First Nat. Bank v. ACCO USA, INC.-IBT RET. PLAN, 93 C 896.

• Decision Date: 07 January 1994
• Docket Number: No. 93 C 896.,93 C 896.
• Citation: 842 F. Supp. 311
• Parties: THE FIRST NATIONAL BANK OF CHICAGO AS TRUSTEE OF THE INSTITUTIONAL REAL ESTATE FUND F, et al., Plaintiffs, v. ACCO USA, INC.-IBT RETIREMENT PLAN, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

842 F. Supp. 311

THE FIRST NATIONAL BANK OF CHICAGO AS TRUSTEE OF THE INSTITUTIONAL REAL ESTATE FUND F, et al., Plaintiffs, v. ACCO USA, INC.-IBT RETIREMENT PLAN, et al., Defendants.

No. 93 C 896.

United States District Court, N.D. Illinois, E.D.

January 7, 1994.

William F. Conlon, Mark Bruce Blocker, Sidlewy & Austin, Chicago, IL, for plaintiffs First Nat. as Trustee.

Harold C. Hirshman, Roger C. Siske, Sonnenschein, Nath & Rosenthal, Chicago, IL, for Manufacturing Corp. Retirement Trust and Donald P. Anderson.

Orin D. Brustad, Clarence L. Pozza, Jr., Miller, Canfield, Paddock & Stone, Detroit, MI, for defendant — ACCO USA, Inc.-IBT Retirement, Jim Beam Brands Co. Plans.

Joel S. Siegel, Bryan Robert Bagdady, Horvath & Lieber, Chicago, IL, for defendant — A.J. Maggio Co. Retirement Trust.

Robert W. Gettleman, Jeffrey Hoke Bergman, Lawrence G. Gallagher, D'Ancona & Pflaum, Chicago, IL, Jerry M. Aufox, Franklin Park, IL, for defendants, A.M. Castle & Co., Employer Trust, A.M. Castle & Co. Employers Profit Sharing Trust.

David S. Steefel, Holme, Roberts & Owen, Denver, CO, for defendant, Donald P. Anderson Trust.

Andrew R. Laidlaw, John T. Murray, Marcia Mahoney, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for defendant, Fort Howard Corp. Profit Sharing Retirement Plan.

Dennis P.W. Johnson, Walter Jones, Jr., Jorge V. Cazares, Pugh, Jones & Johnson, Chicago, IL, Thomas C. Graves, Terry L. Tyrrell, Morrison & Heckler, Kansas City, MO, for defendant, Harris-Hub Co., Inc. Profit Sharing Plan and Trust.

William Edmund Kenny, Michael Gerard Bruton, Pretzel & Stouffer, Chtd., Chicago, IL, for defendants, Henry Newgard & Co. Employee Profit Sharing Trust, Illinois Mun. Retirement Fund.

Lawrence L. Summers, Paul F. Russell, Vedder, Price, Kaufman & Kammholz, Chicago, IL, for defendant, Inland Steel Industries Pension Plan and Trust.

Richard Jonathon Street, Wildman, Harrold, Allen & Dixon, Chicago, IL, for defendants, Kroger Co. Master Retirement Trust, McCormick Pension Plan.

James J. Wochner, Northbrook, IL, for defendant, Ortman-McCain Co. Employees Profit Sharing Plan.

John Skapars, Mark Mayer, Hubbard, Hubbard, O'Brien & Hall, Chicago, IL, for defendant, Pioneer Paint Products Inc. Employees' Defined Ben. Pension Plan and Trust.

Mark D. Erzen, Alan Bruce White, Karganis & White, Ltd., Chicago, IL, for defendant, Safety Kleen Pension Trust Fund.

David Stewart Fleming, Kathryn Elizabeth Garipay, Schaefer, Rosenwein & Fleming, Chicago, IL, Richard W. Reinthaler, Alice Jump, Susan L. Shelhorse, Dwight A. Healy, White & Case, New York City, for defendant, Schering Plough Corp. Master Retirement Plan Trust.

Arthur Weil Friedman, Robert Dickey Hamilton, James P. Bailinson, Miller, Shakman, Hamilton, Kurtzon & Shlifki, Chicago, IL, Richard G. Garrett, Elise D. Weakley, Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, Miami, FL, for defendant, State Bd. of Admin. of Fla.

Stephen David Libowsky, Kenneth Michael Kliebard, Katten, Muchin & Zavis, Chicago, IL, for defendant, St. Clair Mfg. Corp. Retirement Trust.

Harold C. Hirshman, Roger C. Siske, Sonnenschein, Nath & Rosenthal, Chicago, IL, for defendant, The First Nat. Bank of Chicago.

Richard I. Loebl, Jim Beam Brands, Gary Faria, Thomas R. Cox, Miller, Canfield, Paddock & Stone, Detroit, MI, Roberta L. Goodman, American Brands, Inc., Deerfield, IL, for counter claimant, ACCO USA, Inc.-IBT Retirement Plan.

MEMORANDUM OPINION AND ORDER

ZAGEL, District Judge.

This case emanates from First National Bank of Chicago's ("the Bank") attempt to satisfy matured redemption requests from its Institutional Real Estate Fund F ("Fund F") by distributing, to the withdrawing participant plans, cash and quitclaim deeds to undivided fractional interests in each of the Fund F real estate parcels.¹ The defendant plans rejected the proposed distribution in early 1993. The Bank subsequently filed a complaint for injunctive and declaratory relief, compelling each of the defendant plans to accept their fractional shares of Fund F real property, and directing the Trustee to manage the refused fractional shares under the terms of the Trust Instrument during the pendency of this litigation.

The defendants move to dismiss the complaint initially for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) and ultimately for lack of subject matter jurisdiction pursuant to Rule 12(b)(1).² For the reasons set forth below, the defendants' motion to dismiss Counts I and III is denied, and the motion to dismiss Count II is granted.

Count I of the Bank's complaint is entitled "Breach of the Trust Instrument and the Comptroller's Regulations and Violation of ERISA." Specifically, the Bank says that: 29 U.S.C. § 1105(a) makes the Bank a cofiduciary of each of the defendant plans; 29 U.S.C. § 1104(a)(1)(D) requires fiduciaries to discharge their duties "in accordance with the documents and instruments governing the plans"; "12 C.F.R. § 9.18(b)(6), as interpreted by the Comptroller and upheld by the Seventh Circuit, requires that in kind distribution be made by means of the grant of undivided fractional interests in each of the Fund F properties"; and in rejecting the quitclaim deeds to undivided fractional interests, the defendants breached the Trust Instrument and their fiduciary duties in violation of § 1104(a)(1)(D).

Count II states that the Bank, as Trustee, advised the defendants that they were required by law to accept the proposed distribution and that their refusal would be interpreted as a direction to maintain the fractional interests in Fund F until entered otherwise by the court. The Bank requests a judgment against each defendant plan, declaring that the rejected fractional interests remain in Fund F and that the Bank, as Trustee, retains its full powers and protection under the Trust agreement until the Court orders otherwise.³

The defendants urge that the entire complaint must be dismissed as moot because there is no justiciable case or controversy in Article III terms and, therefore this Court has no federal jurisdiction. The defendants argue that the case or controversy between the parties ceased to exist once the Bank decided to terminate Fund F and liquidate its properties pursuant to the Termination Plan. By letter dated April 29, 1993, the Bank advised the OCC of its intent to terminate Fund F and attached a copy of the Termination Plan.⁴ Under the Plan, the Bank as trustee will establish a "Fund F Liquidating Account" of Fund F assets (excluding the Redeemed Former Participants' rejected fractional interests) will sell all Fund F properties "as soon as feasible and prudent," and will periodically and ratably distribute cash available after expenses, including budgeted capital improvements and operation costs. With respect to "The Refused Fractional Interests of the Redeemed Former Participants," the Termination Plan provides as follows:

The Trustee's Termination Plan does not and should not be understood to operate, to affect or override the claims, if any, of any Redeemed Former Participant. As noted above on January 15, 1993, the Trustee made a ratable distribution of cash and fractional interests in property to the Redeemed Former Participants. The Trustee asked each Redeemed Former Participant to confirm that pending resolution of the distribution by a court or otherwise the Trustee is empowered to deal with the refused fractional interests of the Redeemed Former Participants under the same terms as the Trust Instrument. Confirmation was received from each redeemed Former Participant. Consequently, pending resolution by a court or otherwise, the Trustee continues to retain the power and duties to administer the refused fractional interests of the Redeemed Former Participants in accordance with the terms of the Trust Instrument. The Trustee will administer the fractional interests refused by the Redeemed Former Participants within an "Interim Liquidation Account." The Trustee intends to jointly manage the Interim Liquidation Account and the Fund F Liquidating Account for sale purposes and for other necessary investment decisions until such time as the distribution of the rejected fractional interests is resolved by a court or otherwise. (Emphasis added.)

"Mootness can kill a lawsuit at any stage." Steffel v. Thompson, 415 U.S. 452, 459 n. 10, 94 S.Ct. 1209, 1216 n. 10, 39 L.Ed.2d 505 (1974). A case becomes moot "`when the issues presented are no longer "live" or the parties lack a legally cognizable interest in the outcome.'" Murphy v. Hunt, 455 U.S. 478, 481, 102 S.Ct. 1181, 1183, 71 L.Ed.2d 353 (1982).⁵ To test for mootness, a court must ask whether "the relief sought, if granted, would make a difference to the legal interests of the parties (as distinct from their psyches, which might remain deeply engaged with the merits of the litigation)." Air Line Pilots Ass'n Int'l v. UAL Corp., 897 F.2d 1394, 1396 (7th Cir.1990). As Judge Posner noted in Air Line Pilots, the mootness test functions on a continuum, and:

it is usually possible to conjure up a set of facts under which the relief sought would make a difference to the parties. But if it would be a very little difference, then to economize on judicial resources as well as to give expression to policies thought inherent in Article III the case will be declared moot and relief withheld.

Id. at 1396-97.

The Bank insists that the case is not moot. It argues that the declaration (sought in Count II) will resolve a present dispute over the legal basis for the Trustee's continuing powers over the refused fractional interests and the Trustee's ability to deduct its fees. The complaint, however, mentions nothing about a dispute over Trustee fees, and a "live" controversy only exists if the Trustee's exercise of power is contested, regardless of the legal basis for that exercise. See Air Line Pilots, 897 F.2d at 1397 (the mootness criterion seems to imply that "it...