Supreme Court, stayed the state action and denied NYU's motion to dismiss
without prejudice to renewal if the state action resumed.
NYU subsequently moved to dismiss the federal complaint, on the grounds
that (1) plaintiffs fail to state a claim under ERISA; (2) the state law
claims are preempted by ERISA; (3) plaintiffs have failed to state claims
under state law; and (4) if the state law claims are not dismissed on
their merits, the Court should decline to exercise supplemental
jurisdiction over the state law claims.
In opposing the motion, plaintiffs have provided the Court with
materials outside the complaint.*fn2 Because I have considered those
materials, I must convert plaintiffs' motion to dismiss to a motion for
summary judgment.*fn3 See Kreiss v. McCown DeLeeuw & Co.,
37 F. Supp.2d 294, 298 n. 3 (S.D.N.Y. 1999) (citing Fonte v. Rd. of
Managers of Continental Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988),
and Fed. R.Civ.P. 12(b)).
A. Applicable Law
1. Summary Judgment
The standards governing motions for summary judgment are well-settled.
A court may grant summary judgment only where there is no genuine issue
of material fact and the moving party is therefore entitled to judgment
as a matter of law. See Fed R. Civ. P. 56(c); Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S.Ct. 1348, 89
L.Ed.2d 538 (1986). Accordingly, the court's task is not to "weigh the
evidence and determine the truth of the matter but to determine whether
there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To create an
issue for trial, there must be sufficient evidence in the record to
support a jury verdict in the nonmoving party's favor. See id.
To defeat a motion for summary judgment, the nonmoving party "must do
more than simply show that there is some metaphysical doubt as to the
material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. As the
Supreme Court stated in Anderson, "if the evidence is merely colorable,
or is not significantly probative, summary judgment may be granted."
Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (internal citations
omitted). The nonmoving party may not rest upon mere conclusory
allegations or denials, but must set forth "concrete particulars" showing
that a trial is needed. National Union Fire Ins. Co. v. Deloach,
708 F. Supp. 1371, 1379 (S.D.N.Y. 1989) (quoting R.G. Group, Inc. v. Horn
& Hardart Co., 751 F.2d 69, 77 (2d Cir. 1984) (internal quotation marks
Plaintiffs rely upon two sections of ERISA in their complaint, section
502(a)(1)(b), 29 U.S.C. § 1132 (a)(1)(B), and section 404(a)(1),
29 U.S.C. § 1104 (a)(1).
The first of these provisions, section 502(a)(1)(B), permits a
participant or beneficiary of an employee benefit plan to bring a civil
action to recover benefits due under the terms of the plan. See
29 U.S.C. § 1132 (a)(1)(B); Smith v. Dunham-Bush, Inc., 959 F.2d 6,
10 (2d Cir. 1992). Within the context of ERISA, the term "employee
benefit plan" refers to both employee pension plans and employee welfare
benefit plans. See 29 U.S.C. § 1002 (3). An unfunded severance plan
is an employee welfare benefit plan within the meaning of ERISA. See
Reichelt v. Emhart Corp., 921 F.2d 425, 430 (2d Cir. 1990), cert.
denied; 501 U.S. 1231, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991).
In contrast to the stringent requirements it applies to pension plans,
ERISA affords employers "considerable flexibility with respect to welfare
plans." Id. at 429. Because an employee's interest in a welfare benefit
plan is not vested, an employer may amend or terminate a severance pay
plan at any time. See id. at 430; Walsh v. Northrop Grumman Corp.,
871 F. Supp. 1567, 1573 (E.D.N.Y. 1994). As the Second Circuit has held,
an employer's freedom to alter a severance pay plan extends to situations
in which the employer's business is sold as a going concern and employees
obtain positions with the successor company. See Reichelt, 921 F.2d at
430; Veilleux v. Atochem North America, Inc., 929 F.2d 74, 76 (2d Cir.
1991); Ackner v. Lenox, Inc., 782 F. Supp. 267, 269 (S.D.N.Y. 1992).
Section 502 of ERISA also permits a participant or beneficiary to sue
for breach of fiduciary duty in violation of section 409, which provides
Any person who is a fiduciary with respect to a plan
who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by
this subchapter shall be personally liable to make
good to such plan any losses to the plan resulting
from each such breach[.]
29 U.S.C. § 1109 (a). Among the fiduciary obligations established by
ERISA is the duty of care set forth in section 404: "a fiduciary shall
discharge his duties with respect to a plan solely in the interest of the
participants and beneficiaries and  for the exclusive purpose of 
providing benefits to participants and their beneficiaries."
29 U.S.C. § 1104.
The Supreme Court has held that the fiduciary duties imposed by ERISA
inure to the plan itself and not to individual beneficiaries. See
Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 14042, 105
S.Ct. 3085, 87 L.Ed.2d 96 (1985). In Lee v. Burkhart, the Second Circuit
construed Russell as barring individual beneficiaries from seeking
damages under section 502 on their own behalf, rather than on behalf of
their plan. See Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993).
Accordingly, a beneficiary suing in his or her individual capacity lacks
standing to seek damages for breach of fiduciary duty under ERISA. See
Jaffe v. Int'l Bhd. of Teamsters Local 282 Welfare, Pension & Annuity
Trust Funds, No. 97 CV 934 (SJ), 1999 WL 409395, 1999 U.S. Dist. LEXIS
21637, at *9 (E.D.N.Y. Jun. 16, 1999) ("Under § 502(a)(2), monetary
relief is not available for individual plaintiffs and may be sought only
on behalf of an ERISA benefit plan."); Tabasko v. Direct Communs. Group,
No. 90 Civ. 7954 (DC), 1996 U.S. Dist. LEXIS 2503, at *4-5 (S.D.N.Y.
Feb. 28, 1996).
a. The First Cause of Action
In their first cause of action, plaintiffs seek, pursuant to
29 U.S.C. § 1132 (a)(1)(B), to enforce their rights to receive
severance benefits under the Severance Plan. NYU argues in response that
plaintiffs have failed to state a claim under ERISA, because NYU was
entitled to amend the Severance Plan at any time.
The parties do not dispute that the Severance Plan is an "employee
benefit plan" under ERISA.*fn4 The first issue to consider is whether
NYU was authorized to amend the Severance Plan to exclude employees in
plaintiffs' situation from receiving severance benefits. The answer to
this question is clear: under the Second Circuit's holding in Reichelt,
NYU was free to alter the Severance Plan at any time.
Plaintiffs attempt to distinguish the instant case from Reichelt by
pointing out that Goldwater was not sold to Roosevelt "as a going
concern." (Pl. Mem. of Law at 3-4). This is true: NYU did not enter into
any transaction with Roosevelt. Rather, HHC terminated its affiliation
contract with NYU and entered into a new affiliation contract with
Roosevelt. This distinction, however, is not meaningful. The Reichelt
decision did not rest on the relationship between plaintiffs' former and
current employer, but on the absolute right of an employer to alter a
severance pay plan. See Reichelt, 921 F.2d at 430 ("Since an employer has
the right under ERISA to amend or eliminate a severance benefit plan at
any time, a fortiorari it may do so in the context of the sale of a part
of its business as a going concern.") (emphasis added). Moreover, the
plaintiffs in this case experienced the same continuity of employment as
the plaintiffs in Reichelt. See id. at 427. Neither group of employees
missed a day of work; though their employers changed, their jobs did
not. Because I find that Reichelt is controlling, NYU therefore had the
authority to modify the Plan.*fn5
Plaintiffs apparently do not allege that, in enacting the
modification, NYU failed to comply with the ERISA requirements governing
plan amendment or disclosure.*fn6 Instead, they contend that (1) there is
an issue of fact as to plaintiffs' eligibility to receive severance
benefits under the modified Plan; and (2) it was an abuse of NYU's
discretion to exclude plaintiffs from receiving severance benefits. Both
of these arguments are without merit.
The Modified Severance Plan provides that, in instances where NYU loses
its affiliation contract, "separated employees . . . hired by the
successor contractor within 30 days of that contract's effective date"
shall be ineligible for severance pay. (Compl.¶ 88). There is no
dispute that plaintiffs began working for Roosevelt on July 1, 1997
— the day after they were laid off by NYU. (Comp. ¶ 68; Aniano
Aff. ¶ 11). Plaintiffs argue, however, that there is an issue of
fact as to the operative date of eligibility for severance pay. According
to plaintiffs, although HHC accepted a bid from Roosevelt for the
affiliation agreement in April 1997, and assumed control of Goldwater on
July 1, 1997, Roosevelt and HHC did not formally enter into an
affiliation agreement until August 1999. Consequently, plaintiffs argue,
the exclusion does not apply to them, for they were not hired by
Roosevelt within 30 days of what they claim is the "effective date" of
the affiliation contract — that is, July 1999. This position is
No reasonable jury could find that the "effective date" of the
Roosevelt — HHC affiliation contract was July 1999. Roosevelt took
over Goldwater on July 1,