$77.5 Million Suit Against Union Wins Class Action Status

U.S. Dist. Judge Sidney H. Stein (S.D.N.Y., Clinton) granted class certification Jan. 8 to a suit brought by participants in the Int’l Ladies Garment Workers’ Union death benefit fund who allege that the fund violated its fiduciary duties when it transferred $77.5 million of fund assets to the union, which is now part of the Union of Needletrades Indus. & Textile Employees. The fund was established in 1937 and included language prohibiting any withdrawals except for payment of benefits and administrative costs. In 1976, an amendment was added to ILGWU’s constitution that permitted termination of the fund by the union’s board. In 1997, the board terminated the fund and transferred the bulk of the fund’s assets to a new death benefit fund. However, it also transferred $77.5 million of assets to the union itself, and $12.5 million of which was routed to a nonprofit corporation, 21st Century ILGWU Heritage Fund.

Stein granted the participants’ and beneficiaries’ motion for class certification, finding that the requirements for a class action were met. There were common questions such as whether the transfer to ILGWU violated ERISA; whether the documents governing the fund permitted the transfer; and whether the original fund was “terminated” within the meaning of ERISA. Reportedly, 100,000 to 132,000 participants and beneficiaries who could be included in the class. David S. Preminger of Rosen, Preminger & Bloom, N.Y, and Marc I. Machiz of Cohen, Milstein, Hausgeld & Toll, Washington, D.C., represented the retirees. Ronald E. Richman and Holly H. Weiss of Schulte Roth & Zabel, New York, represented the union. [BNA 1/22/02]