Opinion
No. 04 Civ. 2773 (NRB).
January 19, 2005
Geoffrey A. Mort, Esq., Kraus Zuchlewski LLP, New York, NY, Counsel for Plaintiff.
Barbara M. Roth, Esq., Torys LLP, New York, NY, Counsel for Defendant.
MEMORANDUM AND ORDER
On April 12, 2004, plaintiffs Alex H. Ladouceur, Ronald J. Ivans, and David J. Silvers brought this suit against defendants Credit Lyonnaise ("CL") and John L. Quinn pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(3). Plaintiffs allege that defendants reneged on oral promises concerning plaintiffs' retirement benefits and on an oral promise not to reduce plaintiffs' salaries. Plaintiffs filed an Amended Complaint ("Am. Compl.") on May 30, 2004 propounding theories of breach of fiduciary duty, promissory estoppel, breach of contract, and unjust enrichment. On August 3, 2004, defendants moved to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, defendants' motion is granted.
BACKGROUND
Plaintiffs were employees of Credit Lyonnais Rouse (USA) ("CLR"), a wholly owned subsidiary of CL. In 2000, CL began discussing with CLR employees the possibility of merging CLR into CL. At the end of 2000, CL effected the merger and plaintiffs became CL employees. Plaintiffs allege that before the merger, CL employees, including defendant John L. Quinn, CL's Senior Vice President/Human Resources and a Plan trustee, made several representations about salaries and benefits CL employees would receive if the merger were to transpire. Two of these representations are at issue here.First, defendants allegedly made oral promises that the plaintiffs' salaries would not be reduced after the merger. Second, defendants allegedly made oral promises to plaintiffs that plaintiffs' original CLR hire dates would be used for the calculation of retirement benefits if they became employees of CL. Employees who participate in the Credit Lyonnais Retirement Plan ("Plan") are entitled to retirement benefits that vary depending on their age, past salary level, years of service, and the reason for the termination of their employment. Even though CLR did not have a retirement plan, defendants allegedly promised CLR employees that their years of service at CLR would entitle them to accrued retirement benefits as if they had been working at CL during those years. According to the theory of plaintiffs' complaint, defendants' promise, if enforceable, would have entitled plaintiffs to large retirement benefits on reaching retirement age, even if they resigned immediately after commencing employment at CL. Under the Plan, participating employees receive yearly retirement benefits equal to 1.857% of their average salary over the most recent five years of employment, multiplied by their total years of service. Plaintiff Ladouceur, for example, began working for CLR in June, 1987, became a CL employee in January, 2001, and resigned from CL in June, 2001. Under plaintiffs' reading of the oral discussions, CL's alleged promise would entitle Ladouceur to accrued benefits for the entire time he worked for CLR, which, according to the complaint, would result in his receiving $100,000 for six months of service with CL. However, if the oral statements were construed to refer to vesting only, then Ladouceur would have, at most, one year of service with CL and would be entitled to a retirement benefit of less than $10,000 per year.
Plaintiffs contend further that defendants' representations convinced them not to resign as CLR merged into CL, facilitating the success of the merger. Following the merger, in January of 2001, CL reduced the salaries of plaintiffs Ladouceur and Ivans. Thereafter, within months of the merger, each of the plaintiffs resigned: Silvers in April, 2001; Ladouceur in June, 2001; and Ivans in August, 2001. According to plaintiffs' complaint, it was not until 2002 that they were informed about their retirement benefits and learned that CL did not plan to provide them the retirement benefits allegedly promised. There is no allegation that the defendants violated the written terms of the Plan; plaintiffs allege instead that defendants violated the terms of their oral representations.
DISCUSSION
I. Summary Judgment Standard
In considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), we accept as true all material factual allegations in the complaint,Atlantic Mutual Ins. Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196, 198 (2d Cir. 1992), and may grant the motion only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Still v. DeBuono, 101 F.3d 888, 891 (2d Cir. 1996) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In addition to the facts set forth in the complaint, we may also consider documents attached thereto and incorporated by reference therein, Automated Salvage Transp., Inc. v. Wheelabrator Envtl. Sys., Inc., 155 F.3d 59, 67 (2nd Cir. 1998), as well as matters of public record, Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 75 (2d. Cir. 1998), cert. denied, 525 U.S. 1103 (1999).
II. Promissory Estoppel under ERISA
Plaintiffs' second cause of action asserts that because plaintiffs "commenced employment with CLR with the expectation that they would receive a pension from the Plan based upon their hire dates and years of service with CLR," defendants are liable in promissory estoppel "pursuant to the federal common law of ERISA." Am. Compl. ¶¶ 51-52. ERISA, however, requires that pension plans be in writing. See 29 U.S.C. § 1102(a) (1) ("Every employee benefit plan shall be established and maintained pursuant to a written instrument."). This requirement reflects Congress's intent that "plan documents and the [summary plan descriptions] exclusively govern an employer's obligations under ERISA plans" in order to prevent the loss of "[p]redictability as to the extent of [their] future obligations" and consequent "substantial disincentives for even offering such plans." Moore v. Metropolitan Life Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988). See also Smith v. Dunham-Bush, Inc., 959 F.2d 6, 10 (2d Cir. 1992) (noting that the writing requirement protects employees from oral modifications and protects the plan's actuarial soundness). InPerreca v. Gluck, a plaintiff alleged that his employer orally promised that his pension benefits would accrue from an earlier date than that allowed under the express terms of the retirement plan. 295 F.3d 215, 217 (2d Cir. 2002). Perreca held, however, that "regardless of the accuracy of this allegation, plaintiffs' claim fails because oral promises are unenforceable under ERISA and therefore cannot vary the terms of an ERISA plan." Id. at 225 (citing Smith v. Dunham-Bush, Inc., 959 F.2d at 7, 10). As Moore held, "absent a showing tantamount to proof of fraud, an ERISA welfare plan is not subject to amendment as a result of informal communications between an employer and plan beneficiaries."Moore, 856 F.2d at 492.
For similar reasons, there is an exacting standard for promissory estoppel claims involving ERISA plans. The Seventh Circuit, reasoning that ERISA requires pension plans be established in writing, has held that "principles of estoppel are inapplicable to oral assertions in ERISA matters." Frahm v. Equitable Life Assur. Soc. of U.S., 137 F.3d 955, 961 (7th Cir. 1998) (citing Russo v. Health, Welfare Pension Fund, 984 F.2d 762 (7th Cir. 1993)). The Second Circuit has not wholly rejected the possibility of a promissory estoppel claim under ERISA, but does require "extraordinary circumstances" in addition to the four basic elements of promissory estoppel to go forward. Devlin v. Transp. Comms. Int'l Union, 173 F.3d 94, 101-102 (2d Cir. 1999). Without providing detailed guidance on what circumstances are "extraordinary," Devlin explained that a false promise of severance benefits used to induce an employee to retire might rise to the level of "extraordinary," but a promise that was not "used to intentionally induce any particular behavior" on the part of the employee does not. Id. at 102 (citingSchonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 78 (2d Cir. 1996)).
Here, plaintiffs do not argue that defendants made false promises to induce their resignations. Instead, plaintiffs argue that they "relied to their determinant [sic] on [defendants'] representations by deciding to work for CL." Am. Compl. ¶ 51. Inducing a current employee to continue working for his employer or its successor, however, does not rise to the level of "extraordinary circumstances" required to proceed on a promissory estoppel claim under ERISA. Besides failing to establish that their reliance on defendants' promises about their retirement benefits was extraordinary, plaintiffs fail to explain how it caused an injury at all. An injury caused by the plaintiff's reliance is a basic element of promissory estoppel, Schonholz, 87 F.3d at 79, and plaintiffs have failed to explain how they were injured by their reliance on defendants' ERISA promises, given that they voluntarily resigned before they ever learned of the alleged misrepresentation. For the foregoing reasons, we grant defendants' motion to dismiss Count Two.
III. Breach of Fiduciary Duty under ERISA
Plaintiffs frame their first cause of action as one for defendants' breach of fiduciary duties under 29 U.S.C. §§ 1104 and 1132(a)(3) and seek "equitable relief in their [sic] form of disgorgement of profits in an amount equal to the value of the pension plaintiffs would have received from the Plan if their hire dates and years of service with CLR were used as the basis for their pension benefit calculations." Am. Compl. ¶¶ 51-52. Plaintiffs characterize the relief they seek as "restitution in the form of a constructive trust created to secure funds which are rightfully theirs and which remain in Defendants' possession." Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Dismiss Their Amended Complaint ("Plaintiff Mem.") at 15-16.
A plaintiff may bring an ERISA action pursuant to 29 U.S.C. § 1132(a) (1) (B) to recover benefits under a plan, Smith v. Dunham-Bush, Inc., 959 F.2d 6, 8, or under 29 U.S.C. § 1132(a) (3) to obtain "appropriate equitable relief." Plaintiffs appear to have pled a claim in equity under § 1132(a)(3) in an attempt to avoid the rule against oral modification of ERISA plans. This attempt is unavailing. Plaintiffs' characterization of defendants' alleged promises as a breach of fiduciary duty does not alter the fact that the promises were oral modifications to an ERISA plan. The analysis is therefore similar to that set out above; an ERISA plan is not subject to modification by informal communications "absent a showing tantamount to proof of fraud," Moore, 856 F.2d at 492, which has not been pled here. Nonetheless, plaintiffs would have us recognize a claim for breach of fiduciary duty under ERISA for a fiduciary's informal promise to modify a retirement plan, and award a "constructive trust" or "disgorgement of profits . . . equal to the value of the pension they would have received." Am. Compl. at 13. Such a holding would eviscerate the rule against oral modification by allowing plaintiffs to recover the benefit of any alleged oral modification of an ERISA plan made by a fiduciary simply by pleading a "breach of fiduciary duty" theory. Accordingly, we agree with defendants that Count One fails to state a claim upon which relief can be granted.
Furthermore, while plaintiffs claim to seek equitable relief under § 1132(a) (3), the relief they seek is not equitable relief that is available under that section. In Great-West Life Annuity Ins. Co. v. Knudson, the Supreme Court explained that the "appropriate equitable relief" available under § 1132(a) (3) includes only those remedies available in equity in the days of the divided bench. 534 U.S. at 204, 204 (2002). But restitution only lies in equity when a plaintiff seeks a judgment restoring to the plaintiff particular funds or property that are identified as belonging in good conscience to the plaintiff and are in the defendant's possession, not a judgment "imposing a merely personal liability upon the defendant to pay a sum of money." Id. at 213, 214. The amount of money a retirement plan will pay a retired employee depends on whether the employee reaches retirement age and how long he lives afterward. It is untenable to argue that an indeterminate stream of payments to which plaintiffs are not yet entitled constitutes particular funds that belong to the plaintiffs and are in CL's possession. In short, plaintiffs seek a legal remedy when only equitable remedies are available under § 1132(a) (3). For the foregoing reasons, we grant defendants' motion to dismiss Count One.
Defendants also argue that Counts One and Two should be dismissed as time-barred. We do not address this issue because we find that plaintiff has failed to state a claim upon which relief can be granted in Counts One and Two.
IV. Common Law Contract Claims
The third cause of action asserts that plaintiffs Ladouceur and Ivans entered into an oral contract with CL under which they were to receive base salaries that would not be reduced without their consent, and that CL breached by lowering their salaries. The fourth cause of action asserts that, after CL reduced the salaries of Ladouceur and Ivans, CL was unjustly enriched when it received their services at the new, reduced salary level from January, 2001, until they resigned in mid 2001. Am. Compl. ¶¶ 61 et seq. Plaintiffs Ladouceur and Ivans contend that defendants are therefore liable under the common law doctine of quantum meruit for an amount that appears to be the difference between the pre- and post-reduction salaries for the period between the salary reductions and their resignations. Id.
While a district court may exercise supplemental jurisdiction over state law claims, 28 U.S.C. § 1367(c) provides that a court "may decline to exercise supplemental jurisdiction" if "the district court has dismissed all claims over which it has original jurisdiction." Having dismissed the ERISA claims, there is no longer a basis pled in the complaint to support federal subject matter jurisdiction. Even assuming diversity of citizenship, the state law claims in Counts Three and Four fall short of the jurisdictional requirement of $75,000. 28 U.S.C. § 1332. Accordingly, we decline to exercise supplemental jurisdiction over Counts Three and Four and grant defendants' motion to dismiss them.
For Counts Three and Four, Ladouceur seeks $16,918 and Ivans seeks $11,935.
CONCLUSION
For the reasons stated above, defendants' motion to dismiss is granted.
IT IS SO ORDERED.