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RESNICK v. RESNICK

May 15, 1991

HERMAN RESNICK, INDIVIDUALLY, AS CO-TRUSTEE OF THE F. RESNICK INC. RETIREMENT PLAN AND TRUST AND THE F. RESNICK INC. EMPLOYEES' PENSION PLAN AND TRUST, AND AS A SHAREHOLDER OF F. RESNICK ON BEHALF OF HIMSELF AND ALL OTHER SHAREHOLDERS OF SUCH CORPORATION, PLAINTIFF,
v.
IRVING RESNICK, INDIVIDUALLY AND AS CO-TRUSTEE OF THE F. RESNICK INC. RETIREMENT PLAN AND TRUST AND THE F. RESNICK INC. EMPLOYEES' PENSION PLAN AND TRUST, AS DIRECTOR OF F. RESNICK INC. ON BEHALF OF HIMSELF AND ALL OTHER SHAREHOLDERS OF F. RESNICK INC. SIMILARLY SITUATED AND ON BEHALF OF AND IN THE RIGHT OF F. RESNICK INC., THE F. RESNICK INC. RETIREMENT PLAN AND TRUST AND THE F. RESNICK INC. EMPLOYEES' PENSION PLAN AND TRUST, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, ARNOLD RESNICK, A. RESNICK TEXTILE CO., INC. AND F. RESNICK INC., ADDITIONAL DEFENDANTS, STEVEN RESNICK, MAX LANDA, RESNICK & LANDA, INC., F. RESNICK INC. AND MANUFACTURERS HANOVER TRUST COMPANY, ADDITIONAL DEFENDANTS ON THE COUNTERCLAIM.



The opinion of the court was delivered by: Robert J. Ward, District Judge.

  OPINION

Plaintiff Herman Resnick ("Herman") has moved to strike the jury demand contained in the Corrected Answer to the First Amended Complaint filed by defendant Irving Resnick ("Irving"). For the reasons that follow, the motion is granted in part and denied in part.

BACKGROUND

The facts giving rise to this most recent episode in the longstanding and bitter quarrel between the Resnick brothers have been fully documented in prior decisions of this Court, and need not be repeated here at length.*fn1

A. Factual Background

Herman and Irving jointly owned and operated their family business, F. Resnick Inc. ("F. Resnick"), beginning in or about 1955. F. Resnick operated as an importer and distributor of fabrics to clothing manufacturers in the United States and since the 1970's imported fabrics primarily from Prato, Italy. Each brother with his wife owned half of the shares of the company. Irving and Herman were also co-trustees of the F. Resnick, Inc. Employees Pension Plan and Trust (the "Pension Plan"), a defined benefit plan and a qualified employee pension plan under section 401 of the Internal Revenue Code, 26 U.S.C. § 401 et seq., and the F. Resnick Inc. Retirement Plan and Trust (the "Retirement Plan"), a defined contribution plan under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (the Retirement Plan and the Pension Plan are collectively referred to as the "Plans"). For many years Standard Security Life Insurance Company of New York ("SSI") was engaged to perform all actuarial and administrative services for the Pension Plan.

In the spring of 1982, a dispute erupted between the brothers concerning the management and ownership of F. Resnick. Herman and Irving attempted to resolve their conflict through an agreement whereby one of the brothers would sell his shares in F. Resnick to the other. Unfortunately, the settlement efforts ultimately failed, and in or about August, 1982, Irving filed the first of a series of lawsuits between the brothers that have continued almost uninterrupted to this day.*fn2 An inordinate amount of judicial resources in both the federal and state courts have thus far been expended in resolving the brothers' petty sibling rivalries.

On or about March 20, 1984, the parties adopted a series of corporate resolutions settling the first lawsuit (the "Resolutions"), and providing for the immediate dissolution of F. Resnick, the termination of the Plans, the distribution of their assets to the participants and the retention of CMS Pension Service ("CMS") to terminate the Plans. CMS calculated Irving's entitlement from the Pension Plan as a lump sum payment of $1,009,332, which was $27,739 less than had been calculated earlier as his lump sum entitlement by SSI. Herman contends that he prepared a letter authorizing payment of the vested benefits under the Plans as calculated by CMS. He also claims that when he asked Irving, as co-trustee of the Plans, to sign the letter, Irving refused and threatened him with arrest. Herman subsequently commenced this lawsuit.

B. Procedural History

The instant action was begun on November 15, 1985, by Herman, individually and as co-trustee of the Plans, seeking to recover his vested accrued benefits under the Plans. Herman alleged that Irving breached his fiduciary duty as a trustee under ERISA for failing to authorize payment of Herman's benefits. Herman asked that his benefits be paid, that Irving be removed as co-trustee of the Plans and that Herman be awarded his costs of bringing the action and punitive damages of $1,000,000.

In his answer, Irving asserted counterclaims against Herman, alleging that Herman had embarked on a course of action that would destroy F. Resnick by forming a business that competed directly with F. Resnick. Irving claimed that Herman spent over 80% of his time at the new company, had transferred half of F. Resnick's inventory to the new company and solicited business away from F. Resnick for the benefit of that company. Irving contended further that Herman impaired the ability of F. Resnick to function by withdrawing his personal guarantee of F. Resnick's indebtedness as security for credit extended by Manufacturers Hanover Trust Company ("MHT"), the bank where F. Resnick maintained its corporate account. Irving charged that Herman conspired with his son, Steven Resnick ("Steven") and Max Landa ("Landa"), an employee of F. Resnick, to defraud F. Resnick by diverting the assets, customers and good will of F. Resnick. As a result of this conspiracy and Herman's breach of his fiduciary duty to F. Resnick, Irving sought damages as well as the return of Herman's salary and benefits and the salaries and benefits of Herman's co-conspirators to F. Resnick. Irving also sought damages from Herman in the amount of $27,739, representing the difference between the amount of his vested pension benefits as calculated by SSI and the amount he actually received.

This Court's Memorandum Decision dated May 18, 1988 granted partial summary judgment to Herman and ordered Irving to pay Herman the full amounts of his benefits due under the Plans, except for those benefits that accrued during the year the Plans were terminated.

On February 10, 1989, Irving filed a First Amended Answer, Counterclaims and Cross-Claims which added MHT as a defendant on the counterclaims, alleging that MHT participated in the conspiracy to destroy F. Resnick. Herman then filed a First Amended Complaint, which made new claims against Irving, and added Arnold and A. Resnick as defendants. The First Amended Complaint included allegations, in a "mirror image" of Irving's conspiracy claim against Herman, that Irving had conspired with his son Arnold Resnick ("Arnold") to dismantle F. Resnick and transfer its customers, suppliers and other resources to A. Resnick, a competing business which Irving and Arnold caused to be formed. Herman also alleged that Irving breached his fiduciary duties to F. Resnick by forming A. Resnick. The First Amended Complaint also contained claims against Irving for breach of contract, alleging that Irving violated the agreement contained in the Resolutions by inter alia, instituting further lawsuits against Herman and receiving $23,625 from F. Resnick that Irving claimed was wrongfully contributed to the Pension Plan.

On April 3, 1989, Irving filed his Answer to the First Amended Complaint, again asserting claims against MHT and the other third-party defendants.*fn3 Irving sought disgorgement of the profits of Resnick & Landa, Inc. ("Resnick & Landa"), the company Herman allegedly formed as part of the conspiracy to destroy F. Resnick, as well as damages in the amount of $10,000,000 from all of the alleged co-conspirators. Irving's answer included a claim for intentional infliction of emotional distress against all of the co-conspirators. Irving's answer also alleged that Herman had fraudulently induced Irving to enter into the agreement contained in the Resolutions, and sought to rescind that agreement. The answer also contained several ERISA claims, in which Irving claimed that Herman breached his fiduciary duty as co-trustee of the Plans by failing to ...


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