Smith v. Local 819 I.B.T. Pension Plan
| Decision Date | 20 May 2002 |
| Docket Number | Docket No. 01-7583. |
| Citation | 291 F.3d 236 |
| Parties | Esther SMITH, Individually And On Behalf Of All Others Similarly Situated, Plaintiff-Appellee, v. LOCAL 819 I.B.T. PENSION PLAN; The Board of Trustees of the Local 819 I.B.T. Pension Plan, Defendants-Third-Party Plaintiffs-Appellants. The Board of Trustees of Teamsters Local 819 Pension Fund, Individually And On Behalf Of The Teamsters Local 819 Pension Fund, Third-Party Plaintiff-Appellant, v. Connecticut General Life Insurance Company, Third-Party Defendant-Appellee. |
| Court | U.S. Court of Appeals — Second Circuit |
Charles Pergue, New York, NY, (Larry Cary, Vladeck, Waldman, Elias & Engelhard, P.C., on the brief), for Defendants-Third-Party-Plaintiffs-Appellants and Third-Party Plaintiff-Appellant.
Thomas A. Martin, New York, N.Y. (Steven R. Shapiro, Putney, Twombly, Hall & Hirson, LLP, on the brief), for Third-Party Defendant-Appellee.
Before KEARSE, JACOBS and KEITH, Circuit Judges.*
Local 819 I.B.T. Pension Plan and its Board of Trustees (the "Trustees") are defendants in a putative class action brought by plan participant Esther Smith, alleging that the plan has been non-compliant with the Employment Retirement Income Security Act of 1974 ("ERISA") since 1976 (and non-compliant with state law as well), and that these deficiencies were uncorrected or insufficiently cured by a 1997 revision made by the Plan and its Trustees in response to earlier litigation. The Plan and its Trustees appeal from the judgment of the United States District Court for the Southern District of New York (McKenna, J.), dismissing their third-party complaint for indemnification and/or contribution against Connecticut General Life Insurance ("Connecticut General"). It is alleged (or conceded) that Connecticut General designed the plan in 1966, administered it until 1995 (exercising sole discretion over its assets), reformed it on October 1, 1976 to bring it into compliance with ERISA, reformed it again in 1986, and represented to the Trustees that it complied with all applicable laws and regulations, including ERISA.
The district court dismissed the third-party complaint for failure to state a claim, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, on the ground that the class action complaint cited the 1997 reformation (in which Connecticut General played no part) and alleged that it fails to remedy the plan's deficiencies.
On appeal, the Trustees argue that the district court misconstrued the class action as limited to the insufficiency of the 1997 reformation undertaken by the Trustees, and therefore as unconnected to Connecticut General's drafting, redrafting, and administration of the plan in prior years. The Trustees attribute the error to the district court's failure to consider that [i] the noncompliance existed since 1976, and [ii] Smith seeks relief retroactive to that year. Connecticut General challenges the district court's certification of its interlocutory ruling as a final judgment, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.
Preliminarily, we hold that the district court did not abuse its discretion by certifying its ruling as a final judgment.1 As to the merits, we conclude that the Trustees sufficiently state ERISA and state claims for indemnity and contribution because: [1] Smith seeks relief retroactive to the time when Connecticut General administered the plan; and [2] notwithstanding the 1997 reformation, which is not as a matter of law a superseding event, deficiencies in the plan attributable to Connecticut General may have proximately caused (under a negligence theory) or "enabled" (under an ERISA theory, 29 U.S.C. § 1105) any deficiencies in the reformation.
In 1990, plan participant Jennie DeVito initiated suit against the Trustees alleging that the plan was "back-loaded," that is, designed in violation of ERISA to provide excessively low rates of accrual in an employee's early years of employment. DeVito v. Pension Plan of Local 819 I.B.T Pension Fund, 975 F.Supp. 258, 269-70 (S.D.N.Y.1997); see also 29 U.S.C. § 1054. The Trustees served a third-party complaint seeking indemnification and contribution from Connecticut General as the entity that developed and administered the plan.
In 1995, while the DeVito action was pending, the Trustees altered their contractual relationship with Connecticut General. For $4.6 million in consideration paid by the Plan, Connecticut General agreed to the termination of its contract, except to the extent that Connecticut General remained liable under the plan "for providing an annuity to participants receiving a benefit as of June 7, 1995." Smith v. Local 819 I.B.T. Pension Plan, 2001 WL 55733, at *1 (S.D.N.Y. Jan.23, 2001) (internal quotation marks omitted).
DeVito prevailed in 1997, and the Trustees were ordered "to reform the Plan consistent with the requirements of ERISA retroactive to October 1, 1976." DeVito, 975 F.Supp. at 270. The Trustees reformed the plan in 1997, settled their suit with DeVito in 1999, and settled their third-party action against Connecticut General in 2000 (Connecticut General having made no admission of third-party liability).
In 2000, plan participant Esther Smith commenced the present class action on behalf of herself and similarly situated plan participants. Her complaint sought injunctive and equitable relief "to reform the plan in accordance with ERISA's minimum standards retroactive to October 1, 1976," alleging, specifically, that the plan remains "back-loaded" (and thereby noncompliant with ERISA), because the 1997 reformation did "nothing to change the rate of accrual of the normal retirement benefit." Joint App. at 9, 12-13 ("J.A.") (emphasis added). In short, Smith maintained that the Trustees' 1997 reformation of the benefit formula failed to correct the formula's previously-adjudicated noncompliance with ERISA.
The Trustees then filed their third-party complaint against Connecticut General, alleging that: [1] under ERISA, Connecticut General owes indemnification or contribution because Connecticut General was a fiduciary of the Plan, see 29 U.S.C. §§ 1002(21)(A), 1104, 1105; and [2] even if it was not a fiduciary, Connecticut General owes indemnification or contribution under state law for breach of contract, or of other express and implied duties. Specifically, the third-party complaint seeks indemnification for the plan's noncompliance with ERISA resulting from Connecticut General's administration of the plan between 1976 and 1995, and contribution to the extent Connecticut General's breach caused any subsequent noncompliance by the Trustees.
The district court granted Connecticut General's motion to dismiss the third-party complaint for failure to state a claim, on the ground that
it was the Trustees who modified the benefit formula in May of 1997, not [Connecticut General]. Without any facts linking [Connecticut General] to the May Reformation, considering the May Reformation is the basis of Smith's complaint, the Court cannot find any basis for sustaining the third-party action against [Connecticut General].
The Trustees moved for an order, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure, certifying the interlocutory ruling as a final judgment from which the Trustees could appeal. The district court granted the Rule 54(b) motion, citing "an increased risk" otherwise that there would be "a duplicative action between third-party plaintiffs and third-party defendant in the future." Smith v. Local 819 I.B.T. Pension Plan, No. 00 Civ. 0781 (Aug. 16, 2001).
We review for abuse of discretion a district court's decision to certify an order as a final judgment (under Fed.R.Civ.P. 54(b)). See Maurizio v. Goldsmith, 230 F.3d 518, 520 (2d Cir.2000). Notwithstanding the "historic federal policy against piecemeal appeals," judicial efficiency may require certification in the "infrequent harsh case [where] there exists some danger of hardship or injustice through delay which would be alleviated by immediate appeal." Hogan v. Consolidated Rail Corp., 961 F.2d 1021, 1025 (2d Cir.1992) (internal citations and quotation marks omitted). Accordingly, Rule 54(b) "authorizes certification of an interlocutory appeal where there is no just cause for delay." Maurizio, 230 F.3d at 520.
The district court's discretionary certification was appropriate. Certification in this case avoids [i] potentially duplicative litigation, and [ii] an insufficiency of Plan funds to support a possible judgment.
We review de novo the district court's dismissal of the third-party complaint for failure to state a claim. See Castellano v. City of New York, 142 F.3d 58, 66 (2d Cir.1998).2
Dismissal for failure to state a claim is proper where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Harris v. City of New York, 186 F.3d 243, 247 (2d Cir.1999) (internal citation and quotation marks omitted). All factual allegations in the complaint are therefore presumed to be true. See Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); Charles W. v. Maul, 214 F.3d 350, 356 (2d Cir.2000). And all reasonable inferences are drawn in favor of the plaintiff. See Fed.R.Civ.P. 12(b)(6); EEOC v. Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir.2000). However, "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." Gebhardt v. Allspect, Inc., 96 F.Supp.2d 331, 333 (S.D.N.Y.2000) (internal citation and quotation marks omitted).
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