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EUREKA PAPER v. WBMA

June 26, 1991

EUREKA PAPER BOX COMPANY, ET UX., PLAINTIFFS,
v.
WBMA, INC., VOLUNTARY EMPLOYEE BENEFIT TRUST, ET AL., DEFENDANTS.



The opinion of the court was delivered by: McCLURE, District Judge.

  MEMORANDUM

BACKGROUND:

Plaintiffs filed this action to recover for alleged ERISA*fn1 and RICO*fn2 violations committed in connection with the administration of an employee benefit plan established to provide health care coverage for the employees of members of the West Branch Manufacturing Association ("WBMA"). The ten plaintiffs*fn3 are employers who purchased health care coverage for their employees through the WBMA Voluntary Employee Benefit Plan and Trust (the "trust").

Named as defendants are: (1) the trust; (2) the plan administrator, Hartman Financial Services, Inc. ("Hartman"); (3) the claims administrator, NEP Insurance Services, Inc. ("NEP"); (4) David Roche, an employee of Hartman who served as trust manager; and (5) Michael J. Sharbaugh, Executive Director of the trust. (Plaintiffs' fourth amended complaint, filed Oct. 11, 1989, paras. 15-21.)*fn4

Plaintiffs' claims arise out of a series of events which led, ultimately, to the termination of the trust effective October 1, 1987. Funding problems precipitated the trust's termination. Trust administrators first noted a disturbing trend of cost overruns due to an unexpected increase in claims during the winter of 1986. By spring of 1987, the trust was operating at a deficit and a funding increase was required to render it solvent. At a meeting held in March, 1987, participating employers voted to increase contribution rates to fund the deficit, and, hopefully, ensure future liquidity.

Unfortunately, the increase did not solve the problem, and the trust continued to operate at a deficit. At a meeting held September 13, 1988 and attended by representatives from fifty nine of the sixty-seven participating employers, two possible solutions were considered:*fn6 (1) fund the deficit, terminate the trust and re-institute coverage for employees of WBMA members through a group plan purchased from an insurance carrier, or (2) fund the deficit, increase trust contributions to guarantee future liquidity, and continue providing health care coverage through the trust.

The employers voted unanimously to terminate the trust effective October 1, 1988, fund the deficit, and re-institute coverage through a carrier. Thereafter, the amount required from each participating employer was calculated actuarially and employers were advised of the amount they owed. All but ten of the participating employers paid their assessed share. The trust filed an action against the ten recalcitrant employers before the Court of Common Pleas of Lycoming County, Pennsylvania to collect their withdrawal assessments.

The ten employers then filed this action alleging various improprieties on the part of trust administrators. The trust filed a counterclaim for the unpaid withdrawal assessment.

Before the court are: (1) a motion for partial summary judgment on the counterclaim, filed by plaintiffs on April 20, 1990 (Record Document No. 78); (2) a motion for summary judgment by all defendants, filed June 17, 1990 (Record Document No. 98); and (3) a motion for summary judgment filed separately by defendant NEP on August 1, 1990 (Record Document No. 99).

Defendants' June 17th motion seeks judgment in their favor on plaintiffs' ERISA and RICO claims, the former on the ground that plaintiffs lack standing to pursue claims under ERISA, and the latter on the ground that plaintiffs have failed to establish the fundamental prerequisites for a RICO claim. We find in defendants' favor on both issues and will enter an order granting summary judgment in favor of all defendants on both federal claims. Because only pendent state claims remain, we will dismiss those claims so that they may more appropriately be resolved in state court, where the first action between these parties was filed.

DISCUSSION

A. Motion for summary judgment standard

  Summary judgment is appropriate if the "pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, 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." Fed.R.Civ.P.
56(c) (Emphasis supplied).

   . . [T]he plain language of Rule 56(c) mandates
  the entry of summary judgment, after adequate time
  for discovery and upon motion, against a party who
  fails 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. In such a situation,
  there can be `no genuine issue as to any material
  fact,' since a complete failure of proof
  concerning an essential element of the nonmoving
  party's case necessarily renders all other facts
  immaterial. ...

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