McGUIGAN v. LOCAL 295/LOCAL 851 I.B.T. EMPLOYER GROUP PENSION PLAN No. 11-CV-2004 (JG) (MDG).
JOHN MCGUIGAN, Plaintiff, v. LOCAL 295/LOCAL 851 I.B.T. EMPLOYER GROUP PENSION PLAN, LOCAL 295/LOCAL 851 I.B.T. EMPLOYER GROUP PENSION TRUST FUND, Defendants.
United States District Court, E.D. New York.
August 4, 2011.
THE LAW OFFICE OF JOSEPH D. MANNO, Staten Island, New York, By: Joseph D. Manno , Attorney for Plaintiff.
MORGAN, LEWIS & BOCKIUS LLP, New York, By: Donald Havermann and Melissa D. Hill , Attorneys for Defendants.
MEMORANDUM AND ORDER
JOHN GLEESON, District Judge.
Plaintiff John McGuigan, a Teamster, worked for 25 years with the expectation that, upon his retirement in 2009 at approximately age 42, he would receive an early retirement pension benefit for the rest of his life. He applied for his pension on June 5, 2009, only to discover that the early retirement benefit had been eliminated. This was bad news for McGuigan, as it meant that he would have to wait until reaching the age of 65 to receive his pension benefit. Making matters worse, McGuigan learned that if he had applied for his pension just a little sooner — by May 20, 2009 — he would have indeed received the early retirement benefit he expected to receive.
McGuigan subsequently brought this action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and the common law, seeking the retirement benefit to which he claims he was entitled as a participant in his employee pension benefit plan, Defendant Local 295/Local 851 I.B.T. Employer Group Pension Trust Fund (the "Plan").
For the reasons stated below, although McGuigan's circumstances may be unfortunate and deserving of sympathy, his claims lack legal merit. The elimination of his early retirement benefit was part of an effort by his plan's trustees to rehabilitate a plan that was in critical financial condition, an effort that was not merely authorized by law but required by it, and McGuigan received sufficient notice of the benefit's elimination. Accordingly, Defendants' motion to dismiss is granted.
A. The Facts
On May 14, 1984, McGuigan began his employment with Schenker Bax Global, a company located in John F. Kennedy Airport in Queens.
McGuigan did not file his pension application until June 5, 2009. Around the same time, McGuigan received a notice from Defendants dated June 1, 2009 informing him of certain changes in the Plan, including the elimination of the 25-Year Service Pension, an early retirement subsidy. As the June 1, 2009 notice explained, Plan participants who applied for their pensions after May 20, 2009 and began to receive pension benefits after July 1, 2009 would not receive the 25-Year Service Pension. McGuigan therefore lost his entitlement to this early retirement subsidy as a result of having filed his pension application after May 20, 2009.
On April 25, 2011, McGuigan filed his complaint in the instant action, alleging that Defendants violated their fiduciary duties and disclosure obligations under ERISA by failing to inform him of the change in benefits under the Plan and the cut-off date for obtaining the pre-change benefits. Id. ¶¶ 32-35. McGuigan also asserted common law claims based on the same alleged misconduct by Defendants, including a violation of McGuigan's "property rights," breach of contract, breach of fiduciary duty, and negligence. Id. ¶¶ 27-31.
A. The Standard of Review
On a motion to dismiss for failure to state a claim upon which relief can be granted, "the issue is not whether [the] plaintiff is likely to prevail ultimately, but whether [he] is entitled to offer evidence to support the claims." Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000) (quotation marks and brackets omitted). Defendants' Rule 12(b)(6) motion thus tests the legal, not the factual, sufficiency of McGuigan's complaint. In ruling on this motion, I must accept the factual allegations in the complaint as true. Erickson v. Pardus, 551 U.S. 89, 94 (2007). I give no effect, however, to "legal conclusions couched as factual allegations." Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007).
In order to survive a motion to dismiss, a complaint "must contain sufficient factual matter . . . to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The plaintiff therefore is obligated to "provide the grounds of his entitlement to relief" with "more than labels and conclusions," and "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (quotation marks and brackets omitted).
B. The Motion To Dismiss
Defendants assert several grounds for dismissing McGuigan's complaint, including that McGuigan's ERISA claims fail to state a claim upon which relief can be granted, his common law claims are preempted by ERISA, and he has failed to name the appropriate defendants. I address these contentions in turn below.
1. The ERISA Claims
McGuigan's complaint does not invoke specific provisions of ERISA but appears to allege that Defendants (1) violated the fiduciary duties created by ERISA,
a. Applicable Causes of Action Under ERISA
Before analyzing the nuances of these claims, I address whether ERISA permits the type of action McGuigan seeks to bring: an action by an individual participant in a covered plan, alleging breach of fiduciary duty and seeking monetary damages — specifically, $5,000,000 in compensatory damages, as well as punitive damages, Compl. ¶¶ 36-37. A participant in an ERISA-covered pension plan who believes he has borne the brunt of an ERISA violation may bring a civil action on one or more of the following grounds, depending on the circumstances: (1) to recover benefits due to him under the terms of his plan, ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B); (2) "for appropriate relief" under § 409(a) of ERISA, which provides for the personal liability of a plan fiduciary "who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary," and further subjects such fiduciary to "such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary," ERISA §§ 502(a)(2) & 409(a), 29 U.S.C. §§ 1132(a)(2) & 1109(a); or (3) to enjoin any act or practice which violates any provision of ERISA or the terms of the plan, or to obtain other appropriate equitable relief to redress such violations or to enforce any provisions of ERISA or the terms of the plan, ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3).
Despite the availability of damages to an individual plan participant under § 502(a)(1)(B) of ERISA, that provision appears ill-suited to McGuigan's case. "A claim under [§ 502(a)(1)(B)], in essence, is the assertion of a contractual right under a benefit plan," and in order to enforce the terms of the plan under that section, "the participant must first qualify for the benefits provided in that plan." Strom v. Goldman, Sachs & Co., 202 F.3d 138, 142 (2d Cir. 1999) (quotation marks omitted), abrogated on other grounds by Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). By the time McGuigan applied for his pension on June 5, 2009, he was no longer contractually entitled to the 25-Year Service Pension benefit in light of the changes effected by the adoption of the rehabilitation plan. He therefore cannot bring his action pursuant to § 502(a)(1)(B).
The § 502(a)(2) avenue of relief is likewise unavailable to McGuigan in light of the nature of his lawsuit. In order to bring a breach of fiduciary duty action pursuant to § 502(a)(2) of ERISA, a plan participant is required to sue "in a representative capacity on behalf of the plan as a whole." Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 (1985). The source of this requirement is ERISA's governing purpose; as the Supreme Court stated in Massachusetts Mutual Life Insurance Co. v. Russell, "[a] fair contextual reading of the statute makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary." Id. at 142. Here, McGuigan makes no effort to align his cause with that of other Plan participants or beneficiaries or to suggest that Defendants' misconduct harmed the Plan as a whole.
Section 502(a)(3) of ERISA, therefore, is McGuigan's sole recourse. This section does not require a plan participant to sue in a representative capacity on behalf of the plan. See, e.g., Boyce-Idlett v. Verizon Corporate Servs. Corp., No. 06 Civ. 975, 2007 WL 2589445, at *14 (S.D.N.Y. Aug. 30, 2007). As the Supreme Court stated in Varity Corp. v. Howe, 516 U.S. 489, 510 (1996), "[t]he words of subsection (3) — `appropriate equitable relief' to `redress' any `act or practice which violates any provision of this title' — are broad enough to cover individual relief for breach of a fiduciary obligation." Yet an individual participant proceeding under this section may not seek any and all forms of relief; monetary damages, for example, are not available. See Bell v. Pfizer, Inc., 626 F.3d 66, 73 (2d Cir. 2010) (section 502(a)(3) "is restricted in the kinds of relief available"); Wilkins v. Mason Tenders Dist. Council Pension Fund, 445 F.3d 572, 578-79 (2d Cir. 2006) ("Section 502(a)(3) has been characterized as a `catch-all' provision which normally is invoked only when relief is not available under § 502(a)(1)(B). . . . The provision authorizes solely equitable relief, and under the Supreme Court's decision in Great-West [Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002)], this means that money awards are available in suits brought under § 502(a)(3) only in very limited circumstances." (citations and quotation marks omitted)); Shamoun v. Bd. of Trustees, No. 05-CV-5730, 2007 WL 2461921, at *4 (E.D.N.Y. Aug. 24, 2007) ("The Supreme Court has interpreted section 502(a)(3) to contemplate only the type of relief typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages). Plaintiff's request for monetary damages in no way qualifies as `equitable relief' under § 1132(a)(3)." (quotation marks and citation omitted)). The Supreme Court recently reiterated this restriction in Cigna Corp. v. Amara, 131 S.Ct. 1866 (2011), stating that "[w]e have interpreted the term `appropriate equitable relief' in § 502(a)(3) as referring to those categories of relief that, traditionally speaking (i.e., prior to the merger of law and equity) were typically available in equity." Id. at 1878 (quotation marks omitted).
Although McGuigan initially requested millions of dollars in compensatory, actual and punitive damages in his complaint, he has backed off that request in his opposition papers in an attempt to comply with the dictates of § 502(a)(3) and has re-cast his requested relief as "restitutive redress." Manno Affirmation ¶ 8 (elaborating that McGuigan "merely wants to be put in the same position that he should have been in had the defendants properly informed him of the deadline to submit his retirement papers and the consequences of failing to submit those papers after the deadline"). He therefore appears to have seized on the Supreme Court's statement in Cigna that equitable estoppel, which "operates to place the person entitled to its benefit in the same position he would have been in had the [fiduciary's] representations been true," Cigna, 131 S. Ct. at 1880 (quoting J. Eaton, Handbook of Equity Jurisprudence § 62, at 176 (1901)), is one of the remedies available under § 502(a)(3).
Even assuming arguendo that McGuigan's action is legitimately in pursuit of "equitable relief," I am not persuaded that he has stated a claim under § 502(a)(3) of ERISA for the reasons stated below.
b. The Notice Requirements
Defendants argue that their compliance with the Pension Protection Act of 2006
As amended by the PPA, ERISA requires the following notification regarding a multiemployer plan's critical status:
Id. § 1085(b)(3)(D).
There is an additional notice requirement applicable to reductions to a plan's adjustable benefits. ERISA provides:
29 U.S.C. § 1085(e)(8)(C)(i)-(ii).
Defendants provided participants and beneficiaries of the Plan, including McGuigan, with a "Notice of Critical Status" regarding the Plan dated October 26, 2008 ("October 2008 Notice"). This notice identified the grounds for the Plan's actuary's determination that the Plan was in critical status for the plan year beginning July 1, 2008, and further stated: "[t]he law permits pension plans to reduce, or even eliminate, benefits called `adjustable benefits' as part of a rehabilitation plan. If the trustees of the plan determine that benefit reductions are necessary, you will receive a separate notice in the future identifying and explaining the effect of those reductions." Ex. 1 to Declaration of Melissa D. Hill (June 10, 2011), at 1; see also id. (checking the box for "[e]arly retirement benefit or retirement-type subsidy" as one of the types of adjustable benefit subject to reduction or elimination). The notice also specified that "the reductions may only apply to participants and beneficiaries whose benefit commencement date is on or after October 26, 2008." Id. McGuigan's complaint makes no mention of this notice, but I take judicial notice of its distribution to the Plan's participants in light of its filing with the U.S. Department of Labor, see http://www.dol.gov/ebsa/pdf/c-notice11070807.pdf, and I accordingly take it into consideration for purposes of this Rule 12(b)(6) motion.
Defendants followed up the October 2008 Notice with a "Notice of Reduction in Adjustable Benefits and Future Accruals" dated June 1, 2009 ("June 2009 Notice"), Ex. 2 to Hill Decl., which, as a notice of reduction to adjustable benefits, is subject to the requirements of § 1085(e)(8)(C) quoted above. McGuigan admits that he received the June 2009 Notice. See Compl. ¶ 23 ("The plaintiff, John McGuigan, had no way of knowing of the May 20, 2009, cut-off date: the `Notice to the Participants in the Local 295/Local 851 I.B.T. Employer Group Pension Plan' informing members of the change in benefits is dated June 1, 2009, twelve days after the May 20
The June 2009 Notice states, inter alia, that "[t]he purpose of this communication is to give you 30-days' notice that, as of July 1, 2009, participants and beneficiaries will be subject to the Preferred Schedule [one of two schedules in the rehabilitation plan] and will have their benefits changed as described below: . . . The replacement of the 25-Year Service Pension .. . ."
Defendants contend that this notice satisfied the requirements of 29 U.S.C. § 1085(e)(8)(C) and that they therefore cannot be held liable to McGuigan under ERISA. Specifically, they point to the fact that the June 2009 Notice expressly stated that "it was giving `30-days notice that, as of July 1, 2009, participants and beneficiaries will be subject to' the benefit changes described therein, which included the elimination of the 25-Year Service Pension." Defendants' Br. at 9-10 (quoting June 2009 Notice). They further argue that if McGuigan had simply followed the advice he received from them in separate communications — i.e., to apply for his pension three months before his planned retirement date of July 1, 2009 — he would have been grandfathered into the 25-Year Service Pension benefit and would have had no need to bring the instant action.
The question of whether the June 2009 Notice complied with ERISA is "simply one of statutory interpretation," and requires giving "the plan administrators no deference." Wilkins, 445 F.3d at 581. In addressing that question, I conclude that the June 2009 Notice was not in violation of the notice requirements imposed by 29 U.S.C. § 1085(e)(8)(C), as it gave notice to the appropriate parties, including Plan participants, of the elimination of the 25-Year Service Pension 30 days in advance of the effective date of such elimination, and provided them with sufficient information to understand the effect of that change and apprise them of their rights and remedies in connection with the change. McGuigan's essential complaint lies not with the content of the notice but with Defendants' failure to explicitly warn participants like him of the importance of applying for their pensions prior to May 20, 2009. Unfortunately for McGuigan, that complaint does not support a § 502(a)(3) claim of violation of ERISA's notice requirements. In addition, Defendants did not violate ERISA by adopting a rehabilitation plan pursuant to the PPA and withholding the rehabilitation plan's effective date from affected Plan participants until legally required to disclose it.
c. Other Bases for Holding Defendants Liable
McGuigan's complaint also asserts that Defendants breached their fiduciary duties to him as a Plan participant by failing to alert him of the May 20, 2009 cut-off date in advance. Implicit in the claim is an allegation that Defendants made material misrepresentations or omissions in their communications with McGuigan regarding the retirement timeline he would need to follow in order to remain eligible for the 25-Year Service Pension. He alleges that all he was told, apart from the June 2009 Notice, was that he should apply for his pension three months in advance of retirement. By implication, then, the material omissions he attributes to Defendants are: (1) not telling him that there was a specific reason to apply early for his pension — namely, to preserve his eligibility for early retirement benefits; and (2) not revealing the specific May 20, 2009 cut-off date and its significance to him early enough for him to act on that information.
This claim has no merit. Defendants' disclosure obligations are established by statute. The PPA required notice that the Plan was certified to be in critical status and that, inter alia, early retirement benefits could be eliminated as a result. The October 2008 Notice complied with that obligation. As described above, the other relevant disclosure obligation, which is set forth in 29 U.S.C. § 1085(e)(8)(C), was also fulfilled here, and McGuigan does not contend otherwise.
In his papers in opposition to the motion, McGuigan essentially concedes that his claim does not rest on the terms of the Plan or a claimed violation of Defendants' statutory notification obligations. "Rather," he contends, "the focus of the plaintiff's plaint is on the actions of the defendants in keeping him in the dark, so to speak, as to just when he should have submitted his retirement papers in order to preserve his right to receive [early] retirement benefits." Manno Affirmation ¶ 7. This amounts to a complaint about the content of the law, not about Defendants' compliance with it. As Defendants properly observe, the chief purpose of the PPA was to require the trustees of pension plans in critical status to take steps to reduce payouts of adjustable benefits in order to rehabilitate the plans financially. The obligation McGuigan would impose on such trustees — to ensure that all plan participants who are eligible for such benefits are explicitly notified of their need to apply for them — is in tension with that purpose. The notifications discussed above, which Defendants indisputably provided, are all that Congress required.
Finally, any suggestion that Defendants breached their obligation to "discharge [their] duties with respect to [the Plan] solely in the interest of the participants and beneficiaries and . . . for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan," 29 U.S.C. § 1104(a)(1)(A), is belied by the fact that Defendants' elimination of the 25-Year Service Pension was part of a rehabilitation plan they were legally bound to adopt in order to extricate the Plan from its financial distress.
2. The Common Law Claims
Defendants contend that the common law claims McGuigan asserts are all preempted by ERISA. As recited above, McGuigan's common law claims arise out of the same alleged misconduct as do his ERISA claims, i.e., Defendants' failure to timely notify McGuigan of the cut-off date for preserving his entitlement to early retirement benefits. Specifically, McGuigan alleges that Defendants' failure "to inform . . . [him] of the change in retirement benefits and of the cut-off date to preserve his benefits at the pre-change level," Compl. ¶ 27, constituted: (1) a violation of McGuigan's "property rights," id. ¶ 28; (2) a breach of Defendants' "contractual obligations to the plaintiff under the subject Employer Group Pension Plan/Employer Group Pension Trust Fund," id. ¶ 29; (3) "a breach of [Defendants'] fiduciary responsibility to the plaintiff to look out for the rights and interests of the plaintiff regarding his retirement and pension rights and interests," id. ¶ 30; and (4) "negligence against the plaintiff," id. ¶ 31.
"Any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004); see also id. at 208 ("ERISA includes expansive pre-emption provisions, see ERISA § 514, 29 U.S.C. § 1144, which are intended to ensure that employee benefit plan regulation would be exclusively a federal concern." (quotation marks omitted)). In Aetna Health Inc. v. Davila, the Supreme Court held that the state law claims pled in that case were preempted by ERISA because the duties imposed by the state law provisions "do not arise independently of ERISA or the plan terms," "interpretation of the terms of [plaintiffs'] benefit plans forms an essential part of their [state law] claim and [state] liability would exist here only because of [defendants'] administration of ERISA-regulated benefit plans." Id. at 212, 213. The Court has likewise found state claims preempted in the analogous legal context of Labor Management Relations Act ("LMRA") actions where the duties and rights created by the state law causes of actions derived from the terms of the federally-regulated agreement at issue in those cases. See, e.g., United Steelworkers of Am. v. Rawson, 495 U.S. 362, 371 (1990) (state tort action based on alleged negligence in the inspection of a mine preempted by LMRA because duty to inspect the mine arose solely out of the collective-bargaining agreement); Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 217 (1985) (state tort of bad-faith handling of insurance claim preempted by LMRA because "duties imposed and rights established through the state tort . . . derive[d] from the rights and obligations established by the contract").
Despite McGuigan's attempt to base his common law claims in non-ERISA legal terrain ranging from negligence to property, each of these claims derives directly from the Plan, its administration, and the rights and benefits it affords its participants. These claims also are based on the same facts and supported by the same allegations that underlie the ERISA claims. Accordingly, I conclude that these claims are preempted by ERISA and therefore dismiss them.
3. Whether To Permit McGuigan To Amend His Complaint in Order To Add the Plan Fiduciaries As Defendants
As an additional ground for dismissal, Defendants point to McGuigan's failure to name as defendants the fiduciaries of the Plan, such as the plan administrator and plan sponsor. See ERISA §§ 3(21)(A), 29 U.S.C. §§ 1002(21)(A) (defining a plan fiduciary as, inter alia, a person who "exercises any discretionary authority or discretionary control respecting management of such plan" or "has any discretionary authority or discretionary responsibility in the administration of such plan"). As the Supreme Court stated in Harris Trust & Savings Bank v. Salomon Smith Barney Inc., "§ 502(a)(3) admits of no limit (aside from the `appropriate equitable relief' caveat . . .) on the universe of possible defendants. Indeed, § 502(a)(3) makes no mention at all of which parties may be proper defendants — the focus, instead, is on redressing the act or practice which violates any provision of ERISA Title I." 530 U.S. 238, 246 (2000) (quotation marks and brackets omitted). Although McGuigan could have named the Plan's trustees as defendants,
For the reasons stated above, Defendants' motion to dismiss is granted.
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