Nagy v. Wese

• Decision Date: 07 April 2010
• Docket Number: Civil Action No. 09-3995.
• Citation: 705 F.Supp.2d 456
• Parties: Gabriel F. NAGY, Plaintiff,v.Harris M. De WESE, et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

705 F.Supp.2d 456

Gabriel F. NAGY, Plaintiff,v.Harris M. De WESE, et al., Defendants.

Civil Action No. 09-3995.

United States District Court,

E.D. Pennsylvania.

April 7, 2010.

Gerald S. Berkowitz, Berkowitz and Klein LLP, Malvern, PA, for Plaintiff.

Adrienne Roth, Albert Anthony Ciardi, III, Holly Smith, Jennifer E. Cranston, Nicole M. Nigrelli, Ciardi Ciardi & Astin, Nicole M. Nigrelli, Dilworth Paxson LLP, Ryan J. Fleming, William T. Mandia, Stradley Ronon Stevens & Young, Philadelphia, PA, for Defendants.

MEMORANDUM

YOHN, District Judge.

In this action pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., and state law, plaintiff, Gabriel F. Nagy, seeks to recover the assets of the Compass Capital Partners Ltd. Defined Benefit Retirement Plan (the “Plan”), which plaintiff contends were stolen by defendant Harris M. DeWese, the Plan Administrator, and/or defendant Compass Capital Partners, Ltd. (“Compass”), the Plan Sponsor. Plaintiff, a participant in the Plan, sues DeWese, Compass, and Morgan Stanley Smith Barney LLC (“Smith Barney”)-which allegedly facilitated DeWese's and/or Compass's theft-for breach of fiduciary duties owed under ERISA. Plaintiff also asserts a claim for “unjust enrichment” against DeWese and Compass and a claim for “breach of state law fiduciary duty” against Smith Barney.

All three defendants have filed motions pursuant to Federal Rule of Civil Procedure 12(b)(6) or 12(c), seeking dismissal of what they perceive as the two state law claims against them on the ground that such claims are preempted by ERISA. Because plaintiff has clarified that his unjust enrichment claim against DeWese and Compass is not a state law claim but a claim for equitable relief under ERISA, I conclude that the Rule 12(c) motion filed jointly by those defendants is moot. I further conclude that to the extent that plaintiff's state law breach of fiduciary duty claim seeks to recover for breach of fiduciary duties owed to the Plan's participants, the claim is preempted by ERISA. To the extent that the claim seeks to recover for breach of fiduciary duties owed to the Plan, however, I cannot conclude, at this stage of the proceedings, that the claim is preempted. I will therefore grant in part and deny in part Smith Barney's motion, and will dismiss as moot the motion filed by DeWese and Compass.¹

I. Factual Background

Plaintiff filed this civil action in September 2009 and, by consent of the parties, filed a first amended complaint in November 2009. The following factual recitation is based on the allegations of the first amended complaint.

Plaintiff, the former Chief Operating Officer and a former director of Compass, served as Plan Administrator from the time the Plan became effective in January 1998 until February 2003, when DeWese replaced him in that role. (1st Am. Compl. ¶¶ 9-10, 12, 19.) After taking over as Plan Administrator, DeWese transferred the funds of the Plan to Legg Mason Wood Walker, Inc., where Bish, who was also DeWese's personal financial advisor and stockbroker, provided investment advice for compensation and, with DeWese, “exercised control in the administration or management of the Plan and disposition of the Plan's assets.” ( Id. ¶¶ 13-14.) Smith Barney later acquired Legg Mason's brokerage business, and Citigroup Global Markets Inc. thereafter acquired Smith Barney, continuing to do business in the name “Smith Barney.” ( Id. ¶¶ 15-16.) Bish was employed by both successors and, through both changes in ownership, continued to render advice to and manage the assets of the Plan. ( Id.) At some point prior to November 2007, DeWese, acting as the Plan Administrator, “directed Bish and Smith Barney to send all of the Plan's assets to [himself] and or Compass Capital Partners.” ( Id. ¶ 30.) Bish and Smith Barney, “acting as fiduciaries to the Plan,” did so “[w]ithout any investigation, and with knowledge that both DeWese and Compass Capital Partners were in financial difficulty, and without notice to the Plan participants.” ² ( Id. ¶¶ 17, 31.)

Following his retirement from Compass in November 2003, plaintiff, one of five beneficiaries of the Plan, received regular monthly pension payments under the Plan from February 2005 until November 2007.³ ( Id. ¶¶ 19-20, 23-24.) The payments thereafter became irregular, prompting plaintiff to complain to DeWese, and the payments ceased altogether after July 2008, when DeWese allegedly admitted to plaintiff “that he had taken all of the funds out of the Plan and that the Plan was ‘broke’, and that the recent prior payments to [plaintiff] had been made from funds that DeWese personally paid into the Plan's Smith Barney account for payment to [plaintiff].” ( Id. ¶¶ 24-27, 29.)

Based on these factual allegations, plaintiff asserts claims against all defendants for breach of ERISA fiduciary duties ( id., Count I); against DeWese and Compass for “unjust enrichment” ( id., Count II); and against Smith Barney for breach of state law fiduciary duty ( id., Count III).

Smith Barney has now filed a motion to dismiss plaintiff's breach of state law fiduciary duty claim (Count III) pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that that claim is preempted by ERISA. Defendants DeWese and Compass, having answered both the original and the amended complaints, have filed a joint motion pursuant to Rule 12(c), seeking judgment on the pleadings as to plaintiff's unjust enrichment claim (Count II) on the ground that ERISA preempts that claim as well.

II. Legal Standards

“To survive a motion to dismiss [pursuant to Rule 12(b)(6) ], a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Factual allegations “that are ‘merely consistent with’ a defendant's liability,” or that permit the court to infer no more than “the mere possibility of misconduct” are not enough. Id. at 1949-50 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). Rather, the plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for misconduct alleged.” Id. at 1949. In evaluating a motion to dismiss, the court “must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.2009); see also Iqbal, 129 S.Ct. at 1949 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”).

Rule 12(c) permits a party to move for judgment on the pleadings “[a]fter the pleadings are closed-but early enough not to delay trial.” Fed.R.Civ.P. 12(c). Where, as here, a Rule 12(c) motion challenges the plaintiff's failure to state a claim upon which relief can be granted, the court evaluates the motion under the same standard as a motion to dismiss pursuant to Rule 12(b)(6). Foreman v. Lowe, 261 Fed.Appx. 401, 403 n. 1 (3d Cir.2008); Turbe v. Gov't of V.I., 938 F.2d 427, 428 (3d Cir.1991).

III. DiscussionA. Count II: Unjust Enrichment

For his unjust enrichment claim, plaintiff alleges that “DeWese and Compass Capital Partners have been unjustly enriched by their receipt of the funds of the Plan to which they had no right or interest.” (1st Am. Compl. ¶ 38.) Plaintiff demands that “judgment be entered in favor of the plaintiff and for the benefit of the Plan and its participants and against DeWese and Compass Capital Partners jointly and severally for their unjust enrichment by receipt of the Plan's assets, together with interest, costs and attorney fees pursuant to 29 U.S.C. § 1132(g).” ( Id., Count II, Wherefore cl.) Plaintiff also demands that these defendants “be ordered to pay restitution to the plaintiff and the Plan.” ( Id.)

DeWese and Compass have moved for judgment on the pleadings as to this claim, arguing that it is preempted by ERISA. (DeWese/Compass Rule 12(c) Mem. 3-5.) Plaintiff contends that defendants' Rule 12(c) motion is premature as the pleadings in this case “are not yet closed.” (Pl.'s Opp'n to DeWese/Compass Rule 12(c) Mot. 5.) Although there is some support for this position in the case law,⁴ the court need not decide whether the Rule 12(c) motion is in fact premature as plaintiff has clarified, in his opposition to the motion, that Count II is a claim for equitable relief under ERISA's civil enforcement provision, not state law ⁵:

The remedy that [plaintiff] seeks here is equitable relief available to him under ERISA. One of the expressed remedies available to a plan's participants is “appropriate equitable relief” under ERISA, 29 U.S.C. § 1132(a)(3)(B), to make the beneficiaries whole. As this case pertains to DeWese and Compass, equitable relief is being sought from them as named ERISA fiduciaries, to prevent their unjust enrichment. Count II for unjust enrichment only seeks equitable relief expressly permitted by ERISA ....

(Pl.'s Opp'n to DeWese/Compass Rule 12(c) Mot. 6; see also id. at 2 n. 2 (“[I]n [plaintiff's] response to Smith Barney's Rule 12(b)(6) motion and Bish's Rule 12(c) motion, [plaintiff] improperly described Count II as a state law claim. However, Count II is more properly characterized as a demand for equitable relief under 29 U.S.C. § 1132(a)(3).”).) ⁶ Because plaintiff has clarified that Count II is an ERISA claim, not a common law claim, there is no preemption issue. See 29 U.S.C. § 1144(a) (providing that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title” (emphasis added)). Accordingly, the court will dismiss as moot the Rule 12(c) motion filed by DeWese and Compass.

B. Count III: Breach of State Law Fiduciary Duty

For his breach of state law...