duffy, provided:
Section 5.04(b) of the Plan, entitled "Permanent Breaks in Service before July 1, 1976," provides:
A Participant shall be deemed to have incurred a break unless he or she earns at least one month of Current Service Credit during any continuous period (subsequent to the Initial Employer's Initial Contribution Date):
(i) of 2 years if such Participant had accumulated less than 180 months of Service Credit prior to the commencement of such continuous service; or
(ii) of 3 years, if such Participant had accumulated 180 months or more of Service Credit prior to the commencement of such period[.]
Section 5.04(c) provides: "[I]n the event of a break as defined under paragraph (b) hereof, a Participant shall lose all Service Credit accumulated for all periods prior to and during such break." Thus, because Veltri did not earn at least one month between 1960 to 1979 inclusive, he was deemed to have incurred a break and the Fund excluded his years of service from 1957 to 1969.
We have received your letter in reference to the amount of your pension and reviewed the application.
Under the rules and regulations of the Pension Fund you did not receive credit for the years 1957 to 1969. This id [sic] due to the fact that you incurred a break in service and this breach caused you to lose all credit prior to the break. Your pension is only based on the credit you earned after you returned to covered employment in 1980.
For your information I have enclosed a copy of the Pension Fund booklet. If you have any questions please call me at 388-3479.
The letter thus referred to an enclosed copy of the Pension Fund booklet and invited Veltri to call with any questions, but made no specific mention of his right to appeal. Veltri did not appeal this determination, and thereafter accepted these monthly payments of $212.00 from then until the present. Plaintiff contends that during this time he called the Fund on several occasions but never received a response. See Veltri Aff. ¶ 5.
Under the heading "Appeal of a Denial of Benefits," the booklet provides:
If your application for benefits is denied, the Trustees will provide you with a written notice setting forth the reasons for the denial.
If you receive such a notice, you or your authorized representative have a right to appeal the decision by filing a written appeal with the Trustees within 180 days of receiving that notice. Your appeal should state clearly the reasons for your appeal. The Trustees will consider your appeal and give you their decision after reviewing all necessary and pertinent evidence.
Geffner Aff. Ex B.
In early 2001, Veltri again inquired about the amount of his pension, to which the Fund again responded that it excluded his work prior to 1970 because he did not work in the industry for three consecutive years after he left in 1969 and thus incurred a break in service. On May 1, 2001, Veltri, through his newly retained attorney, requested the Fund's record of his service. The Fund did not respond to this letter, so Veltri's attorney wrote again on June 25, 2001 with a copy to the Department of Labor. After the Fund provided Veltri the information he sought, Veltri's attorney wrote in August 2001 to inform the Fund that its records of Veltri's service were incorrect. Veltri received no response to this letter.
Veltri claimed that the Fund incorrectly excluded his years of service from 1957 to 1959 and the fiscal year 1980. The Fund credited him with only two weeks for fiscal year 1980 (which started on July 1, 1979 and ended on June 30, 1980), even though Veltri claimed he worked at that building as of February 1980.
By letter from his attorney dated November 26, 2001, Veltri filed a claim for additional pension benefits, to which he received no response; this letter was sent to Kevin Duffy, who was at that time the Director of the Fund. By letter from his attorney dated March 7, 2002, Veltri filed an appeal with the Trustees of the Fund for a claim for additional benefits, to which he again received no response. On June 4, 2002, Veltri filed the instant lawsuit. On July 29, 2003, the case was transferred from Judge Knapp.
II. DISCUSSION
Defendants contend that this action is barred by New York's six-year statute of limitations because the claim accrued when the Fund advised him on May 25, 1993 — more than nine years before he filed this lawsuit — that his service prior to 1970 was excluded due to the break in service. See Defendant's Memorandum of Law in Support of Motion for Summary Judgment 2. The Fund also seeks dismissal on the basis that Veltri fails to state a cause of action because under the terms of the plan in effect prior to ERISA his ten-year break in service extinguished his credit for the service prior to the break.
Although the Fund also asserted in its initial memorandum that Veltri's cause of action accrued on August: 11, 1992, when the Fund notified him of the amount of his benefits or when Veltri sent the Fund on May 5, 1992, the Fund abandons this position — correctly in my opinion — in its reply memorandum. See Larsen v. NMU Pension Trust of the NMU Pension Welfare Plan, 902 F.2d 1069, 1074 (2d Cir. 1990).
A. Time-bar
The Fund contends that the May 25, 1993 letter by Kevin Duffy of the Fund triggered the six-year statute of limitations. Veltri agrees that the statute of limitations for this claim is six years, but contends that the limitations period did not start to run as of Duffy's May 25, 1993 because the Fund did not clearly repudiate his benefits. Specifically, Veltri contends that the letter of May 25, 1993 did not comply with the requirements of ERISA or the regulations promulgated by the Department of Labor — and thus the defendant is estopped from asserting the defense of statute of limitations. The letter of May 25 did not trigger the six-year statute of limitations.
The Fund also contends in its reply that Veltri had 180 days to file an administrative appeal of this determination. See Def. Reply Mem. at 3 ("Hence, [Veltri] had 180 days from receipt of the May 25, 1993 letter to file an appeal."). However, it claims elsewhere that it treated Veltri's May 5, 1993 letter as an appeal. See Def. Reply Mem. at 6 ("The Fund treated the letter as an appeal.") These positions appear to be irreconcilable — i.e., either Veltri's May 5 letter was an appeal and he thus exhausted the administrative remedies available from the Fund or the Fund's May 25 letter constituted a "denial of benefits" which triggered his administrative remedies.
Miles v. New York State Teamsters Conference Pension Retirement Fund Employee Pension Ben, Plan, 698 F.2d 593, 598 (2d Cir. 1983) (holding that the six-year limitations period prescribed by New York's C.P.L.R. § 213 controls for actions under § 1132).
"A plaintiffs ERISA cause of action accrues, and the six-year limitations period begins to run, "when there has been 'a repudiation by the fiduciary which is clear and made known to the beneficiaries.'" Miles v. New York State Teamsters Conference Pension Retirement Fund Employee Pension Ben. Plan, 698 F.2d 593, 598 (2d Cir. 1983) (quotingValle v. Joint Plumbing Indus. Bd., 623 F.2d 196, 202 n. 10 (2d Cir. 1980)). "[A]n ERISA cause of action accrues and the limitations period begins to run when a claim for benefits is clearly and unequivocally denied." Miele v. Pension Plan of N.Y.S.tate Teamsters Conf. Pension Retirement Fund, 72 F. Supp.2d 88, 99 (E.D.N.Y. 1999). The regulations promulgated pursuant to 29 U.S.C. § 1133 require the following language where benefits are denied to be included: "A description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review[.]" 29 C.F.R. § 2560.503-1(g). Further, it is mandatory that the wording be "calculated to be understood by the claimant." See id. The Fund contends that the standard in the Second Circuit is "substantial compliance" and that this standard is met here because the booklet enclosed with the May 25 letter set out Veltri's rights and the procedure for review. I disagree.
Section 1133 of Title 29 provides:
In accordance with regulations of the Secretary, every employee benefit plan shall — (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
The regulations also require:
(i) The specific reason or reasons for the adverse determination;
(ii) Reference to the specific plan provisions on which the determination is based; [and]
(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary[.]29 C.F.R. § 2560.503-1(g). The Fund claims that the letter's reference to the break in service as the reason for the exclusion of his employment from 1957 to 1969 was sufficient to satisfy the first and second requirements — i.e., Veltri had enough information based on that reference to find the relevant provisions in the booklet. The Fund claims the third requirement was not necessary because there was no additional material that could be used to perfect his claim.
As an initial matter, as noted supra at footnote 8, the Fund has taken two seemingly irreconcilable positions with respect to the significance of Veltri's May 5 and its May 25 letters. The May 25 letter itself belies both of the Fund's alternative (and unsupported) contentions — i.e., that it treated Veltri's May 5 letter as an appeal or that its May 25 letter was a denial of benefits from which Veltri could appeal. Tholke v. Unisys Corp., 2002 U.S. Dist. LEXIS 6658, at *9-*10, *16-*17 (S.D.N.Y. Apr. 16, 2002) ("On August 3, 1995, the Committee held a meeting with respect to Tholke's request for a final review of her claim and unanimously upheld Hartford's denials. The Committee communicated its decision to Tholke by a letter dated August 8, 1995. . . . I find that the six-year statute of limitations began to run on August 8, 1995, the date of the letter that notified Tholke of the Committee's denial of her benefits."). In addition, Duffy nowhere indicated that the Fund either deemed Veltri's letter as an appeal or that it deemed its response as a denial of benefits, and is entirely silent about the significant ramifications that flow from either disposition. To the contrary, the May 25 letter merely invites Veltri to call with any questions (which he attests he did, to no avail). This failure to comply with the regulation's fourth requirement and to inform Veltri that its letter constituted a denial of benefits and that he had 180 days to appeal and the failure of the Fund to inform Veltri of his rights and obligations as required by the regulations strongly suggests that Duffy did not perceive this letter as a "denial of benefits" or as an adjudication of an appeal. Other requirements of the regulation were also overlooked — e.g., the letter failed to mention the provision of the plan on which the Fund based its determination.
Or — if the Fund's position that Duffy's letter constituted a decision of the Trustees on Veltri's appeal is to be credited — the letter also did not indicate to Veltri that his next step, if he so chose, was to sue in federal court.
On page 12 of the Fund's booklet, there is a paragraph entitled "Break in service After July 1, 1976" which states at the end that "Specific formulas are used to determine a bread-in-service (see Section 5.04 of the Plan text) for periods prior to July 1, 1976." Veltri argues that the mere fact that the Fund provided a copy of the booklet is insufficient because the booklet is 69 pages long and "break in service" is not listed as a subject in the table of contents.
Although there is authority in this Circuit for the proposition that the statute of limitations begins to run when a claimant inquires about an alleged miscalculation and is told that the benefits were correctly computed, see Miele v. Pension Plan of N.Y. State Teamsters Conf. Pension Retirement Fund, 72 F. Supp.2d 88, 99 (E.D.N.Y. 1999), am persuaded by other authority that a clearer and more formal repudiation of benefits is required than what occurred here. See Mitchell v. Shearson Lehman Bros., No. 97 Civ. 0526 (MBM), 1997 U.S. Dist. LEXIS 7323, at *9 (S.D.N.Y. May 27, 1997) (finding that plaintiffs claim accrued when the plan denied plaintiffs formal appeal, rather than when it sent a letter that informed plaintiff that the plan reviewed her claim and determined to deny her benefits); Esden v. Retirement Plan of the First Nat'l Bank of Boston, 182 F.R.D. 432, 437 (D. Vt. 1998) (finding that the claim accrued when the fund denied her formal claim for additional benefits, rather than when the fund first notified her of the amount of her benefits), rev'd on other grounds, Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000): cf. Larsen v. NMU Pension Trust of the NMU Pension Welfare Plan, 902 F.2d 1069, 1074 (2d Cir. 1990) (rejecting the contention that the cause of action accrued when the pension fund notified the plaintiff of the amount of benefits awarded); Carollo v. Cement Concrete Workers Dist. Council Pension Plan, 964 F. Supp. 677, 689 (E.D.N.Y. 1997).
In a footnote, the court there stated the rule it followed:
The court need not find that the plaintiff's objections to the alleged miscalculation constitute a formal claim nor that the defendants' rejection of those objections constitutes a formal claim denial to hold that the statute of limitations commenced running. Where a plaintiff objects to or inquires about the amount of benefits and receives a determination that his benefits were correctly computed, that plaintiff is clearly on notice of a possible miscalculation claim.Miele, 72 F. Supp.2d at 99 n. 9.
Clearly, the May 25, 1993 letter did not adequately inform Veltri of his rights and obligations and thus the Fund cannot now contend that the claim fails because he did not exhaust its internal remedies and did not clearly repudiate his benefits such that the statute of limitations ran on his claim for additional benefits. See Syed v Hercules Inc., 214 F.3d 155, 162 (3d Cir. 2000) ("Where benefits termination letter does not comply with statutory and regulatory requirements, time limits for bringing administrative appeal are not enforced against claimant; thus, remedy for violation of 29 U.S.C. § 1133 is to remand to plan administrator so claimant gets benefit of full and fair review." (citations omitted)); Counts v. American General Life and Accident Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997) ("The consequence of an inadequate benefits termination letter is that the normal time limits for administrative appeal may not be enforced against the claimant."); White v. Aetna Life Ins. Co., 210 F.3d 412, 417 (D.C. Cir. 2000) ("If Aetna's March 13 denial notice, supplemented by Hucks' conversations with White and the lawyer, failed to comply substantially with section 1133 and its implementing regulations, then the sixty-day appeal period would not have begun to run, and the lawyer's failure to file a timely appeal could not have served as a legitimate basis for Aetna's refusal to consider the claim."). To the extent that the Fund did not respond to the claim Veltri filed in November 2001 based on its belief that his claim was time-barred or extinguished due to failure to exhaust administrative remedies, the Fund did so in error. Because his claim is neither time-barred nor extinguished, it is necessary to consider whether the Fund's break-in-service rule that applies to pre-ERISA service defeats his claim.
Veltri also cites Benaim v. HSBC Bank USA, No. 00-7729, 2001 U.S. App. Lexis 25377 (2d Cir. Nov. 21, 2001) for the proposition that failure to inform the claimant of his right to administrative review, as required by statute and regulation does not excuse the claimant's failure to exhaust administrative remedies, but precludes a fund from refusing to hear his appeal for failure to comply with the prescribed time limits. This decision, as the Fund notes, is an unpublished opinion.
B. Failure to state a claim
The Fund contends that Veltri fails to state a claim because Veltri's absence from covered employment for more than ten years constituted a "break in service" which caused Veltri to forfeit, under the terms of the plan, the credit he had earned for his employment prior to the break. Veltri does not dispute that under the terms of the plan in effect prior to ERISA he incurred a break in service, but he contends that his benefits should include the thirteen years he worked prior to his break in service because the Fund's break-in-service provision was invalidated by ERISA.
Veltri contends that the Fund's break-in-service provision violates ERISA § 1053(b)(1)(f). However, this provision permits a fund to exclude, for vesting purposes, years of service that would have been disregarded under a pre-ERISA plan's break in service rules. See McDonald, 153 F. Supp.2d at 278. It appears that Veltri invokes this section in error, and I understand him to rely on those provisions of ERISA which Judge Buchwald and the Second Circuit found required a fund to include in the calculation of benefits all the years of an employee's participation, subject only to three statutory exceptions.
This case is nearly identical to a case in which the Second Circuit upheld Judge Buchwald's determination on the precise issue relevant here:
Congress has explicitly provided that, or accrual purposes, an employer is to include all of an employee's years of participation "beginning at the earliest date on which the employee is a participant" and which is included in a period of service required to be taken into account under ERISA § 202(b). . . . Thus, in calculating a vested employee's accrued benefit, employers may not disregard service except as provided by ERISA § 202(b), and may not exclude years of service based on a plan's pre-ERISA break in service rules.McDonald v. Pension Plan of the NYSA-ELA Pension Trust Fund, 153 F. Supp.2d 268, 280-81 (S.D.N.Y. 2001) (emphases added), aff'd in relevant part, 320 F.3d 151, 153 (2d Cir. 2003). The plaintiff in McDonald suffered a break in service under the terms of that plan then in effect (because he failed to work a sufficient number of hours for three consecutive years), and, as a result, lost credit for thirteen years he worked prior to the break in service. See 153 F. Supp.2d at 273. The plaintiff worked sufficient hours to receive credit for ten years after this break in service and when he applied for a pension was awarded benefits based on those ten years. See id. at 273. Judge Buchwald carefully reviewed sections 202, 203, and 204 of ERISA, which respectively pertain to minimum participation standards, minimum vesting standards, and benefit accrual requirements. See id. at 276-80. As Judge Buchwald explained, pursuant to ERISA § 204(b)(1)(D), an employee accrues benefits based upon his or her "years of participation" in a plan, which starts at "'the earliest date on which the employee is a participant in the plan." Such participation is also included in the "period of service required to be taken into account" under § 202(b).See 29 U.S.C. § 1054(b)(1): see also McDonald, 153 F.3d at 156-57. Further, with respect to the computation of years relevant for accrual purposes, § 202(b)(1) provides — with three exceptions, none of which applies here — "all years of service with the employer or employers maintaining the plan shall be taken into account in computing the period of service for purposes of subsection (a)(1)." 29 U.S.C. § 1052(b)(1) (emphasis added); see also McDonald, 153 F.3d at 156-57. The Second Circuit upheld Judge Buchwald's determination that ERISA § 204 "trumps" a plan's break-in-service provision that limits the accrual of benefits arising from pre-ERISA employment. See 320 F.3d at 153.
The Circuit remanded that portion of the decision with respect to whether the definition of a "year of service" in ERISA § 202(a)(3)(A) as service in excess of 1,000 hours in a year affected the plaintiff's claim for additional benefits.
One exception that might be relevant is the so-called Rule of Parity in ERISA § 202(b)(4)(A), which in sum provides that that if the length of the break exceeds the length of years of pre-break service, a fund subject to ERISA is not obligated to include such pre-break service in the computation of benefits. See McDonald 153 F.3d at 160. However, Veltri contends and the Fund does not dispute that the length of his pre-break service (twelve years and nine months) exceeds the length of his break (ten years). Veltri is entitled to the ten years he worked for the building during which it contributed to the Fund, which was effective November 1, 1959. He also is entitled to two years and nine months prior to when the building started to contribute to the Fund because he satisfied the requirements of the plan's "three-year test rule." Under this rule, employees who were employed steadily during the three years before their building began contributions to the Plan might be eligible for service credits for before the building began such contributions. Specifically, employees who earned $98 or more in a calendar quarter receive credit for all three months in that calendar quarter; for the eleven quarters before his building started making contributions, Veltri earned well in excess of $98 per calendar quarter and thus is credited with all 33 months — or two years and nine months.
Here the Fund makes the same argument that was raised and rejected inMcDonald — namely that ERISA § 203 ( 29 U.S.C. § 1053), which does not disturb a plan's pre-ERISA rules on minimum vesting standards, is applicable with respect to the calculation of benefits. ERISA § 203(b)(1) provides, with respect to computation of "period of service:"
The defendant in McDonald argued that "ERISA § 203(b)(1)(F), 29 U.S.C. § 1053(b)(1)(F), which permits a plan to apply its pre-ERISA break in service rules for vesting purposes, applies when determining the accrued benefit of a vested employee under ERISA § 204, 29 U.S.C. § 1054." 153 F. Supp.2d at 275.
In computing the period of service under the plan for purposes of determining the nonforfeitable percentage under subsection (a)(2) of this section, all of an employee's years of service with the employer or employers maintaining the plan shall be taken into account, except that the following may be disregarded:
(F) years of service before this part first applies to the plan if such service would have been disregarded under the rules of the plan with regard to breaks in service, as in effect on the applicable date.29 U.S.C. § 1053(b)(1). Judge Buchwald held that "ERISA § 203(b)(1)(F), 29 U.S.C. § 1053(b)(1)(F), which permits plans to exclude, for vesting purposes, years of service that would have been disregarded under a pre-ERISA plan's break in service rules, is not applicable in determining the accrued benefit payable to an employee who has satisfied the vesting requirements." 153 F. Supp.2d at 275. Again, the Second Circuit affirmed this ruling. See McDonald, 153 F.3d at 157 (noting that ERISA § 203(b) treats breaks in service differently than § 202(b)).
The Fund also attempts to distinguishes McDonald on the basis that unlike Veltri, whose break in service extended both before and after ERISA, the employee there both incurred his break in service and returned to covered employment before ERISA. The Fund argues that Veltri accepted a break in service at a time when he would not vest in the Fund and thus at the time ERISA was enacted Veltri had no expectation in obtaining a pension from the Fund. McDonald, however, leaves no room for the distinction that the Fund seeks to draw. The Circuit affirmed Judge Buchwald's ruling that ERISA requires all years to be included in the calculation of benefits, with three exceptions, and that any provision in a plan to the contrary is trumped. If anything, the fact that Veltri returned to work after ERISA's enactment suggests that he did have an expectation that his prior benefits would be included if he returned to covered employment. The plaintiff in McDonald in contrast returned to covered employment at a time when it still appeared that his past work was to be disregarded.
III. CONCLUSION
For the following reasons, defendant's motion is denied and plaintiffs cross-motion is granted. The Fund is directed to recalculate Veltri's benefits, where his pre-break service is included. The Clerk of the Court is instructed to close this case and any open motions and to remove the matter from my docket.IT IS SO ORDERED.