Meyer v. Berkshire Life Ins. Co.

• Decision Date: 22 January 2001
• Docket Number: No. CIV. CCB-99-1432.,CIV. CCB-99-1432.
• Citation: 128 F.Supp.2d 831
• Parties: Paul D. MEYER, M.D., Trustee for Paul D. Meyer, M.D., P.A. Money Purchase Pension Plan and Trust, et al. v. BERKSHIRE LIFE INSURANCE COMPANY
• Court: U.S. District Court — District of Maryland

128 F.Supp.2d 831

Paul D. MEYER, M.D., Trustee for Paul D. Meyer, M.D., P.A. Money Purchase Pension Plan and Trust, et al. v. BERKSHIRE LIFE INSURANCE COMPANY

No. CIV. CCB-99-1432.

United States District Court, D. Maryland.

January 22, 2001.

Mark Menton Dumler, Brian C. Parker, Parker Dumler Kiely LLP, Baltimore, MD, for Plaintiffs.

Barrett W. Freedlander, Saul, Ewing, Weinberg & Green, Baltimore, MD, for Defendant.

MEMORANDUM

BLAKE, District Judge.

Defendant Berkshire Life Insurance Company ("Berkshire") has moved for summary judgment on all claims brought by plaintiffs Paul D. Meyer and Jorge R. Ordonez (the "Doctors"). During the time relevant to this lawsuit, each doctor was the trustee for a Money Purchase Pension Plan and Trust which was administered by Berkshire and designed to provide life insurance and retirement benefits for the doctor and his employees. The Doctors now claim that Berkshire mismanaged the trust funds. Accordingly, they have filed suit alleging common law claims for professional negligence, negligent misrepresentation or omission, deceit, and breach of fiduciary duty. In the alternative, they claim damages under the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. ("ERISA"), for breach of fiduciary duty. Now pending before this court are Berkshire's motions for summary judgment on all counts pursuant to Rule 56 of the Federal Rules of Civil Procedure. This matter has been fully briefed and no hearing is necessary. See Local Rule 105.6. Because those claims are preempted by ERISA, the court will grant the defendant's motions as to Counts I, II, III, and IV. Summary judgment will be denied on Count V.¹

STANDARD OF REVIEW

Rule 56(c) of the Federal Rules of Civil Procedure provides that:

[summary judgment] shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

A genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.1994). In making this determination, the evidence of the party opposing summary judgment is to be believed and all justifiable inferences drawn in her favor. Halperin v. Abacus Technology Corp., 128 F.3d 191, 196 (4th Cir.1997) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). The nonmoving party may not rest upon mere allegations or denials in her pleading, however, but must set forth specific facts showing that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Allstate Fin. Corp. v. Financorp, Inc., 934 F.2d 55, 58 (4th Cir.1991). Further, the "mere existence of a scintilla of evidence" to support the non-moving party's position is not sufficient to defeat a motion for summary judgment. Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

BACKGROUND

Doctors Meyer and Ordonez are neurosurgeons. In 1980, they left the practice in which they were employed and opened separate, but affiliated, practices. (Pl.s' Opp. at 3.) At that time, the Doctors placed the money they received from their pension plans on deposit at a local bank. (Id.; Ex. B, Ordonez Dep. at 17.) Over the next three years, the Doctors developed a relationship with the branch manager of that bank, Michael Meszaros. (Pl.s' Opp., Ex. E; Ex. A, Meyer Dep. at 20-23.) In 1983, Mr. Meszaros left the bank to work for Berkshire. At that time, he set up a meeting between himself, the Doctors, and Robert Walsh, the general agent for Berkshire in the Baltimore area. The purpose of that meeting was to acquaint the Doctors with the insurance and retirement services offered by Berkshire. (Id., Ex. C, Meszaros Dep. at 76-78.) The Doctors allege that, during this meeting or one subsequent, Mr. Meszaros told them that if each invested with Berkshire, their plans would be worth more than $2,000,000 by the time they were ready to retire. (Meyer Dep. at 82-83.)

Soon thereafter, the Doctors enrolled as employers in the "Berkshire Life Pension Plan." Each set up a separate plan, named himself as Trustee, and became a participant in the plan as an employee of the practice. (Mem. Sup. Mot. for Sum. Jud. Against Meyer ("Meyer Mot.") at 2; Mem. Sup. Mot. for Sum. Jud. Against Ordonez ("Ordonez Mot.") at 2.) Each doctor employed a secretary who was also a participant in his plan. The plans required each doctor to contribute $30,000 annually for himself and a smaller amount each year for his secretary. (Meyer Mot. at 2; Ordonez Mot. at 2.) Of this amount, 25% was used as a premium on a life insurance policy and the remaining 75% was invested to provide a retirement fund. (Meyer Mot. at 2.)²

The plans remained in existence until at least 1996.³ During that time, the Doctors were provided various reports and disclosures which purported to explain the status of their plans and the transactions that had been undertaken during the year. Further, the Doctors met annually with Mr. Meszaros and Mr. Walsh to discuss their plans. (Pl.s' Opp. at 12.) In addition, as trustees of their respective plans, each Doctor was required to approve and authorize all transactions that were made. (Meyer Mot. at 6; Ordonez Mot. at 6.) These disclosures and approvals are the subject of significant debate. Berkshire claims they prove that the Doctors had knowledge sufficient to understand that a breach of fiduciary duty had occurred. In response, the Doctors contend that they relied almost entirely on Mr. Meszaros for investment advice. (Pl.s' Opp. at 13.) They claim to have simply "rubber-stamped" any transactions that he recommended and not to have read carefully the reports they were sent. Indeed, they claim that they looked at the reports only long enough to make sure that the value of the plans increased each year. (Id.)

In the spring of 1996, Dr. Ordonez's secretary had a problem with a loan she had obtained from the plan through Mr. Meszaros. (Pl.s' Opp., Ex. K, Jones Aff. ¶ 3.) She contacted Mr. Meszaros and discovered that he was no longer employed by Berkshire. (Id.) Thereafter, she conveyed her concern to Dr. Ordonez, who met with Mr. Walsh and an insurance representative. (Ordonez Dep. at 35-36.) That meeting worried Dr. Ordonez, he spoke to Dr. Meyer, and the two began looking for an attorney to investigate Berkshire's management of the pension funds. (Id. at 36-37.)

That investigation led to the filing of this lawsuit in which the Doctors allege that Berkshire, through Mr. Meszaros and Mr. Walsh, mismanaged their pension funds. Specifically, they contend that "Meszaros provided grossly incompetent advice and defrauded the Plans by engaging in an investment strategy that significantly reduced the Plans' investment earnings." (Pl.s' Opp. at 9.) The Doctors claim that the mismanagement falls into two categories. First, they allege that Berkshire "churned" the plans' assets to produce commissions. (Pl.s' Opp. at 10.) That is, they claim that Meszaros traded among several investments unnecessarily in order to garner the commission that accompanies each transaction. Second, the Doctors contend that Berkshire did not keep the plans appropriately diversified. (Id. at 11.) In response, Berkshire argues that the common law claims are preempted by ERISA and that the ERISA claim is barred either by the statute of limitations or the Doctors' contributory negligence. It has also raised ratification, waiver, and estoppel as defenses.

ANALYSIS

I. Counts I-IV: Preemption of Common Law Claims

In the first four counts of their complaint the Doctors assert common law claims for professional negligence, negligent misrepresentation or omission, deceit, and breach of fiduciary duty. (Compl.¶ 44-71.) Berkshire contends that these claims are preempted by ERISA. (Meyer Mot. at 38-39.)

Section 514(a) of ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Supreme Court has held that the phrase "relates to" is "expansive" and "broad." See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 1677, 131 L.Ed.2d 695 (1995); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983). Importantly, "ERISA clearly preempts ... claims alleging improper administration of the Plan." All Risks, Ltd. v. Equitable Life Assurance Society, 931 F.Supp. 409, 414 (D.Md.1996).

It is undisputed that the pension plans acquired by the Doctors are qualified plans under ERISA. Initially, however, the parties disagreed as to whether Berkshire was an ERISA fiduciary. Berkshire argued that the Doctors' common law claims were preempted by ERISA and that it was not liable under ERISA because it was not a fiduciary. In response, the Doctors contended that Berkshire could not have it both ways: either Berkshire was a fiduciary and could be sued under ERISA, or it was not a fiduciary, and ERISA, therefore, did not preempt their common law claims. In its reply to the Doctors' opposition, Berkshire rendered evaluation of that issue unnecessary by conceding that it was an ERISA fiduciary. (Def.'s Reply at 2.)

At heart, the Doctors allege mismanagement of their pension fund. Such claims fall directly under the purview of ERISA's preemption provision. See All Risks, 931 F.Supp. at 413-14; Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir.1994) ("claims for breach of contract, fraud, unjust enrichment, breach of fiduciary duty, negligence, [and] accounting ... `relate to' an ERISA-covered plan ... [and] are...