Janese v. Fay

Decision Date27 August 2012
Docket NumberDocket Nos. 11–5369–cv(L), 12–80–cv(XAP).
Citation692 F.3d 221
PartiesDouglas A. JANESE, Christopher V. Shakarjian, Louis D'Aurizio, as representatives of the participants and beneficiaries of the former Niagara Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds, Plaintiffs–Appellants–Cross–Appellees, v. David A. FAY, Angelo Massaro, Dominic P. Massaro, George R. Weidert, Christopher M. Scrufari, David J. Knapp, Trustees of the Niagara–Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds from 1994 through 1998, and John J. Fuchs, Patrick Morin, John J. Simmons, Trustees of the Niagara–Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds from 2006 through 2008, and Gordon J. Knapp, Robert P. Williams, Thomas P. Hartz, Trustees of the Niagara–Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds in 2000, and Santo S. Scrufari, Russell P. Scrufari, Plan Managers of the Niagara–Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds, and Empire State Carpenters Welfare Fund, Empire State Carpenters Pension Fund, Defendants–Appellees–Cross–Appellants.
CourtU.S. Court of Appeals — Second Circuit


Timothy Alan McCarthy, Buffalo, NY (Burd & McCarthy, Buffalo, NY, on the brief), for AppellantsCross–Appellees.

Jeffrey S. Swyers, Washington, D.C. (Allison A. Madan, Slevin & Hart, P.C., Washington, D.C.; Robert L. Boreanaz, Lipsitz Green Scime Cambria LLP, Buffalo, NY, on the brief), for AppelleesCross–Appellants.

Before: NEWMAN, WINTER, and POOLER, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal and a purported cross-appeal primarily concern two issues arising under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. The first issue is whether trustees of a multi-employer pension fund act as fiduciaries when they amend the pension plan. The second issue is whether the claims asserted in this case are time-barred. These issues arise on an appeal by present and former beneficiaries of the former Niagara–Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds 1 from the May 2, 2011, judgment of the District Court for the Western District of New York (John T. Curtin, District Judge) dismissing their complaint against present and former trustees and plan managers of the Funds. The PlaintiffsAppellants also appeal from the December 1, 2011, order denying their motion for reconsideration and for leave to amend. By a purported cross-appeal, the DefendantsAppellees seek to appeal that part of the District Court's October 22, 2010, order that had denied dismissal of Counts I–V of the Complaint for failure to state a claim on which relief could be granted; these counts were subsequently dismissed as time-barred.

We conclude that dismissal of Counts I–V was proper because the trustees were not acting as fiduciaries in amending the Plan, and in reaching that conclusion, we deem the contrary rulings of our Court in Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032 (2d Cir.1985), and Siskind v. Sperry Retirement Program, Unisys, 47 F.3d 498 (2d Cir.1995), to have been abrogated by subsequent decisions of the Supreme Court.2 We also conclude that fact issues remain as to whether Counts VII–IX were properly dismissed as time-barred. The dismissal of Count VI is not challenged on appeal. On the appeal, we therefore affirm in part, vacate in part, and remand. We dismiss the cross-appeal as unnecessary.


The parties. This is a derivative action brought on behalf of the participants and beneficiaries of the Funds seeking to recover assets that the PlaintiffsAppellants assert were wrongfully depleted by the DefendantsAppellees in violation of their fiduciary duties. The DefendantsAppellees are present and former trustees or plan managers of the Funds. The Complaint divides the trustees into four separate groups, based on whether they served as trustees during the following periods: (1) July 13, 2000 to December 31, 2007; (2) January 26, 1999 to July 12, 2000 (the 2000 trustees); (3) January 20, 1994 to January 25, 1999 (the 1994–98 trustees); and (4) November 1993 to January 19, 1994.3 The two plan managers are Santo Scrufari, who served from 1985 to July 14, 1996, and his son Russell, who succeeded his father and served until December 31, 2008.

The allegations in the Complaint. The Complaint asserted nine counts of breach of fiduciary duty, eight of which are at issue in this appeal. Counts I–V alleged various plan amendments that are claimed to have breached the trustees' fiduciary duties. Count VI alleged an increase in the monthly retirement benefit for a retired trustee, accomplished with a plan amendment. The dismissal of this count is not challenged on appeal.

Count VII alleged that, from 1993 to July 14, 1996, Santo Scrufari manipulated Pension Fund calculations in order to grant himself and one trustee higher pay-outs than they were owed under the Fund Plan. He concealed this from the other trustees by altering the relevant pension credit records. Count VII further asserted that the 1994–98 trustees breached their fiduciary duties by failing to adequately monitor Scrufari. Counts VIII–IX alleged that the Scrufaris and their associates stole money from the Welfare Fund over a number of years, fraudulently concealed these withdrawals by labeling them “Scholarship” or “Health Care” benefits, and failed to pay taxes on these withdrawals. Like Count VII, Counts VIII and IX further asserted that the 1994–98 trustees and the 2000 trustees failed to adequately monitor the Scrufaris.

Prior litigation involving Santo Scrufari. In 2006, Santo Scrufari was found liable for a number of breaches of fiduciary duty, including improper weighting of his fringe benefits, during the period between March 1989 and October 1992. See LaScala v. Scrufari, No. 93–CV–982C(F), 2006 WL 469404, at *1 (W.D.N.Y. Feb. 27, 2006), rev'd,479 F.3d 213 (2d Cir.2007), on remand,2010 WL 475284, at *1 (W.D.N.Y. Feb. 5, 2010). That suit did not consider Scrufari's activities after October 1992. See LaScala, 2006 WL 469404 at *1.

Procedural history of the pending suit. The Plaintiffs filed the present action on June 26, 2009. They assert that they became aware of the Defendants' illegal activities after September 20, 2007, when damages discovery in the LaScala case revealed incriminating documents. The Defendants moved to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), principally asserting that the Plaintiffs' claims were time-barred under section 413 of ERISA, 29 U.S.C. § 1113 (as amended). The District Court granted the motion as to all pertinent claims on that basis but rejected the Defendants' alternative claim that Counts I–V did not allege actions that fell within the scope of ERISA's fiduciary duty statute.

Following entry of judgment, the Plaintiffs moved for reconsideration of the District Court's order and for leave to amend the complaint to allege fraud with greater particularity. The District Court denied the motion for reconsideration, rendering the motion to amend moot. See National Petrochemical Co. of Iran v. M/T Stolt Sheaf, 930 F.2d 240, 244 (2d Cir.1991) ( [O]nce judgment is entered the filing of an amended complaint is not permissible until judgment is set aside or vacated pursuant to Fed.R.Civ.P. 59(e) or 60(b).”) (internal quotation marks and citation omitted).

I. Whether Trustees Act as Fiduciaries in Amending a Plan

We consider first the contention of the Appellees that the dismissal of Counts I–V should be affirmed on the ground that the actions challenged in those counts were pension plan amendments, which are not fiduciary actions and therefore do not violate section 404(a)(1) of ERISA. Initially, we note that the Appellees took the unnecessary step of filing a cross-appeal to assert this contention. An appellee needs to file a cross-appeal only to request an appellate court to grant some additional relief beyond the judgment entered by a district court. See Carlson v. Principal Financial Group, 320 F.3d 301, 309 (2d Cir.2003). In the absence of a cross-appeal, an appellee is entitled to seek affirmance on any ground supportable by the record. See Bruh v. Bessemer Venture Partners III L.P., 464 F.3d 202, 205 (2d Cir.2006) ([W]e may affirm on any basis for which there is sufficient support in the record, including grounds not relied on by the district court.”). For this reason, we will dismiss the cross-appeal as unnecessary, but nonetheless consider the contention that the Appellees have advanced in support of the District Court's judgment.

In 1985, this Court ruled that, with respect to multi-employer pension plans, the act of amending a plan should be treated as a fiduciary function, see Chambless, 772 F.2d at 1040, thereby invoking section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1), which obliges a fiduciary to “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries.” Ten years later we ruled that amending a single employer pension plan was not a fiduciary function, pointedly distinguishing Chambless on the ground that [i]n the multi-employer setting, trustees amending a pension plan ‘affect the allocation of a finite plan asset pool’ to which each participating employer has contributed.” See Siskind, 47 F.3d at 506 (quoting Musto v. American General Corp., 861 F.2d 897, 912 (6th Cir.1988)). The Appellees contend that the ruling in Chambless and the language in Siskind distinguishing multi-employer plans has been abrogated by the combined effect of three decisions of the Supreme Court: Curtiss–Wright Corp. v. Schoonejongen, 514 U.S. 73, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995); Lockheed Corp. v. Spink, 517 U.S. 882, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996), and Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999). The Appellants respond that the Chambless/ S...

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