Opinion
No. 02-CV-6233 CJS.
February 8, 2005
Robert W. Wood, Esq., Rochester, New York, for Plaintiffs.
Louis Orbach, Esq., Bond, Schoeneck King, PLLC, Syracuse, New York, for defendants.
DECISION AND ORDER
INTRODUCTION
Plaintiffs are former employees of defendant Excellus Health Plan who are seeking additional retirement benefits pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq., and damages under New York State law. Now before the Court is defendants' motion [#22] for summary judgment, and plaintiffs' cross-motion [#24] for summary judgment and for leave to amend the complaint. For the reasons that follow, defendants' motion is granted, plaintiffs' cross-motions are denied, and this action is dismissed.
BACKGROUND
The relevant facts are not disputed. Defendant Excellus Health Plan, Inc. ("Excellus") was an employer which sponsored the defendant Excellus Retirement Plan ("the plan"). The Plan is an employee pension benefit plan as defined by ERISA, 29 U.S.C. § 1002(2). By the terms of the plan, authority to amend the plan is reserved to Excellus's Board of Directors and an authorized subcommittee of that board. Id. at ¶ 12.1. Any such amendment is required to be made in writing. Id. The plan provides for the creation of a Retirement Committee, which is named as fiduciary of the plan and given "full authority and responsibility to control and manage the operation and administration of the Plan." Plan ¶ 11.2. The Retirement Committee determines claims for benefits, as well as appeals. Id. at ¶¶ 14.7-14.8. In this regard, the plan gives the Retirement Committee discretionary authority to interpret and apply the terms of the plan:
The Retirement Committee shall have the exclusive right to interpret and apply all of [the] terms of the Plan (but not to modify or amend the Plan) and to decide any and all questions arising in the administration, interpretation, and application of the Plan. The Retirement Committee shall establish whatever rules it finds necessary for the operation and administration of the Plan and shall endeavor to apply these rules in its decisions so as not to discriminate in favor of any person. The actions and decisions of the Retirement Committee with respect to the Plan (a) shall be conclusive and binding upon the Employer and all persons having or claiming to have any right or interest in or under the Plan, and (b) shall not be overturned unless found to be arbitrary and capricious. Plan ¶ 11.3.
Plan participants receive retirement benefits ("Accrued Benefit") based upon their average annual compensation and "credited service." Plan ¶ 2.1. Credited Service under the plan is measured in years: "Participants . . . shall receive one Year of Credited Service for each Plan Year in which they complete 2080 Hours of Service. Id. at ¶ 2.12. Not all "service" is "credited service." For example, participants may accrue a "year of service" merely by completing 1000 hours of service. Id. at ¶ 2.51. Participants do not obtain a vested interest in accrued benefits until they complete five years of service. Id. at ¶ 6.1.
The Plan's Summary Plan Description ("SPD") distinguishes "vesting service" from "benefit service" as follows:
There are two types of service credited under the Plan; vesting service and benefit service. Vesting service determines your eligibility for certain benefits under the Plan, as well as your right to a vested pension if you leave the Company before you are eligible to retire. Benefit service is used to determine the amount of your retirement income.
(emphasis in original). The SPD also contains a section entitled "Service Credit for Employment with Other Organizations," which states: "[I]f you were employed by any . . . Blue Cross and/or Blue Shield organization prior to joining the Company, you may be credited with vesting service and/or benefit service under the Plan." (emphasis added).
Plaintiffs' Memo of Law incorrectly states that, in the SPD, "[t]he term `benefit service' is not mentioned."
Excellus operated an affiliate known as the Group Health Medical Centers ("Group Health"), whose employees were participants in the plan. In or about December 1993, Group Health hired plaintiffs Maria K. Bizo ("Bizo") and Betty S. Vickery ("Vickery"). Prior to that, both plaintiffs each worked approximately thirteen years at another health care provider, Rochester Medical Group ("Rochester Medical"). Although Rochester Medical had performed contract work for Excellus, it was not part of Excellus and was not a Blue Cross and/or Blue Shield Organization. During their employment with Rochester Medical, both Bizo and Vickery participated in that company's pension plan.
During negotiations with Group Health prior to being hired, plaintiffs requested that they receive some type of recognition for their prior years of employment at Rochester Medical. On December 3, 1993, Group Health's Vice President, Patricia Bonino ("Bonino"), sent letters to the plaintiffs, containing the same relevant language: " Furthermore, we will recognized the years of service that you previously worked at Group Health [sic] and arrange for vesting in terms of the pension plan and will allow 5 weeks of vacation from your start date." Orbach Declaration, Exhibits F G (emphasis added). It is undisputed that new hires ordinarily did not vest in the plan until they had five years of service, and received less than five weeks of vacation.
As noted earlier, plaintiffs had previously been employed by Rochester Medical, not Group Health.
Plaintiffs contend that as a result of their negotiations with Bonino, they "believed" or "understood" that their prior years of service would be counted in calculating their benefits under the plan. However, they admit that Bonino made no such express promise orally or in her letter. Bonino, on the other hand, states that her letter was only intended to indicate that plaintiffs' years of service at Rochester Medical Group would be counted toward vesting service. Bonino testified that she had previously made similar offers to physicians who had been formerly employed by Rochester Medical. Because Bonino's testimony in this regard is relevant to one of plaintiffs' arguments below, the Court will set it forth in its entirety:
Q. And this type of offer that's contained in [your letter in] the sentence starting with "Furthermore," had you in the past prior to making this offer to Ms. Bizo had you done this with any other employees?
Mr. Orbach: Objection to form.
A. I believe we had with other Rochester Medical Group employees.
Q. What type of employees were they?
A. Physicians.
Bonino Dep. 30.
At or around the same time that plaintiffs were seeking employment with Excellus, they turned down other offers of employment from Strong Memorial Hospital ("Strong"). In that regard, plaintiffs testified that Group Health offered them more money than Strong, and that they preferred working for Group Health rather than Strong because they were already familiar with Group Health's patients. Vickery also noted that Group Health's office was conveniently located near her home. When asked if they would have accepted an offer of employment from Group Health that did not include the promise of credit for prior service, neither plaintiff could answer unequivocally.
In any event, plaintiff's accepted Group Health's offer and worked there for over five years before leaving to pursue other employment. At some point plaintiffs realized that their years of service at Rochester Medical Group had not been counted as benefit service under the plan, and on January 27, 2003 they submitted a claim to the Retirement Committee, requesting a "recalculation of [their] benefits reflecting the years of service that [they] had worked at Rochester Medical Group." In their written requests to the Retirement Committee, plaintiffs stated:
As an inducement to accept a position as OB/GYN nurse at Group Health, I was told by Patricia Bonino that I would be immediately vested in the Pension Plan and would be credited for the years I previously worked at Group Health. These verbal inducements were followed up by a letter written to me from Ms. Bonino indicating that I would be credited with the years of service I had previously worked at Group Health. A copy of this letter is enclosed.
The reference to Group Health is incorrect. As previously indicated, plaintiffs previously worked for Rochester Medical, not Group Health.
The reference to Group Health is incorrect. As previously indicated, plaintiffs previously worked for Rochester Medical, not Group Health.
As indicated, plaintiffs also provided the Retirement Committee with their December 3, 1993 letters from Bonino. On July 21, 2003, the Retirement Committee denied both claims, noting, in relevant part:
[C]redited service is extended only to participants. . . . During your years of employment with Rochester Medical Group, you were not a participant in the Plan and did not earn credited service. . . . However, even if that prior service is taken into account, [the Plan] also provides that contributions or benefits provided through the defined contribution plan maintained by Rochester Medical Group would be treated as provided by the Medical Centers. The actuaries for the Plan have estimated that the value of the contributions made on your behalf pursuant to the Rochester Medical Group plan would more than offset any benefit you might have earned under the Plan, if your Rochester Medical Group Service were taken into account as service under the Plan. . . . Therefore, there is no Plan basis to grant your request.
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Ms. Patricia Bonino's 1993 letter to you was not part of the Plan nor does the Retirement Committee construe the letter as an amendment or modification of the Plan. . . . Even if Ms. Bonino's letter is considered an amendment or modification of the Plan, we do not interpret her letter as requiring the Plan to recognize your prior service with Rochester Medical Group for benefit calculation purposes. Rather, we interpret the phrase ". . . recognize the years of service that you previously worked at Group Health and arrange for vesting . . ." to require the recognition of your prior service only for purposes of vesting in the benefit you might earn under the Plan.
On September 19, 2003, plaintiffs appealed, arguing that it was "obvious" that Bonino's letter referred to benefit service, and that Bonino's letter had "induced" them to accept Group Health's offer of employment. Plaintiffs did not rely upon anything Bonino allegedly said, but instead, argued that her letters constituted a written amendment of the plan. On November 19, 2003, the Retirement Committee denied the appeals for essentially the same reasons that it gave originally, namely, that plaintiffs were not entitled to additional benefits under the plan, that Bonino had no authority to amend the plan, and that Bonino's letter did not in any event promise the benefits that plaintiffs sought.
Plaintiffs commenced this action on April 25, 2002. The Second Amended Complaint, which is the operative complaint in this action, purports to state three separate causes of action: 1) a claim under ERISA alleging that Bonino's letters modified the plan, and that the Retirement Committee's failure to correctly administer the plan, as amended, was "abritrary, illegal, capricious, unreasonable, and not made in good faith, and is [a] breach of Defendant's fiduciary duty owned to Plaintiffs"; 2) a New York State law claim for breach of contract; and 3) a New York State law claim for negligent misrepresentation. Supplemental jurisdiction over the state-law claims is based upon 28 U.S.C. § 1367(a). Pursuant to a Scheduling Order [#15] issued by the Honorable Marian W. Payson, United States Magistrate Judge, all motions to join parties or amend pleadings were to be filed by January 16, 2004, all discovery was to be completed by August 31, 2004, and all dispositive motions were to be filed by November 1, 2004.
On October 28, 2004, defendants electronically filed and served the subject summary judgment motion. They claim to be entitled to summary judgment on the ERISA claims, because the Retirement Committee's determinations were not arbitrary or capricious, and on the state law claims, because they are preempted by ERISA. On November 4, 2004, the undersigned issued a Motion Scheduling Order [#23] directing plaintiffs to file and serve "any responding papers submitted in connection with [defendant's] motion" on or before December 3, 2004.
On December 3, 2004, plaintiffs' filed a cross-motion, styled as a motion for summary judgment and for "[a]n Order permitting an amendment of the Second Amended Complaint, only in the event the breach of contract claim is dismissed by the Court pursuant to Rule 15." The motion to amend seeks leave to replace the breach of contract claim with a claim for "promissory estoppel" in the event that this Court rules that the contract claim is preempted by ERISA. On January 6, 2005, defendant filed and served reply papers, which include an argument that plaintiff's cross-motions are untimely under the terms of the aforementioned Scheduling Order issued by Judge Payson, and should be denied. On February 3, 2005, counsel for the parties appeared before the undersigned for oral argument.
ANALYSIS
The standard for granting summary judgment is well established. Summary judgment may not be granted unless "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 a judgment as a matter of law." Fed.R.Civ.P. 56(c). A party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists. See, Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). "[T]he movant must make a prima facie showing that the standard for obtaining summary judgment has been satisfied." 11 Moore's Federal Practice, § 56.11[1][a] (Matthew Bender 3d ed.). In moving for summary judgment against a party who will bear the ultimate burden of proof at trial, the movant may satisfy this burden by pointing to an absence of evidence to support an essential element of the nonmoving party's claim. See, Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once that burden has been established, the burden then shifts to the non-moving party to demonstrate "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). To carry this burden, the non-moving party must present evidence sufficient to support a jury verdict in its favor. Anderson, 477 U.S. at 249. Summary judgment is appropriate only where, "after drawing all reasonable inferences in favor of the party against whom summary judgment is sought, no reasonable trier of fact could find in favor of the non-moving party." Leon v. Murphy, 988 F.2d 303, 308 (2d Cir. 1993).
Turning first to the preemption issue, the Court finds that the breach of contract and negligent misrepresentation claims are preempted. ERISA's preemption clause, 29 U.S.C. § 1144(a), states in relevant part that ERISA "supersede[s] any and all State laws insofar as they may now or hereafter relate to an employee benefit plan." On facts similar to those present here, courts have held that breach of contract and misrepresentation claims are preempted. See, e.g. Smith v. Dunham-Bush, Inc., 959 F.2d 6, 8-10 (2d Cir. 1992); Cerasoli v. Xomed, Inc., 952 F.Supp. 152, 156-61 (W.D.N.Y. 1997). As in those cases, plaintiffs here are plan participants who are seeking the functional equivalent of additional plan benefits. The plan is directly linked to plaintiffs' state-law claims, since, in order to calculate their alleged damages, it would be necessary to re-calculate their benefits under the plan by treating their years of service at Rochester Medical as benefit service. See, Smith v. Dunham-Bush, Inc., 959 F.2d at 10 ("[Plaintiff] is an ERISA plan participant. He makes explicit reference to the pension plan in his complaint. . . . Moreover, . . . the calculation of the promised supplemental benefits would indeed implicate [defendant's] ERISA plan. . . . In reality, his suit represents an attempt to supplement the plan's express provisions and secure an additional benefit. [Plaintiff's] cause of action therefore relates not merely to his benefits, but to the essence of the plan itself.") (citation omitted); Cerasoli v. Xomed, Inc., 952 F.Supp. at 156-57 ("With respect to plaintiff's breach of contract claim, I find that ERISA preemption is clearly applicable. . . . The alleged breach . . . consists of defendant's failure to provide plaintiff with benefits under the . . . plan. . . . [As for the negligent misrepresentation claim,] the alleged misrepresentations . . . relate directly to plaintiff's benefits under the . . . plan.").
Plaintiffs attempt to evade preemption by arguing that "the contract at issue is not the pension plan itself but the offer of employment letter to Plaintiffs dated December 3, 1993." As did the court in the Cerasoli case, this Court rejects that argument. See, Cerasoli v. Xomed, Inc., 952 F.Supp. at 156 (Rejecting plaintiff's argument that "even if his claims do fall within the scope of ERISA, there is no preemption because the factual basis for his suit, i.e., defendant's alleged contractual duties and misrepresentations, is independent of the rights and duties created by the plan."); compare Daponte v. Manfredi Motors, Inc., 335 F.Supp.2d 352, 360 (E.D.N.Y. 2004) (finding that a negligent misrepresentation claim was not preempted by ERISA where the alleged misrepresentation pertained to "a collateral employment agreement," rather than to the defendant's benefit plan.) Plaintiffs also contend that "recent interpretations of the preemption language in ERISA have been more limiting," suggesting that of late courts have been less likely to find that state-law claims are preempted. In this regard, plaintiffs cite this Court's decision in Pension Plan for Employees of Battenfeld Grease Oil Corp. v. Principal Mut. Life Ins. Co., 62 F.Supp.2d 1055 (W.D.N.Y. 1999). However, the Battenfeld decision is not on point, since it did not involve a plan participant suing the plan or the employer, but rather, involved a plan suing a third-party insurance company for breach of a contract. Id. at 1060 ("[T]he breach of contract claim here is entirely independent of the ERISA pension plan. It can stand on its own. . . . The breach alleged here refers to the valuation of the assets under the contracts at the time of their transfer to another insurance company, not the benefits due to plan participants.").
Unlike plaintiffs in the instant case, the plaintiffs in Daponte did not sue under ERISA and did not claim to be entitled to benefits under the em ployer's plan. Id. at 359.
Alternatively, plaintiffs seek leave to amend the complaint, for a third time, to redesignate the breach of contract claim as one for promissory estoppel. While it is possible to bring such a claim under ERISA, see, Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 78 (2d Cir. 1996), cert. den., 519 U.S. 1008 (1996), defendants oppose the motion on the grounds that it is untimely and will prejudice them. It is well settled that
despite the lenient standard of Rule 15(a), a district court does not abuse its discretion in denying leave to amend the pleadings after the deadline set in the scheduling order where the moving party has failed to establish good cause. . . . [A] finding of "good cause" depends on the diligence of the moving party.Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir. 2000). Clearly, plaintiffs' motion to amend is untimely, coming almost one year beyond the deadline set by Judge Payson. Discovery is now complete and dispositive motions have been filed. Moreover, despite having been advised of the need to demonstrate good cause when seeking an extension of scheduling deadlines, plaintiffs offer absolutely no explanation for their delay in bringing the motion. For these reasons, plaintiffs' motion to amend is denied. See, Grochowski v. Phoenix Const., 318 F.3d 80, 86 (2d Cir. 2003) ("The plaintiffs delayed more than one year before seeking to amend their complaint. Furthermore, when the motion was filed, discovery had been completed and a summary judgment motion was pending. On this record we cannot say that the district court abused its discretion in denying the plaintiffs' motion to amend.").
Judge Payson's Scheduling Order states: "No extension of the above cutoff dates will be granted except upon written application, made prior to the cutoff date, showing good cause for the extension." (Emphasis in original).
The Court will now consider plaintiffs' claim for benefits pursuant to ERISA, 29 U.S.C. § 1132(a)(1)(B), which section states, in relevant part, that
[a] civil action may be brought —
(1) by a participant or beneficiary —
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(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;
In this regard, since the plan undoubtedly grants the Retirement Committee discretionary authority to determine eligibility, the Court must review the Retirement Committee's determination to deny benefits using the deferential arbitrary and capricious standard of review. Pagan v. NYNEX Pension Plan, 52 F.3d 438, 441 (2d Cir. 1995) ("[W]here the written plan documents confer upon a plan administrator the discretionary authority to determine eligibility, we will not disturb the administrator's ultimate conclusion unless it is `arbitrary and capricious.'") ( quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57 (1989)). Under this standard, a court "may overturn a decision to deny benefits only if it was without reason, unsupported by substantial evidence or erroneous as a matter of law." Id. at 442 (citations and internal quotation marks omitted). "[A] district court's review under the arbitrary and capricious standard is limited to the administrative record." Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995).
Here, plaintiffs concede that they are not entitled to additional benefits under the actual terms of the plan as it existed at the time of their hiring. Rather, they claim that Bonino's letters modified the plan. The Court finds, however, that the Retirement Committee's decision rejecting that argument was not arbitrary or capricious. The plan expressly states that it can be modified only by Excellus's Board, and therefore Bonino had no authority to modify the plan. Moreover, even assuming that Bonino had such authority, her letters simply do not suggest, let alone state unequivocally, that plaintiffs' prior years of service with Rochester Medical would be counted as benefit service under the plan. To be precise, Bonino wrote: "[W]e will recognize the years of service that you previously worked at Group Health and arrange for vesting in terms of the pension plan and will allow 5 weeks of vacation from your start date." Since there is no mention of benefit service, it was reasonable for the Retirement Committee to read this statement as referring only to vesting and vacation.
Although it does not appear that plaintiffs are claiming that Bonino orally amended the plan, such an argument would fail in any event. See, Perreca v. Gluck, 295 F.3d 215, 225 (2d Cir. 2002) ("[O]ral promises are unenforceable under ERISA and therefore cannot vary the terms of an ERISA plan.")
Plaintiffs also contend that the Retirement Committee's decision was arbitrary and capricious because
it was further learned through the deposition of Pat Bonino that physicians were hired by Defendants with similar recognition of years worked at [Rochester Medical]. Given this new information obtained through discovery, and the allegations themselves, issues of fact would certainly exist as to whether the Retirement Committee's actions were arbitrary and capricious.
Pl. Memo of Law, p. 6. Bonino's testimony on this point, however, was not part of the administrative record before the Retirement Committee. Moreover, Bonino did not testify that the physicians received benefit service under the plan, as plaintiffs suggest, but rather, she testified that the physicians received the same "offer" that plaintiffs received, which, according to her testimony, pertained only to vesting and vacation.
Plaintiffs, in their brief, also refer to a claim for breach of fiduciary duty under ERISA. Plaintiffs do not specifically identify the provision of ERISA under which they make their claim for breach of fiduciary duty. However, 29 U.S.C. § 1132(a)(3) states, in relevant part, that
[a] civil action may be brought —
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(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or
(B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;
Moreover, 29 U.S.C. § 1104(a)(1), states, in relevant part, that
a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and —
(A) for the exclusive purpose of:
(i) providing benefits to participants and beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;
(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
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(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter.
The only reference to a claim for breach of fiduciary duty in plaintiffs' Second Amended Complaint states:
The Defendant's failure to comply with the terms of the pension plan, as modified, constitutes a violation of ERISA and is otherwise arbitrary, illegal, capricious, unreasonable, and not made in good faith, and is [a] breach of Defendant's fiduciary duty owed to Plaintiffs.
Second Amended Complaint ¶ 21. The Court construes this language to allege that the Retirement Committee breached its fiduciary duties to plaintiffs by rendering a decision that was arbitrary and capricious. However, such a claim would be merely duplicative of plaintiffs' claim for benefits under 29 U.S.C. § 1132(a)(1)(B), therefore equitable relief under 29 U.S.C. § 1132(a)(3) and 29 U.S.C. § 1104(a)(1) would not be "appropriate" under the facts of this case. Varity Corp. v. Howe, 516 U.S. 489, 515, 116 S.Ct. 1065, 1079 (1996). As a separate basis for granting summary judgment on the fiduciary duty claim, the Court finds that plaintiffs have not produced any evidence that the Retirement Committee breached its fiduciary duties.
While an argument might have been made that Excellus breached its fiduciary duty to plaintiffs based upon Bonino's alleged misrepresentations concerning plan benefits, the Court finds no such argument in plaintiffs' papers. See, Id., 516 U.S. at 502-03, 116 S.Ct. at 1072-73 (Holding that an employer may be found to have acted in a fiduciary capacity when it communicates with plan participants regarding benefits.). The Court believes that such a claim would fail in any event, since plaintiffs have not come forward with evidentiary proof in admissible form that Bonino made any misrepresentation. When pressed on this precise point at their depositions, plaintiffs admitted that they were never told that their years of service with Rochester Medical would be counted as benefit service. Bizo Dep. 74, 88-89; Vickery Dep. 37. At most, they testified that they subjectively believed that was what Bonino was agreeing to. Bizo Dep. 88-89; Vickery Dep. 48-49. To the extent that plaintiffs' affidavits submitted in opposition to the summary judgment motion now claim otherwise, the Court is disregarding them. Langman Fabrics, a div. of Blocks Fashion Fabrics, Inc. v. Graff Californiawear, Inc., 160 F.3d 106, 112 (2d Cir. 1998) ("We have indeed held that a party may not create an issue of fact precluding summary judgment by offering an affidavit that contradicts his earlier sworn testimony in the case.").
Lastly, plaintiffs have moved for summary judgment and for an award of attorney's fees. However, they have not demonstrated that they are entitled to either type of relief. Accordingly, those applications are denied.
CONCLUSION
Defendants' motion [#22] for summary judgment is granted in its entirety, plaintiffs' cross-motions [#24] are denied in their entirety, and this action is dismissed with prejudice.
So Ordered.