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DOWNES v. JP MORGAN CHASE & CO.

United States District Court, S.D. New York


June 3, 2004.

SUE DOWNES, Plaintiff, -V.- JP MORGAN CHASE & CO., EMPLOYEE WELFARE BENEFIT PLANS, EMPLOYEE BENEFIT PLANS, 401K SAVINGS PLAN AND EMPLOYEE STOCK OPTION PROGRAM, Defendants. Shira J. Rosenfeld, New York, NY, for Plaintiff. Mark G. Cunha, Simpson Thacher & Bartlett LLP, New York, N.Y. (Vincent R. FitzPatrick III, on the brief), for Defendants

The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

Sue Downes brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., the Equal Pay Act, 29 U.S.C. § 206(d)(1), and New York State law to recover certain employee benefits. Downes alleges that defendant J.P. Morgan Chase & Co.*fn1 wrongfully classified her as an independent contractor rather than as an employee and on that basis denied her, among other benefits, health care, bonuses, vacation, and severance pay. She also alleges that J.P. Morgan discriminated against her by paying similarly-situated male employees more than she received. J.P. Morgan moves to dismiss, arguing that Downes's complaint is largely time-barred and, as to most counts, fails to state a claim on the merits. For the reasons that follow, the motion will be granted in part and denied in part.

  BACKGROUND

  The following facts, drawn from the complaint, must be accepted as true for purposes of this motion to dismiss. See Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995). J.P. Morgan maintains and administers various benefits plans for its employees, which entitle them to health care, vacation, paid sick and holiday leave, severance, and a pension plan. (Compl. ¶ 10.) In June 1993, Downes began to perform work for Chase Manhattan Banking Corporation, J.P. Morgan's predecessor.*fn2 (Id. ¶ 14.)

  In February 2003, Downes and J.P. Morgan entered into a one-year employment contract. In May 2003, Downes stopped working for J.P. Morgan because, she alleges, it discharged her. (Id. ¶ 15.) At no time did J.P. Morgan or its predecessor provide her employee benefits of any kind. (Id. ¶¶ 10, 21, 35, 48.) Nor, after she ceased to perform work for J.P. Morgan, did it provide her severance pay or continuing healthcare coverage. (Id. ¶¶ 27, 41.)

  Downes alleges that J.P. Morgan deliberately "misclassif[ied] her as a consultant and/or independent contractor with the specific intent to deny her benefits." (Id. ¶ 38.) She also alleges that J.P. Morgan paid similarly-situated male employees, "who had jobs that required equal skill, effort and responsibility and were performed under similar working conditions," higher wages than she received. (Id. ¶ 57.) DISCUSSION

 I. Standard on a Motion to Dismiss

  On a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court must accept as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to the plaintiff, drawing all reasonable inferences in her favor. Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). The Court will not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of h[er] claim that would entitle h[er] to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

 II. ERISA Claims

  The gravamen of the complaint is that J.P. Morgan misclassified Downes with the intent to deny her various benefits enjoyed by J.P. Morgan employees under ERISA-governed plans that it maintains and administers. Downes brings her first three claims under ERISA §§ 404, 502(a)(1)(B), and 510, codified, respectively, at 29 U.S.C §§ 1104, 1132(a)(1)(B), and 1140. J.P. Morgan argues that the statute of limitations bars all of these claims, and that each in any event fails on the merits.

  A. Denial of Benefits

  As a threshold issue, the Court notes that while Downes brings her first two claims under distinct statutory sections, each seeks substantially the same relief: damages for benefits that Downes alleges J.P. Morgan wrongfully withheld from her. J.P. Morgan correctly argues that insofar as Downes purports to bring her first claim pursuant to ERISA § 409, 29 U.S.C. § 1109 (Compl. ¶ 32), she fails to state a claim. ERISA § 409 makes fiduciaries liable for breaches of the standard of care set forth in § 404.*fn3 But it makes them liable to the plan, not to individuals. Section 409(a) provides in relevant part that a fiduciary "shall be personally liable to make good to [an ERISA] plan any losses to the plan resulting from [his or her] breach, and to restore to such plan any [wrongful] profits of such fiduciary." 29 U.S.C. § 1109(a). ERISA § 409 therefore does not provide a private right of action for individual damages; suits under § 409 must seek recovery on behalf of the plan as a whole. See Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985); Rudolph v. Joint Indus. Bd. of the Elec. Indus., 137 F. Supp.2d 291, 297 (S.D.N.Y. 2001). To the extent that Downes purports to bring her first claim for breach of fiduciary duty "[p]ursuant to ERISA § 409" (Compl. ¶ 32), she therefore fails to state a cognizable claim.

  But Downes may, and does in her second claim (Compl. ¶¶ 33-36), seek essentially the same relief under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), which gives participants in or beneficiaries of plans a right of action "to recover benefits due to [them] under the terms of the plan[s], or to clarify [their] rights to future benefits." Id.; see Rudolph, 137 F. Supp.2d at 297. Furthermore, while the complaint does not cite ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), Downes argues in her brief that she also can bring a cause of action for breach of fiduciary duty under that subsection, which provides a right of action to a "participant, beneficiary or fiduciary" seeking to enjoin violations of an ERISA plan or "(B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan." Id. (P. Br. 4-5.) While Devlin v. Empire Blue Cross and Blue Shield, 274 F.3d 76, 89 (2d Cir. 2001), cited by Downes, arguably supports that argument, it is questionable (1) whether Downes seeks "other appropriate equitable relief within the meaning of § 502(a)(3), see Bona v. Barasch, No. 01 Civ. 2289, 2003 WL 1395932, at *10-*12 (S.D.N.Y. Mar. 20, 2003), and (2) whether an action pursuant to § 502(a)(3) can seek "appropriate equitable relief where, as here, another ERISA provision (here, § 502(a)(1)(B)) offers the plaintiff adequate relief. See Varity Corp. v. Howe, 516 U.S. 489, 515 (1996) ("[W]e should expect that where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be `appropriate.'"); Mead v. Arthur Andersen, LLP, 309 F. Supp.2d 596, 598 (S.D.N.Y. 2004) (distinguishing Devlin on this ground).

  The Court need not delve further into these issues, however, because the applicable statutes of limitations bar Downes's benefits claims whether she brings them pursuant to § 502(a)(3), that is, under the rubric of a breach of fiduciary duty, or pursuant to § 502(a)(1)(B), which explicitly authorizes actions to recover allegedly due ERISA benefits. First, insofar as Downes properly alleges an ERISA § 502(a)(3) claim, ERISA § 413, 29 U.S.C. § 1113, sets forth the applicable statute of limitations. Caputo v. Pfizer, Inc., 267 F.3d 181, 188 (2d Cir. 2001). ERISA § 413 provides:

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of —
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation[.]
29 U.S.C. § 1113 (emphasis added.) A plaintiff has "actual knowledge," and hence the claim accrues, "when [s]he has knowledge of all material facts necessary to understand that an ERISA fiduciary has breached his or her duty or otherwise violated the Act." Caputo, 267 F.3d at 193. Second, insofar as Downes brings her benefits claims pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), the statute of limitations is six years, corresponding to "the controlling limitations period . . . specified in the most nearly analogous state limitations statute." Miles v. N.Y.S. Teamsters Conference Pension and Ret. Fund, 698 F.2d 593, 598 (2d Cir. 1983). A claim under § 502(a)(1)(B) accrues "upon a clear repudiation by the plan that is known, or should be known, to the plaintiff — regardless of whether the plaintiff has filed a formal application for benefits." Carey v. International Brotherhood of Electrical Workers Local 363 Pension Plan, 201 F.3d 44, 49 (2d Cir. 1999); see also Miles, 698 F.2d at 598. Under both statutes, the plaintiff's "actual knowledge" of the alleged breach triggers the statute of limitations.

  Here, the alleged breach occurred when J.P. Morgan classified Downes as an independent contractor rather than as an employee, thereby rendering her ineligible for benefits. See Brennan v. Metro. Life Ins. Co., 275 F. Supp.2d 406, 409 (S.D.N.Y. 2003) ("[A]ll of the district courts that have considered claims made by individuals who were classified or treated as independent contractors have held that the statute of limitations begins to run when the beneficiary first learns that she is considered an independent contractor and is therefore not entitled to benefits, regardless of whether she later files a formal claim for benefits."); id. at 409-10 (collecting cases); see also Ambris v. Bank of New York, No. 96 Civ. 61, 1998 WL 702289, at *6 (S.D.N.Y. Oct. 7, 1998). J.P. Morgan's predecessor-in-interest hired Downes in June 1993. (Compl. ¶¶ 6, 14.) She filed her complaint on November 14, 2003, more than ten years later. Hence, if Downes had "actual knowledge" of the breach or violation before November 14, 1997 (for her § 502(a)(1)(B) claim) or November 14, 2000 (for her putative § 502(a)(3) claim), then her claims for unpaid benefits are time-barred.*fn4

  Downes argues that the Court cannot presume her "actual knowledge of the breach or violation." Before discovery, she contends, it would be premature to infer that she knew that J.P. Morgan had not been providing her employee benefits. This is simply implausible. It cannot seriously be maintained that Downes failed to realize that J.P. Morgan had not been providing her employee benefits for ten years. Surely, each time Downes visited a doctor, she did not fail to notice that she did not have health insurance subsidized or provided by J.P. Morgan, and each time she took a leave of absence for illness or vacation, she did not fail to notice that she received no compensation from J.P. Morgan for the days she missed work.*fn5

  Nor is Downes's argument that the Court must await discovery before inferring that she knew J.P. Morgan deemed her an independent contractor from the outset supported by the cases she cites for this proposition. Bona, 2003 WL 1395932, held that the plaintiffs' allegations that the "defendants' course of conduct took place over many years and attracted public attention" did not suffice to impute to them "actual knowledge" and thereby to trigger the three-year statutory deadline for breaches of fiduciary duty. Id. at *15. Carollo v. Cement and Concrete Workers District Council Pension Plan, 964 F. Supp. 677 (E.D.N.Y. 1997), simply denied summary judgment on limitations grounds where, far from establishing the plaintiff's actual knowledge of the violation, the defendants sought "further discovery on this issue." Id. at 688. Both Bona and Carollo thus involved claims for breach of fiduciary duty where the breach at issue would not necessarily have been obvious or immediately apparent to the plaintiff.

  Here, even assuming that Downes can properly assert a claim for breach of fiduciary duty under ERISA § 502(a)(3) — and it is far from clear that she can, see Varity, 516 U.S. at 515 — the breach that triggers the statute of limitations occurred when one or more fiduciaries of one or more of J.P. Morgan's employee benefits plans classified Downes as an independent contractor rather than as an employee, rendering her ineligible for benefits. It blinks reality to assert that Downes remained unaware of this alleged breach, for its consequences — that she did not receive employee benefits — would have soon, if not immediately, been apparent. Downes certainly knew that J.P. Morgan did not regard her as an employee entitled to benefits, including health insurance, vacation, and annual bonuses, before November 14, 1997, some four years after she began to work there. See Brennan, 27 F. Supp.2d at 409; Ambris, 1998 WL 702289, at *6. Her benefits claims based on her alleged misclassification as an independent contractor, whether brought pursuant to ERISA § 502(a)(3), to which a three-year statute of limitations applies, or § 502(a)(1)(B), to which a six-year statute of limitations applies, are therefore time-barred.*fn6

  B. Discrimination

  Downes's third ERISA claim (Compl. ¶¶ 37-39) is likewise time-barred, but in any event fails to state a claim on the merits. ERISA § 510, 29 U.S.C. § 1140, makes it unlawful for an employer to "discriminate against a participant or beneficiary for exercising any right to which [s]he is entitled under" an ERISA plan, "or for the purposes of interfering with the attainment of any right to which such participant may become entitled under the plan." Downes alleges that J.P. Morgan violated § 510 "by misclassifying her as a consultant and/or independent contractor with the specific intent to deny her benefits." (Compl. ¶ 38.)

  The parties agree that the statute of limitations for ERISA § 510 claims is two years. (D. Br. 9-10; P. Br. 13.) See Sandberg v. KPMG Peat Marwick, L.L.P. 111 F.3d 331, 336 (2d Cir. 1997). Again, the claim accrues from the date on which Downes knew or should have known about the alleged wrong, that is, her misclassification with intent to deny her benefits. Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1140-41 (7th Cir. 1992) ("Because the purpose of Section 510, like intentional employment discrimination cases, is to prevent actions taken for an unlawful purpose, it is the decision and the participant's discovery of this decision that dictates accrual."). For the reasons set forth above, Downes undoubtedly knew, well before November 14, 2001 (two years before she filed her complaint), that J.P. Morgan deemed her an independent contractor, not an employee. Her ERISA § 510 claim is therefore time-barred.

  In any event, this allegation fails to state a claim. ERISA § 510 prohibits employers from disrupting vested or soon-to-be vested employee benefits for several purposes, including, for example, to harass or retaliate against an employee, or to prevent him or her from testifying in an ERISA proceeding. See Sandberg, 111 F.3d at 334. But here, as in Williams v. American International Group, Inc., No. 01 Civ. 9673, 2002 WL 31115184 (S.D.N.Y. Sept. 23, 2002), "[Downes] does not allege any disruption of her employment that was designed to preclude her from obtaining benefits; instead, she contends that the act of hiring her as an [independent contractor], instead of as a regular employee, is itself a violation of § 510. This position is untenable in law." Id. at *2; accord, Schwartz v. Independence Blue Cross, 299 F. Supp.2d 441, 450 (E.D. Pa. 2003) (no cause of action lies under § 510 for "misclassification"). Downes therefore fails to state a claim under ERISA § 510.

 IV. The COBRA Claim

  Downes brings her fourth claim pursuant to ERISA §§ 601, 602, and 606, 29 U.S.C. § 1161, 1162, and 1166, which give covered employees the rights to the continuation of health insurance in the event of certain qualifying events and to notice of that benefit. Congress enacted these provisions, the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), "to provide employees who had been covered by an employment-related group health care plan with the opportunity to elect group rate continuation of coverage under the plan in the face of some `qualifying event' — job loss or hour reduction." Hubicki v. Amtrak Nat'l Passenger R.R. Co., 808 F. Supp. 192, 196 (E.D.N.Y. 1992). Downes thus seeks post-discharge healthcare benefits under some J.P. Morgan group plan. J.P. Morgan moves to dismiss this claim on three grounds.

  First, J.P. Morgan contends that because Downes alleges that it "fraudulently" denied her benefits (Compl. ¶ 41), she must plead with particularity pursuant to Fed.R.Civ.P. 9(b), which she did not. This appears to be no more than a trivial pleading error. Read as a whole, the complaint does not allege fraud in connection with J.P. Morgan's refusal to offer Downes COBRA benefits, any more than it does in connection with her other ERISA claims, and Downes does not contend otherwise in her brief. Simply deleting the word "fraudulently" would cure the pleading, and while granting Downes leave to replead to make this change would certainly be appropriate, it would also be a needless formality. Second, J.P. Morgan argues that because Downes never enjoyed healthcare coverage in the first place, she cannot logically have "lost" that coverage or be entitled to its "continuation." This argument begs the question. If, but for J.P. Morgan's wrongful misclassification, Downes should have enjoyed certain ERISA benefits, healthcare among them, then she can state a claim for having been denied the continuing coverage (and notice of such coverage) to which COBRA entitles her. In Baraschi v. Silverwear, Inc., No. 01 Civ. 11263, 2002 WL 31867730 (S.D.N.Y. Dec. 23, 2002), the court denied a motion to dismiss under similar circumstances. The plaintiff had annexed a contract to her complaint, which facially appeared to contradict her claim to ERISA benefits, but the complaint nonetheless alleged that the defendants had wrongfully denied her those benefits. Id. at *1. While the court noted its doubts based on the contractual language, that language did not unambiguously contradict the plaintiff's claim. Consequently, accepting for purposes of the motion the truth of the plaintiff's allegation that she qualified as a "participant" in the defendants' employee benefits plan, the court held that, as a participant, the plaintiff stated a claim for COBRA benefits. Id. at *6. Here, Downes has neither annexed a contract to her complaint nor even alleged the existence of a relevant one (nor identified the plan or plans that allegedly cover her). Nevertheless, because the Court must assume the truth of her allegations that J.P. Morgan misclassified her, and that she should have received healthcare benefits under a relevant ERISA-governed plan, Downes's COBRA claim survives.

  Finally, J.P. Morgan argues that Downes's COBRA claim, like her other ERISA claims, must be dismissed because she failed to exhaust her administrative remedies. (D. Br. 7, 8, 10.) This argument is at best formalistic where the gravamen of the complaint is that J.P. Morgan misclassified Downes. Because of that misclassification, she had neither the right nor the ability to obtain administrative review. That Downes did not engage in the perfunctory gesture of writing to J.P. Morgan to seek review under an administrative plan that J.P. Morgan denies she had any right to participate in hardly provides a fair ground on which to dismiss her ERISA claims. J.P. Morgan's motion will therefore be denied insofar as it seeks dismissal of Downes's COBRA claim.*fn7

 IV. The Equal Pay Act Claim

  Downes also brings a claim pursuant to the Equal Pay Act, 29 U.S.C. § 206(d)(1), which prohibits gender-based wage discrimination. She alleges that J.P. Morgan "discriminated against [her] because it compensated male employees, who had jobs that required equal skill, effort and responsibility and were performed under similar working conditions as Downes's job, at a higher rate than Downes." (Compl. ¶ 57.) J.P. Morgan argues that this allegation fails adequately to plead an Equal Pay Act claim, even under the liberal standards of Fed.R.Civ.P. 8, and that it is partially time-barred. With respect to the adequacy of Downes's pleading, J.P. Morgan cites a single decision that dismissed a similarly-skeletal Equal Pay Act complaint. In Bernstein v. The MONY Group, Inc., 228 F. Supp.2d 415 (S.D.N.Y. 2002), the court dismissed an Equal Pay Act claim where the plaintiff had alleged that the defendants "pa[id] higher wages to male employees doing equal work with female employees in jobs requiring equal skill, effort and responsibility under similar working conditions." Id. at 420 (quoting the complaint). The court reasoned that the plaintiff failed to "specifically detail the time periods [or] the positions at which female employees received lower wages, and consequently fail[ed] to provide `fair notice' to Defendants." Id. Downes responds that in another district court decision, Brusseau v. Iona College, No. 02 Civ. 1372, 2002 WL 1933733 (S.D.N.Y. Aug. 21, 2002), the court sustained an Equal Pay Act claim articulated at a similar level of generality, finding it sufficient under Rule 8. Id. at *1. But Brusseau does not quote the language of the complaint at issue in that case, making it difficult to determine what level of specificity the court found sufficient.

  Under the liberal notice-pleading standards of Rule 8, and in view of the Supreme Court's recent admonition to heed this standard in employment discrimination cases, see Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002), the Court declines to dismiss Downes's Equal Pay Act claim at this juncture, particularly as the parties have already engaged in considerable discovery; should Downes fail to adduce evidence supporting her Equal Pay Act allegation, J.P. Morgan can shortly move for summary judgment on this claim. The complaint gives J.P. Morgan adequate notice of the essence of Downes's claim: that similarly-situated male employees received higher wages than she did. J.P. Morgan presumably knows in what capacity Downes worked for it, and it can ascertain the substance of her claim by comparing her skills, responsibilities, and wages to those of similarly-situated male workers.

  With respect to the statute of limitations, a two-year period generally applies to Equal Pay Act claims, although if the employer violated the Act willfully, the period is three years. Pollis v. New Sch. for Soc. Research, 132 F.3d 115, 118 (2d Cir. 1997). A new claim accrues each time an employee receives a paycheck under a discriminatory wage policy, but the policy's existence does not make the violation a "continuing" one, such that the plaintiff can seek backpay beyond the statutory period of two or three years. Id. at 118-19. Accordingly, Downes's Equal Pay Act claim survives, but will permit recovery only for violations that occurred within the applicable limitations period.

 V. Pendent Claims

  Downes also brings two pendent claims under New York law, alleging a violation of the New York Labor Law and a common-law claim for breach of contract. While J.P. Morgan moves to dismiss these claims on a number of grounds, several of which may be meritorious,*fn8 the Court need not address them now. If Downes's federal claims do not survive summary judgment, the Court would in any event decline to exercise supplemental jurisdiction over her state-law claims. See Giordano v. City of New York, 274 F.3d 740, 754 (2d Cir. 2001) (noting that, as a general matter, where all federal claims have been dismissed before trial, pendent state claims should be dismissed without prejudice and left for resolution to the state courts; collecting cases).

  CONCLUSION

  For the reasons set forth above, Downes's first, second, and third claims are dismissed, her seventh claim is partially dismissed insofar as it seeks compensation for alleged violations outside the applicable limitations period, and the motion is otherwise denied.

  SO ORDERED.


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