The opinion of the court was delivered by: Siragusa, District Judge.
This action was brought by the plaintiff pension plans against
the defendant insurance company alleging breach of fiduciary
duty under the Employee Retirement Income Security Act of 1974
("ERISA"), 29 U.S.C. § 1001, et. seq. and for breach of
contract. Before the Court is the defendant's motion for summary
judgment, filed May 22, 1997 (document # 8), and the plaintiffs'
motion for summary judgment, filed May 23, 1997 (document # 12).
The plaintiffs seek summary judgment on the theory that the
defendant insurance company violated the terms of the investment
contract in force between the parties, and the defendant seeks
summary judgment on the basis that the plaintiffs' fund manager
misunderstood the contract and did not move the pension funds in
sufficient time to avoid a $234,355 loss to the fund. In dispute
is whether the defendant is a fiduciary under ERISA, whether the
plaintiffs have standing to bring the suit, whether ERISA
supersedes any state law contractual claim, and whether any
claims are barred by the applicable statutes of limitations.
Jurisdiction in this court is based on a federal question
pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(f). For the
breach of contract claims, this Court has supplemental
jurisdiction under 28 U.S.C. § 1332 and diversity jurisdiction
under 28 U.S.C. § 1332.
The plaintiffs filed their suit September 27, 1995, and the
case was originally assigned to the Honorable William M. Skretny.
The parties have completed discovery. Following oral argument on
the motions, Judge Skretny transferred the case to the
undersigned by an order entered on December 15, 1997 (document #
26). At the suggestion of the parties, this Court heard
reargument on the motions and reserved decision. For the reasons
stated below, the Court denies the defendant's motion for summary
judgment, and grants in part and denies in part the plaintiffs'
motion for summary judgment.
The plaintiffs are Battenfeld Grease and Oil Corporation of New
York ("BATCO") and Battenfeld-American, Inc. ("BATAM"). Both
companies operated in Buffalo, New York, and had pension plans
which met the definition of a pension plan under ERISA,
29 U.S.C. § 1002(2)(A).
Since 1989, John A. Bellanti Sr. has served as the trustee of
each plan. Kent aff., at 3. The other trustee is his wife,
Florence Bellanti. Kent aff., at 3. Mr. Bellanti had handled the
pension funds for BATAM and BATCO since becoming BATCO's
controller in November, 1956. Defendant's Statement of Undisputed
Facts (May 22, 1997, document # 9) ("Defendant's Statement"), at
2. In September 1983, after having worked his way up through the
ranks, Mr. Bellanti purchased both companies, BATAM and BATCO,
and became president and chairman of the board of directors and
the majority shareholder for both companies. He has also been a
certified accountant for thirty-one years. Id., at 2-3.
The pension plans for BATAM and BATCO were funded by two
contracts with the defendant*fn1. One was a group annuity
contract between the defendant and the trustees of the Battenfeld
Pension Plan, contract 51959. The other was between the defendant
and the trustees of the Battenfeld American Pension Plan, also a
group annuity contract, number 51960. Each was issued on March
17, 1981 with an effective date of January 1, 1980, and each was
identical in all material respects to the other. The contracts
were drafted by the defendant and were not subject to
negotiation. Plaintiffs' Memorandum of Law in Support of
Plaintiffs' Motion for Summary Judgment (May 23, 1997, document #
13) ("Plaintiffs' Memorandum"), at 2. Prior to signing the
contracts as trustee, Mr. Bellanti reviewed them with the
assistance of a lawyer, Gary
Kotaska, Esq. Defendant's Statement, at 3-4.
Both contracts were supported by the defendant's General
Account, about which the defendant stated, "[t]he assets held in
the General Account are invested for the benefit of our insurance
and retirement plan customers," and consisted primarily of bonds
and other loans, such as commercial and residential mortgages.
Defendant's Statement, at 4. The contracts permitted the trustees
of the pension plans to withdraw funds from the contract at any
From the inception of the plans in January 1980 until April
1994, all monies deposited pursuant to the contracts were
invested in the General Asset Fund, sometimes referred to as the
General Account. Plaintiffs' Memorandum, at 3. Principal reported
regularly on the value of the invested funds on a "book value"
basis. The book value consisted of the sum of all contributions
to date, along with the sum of all interest earned to date. Id.
The defendant also reported from time to time the "market value"
of the investments, but did not disclose to the plaintiffs the
formula for calculating this value. Id.
The contracts' Article VI, Limitation on Payments and
Transfers, governed payout of the funds upon demand of the
plaintiffs. Section 1, Subsection 2, Accelerated Payment or
Transfer at Investment Value, reads in pertinent part,
In lieu of the installment payments described in
Subsection 1 above, the Contractholder may request
that subject to the limitations of this Article any
payment or transfer be made on an investment value
basis. In this event, the amount of payment or the
amount transferred will be a percentage of the amount
deducted from the General Asset Fund. Such percentage
adjusts for the difference between the interest rate
currently available for new investments and the
current Experience Interest Rate for this contract.
The Bankers Life will inform the Contractholder in
writing of said percentage within 30 days of the
Contractholder's written request for payment or
In any event, payment or transfer under this
Subsection 2 will not be made until The Bankers Life
has received written agreement from the
Contractholder to the investment value adjustment.
Kent aff., at Exhibit F. The contracts provided that the
plaintiffs could elect either installment payments, or a lump sum
payment at investment value. If the latter, the amount of the
payment would be adjusted by the defendant to account for the
difference in interest rates for current investments and
something they called the "Experience Interest Rate." ...