United States District Court, W.D. New York
January 6, 2004.
PATRICK P. LEE and RICHARD J. RYAN, as Trustees of MOOG CONTROLS, INC. RETIREMENT PLAN, Plaintiff's,
MANUFACTURERS & TRADERS TRUST CO., Defendant
The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District
DECISION AND ORDER
In its answer to the complaint, defendant, Manufacturers &
Traders Trust Co. ("M&T Bank"), asserted several counterclaims
against the Plaintiff's, Patrick P. Lee and Richard J. Ryan (hereinafter
sometimes "Trustees"), trustees of the Moog Controls, Inc. Retirement
Plan ("the Plan"). The Trustees now move for partial summary judgment
dismissing the counterclaims.
The Trustees' motion is granted and the counterclaims are dismissed. It
appears that the pleaded counterclaims are asserted against the wrong
party. The Trustees commenced this action as representatives of the Plan.
It is the Plan, therefore, not the Trustees individually, that seeks
relief and recovery from M&T Bank for the alleged breach of the
bank's fiduciary obligations.
The so-called counterclaims seek contribution and indemnity, not
against the Plan itself, but against the individual Trustees for the
alleged breach of their own fiduciary obligations. See Chemung Canal
Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 16 (2d Cir. 1991),
505 U.S. 1212 (1992). The proper mechanism to seek such relief is by
way of a third-party complaint against the Trustees individually. If I
were writing on a tabula rasa, it would be a simple matter to
allow M&T Bank leave to file a third-party complaint to properly
position the parties. But, M&T Bank previously moved (Dkt. #20) to do
just that file a third-party complaint against the Trustees, and
another, John Burgess. United States Magistrate Judge Jonathan W. Feldman
denied the motion on December 18, 2002 (Dkt. #20), on the stated grounds
that it was untimely. There was no appeal from that order.
Generally, that would end the matter. It appears, however, that both
the Trustees and M&T Bank relied, in part, on the assumption that the
proposed third-party complaint was essentially duplicative of the
existing counterclaims. See, e.g., Letter from Greta K. Kolcon,
attorney for M&T Bank, dated December 16, 2002. I see the matter
differently and believe that a third-party complaint is the only vehicle
for seeking relief against the Trustees in their individual capacity for
any alleged breach of their fiduciary responsibilities.
This Court has broad discretion to allow the filing of a third-party
complaint under Federal Rules of Civil Procedure 14 at any time after
commencement of the action. Kenneth Leventhal & Co. v. Joyner
Wholesale Co., 736 F.2d 29, 31 (2d Cir. 1984); Quijano v. AMR
Services Corp., No. 9196, 1998 U.S. Dist. LEXIS 7210, at *2
(S.D.N.Y. May 9, 1998).
Under the circumstances in this case, I dismiss the counterclaims on
the grounds that they are asserted against the wrong party, and grant
M&T Bank leave to file a third-party complaint against the Trustees
in their individual capacities, within ten (10) days after entry of this
There are two other matters that must be attended to: (1) whether the
third-party complaint should be disallowed as futile; and (2) whether a
conflict exists that precludes the Plan's counsel,
Phillips, Lytle, Hitchcock, Blaine & Huber, from representing
both the Plan as plaintiff and the Trustees, Lee and Ryan, in their
individual capacity as third-party defendants.
On the first point, I find that M&T Bank can assert a third-party
claim (assuming a proper pleading) against the Trustees for contribution
and indemnity. Whether M&T Bank can convince the factfinder that the
Trustees' alleged defalcations caused the Plan's loss or contributed to
it, is a matter of proof and cannot be decided as a matter of law.
Discovery has been completed, and I am unable to find that there is no
evidence whatsoever to support M&T Bank's claim that the plaintiff
Trustees failed to live up to their responsibilities as fiduciaries.
See, e.g., Toussaint v. James, No. 01 Civ. 10048, 2003 U.S.
Dist. LEXIS 12940, at *11 (S.D.N.Y. July 25, 2003).
Concerning the conflict-of-interest matter, there may be a potential
conflict but in the posture of this case, I see no reason why the
affected parties could not proceed with joint counsel. As long as the
parties are apprised of the risks, I see no basis now for me to block
their choice of counsel. See DR 5-105(c); United States v.
Camisa, 969 F.2d 1428, 1430 (2d Cir. 1992); In re Taylor,
567 F.2d 1183, 1191 (2d Cir. 1977).
The Court's obligation is to advise and ascertain if the affected
parties wish to proceed with joint counsel. To that end, I direct counsel
for the Trustees and the Trustees themselves, Patrick P. Lee and Richard
J. Ryan, as well as the "independent Trustee" that has apparently been
appointed for this action, to appear before the Court, in person, on the
January 21, 2004 at 10:00 a.m. for the Court to conduct the required
inquiry into the joint representation.
Plaintiff's' motion for partial summary judgment (Dkt. #28) is granted
and the counterclaims asserted in the answer are dismissed.
Defendant, Manufacturers and Traders Trust Company, is granted leave to
file a third-party complaint against Trustees Patrick P. Lee and Richard
J. Ryan, within ten (10) days of entry of this order. The order of United
States Magistrate Judge Jonathan W. Feldman (Dkt. #26) denying
Manufacturers and Traders Trust Company leave to file a third-party
complaint is vacated.
The plaintiff Trustees, the independent Trustee and counsel for
Plaintiff's, are directed to appear before the Court on January 21,
2004 at 10:00 a.m. for inquiry concerning issues relating to joint
IT IS SO ORDERED.
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