Opinion
No. 00 CIV 9649 (JGK)
December 20, 2002
OPINION AND ORDER
The defendants have filed a, motion to dismiss the Ninth and Tenth Causes of Action of the First Amended Complaint ("Complaint") pursuant to Fed.R.Civ.P. 12(b)(6).
On a motion to dismiss, the allegations in the Complaint are accepted as true, Grandon v. Merrill Lynch Co., 147 F.3d 184, 188 (2d Cir. 1998), and all reasonable inferences must be drawn in favor of the plaintiff. Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). Therefore, the defendants' present motion should only be granted if it appears that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. See Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002); Conley v. Gibson, 355 U.S. 41; 45-46 (1957); Grandon, 147 F.3d at 188; Goldman, 754 F.2d at 1065.
In deciding the motion, the Court may consider documents that are referenced in the Complaint, documents that the plaintiff relied on in bringing suit and that are either in the plaintiff's possession or the plaintiff knew of when bringing suit, or matters of which judicial notice may be taken. Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); see also Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993);, Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991); Vtech Holdings Ltd. v. Lucent Techs., Inc., 172 F. Supp.2d 435, 437 (S.D.N.Y. 2001).
A.
The Ninth Cause of Action alleges that the Plan amendment adopted on December 27, 1999, retroactive to January 1, 1997, was in violation of the Internal Revenue Code, 26 U.S.C. § 401(a)(4), and the applicable Regulation, 26 C.F.R. § 1.401(a)(4), which prohibit discrimination in contributions or benefits. (Compl. ¶¶ 85-90.) The plaintiff contends that the amendment was discriminatory because it allowed defendant Barbara Bergreen to accrue benefits while at the same time prohibiting the plaintiff and employee Jerome A. Siegel from doing the same. (Compl. ¶¶ 86-87, 89.) The plaintiff further alleges that the Plan fiduciaries breached their fiduciary duties by administering the Plan "in violation of the Internal Revenue Code and the terms of the Plan." (Compl. ¶ 90.)
The defendants deny that the Plan is in violation of the IRC. To support this claim, the defendants have submitted an IRS determination letter allegedly confirming the Plan's qualified status. However, the determination letter is not properly before the Court on a motion to dismiss and thus cannot be considered unless the Court transforms the motion into a motion for summary judgment, which the Court declines to do. See Friedl v. City of New York, 210 F.3d 79, 83-84 (2d Cir. 2000);Hayden v. County of Nassau, 180 F.3d 42, 54 (2d Cir. 1999); Fonte v. Bd. of Managers of Cont'l Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988)
However, the defendants correctly argue that there is no private right of action for an alleged violation of Section 401, and thus the plaintiff has no claim based on the alleged failure of the Plan to comply with Section 401. See Reklau v. Merchants Nat'l Corp., 808 F.2d 628, 631 (7th Cir. 1986) ("[T]he district court's refusal to find an implied cause of action under § 401 of the I.R.C. was proper."); see also Sirna v. Prudential Sec., Inc., 95 Civ. 8422, 95 Civ. 9016, 96 Civ. 4534, 1997 WL 53194, at *3 (S.D.N.Y. Feb. 10, 1997) (collecting cases).
It is unnecessary to reach the defendants' alternative argument that the plaintiff cannot make a successful discrimination claim because, as a highly compensated employee, he is not protected by the non-discrimination terms of the IRC. Cf. Treas. Reg. § 1.401(a)(4)-1(a).
The plaintiff's attempt to recast his claim as a breach of fiduciary duty also fails. The Plan itself does not require compliance with the IRC's non-discrimination requirement and the Sections of the Plan cited by the plaintiff are inapposite. The plaintiff's reliance on Esden v. Bank of Boston, 229 F.3d 154 (2d Cir. 2000), is also misplaced. InEsden, the Second Circuit Court of Appeals held that a cash balance plan that guarantees that interest will be credited to a hypothetical account at a minimum rate violates ERISA when it assumes a lower rate while projecting the account's value out to normal retirement age in calculating the lump-sum equivalent of a terminating vested participant's accrued benefit. Id. at 157. The defendants are correct that Esden offers no support to the plaintiff's claim that the defendants breached their fiduciary duties by adopting the Plan amendment in alleged violation of Section 401. As the Court stated in its earlier opinion and order, "the act of amending a pension plan does not trigger ERISA's fiduciary provisions." Suozzo v. Bergreen, 00 Civ. 9649, 01 Civ. 7258, 2002 WL 1402316, at *11 (S.D.N.Y. June 27, 2002) (quoting Lockheed Corp. v. Spink, 517 U.S. 882, 891 (1996)). The issue that the plaintiff seeks to challenge in the Ninth Cause of Action is the adoption of the 1999 Amendment which the plaintiff alleged was in violation of Section 401 and its applicable regulations. The plaintiff cannot sustain a claim for breach of fiduciary duties when the defendants' challenged action triggered no such duties under ERISA.'
B.
The Tenth Cause of Action alleges that Barbara Bergreen, as a "party in interest", knowingly participated in the adoption and funding of the December 27, 1999 Amendment so that the Plan would pay her benefits in violation of the antidiscrimination provision of the IRC and the terms of the Plan. (Compl. ¶¶ 91-93.) Because the Tenth Cause of Action is wholly derivative of the Ninth Cause of Action it must also be dismissed.
CONCLUSION
For the reasons explained above, the Ninth and Tenth Causes of Action in the plaintiff's First Amended Complaint are dismissed.
SO ORDERED.
The defendants have moved for reconsideration or certification for interlocutory appeal of this Court's opinion and order dated June 25, 2002 which granted in part and denied in part the defendants' motion to dismiss.
The standards for granting a motion for reconsideration or reargument are well established. In deciding a motion for reconsideration pursuant to Local Civil Rule 6.3, the Court applies the same standards as those governing former Local Civil Rule 3(j). United States v. Letscher, 83 F. Supp.2d 367, 382 (S.D.N.Y. 1999) (collecting cases). The moving party is required to demonstrate that the Court overlooked the controlling decisions or factual matters that were put before the Court in the underlying motions. Nakano v. Jamie Sadock, Inc., 98 Civ. 0515, 2000 WL 1010825, at *1 (S.D.N.Y. July 20, 2900); Walsh v. McGee, 918 F. Supp. 107, 110 (S.D.N.Y. 1996); In re Houbigant, 914 F. Supp. 997, 1001 (S.D.N.Y. 1996). The rule is "narrowly construed and strictly applied so as to avoid repetitive arguments on issues that have been considered fully by the Court." Walsh, 918 F. Supp. at 110; see also Nakano, 2000 WL 1010825, at *1; United States v. Mason Tenders Dist. Council of Greater New York, 909 F. Supp. 882, 889 (S.D.N.Y. 1995).
The Court will grant reconsideration and reargument because it is apparent that with respect to one aspect of the opinion the Court was in error. However, having reconsidered the opinion and order the Court's ultimate decision remains unchanged.
First, the defendants contend that the Court erred by relying on Rev. Proc. 94-13 to determine whether the 1989 Restatement complied with Alternative IID. Compliance with Alternative IID would have obviated the need to comply with the notice requirement of ERISA Section 204(h). The Defendants argue that Rev. Proc. 94-13 applied solely to an irrelevant 1993 tax bill and not to the Tax Reform Act of 1986 pursuant to which Alternative IID was proposed by the Internal Revenue Service as a means of compliance. The defendants correctly point out that the plaintiff never relied on Rev. Proc. 94-13. However, what the defendants fail to point out is that the defendants introduced Rev. Proc. 94-13 into the arguments by relying on it as the most recent Revenue Procedure extending the effective date of the Revenue Rulings for compliance with the Tax Reform Act of 1986. ( See Defendants' Memorandum in Support of Motion to Dismiss at 7, n. 2; Affidavit of Edward Reich dated Mar. 16, 2001 Ex. E-6.) In any event, the parties now agree that Rev. Proc. 94-13 is not relevant to the effectiveness of the adoption of the 1989 Restatement and, to the extent that the Court relied on the Procedure, that was error.
However, there are still issues of fact as to the compliance of the 1989 Restatement with Alternative IID. Those issues include whether any distribution to Mr. Bergreen precluded the use of Alternative IID. That is an issue that cannot be resolved on this motion. Moreover, the Court's denial of the motion to dismiss was not based solely on Rev. Proc. 94-13. Rather, it was based on a reading of IRS Notice 88-131 and the degree to which benefits for the plaintiff were required to accrue beyond the $48,000 limit established in the Restatement. While the defendants argue that the $48,000 limit was consistent with Alternative IID as a means to bring the Plan into compliance with the Tax Reform Act Amendments, the plaintiff denies that is true. The Court cannot resolve that dispute on this motion to dismiss. The defendants argue that Scott v. Admin. Comm. of Allstate Agents Pension Plan, 113 F.3d 1193 (11th Cir. 1997), stands for the proposition that Plans are given flexibility to comply with the Tax Reform Act. But the Court was well aware of Scott and cited it. Scott deals with the sufficiency of notice under Model Amendment 3 and not the compliance of a Plan with Alternative IID and is not controlling authority that the Court overlooked.
The defendants also argue that the Court should determine that any claims relating to the 1988 Amendment are barred by the statute of limitations in ERISA Section 413. The Court considered this argument and rejected it. As the Court explained, the plaintiff's complaint is not wholly clear but neither are the defendants' arguments. Construing the plaintiff's Second Cause of Action as a claim for benefits under ERISA, which is consistent with some of the language in that Cause of Action, including the language which claims that the "decision of the Administrative Committee was arbitrary and capricious," (Am. Compl. ¶ 51), the cause of action would be timely based on the date that the Committee denied the plaintiff's claim for benefits. That is perfectly consistent with the decision in DeVito v. Pension Plan, 975 F. Supp. 258, 264-65 (S.D.N.Y. 1997), on which the defendants rely.
The defendants also ask the Court to certify these issues for interlocutory appeal. That motion is denied.
28 U.S.C. § 1292(b) provides that a district court may certify an interlocutory order for appeal if it is of the opinion that (1) the order "involves a controlling question of law"; (2) as to which there is substantial ground for difference of opinion"; and (3) "that an immediate appeal of the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). The determination of whether § 1292(b) certification is appropriate under these standards lies within the discretion of the district court. See, e.g., Ferraro v. Sec'y of U.S. Dep't of Health Human Servs., 780 F. Supp. 978, 979 (E.D.N.Y. 1992) (collecting cases and citations)
Interlocutory appeals under Section 1292(b) are an exception to the general policy against piecemeal appellate review embodied in the final judgment rule, and only "exceptional circumstances [will] justify a departure from the basic policy of postponing appellate review until after the entry of a final judgment." Coopers Lybrand v. Livesay, 437 U.S. 463, 475 (1978); see also Flor v. Bot Fin. Corp., 79 F.3d 281, 284 (2d Cir. 1996) (per curiam) (collecting cases). Because piecemeal litigation is generally discouraged, the Court of Appeals has repeatedly emphasized that a district court is to "exercise great care in making a § 1292(b) certification." Westwood Pharm., Inc. v. Nat'l Fuel Gas Distrib. Corp., 964 F.2d 85, 89 (2d Cir. 1992) see also Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21, 25 (2d Cir. 1990) ("[T]he power to grant an interlocutory appeal must be strictly limited to the precise' conditions stated in the law.") (internal alteration omitted) (quoting Gottesman v. Gen. Motors Corp., 268 F.2d 194, 196 (2d Cir. 1959)). Section 1292(b) was not intended "to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation,"Telectronics Proprietary, Ltd. v. Medtronic, Inc., 690 F. Supp. 170, 172 (S.D.N.Y. 1987) (internal quotation marks omitted), or to be a "vehicle to provide early review of difficult rulings in hard cases." German v. Fed. Home Loan Mortgage Corp., 896 F. Supp. 1385, 1398 (S.D.N.Y. 1995);see also Abortion Rights Mobilization, Inc. v. Regan, 552 F. Supp. 364, 366 (S.D.N.Y. 1982); McCann v. Communications Design Corp., 775 F. Supp. 1506, 1534 (D. Conn. 1991). Rather certification is warranted only in exceptional cases," where early appellate review "might avoid protracted and expensive litigation." Telectronics, 690 F. Supp. at 172; see also German, 896 F. Supp. at 1398.
Finally, the institutional efficiency of the federal court system is among the chief concerns underlying § 1292(b) The efficiency of both the district court and the appellate court are to be considered, and the benefit to the district court of avoiding unnecessary trial time must be weighed against the inefficiency of having the relevant Court of Appeals hear multiple appeals in the same case. See Harriscom Svenska AB v. Harris Corp., 947 F.2d 627, 631 (2d Cir. 1991).
This case does not present the type of exceptional circumstances necessary for the Court to certify an order for interlocutory review. The litigation presents complicated statutory issues that should not be subject to piecemeal appeals. The entire litigation with respect to the plaintiff's entitlements from the defendants should be resolved at the same trial. The claims are complicated and interrelated. Certification would likely waste, rather than conserve, judicial resources because the Court's opinion and order was based on many. grounds on which the defendants do not seek interlocutory review. Therefore, a decision on narrow issues by the Court of Appeals would be unlikely to result in a more expeditious resolution of the case. In light of the strong presumption in favor of the final judgment rule and the lack of special circumstances justifying an exception in this case, the motion for interlocutory appeal is denied.
CONCLUSION
The defendants' motion for reconsideration and reargument is granted. After reconsidering the Court's earlier opinion and order, the Court's decision remain's unchanged. The defendants' motion for interlocutory appeal is denied.