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Vincent F. Depasquale v. Daniel Depasquale

February 28, 2013

VINCENT F. DEPASQUALE, PLAINTIFF,
v.
DANIEL DEPASQUALE, AND PENSION DESIGN SERVICES, INC., DEFENDANTS.



The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge.

MEMORANDUM AND ORDER

Plaintiff Vincent DePasquale alleges that Daniel DePasquale ("Daniel") breached an agreement with a third-party, and that Daniel, as a trustee of Debro Manufacturing Corporation's pension plan, and Pension Design Services, Inc. ("PDS") violated certain provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001--1461, thereby causing him harm. (See Am. Compl. (Doc. No. 3).) Before the Court are defendants' fully-briefed motions to dismiss Federal Rules of Civil Procedure 12(b)(5), 12(b)(6) and 12(b)(7) (Doc. Nos. 16 -18). For the reasons that follow, the Court grants defendants' motions, and dismisses the amended complaint.

BACKGROUND

The following facts are taken from plaintiff's amended complaint and considered to be true for purposes of these motions to dismiss.

Debro Manufacturing Corporation ("Debro"), a manufacturer of outdoor lawn furniture and beach chairs, was incorporated in New York in 1976 by two brothers, Daniel and Joseph DePasquale ("Joseph"). (Doc. No. 3 ¶ 6.) On September 1, 1989, Debro established a defined pension plan that was funded through a trust with Joseph and Daniel designated as trustees. (Id. ¶ 12.) The pension plan administrator was designated as "the Employer" and listed its address as "37-01 31st Street, Long Island City, NY 11101, the address of Debro." (Id.) At some point in 1989, a Summary Plan Description ("SPD") of Debro's pension plan was created. (Id. ¶ 15.) A Debro employee became eligible to participate in the pension plan after two years of service, which was defined as 1000 hours of service within a twelve-month period. (Id. ¶ 13.)

Plaintiff, Joseph's younger son, began working at Debro part-time in 1995, and then full-time in 1999. (Id. ¶ 9.) Plaintiff alleges that he became eligible to participate in Debro's pension plan in 2001. (Id. ¶ 14.)

On August 7, 2003, Joseph entered into a stock purchase agreement with Daniel whereby Joseph purchased all of Daniel's interests in Debro and became owner of 100% of Debro's authorized and issued shares of stock ("August 7, 2003 Agreement of Sale"). (Id. ¶ 6.) Joseph also purchased, in the same purchase agreement, Daniel's interests in Fiesta Realty, Inc., which owned the land under Debro's manufacturing plant, and Summit Enterprises, Inc., which owned other property utilized by Debro. (Id.) At closing, Daniel resigned as a director and officer of Debro, Fiesta Realty, Inc., and Summit Enterprises, Inc. (Id. ¶ 7.) The purported reason for this agreement was to allow Joseph's "sons [to] easily take over the business without having to resolve any claims" from Daniel, his heirs, or his side of the family. (Id. ¶ 8.) Also on August 7, 2003, Joseph, as president of Debro, entered into a seven-year employment agreement with Daniel whereby Daniel would be paid $28,571.43 per year to "act as an Executive within Debro" on a part-time basis. (Id. ¶ 11.)

Joseph died in March 2004 and his wife, Lillian DePasquale, inherited Joseph's interests in Debro, becoming the sole owner of Debro. (Id. ¶¶ 10, 24.) In "early 2005" Daniel informed plaintiff that Debro "had to go out of business" and "despite [plaintiff]'s strong entreaties and requests and protestations, [ ] refused to give [plaintiff] access to the books and records of Debro." (Id. ¶ 17.)

Then, "[i]n early 2006" Daniel "handed [plaintiff] a check in the amount of about $20,000.00," informing plaintiff that "Debro had a pension plan and that this pension plan was underfunded requiring Dan[iel] to terminate it and distribute its assets" and that the amount of the check represented plaintiff's share of the pension plan. (Id. ¶ 18.) Plaintiff immediately asked Daniel "to explain how this $20,000.00 had been calculated," "for other information about this pension plan," and the "latest financial statements for the plan." (Id. ¶ 19.) Daniel did not answer those questions and instead directed plaintiff to speak to his Aunt Mary, a non-executive employee of Debro, who "professed to have no information about this pension plan" when asked. (Id. ¶¶ 19--20.) Plaintiff also alleges that he "received no further information about this pension plan despite repeatedly asking Dan[iel] for further information." (Id. ¶ 21.) In contrast to plaintiff's share of the pension plan, Debro's pension plan paid out $812,612.00 to Daniel, $197,612.00 to Daniel's wife, and $222,912.00 to Lillian DePasquale. (Id. ¶¶ 23--24.)

Subsequently, Debro ceased doing business in May 2006, and sometime thereafter Daniel liquidated Debro's property and equipment "for a fraction of its true market value" and "formally dissolved the corporation." (Id. ¶¶ 22--25.)

STANDARD OF REVIEW

I.Motion to Dismiss For Insufficient Process

"[I]n considering a motion to dismiss pursuant to 12(b)(5) for insufficiency of process, a Court must look to matters outside the complaint to determine whether it has jurisdiction." Darden v. DaimlerChrysler N. Am. Holding Corp., 191 F. Supp. 2d 382, 387 (S.D.N.Y. 2002). "Conclusory statements that a defendant was properly served are insufficient to overcome a defendant's sworn affidavit that he was never served with process." Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003). "On a Rule 12(b)(5) motion to dismiss, the plaintiff bears the burden of establishing that service was sufficient." Khan v. Khan, 360 Fed. App'x 202, 203 (2d Cir. 2010).

II.Motion To Dismiss For Failure To State A Claim

A motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) requires the court to examine the legal, rather than factual, sufficiency of a complaint. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). As required by Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." To withstand a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

In deciding a Rule 12(b)(6) motion, the court must "take[] factual allegations [in the complaint] to be true and draw[] all reasonable inferences in the plaintiff's favor." Harris, 572 F.3d at 71 (citation omitted). Further, "a district court must limit itself to facts stated in the complaint or in documents attached to the complaint as exhibits or incorporated in the complaint by reference." Newman & Schwartz v. Asplundh Tree Expert Co., Inc.,102 F.3d 660, 662 (2d Cir. 1996). However, the court may also consider "matters of which judicial notice may be taken" and documents of which plaintiff "had knowledge and relied on in bringing suit." Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993).

A complaint need not contain "'detailed factual allegations,'" but it must contain "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555). In other words, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). Rather, the plaintiff's complaint must include "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556). The determination of whether "a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950 (citing Iqbal v. Hasty, 490 F.3d 143, 157--58 (2d Cir. 2007)).

III.Motion To Dismiss For Failure To Join A Party

Federal Rule of Civil Procedure 12(b)(7) provides for dismissal of an action for the failure to join parties necessary to the action as defined under Rule 19. The Second Circuit has set forth a "two-step test for determining whether the court must dismiss an action for failure to join an indispensable party." Viacom Int'l, Inc. v. Kearney, 212 F.3d 721, 724 (2d Cir. 2000). First, the court must determine whether a party is necessary under Rule 19(a), id., which sets forth that a party must be joined if:

(A) in the person's absence complete relief cannot be accorded among existing parties, or (B) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may

(i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave an existing party subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations because of the interest.

Fed. R. Civ. P. 19(a). Second, if a necessary party cannot be joined, "it must then be determined whether the party's absence warrants dismissal pursuant to Rule 19(b)" because the party is also indispensable. Kearney, 212 F.3d at 725. Rule 19(b) provides that:

If a person who is required to be joined [under Rule 19(a)] cannot be joined, the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed. The factors for the court to consider include: (1) the extent to which a judgment rendered in the person's absence might prejudice that person or the existing parties; (2) the extent to which any prejudice could be lessened or avoided by: (A) protective provisions in the judgment; (B) shaping the relief; or (C) other measures; (3) whether a judgment rendered in the person's absence would be adequate; and (4) whether the plaintiff would have an adequate remedy if the action were dismissed for non-joinder.

Fed. R. Civ. P. 19(b).

DISCUSSION

In the amended complaint, plaintiff asserts six claims against Daniel individually, one claim against PDS individually, and one claim against both Daniel and PDS. (Doc. No. 3) Specifically, plaintiff asserts that Daniel: 1) breached his fiduciary duty by failing to provide plaintiff with a copy of the SPD; 2) breached his fiduciary duty by failing to provide plaintiff with copies of the Notice of Intent to Terminate ("NOIT"), Notice of Plan Benefits ("NOPB"), and Notice of Annuity Contract ("NOAC"); 3) committed fraud by failing to provide these documents; 4) breached his fiduciary duties and committed fraud by failing to properly account for Debro's pension plan assets; 5) violated 29 U.S.C. § 1132(a)(1)(B) by failing to give plaintiff the full amount of pension benefits owed; and 6) breached an employment agreement. (Id. ¶¶ 26--43, 59--82.) Plaintiff further alleges that PDS made a false statement in Schedule EA-S by certifying that Debro's defined benefit pension plan had complied with one of ERISA's three minimum accrual standards when it had not. (Id. ¶¶ 44--54.) Finally, plaintiff claims that both Daniel and PDS improperly segregated pension plan assets. (Id. ¶¶ 55--59.)

Both defendants move to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), contending, first, that the action is barred by ERISA's statute of limitations, and alternatively, plaintiff failed to state a claim upon which relief may be granted.

(See Doc. Nos. 15, 16.) Daniel additionally moves to dismiss the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(5) for insufficient service of process, and pursuant to Federal Rule of Civil Procedure 12(b)(7) for failure to join Lillian DePasquale and the estate of Joseph DePasquale. (Doc. No. 16-1 at 17--18.) The Court begins its analysis with the question of service of process. See Arrowsmith v. United Press Int'l, 320 F.2d 219, 220 (2d Cir. 1963) ("[L]ogic compel[s] initial consideration of the issue of ...


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