defendant's discretion to set the MVA formula gave it sufficient authority over the disposition of these plan assets to make it a pension plan fiduciary under ERISA. Plaintiff relies on Chicago Bd. Options Exch., Inc. v. Connecticut Gen. Life Ins. Co., 713 F.2d 254 (7th Cir. 1983), in which an insurance company and a pension plan entered into a contract which gave the insurance company the unilateral discretion to change the contract in such a way as to lock the plan into a low-yield investment for ten years. The Court found that the insurance company's discretion to change the contract unilaterally was not qualitatively different from the ability to choose plan investments, and thus the defendant could only exercise its discretion in light of ERISA's fiduciary obligations. Id. at 260. Plaintiff argues that defendant's discretion to set the MVA formula upon termination of the GICs gave it sufficient discretionary control over plan assets to create a fiduciary duty under ERISA.
However, in cases where a court has based an ERISA fiduciary duty on the power to alter an investment contract, the relevant contract allowed the contract seller, on its sole initiative, to alter the contract in a manner which would lessen its value to the plan. See e.g., Id.; Associates in Adolescent Psychiatry v. Home Life Ins. Co., 941 F.2d 561, 564 (7th Cir. 1991), cert. denied, 117 L. Ed. 2d 426, 112 S. Ct. 1182 (1992) (contract gave the insurance company the right periodically and unilaterally to change the prospective interest rate); Ed Miniat, Inc. v. Globe Life Ins. Group, 805 F.2d 732, 734, 737-38 (7th Cir. 1986), cert. denied, 482 U.S. 915, 96 L. Ed. 2d 676, 107 S. Ct. 3188 (1987) (contract gave insurance company the right unilaterally to lower the rate of return and increase the premium rate). However, the GICs in this case do not give defendant the right unilaterally to change the contracts to lessen their value to the plan. During the life of the contracts, defendant has no power to alter the GICs without plaintiff's written consent.
Defendant's discretion to set and calculate the MVA formula only arises after the plaintiff exercises its discretion to terminate the GIC. The Second Circuit has underscored that contracts must be viewed in their entirety in determining whether an insurance company's unilateral discretion is sufficient to create a fiduciary duty under ERISA. Harris Trust, 970 F.2d at 1145-46 (2d Cir. 1992).
Since plaintiff's discretion to terminate the GIC triggers defendant's limited discretion to set the MVA formula, defendant's discretion merely offsets plaintiff's otherwise unrestrained power to terminate the GICs prematurely. We believe this limited discretion is not equivalent to the power to choose plan investments, as in Chicago Bd., and under these circumstances, we do not believe defendant is an ERISA fiduciary.
However, we need not reach this difficult question to dispose of plaintiff's ERISA-based breach of contract theory. ERISA preempts state law claims that relate to an employee benefit plan. 29 U.S.C. § 1144(a). ERISA is the federal statutory scheme which regulates pension plans, 29 U.S.C. § 1001, and consequently all fiduciary duties created by ERISA relate to employment benefit plans. Thus, ERISA preempts plaintiff's state law theory for breach of contract because the claim is based on a breach of duty created by ERISA. Therefore, even if ERISA creates a fiduciary duty for the defendant, ERISA also preempts any state law causes of action for a violation thereof.
Thus this theory does not support summary judgment for plaintiff on the contract claim.
In sum, both parties' motions for summary judgment on the contract claim are denied because they are either legally meritless or raise material issues of disputed fact.
II. Defendant's Motion for Summary Judgment on Fraud and Negligent Misrepresentation Claims
Defendant's motion for summary judgment on fraud and negligent misrepresentation claims is granted because plaintiff did not rely on the alleged misstatements by defendant. Plaintiff must prove detrimental reliance on defendant's material misstatement to sustain an action for either fraud or negligent misrepresentation. Robertson v. Gaston Snow & Ely Bartlett, 404 Mass. 515, 536 N.E.2d 344, 349, cert. denied, 493 U.S. 894, 107 L. Ed. 2d 192, 110 S. Ct. 242 (1989); Zimmerman v. Kent, 31 Mass. App. Ct. 72, 77, 575 N.E.2d 70, 74 (1991) (detrimental reliance an essential element of fraud). Plaintiff bases its claims on defendant's written statements of the original MVA formula in July and August of 1991. Pl's Br. in Opp. at 41. However the undisputed facts show that plaintiff did not rely on these statements in its decision to terminate the contracts.
Senior officials at State Street admitted that they would have terminated the GICs even if the MVAs had been as high as 10%. Gaffney Dep. at 141. This is confirmed by the fact that plaintiff could have withdrawn its termination of the GICs once MONY revealed that the revised MVA's would range from approximately 3.3% to 5.9%,
but State Street elected to continue with the terminations in full knowledge of the revised MVA formula. Gaffney Dep. at 96-97. Whether MONY applied the original or revised MVA formula to the canceled GICs did not affect plaintiff's decision to terminate the contracts. Therefore, plaintiff did not rely on the alleged misstatements, and the claims for fraud and negligent misrepresentation are dismissed.
III. The Cross Motions for Summary Judgment on the State Statutory Claims
The parties' cross motions for summary judgment for the claim under Massachusetts unfair business practice statute, Mass. Gen. L. ch. 93A. § 11, are denied because plaintiff's motion is legally inadequate and defendant's motion raises an issue of fact. 93A § creates a cause of action for any unfair or deceptive business practice. Plaintiff points out that a breach of fiduciary duty is sufficient to create liability under chapter 93A § 11. See Doliner v. Brown, 21 Mass. App. Ct. 692, 697, 489 N.E.2d 1036, 1040 (1986). Since plaintiff claims that defendant is an ERISA fiduciary and defendant violated that duty, it concludes that defendant is also liable under 93A § 11. As stated above we do not believe defendant is an ERISA fiduciary and, even if it is, ERISA preempts any state law remedy for violation of a duty created by ERISA. Supra at 13-16; 29 U.S.C. § 1144(a). Therefore, plaintiff's motion for summary judgment on the 93A § 11 claim is denied.
Similarly defendant is not entitled to a summary judgment on the 93A § 11 claim. A trade practice is unfair if (1) it is within at least the penumbra of common law, statutory or other established concept of fairness; (2) it is immoral, unethical, oppressive or unscrupulous; and (3) it causes substantial injury to other businessmen. PMP Assoc., Inc. v. Globe Newspaper Co., 366 Mass. 593, 321 N.E.2d 915, 917 (1975) (adopting FTC's definition). If plaintiff successfully establishes that MONY breached the contract and intentionally misrepresented the MVA formula, a reasonable fact finder may conclude that defendant perpetrated an unfair business practice under 93A § 11. Heller Financial v. Insurance Co. of N. Am., 410 Mass 400, 409, 573 N.E.2d 8, 13 (1991) (a misrepresentation is sufficient to support a 93 A § 11 claim). Although plaintiff did not rely on any of the alleged misstatements by defendant, reliance is not required to show a violation of 93A § 11. Id.; Zayre Corp. v. Computer Sys. of Am., Inc., 24 Mass. App. Ct. 559, 511 N.E.2d 23, 30, review denied, 400 Mass. 1107, 513 N.E.2d 1289 (1987). The Massachusetts statute only requires that plaintiff show an unfair business practice which caused plaintiff damage. Plaintiff's allegations that defendant concealed its breach of contract until the eleventh hour is sufficient to support a claim for a violation of 93A § 11, and therefore defendant's motion for summary judgment on the claim is denied.
IV. Defendant's Summary Judgment Motion on the Conversion Claim
Defendant moves for summary judgment on plaintiff's conversion claim on the grounds that a claim for conversion of money may not prevail unless the funds are kept in a separate identifiable fund. Def Br. in Supp at 45-46. Although it is unclear whether Massachusetts law only allows conversion actions for funds kept in a separate account, even if it does the funds under the GICs were sufficiently separate to support an action for conversion.
"Conversion requires the wrongful exercise of dominion over personality, including money, to which a plaintiff has an immediate right of possession." Schmid v. National Bank of Greece, S.A., 622 F. Supp. 704, 713 (D. Mass. 1985), aff'r, 802 F.2d 439 (1st Cir. 1986). Defendant urges that we accept the majority rule that limits conversion actions for money to those instances where the funds converted are held in a separate identifiable account.
However, even if we apply such a limitation to the Massachusetts conversion action, plaintiff's claim is still sufficient. The GICs at issue provided that all plaintiff's contributions be held in a separate General Investment Accumulation Fund, Contracts 2.1, and, each contract's fund was sufficiently identifiable to support an action for conversion. The fact that the General Investment Accumulation Funds were part of defendant's general assets, Contracts 2.1, does not change our analysis. Bank deposits are part of a bank's general assets. Nonetheless an action against a bank for conversion is proper when an account identifies the funds of the plaintiff. In Re 604 Columbus Ave. Realty Trust, 968 F.2d 1332, 1358-59 (1st Cir. 1992). Consequently, defendant's motion for summary judgment on the conversion claim is denied.
The parties' cross motions for summary judgment on the breach of contract and Massachusetts unfair business practice statute claims and defendant's motion for summary judgment on the conversion claim are denied because they are legally inadequate or because they raise disputed matters of fact. However, defendant's motion for summary judgment on the remainder of the state statutory claims, the fraud claim, and the negligent misrepresentation claim is granted.
Dated: New York, New York
January 15, 1993
William C. Conner
United States District Judge