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Ello v. Singh

October 19, 2007


The opinion of the court was delivered by: Kenneth M. Karas, District Judge


Before the Court is Plaintiff's Motion to File a Proposed Second Amended Complaint ("PSAC") against Defendants Proskauer Rose LLP ("Proskauer"), Ishry Singh, Raymond Pocino, John Virga, the Greater New York Laborers-Employers Cooperation and Education Trust Fund ("GNYLECET"), Mason Tenders District Council Trust Funds ("MTDCTF"), Laborers International Union of North America ("LIUNA"), Paul O'Brien, Charles Carron, Merrick Rossein, and Chris Columbia (collectively "Defendants").*fn1 Plaintiff alleges that several Defendants have breached fiduciary duties to the MTDCTF*fn2 ; that Plaintiff was discharged from his employment in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.; that several Defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; and that some defamed Plaintiff. Defendants oppose Plaintiff's Motion on futility grounds, arguing that Plaintiff has failed to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons stated below, Plaintiff's Motion is GRANTED in part and DENIED in part.

I. Background

A background of the facts leading up to this point in the litigation of this case is discussed in a prior Opinion & Order from this Court. See Ello v. Singh, No. 05 Civ. 9625, 2006 WL 2270871 (S.D.N.Y. Aug. 7, 2006) (denying Plaintiff's motion to disqualify counsel). Rather than repeat those familiar facts here, the Court will refer to the relevant facts only when necessary.

There is a need, however, to lay out the procedural history of this case. This case began on November 15, 2005 when Plaintiff filed a Complaint. (Dkt. No. 1.) Then, on February 9, 2006, Plaintiff filed an Amended Complaint. (Dkt. No. 33.) Five months later, on July 13, 2006 -- the same day the Court scheduled oral argument on Plaintiff's motion to disqualify Defendants' counsel (Dkt. No. 36) -- Plaintiff again attempted to amend his Complaint, this time without prior permission of the Court.*fn3 The Court denied Plaintiff's disqualification motion, see Ello, 2006 WL 2270871, at *1, and denied Plaintiff's attempt to file the July 13th Complaint for failure to comply with the Court's Individual Practices (Dkt. No. 38).*fn4 Less than a week later, Plaintiff sought the Court's permission to file an Amended Complaint. (Dkt. No. 40.) However, before the Court could schedule a conference to hear the Parties on what Complaint Plaintiff would seek leave to file, Plaintiff asked the Court to refrain from scheduling a conference, because he intended to file yet another Amended Complaint. Before Plaintiff submitted his next Amended Complaint and accompanying motion, the Court explained that any additional amendments to the Complaint would have to be based on new evidence that was not previously available to Plaintiff. (Ct. Conf. Tr. 5-7, Sept. 12, 2006.) After an exchange of letters between the Parties, Plaintiff filed a Motion to Amend the Complaint with a PSAC on September 15, 2006.

But there is more. On November 6, 2006, this litigation took another step backward before moving forward. On that date, Plaintiff filed his Reply Memorandum of Law in Support of its Motion to File the PSAC ("Plaintiff's Reply Memorandum"). Plaintiff's Reply Memorandum, which unjustifiably exceeded the permitted page limit by thirty-nine pages,*fn5 was also accompanied by what amounts to a Second Proposed Second Amended Complaint ("SPSAC"). Plaintiff's SPSAC, which he did not seek permission to file -- the second time that has happened in this case -- seeks to expand Plaintiff's defamation claims and to add a malicious prosecution claim against Singh and Proskauer.

To summarize: After filing his Complaint in this case, Plaintiff amended his Complaint, and after doing so, he filed a different, proposed Amended Complaint which was subsequently rejected for failure to comply with the Court's Individual practices. Plaintiff next withdrew a different proposed Complaint (a third version of the Complaint, in effect), then submitted a PSAC. Finally, in the midst of briefing on the PSAC, without permission, Plaintiff attempted to file a SPSAC. Tallying the score, Plaintiff has filed five versions of the Complaint. At the pre- motion conference on the PSAC, after an inquiry by the Court as to what Complaint Plaintiff was seeking leave to file, Plaintiff indicated that he is pursuing all of the causes of action in the PSAC and the defamation claim raised in the SPSAC.*fn6 (Pre-motion Conf. Tr. 26, Dec. 12, 2006.) However, Plaintiff confirmed that he does not intend to go to trial on the malicious prosecution claim raised in the SPSAC. (Id.)

Plaintiff's allegations (which are assumed to be true for the purposes of this Motion) are as follows: (1) Defendants Proskauer, Virga, Pocino, O'Brien, and Carron breached fiduciary duties owed to the Mason Tenders District Council Pension Plan and Welfare Plan (PSAC ¶¶ 24-135); (2) Defendants Pocino, Proskauer, and Virga violated Section 510 of ERISA by discharging Plaintiff from his positions with LIUNA and GNYLECET (id. ¶¶ 136-96); (3) Defendants Proskauer, Virga, Pocino, O'Brien, and Carron, operated MTDCTF in violation of RICO (id. ¶¶ 197-286); and (4) Defendants Proskauer, Pocino, Rossein, Singh, and Columbia defamed Plaintiff (SPSAC ¶¶ 287-418).

This case initially arose out of an allegation by Singh, an accounts payable employee of the MTDCTF, that Plaintiff sexually assaulted Singh on February 4, 2005. At the time, Plaintiff was an employee of the LIUNA and the MTDC, where he held numerous positions within both organizations. See Ello, 2006 WL 2270871, at *1 (describing Plaintiff's prior positions). Plaintiff claims that Singh, an employee of MTDCTF,*fn7 approached Plaintiff on a number of occasions between December 2004 and February 2005 to solicit Plaintiff's assistance in securing a position with the MTDC. Plaintiff allegedly rebuffed Singh's requests, due to what Plaintiff says were budgetary constraints and policies which favor LECET and Local #279 employees for available positions. Despite Plaintiff's refusal to offer Singh employment, Singh allegedly continued to remind Plaintiff that he was interested in employment. On February 4, 2005, Plaintiff and Singh had a conversation at a local restaurant and bar. During this conversation, Singh allegedly attempted to make his prospective employment more attractive by claiming that he had family in law enforcement. Plaintiff allegedly told Singh that LIUNA maintained an active Inspector General's Office and that there was no need for the assistance of outside law enforcement. Plaintiff claims that this was the end of their interactions that night -- once the conversation ended, the two men headed towards the offices of the MTDCTF and eventually parted ways.

Plaintiff claims that Singh retaliated against Plaintiff for his refusal to hire him by filing false allegations that Plaintiff sexually assaulted Singh on February 4, 2005. Plaintiff alleges that he learned of Singh's allegation on February 9, 2005, from New York City Detective Whelan. (PSAC ¶ 167.) That same day, Plaintiff believes that a meeting of Trustees was held to discuss Singh's allegations against Plaintiff. (Id. ¶ 166.) This alleged meeting was held in Plaintiff's absence and the minutes were subsequently withheld from Plaintiff. (Id.) That same day, Pocino told Plaintiff to stay away from the MTDCTF's employees and staff, allegedly pursuant to Proskauer's advice. (Id. ¶ 172.) Pocino refused to discuss Singh's harassment report with Plaintiff, also allegedly pursuant to Proskauer's advice. (Id.) Singh's allegation caused the MTDCTF to subsequently investigate the claim. Proskauer, serving as counsel, retained Merrick T. Rossein, Esq., to conduct an investigation. Plaintiff, apparently on the advice of his counsel, never met with Rossein. In mid-March 2005, Pocino requested Plaintiff's resignation, which Plaintiff submitted under "duress." (Id. ¶¶ 188-89.)

II. Discussion

A. Standard of Review

Rule 15(a) of the Federal Rules of Civil Procedure states that leave to amend a complaint should be "freely given when justice so requires." Fed. R. Civ. P. 15(a). However, "[a] district court has discretion to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007). "When the plaintiff has submitted a proposed amended complaint, the district judge may review that pleading for adequacy and need not allow its filing if it does not state a claim upon which relief can be granted." Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991). The adequacy of the proposed amended complaint is judged by the same standard as that applied to a motion to dismiss for failure to state a claim, Rule 12(b)(6) of the Federal Rules of Civil Procedure. See General Elec. Capital Financial, Inc. v. Bank Leumi Trust Co. of New York, No. 95 Civ. 9224, 1999 WL 33029, at *5 (S.D.N.Y. Jan. 21, 1999) (citing Ricciuti, 941 F.2d at 123).

A motion brought under Fed. R. Civ. P. 12(b)(6) posits that Plaintiff has failed "to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The Supreme Court has recently held that "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle-[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (citations omitted and second alteration in original). In Bell Atlantic, id. at 1964-69, the Supreme Court also abandoned reliance on the oft-quoted refrain from Conley v. Gibson that, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief[,]" 355 U.S. 41, 45-46 (1957). As the Court explained, a literal application of Conley's "no set of facts" rationale is improper because "a wholly conclusory statement of claim would survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some 'set of [undisclosed] facts' to support recovery . . . ." Bell Atl., 127 S.Ct. at 1968. Instead, the Court emphasized that "[f]actual allegations must be enough to raise a right to relief above the speculative level . . . [,]" id. at 1965, and "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint[,]" id. at 1969. Plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Id. at 1974; see also Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) ("After careful consideration of the Court's opinion and the conflicting signals from it that we have identified, we believe the Court is not requiring a universal standard of heightened fact pleading, but is instead requiring a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible."). If Plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Bell Atl., 127 S.Ct. at 1974.

When considering a Rule 12(b)(6) motion, a court must limit itself to facts stated in the complaint, documents attached to the complaint, and documents incorporated into the complaint. See Newman & Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 662 (2d Cir. 1996) (citation omitted). The Court will accept as true Plaintiff's allegations, and draw all inferences in Plaintiff's favor. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Blimpie Int'l, Inc. v. Blimpie of the Keys, 371 F. Supp. 2d 469, 470-71 (S.D.N.Y. 2005). At this stage, the Court is not concerned with weighing the evidence which would be presented at trial. See Chosun Int'l Inc. v. Chrisha Creations, Ltd., 413 F.3d 324, 327 (2d Cir. 2005).


Congress has stated that the primary purpose of ERISA is to "protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information . . . ." 29 U.S.C. § 1001(b). ERISA achieves these objectives "by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." Id. In addition, ERISA was intended to "to protect interstate commerce, the Federal taxing power, and the interests of participants in private pension plans and their beneficiaries by improving the equitable character and the soundness of such plans by requiring them to vest the accrued benefits of employees with significant periods of service, to meet minimum standards of funding, and by requiring plan termination insurance." 29 U.S.C. § 1001(c).

Plaintiff has pled two ERISA causes of action. First, he alleges that certain Defendants breached their fiduciary duties under ERISA. Second, he alleges that his employment was terminated in violation of ERISA. Both claims are discussed, in turn.

1. Breach of Fiduciary Duty under Section 502 of ERISA

Section 502 of ERISA, 29 U.S.C. § 1132, provides a number of causes of action to enforce ERISA's regulation of employee benefit plans. The rights enforced by Section 502 are found in each employee benefit plan, in the statutes that make-up ERISA, and in the common-law of ERISA as developed by the courts. Plaintiff's first ERISA claim is for breach of fiduciary duties. Plaintiff brings this action as a former Trustee of the MTDCTF and as a participant in the Pension and Welfare Plans.*fn8 (PSAC ¶ 24.) Plaintiff claims that Proskauer, Virga, Pocino, O'Brien, and Carron*fn9 breached their fiduciary duties owed towards the MTDC Pension, Annuity, and Welfare Plans. (Id.) Section 404 of ERISA describes four affirmative duties for fiduciaries:

(1) exclusive purpose; (2) prudence; (3) diversification; and (4) acting in accordance with the plan. See 29 U.S.C. § 1104. Plaintiff seeks injunctive and equitable relief pursuant to 29 U.S.C. § 1132(a). ( PSAC ¶ 24.)

Plaintiff alleges that Proskauer, serving as counsel to MTDC and MTDCTF, acted as a fiduciary as that term is defined in 29 U.S.C. § 1002(21). Plaintiff merely alleges, on information and belief, that Proskauer was retained as a "Fund fiduciary." (PSAC ¶ 31.) He alleges that Proskauer is a fiduciary of the pension, annuity, and welfare plans because it went beyond merely providing legal advice. (Id.) Proskauer also allegedly usurped the Trustees' powers by dictating certain courses of action, rather than merely advising the Trustees. (Id. ¶ 33.) According to Plaintiff, Proskauer undertook discretionary control and authority in the administration of the MTDC. (Id. ¶¶ 34-75.) The allegations include: Proskauer selected Virga for the position of Director based on a pre-existing relationship, despite Virga's lack of adequate credentials (id. ¶ 35); Proskauer attorneys attended Trust Fund and Executive Board meetings, even though their attendance was not mandatory (id. ¶ 36); Proskauer's presence deterred opposition to Proskauer's views on various matters (id. ¶ 38); Proskauer wrote the minutes for several, high-level meetings, and billed the MTDC for time devoted to this effort -- work which Plaintiff claims was unnecessary and costly (id. ¶¶ 40-49); Proskauer attorneys traveled to MTDCTF meetings at the expense of the MTDC (id. ¶¶ 51-53); Proskauer took over MTDC's delinquency work (id. ¶¶ 54-59); Proskauer favored litigation over settlement in a particular case (id. ¶¶ 60-67); Proskauer advised against taking any legal action against Carlos Mellace, who at one time was a co-administrator of MTDCTF (id. ¶¶ 68-71); and Proskauer submitted a bill for $49,192.50 for services related to a real estate purchase under the Training Fund, which Plaintiff claims was not authorized (id. ¶¶ 72-75).

With respect to the other Defendants named in this cause of action, Plaintiff alleges a number of other breaches of fiduciary duties, including: the authorization of a vehicle for Virga's use (id. ¶¶ 81-84); Virga's decision to provide breakfast for himself and other employees (id. ¶ 85); the payment of welfare benefits to at least one expelled member of the union -- a matter which Plaintiff investigated and Proskauer attempted to conceal (id. ¶¶ 90-98); Virga's failure to report account delinquencies (id. ¶¶ 100-11); O'Brien's recommendation to hire Lazard Asset Management ("Lazard") to manage plan assets without disclosing that O'Brien's son, a recent college graduate, had been hired by Lazard (id. ¶¶ 112-15); the conflict of interest due to Proskauer's representation of Lazard (id.); the all-expense-paid golfing trips to exclusive golf resorts enjoyed by Pocino and his wife (id. ¶¶ 116-18); Proskauer's revision of an investment management agreement to establish higher fees (id. ¶¶ 119-21, 126-27); Proskauer's use of plan assets to prove Plaintiff was criminally liable for assaulting Singh (id. ¶¶ 122-24); Proskauer's, Virga's, O'Brien's, and Carron's conspiracy to preclude Plaintiff from attending Trust Fund and Executive Board meetings (id. ¶ 125); Proskauer's, Virga's, O'Brien's, and Carron's conspiracy to deny Plaintiff access to records (id.); and Proskauer's erroneous advice to MTDCTF regarding the Pension Plan's Summary Plan Description (id. ¶¶ 130-35).

The Court begins its analysis of these claims with an examination of the standing requirement under Section 502 of ERISA. Section 502 names three classes of persons who may commence an action for breach of a fiduciary duty: (1) a participant or beneficiary, (2) the Secretary of Labor, and (3) a fiduciary. 29 U.S.C. § 1132(a); see McCabe v. Trombley, 867 F. Supp. 120, 125 n.3 (N.D.N.Y. 1994) ("Section 1132 is the provision which defines the scope of the court's subject matter jurisdiction over the instant suit, in which plaintiff alleges a breach of fiduciary duty."). Plaintiff brings this cause of action as a former Trustee of the MTDCTF, as well as a plan participant.

As a former Trustee, Plaintiff lacks standing to allege a breach of fiduciary duties. In Chemung Canal Trust Co. v. Sovran Bank/Md., 939 F.2d 12 (2d Cir. 1991), the Second Circuit long ago held that a former fiduciary lacks standing to claim a breach of ERISA's fiduciary duties, id. at 14. The Second Circuit considered the list of people that Section 502 allows to sue, and concluded that "[t]he statute names only three classes of persons who may commence an action, and a former fiduciary is not one of them." Id. The Second Circuit went on to explain that the list in Section 502 was "exclusive" and that the statute's legislative history indicated no intent to "grant a former fiduciary a continuing right to sue on behalf of the plan . . . ." Id. Accordingly, Plaintiff lacks standing to sue as a former Trustee.*fn10

Plaintiff also claims standing as a plan participant. Standing requirements for a plan participant differ depending on kind of relief requested by Plaintiff.*fn11 While "a plan participant may have Article III standing to obtain injunctive relief related to ERISA's disclosure and fiduciary duty requirements without a showing of individual harm to the participant[,]" Plaintiff must have "suffered an injury-in-fact" to claim restitution or disgorgement. Cent. States Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 433 F.3d 181, 199-200 (2d Cir. 2005); see also New York Dist. Council of Carpenters Pension Fund v. Savasta, No. 99 Civ. 11362, 2005 WL 22872, at *2 (S.D.N.Y. Jan. 4, 2005) (noting that Section 502(a)(3) provides for limited relief, and not "classic compensatory and punitive damages.").

The PSAC contains two instances where the Plaintiff alleges that he was personally affected by the alleged breaches of fiduciary duty. First, Plaintiff claims that Proskauer expended plan assets starting in February 2005 to prove Plaintiff was guilty of criminal charges (PSAC ¶ 122); and second, that Proskauer, Virga, O'Brien, and Carron conspired to deny Plaintiff access to Fund records and to preclude him from attending Trust Fund and Executive Board meetings (id. ¶ 125). The Court will assume that Plaintiff has adequate participant standing for these two allegations because of these specific claims in the PSAC that Plaintiff was personally injured.

Standing, however, does not end the matter: Fund Defendants argue that even if Plaintiff has standing, he has not pled a breach of any duty, because no interest of his in the Fund has been denied or taken away. The Court agrees. An employer's investigation of allegation of sexual harassment "is not a gratuitous or optional undertaking; under federal law, an employer's failure to investigate may allow a jury to impose liability on the employer." See Malik v. Carrier Corp., 202 F.3d 97, 105 (2d Cir. 2000). Thus, Fund Defendants had "an affirmative duty to investigate the report of an allegation of sexual harassment." Id. at 109. Furthermore, Proskauer cannot be sued for a breach of fiduciary duties in investigating Singh's allegations because, inter alia, its services were authorized by the Trustees, and do not "amount to illegal profits or ill-gotten gains derived directly from defendants' alleged culpable acts." See Savasta, 2005 WL 22872, at *2-3 (holding that fees paid to a non-fiduciary pursuant to a service agreement with a union fund are not actionable as disgorgement under Section 502 of ERISA). Although Section 510 of ERISA may permit a cause of action against a fund attorney, see Greenwood Mills, Inc. v. Burris, 130 F. Supp. 2d 949, 960-61 (M.D.Tenn. 2001), Plaintiff must allege far more egregious conduct than what he alleges here, which is nothing more than his disagreement with Proskauer's role and some of their fees.

Plaintiff's second allegation of breach is also unfounded. Fund Defendants' decision to preclude Plaintiff from attending a meeting of the Trustees and accessing Fund records, even if true, does not state a breach of fiduciary duty recognized by statute, any plan, or the common-law. Plaintiff's allegations do not state a claim, in large part, because they are far afield from ERISA's purpose, as well as the statutory rights and rights at common-law that ERISA seeks to protect. See 29 U.S.C. §§1001(b)-(c), 1104, 1132(a); see also Massachusetts v. Morash, 490 U.S. 107, 112 (1989) ("ERISA was passed by Congress in 1974 to safeguard employees from the abuse and mismanagement of funds that had been accumulated to finance various types of employee benefits."); Ancekewicz v. Long Island Univ., No. 02 Civ. 4490, 2005 WL 1411917, at *8 (E.D.N.Y. June 15, 2005) ("ERISA's goal of protecting [pension and other] benefits from interference does not transform ERISA's statutory scheme into a federal job protection scheme." (quoting Raymond v. Mobil Oil Corp., 983 F.2d 1528, 1539 (10th Cir. 1993)) (alteration in original). Nothing about precluding Plaintiff from meetings about his alleged sexual assault, even if that assault never occurred, remotely threatens the management of Plaintiff's benefits.

Proskauer also argues that Plaintiff has not sufficiently pled that Proskauer is a fiduciary under 29 U.S.C. § 1002(21). The statute states, in relevant part: a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C.A. § 1002(21)(A). "This definition requires (1) showing that the plan assets are at issue and (2) that the individual defendants exercised authority or control relating to the management or disposition of such assets." Maney v. Fischer, No. 96 Civ. 0561, 1998 WL 151023, at *4 (S.D.N.Y. Mar. 31, 1998). Courts have construed broadly the definition of "fiduciary" contained in ERISA. See Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993). "[W]hether or not an individual or entity is an ERISA fiduciary must be determined by focusing on the function performed, rather than on the title held." Blatt v. Marshall & Lassman, 812 F.2d 810, 812 (2d Cir. 1987) (holding that defendants were ...

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