Sacerdote v. Cammack Larhette Advisors, LLC
| Decision Date | 08 June 2022 |
| Docket Number | 17-CV-8834 (AT)(VF) |
| Parties | DR. ALAN SACERDOTE, DR. HERBERT SAMUELS, MARK CRISPIN MILLER, MARIE E. MONACO, DR. SHULAMITH LALA STRAUSSNER, AND JAMES B. BROWN, individually and as representatives of a class of participants and beneficiaries on behalf of the NYU School of Medicine Retirement Plan for Members of the Faculty, Professional Research Staff and Administration and the New York University Retirement Plan for Members of the Faculty, Professional Research Staff and Administration, Plaintiffs, v. CAMMACK LARHETTE ADVISORS, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
DR. ALAN SACERDOTE, DR. HERBERT SAMUELS, MARK CRISPIN MILLER, MARIE E. MONACO, DR. SHULAMITH LALA STRAUSSNER, AND JAMES B. BROWN, individually and as representatives of a class of participants and beneficiaries on behalf of the NYU School of Medicine Retirement Plan for Members of the Faculty, Professional Research Staff and Administration and the New York University Retirement Plan for Members of the Faculty, Professional Research Staff and Administration, Plaintiffs,
v.
CAMMACK LARHETTE ADVISORS, LLC, Defendant.
No. 17-CV-8834 (AT)(VF)
United States District Court, S.D. New York
June 8, 2022
ORDER
VALERIE FIGUEREDO, UNITED STATES MAGISTRATE JUDGE.
On September 18, 2018, New York University (“NYU”) School of Medicine filed a motion for sanctions against Dr. Alan Sacerdote and other participants in two ERISA-governed retirement plans sponsored by NYU (collectively, “Plaintiffs”) and Plaintiffs' counsel. See Mot. for Sanctions, ECF No. 163.[1] The NYU School of Medicine argues that the instant suit is duplicative of a prior suit in this District and was initiated by Plaintiffs to circumvent unfavorable court orders in that first suit. The NYU School of Medicine seeks sanctions pursuant to Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, and/or the court's inherent power; or alternatively, asks for
attorney's fees under ERISA § 502(g)(1). See Defs.' Br. at 1, Sept. 18, 2018, ECF No. 164. For the following reasons, the NYU School of Medicine's motion for sanctions is DENIED.
BACKGROUND
The instant motion was filed in Sacerdote II, the second of two actions brought by Plaintiffs in this District alleging ERISA violations in connection with two retirement plans sponsored by NYU. This Court refers to the two actions as Sacerdote I (No. 16-CV-06284) and Sacerdote II (No. 17-CV-8834).
A. Sacerdote I
Plaintiffs filed their first complaint on August 9, 2016, against only New York University. Plaintiffs alleged that NYU breached the duties of loyalty and prudence under ERISA, based on unreasonable administrative fees, unreasonable investment management fees and performance losses, and failure to monitor unnamed co-fiduciaries. See Compl. ¶¶ 136-53, Sacerdote I, ECF No. 1. On November 9, 2016, Plaintiffs amended their complaint to allege breaches of ERISA's duties of loyalty and prudence, as well as its prohibited transaction rules, by: (1) locking the plans into an imprudent investment and recordkeeping arrangement with TIAA-CREF (Counts I and II); (2) causing the plans' participants to pay unreasonable administrative fees to TIAA-CREF and Vanguard (Counts III and IV); and (3) causing the plans' participants to pay unreasonable investment management, marketing, distribution, mortality, and expense risk fees, and incur unreasonable performance losses (Counts V and VI). See Am. Compl. ¶¶ 195-233, Sacerdote I, ECF No. 39. Plaintiffs also alleged that NYU failed to properly monitor unnamed co-fiduciaries to the plans (Count VII). Id. at ¶¶ 234-40. As with the original complaint, NYU was the only named defendant.
NYU moved to dismiss the amended complaint, and on August 25, 2017, the Honorable Katherine B. Forrest granted in part and denied in part NYU's motion. The Court dismissed all
claims except those alleging certain breaches of ERISA's duties of loyalty and prudence in Counts III and V. See Opinion & Order at 37, Aug. 25, 2017, Sacerdote I, ECF No. 79. With respect to Count VII, alleging NYU's failure to properly monitor unnamed co-fiduciaries, the Court concluded that Plaintiffs' failure to name any specific co-fiduciary rendered the claim materially deficient. Id. at 34-35. However, the Court noted that Plaintiffs could file a motion for reconsideration if they possessed additional facts to support their co-fiduciary claim. Id. at 35.
While NYU's motion to dismiss had been pending, Plaintiffs learned that NYU had delegated responsibility for administering the plans to a Retirement Plan Committee (the “Committee”), consisting of nine officers of NYU and NYU Langone Medical Center. With these additional facts, Plaintiffs moved on September 8, 2017, for reconsideration of the Court's dismissal order. See Mot. for Reconsideration, Sacerdote I, ECF No. 81. That same day, Plaintiffs moved for leave to file a second amended complaint. Plaintiffs sought to add the Committee and its nine individual members as defendants, and additional facts to bolster their co-fiduciary claim. See Mot. to Amend, Sacerdote I, ECF No. 83; Pls.' Br. at 1, Sept. 8, 2017, Sacerdote I, ECF No. 84.
On October 17, 2017, the Court denied Plaintiffs' motion for leave to amend. See Order at 2, Sacerdote I, ECF No. 100. The Court concluded that Plaintiffs had not shown good cause for why they failed to amend the complaint earlier, given that NYU had disclosed the existence of the Committee and its members in November 2016. Id. at 1-2. The Court also denied Plaintiffs' subsequent motion for reconsideration for substantially the same reason. See Opinion & Order at 210, Oct. 19, 2017, Sacerdote I, ECF No. 101.
From April 16 to April 26, 2018, a bench trial was held before Judge Forrest. During trial, Judge Forrest raised Plaintiffs' concern that NYU might “seek to avoid liability” for the conduct of the Committee members on the grounds that “there is no liability under ERISA and/or that respondeat superior doesn't apply” to NYU and could argue, “if there [were] a judgment, ” that it
would not “stand as against the current named defendant, ” NYU. See Trial Tr. at 417-18, Sacerdote I, ECF No. 330. On the record, counsel for NYU stated that NYU would not seek to avoid liability for the actions of the Committee members. See Id. at 418. On July 31, 2018, the Court found in favor of NYU on all claims. See Opinion & Order at 3, Sacerdote I, ECF No. 348. The Court found “that while there were deficiencies in the Committee's processes-including that several members displayed a concerning lack of knowledge relevant to the Committee's mandate-[P]laintiffs [had] not proven that the Committee acted imprudently or that the Plans suffered as a result.” Id.
Plaintiffs then filed a motion for amended or additional findings, or to amend the judgment to include equitable relief. See Mot. to Amend, Sacerdote I, ECF No. 350. In part, Plaintiffs asked that two Committee members, Margaret Meagher and Nancy Sanchez, be removed from the Committee and be barred from serving as fiduciaries to the plans. The Court had found that Meagher “did not demonstrate the depth of knowledge one would expect from a fiduciary, ” and that Sanchez-Meagher's supervisor-“not only [failed] to demonstrate a satisfactory understanding of key documents and her role as a fiduciary, but she also relied on Meagher to review certain key documents.” See Opinion & Order at 6 n.8, n.9, Sacerdote I, ECF No. 348. Plaintiffs reasoned that even though the Court had concluded that the Committee as a whole did not breach its duties, the Court's “findings specific to Meagher and Sanchez demonstrate[d] that both of them repeatedly failed to exercise the prudence required of a fiduciary... and that both of them [were] unfit to effectively serve on the Committee in the future.” Pls.' Br. at 5, Aug. 14, 2018, Sacerdote I, ECF No. 351. NYU countered that Meagher and Sanchez were never defendants in Sacerdote I and it was thus “improper” to seek relief against them now. Defs.' Br. at 14-15, Aug. 28, 2018, Sacerdote I, ECF No. 352. The Court denied the motion. See Order, July 1, 2019, Sacerdote I, ECF No. 398.
Plaintiffs appealed to the Second Circuit. As is relevant here, on August 16, 2021, the Second Circuit vacated the district court's denial of Plaintiffs' motion for leave to amend, which had sought to add the Committee and its members as defendants. See Sacerdote v. New York Univ., 9 F.4th 95, 116-17 (2d Cir. 2021). The Second Circuit concluded that the district court had applied the wrong legal standard in denying Plaintiffs' motion for leave to amend and that the error was not harmless. Id. at 114-17.
B. Sacerdote II
On November 13, 2017, the same Plaintiffs as in Sacerdote I filed a new action-Sacerdote II-alleging substantially the same claims as in Sacerdote I, including those claims the Court had dismissed in its August 25, 2017 order. See Compl. ¶¶ 222-75, ECF No. 1; Opinion & Order at 37, Sacerdote I, ECF No. 79. The Sacerdote II complaint named as defendants: NYU Langone Hospitals, NYU School of Medicine, the Retirement Plan Committee, and 21 past or present members of the Committee[2] (collectively, the “NYU Defendants”). It did not name NYU. See Compl., ECF No. 1. The Sacerdote II complaint also added a new claim and specifically identified the Committee and its members as the co-fiduciaries that NYU Langone Hospitals and NYU School of Medicine allegedly failed to monitor. Id. at ¶ 275.
The next day, on November 14, 2017, counsel for the NYU Defendants sent a letter to Plaintiffs' counsel, arguing that the complaint was “an outrageous attempt at avoiding Judge Forrest's October 17, 2017 Order denying [Plaintiffs'] motion to file a second amended complaint.” Decl. of Mark Muedeking, ECF No. 165-1. Counsel asked that Plaintiffs “immediately
withdraw the complaint, ” and threatened that if Plaintiffs did not do so, counsel would ask the Court “for permission to file a motion to strike that complaint as well as a motion for sanctions in this case.” Id.
On December 20, 2017, the NYU Defendants moved to dismiss the action as duplicative of Sacerdote I. See Mot. to Dismiss, ECF No. 74. Rather than responding to the motion, Plaintiffs amended the Sacerdote II complaint on January 10, 2018. See Am. Compl., ECF No. 105. The amended complaint removed NYU Langone Hospitals as a defendant. Id. For the first time, the Plaintiffs named Cammack Larhette Advisors, LLC (“Cammack”) as a defendant, and alleged that Cammack was a...
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