Roma Concrete Corp. v. Pension Assocs.
| Decision Date | 03 June 2019 |
| Docket Number | CIVIL ACTION NO. 19-1123 |
| Citation | 384 F.Supp.3d 507 |
| Parties | ROMA CONCRETE CORP. and Robert D. Scarduzio, v. PENSION ASSOCIATES |
| Court | U.S. District Court — Eastern District of Pennsylvania |
John Grant Stringham, Kenneth M. Dubrow, The Chartwell Law Offices, LLP, Philadelphia, PA, for Plaintiff.
Maureen P. Fitzgerald, Marshall Dennehey Warner Coleman & Goggin, King of Prussia, PA, for Defendant.
MEMORANDUM RE: MOTION TO DISMISS
Plaintiffs, Roma Concrete Corporation ("Roma") and Robert D. Scarduzio ("Scarduzio"), one of Roma's owners, allege that Defendant Pension Associates is liable for failing to lawfully fulfill its role as the Third Party Administrator ("TPA") and actuary for Roma's Defined Benefit Plan ("DB Plan"). Plaintiffs' Complaint arises from Defendant's alleged material misrepresentations and calculation errors in reports and accountings regarding the DB Plan, which allegedly caused a shortfall in benefits in excess of $ 400,000. The Complaint alleges three Counts: (1) professional negligence; (2) breach of contract; and (3) breach of fiduciary duty.
Presently before this Court is Defendant's Motion to Dismiss all Counts of the Complaint. For the reasons discussed below, the Motion to Dismiss is GRANTED.
Taking Plaintiffs' allegations as true, the factual background is as follows. Roma is a corporation incorporated in Pennsylvania that maintains a place of business in Upper Darby, Pennsylvania. (Compl. ¶ 2.) Scarduzio, a co-owner of Roma, is an individual who maintains a place of business at Roma in Upper Darby, Pennsylvania. (Id. ¶ 3.) Defendant, which provides actuarial and third party administrative services throughout the United States, is a limited liability company incorporated in Connecticut and located in Stamford, Connecticut. (Id. ¶¶ 4, 6.)
Defendant advertised itself as a "highly skilled actuarial firm" that "specialize [sic] in maximizing pension deductions for business executives." (Id. ¶ 22.) In or about January 2007, Roma "retained or engaged" Defendant to design and serve as the TPA and actuary for its DB Plan. (Id. ¶ 10.) In accordance with the parties' contract ("2007 Contract")1 , as of January 1, 20072 , Roma implemented the DB Plan to provide retirement benefits for its employees and owners, including Scarduzio. (Id. ¶ 15.) The DB Plan identifies Roma as "the Employer" and Scarduzio as a "Trustee." (DB Plan at 1.)
The DB Plan had an expected investment horizon of ten years and designated Roma as "Plan Administrator" whose role was to "administer the [DB] Plan for the exclusive benefit of the Participants and their Beneficiaries." (Compl. ¶ 16) (quoting DB Plan ¶ 3.3.1.) The "Plan Administrator" was also required to "compute, certify, and direct the Trustee with respect to the amount and kind of benefits to which any Participant is entitled." (Compl. ¶ 17) (quoting DB Plan ¶ 3.3.1(a)(2)).) It is standard practice for the "Plan Administrator" to engage an Enrolled Actuary, referred to as the "[TPA] and Actuary," to complete such computations. (Compl. ¶ 18.) Pursuant to the parties' contract, Defendant, the "[TPA] and Actuary" for the DB Plan, agreed to provide thorough and accurate actuarial details regarding the Plan. (Id. ¶¶ 19–20.)
Over the course of several years, Defendant issued "numerous" reports, summaries, and accountings related to its administration of and Roma's contributions to the DB Plan. (Id. ¶ 23.) These documents included "numerous material misrepresentations" regarding the DB Plan formula and the allocation of DB Plan benefits. (Id. ) For example, Roma's new TPA, the MandMarblestone Group, LLC ("MMG"), "recently discovered" that Defendant used improper interest and mortality assumptions in calculating lump sum values in one report. (Id. ¶ 25.) Further, Defendant prepared a DB Plan Report for the year December 31, 2015 through December 31, 2016 that included a lump sum calculation for Scarduzio that was approximately $ 600,000 higher than "the correct calculation permits under the law." (Id. ¶ 27.)
Defendant's summaries and allocations of the DB Plan's funding represented to Plaintiffs that one of Roma's employees, Kathleen Spera, would be entitled to 3–7% of the contribution made by Roma, while the remainder would primarily benefit Roma's owners, including Scarduzio. (Id. ¶ 28.) MMG's correct calculation, however, revealed that Spera's accrued lump sum represented 27% of the DB Plan. (Id. )
Indeed, when Plaintiffs' counsel sent Defendant a letter dated June 13, 2018 to ask about the "newly discovered miscalculations" involving Spera, Defendant stated that "[i]t appears that an error was made in the computer benefits for Kathleen Spera and [another Roma employee]." Defendant explained that "[t]he consultant misinterpreted the meaning of the phrase of actuarial equivalent of 15.7% of annual compensation." (Compl. Ex. B.) Defendant's miscalculations resulted in the loss of Scarduzio's expected pension benefits in an amount exceeding $ 400,000. (Id. ¶¶ 24, 28.)
Plaintiffs filed the Complaint against Defendant in the Court of Common Pleas of Philadelphia County on October 10, 2018. (ECF 1, Notice of Removal.) On March 18, 2019, Defendant filed a Notice of Removal in this Court, alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) (ECF 1). On March 28, 2019, Defendant filed a Motion to Dismiss all Counts in the Complaint (ECF 3).
On April 1, 2019, the parties stipulated to extend Plaintiffs' deadline to respond to the Motion to Dismiss to April 26, 2019 (ECF 5), which the Court approved (ECF 6). Accordingly, Plaintiffs filed a Response on April 25, 2019 (ECF 7, "Resp.").
In considering a motion to dismiss under Rule 12(b)(6), the Court "accept[s] all factual allegations as true [and] construe[s] the complaint in the light most favorable to the plaintiff." Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011) (internal quotation marks and citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 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) ).
The Court in Iqbal explained that, although a court must accept as true all of the factual allegations contained in a complaint, that requirement does not apply to legal conclusions; therefore, pleadings must include factual allegations to support the legal claims asserted. Iqbal, 556 U.S. at 678, 684, 129 S.Ct. 1937. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); see also Phillips v. Cty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (citing Twombly, 550 U.S. at 556 n.3, 127 S.Ct. 1955 ) ("We caution that without some factual allegation in the complaint, a claimant cannot satisfy the requirement that he or she provide not only ‘fair notice,’ but also the ‘grounds’ on which the claim rests."). Accordingly, to survive a motion to dismiss, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ).
In the Motion to Dismiss, Defendant contends that the Complaint must be dismissed for three reasons. First, Defendant argues that the parties' dispute must be resolved through arbitration because Plaintiffs' claims fall within the scope of the arbitration provision in the parties' January 6, 2017 contract ("2017 Contract").3 (MTD at 4.) Second, Defendant contends that Scarduzio's claims against Defendant are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"). (MTD at 9–12.) Defendant does not argue that Roma's claims in the same Counts are preempted. Third, Defendant argues that Plaintiffs' tort claims–Counts I and III–should be dismissed pursuant to the "gist of the action" doctrine, as Plaintiffs' allegations underlying these claims arise from the terms of the parties' contract.4 (Id. at 13–15.)
In the Response, Plaintiffs argue that the 2017 Contract does not govern this action because the misconduct alleged took place over a ten-year period prior to the execution of that contract. (Resp. at 6.) In other words, the 2007 Contract, which Plaintiffs reference in the Complaint but neither party has located, governs Plaintiffs' claims. (See id. at 7.) Plaintiffs make no allegations regarding whether the 2007 Contract contained an arbitration provision.
Next, Plaintiffs seek to undermine Defendant's contention that Scarduzio's claims are preempted by ERISA, arguing that because Scarduzio could not have brought his claims under ERISA, they are not preempted. (Id. at 9.) Specifically, Plaintiffs argue that Scarduzio is not seeking to recover plan benefits, but rather economic damages relating to funds diverted into the DB Plan as a result of Defendant's alleged misconduct. (Id. at 10.)
Finally, Plaintiffs argue that Plaintiffs' professional negligence and breach of fiduciary duty claims–Counts I and III–are not barred by the "gist of the action" doctrine because both claims are based on "broader social duties owned by Defendant" to Plaintiffs as the TPA and actuary of the DB Plan. (Id. at 14.)
As discussed above, Defendant contends that Plaintiffs' Complaint must be dismissed for three reasons: (1) Plaintiffs' claims fall within the purview of the arbitration clause in the 2017 Contract; (2) Scarduzio's claims in Counts I, II,...
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