UNITE HERE Must Pay $5.5M to Hotel Employees Over ERISA Breach

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By Carmen Castro-Pagan

Aug. 29 — UNITE HERE Health must pay $5.5 million to Greenbrier Hotel Corp. and its employees for breaching its ERISA fiduciary duties by amending plan documents to retain excess assets when the plan was terminated ( Greenbrier Hotel Corp. v. UNITE HERE Health , 2016 BL 280134, S.D. W.Va., No. 5:13-cv-11644, 8/26/16 ).

The amendment was “made for the purpose of depriving” certain participants of funds otherwise reserved for their benefit and, as such, was unreasonable, discriminatory and in bad faith, Judge Irene C. Berger held Aug. 26 after a six-day bench trial. Absent the amendment, the plan unambiguously required transfer of the funds upon termination, Berger said. Thus, UNITE HERE abused its discretion when it didn’t transfer the excess assets to Greenbrier’s newly created health plan, Berger said.

The dispute stemmed from an amendment to UNITE HERE’s health plan after its trustees announced their decision to terminate it.

Greenbrier and its employees sued UNITE HERE in the U.S. District Court for the Southern District of West Virginia to recover the $5.5 million in excess assets from the plan. Greenbrier argued that after the plan was terminated, its excess assets should have been remitted to the new, self-funded health plan sponsored by the hotel.

Last year, the court declined to dismiss the lawsuit, holding that Greenbrier was a fiduciary with standing to enforce the rights of its employees as plan beneficiaries.

During the trial, UNITE HERE argued that an assets transfer would violate the Employee Retirement Income Security Act because it would benefit Greenbrier by displacing money the fund would have otherwise spent to provide health benefits. In rejecting this argument, the court said it was undisputed that the money would be ultimately used to provide health benefits to Greenbrier’s employees.

As to the plan amendment, the court said that UNITE HERE’s trustees removed certain language pertaining to their fiduciary obligations and then amended the plan’s termination clause in an effort to “bolster” the fund’s claim to the excess assets. In doing so, the trustees failed to follow the plan’s amendment procedures and thus the amendment was invalid.

The plan documents allowed the trustees to use the money to provide benefits to plan participants or to transfer the money to a plan that would do so, the court said.

Spilman Thomas & Battle and Masters Law Firm represented Greenbrier and the employees. Bowles Rice McDavid Graff & Love and Seyfarth Shaw represented UNITE HERE.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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