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Cantor v. American Banknote Corp.

October 18, 2007


The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge


Plaintiff Fredrette Cantor claims on her own behalf and as representative of the estate of her husband, Sheldon Cantor ("Cantor"), against Defendants American Banknote Corporation ("ABN"), American Banknote Company ("ABNCo") and Patrick Gentile ("Gentile"), ABN's Chief Financial Officer, alleging state law claims for breach of contract, equitable estoppel, and negligent misrepresentation; and an Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), claim for breach of fiduciary duty. Defendants move to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6), arguing, inter alia, that (1) the exclusive jurisdiction of the United States Bankruptcy Court for the District of Delaware bars this Court from adjudicating Plaintiff's claims; (2) Plaintiff's allegations do not state a claim under ERISA; (3) Plaintiffs state law claims are preempted by ERISA; and (4) that ABN was discharged in bankruptcy from liability for this claim. The Court finds that it has subject matter jurisdiction and so it denies Defendants' jurisdictional motion pursuant to Fed. R. Civ. P. 12(b)(1). As to the motion pursuant to Fed. R. Civ. P. 12(b)(6), the Court grants Defendants' motion in part and denies it in part, and dismisses Plaintiff's ERISA and negligent misrepresentation claims.


From 1971 to September 18, 2001, Cantor was a full-time, management employee of ABN, and as such was eligible to receive life insurance benefits under a group insurance plan (the "Hartford Plan") issued by the Hartford Life and Accident Insurance Company ("Hartford"). ABN was responsible for paying the premiums on Cantor's life insurance coverage for as long as he was eligible. The Hartford Plan constitutes an employee benefit plan under ERISA, and ABNCo was at all relevant times the administrator and sponsor of the Hartford Plan within the meaning of the statute.

I. The 2001 Agreement

On or about December 8, 1999, ABN filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in the Southern District of New York. During the ensuing bankruptcy proceedings, Cantor filed various compensation claims. In the course of ongoing negotiations over these claims, ABN representatives encouraged Cantor to retire or take long-term disability due to his various chronic ailments. Cantor wanted to maintain his insurance and medical benefits as an active ABN corporate officer, and so he rejected this proposal. Cantor and ABN ultimately entered into a Settlement Agreement in 2001 (the "2001 Agreement"). The agreement provided, inter alia, that "[u]pon expiration of [Cantor]'s eligibility, if any, to receive long-term disability payments, ABN shall pay [Cantor] severance benefits.payable in twelve (12) equal monthly installments.." Am. Compl. Ex. B ¶ 1(a). The 2001 Agreement further provided that during the period in which payments, including the aforementioned severance payments, remained outstanding, ABN "shall take all necessary steps to amend its group insurance contracts to provide [Cantor] and [Cantor]'s dependants with the same level of insurance benefits provided to [Cantor] and his dependants pursuant to his existing Employment Agreement." Am. Compl. Ex. B ¶ 2.

II. Violation of the 2001 Agreement

After the 2001 Agreement, Cantor applied for long-term disability benefits under the Hartford Plan, and left full-time employment with ABN on September 28, 2001. His benefit application was approved, and he received such benefits from on or about January 2, 2002 through December 31, 2003, when the maximum benefit period under the Hartford Plan expired. During this period he was assured by ABN personnel, including Gentile, that his life insurance coverage would continue and be protected while he was receiving long-term disability benefits. In November 2003, in anticipation of the expiration of his disability benefits and subsequent termination of his life insurance coverage under the 2001 Agreement, Cantor attempted to convert his group insurance coverage to an individual life insurance policy. He was ultimately denied his request for conversion when Hartford determined that his coverage under the Hartford Plan should have been terminated on September 28, 2002, one year after he ceased being actively employed by ABN, and the Hartford Plan allowed for conversion of coverage only within 31 days of termination.

III. The Second Bankruptcy and the 2005Agreement*fn2

In early 2005, ABN filed for bankruptcy a second time. On April 8, 2005, the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") issued an order (the "Confirmation Order") confirming a reorganization plan submitted by ABN (the "Reorganization Plan"). The Reorganization Plan provided that the "Released Parties" were released from liability "for any act or omission in connection with, relating to, or arising out of this Chapter 11 Case.and pursuit of confirmation of the [Reorganization Plan]." Affidavit of Peter S. Goodman ("Goodman Aff."), Ex. B ¶ 12.5. "Released Parties" included officers of ABN such as Gentile. Id. at ¶ 1.74. The Reorganization Plan also stated that "on the Effective Date of the Plan, the Reorganized Debtor and Sheldon Cantor shall enter into the Cantor Consulting Agreement." Id. at ¶ 10.6. The Confirmation Order in turn stated that "[o]n the Effective Date, the Debtor shall be, and hereby is, authorized to enter into the Cantor Consulting Agreement with Sheldon Cantor.." Goodman Aff., Ex. C ¶ 19. This agreement (the "2005 Agreement") provided that, notwithstanding the reorganization, Cantor would be: entitled to commence any cause of action he held prior to [January 19, 2005] against the Company, provided however, that Consultant agrees to limit recovery for such causes of action, if any, to any available insurance proceeds under which the Company may be insured or a beneficiary, if applicable, and waive any and all rights to seek recovery from the Company's assets. To the extent the Company is required to incur any legal or other costs associated with any cause of action or other claim asserted by Consultant, upon two (2) days written notice from Company, Consultant shall cease the prosecution of any such claim or cause of action.

Goodman Aff., Ex. D, Addendum ¶ D. The agreement also provided that Cantor would provide general consulting services to ABN and be paid $125,000 in five annual installments of $25,000. Id. at ¶¶ A, C. In the event of Cantor's death, any unpaid installments were to be accelerated and paid to his estate forty-five days after his death. Id.


I. Defendants' Rule 12(b)(1) Motion*fn3

"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). In deciding a Rule 12(b)(1) motion, the Court may properly refer to evidence outside the pleadings, id. (citing Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986)), and the Court "construe[s] all ambiguities and draw[s] all inferences in [the] plaintiff's favor." Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (internal quotations and citations ...

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