Opinion
Civil Action No. 01-481
June 3, 2002
Albert A. Torrence, Esq., Beaver, PA, Plaintiff's Counsel
Tucker Arensberg, Beverly Weiss Manne, Esq., Pittsburgh, PA, Counsel for SW Bank
Marcus Shapira, Robert L. Allman II, Esq., Pittsburgh, PA, Counsel for Rick Collins
Meyer Unkovic Scott, Beth Ann Slagle, Esq., Pittsburgh, PA, Counsel for Diane Newland
Stevens Lee, William J. Payne, Esq., Reading, PA, Counsel for John Hancock Ins.
Jones Gregg Creehan Gerace, John P. Davis III, Esq., Pittsburgh, PA, Counsel for Gen. Amer. Life Ins.
OPINION and ORDER OF COURT
SYNOPSIS
Pending is a Motion to Dismiss, filed by Additional Defendant Rick Collins ("Collins"). (Docket No. 41). Plaintiff, John A. Nelson ("Nelson"), filed a Brief in Opposition. After careful review of the submissions by the parties and based on my Opinion set forth below, Collins' Motion to Dismiss is granted.
I. FACTUAL BACKGROUND
Plaintiff, Nelson, filed the original Complaint on March 13, 2001, against Defendant Jones Brown, Inc. ("JB"). (Docket No. 1). Thereafter, Nelson filed a Motion to Join Additional Defendants. (Docket No. 6). The Motion was granted, and the Complaint to Join Additional Defendants was filed on July 1, 2001. (Docket No. 12).
Nelson was an employee of JB and, in November of 1989, he became JB's Chief Financial Officer ("CFO"). (Docket No. 12, ¶ 7). On or about May 30, 1995, Nelson and JB entered into an agreement to compensate Nelson after his termination or retirement. (Docket No. 12, ¶ 8). On July 17, 2001, I ruled on a Motion to Dismiss filed by JB. (Docket No. 9). Therein, I found the allegations of the Complaint to be sufficient such that the agreement between Nelson and JB was a pension plan falling under the provisions of the Employee Retirement Income Security Program ("ERISA"). 29 U.S.C. § 1002. Id. The pension plan was funded by certain insurance policies. (Docket No. 12, ¶ 12).
Nelson then resigned from employment with JB on or about November 1, 2000, and Rick Collins became the new CFO and a member of the Board of Directors. (Docket No. 12, ¶¶ 7, 15, 35). Nelson alleges that under the terms of the agreement, JB was to begin monthly payments of $6,250 by January 1, 2001. (Docket No. 12, ¶¶ 16, 23). Nelson has not received any payments to date. (Docket No. 12, ¶ 18).
In Count III of the Complaint to Join, Nelson contends that under ERISA, Collins, as CFO and a member of the Board of Directors, owed a fiduciary duty to protect and use the assets of the plan for the purposes set out in the pension plan. (Docket No. 12, ¶¶ 34, 35). Nelson asserts that Collins breached a fiduciary duty when he voted to liquidate the insurance policies and use the proceeds for general business purposes. (Docket No. 12, ¶ 38). As a result of this alleged breach, Nelson submits, inter alia, that Collins is individually and jointly liable to him (along with the other Board members) for the benefits due under the pension plan. (Docket No. 12, ¶ 43).
Count IV of the Complaint to Join avers that Diane Newland ("Newland") was the named Plan Administrator of the pension plan. (Docket No. 12, ¶ 41). Nelson claims that as the Plan Administrator, Newland owed a fiduciary duty to protect the assets of the plan and ensure that they were given to Nelson according to the terms of his agreement. (Docket No. 12, ¶ 42). Nelson maintains that the fiduciary duty Newland owed him was separate from, and in addition to, the duties owed by the members of the Board of Directors, including Collins. (Docket No. 12, ¶ 43).
Collins filed a Motion to Dismiss on the grounds that, as CFO and a member of the Board of Directors, he did not act as a fiduciary and was not constrained by fiduciary duties when he voted to liquidate Nelson's insurance plans. (Docket No. 41). Nelson filed a Brief in Opposition, but has failed to cite any relevant case law or provide any analysis in support of his position.
II. LEGAL ANALYSIS A. Standard of Review
In deciding a motion to dismiss, the Court must accept all the factual allegations as true, and must view the complaint in a light most favorable to the plaintiff. Colburn v. Upper Darby Twp., 838 F.2d 663, 664-65 (3d Cir. 1988), cert. denied, 489 U.S. 1065, 109 S.Ct. 1338, 103 L.Ed.2d 808 (1989). I may dismiss a complaint only if it appears beyond a reasonable doubt that the plaintiff fails to offer any factual basis to support its allegations. Craftsmen Local 6 of N.J. Welfare Fund v. Wettlin Assoc., Inc., 237 F.3d 270, 272 (3d Cir. 2001). In ruling on a motion for failure to state a claim, I must look to whether the pleaded facts are sufficient to determine that the complaint is not frivolous and provides defendants with adequate notice to frame an answer. Colburn, 838 F.2d at 666.
While the Court will accept well-pleaded allegations as true for the purposes of the motion, it will not accept unsupported conclusions, unwarranted inferences or sweeping legal conclusions cast in the form of factual allegations. See Miree v. Dekalb County Ga., 433 U.S. 25, 27 n. 2 (1997). In addition, the information plaintiff supplies must be sufficient to outline the elements of the claim, or to permit the inference that these elements exist. See Fed.R.Civ.P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 45 (1957). With this standard in mind, I now turn to the issues of the case.
B. Existence of a Fiduciary Duty
Collins filed a Motion to Dismiss, claiming that his vote regarding the liquidation of Nelson's pension plan was a business decision made by JB through the Board of Directors. As such, Collins maintains this act does not fall under the scope of ERISA. Therefore, Collins argues that he did not owe Nelson a fiduciary duty. (Docket No. 41).
As mentioned previously, Nelson is not a named fiduciary or the plan administrator of the plan. See, Complaint to Join. Section 3(21)(A) of ERISA defines three situations in which a person that is not a named fiduciary or plan administrator can assume a fiduciary duty. 29 U.S.C. § 1002(21)(A). They are:
(i) if the person exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,
(ii) if the person renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or
(iii) if the person has any discretionary authority or discretionary responsibility in the administration of such plan.29 U.S.C. § 1002(21)(A). Thus, fiduciary duties under ERISA attach only to "particular persons performing particular functions." Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1158 (3d Cir. 1990).
Plaintiff does not take issue with the second section. Therefore, I will not address it in my opinion. Instead, Nelson asserts that Collins, as CFO and member of the Board of Directors, had discretionary authority over the plan. (Docket No. 12, ¶ 34). Nelson focuses his claim on the assumption that Collins exercised discretionary authority over the plan by authorizing the liquidation of the insurance proceeds, thereby affecting the plan's management and/or administration.
First, I note that the fiduciary status of a corporation is not automatically conferred upon the officers of the corporation merely by virtue of their office. Confer v. Custom Engineering Co., 952 F.2d 34, 37 (3d Cir. 1991). It is the Plan Administrator who bears the "principal responsibility for the management and administration of the Plan." Id at 38. In this case, the Plan Administrator is alleged to be Diane Newland. (Docket No. 12, ¶ 41). Thus, a fiduciary duty will only attach to an officer's actions when he functions in the same capacity as a plan administrator. See Bennett v. Conrail Matched Savings Plan, 168 F.3d 671, 679 (3d Cir. 1999). Therefore, I must look to the actions of Collins.
In this regard, Nelson summarily concludes as follows:
In this case it is clear that Collins was a fiduciary with respect to the Nelson Pension Plan because he exercised discretionary authority over the plan itself. This fact is demonstrated by the action of Collins in deciding to liquidate both the John Hancock and the General American life insurance policies issued on the life of Nelson and utilizing the proceeds from the liquidation of those policies for the benefit of Jones Brown. Collins ordered the liquidation of these policies despite the fact that they had been collaterally assigned to, and were in fact owned by, Nelson.See, Brief in Opp., p. 4. Nelson does not, however, cite to any case law to support this conclusion. In opposition, Collins argues that these allegations alone are insufficient to confer a fiduciary duty upon him because said allegations do not support an inference that Collins took action involving the management or administration of the plan, but were rather business decisions outside the constraints of ERISA. I agree with Collins.
There is a distinction between actions that invoke fiduciary responsibilities and corporate management decisions. Lockheed Corp. v. Spink, 517 U.S. 882 (1996). In Lockheed, the company and the board of directors amended a pension plan to include employees who were originally excluded because of their age at the time they were hired. Later, Lockheed and the board of directors created a plan for members that opted for early retirement. The early retirement plan imposed two conditions on employees. First, it mandated that employees could not be compensated for their years of service before they became members of the plan, and second, that employees release any employment related claims they might have against Lockheed. Id. at 885. Plaintiff brought suit against Lockheed, alleging that the board of directors breached their fiduciary duties when they amended the early retirement programs. Id. at 886. In rendering its decision, the Court recognized that "amending or terminating a plan . . . cannot be an act of plan 'management' or 'administration.'" Id. at 890; Varity Corp. v. Howe, 516 U.S. 489, 505 (1996). Therefore, the Court found that the board of directors did not perform the specific functions of a fiduciary when it acted to amend the retirement plan. Lockheed, 517 U.S. at 889; see Hozier v. Midwest Fasteners, 908 F.2d 1155, 1162 (3d Cir. 1990) (therein the Third Circuit acknowledged that an employer can decide to terminate or amend a plan without the constraints of fiduciary duties); see also DeMaio v. Cigna Corp., Civ.A. No. 89-0724, 1993 WL 20173 (E.D. Pa. Jan. 26, 1993).
Based on the allegations in the Complaint to Join, I cannot infer that a vote in favor of liquidating Nelson's pension plan is an exercise of discretionary authority over the plan as defined in § 3(21)(A) of ERISA. See 29 U.S.C. § 1002(21)(A); Lockheed, 517 U.S. at 891. Thus, I find that Nelson's Complaint to Join does not set forth sufficient facts to support the theory that Collins had discretionary authority over the management or administration of Nelson's pension plan. Consequently, I find that Collins does not qualify as a fiduciary under ERISA. 29 U.S.C. § 1002(21)(A).
ORDER OF COURT
And now, this 3rd day of June, 2002, after careful consideration of the submissions of the parties and for the reasons set forth in the Opinion accompanying this Order, it is ordered that the Defendant, Rick Collins', Motion to Dismiss (Docket No., 40) is granted and Rick Collins is dismissed from the case.