Opinion
11 Civ. 3701 (PAC)
03-24-2014
RAGLAN GEORGE, Jr., MANUELA BUTLER, KEVIN BYRNE, BERTIE CARAWAY, JEAN FLEURY, SVETLANA GOYKHBERG, ROBERT LESLIE, ANN MARIE LUNETTA, EMILY MOYE, FLORETHA SCANTLEBURY, RAPHAEL SENCION and ELBA SERRANO as TRUSTEES of THE DISTRICT COUNCIL 1707 LOCAL 389 HOME CARE EMPLOYEES' PENSION FUND and RAGLAN GEORGE, Jr., MANUELA BUTLER, KEVIN BYRNE, BERTIE CARAWAY, JEAN FLEURY, SVETLANA GOYKHBERG, ROBERT LESLIE, EMILY MOYE, FLORETHA SCANTLEBURY, and ELBA SERRANO as TRUSTEES of THE DISTRICT COUNCIL 1707 LOCAL 389 HOME CARE EMPLOYEES' HEALTH and WELFARE FUND, Plaintiffs, v. GAIL STRAYHORN, Defendant.
MEMORANDUM & ORDER :
Plaintiffs are trustees of two employee benefit funds who claim that their former employee, Defendant Gail Strayhorn, breached her fiduciaries duties to the funds under the Employee Retirement Income Security Act of 1974 ("ERISA"). Defendant moves to dismiss the Second Amended Complaint for lack of subject matter jurisdiction on the grounds that (1) it is time-barred because it does not "relate back" to the initial complaint under Federal Rule of Civil Procedure 15(c)(1)(B); and (2) ERISA permits Plaintiffs to seek only equitable relief, not the monetary damages that Plaintiffs claim. For the reasons below, the Court DENIES Defendant's motion to dismiss.
BACKGROUND
A. Allegations of the Second Amended Complaint
Plaintiffs are trustees of a union's two employee benefit funds: (1) the District Council 1707 Local 389 Home Care Employees' Pension Fund; and (2) the District Council 1707 Local 389 Home Care Employees' Health and Welfare Fund (collectively, the "Funds"). The Second Amended Complaint ("SAC") alleges that Strayhorn is the former "Funds Director" and thus a fiduciary of the Funds under ERISA, 29 U.S.C. § 1002(21)(A), because she exercised discretion and control over their assets. (SAC ¶¶ 4-5.)
Since Plaintiffs have titled both of their amended complaints as "Amended Complaint," this Opinion refers to the latest in time as the "Second Amended Complaint" (Dkt. 33 (June 10, 2013)) and the earlier in time as the "First Amended Complaint" (Dkt. 27 (Nov. 8, 2011)). This action was commenced with the "Initial Complaint." (Dkt. 1 (June 1, 2011).)
The gravamen of the SAC is that Strayhorn breached her fiduciary duties to the Funds under ERISA, 29 U.S.C. §§ 1104, 1106, 1132, by executing lease agreements on their behalf for office equipment "that did not exist, and/or was never intended for actual delivery" and receiving compensation for doing so. (See id. ¶¶ 7-13.) The misconduct allegedly occurred "during the years 2002 through 2008." (Id. ¶ 7.) Strayhorn's employment with the Funds was terminated on February 11, 2009. (Id. ¶ 19.) During a subsequent forensic audit in November 2009, the Funds "learned of the fraudulent Leases." (Id. at ¶¶ 15, 19, 20.)
B. Procedural History
The Initial Complaint was filed on June 1, 2011, and it alleged both ERISA claims and state-law fraud claims. It named the Funds and "the Trustees thereof" as plaintiffs and named several other state-law defendants along with Strayhorn. It also included allegations that Strayhorn caused the Funds to pay excess sums for stationery and printing supplies. On November 3, 2011, the plaintiffs voluntarily dismissed certain state-law defendants from this action (see Dkt. 25) in order to adjudicate the claims relating to the stationery and printing supplies in a separate action. They filed that action in this Court on the following day as a related case. See No. 11 Civ. 7911 (the "Related Case"). On November 8, 2011, the plaintiffs filed the First Amended Complaint in this action, which omitted those state-law defendants and the claims relating to the stationery and printing supplies.
In the Related Case, the Court ruled that it lacked subject matter jurisdiction under ERISA because the complaint named only the Funds themselves as plaintiffs, not their individual trustees. See 2013 WL 1223362, at *5 (Mar. 25, 2013) ("[T]he jurisdictional provisions of ERISA do not on their face authorize a pension fund to assert a cause of action."). Apparently recognizing the same deficiency in this case, the plaintiffs subsequently sought and received leave to file the Second Amended Complaint, which named the Funds' individual trustees as Plaintiffs. (Dkt. 33 (June 10, 2013).)
The SAC also makes several other changes, namely:
• drops all defendants, except Strayhorn as the sole defendant;
• eliminates the remaining state-law fraud claim and supporting allegations;
• reduces the number of leases for which claims are made from 21 to 20;
• reduces the alleged amount of liability incurred under the leases;
• specifies the entities with which the lease agreements were made;In sum, while the SAC eliminated certain claims and defendants and specified which leases and lawsuits had caused the Funds to suffer damages, the core claim of all three complaints is that Strayhorn executed the leases for nonexistent equipment in exchange for compensation.
• reduces the number of legal actions the Funds allegedly had to defend from three to two; and
• specifies which entities were bringing those actions.
DISCUSSION
I. Statute of Limitations
Although Defendant styles her statute-of-limitations defense as a motion for lack of subject matter jurisdiction under Rule 12(b)(1), "[s]uch a motion is properly treated as a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted." Ghartey v. St. John's Queens Hosp., 869 F.2d 160, 162 (2d Cir. 1989). "To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
The Court exercises subject matter jurisdiction over the claims pursuant to 29 U.S.C. § 1132(a)(2), (e), which provides for exclusive federal jurisdiction for civil actions brought by fiduciaries under ERISA. The SAC has cured any prior defect in this regard by naming the trustees as plaintiffs.
It is undisputed that the Initial Complaint was timely filed under ERISA's applicable statute of limitations; it was brought within "three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation." See 29 U.S.C. § 1113(2). Since the Initial Complaint alleges that the forensic audit uncovered the misconduct in November 2009, the plaintiffs had until November 2012 to file a complaint, and they did so on June 1, 2011.
Since the SAC was not filed until June 10, 2013, well after the period of limitations had expired, the question is whether the SAC "relates back" to the date of the Initial Complaint under Rule 15(c)(1)(B). To relate back, the SAC must "assert[] a claim or defense that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading." Id. "[T]he 'central inquiry is whether adequate notice of the matters raised in the amended pleading has been given to the opposing party within the statute of limitations by the general fact situation alleged in the original pleading.'" Slayton v. Am. Exp. Co., 460 F.3d 215, 228 (2d Cir. 2006). "Where the amended complaint does not allege a new claim but renders prior allegations more definite and precise, relation back occurs." Id.
Here, the SAC clearly arises out of the same "conduct, transaction, or occurrence" set forth in the Initial Complaint: Strayhorn's alleged execution of bogus leases for her personal gain. Most of the significant differences between the two complaints reflect deletions in the SAC, not additions of new claims or allegations for which Strayhorn might have lacked adequate notice. Moreover, even where the SAC adds new language, it serves only to narrow the issues by making the allegations more definite and precise, for example by specifying which leases are at issue and which counterparties have sued the Funds. Strayhorn has not provided any basis for her conclusion that "completely abandon[ing]" certain claims makes the SAC "an entirely new set of operative facts" (Def.'s Br. at 6), and the Court cannot imagine why it would be under the circumstances. Accordingly, the SAC relates back to the Initial Complaint and is therefore timely under the applicable statute of limitations.
Plaintiffs explain that one of the leases was dropped from the SAC because that dispute was resolved in another action by a default judgment against Strayhorn. (Pls.' Br. at 3.) That judgment, in turn, reduced the amount of damages claimed in the SAC. (Id.) --------
II. Relief Sought Under ERISA
Strayhorn also contends that the SAC should be dismissed because ERISA authorizes only claims for equitable relief, not monetary damages. The statute provides otherwise:
Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries . . . shall be personally liable 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. . . .29 U.S.C. § 1109 (emphases added). In other words, a fiduciary of an employee benefit plan may hold another fiduciary personally liable for losses resulting from the latter's breach of fiduciary duties. See, e.g., LaScala v. Scrufari, 479 F.3d 213, 222 (2d Cir. 2007) ("[U]nder [§ 1109], those benefits attributable to [Defendant]'s fiduciary breaches constitute profits that [Defendant] must 'restore' to the Funds."); In re State St. Bank & Trust Co. Fixed Income Funds Inv. Litig., 842 F. Supp. 2d 614, 652 (S.D.N.Y. 2012) ("Section [1109] speaks both to causation . . . and damages . . . ."). That is precisely what Plaintiffs seek here with respect to Strayhorn. Accordingly, there is no pleading deficiency in the SAC's claim for relief.
CONCLUSION
For the foregoing reasons, the Court DENIES Defendant's motion to dismiss. Dated: New York, New York
March 24, 2014
SO ORDERED
/s/_________
PAUL A. CROTTY
United States District Judge