Geller v. County Line Auto Sales, Inc.

• Decision Date: 06 June 1996
• Docket Number: No. 572,D,572
• Citation: 86 F.3d 18
• Parties: , 20 Employee Benefits Cas. 1386, Pens. Plan Guide P 23921T Leon GELLER, Eli Bloom, Irwin Katz, James E. Farley, Mark Herrmann, Trustees of GNY Automobile Dealers Health & Welfare Trust, Plaintiffs-Appellants, v. COUNTY LINE AUTO SALES, INC., Carmine Bellofatto, Patrick DeJoseph, Defendants-Appellees. ocket 95-7570.
• Court: U.S. Court of Appeals — Second Circuit

Page 18

86 F.3d 18

65 USLW 2060, 20 Employee Benefits Cas. 1386,

Pens. Plan Guide P 23921T

Leon GELLER, Eli Bloom, Irwin Katz, James E. Farley, Mark Herrmann, Trustees of GNY Automobile Dealers Health & Welfare Trust, Plaintiffs-Appellants, v. COUNTY LINE AUTO SALES, INC., Carmine Bellofatto, Patrick DeJoseph, Defendants-Appellees.

No. 572, Docket 95-7570.

United States Court of Appeals Second Circuit.

Argued Dec. 12, 1995.

Decided June 6, 1996.

Terrence P. O'Reilly, Foley, Hickey, Gilbert & O'Reilly, New York City, for Plaintiffs-Appellants.

Robert M. Sullivan, Law Offices of Ira J. Greenhill, New York City, for Defendants-Appellees.

Patrick DeJoseph, Hewlett, New York, Defendant-Appellee Pro Se.

Before OAKES, WINTER, and WALKER, Circuit Judges.

WALKER, Circuit Judge:

The plaintiffs, the trustees of the GNY Automobile Dealers Health and Welfare Trust (the "Trust"), commenced this action against County Line Auto Sales, Inc. ("County Line") and two of its officers, Carmine Bellofatto and Patrick DeJoseph, to recover moneys allegedly fraudulently obtained in violation of federal and state law. The plaintiffs appeal from a May 17, 1995 memorandum and order of the United States District Court for the Eastern District of New York (Charles P. Sifton, Chief Judge ) granting the defendants' motion to dismiss the complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Because the district court erred in holding that the plaintiffs' common law fraud claim is preempted by ERISA, we vacate the district court's order.

BACKGROUND

The facts of this case, in which an employer is being sued by a trust for improper administration of an employee benefit plan, are set forth by the district court in Geller v. County Line Auto Sales, Inc., No. CV-94-3123, 1995 WL 313123 (E.D.N.Y. May 17, 1995). On a motion directed to the pleadings, we, like the district court, must take as true the facts as alleged in the complaint. We reiterate only those facts necessary to the disposition of this appeal.

The plaintiffs brought this action in their capacity as trustees for the Trust, which provides medical benefits to members of the Greater New York Automobile Dealers Association (the "Association") and their employees. To be eligible to receive benefits under the Trust, a participant must be a full-time employee of a member-employer. County Line is a member-employer.

In October 1989, the defendants registered Patricia Kleppner, defendant DeJoseph's girlfriend, as a full-time employee of County Line who was eligible for Trust plan membership even though she was not so employed. In reliance, the plaintiffs enrolled Kleppner in the Trust plan effective December 1989. The defendants confirmed Kleppner's status as a full-time employee between December 1989 and August 1993 by remitting monthly premiums to the Trust upon receipt of an invoice. The invoice stated:

By paying this bill the company hereby acknowledges and guarantees that the employees listed are in fact eligible for the group insurance shown according to the terms of the contract as outlined in the employee booklet.

During the relevant period, Kleppner's name was among the employees listed on each invoice.

In November 1991, Kleppner was diagnosed with lung cancer and was hospitalized several times before her death in August 1993. During the period of her illness, Kleppner received medical, diagnostic, and laboratory services for which the plaintiffs paid out $104,554.82 from the Trust fund.

After Kleppner died, the Trust learned that she had never been a County Line employee. The Trust demanded that the defendants reimburse the Trust for its expenditures on Kleppner's behalf. When the defendants refused, the plaintiffs brought this action seeking 1) reimbursement pursuant to ERISA's civil enforcement provisions, 29 U.S.C. § 1132(a), 2) compensatory and punitive damages based upon New York common law fraud, and 3) New York common law restitution.

The district court found that the plaintiffs could not prevail under ERISA's civil enforcement provisions: first, as fiduciaries the plaintiffs were limited to equitable relief under 29 U.S.C. § 1132(a)(2) and the claim here was for money damages; second, the broad panoply of remedies available against fiduciaries under 29 U.S.C. § 1132(a)(3) was not available to the plaintiffs because the defendants were not fiduciaries. The district court further held that ERISA's preemption provision, 29 U.S.C. § 1144(a), barred the plaintiffs' second and third causes of action for state law relief. The Trustees now appeal.

DISCUSSION

We review de novo the dismissal of the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, taking as true the facts alleged in the complaint and drawing all reasonable inferences in the plaintiffs' favor. Jackson Nat'l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699-700 (2d Cir.1994) (citing Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir.1991)). A dismissal under Rule 12(b)(6) for failure to state a cognizable claim may be affirmed only where "it appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

I. ERISA's civil enforcement provisions

The Trust's first cause of action is predicated upon 29 U.S.C. § 1132(a), which identifies the persons empowered to bring a civil action and provides in relevant part:

A civil action may be brought--

...

* * *

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title [for imposition of liability for breach of fiduciary duty]; [or]

(3) by a participant, beneficiary or fiduciary (A) to enjoin any act or practice which violates any provision of this sub-chapter 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.

The plaintiffs may recover against the defendants if they can demonstrate either that the defendants are "fiduciaries" under subsection (2) or that restitution is encompassed by the phrase "other ... equitable relief" in subsection (3). We agree with the district court that the plaintiffs are unable to recover under either provision.

Section 1132(a)(2) incorporates by reference 29 U.S.C. § 1109, which states in pertinent part:

(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter 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 the use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.

Thus, the plaintiffs are foreclosed from recovering under § 1132(a)(2) unless they can demonstrate that County Line, Bellofatto, and DeJoseph are fiduciaries. They are not. "Fiduciary" is defined, in relevant part, as follows:

[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A). The Department of Labor regulations that set forth the Department's interpretative guidelines further delineate the responsibilities of a fiduciary, explaining that "persons who have no power to make any decisions as to plan policy, interpretations, practices or procedures" and, therefore, perform "purely ministerial functions" are not fiduciaries. 29 C.F.R. § 2509.75-8. According to the regulations, the performance of ministerial functions includes, inter alia, the determination of eligibility for participation or benefits, the maintenance of service and employment records, the calculation of benefits, and the processing of claims. Id. A person performing these functions

is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, and does not render investment advice with respect to any money or other property of the plan and has no authority or responsibility to do so.

Id.

The defendants' duties, as alleged in the complaint, are insufficient to support a finding that they are fiduciaries. The single paragraph of the complaint that addresses their responsibilities in relation to the plan states only that each month the Trust presented an invoice to County Line which "set forth Patricia Kleppner as a covered employee of County Line." Compl. p 15. The defendants' acts in guaranteeing eligibility and remitting premiums to the Trust cannot be construed as discretionary. Because the complaint fails to allege facts sufficient to support an inference that any of the defendants is a plan fiduciary, no liability can attach to them under § 1132(a)(2).

United States Steel Corp. v. Com. of Pennsylvania Human Relations Comm'n, 669 F.2d 124, 127 (3d Cir.1982), cited by the plaintiffs, is inapposite. We agree with the plaintiffs that there is "a legislative presumption that not infrequently the...