Bunt v. Pension Mortg. Associates, Inc.

Decision Date24 October 1995
Citation666 A.2d 1091,446 Pa.Super. 359
PartiesDr. Alexander BUNT, Jr., as Trustee for Christian Medical Center Defined Benefit Pension Plan, Campus Medical Center, Appellant v. PENSION MORTGAGE ASSOCIATES, INC., Francis J. Regan, Jr., and Jeffrey Williams. Dr. Alexander BUNT, Jr., as Trustee for Christian Medical Center Defined Benefit Pension Plan, Campus Medical Center, Appellant v. Francis J. REGAN, Jr., and Jeffrey Williams, Individually and T/A Williams Financial Group, Robert G. Welch, Esquire, Individually and T/A Robert G. Welch, P.C. and Intrepid I Services, Inc., T/A Intrepid I.
CourtPennsylvania Superior Court

David Zicherman, Philadelphia, for appellant.

William G. Halligan, Media, for appellees.

Before BECK, SAYLOR and HESTER, JJ.

HESTER, Judge:

Dr. Alexander Bunt, Jr., in his capacity as trustee for Christian Medical Center Defined Benefit Pension Plan, Campus Medical Center (the "Plan"), appeals the April 26, 1994 decision of the trial court to dismiss two actions based on the fact that they are pre-empted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S. §§ 1001, et seq., and that pursuant to that statute, Pennsylvania lacks jurisdiction. We affirm.

Two separate actions are at issue herein. 1 Appellant instituted both actions in his capacity as trustee of the Plan. In 1989, appellant instituted the first action against Pension Mortgage Associates, Inc., Francis J. Regan, Jr., and Jeffrey Williams. In 1992, appellant instituted the second action against Mr. Regan, Mr. Williams, Williams Financial Group, Robert G. Welch, Esquire, Robert G. Welch, P.C., and Intrepid I Services, Inc., t/a Intrepid I. The defendants collectively are the appellees. Both actions concern the fact that appellees allegedly advised appellant to invest the Plan assets in investment vehicles which suffered losses.

In the 1989 complaint, appellant alleges the following. Since January, 1986, the individual defendants have been employed to administer the Plan, have been employed as investment fund managers, and have directed fund investments. In 1989, the individual defendants recommended that Plan assets be placed in a real estate mortgage which they said would be financially safe. The mortgage was to yield an annual return of eleven percent and was secured with 118 acres of real estate in New Jersey. The defendants prepared a mortgage participation agreement for the transaction, and appellant liquidated Plan assets to invest $162,025.68 in the mortgage investment vehicle. The individual defendants received a finder's fee for the investment, and in addition, the corporate defendant, in which the two individual defendants own a controlling interest, received interest income on the mortgage principal. Appellant alleges in the complaint that he received only two interest payments from this venture and has not received any return of his principal.

As relief, appellant requests that the corporate defendant be dissolved, the mortgage agreement be rescinded, sanctions authorized under ERISA be imposed, an accounting be ordered, all transactions between the Plan and the corporate defendant be set aside, all money forwarded to the corporate defendant be reimbursed to the Plan, all outstanding debts due the Plan under the mortgage agreement be paid, and lost profits be refunded.

In the 1992 action, appellant alleges the following. Mr. Regan and Mr. Williams were responsible for the investment of Plan assets and administration of the Plan. In addition, Mr. Welch was hired to assist in the administration of the Plan and investment of Plan assets. The individual defendants collusively induced appellant to execute certain investment contracts and transfer $644,030.58 from the Plan to investments in nine entities, including Intrepid I Services, Inc. Appellant never was told that Mr. Williams and Mr. Welch were officers, directors, and controlling shareholders in that corporation. Appellant also was not informed that Mr. Williams received a commission on the foregoing investment, which was shared with the other two individuals.

The investments did not perform as represented by the defendants, and in June, 1990, appellant received notice that one of the nine entities filed for bankruptcy. In the 1992 action, appellant again requests return of the Plan investments and remedies similar to those requested in the 1989 action.

The two actions were consolidated. After the pleadings were closed and discovery was conducted and upon motion by appellees, both actions were dismissed due to the operation of ERISA. This appeal followed.

Congress has the power to pre-empt state law as well as state causes of action pursuant to the supremacy clause of the United States Constitution. U.S. Const.Art. VI, cl. 2. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992); Gingold v. Audi-NSU-Auto Union, A.G., 389 Pa.Super. 328, 567 A.2d 312 (1989). State law can be pre-empted by federal legislation either explicitly in the statute itself or implicitly. In the latter case, pre-emption will be found if the state law is in actual conflict with the federal law or if federal regulation of the area at issue is so comprehensive that the inference is created that Congress intended to occupy the entire area of law. Cipollone v. Liggett Group, Inc., supra; see also Heiple v. C.R. Motors, Inc., 446 Pa.Super. 310, 666 A.2d 1066 (1995).

At issue in this case is ERISA's express pre-emptive provision, 29 U.S.C. § 1144 (emphasis added): 2

(a) Except as provided in subchapter (b) 3 of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ...

....

(c) For purposes of this section:

(1) The term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State....

(2) The term "State" includes a State, and political subdivisions thereof, or any agency or instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this subchapter.

Section 1144 is included in subchapter I of ERISA. This subchapter expansively governs reporting and disclosure requirements for all employee benefit plans, the substantive provisions that must be included in employee benefit pension plans, funding requirements for employee benefit pension plans, fiduciary responsibility and fiduciary liability provisions applicable to employee benefit plans, and administrative and enforcement provisions. Among the enforcement provisions is 29 U.S.C. § 1132 (emphases added), which regulates jurisdiction and provides in relevant part:

Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section.

Subsection (a)(1)(B) confers concurrent state jurisdiction only with respect to civil actions brought by participants or beneficiaries and is not applicable herein.

Furthermore, portions of ERISA included in subchapter I involve extensive regulation of fiduciaries. Those provisions outline the duties of fiduciaries, the standards of care applicable to them, and transactions they are not permitted to perform. See 29 U.S.C. §§ 1101-1114 (part 4 of subchapter I of subtitle B of ERISA--Fiduciary Responsibility). Especially pertinent to this case is 29 U.S.C. § 1109, which provides in relevant 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 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. A fiduciary may also be removed for a violation of section 1111 of this title.

Where, as here, Congress has considered the issue of pre-emption and has included a provision addressing the issue, then that provision is to be used as the controlling indication of Congress's intent with regard to the viability of state law. Cipollone v. Liggett Group, Inc., supra. Where the language is broad, it must be given that effect and will not be given a restrictive reading. Cipollone v. Liggett Group, Inc., supra. ERISA's language is broad, and the Supreme Court has ruled specifically that the provision was intended to pre-empt any state law 4 that relates to an employee benefit pension plan; it is not necessary that the law conflict with a substantive provision in ERISA to be pre-empted. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). If the substantive remedies provided by state law cover the same remedies provided in ERISA, the state law is pre-empted. Id. Section 1109 provides a remedy to the Plan for the actions of appellees which are contained in these complaints. ERISA therefore pre-empts these actions.

Furthermore, the jurisdictional provision of ERISA mandates that all actions by or against a Plan, except those specified, are to be brought in federal court. These are not actions subject to concurrent state jurisdiction as they were not brought by a participant or beneficiary to recover a benefit due under the terms of a plan, to enforce rights under a plan, or to clarify rights to future benefits. These are actions instituted by a Plan...

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