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DELAURENTIS v. JOB SHOP TECH. SERVS.

January 18, 1996

ANGELA DeLAURENTIS, EVELYN BLUMBERG, JOHN PIZO, JOSEPH COPPOLA, RICHARD REKSC, et al., Plaintiffs, against JOB SHOP TECHNICAL SERVICES, INC., d/b/a INTERNATIONAL TECHNICAL SERVICES, INC., RALPH CORACE, individually and as Trustee of INTERNATIONAL TECHNICAL SERVICES, INC. 401(k) PROFIT SHARING PLAN AND TRUST, CEP CONSULTANTS, INC., COMPREHENSIVE CONSULTING GROUP, EDWARD ISAACS & CO. and THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, Defendants.


The opinion of the court was delivered by: WEXLER

 WEXLER, District Judge

 Plaintiffs, a purported class of former employees of defendant Job Shop Technical Services, Inc. d/b/a International Technical Services, Inc. ("ITS") and participants in the International Technical Services, Inc. 401(k) Profit Sharing Plan and Trust (the "Plan"), brought the above-referenced action for violations of, inter alia, the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq., and the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq. against ITS, the Plan's administrator, Ralph Corace ("Corace"), the Plan's trustee, CEP Consultants, Inc. and Comprehensive Consulting Group (collectively, "CEP"), the Plan's administrative consultants, Edwards Isaacs & Co ("EIC"), the Plan's accountant, and the Equitable Life Assurance Society of the United States ("Equitable"), the Plan's investment advisor. In addition, ITS and Corace cross-claimed against CEP, EIC, and Equitable for indemnification. Presently before the Court are the motions of CEP, EIC, and Equitable, Pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6), for an order dismissing the Amended Complaint and the Crossclaim.

 I. BACKGROUND

 According to the Amended Complaint, the Plan is an employee benefit plan under ERISA. Amended Complaint, PP 207, 209. Plaintiffs were employees of ITS and participants in the Plan, who elected to have portions of their salary withheld and paid to the Plan by ITS. Id. P 221.

 The Amended Complaint asserts that, between 1991 and 1994, Corace and ITS diverted in excess of $ 3 million from the Plan by failing to make contributions to the Plan as required by the Plan and ERISA. Id. P 216. Under the Plan, Corace is named trustee and ITS administrator. Id. P 211.

 The Amended Complaint also alleges that CEP, EIC, and Equitable participated in the wrongdoing. According to the Amended Complaint, CEP drafted the Plan and acted as a consultant, providing to the Plan such services as the preparation of quarterly benefit statements (the "quarterly statements"). Id. P 212. Equitable, the investment manager for the Plan, provided data used by CEP in compiling the quarterly statements. Id. P 213. EIC provided accounting services for the Plan, including audits, preparation of financial statements, and rendering of certified opinions as to the financial condition of the Plan. Id. P 214.

 In 1991, EIC allegedly became aware that ITS was delinquent in making contributions to the Plan, yet declined to notify the Plan's participants or the United States Department of Labor. Id. PP 214-215. In 1993 and 1994, the quarterly statements, indicating that ITS had fully contributed to the Plan, were prepared by CEP with "actual or constructive" knowledge that the information contained therein was false. Id. P 217. Again, in 1993 and 1994, EIC had "actual or constructive" knowledge that funds were being diverted from the Plan, yet failed to take action. Id. P 219.

 The first cause of action asserts that ITS, Corace, and CEP are "fiduciaries," as that term is defined under ERISA, and that their failure to contribute to the Plan and "intentional misrepresentation concerning the payment of these contributions" constitutes a breach of fiduciary duties under ERISA. See id. PP 226-30, 233. The second cause of action, also asserted against ITS, Corace, and CEP, for breach of co-fiduciary duties under ERISA, adds the charge that "defendants . . . knew or should have known that the [quarterly] statements were false or fraudulent" and that the quarterly statements "were an attempt to mislead Plan participants by concealing the true facts concerning the payment of . . . contributions." Id. P 239.

 The eighth cause of action, asserted against CEP, EIC, and Equitable as nonfiduciaries for knowing participation in a fiduciary's breach, alleges that these defendants "had actual or constructive knowledge of the breach of fiduciary duty by [ITS] and Corace" and demands that they be held jointly and severally liable for the breach because "their failure to take appropriate action to remedy [the breach]" constitutes knowing participation in the breach. The Amended Complaint does not specify the legal derivation of the eighth cause of action - i.e., whether it is brought under ERISA, federal common law, or state law.

 The seventh cause of action charges ITS, Corace, and CEP with violations of RICO.

 II. DISCUSSION

 Dismissal of a complaint under Fed. R. Civ. P. 12(b)(6) is proper only 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." Allen v. Westpoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)). In considering a motion to dismiss the complaint for failure to state a claim upon which relief can be granted, the complaint will be construed in the light most favorable to the plaintiffs, and the court accepts as true all facts alleged in the complaint. See Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). Baldly conclusory statements that fail to provide notice of the basic events of which the plaintiff complains need not be credited by the court. Moscowitz v. Brown, 850 ...


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