Opinion
13 CV 9201 (VB)
01-30-2015
PHILIP RABIN, Plaintiff, v. PARCHEM TRADING, INC. PROFIT SHARING PLAN and PATRICIA TURCAN as Administrator, Defendants.
MEMORANDUM DECISION :
Plaintiff Philip Rabin brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA") to recover the cash surrender value of a whole life insurance policy purchased on his behalf by his former employer, Parchem Trading, Ltd. ("Parchem"). Plaintiff seeks a declaratory judgment that he is entitled to the policy's cash surrender value, and requests an injunction preventing Parchem's Profit Sharing Plan (the "Plan"), which currently holds that money, from distributing the money to anyone else. He also asserts claims for promissory estoppel and breach of contract.
"The cash surrender value of a life insurance policy is the amount of money payable when an insurance policy having cash value, such as a whole-life policy, is redeemed before maturity or death." Wornick v. Gaffney, 544 F.3d 486, 488 n.1 (2d Cir. 2008) (alteration and internal quotation marks omitted).
Defendants—the Plan and its administrator, Patricia Turcan—bring a counterclaim for a declaratory judgment that plaintiff waived his claims by entering into a settlement agreement ending a prior suit he brought against Parchem and its owner, Ephraim Rabin ("Ephraim"). Ephraim is plaintiff's son.
Defendants have moved for judgment on the pleadings. Plaintiff has cross-moved for judgment on the pleadings on defendants' counterclaim, and for summary judgment on his breach of contract claim. Plaintiff also seeks attorneys' fees under Section 502(g) of ERISA.
For the following reasons, defendants' motion is DENIED; plaintiff's motion is GRANTED; and the Court declines to award attorneys' fees to plaintiff.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367.
BACKGROUND
The parties have submitted briefs, statements of facts, and declarations with supporting exhibits, which reflect the following factual background.
Plaintiff founded Parchem in 1988. He was a participant in the Plan, which provides eligible Parchem employees with retirement, disability, and death benefits. Among plaintiff's benefits under the Plan was a whole life insurance policy purchased by Parchem naming him as the insured. Parchem was responsible for paying the policy premiums.
Plaintiff was terminated from Parchem in June 2011.
In September 2011, plaintiff sued Parchem and Ephraim, seeking a declaratory judgment determining his retirement benefits and asserting various claims under New York law. One such claim was that Ephraim fraudulently induced plaintiff to transfer his shares in Parchem Nutrition Inc. ("PNI"), a company they jointly formed and operated, to Ephraim.
Plaintiff, Parchem, and Ephraim settled the 2011 case in August 2013, entering into a Settlement & Release Agreement (the "Settlement Agreement"). The Settlement Agreement defined the "Parties" to that contract as plaintiff, Parchem, and Ephraim. (Yankwitt Decl. Ex. E). Those three agreed to
waive and/or withdraw all claims and counterclaims which currently exist and/or any other potential claims that may exist
and/or arise, directly or indirectly, out of the allegations made by all Parties in the underlying pleadings to the Action, including any and all verbal or written agreements between Defendants, their affiliates, heir, successors or assigns and Plaintiff, Plaintiff's heirs, successors or assigns, from the beginning of time until the end of time (collectively, "Claims").(Id.). The Settlement Agreement further provided that "Defendants," meaning Parchem and Ephraim, would pay plaintiff a specified amount of money "in full settlement of all Claims Plaintiff has or may have against Defendants or any affiliate of Defendants." Id. Plaintiff in turn agreed to "release[] and forever discharge[] Defendants and each of their heirs, executors, administrators, and successors of and from any and all claims . . . known or unknown . . . against Defendants, which Plaintiff . . . may now have or ever had." (Id.). The Settlement Agreement also contained a "no oral modification" clause, stating the Agreement "may only be amended, modified, terminated or abrogated by a written agreement signed by all Parties." (Id.). The Settlement Agreement is governed by New York law.
In September 2013, after the Settlement Agreement was signed, Parchem stopped paying the premiums on the policy, as plaintiff was no longer a Parchem employee. Parchem then began the process of "surrendering," or terminating, the policy. Parchem consulted its accountant to determine who should receive the cash surrender value, which was approximately $70,000. Parchem was told that, under the Plan, the cash surrender value would be payable to plaintiff. Accordingly, Turcan directed counsel for Parchem to inform plaintiff's counsel that plaintiff would receive the cash surrender value upon surrender of the policy.
On September 16, 2013, Parchem's counsel emailed plaintiff's counsel a "Life Policy Transaction Request" form, which stated the policy would be surrendered. (Landrigan Decl. Ex. F). Parchem's counsel requested that plaintiff sign the third page of the form. Parchem's counsel later noted in a September 25, 2013, email that plaintiff needed to sign the form "in a week if [he] is going to receive the $." (Id.). Plaintiff's counsel returned the signed form to Parchem's counsel on September 27, 2013. Parchem then surrendered the policy. In mid-October 2013, the Plan received a check for the cash surrender value.
But plaintiff never received that money. Sometime after September 2013, the Plan concluded plaintiff had waived his right to the cash surrender value by entering into the Settlement Agreement. The Plan therefore declined to turn the money over to plaintiff.
Plaintiff commenced this action on December 31, 2013, and later amended the complaint to add a breach of contract claim.
Defendants contend plaintiff waived his claims by signing the Settlement Agreement. They also contend his contract claim is preempted by ERISA and, therefore, must be dismissed.
DISCUSSION
I. Legal Standards
A. Judgment on the Pleadings
At any time after the pleadings close and before trial commences, a party may move for judgment on the pleadings under Rule 12(c). See Citibank, N.A. v. Morgan Stanley & Co. Int'l, PLC, 724 F. Supp. 2d 407, 414 (S.D.N.Y. 2010). "The standard for addressing a Rule 12(c) motion for judgment on the pleadings is the same as that for a Rule 12(b)(6) motion to dismiss for failure to state a claim." Cleveland v. Caplaw Enters., 448 F.3d 518, 520 (2d Cir. 2006).
In deciding a Rule 12(b)(6) motion to dismiss, the Court evaluates the sufficiency of the operative complaint under the "two-pronged approach" announced by the Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). First, plaintiff's legal conclusions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements," are not entitled to the assumption of truth and are thus not sufficient to withstand a motion to dismiss. Id. at 678; Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010). Second, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. at 679.
To survive a Rule 12(b)(6) motion, the allegations in the complaint must meet a standard of "plausibility." Id. at 678; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564 (2007). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. at 678. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.
B. Summary Judgment
The Court must grant a motion for summary judgment if the pleadings, discovery materials before the Court, and any affidavits show there is no genuine issue as to any material fact and it is clear the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material when it "might affect the outcome of the suit under the governing law. . . . Factual disputes that are irrelevant or unnecessary" are not material and thus cannot preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A dispute about a material fact is genuine if there is sufficient evidence upon which a reasonable jury could return a verdict for the non-moving party. See id. The Court "is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried." Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 60 (2d Cir. 2010) (citation omitted). It is the moving party's burden to establish the absence of any genuine issue of material fact. Zalaski v. City of Bridgeport Police Dep't, 613 F.3d 336, 340 (2d Cir. 2010).
If the non-moving party has failed to make a sufficient showing on an essential element of his case on which he has the burden of proof, then summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. at 323. If the non-moving party submits "merely colorable" evidence, summary judgment may be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. at 249-50. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts, and may not rely on conclusory allegations or unsubstantiated speculation." Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (internal citations omitted). The mere existence of a scintilla of evidence in support of the non-moving party's position is likewise insufficient; there must be evidence on which the jury could reasonably find for him. Dawson v. Cnty. of Westchester, 373 F.3d 265, 272 (2d Cir. 2004).
On summary judgment, the Court construes the facts, resolves all ambiguities, and draws all permissible factual inferences in favor of the non-moving party. Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003). If there is any evidence from which a reasonable inference could be drawn in favor of the non-moving party on the issue on which summary judgment is sought, summary judgment is improper. See Sec. Ins. Co. of Hartford v. Old Dominion Freight Line Inc., 391 F.3d 77, 83 (2d Cir. 2004).
II. Waiver Through the Settlement Agreement
The Settlement Agreement does not bar plaintiff's claims.
"A non-party to a contract governed by New York law lacks standing to enforce the agreement in the absence of terms that clearly evidence an intent to permit enforcement by the third party in question." Premium Mortg. Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009) (alteration and internal quotation marks omitted).
Neither the Plan nor Turcan was a party to the Settlement Agreement, which defines the "Parties" as only plaintiff, Parchem, and Ephraim. (Yankwitt Decl. Ex. E). Thus, the question is whether the terms of the Settlement Agreement "clearly evidence an intent to permit enforcement" by the Plan or Turcan. Premium Mortg. Corp. v. Equifax, Inc., 583 F.3d at 108.
They do not.
The only non-parties who arguably have the power to enforce the Settlement Agreement are "affiliates" of Parchem or Ephraim, as well as Parchem's and Ephraim's "heirs, executors, administrators, and successors." (Yankwitt Decl. Ex. E). But neither the Plan nor Turcan is an "affiliate" of Parchem or Ephraim. An "affiliate" is "[a] corporation that is related to another corporation by shareholdings or other means of control," as, for example, PNI was to Parchem. See BLACK'S LAW DICTIONARY 67 (9th ed. 2009); accord Crewe v. Rich Dad Educ., LLC, 884 F. Supp. 2d 60, 75 (S.D.N.Y. 2012) (same); Citibank, N.A. v. Franco, 2011 WL 6961404, at *4 n.2 (S.D.N.Y. Dec. 29, 2011) ("[V]arious New York statutes define an 'affiliate' as 'any company that controls, is controlled by, or is under common control with another company.'" (citing N.Y. Banking Law § 6-1(1)(a); N.Y. Ins. Law § 2101(x)(1)(A))). And although Turcan is the Plan's administrator, she is not a Parchem administrator, as the Plan and Parchem are separate legal entities. See 29 U.S.C. § 1132(d)(1).
The Court recognizes some courts, applying a broader definition of "affiliate," have held that an ERISA plan may be an "affiliate" of an employer. See, e.g., Sullivan v. Cap Gemini Ernst & Young U.S., 573 F. Supp. 2d 1009 (N.D. Ohio 2008). But as Sullivan acknowledged, courts have "come down on both sides of the issue." Id. at 1018. Given this split in the case law—none of which comes from the Second Circuit, the Southern District of New York, or the New York State courts—it can hardly be said the terms of the Settlement Agreement "clearly evidence an intent to permit enforcement" by the Plan or Turcan as "affiliates." Premium Mortg. Corp. v. Equifax, Inc., 583 F.3d at 108 (emphasis added).
Moreover, even assuming plaintiff released his claims in this action by signing the Settlement Agreement, Parchem's subsequent offer to pay plaintiff the policy's cash surrender value in exchange for his agreement to surrender the policy amounts to a waiver of the right to enforce the Settlement Agreement. See Seven-Up Bottling Co. (Bangkok), Ltd. v. PepsiCo, Inc., 686 F. Supp. 1015, 1023 (S.D.N.Y. 1988) ("[V]alid and enforceable rights under a contract may be waived by a subsequent writing or a subsequent course of conduct."). Once plaintiff signed the form, as he was asked to do, defendants lost the right to renege on their offer. See Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 184 (1982) ("A waiver, to the extent that it has been executed, cannot be expunged or recalled.").
And although the Settlement Agreement provides it "may only be amended, modified, terminated or abrogated by a written agreement signed by all Parties," (Yankwitt Decl. Ex. A), "a contracting party may orally waive enforcement of a contract term notwithstanding a provision to the contrary in the agreement." Schapfel v. Taylor, 65 A.D.3d 620, 620 (2d Dep't 2009) (internal quotation marks omitted) (emphasis added); Baker v. Norman, 226 A.D.2d 301, 303 (1st Dep't 1996) (same). "If a provision can be orally waived, a fortiori, it can be waived" through an exchange of emails, as in this case. See Baker v. Norman, 226 A.D.2d at 303 (finding waiver through facsimile transmissions).
Accordingly, defendants' motion for judgment on the pleadings is denied as to plaintiff's claims for a declaratory judgment, an injunction, and promissory estoppel; and plaintiff's motion for judgment on the pleadings on defendants' counterclaim is granted.
III. Preemption of Breach of Contract Claim
Plaintiff contends his acceptance of Parchem's offer to pay him the cash surrender value constituted a contract that defendants breached by failing to pay him. Defendants argue ERISA preempts this breach of contract claim and, consequently, the claim must be dismissed.
Even assuming plaintiff's breach of contract claim is preempted, "the appropriate remedy is not to dismiss . . . the claim but rather to treat it as a claim made under ERISA." Arthurs v. Met. Life Ins. Co., 760 F. Supp. 1095, 1098 (S.D.N.Y. 1991) (emphasis added); accord Wilkins v. Time Warner Cable, Inc., 10 F. Supp. 3d 299, 318 (N.D.N.Y. 2014) ("Where a district court determines that a state law claim is preempted by ERISA, it may properly treat the claim as one brought under ERISA and decide it on the merits."). Treating plaintiff's breach of contract claim as a claim under ERISA, the Court concludes plaintiff is entitled to summary judgment.
Section 502(a)(1)(B) of ERISA authorizes a plan participant to bring a civil action "to recover benefits due to him under the terms of his plan." 29 U.S.C. § 1132(a)(1)(B). "To prevail under § 502, a plaintiff must show that (1) the plan is covered by ERISA, (2) plaintiff is a participant or beneficiary of the plan, and (3) plaintiff was wrongfully denied [a benefit] owed under the plan." Giordano v. Thomson, 564 F.3d 163, 168 (2d Cir. 2009) (citations omitted).
Defendants do not dispute that the Plan is covered by ERISA or that plaintiff was a Plan participant. Defendants' only argument as to why plaintiff cannot recover the policy's cash surrender value under ERISA is that he "waived and released all ERISA claims pursuant to the express terms of the Settlement Agreement." (Defs.' Mem. at 10 n.2). However, as explained above, the Court rejects defendants' waiver argument. Plaintiff is therefore entitled to summary judgment on his breach of contract claim, as treated as a claim under Section 502(a)(1)(B), and defendant's motion for judgment on the pleadings is denied as to this claim.
IV. Attorneys' Fees
ERISA gives district courts discretion to "award attorneys' fees to a beneficiary who has obtained 'some degree of success on the merits.'" Donachie v. Liberty Life Assur. Co. of Boston, 745 F.3d 41, 46 (2d Cir. 2014) (quoting Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 254-55 (2010)). As the Second Circuit has explained, "granting a prevailing plaintiff's request for fees is appropriate absent some particular justification for not doing so." Id. at 47 (internal quotation marks omitted). In deciding whether such a justification exists, courts must consider five factors, "known in this Circuit as the 'Chambless factors.'" Id. at 46 (citing Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir. 1987)). They are:
(1) the degree of opposing parties' culpability or bad faith; (2) ability of opposing parties to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5) the relative merits of the parties' positions.Id. (internal quotation marks omitted).
The Court has carefully considered the Chambless factors, and, for substantially the reasons set forth in defendants' reply brief (Doc. #24), principally the absence of bad faith, the Court declines to award plaintiff attorneys' fees.
CONCLUSION
Defendants' motion for judgment on the pleadings is DENIED.
Plaintiff's motion for judgment on the pleadings and for summary judgment is GRANTED.
Plaintiff's request for attorneys' fees is DENIED.
By February 9, 2015, plaintiff is directed to submit a proposed Judgment in accordance with Local Civil Rule 77.1. Dated: January 30, 2015
White Plains, NY
SO ORDERED:
/s/
Vincent L. Briccetti
United States District Judge