The opinion of the court was delivered by: CONNER
This is an action brought by three members of the Pension Committee ("Pension Committee") of the Cornell Manufacturing Company, Inc. Employees Pension Trust to recover amounts allegedly overpaid to Sidney B. Mushlin ("Mushlin"), formerly a principal of Cornell Manufacturing Company, Inc. ("Cornell"), as part of a lump-sum distribution of Mushlin's retirement benefits voted on by the Pension Committee and paid out by the pension plan when Mushlin and his wife Muriel were the sole trustees of the plan and the sole members of the Pension Committee overseeing the operation of the plan.
The case is presently before the Court on plaintiffs' motion to dismiss defendants' first counterclaim for joinder, under Rule 22, F.R.Civ.P., of claims asserted by Cornell in a pending state court action against these defendants, and to dismiss defendant Muriel Mushlin's third counterclaim for a distribution of pension benefits to which she alleges she is entitled under the Cornell pension plan. As to the third counterclaim, plaintiffs have moved alternatively for a stay of that claim pending the resolution of a substantially similar claim pending in the action brought by Cornell in state court to recover amounts allegedly overpaid by Cornell into the pension plan fund.
On February 1, 1969, Cornell, a business previously controlled by Mushlin and his wife, was purchased by National Screw and Manufacturing Company ("NSC"), a subsidiary of Monogram Industries, Inc. ("Monogram"). Monogram-NSC continued thereafter to operate Cornell as a subsidiary, and Mushlin continued to work for Cornell as its president and general manager. The terms of Mushlin's employment were set forth in two successive employment agreements with the corporation.
Muslin's normal retirement date was December 1, 1975; however, he continued to work for the Cornell subsidiary of Monogram-NSC until August 1976, when the corporation terminated his employment.
Cornell had established a pension plan on May 13, 1959, ten years prior to its acquisition by Monogram-NSC. Under the Agreement for Purchase of Partnership Assets and the Agreement for Purchase of Corporate Assets entered into at the time of Monogram-NSC's purchase of Cornell, Monogram-NSC agreed to assume the employer's obligation under the plan.
From March 1974 through July 31, 1976, Mushlin and his wife, Muriel, acted as co-trustees of the Cornell pension plan and as sole members of the plan's Pension Committee. On or about December 1, 1975, the Pension Committee, composed of Mushlin and Muriel Mushlin, adopted a resolution concerning payment of a lump-sum pension distribution to Mushlin. In April 1976, in accordance with that resolution, Mushlin received a distribution from the pension plan of $ 520,666, a sum which was calculated using a base annual income figure for Mushlin of $ 100,000, equivalent to Mushlin's income from Cornell in 1965.
In 1977, Cornell brought an action in New York state court (the "Cornell state action") seeking recovery under state statutory and common law for the Mushlins' alleged breach of their fiduciary duties to the corporation by, inter alia, causing the corporation to make allegedly excessive contributions to the pension plan to fund the anticipated pension benefit payout to Mushlin.
Pleadings before this Court
Plaintiffs' complaint alleges that, according to the Cornell pension plan, defendant Mushlin's pension benefits should have been calculated from a base salary of $ 38,000, representing Mushlin's average annual salary over the period from December 1, 1960 to November 30, 1965, rather than the $ 100,000 figure actually used; and by using an annuity purchase cost figure of $ 1,136.36 per $ 10 of monthly benefit, a figure which plaintiffs allege is lower than the conversion figure actually used in computing the lump-sum amount to which Mushlin was entitled. Plaintiffs further assert that under Article XII, Section 5 of the pension plan, it was improper for Mushlin and Muriel Mushlin (who, plaintiffs contend, was under Mushlin's control) to decide the amount of or otherwise take action on Mushlin's pension benefits. They thus contend that the Mushlins breached their fiduciary duties as trustees of the pension plan and as members of the directing Pension Committee, and that Mushlin thereby received an improper benefit under the plan; and request, under 29 U.S.C. §§ 1109 and 1132, return of the alleged pension overpayment, or $ 387,990.
Defendants have answered that the calculation of Mushlin's pension payment using a base salary figure of $ 100,000, representing Mushlin's 1965 income, was proper under the Cornell pension plan, and that the annuity purchase cost used to convert Mushlin's pension entitlement to a lump-sum amount was proper. Defendants raise as affirmative defenses the statute of limitations and the allegation that they acted in good faith "in conformity with the manner in which the pension plan had been administered since its inception," in accordance with advice of counsel, and upon instructions received from the professional administrator who had been retained both to design and to supervise the operation of the pension plan. Defendants further assert as affirmative defenses that the pension benefit which Mushlin received had been fully funded at the time Mushlin received the payment, so that the plan suffered no damage as a result of the payment even if the amount paid had been improper; and that any recovery of damages by the plan's Pension Committee would inure, not to the benefit of the plan, but to the benefit of the corporation (Monogram-NSC and its subsidiary Cornell), and that the corporation, as the real party in interest, is estopped from receiving such a recovery by Monogram-NSC's agreement, at the time Cornell was purchased, to continue to fund the Cornell pension plan "as it was then being administered."
Finally, defendants raise three counterclaims. The first asserts a right to join Cornell as a party plaintiff and to require Cornell to interplead its state law claims under Rule 22, F.R.Civ.P., alleging that Cornell's state action is based on allegations of overpayment of pension benefits to Mushlin substantially identical to those made by plaintiffs here; that the separate claims of the present plaintiffs and Cornell may expose the defendants to double liability on the same fund, namely, the pension payment which Mushlin received; and that this Court has jurisdiction to hear this counterclaim under the doctrine of ancillary jurisdiction. The second alleges that plaintiffs, by bringing this action, which, defendants allege, is in the interest of Cornell (and through Cornell, Monogram-NSC) rather than in the interests of the pension plan itself, have increased the administrative expenses of the pension plan in a manner which constitutes waste and a violation of plaintiffs' statutory duties under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). The third, raised by defendant Muriel Mushlin alone, seeks pension benefits allegedly due to her under the Cornell pension plan.
Plaintiffs reply that the first and second counterclaims fail to state a cause of action, that defendants have no standing to raise the second counterclaim, and that, since the third counterclaim is identical, with the exception of one paragraph, to a counter- and cross-claim brought by Muriel Mushlin in the Cornell state court action, the counterclaim here should be dismissed, or this Court's ...