Iron Workers Local No. 60 Annuity Pension Fund et al v. Solvay Iron Works, Inc. et al
Filing
178
ORDER that Defendant Sheila Maestri's motion for summary judgment (Dkt. No. 161 ) is GRANTED with respect to the Sixth Cause of Action (ERISA § 406(a) (1)) and Seventh Cause of Action (New York Law claims); that the Sixth and Seventh Cau ses of Action as to Defendant Sheila Maestri are DISMISSED with prejudice; that Defendant Sheila Maestri's motion for summary judgment (Dkt. No. 161 ) is otherwise DENIED in its entirety. Plaintiffs' motion for summary judgment (Dkt. No . 163 ) is GRANTED as to John Maestri's liability under the Fifth and Sixth Causes of Action; Plaintiffs' motion for summary judgment (Dkt. No. 163 ) is otherwise DENIED. Plaintiffs are awarded $48,479.88 in attorneys' and pa ralegal fees and costs for the period May 1, 2013 through March 29, 2016 and $72,898.45 in attorneys' and paralegal fees and costs for the period March 29, 2016 to February 28, 2017. Signed by Judge Brenda K. Sannes on 5/11/18. (Copy served on pro se parties via regular mail)(rjb, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
IRON WORKERS LOCAL NO. 60 ANNUITY PENSION FUND, by Gary
E. Robb and Sam Conley, as Trustees; IRON WORKERS LOCAL UNION
NO. 60 TRAINING, SKILL IMPROVEMENT, EDUCATION AND
APPRENTICESHIP FUND, by Gary E. Robb and Sam Conley, as
Trustees; CENTRAL NEW YORK IRONWORKERS AND EMPLOYERS
COOPERATIVE TRUST, by Gary E. Robb and Sam Conley, as Trustees;
IRON WORKERS LOCAL UNION 60 SUPPLEMENTAL BENEFIT
PLAN, by Gary E. Robb and Sam Conley, as Trustees; IRON WORKERS
LOCAL UNION NO. 60, by Gary E. Robb, as Business Manager; IRON
WORKERS DISTRICT COUNCIL OF WESTERN NEW YORK AND
VICINITY WELFARE FUND, by Suzanne Ranelli, as Administrative
Manager; IRON WORKERS DISTRICT COUNCIL OF WESTERN NEW
YORK AND VICINITY PENSION FUND, by Suzanne Ranelli, as
Administrative Manager; IRON WORKERS DISTRICT COUNCIL OF
WESTERN NEW YORK AND VICINITY ANNUITY FUND, by Suzanne
Ranelli, as Administrative Manager; UPSTATE IRONWORKER
EMPLOYERS’ ASSOCIATION, INC., by John Gorczynski, as President;
UPSTATE NEW YORK DISTRICT COUNCIL OF IRON WORKERS
EMPLOYERS COOPERATIVE TRUST, by Garrett Geartz and John
Linehan, Jr., as Trustees; IRON WORKERS LOCAL UNIONS NOS.
33/440 SUPPLEMENTAL BENEFIT FUND, by Garrett Geartz and John
Linehan, Jr., as Trustees; IRON WORKERS LOCAL NO. 33 JOINT
APPRENTICESHIP COMMITTEE APPRENTICE TRAINING FUND, by
Garrett Geartz and John Linehan, Jr., as Trustees; IRON WORKERS
LOCAL UNION NO. 33, by John Linehan, Jr., as Business Manager;
INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL AND
ORNAMENTAL IRON WORKERS LOCAL UNION NO. 440 JOINT
APPRENTICE TRAINING FUND, by Thomas Thomas and John
Gorczynski, as Trustees, and IRON WORKERS LOCAL UNION NO. 440,
by Thomas Thomas as Business Manager,
Plaintiffs,
v.
SOLVAY IRON WORKS, INC., JOHN B. MAESTRI, Individually and as
an Officer and Shareholder of Solvay Iron Works, Inc., BERT MAESTRI,
Individually and as an Officer and Shareholder of Solvay Iron Works, Inc.,
SHEILA MAESTRI, Individually and as an Officer and a Director of
Solvay Iron Works, Inc., ALFRED R. CHEMOTTI, JR., Individually and
as an Officer and Shareholder of Solvay Iron Works, Inc., KELLY C.
ORMSBY, Individually, as an Officer of Solvay Iron Works, Inc. and as an
Officer of Ormsby Iron, LLC, and ORMSBY IRON, LLC,
Defendants.
5:15-cv-54
(BKS/DEP)
APPEARANCES:
Blitman & King LLP
Jennifer A. Clark, of Counsel
Franklin Center, Suite 300
443 North Franklin Street
Syracuse, New York 13204-1415
Attorneys for Plaintiffs
Hancock Estabrook, LLP
Daniel B. Berman
Whitney M. Kummerow
1500 AXA Tower I
100 Madison Street
Syracuse, New York 13202
Attorneys for Defendants John Maestri and Sheila Maestri
Kelly C. Ormsby, pro se
Fulton, New York
Hon. Brenda K. Sannes, United States District Judge:
MEMORANDUM-DECISION AND ORDER
I.
INTRODUCTION
On January 16, 2015, Plaintiffs Iron Workers Union Nos. 60, 33, and 440 (the “Unions”)
and a number of the Iron Workers benefit funds (“Plaintiff Funds”), by their trustees, managers,
and officers, filed a Complaint against Defendant Solvay Iron Works, Inc., John B. Maestri, Bert
Maestri, Sheila Maestri, Alfred R. Chemotti, Jr., Frank Petro, 1 Kelly C. Ormsby, and Ormsby
Iron, LLC, 2 alleging that Defendants violated, inter alia, sections 406, 409, and 515 of the
Employment Retirement Income Security Act of 1974 (“ERISA”) (codified at 29 U.S.C.
§§ 1106, 1109, 1145) and New York state law by diverting assets of the Plaintiff Funds and
1
All claims against Defendant Frank Petro were dismissed following his death. (Dkt. No. 158).
2
Following the commencement of this action, Defendant Ormsby Iron, LLC filed a Chapter 7 bankruptcy petition;
on August 4, 2016, United States Magistrate Judge David E. Peebles entered an order staying all claims against
Defendant Ormsby Iron, LLP until further notice. (Dkt. No. 98).
2
failing to timely remit fringe benefit contributions and deductions. (Dkt. No. 1). Plaintiffs filed
an Amended Complaint on May 14, 2015. 3 (Dkt. No. 63).
Defendant Solvay Iron Works, Inc. neither filed an answer nor appeared in this action,
and Plaintiffs moved for default judgment. (Dkt. No. 90). On March 28, 2017, the Court granted
Plaintiffs’ motion and entered partial judgment against Defendant Solvay Iron Works on the
First, Second, Third, and Fourth Causes of Action in the sum of $755,977.68 in contributions,
deductions, interest, liquidated damages, and attorney fees and costs. (Dkt. No. 134, at 22).
Presently before the Court are: (1) Defendant Sheila Maestri’s motion under Rule 56 of
the Federal Rules of Civil Procedure for summary judgment (Dkt. No. 161); (2) Plaintiffs’
motion under Rule 56 for summary judgment against Defendants Sheila Maestri, John Maestri,
and Kelly Ormsby (Dkt. No. 163); 4 and (3) Plaintiffs’ supplemental application for attorneys’
fees and costs (Dkt. No. 148), which the Court authorized in its Memorandum-Decision and
Order granting Plaintiffs’ motion for default judgment (Dkt. No. 134). Plaintiffs oppose Sheila
Maestri’s motion for summary judgment, Defendants 5 oppose Plaintiffs’ motion for summary
3
Defendants Ormsby and Ormsby Iron, LLC filed a Crossclaim against Defendants John Maestri and Solvay Iron
Works. (Dkt. Nos. 66, 67). Defendant John Maestri filed a Crossclaim against Defendants Ormsby and Ormsby Iron.
(Dkt. Nos. 74, 75). Defendant Chemotti, Jr. filed an Answer and a Counterclaim against all Plaintiffs. (Dkt. No. 73).
4
Plaintiffs have not sought summary judgment against Defendants Chemotti or Bert Maestri.
5
As Defendant Kelly Ormsby is proceeding pro se, the Court directed Plaintiffs to serve Ormsby with a “Notice to
Pro Se Litigants of the Consequences of Failing to Respond to a Summary Judgment Motion,” as required by Local
Rule 56.2, and extended the response and reply deadlines to enable Defendant Ormsby to respond to Plaintiffs’
motion for summary judgment. (Dkt. No. 165). Ormsby subsequently filed a notarized letter opposing summary
judgment. (Dkt. No. 173). It states in relevant part:
The depositions of Gary Robb, Alfred Chemotti, Laura Michalski, Sarah Shatrau, and Samanth[a]
Spataro all state that John Maestri was solely responsible for the financial decisions made with
respect to Solvay Iron Works.
I oppose the summary judgment motion as it is written against me. I am not responsible for this
debt. If I can’t collect the receivables that were due to Solvay Iron Works, how can I be
responsible to pay them? The owners failed to collect their receivables and pay off their debt. I had
received letters from their lawyers saying that that was what they were going to do at the time that
Solvay Iron Works closed. John Maestri fired them, I have had no control over any of that, to
include paying the bills. That was all John Maestri’s responsibility.
3
judgment, and there is no opposition to Plaintiffs’ supplemental application. For the following
reasons, Sheila Maestri’s motion for summary judgment is granted in part and denied in part,
Plaintiffs’ motion for summary judgment is granted in part and denied in part, and Plaintiffs’
supplemental application for attorneys’ fees and costs is granted.
II.
BACKGROUND 6
A.
Plaintiff Funds
The Plaintiff Funds are jointly-administered benefit plans maintained by employee
organizations and employers pursuant to agreements and declarations of trust to provide, inter
alia, health, retirement, unemployment, and training benefits to eligible participants. (Dkt.
No. 163-1, ¶¶ 1–11; 174-1, ¶¶ 1–11). The Plaintiff unions are labor organizations located in
Rochester, Whitesboro, and Syracuse, New York. (Dkt. No. 163-1, ¶¶ 12–14; 174-1, ¶¶ 12–14).
B.
Solvay Iron
Defendant John Maestri ran Solvay Iron from 1948, when it opened, until it closed in
September 2013, (Dkt. No. 174-7, at 8), and at all relevant times was the chief executive officer,
majority shareholder, and a member of Solvay Iron’s board of directors. (Dkt. No. 163-10, ¶ 12).
In the fall of 2011, John Maestri hired Kelly Ormsby as a consultant to review Solvay Iron’s
“financial books and records and its shop and field procedures.” (Dkt. No. 163-10, ¶ 9). Ormsby
discovered that Solvay Iron “was millions of dollars in debt 7 and [that] it was not paying its
creditors” and “concluded that it could not overcome th[e] deficit.” (Dkt. No. 163-10, ¶ 9). In
November 2011, Ormsby met with John Maestri and his daughter Sheila Maestri (who was not
yet formally associated with Solvay Iron), advised them of his assessment, and recommended
(Dkt. No. 173, at 1).
6
The facts have been drawn from the parties’ statements of material facts (Dkt. Nos. 161-11, 163-1), responses
thereto (Dkt. Nos. 167; 174-1), and the attached exhibits.
7
Kelly Ormsby testified that Solvay Iron was approximately $4.5 million in debt. (Dkt. No. 163-10, at 25).
4
that Solvay Iron cease operations and close. (Dkt. No. 163-10, ¶ 10). According to Ormsby, John
Maestri responded “that he would not close his business, wanted to save his company, and asked
that [Ormsby] help.” (Id.).
In December 2011, Ormsby, with John Maestri’s authorization, entered into a collective
bargaining agreement 8 with Plaintiffs obligating Solvay Iron to remit contributions and
deductions to the Plaintiff Funds for each hour of bargaining unit work, i.e., iron workers’ work. 9
(Dkt. No. 63; Dkt. No. 163-1, ¶ 15; Dkt. No. 163-8, ¶ 13; Dkt. No. 174-1, ¶ 15).
At a January 28, 2012 meeting of Solvay Iron’s board of directors, Ormsby became
Solvay Iron’s chief operating officer 10 “with full authority over all operations.” (Dkt. No. 16310, at 272). The board also approved John Maestri’s motion to: (i) appoint Sheila Maestri as
“Vice Chairman of the Board and secretary of the corporation”; and (ii) enable her to
“immediately assume responsibilities as Chairman of the Board and Chief Executive Office[r] of
8
John Maestri authorized Ormsby to sign the CBA on behalf of Solvay Iron. (Dkt. No. 163-8, ¶ 13).
9
Under the IW60 Agreement, Solvay Iron was “bound by the terms and conditions, rules and regulations of the
Restated Agreement and Declaration of Trust of the IW60 Pension Fund, the Restated Agreement and Declaration of
Trust of the IW60 Training Fund, and the Restated Agreement and Declaration of Trust of the IW60 SB . . . the
Restated Agreement and Declaration of Trust of the Local 60 E.C.T., and the IW60 Benefit Funds’ and Local 60
E.C.T.’s Collections Policy” (collectively the “IW60 Funds, Trust, and Collections Policy”). (Dkt. No. 63, ¶ 33).
The IW60 Funds, Trust, and Collections Policy obligate Defendant to remit contributions for each hour of
bargaining unit work its employees perform. (Id. ¶ 34). The IW60 Agreement requires Defendant to deduct
stipulated sums for each hour worked from certain employees’ wages and pay these sums (Union dues) to Local 60.
(Id. ¶ 35). The IW60 Funds, Trust, and Collections Policy and IW60 Agreement required Solvay Iron to file
remittance reports and remit contributions and deductions owed by the fifteenth “day of the month following the
month during which the hours were worked.” (Id. ¶ 36).
Under the IW12/33/440 Agreement and IW60 Agreement, Solvay Iron was “bound by the terms and conditions,
rules and regulations” of the Restated Agreements and Declarations of Trust of the [IWDC] Welfare Fund, Pension
Fund, and Annuity Fund, and the IWDC Funds’ Collections Policies, the Agreement and Declaration of Trust of the
33/440 Supplemental Benefit Fund, the 33/440 Supplemental Benefit Fund Collections Policy, the Agreement and
Declaration of Trust of the 33 Training Fund, the Restated Agreement and Declaration of Trust of the 440 Training
Fund, and the Agreement and Declaration of Trust of the Iron Workers Employers Cooperative Trust (“IWECT”).
(Dkt. No. 63, ¶ 49). These Agreements, Funds, and Trusts required Solvay Iron to remit contributions and
deductions for each hour of bargaining unit work its employees perform by the fifteenth day of each month. (Id.
¶¶ 50–52).
10
Ormsby became president of Solvay Iron in June 2012.
5
the Corporation” in the event John Maestri was “temporarily or permanently unable to fulfill his
role” as CEO. 11 (Dkt. No. 163-10, at 272; Dkt. No. 161-11, ¶ 2).
Ormsby states that in 2012, despite his efforts to turn the company around, growing debt,
an underbid project, and the death of a Solvay Iron employee at a construction site 12 weakened
Solvay Iron’s finances. (Dkt. No. 163-10, ¶¶ 25–30). Ormsby further states that in May 2012, he
told John and Sheila Maestri that “Solvay Iron would need to sell $12 million worth of work and
make a twenty percent (20%) profit in 2013 to cover the debt.” (Dkt. No. 163-10, ¶ 28).
By July 2013, Solvay Iron had $5,000 in its general account, $2,000 in its “payroll
account,” and $2.3 million in debt. (Dkt. No. 163-10, ¶ 40). Ormsby tendered a resignation from
Solvay Iron on July 5, 2013, (Dkt. No. 163-1, ¶ 20), but remained involved in the company.
(Dkt. No. 174-1, ¶ 20).
On August 29, 2013, John and Sheila Maestri and Ormsby met with Plaintiffs to discuss
the debt. (Dkt. No. 163-8, ¶ 18). Plaintiffs advised these Defendants that Solvay Iron’s debt,
including interest and liquidated damages, exceeded $1 million. (Dkt. No. 163-10, ¶ 41).
According to Plaintiffs, from June 2012 through September 30, 2013, “Solvay Iron was paid
over $8.6 million by its customers for its employees’ work.” (Dkt. No. 163-1, ¶ 27; Dkt.
No. 174-1, ¶ 27). Plaintiffs claim that Defendants nevertheless failed to pay $673,824.75 in
contributions for hours worked by Solvay Iron employees, (Dkt. No. 163-1, ¶ 22; Dkt. No. 1741, ¶ 22), and “untimely remitted $263,092.07 in contributions to Plaintiffs for hours worked by
[Solvay Iron’s] employees” during that same time period. (Dkt. No. 163-1, ¶ 23; Dkt. No. 174-1,
¶ 23).
11
In 2009, John Maestri gave Sheila Maestri power of attorney over his personal matters in the event he became
incapacitated. (Dkt. No. 167, at 6; Dkt. No. 163-3, 231–37).
12
Following the employee’s death, Solvay Iron’s liability and workers compensation insurance premium increased
by more than $500,000 per year. (Dkt. No. 163-10, ¶ 30).
6
Solvay Iron ceased operations on or about September 27, 2013. (Dkt. No. 163-10, ¶ 42).
Sheila Maestri “officially resigned from the Board on February 20, 2014.” 13 (Dkt. No. 161-1,
¶ 11).
C.
Individual Defendants – Roles at Solvay Iron
Plaintiffs claim that John and Sheila Maestri and Kelly Ormsby were fiduciaries with
respect to plan assets and are therefore liable for the unpaid and untimely contributions and
deductions. Each of these Defendants deny having fiduciary status.
1.
John Maestri
Defendant John Maestri is the former Chief Executive Officer of Solvay Iron Works.
(Dkt. No. 161-11, ¶ 1). It is undisputed that John Maestri had authority and control over Solvay
Iron’s bank accounts. (Dkt. No. 163-1, ¶ 41; Dkt. No. 174-1, ¶ 41). Plaintiffs contend that John
Maestri determined which of Solvay’s Iron’s bills to pay and when to pay them and that he was
aware both of Solvay Iron’s “debt with Plaintiffs” and that Solvay Iron was “paying other
creditors instead of remitting the [plan assets] to Plaintiffs.” (Dkt. No. 163-1, ¶¶ 34–36). In his
affidavit, Ormsby asserts that:
Defendant J. Maestri made [final] decisions and authorized all
payments to creditors. [Ormsby] would review the accounts
payable log and give Defendant J. Maestri the log with [Ormsby’s]
suggestions of which creditors to pay and how much to pay the
creditors. Defendant J. Maestri would review the log, make a
check mark next to those bills he wanted to pay, strike any bills he
did not want to pay and, on occasion, he would write the dollar
amounts to be paid to the creditor. [J. Maestri] would return the
accounts payable log to [Ormsby] or to Controller Sarah Shatrau 14
with a request to issue the checks.
13
Sheila Maestri states that “[a]lthough the company had been shut down by that time, [she] was not aware that
[she] still had to take formal steps to resign until then.” (Dkt. No. 161-1, ¶ 11).
14
As controller, Shatrau was responsible for the oversight of accounts receivable, accounts payable, and payroll.
(Dkt. No. 163-12, at 17).
7
(Dkt. No. 163-10, ¶ 16). Ormsby avers that John Maestri “decided to pay the insurance
premiums, material suppliers, the employees’ wages, himself and other overhead expenses but to
leave employees’ fringe benefit contributions and Plaintiffs unpaid.” (Id. ¶ 17). Ormsby states
that John Maestri elected to “pay the insurance premiums since [Solvay Iron] could not operate
without insurance” and instructed him to send Plaintiffs $10,000 “‘here or . . . there’ to keep
them quiet.” (Id. ¶ 31).
John Maestri disputes having this level of control over Solvay Iron’s accounts payable
and asserts that accounts payable were Ormsby’s responsibility. (Dkt. No. 174-1, ¶¶ 36–40). In
support of this assertion, John Maestri cites the March 16, 2013 board minutes, which state:
“Accounts payable system discussed. Unanimous agreement that [Ormsby] is ably handling the
acc[oun]t[s] payable.” (Dkt. No. 174-3, at 36). The minutes further state: “It was suggest[ed] that
[John Maestri] refer invoice issues to [Ormsby] for detailed attention.” (Dkt. No. 174-3, at 36).
2.
Sheila Maestri
Sheila Maestri was the secretary and treasurer of Solvay Iron’s board of directors from
January 2012 until February 2014. (Dkt. No. 163-10, at 272; Dkt. No. 161-11, ¶ 2; Dkt. No. 1611, ¶ 11). It is undisputed that she was not a shareholder, owner, or employee of Solvay Iron, and
that she did not receive a salary or any employee benefits; indeed, she is a registered nurse and
worked full time as a professor of nursing during the time period relevant to this action. (Dkt.
No. 161-11, ¶¶ 2–4; Dkt. No. 163-3, at 168–69). Sheila Maestri avers that the only remuneration
she “ever received from Solvay Iron . . . was payment of a Christmas bonus one year for Board
members.” (Dkt. No. 161-1, ¶ 15). In her declaration, Sheila Maestri states that she had “no role
in the management of Solvay Iron’s day-to-day operations” and “never supervised Solvay Iron
employees.” (Dkt. No. 161-1, ¶ 5). Sheila Maestri further states that she had no, and did not
exercise any, “discretion, authority or control over Solvay Iron’s assets” or “over which of
8
Solvay Iron’s creditors were paid or not paid.” (Dkt. No. 161-1, ¶¶ 6–7). As a board member,
Sheila Maestri “never determined the compensation or working conditions for Solvay Iron
employees.” (Dkt. No. 161-11, ¶ 5; Dkt. No. 167, ¶ 5). Sheila Maestri testified that she had
power of attorney “to be able to conduct business on [John Maestri’s] behalf if he becomes
incapacitated,” (Dkt. No. 163-3, at 171), but maintains that she had no authority or control over
Solvay Iron’s bank accounts or finances—noting that Ormsby testified that “as far as [he] knew,”
Sheila Maestri “wasn’t authorized on paper to do anything.” (Dkt. No. 163-10, at 154; Dkt.
No. 161-11, ¶ 8; Dkt. No. 167, ¶ 8). Sheila Maestri had “no duties related to the contracts signed
by Solvay Iron, particularly in relation to agreements made with Plaintiffs in this action.” (Dkt.
No. 161-11, ¶ 9; Dkt. No. 167, ¶ 9).
In her declaration, Sheila Maestri describes her duties with respect to Solvay Iron as
follows:
I took meeting minutes at the Board meetings and on several
occasions discussed irregularities in the Solvay Iron records with
Solvay Iron’s external accountants. For example, it was alleged
that the former Secretary and Treasurer of Solvay Iron was stealing
from the company. Solvay Iron’s external accountants investigated
the matter and I discussed their findings and opinions with them.
There was nothing ordinary about this in the sense of Solvay Iron’s
normal business operations and it had nothing to do with the
payment or non-payment of any amounts owed to the Plaintiffs.
(Dkt. No. 161-1, ¶ 16).
Plaintiffs (and Ormsby) view Sheila Maestri’s role differently. Plaintiffs assert that Sheila
Maestri was authorized to assume the responsibilities of board chairperson and CEO of Solvay
Iron if John Maestri was unable to fulfill these roles. (Dkt. No. 167, at 5–6; Dkt. No. 163-10, at
272). Further, noting that John Maestri had given Sheila Maestri power of attorney, Plaintiffs
assert that when John Maestri “was unable to act,” Sheila Maestri “had the ability to exercise
9
authority and control over [Solvay Iron’s] bank accounts and finances.” (Dkt. No. 163-1, ¶ 42;
Dkt. No. 163-3, at 230–237; Dkt. No. 163-3, at 171).
Plaintiffs and Ormsby contend that Sheila Maestri was aware of Solvay Iron’s financial
records as she reviewed them on “a regular basis.” (Dkt. No. 161-11, ¶ 8; Dkt. No. 167, ¶ 8).
Ormsby avers that Sheila Maestri asked him to “keep her aware” of “John Maestri’s business and
Solvay Iron’s business,” and that he met with Sheila Maestri monthly “to review the finances of
the Corporation and its financial records.” (Dkt. No. 163-10, ¶ 21). Ormsby states that he “often
complained” to Sheila Maestri that “her father [John] Maestri had underbid projects,” that Solvay
Iron “was not generating enough income to pay bills,” and that John Maestri “was not listening
to [Ormsby’s] advice,” and Ormsby asked her to “address the situation with her father.” (Dkt.
No. 163-10, ¶ 21). Ormsby avers that because either he or John Maestri presented an accounts
payable log reflecting “the debt with the Plaintiffs” to the board at (or before) every monthly
meeting, Sheila Maestri “knew how much money was in the bank and knew about [Solvay
Iron’s] outstanding bills.” (Dkt. No. 163-10, ¶ 32).
Plaintiffs claim that Sheila Maestri also had a role in determining how Solvay Iron spent
its money and which of its creditors to pay. In support of their claim, Plaintiffs refer to evidence
that Sheila Maestri approved payment of an employee’s college tuition, (Dkt. No. 163-12, at 54),
and directed payment to two creditors, (id. at 55 (directing payment to Mackenzie Hughes); Dkt.
No. 161-7, at 3 (telling Solvay Iron controller Sarah Shatrau that she wanted “to make sure
[Ormsby] gets paid back for what he’s paid for fuel. Get him paid back this week if we can
afford it”)). Ormsby likewise claims that Sheila Maestri was involved in Solvay Iron’s payment
of creditors—asserting that she paid Solvay Iron’s insurance premiums from her personal
account; advanced money to Solvay Iron from her father’s account; suggested which bills to pay;
10
authorized payment of certain bills and expenses; and had influence over her father. 15 (Dkt.
No. 163-10, ¶ 20; Dkt. No. 167, ¶ 3).
3.
Kelly Ormsby
Plaintiffs and John and Sheila Maestri assert that as chief operating officer, Ormsby had
“certain duties concerning collection of [Solvay Iron’s] accounts receivables and payment of
[Solvay Iron’s] bills.” (Dkt. No. 163-1, ¶ 21; Dkt. No. 174-1, ¶ 21). John Maestri contends that
he “relinquished control over operations of Solvay Iron when Mr. Ormsby came on board in late
2011” and notes that Ormsby “signed many contracts on behalf of Solvay Iron . . . including the
collective bargaining agreements with the unions.” (Dkt. No. 174, at 14; Dkt. No. 163-10, at 69).
During his deposition, John Maestri testified that he and Ormsby discussed Solvay Iron’s
finances regularly, including its outstanding bills, but that they did not discuss which creditors to
pay, because Ormsby “did that.” (Dkt. No. 174-7, at 20).
Ormsby avers that his role at Solvay Iron was to “assist in developing a turnaround plan
and to determine the volume of work needed to cover” Solvay Iron’s debt, but states that he “did
not want to make any financial decisions and . . . would not make those decisions.” (Dkt.
No. 163-10, ¶ 11). Ormsby acknowledges that he could make recommendations concerning
which bills to pay and when, but maintains that he had no authority to determine how to spend
Solvay Iron’s money and that John Maestri made all final decisions. (Dkt. No. 163-10, ¶ 13).
Regarding his responsibility with respect to accounts payable, Ormsby explains that he
would review the accounts payable log and give Defendant J.
Maestri the log with [his] suggestions of which creditors to pay
and how much to pay the creditors. Defendant J. Maestri would
review the log, make a check mark next to those bills he wanted to
pay, strike any bills he did not want to pay and, on occasion, he
15
Sheila and John Maestri object to the Shatrau and Ormsby affidavits on the basis that they contradict prior
deposition testimony. (Dkt. No. 174, at 21 n.2). None of the purported contradictions, however, are material.
11
would write the dollar amounts to be paid to the creditor. [J.
Maestri] would return the accounts payable log to [him (Ormsby)]
or to Controller Sarah Shatrau with a request to issue the checks.
(Dkt. No. 163-10, ¶ 16).
III.
MOTIONS FOR SUMMARY JUDGMENT
A.
Standard of Review
Under Federal Rule of Civil Procedure 56(a), summary judgment may be granted only if
all the submissions taken together “show that there is no genuine issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986).
The moving party bears the initial burden of demonstrating “the absence of a genuine issue of
material fact.” Celotex, 477 U.S. at 323. A fact is “material” if it “might affect the outcome of
the suit under the governing law,” and is genuinely in dispute “if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248; see
also Jeffreys v. City of New York, 426 F.3d 549, 553 (2d Cir. 2005) (citing Anderson). The
movant may meet this burden by showing that the nonmoving party has “fail[ed] to make a
showing sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322; see also Selevan
v. N.Y. Thruway Auth., 711 F.3d 253, 256 (2d Cir. 2013) (summary judgment appropriate where
the nonmoving party fails to “‘come forth with evidence sufficient to permit a reasonable juror to
return a verdict in his or her favor on’ an essential element of a claim” (quoting In re Omnicom
Grp., Inc. Sec. Litig., 597 F.3d 501, 509 (2d Cir.2010))).
If the moving party meets this burden, the nonmoving party must “set out specific facts
showing a genuine issue for trial.” Anderson, 477 U.S. at 248, 250; see also Celotex, 477 U.S. at
323-24; Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). “When ruling on a summary
12
judgment motion, the district court must construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the
movant.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003). Still, the
nonmoving party “must do more than simply show that there is some metaphysical doubt as to
the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986),
and cannot rely on “mere speculation or conjecture as to the true nature of the facts to overcome
a motion for summary judgment,” Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir.1986)
(quoting Quarles v. Gen. Motors Corp., 758 F.2d 839, 840 (2d Cir. 1985)). Furthermore, “[m]ere
conclusory allegations or denials . . . cannot by themselves create a genuine issue of material fact
where none would otherwise exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (quoting
Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995)). Upon cross-motions for summary
judgment, the Court must “in each case constru[e] the evidence in the light most favorable to the
non-moving party.” Krauss v. Oxford Health Plans, Inc., 517 F.3d 614, 621–22 (2d Cir. 2008);
see also Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993).
Where a party proceeds pro se, the Court must read his or her submissions liberally and
interpret them “to raise the strongest arguments that they suggest.” McPherson v. Coombe, 174
F.3d 276, 280 (2d Cir. 1999) (quoting Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir. 1994)).
However, a pro se party’s “‘bald assertion,’ completely unsupported by evidence, is not
sufficient to overcome a motion for summary judgment.” Jordan v. New York, 773 F. Supp. 2d
255, 268 (N.D.N.Y. 2010) (citing Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir. 1991)); see also
Wagner v. Swarts, 827 F. Supp. 2d 85, 92 (N.D.N.Y. 2011).
Sheila Maestri seeks summary judgment dismissing the Fifth, Sixth, Seventh, and Ninth
Causes of Action. (Dkt. No. 161). Plaintiffs seek summary judgment against Sheila and John
13
Maestri and Kelly Ormsby, entry of judgment in the amount of $1,186,108.70, and an order
allowing Plaintiffs to submit an application for attorneys’ fees and costs they incurred after the
filing of the instant motion. (Dkt. No. 163).
B.
Plan Assets and Fiduciary Status
The Fifth and Sixth Causes of Action allege that Defendants Sheila Maestri, John
Maestri, and Kelly Ormsby breached their fiduciary duties with respect to plan assets, in
violation of ERISA §§ 406, 409, and 515 (codified at 29 U.S.C. §§ 1106, 1109, 1145). Before
reaching the merits of Plaintiffs’ claims, the Court must determine whether the unpaid
contributions constitute plan assets and whether the individual defendants were acting as
fiduciaries under ERISA.
1.
Plan Assets
“ERISA expressly authorizes civil actions against plan fiduciaries in their personal
capacity for breaches of their fiduciary duties with respect to plan asset management.” Sullivan v.
M.A.C. Design Corp., No. 14-cv-1846, 2015 WL 5518456, at *2, 2015 U.S. Dist. LEXIS
124465, at *6 (E.D.N.Y. Sept. 17, 2015) (citing 29 U.S.C. §§ 1109(a), 1132(a)(2); Finkel v.
Romanowicz, 577 F.3d 79, 82 n.4 (2d Cir. 2009)). ERISA does not define “assets,” and the
Second Circuit has held that, in general, unpaid employer contributions are not assets under
ERISA. In re Halpin, 566 F.3d 286, 289–90 (2d Cir. 2009). Parties to a collective bargaining
agreement are, however, “free to contractually provide for some other result.” Id. at 290. The
collective bargaining agreements in this case specify that withheld contributions are plan assets:
“Title to all monies paid into and/or due and owing to the Fund shall be vested in and remain
exclusively in the Trustees of the Fund; outstanding and withheld contributions constitute plan
assets.” (Dkt. No. 163-8, at 186; Dkt. No. 163-8, at 7, ¶ 24). Defendants have not adduced
evidence calling this fact into question and do not contend otherwise. (Dkt. No. 161-12, at 12).
14
Thus, beginning in June 2012, when Solvay Iron failed to remit to the Plaintiff funds the
contributions it owed for hours worked by covered employees, those withheld contributions
constituted plan assets.
2.
Fiduciary Status
“‘In every case charging breach of ERISA fiduciary duty . . . the threshold question is . . .
whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when
taking the action subject to complaint.’” Coulter v. Morgan Stanley & Co. Inc., 753 F.3d 361,
366 (2d Cir. 2014) (quoting Pegram v. Herdrich, 530 U.S. 211, 226 (2000)). “Fiduciaries under
ERISA are those so named in the plan, or those who exercise fiduciary functions.” In re
Citigroup Erisa Litig., 104 F. Supp. 3d 599, 613 (S.D.N.Y. 2015). ERISA identifies an
individual “as a fiduciary with respect to a plan to the extent” the individual “exercises any
discretionary authority or discretionary control respecting management of such plan or exercises
any authority or control respecting management or disposition of its assets” or “has any
discretionary authority or discretionary responsibility in the administration of such plan.” 29
U.S.C. § 1002(21)(A). “Congress intended ERISA’s definition of fiduciary ‘to be broadly
construed’” and functional. LoPresti v. Terwilliger, 126 F.3d 34, 40 (2d Cir. 1997) (quoting Blatt
v. Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987)); see Mertens v. Hewitt Assocs., 508
U.S. 248, 262 (1993) (“ERISA . . . defines ‘fiduciary’ not in terms of formal trusteeship, but in
functional terms of control and authority over the plan.”). “The Supreme Court has emphasized
the limiting effect of the statutory phrase ‘to the extent’ because an ERISA fiduciary ‘may wear
different hats.’” Patrico v. Voya Fin., Inc., No. 16-cv-7070, 2017 WL 2684065, at *2, 2017 U.S.
Dist. LEXIS 95735, at *7 (S.D.N.Y. June 20, 2017) (quoting Pegram, 530 U.S. at 225). Thus,
“‘a person may be an ERISA fiduciary with respect to certain matters but not others’; fiduciary
status exists only ‘to the extent’ that the person ‘has or exercises the described authority or
15
responsibility’ over a plan.” Coulter, 753 F.3d at 366 (quoting F.H. Krear & Co. v. Nineteen
Named Trs., 810 F.2d 1250, 1259 (2d Cir. 1987)).
As an initial matter, there is evidence that the plan assets at issue in this case were
commingled with funds in Solvay Iron’s operating account, (see Dkt. No. 163-3, at 1–84 (M&T
Bank records for the “Solvay Iron Works Inc. Operating Account”); see also Dkt. No. 163-12, at
71; Dkt. No. 163-3, at 35 (records reflecting Solvay Iron’s receipt of payment for bargaining unit
work and deposit of payment into its operating account)), from which Solvay Iron paid other
creditors (see Dkt. No. 163-3, at 35 (November 13, 2012 “M&T Comm Card Payment”)), and
over which, Plaintiffs claim, the individual Defendants exercised authority or control. The
individual Defendants do not appear to dispute that plan assets were commingled with other
funds in Solvay Iron’s operating account. It is the individual Defendants’ alleged management or
disposition of plan assets in Solvay Iron’s operating account that is at issue in this case.
“‘[M]anagement or disposition’ . . . [of ERISA plan assets] refers to the common
transactions in dealing with a pool of assets: selecting investments, exchanging one instrument or
asset for another, and so on.” Finkel, 577 F.3d at 86 (2d Cir. 2009) (citation omitted). The fact
that an individual “was an officer of a company,” “was ‘authorized to sign checks on the
Company’s account,.’ and had “some general knowledge that deductions were made from
employees’ wages” is insufficient to render him an ERISA fiduciary absent any “responsibility
for determining which of the company’s creditors would be paid or in what order.” Finkel, 577
F.3d at 86 (quoting LoPresti, 126 F.3d at 40 (finding “[o]f equal if not more import [than signing
checks on the company’s commingled account] . . .” is whether the individual “had a role in
determining which bills to pay, in that [the individual] decided which creditors were to be paid
out of the Company’s general account . . . and when those creditors were to be paid”).
16
In LoPresti, the plaintiff union sued the defendant company and its sole shareholders and
officers, Donald and John Terwilliger, alleging that the defendants violated the collective
bargaining agreement by failing to forward to the union contributions they had deducted from
employee paychecks and maintained in the company account from which they paid creditors.
126 F.3d at 36–38. Donald and John Terwilliger were the only signatories on the company
account and “signed multiple checks which were drawn on [the] [c]ompany account, including
checks which were forwarded to the Union.” Id. at 37, 40. Following a bench trial, the district
court found that the individual defendants were not fiduciaries under ERISA and entered
judgment in their favor. Id. at 37. The union appealed and the Second Circuit reversed as to
Donald Terwilliger. Id. at 43. The Second Circuit found that “[b]y focusing on whether the
Terwilligers were administrators of the Funds . . . the district court overlooked the fact that an
individual also may be an ERISA fiduciary by . . . ‘exercis[ing] any authority or control
respecting management or disposition of [plan] assets.” Id. at 40 (alteration in original) (quoting
29 U.S.C. § 1002(21)(A)(i), (iii)).
Next, the Circuit examined the individual defendants’ roles in paying company creditors
and determined that Donald was a fiduciary:
Donald had a role in determining which bills to pay, in that he
decided which creditors were to be paid out of the Company’s
general account (which, during the relevant time frame, included
employee Fund contributions), and when those creditors were to be
paid . . . . Donald’s commingling of plan assets with the
Company’s general assets, and his use of those plan assets to pay
Company creditors, rather than forwarding the assets to the Funds
means that he “exercised[d] . . . authority or control respecting . . .
disposition of [plan] assets,” and hence is a fiduciary for purposes
of imposing personal liability under ERISA.
Id. at 40 (internal quotation marks omitted) (quoting 29 U.S.C. § 1002(21)(A)). The Circuit,
however, affirmed the district court’s finding that John Terwilliger was not a fiduciary. Id. at 40–
17
41. The difference, the Circuit explained, was that John Terwilliger, though he was authorized to
sign checks and “had some general knowledge that deductions were made from employees’
wages,” was “primarily a production person with no responsibility for determining which of the
company’s creditors would be paid or in what order.” Id. at 40 (internal quotation marks
omitted). The Circuit therefore concluded that “the record does not support a finding that John
performed any of the functions enumerated in § 1002(21)(A) so as to render him personally
liable for breach of fiduciary duty under ERISA.” Id. at 41.
a.
John Maestri
It is undisputed that John Maestri was the chief executive officer and majority
shareholder of Solvay Iron. Plaintiffs assert that John Maestri determined which of Solvay Iron’s
bills to pay as well as when and whether to pay contributions to the Plaintiff Funds. (Dkt.
No. 163-1, ¶¶ 36–37). Ormsby states that he was “involved in accounts payable” but that he “did
not have the authority to make final decisions.” (Dkt. No. 163-10, ¶ 16). Ormsby explains that he
suggested which creditors to pay and how much to pay them but that John Maestri “made those
decisions and authorized all payments to creditors,” and that the employees responsible for
issuing checks “printed only those checks approved by” John Maestri. (Dkt. No. 163-10, ¶ 16).
Ormsby avers that John Maestri “decided to pay the insurance premiums, material suppliers, the
employees’ wages, himself and other overhead expenses but to leave employee’s fringe benefit
contributions and Plaintiffs unpaid.” (Dkt. No. 163-10, ¶ 17).
John Maestri contends that he “relinquished control over operations of Solvay Iron when
Mr. Ormsby came on board in late 2011” and notes that Ormsby “signed many contracts on
behalf of Solvay Iron . . . including the collective bargaining agreements with the unions.” (Dkt.
18
No. 174, at 14; Dkt. No. 163-10, at 69). 16 During his deposition, John Maestri testified that he
and Ormsby discussed Solvay Iron’s finances regularly, including its outstanding bills, but that
they did not discuss which creditors to pay, because Ormsby “did that.” (Dkt. No. 174-7, at 20).
John Maestri further testified, however, that if he was “close to a supplier” and got a call from
that supplier requesting payment, he would give that supplier money “as we went along” to keep
the supplier “happy.” (Dkt. No. 174-7, at 19–20).
In support of his contention that Ormsby was responsible for deciding which creditors to
pay, John Maestri also cites the March 16, 2013 Board Minutes, which state: “Accounts payable
system discussed. Unanimous agreement that [Kelly Ormsby] is ably handling the acct payable.”
(Dkt. No. 174-3, at 36). Under “Action,” the Board Minutes state: “It was suggested that [John
Maestri] refer invoice issues to [Kelly Ormsby] for detailed attention.” (Dkt. No. 174-3, at 36).
The evidence, however, that Ormsby was “handling” accounts payable and received invoices and
that John Maestri did not discuss which creditors to pay because Ormsby “did that,” does not
speak to the issue of who actually controlled the company funds. Additionally, it is undisputed,
that John Maestri was Solvay Iron’s majority shareholder, that he had authority and control over
Solvay Iron’s bank accounts, and that he paid suppliers to keep them “happy.” Thus, even
viewed in the light most favorable to John Maestri, the evidence shows that John Maestri
exercised management or control over plan assets. (Dkt. No. 174-7, at 19–20). See NYSA-ILA
Med. & Clinical Servs. Fund v. Catucci, 60 F. Supp. 2d 194, 202 (S.D.N.Y. 1999) (“Sabato
16
Plaintiffs argue that, because John Maestri delegated accounts payable authority to Ormsby, which Ormsby denies
included any discretion or decision-making authority, John Maestri is liable for Ormsby’s failure to remit
contributions on the ground that he failed to monitor Ormsby’s activities. (Dkt. No. 163-15, at 16–19). As
Defendants note, however, (Dkt. No. 174, at 24), none of the cases Plaintiffs cite relate to the factual context of the
present case, i.e., a company’s failure to remit contributions under the terms of a collective bargaining agreement.
See, e.g., Bennett v. Manufacturers & Traders, No. 99-cv-827, 2005 WL 2896962, at *7, 2005 U.S. Dist. LEXIS
40592, at *17 (N.D.N.Y. Nov. 2, 2005) (discussing alleged ERISA violations by trustees of profit sharing plans);
Liss v. Smith, 991 F. Supp. 278, 309 (S.D.N.Y. 1998) (discussing fiduciary responsibilities of union president and
the power to appoint trustees). As Plaintiffs failed to cite relevant case law for this proposition, the Court does not
address this argument at this time.
19
Catucci clearly had managerial discretion and control over all of Salco. During the entire period
of Salco’s debt to the Fund, he was the corporation’s President and controlling shareholder. He
ran the corporation and make [sic] all decisions on payments by Salco.”). Accordingly, Plaintiffs
are entitled to summary judgment as to John Maestri’s fiduciary status.
b.
Sheila Maestri
It is undisputed that Sheila Maestri was a member of Solvay Iron’s board and served as
secretary and treasurer. Sheila Maestri avers that her duties included taking minutes at board
meetings and “discussed irregularities in the Solvay Iron Records with . . . external accountants.”
(Dkt. No. 161-1, 16). In her declaration, Sheila Maestri states that she was not a shareholder or
employee of Solvay Iron and had no “discretion, authority or control over which of Solvay Iron’s
creditors were paid or not paid at any time.” (Dkt. No. 161-1, ¶¶ 3–4, 7). Based on this evidence,
Sheila Maestri argues that she is entitled to summary judgment.
Plaintiffs, however, argue that Sheila Maestri had a role in determining how Solvay Iron
spent its money and which of its creditors to pay. There is evidence, for instance, that she
recommended payment of an employee’s college tuition (Dkt. No. 163-12, at 54), and payment
to two creditors, (id. at 55 (directing payment to Mackenzie Hughes); Dkt. No. 161-7, at 3
(telling Solvay Iron controller Sarah Shatrau that she wanted “to make sure [Ormsby] gets paid
back for what he’s paid for fuel” and instructed Shatrau to “[g]et him paid back this week if we
can afford it”). However, Shatrau asserted in her affidavit that before Solvay Iron paid any bills,
the procedure was “to itemize the outstanding invoices (creditor and amount)” and present the
itemization to Ormsby, who, in turn, would present it to John Maestri. (Dkt. No. 163-12, ¶ 6).
Thus, even viewing the facts in the light most favorable to Plaintiffs, the evidence shows, at best,
that Sheila Maestri made recommendations regarding what to pay; there is no evidence that
Sheila Maestri was the one to decide whether Solvay Iron could “afford” to pay any bill she
20
recommended be paid. For example, even though Sheila Maestri recommended that Solvay Iron
pay Shatrau’s tuition, it was John Maestri who approved that recommendation and directed
payment. (Dkt. No. 163-12, at 54). Sheila Maestri was the board secretary and treasurer, she took
meeting minutes, (Dkt. No. 163-3, at 172), and heard the financial reports at monthly board
meetings (Dkt. No. 163-3, at 181), discussed Solvay Iron’s finances with Shatrau, attended
production meetings 17 on occasion (Dkt. No. 163-12, at 44–45), and discussed with John Maestri
and Ormsby Solvay Iron’s debt to Plaintiffs and how to pay it down. (Dkt. No. 163-12, at 51). It
is well settled that “an individual is not liable for corporate ERISA obligations solely by virtue of
his role as officer, shareholder, or manager.” Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir. 1993).
Thus, in the absence of evidence that Sheila Maestri had authority or control beyond
recommending, in a few instances, that certain creditors be paid, and no evidence that she had
any authority or control over the funds in Solvay Iron’s operating account, no factfinder could
conclude that Sheila Maestri had any authority with respect to plan assets. Cf., Pension Ben.
Guar. Corp. v. Solmsen, 671 F. Supp. 938, 944–45 (E.D.N.Y. 1987) (“Most significantly,
defendant was responsible for authorizing and making payments to the Plan. According to his
own testimony, he exercised discretion in declining to authorize and make payments when the
bank balance was not ‘sufficient.’ These acts show defendant's discretionary authority as to the
management and administration of the Plan and the disposition of its assets.”). 18
Accordingly, Sheila Maestri’s motion for summary judgment is granted as to her
fiduciary status and Plaintiffs’ cross-motion for summary judgment is denied.
17
Shatrau testified that at production meetings, project schedules and progress were discussed. (Dkt. No. 163-12, at
46).
18
Plaintiffs also rely on John Maestri’s assignment of power of attorney to Sheila Maestri as a basis for fiduciary
status. Citing In re Alan G.W., 29 N.Y.S.3d 755, 757 (N.Y. Sup. 2016), Sheila Maestri notes that under New York
law, “a fiduciary cannot delegate his fiduciary powers by granting a general power of attorney.” (Dkt. No. 174, at
23). Plaintiffs did not reply to this argument and the Court finds no basis for concluding that the power of attorney
raises a material issue of fact as to whether she was a fiduciary with respect to the Plaintiff Funds.
21
c.
Kelly Ormsby
Plaintiffs contend that Kelly Ormsby, who was chief operating officer and president of
Solvay Iron, possessed authority and control over plan assets and the bank accounts that held
those plan assets. (Dkt. No. 163-15, at 14). Ormsby states that he made “suggestions” regarding
“which creditors to pay and how much to pay the creditors” and presented an accounts payable
log to John Maestri, who would review the log, “make a check mark next to those bills he
wanted to pay, strike any bills he did not want to pay and, on occasion, . . . write the dollar
amounts to be paid to the creditor.” (Dkt. No. 163-10, ¶ 16). Ormsby was the signatory to the
CBA, and, as discussed above, John Maestri testified that Ormsby was responsible for handling
accounts payable and deciding which creditors to pay. (Dkt. No. 174-7, at 20). There is,
therefore, a material issue of fact concerning what authority, if any, Ormsby had over plan assets.
See Coleman v. BMC Const. Corp., 425 F. Supp. 2d 477, 483–84 (S.D.N.Y. 2006) (denying the
plaintiff union funds’ motion for summary judgment where there were factual issues concerning
the individual defendant’s “degree of control over company funds”).
C.
Fifth Cause of Action: ERISA § 406 – Prohibited Transactions
The Fifth Cause of Action alleges that Sheila and John Maestri and Kelly Ormsby, as
fiduciaries and parties in interest, engaged in prohibited transactions in violation of ERISA
§ 406(a). (Dkt. No. 63, at 17). Specifically, Plaintiffs assert that a series of checks 19 John Maestri
received from Solvay Iron between July 2012 and October 2013 totaling $469,663.20, 20 Sheila
Maestri’s receipt of $2,249.00, and Kelly Ormsby’s receipt of $53,930.11 were prohibited
transactions under ERISA. (Dkt. No. 163-1, ¶¶ 28–30; Dkt. No. 163-2, at 104–34).
19
Kelly Ormsby states that Solvay Iron issued these checks at John Maestri’s direction, and Sheila Maestri
deposited them in John Maestri’s accounts. (Dkt. No. 163-10, ¶ 35).
20
John Maestri notes that one of the checks is not payable to him, but to Merrill Lynch. (Dkt. No. 174-1, ¶ 28; Dkt.
No. 163-2, at 128).
22
ERISA § 404(a)(1) requires an ERISA fiduciary to “discharge his [or her] responsibility
‘with the care, skill, prudence, and diligence’ that a prudent person ‘acting in a like capacity and
familiar with such matters’ would use.” Tibble v. Edison Int’l, 135 S.Ct. 1823, 1828 (2015)
(quoting 29 U.S.C. § 1104(a)(1)). “Section 406 of ERISA supplements the general fiduciary
obligations set forth in § 404 by prohibiting certain categories of transactions believed to pose a
high risk of fiduciary self-dealing.” Henry v. Champlain Enters., Inc., 445 F.3d 610, 618 (2d Cir.
2006). ERISA § 406(a)(1) provides, in relevant part:
(a) Transactions between plan and party in interest
...
(1) A fiduciary with respect to a plan shall not cause the plan to
engage in a transaction, if he knows or should know that
such transaction constitutes a direct or indirect—
(A) sale or exchange, or leasing, of any property between
the plan and a party in interest;
(B) lending of money or other extension of credit between
the plan and a party in interest;
(C) furnishing of goods, services, or facilities between the
plan and a party in interest; [or]
(D) transfer to, or use by or for the benefit of a party in
interest, of any assets of the plan . . . .
29 U.S.C. § 1106(a)(1).
1.
Parties in Interest
ERISA defines “party in interest” as:
(A) any fiduciary (including, but not limited to, any administrator,
officer, trustee, or custodian), counsel, or employee of such
employee benefit plan;
...
(E) an owner, direct or indirect, of 50 percent or more of—
(i)
the combined voting power of all classes of stock entitled
to vote or the total value of shares of all classes of stock
of a corporation.
23
(ii)
the capital interest or the profits interest of a partnership,
or
(iii) the beneficial interest of a trust or unincorporated
enterprise,
which is an employer or an employee organization described in
subparagraph (C) or (D);
(F) a relative (as defined in paragraph (15)) of any individual
described in subparagraph (A), (B), (C), or (E); [or]
...
(H) an employee, officer, [or] director . . . .
29 U.S.C. § 1002(14). Paragraph (15) explains that the “term ‘relative’ means a spouse, ancestor,
lineal descendant, or spouse of a lineal descendant.” Id. § 1002(15).
As discussed, Plaintiffs have established that John Maestri is a fiduciary, further, as the
owner of Solvay Iron, he is also party in interest, as is his daughter Sheila (relative). Plaintiffs
assert that Ormsby, who was employed by Solvay Iron and was president and chief operating
officer, is a party in interest as “an officer and director.” (Dkt. No. 163-15, at 22).
2.
Liability
“To state a claim under ERISA § 406(a)(1) . . . plaintiffs must allege that the defendant is
a fiduciary; the defendant caused the plan to engage in one of the prohibited transactions set forth
in § 406(a)(1); the transaction was “between the plan and a ‘party in interest’” (for
§ 406(a)(1)(A)[–](C)) or involved plan assets (for § 406(a)(1)(D)); and the defendant knew or
should have known that the transaction was prohibited.” Sacerdote v. N.Y. Univ., No. 16-cv6284, 2017 WL 3701482, at *4, 2017 U.S. Dist. LEXIS 137115, at *13 (S.D.N.Y. Aug. 25,
2017). “Section 406(b) [is to] be broadly construed, see Leigh v. Engle, 727 F.2d 113, 126 (7th
Cir. 1984), and . . . liability. . . imposed even where there is ‘no taint of scandal, no hint of selfdealing, no trace of bad faith.’” Lowen v. Tower Asset Mgmt., Inc., 829 F.2d 1209, 1213 (2d Cir.
1987) (quoting Cutaiar v. Marshall, 590 F.2d 523, 528 (3d Cir. 1979)).
24
“When a fiduciary violates the rules set forth in § 406(a)(1), § 409 of ERISA renders [the
fiduciary] personally liable for any losses incurred by the plan, any ill-gotten profits, and other
equitable and remedial relief deemed appropriate by the court. But in order to sustain an alleged
transgression of § 406(a), a plaintiff must show that a fiduciary caused the plan to engage in the
allegedly unlawful transaction.” Lockheed Corp. v. Spink, 517 U.S. 882, 888 (1996) (citing 29
U.S.C. § 1109(a)). “The transactions enumerated in § 406(a)(1) are per se violations of ERISA
regardless of the motivations which initiated the transaction, the prudence of the transaction, or
the absence of any harm resulting from the transaction.” Liss v. Smith, 991 F. Supp. 278, 307
n.30 (S.D.N.Y. 1998). Section 1106(a) requires that the fiduciary “knows or should know” the
facts that would make the transaction prohibited. Harris Tr. & Sav. Bank v. Salomon Smith
Barney Inc., 530 U.S. 238, 242 (2000).
Furthermore, under ERISA § 502(a)(3), a plaintiff plan may bring an equitable claim for
relief, based on a violation of § 406(a), against parties in interest, even though they are nonfiduciaries. Harris Tr., 530 U.S. at 246 (explaining that ERISA § 502(a)(3) authorizes
“‘appropriate equitable relief’ for the purpose of ‘redress[ing any] violations or . . . enforc[ing]
any provisions’ of ERISA or an ERISA plan.” (quoting Peacock v. Thomas, 516 U.S. 349, 353
(1996)); see also Haley v. Teachers Ins. & Annuity Ass’n of Am., No. 17-cv-855, 2018 WL
1585673, at *8, 2018 U.S. Dist. LEXIS 52138, at *20–21 (S.D.N.Y. Mar. 28, 2018) (“Where
plaintiffs seek to recover profits from a nonfiduciary which were derived from allegedly
knowing participation in a § 406(a) violation, courts have permitted disgorgement claims to
proceed under § 502(a)(3).”). The Supreme Court has explained that, in order to hold “a
transferee of ill-gotten trust assets” liable,
the transferee must be demonstrated to have had actual or
constructive knowledge of the circumstances that rendered the
25
transaction unlawful. Those circumstances, in turn, involve a
showing that the plan fiduciary, with actual or constructive
knowledge of the facts satisfying the elements of a § 406(a)
transaction, caused the plan to engage in the transaction.
Harris Tr., 530 U.S. at 251.
a.
John Maestri
Plaintiffs claim that John Maestri engaged in prohibited transactions by diverting plan
assets via a series of checks totaling $469,663.20 from the Solvay Iron operating account, and
depositing those assets in his own account. (Dkt. No. 163-2, at 104–32). John Maestri notes that
one of these checks is not payable to him, but to Merrill Lynch, in the amount of $10,000. (Dkt.
No. 163-2, at 128). John Maestri, as chief executive officer and majority shareholder, is, as
discussed, a fiduciary and a party in interest. Further, it is uncontroverted that John Maestri knew
during the time period when he received the checks—July 2012 through October 2013—that
Solvay Iron owed contributions to the Plaintiff funds and that plan assets were commingled in
Solvay Iron’s operating account. (Dkt. No. 163-10, ¶ 32). Finally, there is evidence that John
Maestri directed the issuance of theses checks, (Dkt. No. 163-10, ¶ 35), and therefore “caused the
plan to engage in the transaction.” Harris Tr., 530 U.S. at 128. These transactions were therefore
per se violations of ERISA and Plaintiffs are entitled to summary judgment against John Maestri
under § 406(a)(1).
John (and Sheila Maestri) also argue that they should not be held liable under ERISA
§ 406 because they loaned money to Solvay Iron. John Maestri asserts that he loaned Solvay Iron
approximately $441,000 in 2013. (Dkt. No. 174-6, at 56). Sheila Maestri asserts that she loaned
Solvay Iron $12,754.66 in 2013. (Id.). Under 29 U.S.C. § 1108(a), the Secretary of Labor is
authorized to “grant a conditional or unconditional exemption of any fiduciary or transaction, or
class of fiduciaries or transactions, from all or part of the restrictions imposed by” ERISA § 406.
26
These exemptions are outlined in 29 U.S.C. § 1108(b) and 29 C.F.R. Part 2550, but Defendants
have not identified which, if any of the exemptions might apply. See, e.g., 29 C.F.R.
§ 2550.408b–1 (“General Statutory Exemption for Loans to Plan Participants and Beneficiaries
Who Are Parties in Interest with Respect to the Plan”); id. § 2550.408b–2 (“General Statutory
Exemption for Services or Office Space”). Accordingly, their argument is unavailing.
b.
Sheila Maestri
Plaintiffs challenge Sheila Maestri’s receipt of $2,000.00 in plan assets in December
2012 (Dkt. No. 263-2, at 138; Dkt. No. 163-3, at 41) and $249.00 January 2013 (Dkt. No. 163-2,
at 136; Dkt. No. 163-3, at 43). Sheila Maestri concedes she is a party in interest but seeks
summary judgment and questions whether “such a relatively small amount of money”—
$2,246.00—can be considered barred by ERISA’s prohibition on self-dealing, particularly
where, as here, she had “already expended that amount of her personal funds on Solvay Iron
business.” (Dkt. No. 174, at 27). ERISA § 406 imposes liability for the prohibited transfer of
“any assets of the plan.” 29 U.S.C. § 1106(a)(1). Thus, as it is undisputed that the $2,249.00
Sheila Maestri received constituted plan assets, it falls within ERISA § 406. Accordingly, the
Court turns to the merits.
Sheila Maestri maintains that she knew nothing of Solvay Iron’s debt to the Plaintiff
funds until, at the earliest, July 2013—more than six months after she received the checks
totaling $2,249.00. (Dkt. No. 174-1, ¶ 35; Dkt. No. 174-3, at 44 (July 13, 2013 board minutes
“Accounts payable: Local 60: [Solvay Iron] owes Local 60 100,000+”)). She further maintains
that she knew nothing of Solvay Iron’s banking practices or financial information, condition, or
paying the wages or benefits of covered employees. (Dkt. No. 163-3, 189–90). Thus, she has
adduced evidence, which, if credited, indicates that she lacked actual or constructive knowledge
of the circumstances that rendered her receipt of $2,249.00 unlawful. Ormsby avers that because
27
either he or John Maestri presented an accounts payable log reflecting “the debt with the
Plaintiffs” to the board at (or before) every monthly meeting, Sheila Maestri “knew how much
money was in the bank and knew about [Solvay Iron’s] outstanding bills.” (Dkt. No. 163-10,
¶ 32). Such evidence, if credited, would allow a factfinder to infer that Sheila Maestri possessed
at least constructive knowledge that she was receiving plan assets. 21
c.
Kelly Ormsby
Plaintiffs have presented evidence that Ormsby received $53,390.11 from Solvay Iron
between May 2012 and September 2013. (Dkt. No. 163-2, at 71–72). Even assuming Kelly
Ormsby is not a fiduciary, because it is undisputed that as chief operating officer, he was a party
in interest, that he was fully familiar with Solvay Iron’s accounts payable, including Solvay
Iron’s debt to the Plaintiff funds, and that he received $53,390 in plan assets, he may be liable
under ERISA § 406. See Metzler v. Solidarity of Labor Orgs. Health & Welfare Fund, No. 95cv-7247, 1998 WL 477964, at *8, 1998 U.S. Dist. LEXIS 12565, at *29 (S.D.N.Y. Aug. 14,
1998) (“In order for a particular transaction to run afoul of § 406(a)(1)(D), it must involve (1) a
transfer (2) to a party in interest (3) of plan assets.”). There are, however, issues of fact
concerning whether a fiduciary with knowledge of the circumstances that rendered the
transaction unlawful caused the transfer of plan assets to Kelly Ormsby. Indeed, Plaintiffs have
not identified who “caused” this transaction. Accordingly, summary judgment is inappropriate.
D.
Sixth Cause of Action – ERISA § 515
In the Sixth Cause of Action, Plaintiffs allege that John and Sheila Maestri and Kelly
Ormsby were (i) fiduciaries with respect to the Plaintiff Plans, (ii) received “sums of money
21
Plaintiffs appear to seek to hold Sheila Maestri liable for her part in endorsing and depositing the checks issued to
John Maestri into John Maestri’s account. (Dkt. No. 167-2, at 9). There is no evidence, however, that this benefitted
Sheila Maestri in any way, that it involved any discretionary authority or control, or that she was anything more than
an intermediary.
28
related to construction projects intended to pay . . . the wages and benefits of employees
furnishing and supplying the labor,” (iii) that these monies “constitute assets of the Plaintiff
Plans,” (iv) that Defendants determined which creditors Solvay Iron would pay, and (v) that
Defendants failed to timely remit $183,329.84 in contributions, and failed to remit $840,257.60
in contributions to the Plaintiff Funds. (Dkt. No. 63, ¶¶ 74–86). Plaintiffs further allege that by
using plan assets for purposes other than the interests of the Plaintiff Funds, and allowing the
transfer or diversion of the Plaintiff Funds’ assets, they have breached their fiduciary duties of
loyalty and prudence, in violation of ERISA § 404, as fiduciaries, failed to make contributions
under the terms of the Plaintiff Plans, in violation of ERISA § 515, and, under § 409 of ERISA
are “personally liable to make good to such plan any losses to the plan resulting from such
breach.” (Dkt. No. 63, ¶¶ 90–92). Under § 515 of ERISA,
[e]very employer who is obligated to make contributions to a
multiemployer plan under the terms of the plan or under the terms
of a collectively bargained agreement shall, to the extent not
inconsistent with law, make such contributions in accordance with
the terms and conditions of such plan or such agreement.
29 U.S.C. § 1145.
To the extent Defendants allocated monies from Solvay Iron’s operating account, which
contained plan assets, to expenses rather than to the Plaintiff funds, they breached their duties of
loyalty and prudence under ERISA § 404(a). Pension Benefit Guaranty Corp. v. Solmsen, 671 F.
Supp. 938, 946 (E.D.N.Y. 1987) (“Defendant allocated available monies to corporate expenses
rather than the . . . fund, thereby breaching his duty to act solely in the interests of the Plan’s
participants . . . in violation of 29 U.S.C. §§ 1104(a)(1).”). Given John Maestri’s fiduciary status,
it follows, under the facts of this case, that Plaintiffs are entitled to summary judgment against
him under ERISA § 515 for the unpaid and untimely paid contributions. As there is no evidence
from which a fact-finder could conclude that Sheila Maestri was a fiduciary, she is entitled to
29
summary judgment dismissing this cause of action. There are, however, questions of fact
concerning Ormsby’s fiduciary status. Plaintiffs’ motion for summary judgment as to Ormsby
under § 515 is therefore denied. 22
E.
Seventh Cause of Action – New York Law
Sheila Maestri seeks summary judgment dismissing the Seventh Cause of Action, which
alleges that “Defendants abused their position as fiduciaries by permitting, directing or
instigating this deduction and retention, use or diversion of their employees’ monies in a manner
contrary to their fiduciary obligations and their action is a breach of trust under Article 3-A of
the New York Lien Law,” Labor Law, and Penal Law. (Dkt. No. 63, ¶¶ 101–104). Sheila Maestri
argues that she cannot be held personally liable under New York Labor Law because she is not
an employer. (Dkt. No. 161-12, at 15). Plaintiffs oppose summary judgment but have not in the
Amended Complaint, or in their opposition to Sheila Maestri’s motion for summary judgment,
identified a provision of the New York Labor Law or Penal Law under which they intend to
proceed or disputed her argument that she is not an employer. Instead, citing New York Business
Corporation Law § 701, Plaintiffs argue that Sheila Maestri is liable to them “by virtue of her
position as a director of an insolvent corporation.” 23 (Dkt. No. 167-2, at 25). Plaintiffs do not
22
Plaintiffs argue that even assuming Ormsby “made the decisions to misuse and diver Plaintiffs’ plan assets, the
fact remains that [John Maestri] hired . . . Ormsby and delegated to him the task of handling Plaintiffs’ plan assets.”
(Dkt. No. 163-15, at 19). They further argue that John Maestri and Sheila Maestri “failed to take reasonable and
prudent steps to monitor . . . Ormsby . . . and to determine whether he was fulfilling the fiduciary responsibilities
owed to Plaintiffs.” (Id. at 90–20). While this provides a basis for liability against John Maestri, as he is a fiduciary,
in the absence of evidence that Sheila Maestri was a fiduciary with respect to the Plan Funds, she cannot be held
liable for failing to monitor Ormsby. See In re WorldCom, Inc., 263 F. Supp. 2d 745, 760–61 (S.D.N.Y. 2003)
(rejecting argument that the defendant supervisor of ERISA fiduciary was also an ERISA fiduciary explaining that
“the plaintiffs' argument goes too far” and “ would make any supervisor of an ERISA fiduciary also an ERISA
fiduciary,” a proposition for which the plaintiffs had provided no statutory or decisional support”).
23
Section 701 states:
Subject to any provision in the certificate of incorporation authorized by paragraph (b) of section
620 (Agreements as to voting; provision in certificate of incorporation as to control of directors) or
by paragraph (b) of section 715 (Officers), the business of a corporation shall be managed under
30
explain how (or whether) this argument bears any connection to their state law claims. Indeed,
Plaintiffs make no reference in their opposing papers to the New York Labor Law or Penal
Law. 24 Accordingly, the Court deems this claim as against Sheila Maestri abandoned. See Taylor
v. City of New York, 269 F. Supp. 2d 68, 75 (E.D.N.Y. 2003) (“Federal courts may deem a claim
abandoned when a party moves for summary judgment on one ground and the party opposing
summary judgment fails to address the argument in any way.” (citing Douglas v. Victor Capital
Grp., 21 F. Supp. 2d 379, 393 (S.D.N.Y. 1998)).
F.
Ninth Cause of Action – Injunctive Relief
Sheila Maestri moves for summary judgment dismissing the ninth cause of action, in
which Plaintiffs seek an order enjoining her from further violating ERISA. (Dkt. No. 161-12, at
23; Dkt. No. 63, at 27). In view of the issues of material fact with respect to the Fifth Cause of
Action, ERISA § 406(a)(1), Sheila Maestri’s motion is denied.
G.
Damages
Although Plaintiffs are entitled to summary judgment as to John Maestri, as there are
issues of material fact requiring trial as to Sheila Maestri and Ormsby, and all claims against
Defendants Chemotti and Bert Maestri remain pending, the Court declines to address Plaintiffs’
arguments concerning damages attorneys’ fees.
the direction of its board of directors, each of whom shall be at least eighteen years of age. The
certificate of incorporation or the by-laws may prescribe other qualifications for directors.
N.Y. Bus. Corp. Law § 701. To the extent Plaintiffs claim that this provision renders Sheila Maestri liable as a
fiduciary under ERISA, they have filed no case law supporting such a claim.
24
In a footnote to their argument concerning Sheila Maestri’s status as an ERISA fiduciary and “trust fund assets,”
Plaintiffs cite several cases that allude to the New York Lien Law. (Dkt. No. 167-2, at 17 n.6 (citing, inter alia,
People v. Rallo, 46 A.D.2d 518, 527–28 (4th Dep’t 1975), Nat’l Surety Corp. Fishkill Nat’l Bank, 61 Misc. 2d 579,
586 (1969)). However, they neither contend Sheila Maestri is liable under the Lien Law nor make any other
reference to it in their papers.
31
IV.
SUPPLEMENTAL APPLICATION FOR ATTORNEYS’ FEES AND COSTS
In a Memorandum Decision and Order entered on March 28, 2017, the Court granted
Plaintiffs’ motion for default judgment against Defendant Solvay Iron and entered partial
judgment in favor of Plaintiffs, including an award of attorneys’ and legal assistants’ fees and
costs. (Dkt. No. 134). As there were duplicative time entries that required further explanation
and Plaintiffs had requested permission to file a supplemental application for any attorneys’ fees
and costs they incurred for the period after their filing of the motion for default judgment, the
Court made a partial award of attorneys’ and legal assistants’ fees and allowed Plaintiffs to
submit additional evidence regarding the problematic entries along with their supplemental
application for attorneys’ and legal assistants’ fees. (Dkt. No. 134, at 19, 22). Subsequently,
Plaintiffs filed an affidavit by their attorney explaining the duplicative entries as well as an
application for attorneys’ fees for the period following their motion for default judgment (March
29, 2016 to February 28, 2017). (Dkt. No. 148). The Court has carefully reviewed Plaintiffs’
request, which is supported by documentary evidence, including detailed billing records, and
finds, for the reasons stated in the Memorandum Decision and Order (Dkt. No. 134, at 17–21),
Plaintiffs are entitled to an award of $48,479.88 in attorneys’ and paralegal fees and costs for the
period May 1, 2013 through March 29, 2016 and $72,898.45 in attorneys’ and paralegal fees and
costs for the period March 29, 2016 to February 28, 2017.
V.
CONCLUSION
For these reasons, it is hereby
ORDERED that Defendant Sheila Maestri’s motion for summary judgment (Dkt.
No. 161) is GRANTED with respect to the Sixth Cause of Action (ERISA § 406(a)(1)) and
Seventh Cause of Action (New York Law claims); and it is further
32
ORDERED that the Sixth and Seventh Causes of Action as to Defendant Sheila Maestri
are DISMISSED with prejudice; and it is further
ORDERED that Defendant Sheila Maestri’s motion for summary judgment (Dkt.
No. 161) is otherwise DENIED in its entirety; and it is further
ORDERED that Plaintiffs’ motion for summary judgment (Dkt. No. 163) is GRANTED
as to John Maestri’s liability under the Fifth and Sixth Causes of Action; and it is further
ORDERED that Plaintiffs’ motion for summary judgment (Dkt. No. 163) is otherwise
DENIED; and it is further
ORDERED that Plaintiffs are awarded $48,479.88 in attorneys’ and paralegal fees and
costs for the period May 1, 2013 through March 29, 2016 and $72,898.45 in attorneys’ and
paralegal fees and costs for the period March 29, 2016 to February 28, 2017.
IT IS SO ORDERED.
Dated: May 11, 2018
Syracuse, New York
33
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