Under Rule 15 of the Fed.R.Civ.P., leave to amend a complaint
"shall be freely given when justice so requires." Fed.R.Civ.P.
15(a). Amendment may be denied if the amended claim would be
futile. In this circuit, an amendment to a pleading is deemed
futile "if a proposed claim could not withstand a motion to
dismiss pursuant to Rule 12(b)(6)." Barrett v. United States
Banknote Corp., 806 F. Supp. 1094, 1098 (S.D.N.Y. 1992).
Rule 12(b)(6) motions may only be granted where "it appears beyond
doubt that plaintiff can prove no set of facts in support of his
claim that would entitle him to relief." Citibank, N.A. v. K-H
Corp., 968 F.2d 1489, 1494 (2d Cir. 1992).
In deciding whether Plaintiffs should be granted leave to
amend, this Court must determine whether Plaintiffs state a
claim under ERISA. And when reviewing a Plan Administrator's
denial of eligibility for an ERISA plan, a district court may
review the decision de novo. See Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). I
find that, because Plaintiffs are precluded from relitigating
the issue of whether they are employees within the meaning of
ERISA, they fail to state a claim upon which relief may granted.
Plaintiffs Are Precluded from Relitigating the Question of
Employee Status under ERISA
Each of the ERISA Plans at issue covers only Bestfoods
"employees." (See Defendant's Ex. A. §§ 1.13, 21.; Ex. B §§
1.15,2.1; Ex. C §§ 1.17,2.1.)*fn3 Defendants argue that
amendment is futile because this Court has already determined
that Plaintiffs are not "employees" within the meaning of ERISA
and therefore are precluded from bringing the proposed claims.
In the alternative, Defendants argue that Plaintiffs are not
eligible for the Plans. Plaintiffs argue that amendment is not
futile because (1) plaintiffs are employees within the meaning
of ERISA and (2) their ERISA benefits were denied in violation
of the Plans.
Defendants are correct. This Court has already determined
that, as a matter of law, Plaintiffs were not employees of
Defendants, and the Second Circuit upheld that determination.
Plaintiffs are therefore estopped from relitigating that issue
Plaintiffs contend that their original ERISA claims were
dismissed by Judge Jones under Rule 12(b)(6) because they had
failed to plead with sufficiency that CPC was in any sense an
ERISA "fiduciary," not because they were not "employees" for
ERISA purposes. Defendants argue that Judge Jones' dismissal of
the ERISA claim, and the Second Circuit's affirmance, required a
finding that Plaintiffs were not "employees" for ERISA purposes.
I agree with Plaintiffs and disagree with Defendants. See
Smith, et al. v. CPC Int'l, Inc., et al., 97 Civ. 1547, 1998 WL
50204, slip op. at 7 (S.D.N.Y. Jan. 30, 1998); Smith, et al. v.
CPC Int'l, et al., 201 F.3d 432, 1999 WL 1067649 (summary
order) (2d Cir. April 16, 1999).
However, Judge Jones also dismissed a claim for negligent
representation that was
predicated entirely on alleged misstatements about Plaintiffs'
employment status. Her dismissal of that claim, and the Second
Circuit's affirmance, is enough to bar relitigation of the
"employee" question in the ERISA context.
The Supreme Court has determined that, under ERISA (unlike the
Fair Labor Standards Act, which governed the standard discussed
by this Court in a related case, McGuiggan, et al v. CPC Int'l
et al., 84 F. Supp.2d 470 (S.D.N.Y. 2000)), traditional common
law agency principles govern the determination of employment
status. See Nationwide Mutual Insurance Co. v. Darden,
503 U.S. 318, 323-24, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). Those
common law principles are centered on the control test, which
examines "the hiring party's right to control the manner and
means by which the product is accomplished.'" See id. (quoting
Community for Creative Non-Violence v. Reid, 490 U.S. 730,
751-752, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989)). Among the
factors considered in determining employer's control over an
the skill required; the source of instrumentalities
and tools; the location of the work; the duration of
the relationship between the parties; whether the
hiring party has the right to assign additional
projects to the hired party; the extent of the hired
party's role in hiring and paying assistants; whether
the hiring party is in business; the provision of
employee benefits; and the tax treatment of the hired
Contrary to Plaintiffs' assertion in their papers, the common
law test of agency discussed in Darden is the same test
applied by New York courts in addressing a variety of
employer-employee relationships. See 36 N.Y.Jur.2d, Employment
Relations § 4 (1996) ("The really essential element of the
[employer-employee] relationship is the right of control, that
is, the right of one person, the master, to order and control
the other, the servant, in the performance of work by the
latter. . . ."); Fitzpatrick v. Holimont Inc., 247 A.D.2d 715,
669 N.Y.S.2d 88 (1998) (applying common law agency test to
workers' compensation determination); In the Matter of HTA Of
New York Inc., 255 A.D.2d 733, 680 N.Y.S.2d 725 (1998)
(applying common law agency test to review of unemployment
compensation board's determination).
In her original opinion, Judge Jones dismissed Plaintiffs'
state law negligent misrepresentation claim, which was premised
on the allegation that Plaintiffs had been common law
"employees" of Bestfoods. The alleged misrepresentation was that
Bestfoods told Plaintiffs they were "independent distributors,
rather than employees" and "failed to treat them as employees
for tax purposes." Smith, 1998 WL 50204 at *4. Judge Jones
held that this would constitute a misrepresentation claim only
if the distributors were, in fact, employees and not independent
distributors. See Id. Judge Jones concluded that Plaintiffs
failed to state a claim that any negligent misrepresentation was
made, even though they alleged in the complaint that they were
Bestfoods employees because Bestfoods exercised control over
them by virtue of twenty-four specific "control factors." See
id.; (Am.Cplt. ¶ 26.) Thus, she necessarily found that the
facts alleged in the complaint did not make Plaintiffs
"employees" under traditional state law principles. The Second
Circuit affirmed dismissal of this claim. See Smith, 201 F.3d
at 432. The issue is now foreclosed.
Plaintiffs' motion to amend the complaint is denied.
This case has been consolidated for trial with Arasimowicz v.
Bestfoods, 99 Civ. 8977, with trial scheduled to begin
September 25, 2000.
This constitutes the decision and order of this Court.