Matthews and Fields Lumber v. New England Ins. Co.

• Decision Date: 26 September 2000
• Docket Number: No. 99-CV-6314L.,99-CV-6314L.
• Parties: MATTHEWS AND FIELDS LUMBER CO., INC., Plaintiff, v. NEW ENGLAND INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of New York

113 F.Supp.2d 574

MATTHEWS AND FIELDS LUMBER CO., INC., Plaintiff, v. NEW ENGLAND INSURANCE COMPANY, Defendant.

No. 99-CV-6314L.

United States District Court, W.D. New York.

September 26, 2000.

George DesMarteau, DesMarteau & Beale, Rochester, MN, for Matthews and Fields Lumber Co., Inc., plaintiffs.

Patrick J. Solomon, Nixon, Peabody LLP, Rochester, MN, for New England Insurance Company, defendants.

DECISION AND ORDER

LARIMER, Chief Judge.

The complaint in this action was originally filed in New York State Supreme Court, Monroe County, in May 1998. The complaint alleges that defendant, New England Insurance Company ("New England") breached certain duties that it owed to plaintiff, Matthews and Fields Lumber Co., Inc. (sometimes "M & F"), with respect to defendant's amendment of a defined benefit plan ("the Plan") that M & F had adopted for its employees. Defendant removed the action to this court in July 1999, on the ground that plaintiff's claims are preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1101 et seq. Defendant has moved to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

BACKGROUND

The complaint alleges that in 1968, M & F adopted a retirement benefit plan for its employees. M & F purchased the Plan from New England, which had drafted it. Although M & F was the Plan administrator, New England did provide certain services to M & F with respect to the Plan's administration, including calculation of employee benefits.

Plan benefits were calculated based on employees' compensation. In 1982, M & F modified its compensation structure for certain salespersons to provide for a salary plus commissions.¹ The Plan provided that commissions would be excluded from benefit calculations, however.

In 1984, M & F, upon defendant's recommendation, executed a restatement of the Plan in order to remain in compliance with certain statutory changes. New England prepared the restatement, and on June 25, 1987,² Scott Fields, M & F's Secretary and Treasurer, signed the restatement on behalf of M & F. The signature page stated, inter alia, that M & F "ha[d] received, read, accept[ed] and incorporate[ed] by reference" the restated Plan. See Affidavit of Stephen Chiumenti, Esq. (Docket Item 6) Ex. A. It further stated, "It is understood that [New England] shall not be responsible for the tax and legal aspects of the Plan and Trust, full responsibility for which is assumed by [M & F], which hereby acknowledges that it has consulted legal and tax counsel to the extent considered necessary." Id.

Unlike the original Plan, the restatement contained a provision stating that commissions would be included in benefit calculations. Plaintiff alleges that, despite the statement that M & F had read and accepted the restated Plan, in fact neither Fields nor anyone else from M & F had read the restated Plan when Fields signed it. M & F alleges that it was unaware that the restated Plan provided that commissions were to be included, and that M & F, relying on defendant's representations that no substantive changes had been made to the terms of the original Plan, simply assumed that commissions remained excluded as before.

In May 1996, M & F decided to terminate the Plan, resulting in lump-sum distributions of accrued benefits to the covered employees. The distributions, however, allegedly came up some $62,000 short of the amount to which the employees were entitled. At this stage of the proceedings, it is not entirely clear why that occurred, but it appears that plaintiff alleges that the shortfall was related to the fact that the Plan as restated called for the inclusion of commissions in calculating benefits. At any rate, M & F eventually made up the shortfall out of its own funds by paying its employees the additional amounts owed. M & F also alleges that it incurred other expenses due to this error because it was forced to reprocess the termination of the Plan in order to comply with Internal Revenue Service requirements.

The complaint asserts two causes of action. The first alleges that New England breached its agreement with M & F to provide expert services in regard to the adoption and administration of the Plan. Although this cause of action does not expressly articulate any particular legal theory, it is in essence a claim for professional malpractice. The second cause of action alleges negligence by defendant in its calculation of benefits and a breach of defendant's duty of due care. M & F alleges that it has been damaged in the amount of $95,000.

DISCUSSION

Defendant asserts two grounds in support of its motion to dismiss. First, defendant alleges that plaintiff's claims are preempted by ERISA, and that because M & F has not asserted an ERISA claim, the complaint must be dismissed.

Second, defendant contends that M & F's claims are time-barred. Citing 29 U.S.C. § 1113, defendant states that the limitations period for a breach of fiduciary duty claim is six years after the last act that constituted part of the breach, or three years after the earliest date on which the plaintiff either had actual knowledge of the breach, or on which a report from which the plaintiff could reasonably be expected to have obtained knowledge of the breach was filed with the Secretary of Labor, whichever period ends first. Here, defendant states, the last act that was part of the alleged breach could have occurred no later than 1987, when Scott Fields signed the restated Plan on M & F's behalf. According to defendant, then, the limitations period ended in 1993 at the latest, well before the complaint was filed in 1998.

Defendant also asserts that even if plaintiff's claims are not preempted by ERISA, they are time-barred under New York law, which provides limitations periods of six years for breach of contract, and three years for negligence and breach of the duty of due care. Again, according to defendant, the last date on which those periods could have commenced was 1987.

M & F denies that its claims are preempted by ERISA. M & F contends that it is not asserting a claim for benefits or for equitable relief under ERISA, but simply a straightforward common-law claim for damages based on defendant's alleged negligence and professional malpractice.

M & F also states that whether or not its claims are preempted by ERISA, they are not time-barred. M & F alleges that it did not have actual knowledge of the breach until May 1996, when the shortfall in benefits was discovered, less than three years before the complaint was filed. M & F further states that if its claims are treated as state law claims, the limitations period was also tolled under the doctrine of continuous representation, which is derived from the "continuous-treatment" doctrine applied to medical malpractice claims; see N.Y. C.P.L.R. § 214-a.³

At oral argument on defendant's motion on June 13, 2000, the court inquired of counsel whether, even if the court did not find plaintiff's claims to be preempted by ERISA, the court would nonetheless have jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332. Counsel for both parties agreed that diversity jurisdiction does exist here, since M & F is a New York corporation and New England is a foreign corporation, and the jurisdictional amount has been met. The parties also agreed that if the limitations period commenced upon the execution of the restated Plan in 1987, plaintiff's claims would be time-barred under both ERISA and New York law. In a supplemental letter brief submitted at the court's request, defendant also requests the court to exercise its diversity jurisdiction and dismiss plaintiff's claims on the ground that they are time-barred, thus making it unnecessary to reach the preemption issue.

After reviewing the pleadings, the Plan itself,⁴ and relevant case authority, I agree with defendant that regardless of whether M & F's claims are preempted by ERISA, they are time-barred, because the limitations period commenced on June 25, 1987, when Fields signed the restated Plan on behalf of M & F. The law in New York is clear that absent certain exceptional circumstances that are not alleged here, parties are bound by his signature, and cannot be heard to complain that they did not read a document before signing it.

For example, in Pressley v. Rochester City Sch. Dist., 234 A.D.2d 998, 652 N.Y.S.2d 191 (4th Dep't 1996), the court, affirming the dismissal of the complaint in a tort action arising out of an automobile accident, held that a release signed by the plaintiff was valid and enforceable, notwithstanding the plaintiff's assertion that she had not read the release before executing it. In doing so, the court stated that a "party is under an obligation to read a document before executing it and cannot avoid its effect by asserting that he or she did not read it or know its contents." Id. at 999, 652 N.Y.S.2d 191. There is ample authority in other cases expressing the same rule. See, e.g., Friedman v. Fife, 262 A.D.2d 167, 168, 692 N.Y.S.2d 61 (1st Dep't 1999) ("Plaintiff will not be heard to claim that he received only a signature page for the stock restriction agreement, since he was bound to know and read what he signed"; affirming order granting motion to dismiss) (citing Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 11, 537 N.Y.S.2d 787, 534 N.E.2d 824 (1988)); Blog v. Battery Park City Auth., 234 A.D.2d 99, 100, 650 N.Y.S.2d 713 (1st Dep't 1996) ("As a general matter, a party will not be excused from reading a document that he or she has signed"); Worcester Ins. Co. v. Hempstead Farms Fruit Corp., 220 A.D.2d 659, 660, 633 N.Y.S.2d 66 (2d Dep't 1995) ("A party who enters into a written contract is bound by its stipulations and conditions whether or not he or she reads the contract"). In fact, courts have gone so far as to term a party's signing a document without having read it first "gross negligence." Pimpinello...