Justice v. Bankers Trust Co., Inc., Civ. A. No. CV83-L-5188-NE.

• Decision Date: 19 April 1985
• Docket Number: Civ. A. No. CV83-L-5188-NE.
• Citation: 607 F. Supp. 527
• Parties: Curtis JUSTICE, et al., Plaintiffs, v. BANKERS TRUST COMPANY, INC., a foreign corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of Alabama

607 F. Supp. 527

Curtis JUSTICE, et al., Plaintiffs, v. BANKERS TRUST COMPANY, INC., a foreign corporation, et al., Defendants.

Civ. A. No. CV83-L-5188-NE.

United States District Court, N.D. Alabama, Northeastern Division.

April 19, 1985.^*

COPYRIGHT MATERIAL OMITTED

Brinkley & Ford, J. Allen Brinkley, Robert H. Ford, Daniel F. Aldridge, Price & Henson, Walter J. Price, Jr., Huntsville, Ala., for plaintiffs.

Bradley, Arant, Rose & White, Samuel H. Franklin, Richard H. Walston, Birmingham, Ala., for defendants.

MEMORANDUM OF OPINION

LYNNE, Senior District Judge.

This case involves so-called "welfare" benefits under a supplemental unemployment benefit ("SUB") plan covered by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. The SUB Plan at issue was created by a collective bargaining agreement between employer Revere Copper & Brass, Inc. ("Revere"), and the United Steelworkers of America, AFL-CIO ("the Union"), which is the union representing employees at Revere's Scottsboro facilities. In order to effectuate the terms of the SUB Plan, Revere entered into a trust agreement to provide for the custody and investment of plan assets. Defendant Bankers Trust Company was appointed trustee pursuant to this agreement.

Under the original terms of the plan, the trust fund was pre-funded. However, the plan was later amended to provide for funding by Revere on an "as-needed" basis; in other words, Revere was to pay into the fund only so much as was required to pay the calculated benefits due for a particular week.

In October, 1982, Revere filed for reorganization under Chapter 11 of the Bankruptcy Code and simultaneously ceased making payments to the trust fund for distribution of benefits. On the same day that Revere filed its Chapter 11 petition, Revere notified the Union that it intended to declare bankruptcy and cease making certain benefit contributions, including SUB Plan contributions. The Union promptly filed a grievance which has since been held in abeyance in deference to the bankruptcy proceedings.

In addition, the Union is presently pursuing a claim in the bankruptcy proceedings for all outstanding SUB Plan benefits due under the terms of the amended Plan. Apparently, the principal issue in regard to the Union's claim in bankruptcy is whether the plan participants and beneficiaries are administrative creditors (and hence entitled to 100 cents on the dollar) or trade creditors (and hence entitled to only 65 cents on the dollar). Deposition of Carl Statum at 79-89, 92-95.

Plaintiffs in the instant case are certain employees of Revere claiming entitlement to supplemental unemployment benefits which apparently were "guaranteed" under the collective bargaining agreement. Plaintiffs are obviously precluded from proceeding directly against Revere in this Court due to the pendency of the bankruptcy proceedings, see 11 U.S.C. § 362, and apparently are not content to await the outcome of the claims made against Revere on their behalf in bankruptcy court. Instead, plaintiffs seek to recover their "gauranteed" benefits (and related damages) from Bankers Trust, on the theory that Bankers Trust breached certain fiduciary duties owing to the plaintiffs under ERISA. Primarily on this basis, the plaintiffs filed suit in the Circuit Court of Jackson County, Alabama. The complaint alleged not only that Bankers Trust violated its fiduciary duties under various sections of ERISA, but also that Bankers Trust was liable for alleged breaches of fiduciary duties by Revere. In addition, plaintiffs raised state law claims of fraud and misrepresentation, conversion, and a claim for money had and received. Bankers Trust removed the lawsuit to this Court on the basis of federal question jurisdiction under ERISA. A subsequent motion to remand filed by the plaintiffs was denied. Several months later, on September 24, 1984, Bankers Trust filed a motion for summary judgment. After numerous continuances and extensions of time to allow plaintiffs to adduce all available evidence in opposition to the motion, with a full opportunity having been afforded the parties to complete discovery, the motion is now ripe for adjudication. There being no genuine issue as to any material fact, the Court concludes that the defendant is entitled to judgment as a matter of law.¹

The state law claims will be dealt with at the outset.² With regard to the claims for conversion and for money had and received, the thrust of those claims is the mismanagement or wrongful administration of the corpus of an ERISA trust fund. Similarly, the claims of fraud and misrepresentation are premised upon the suppression of material facts which Bankers Trust, as a plan fiduciary, was obligated to disclose. Viewed in this light, it becomes plain that no recovery may be had upon these state law claims unless the right to such recovery arises under ERISA. Section 514 of ERISA, 29 U.S.C. § 1144(a), preempts all state laws that "relate to" any employee benefit plan:

Except as provided in subsection (b) 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 described in § 1003(a) of this title and not exempt under § 1003(b) of this title.

29 U.S.C. § 1144(a) (emphasis supplied). The only state laws expressly exempted from ERISA's broad preemptive sweep are those laws regulating insurance, banking and securities, and criminal laws of general application. 29 U.S.C. § 1144(b).

In light of this express Congressional declaration of preemptive intent, the Court need not determine whether and to what extent state law fraud and misrepresentation principles might conflict with or alter the requirements of ERISA. See Brown v. Hotel & Restaurant Employees & Bartenders International Union Local 54, ___ U.S. ___, ___ - ___, 104 S.Ct. 3179, 3185-86, 82 L.Ed.2d 373, 382-83 (1984); Fidelity Federal Savings & Loan Assoc. v. De La Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982). The import of the statutory language cannot be mistaken. As the Supreme Court stated in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981), ERISA was "meant to establish pension plan administration as exclusively a federal concern."

Recently, in Shaw v. Delta Air Lines Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), the Supreme Court confirmed ERISA's broad preemptive sweep and further confirmed that the term "relate to" as used in the Act was to be given a liberal and broad interpretation. As noted by the Court, it was the intent of Congress to eliminate all possibility of conflict with state law principles and to make the field of employee benefit plans exclusively federal in nature. 463 U.S. at 99, 103 S.Ct. at 2901, 77 L.Ed.2d at 502. Indeed, Congress considered and rejected a proposal to limit the preemptive scope of the statute to the specific areas and issues concerning employee benefit plans directly regulated by ERISA's express provisions, reasoning that "such a formulation raised the possibility of endless litigation over the validity of state action that might impinge on the federal regulatory scheme." Shaw v. Delta Air Lines, Inc., 463 U.S. at 99, n. 20, 103 S.Ct. at 2901, n. 20, 77 L.Ed.2d at 502, n. 20 (1983). See also 120 Cong.Rec. 29942; Hewlett-Packard Co. v. Barnes, 425 F.Supp. 1294, 1298-1300 (N.D.Cal.1977), affirmed 571 F.2d 502 (9th Cir.1978), cert. denied 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978); In re C.D. Moyer Co. Trust Fund, 441 F.Supp. 1128, 1130-31, n. 4 (E.D.Pa.1977), affirmed 582 F.2d 1273 (3d Cir.1978). Thus, the settled construction of 29 U.S.C. § 1144(a) is that it preempts not only state laws dealing with the subject matters directly covered by ERISA, but also any state laws which "relate" either directly or indirectly to an employee benefit plan. Shaw v. Delta Air Lines, 463 U.S. at 95-100, 103 S.Ct. at 2899-2901, 77 L.Ed.2d at 501-502. Accord, Wadsworth v. Whaland, 562 F.2d 70 (1st Cir.1977), cert. denied 435 U.S. 980, 98 S.Ct. 1630, 56 L.Ed.2d 72 (1978); District 65, UAW v. Harper & Row Publishers, Inc., 576 F.Supp. 1468 (S.D.N.Y.1983). See generally American Progressive Life and Health Ins. Co. of New York v. Corcoran, 715 F.2d 784 (2d Cir.1983); Bucyrus-Erie Co. v. Dept. of Industry, Labor and Human Relations, 599 F.2d 205 (7th Cir.1979), cert. denied 444 U.S. 1031, 100 S.Ct. 701, 62 L.Ed.2d 667 (1980).

In the instant case, it is clear that the state law claims of fraud and misrepresentation are preempted. As noted above, these claims are based upon the alleged suppression of material facts which Bankers Trust, as a plan fiduciary, was under an obligation to disclose. Because any fiduciary duties owed by Bankers Trust arise under ERISA, or the trust agreement governed by ERISA, the liability of Bankers Trust for any suppression of material facts relating to the plan or its assets must be adjudged solely by reference to ERISA. Insofar as state law fraud and misrepresentation principles are relevant here, they relate directly or indirectly to the duties or liabilities of Bankers Trust in connection with the ERISA plan at issue and are thus preempted. See District 65, UAW v. Harper & Row Publishers, Inc., 576 F.Supp. 1468, 1487 (S.D.N.Y.1983) (common law claims of fraud, conversion, unjust enrichment, and tortious interference with contract preempted by ERISA); Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520, 524 (E.D.Mich.1983) (common law fraud claim dismissed as preempted by ERISA); Whitaker v. Texaco, Inc., 566 F.Supp. 745 (N.D.Ga.1983) (state law misrepresentation and breach of fiduciary duty claims preempted by ERISA); Ziskind v. Retail Clerks International Association, 3 E.B.C. 1012, 1014-1015 (E.D.Cal.1982) (state cause of action for negligent misrepresentation preempted by ERISA). Cf. Dependahl v....