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Perlman v. Fid. Brokerage Servs. LLC

United States District Court, E.D. New York

March 26, 2013


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For Plaintiff: Amalia Goldvaser, Rachel Dara Nicotra, Steven Jay Hyman of McLaughlin & Stern, LLP, New York, N.Y.

For Fidelity: Charles F. Seemann of Jackson Lewis LLP, New Orleans, L.A.; Ana Shields of Jackson Lewis LLP, Melville, N.Y.

For Ameriprise: Michael J. Zaretsky of Chorpenning, Good, Carlet & Garrison Esqs., New York, N.Y.; Virginia T. Shea of Carlet, Garrison, Klein & Zaretsky, LLP, Clifton, N.J.

For Wendy Perlman: Phillip C. Landrigan of McCarthy Fingar LLP, White Plains, N.Y.

For Jonathan Blass: Craig A. DiPrima of The Law Office of Craig A. DiPrima LLC, Huntington, N.Y.; Eric Wilen Penzer of Farrell Fritz, PC, Uniondale, N.Y.


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JOSEPH F. BIANCO, United States District Judge.

Hildegard Perlman (" plaintiff" or " Hildegard" ) brought this action against Fidelity Brokerage Services LLC, Fidelity Management Trust Company (collectively, " Fidelity" ), Ameriprise Financial Services Inc. (" Ameriprise" ), Jonathan Blass (" Blass" ), as Executor and Trustee under the Last Will and Testament of Norman Perlman, and Wendy Perlman (" Wendy" ) (collectively, " defendants" ), alleging violations of the Employee Retirement Income Security Act of 1975 (" ERISA" ), 19 U.S.C. § 1001 et seq., as to the Individual Retirement Account (" IRA" ) of her late husband, Norman Perlman (" Norman" ).

Specifically, plaintiff claims that, as the surviving spouse of an ERISA plan participant, she is entitled to assets that she alleges were improperly rolled over into an IRA. Plaintiff asserts that, because she did not provide formal written authorization, the transfer of assets from her late husband's Keogh plan into an IRA was improper under ERISA. Accordingly, she claims that Norman's beneficiary declaration under the IRA (entitling her to one-third of the assets) is invalid, and that she is therefore entitled to all of the assets in the IRA. Plaintiff seeks declaratory judgment affirming that she is entitled to survivorship rights in the IRA, pursuant to Section 205(a) of ERISA.

Presently before the Court are three motions made by defendants: (1) a motion for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, and to deposit funds, pursuant to 28 U.S.C. § § 1335 and 2361, by Ameriprise; (2) a motion for judgment on the pleadings, pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, and for summary judgment, pursuant to Rule 56, by Fidelity (along with a request that the Court grant Fidelity leave to move for attorneys' fees and costs pursuant to 29 U.S.C. § 1132(g)); and (3) a motion for summary judgment, pursuant to Rule 56, and to dismiss, pursuant

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to Federal Rule of Civil Procedure 12(b)(7)[1] by Wendy (along with a request for attorneys' fees and costs pursuant to 29 U.S.C. § 1132(g)).

Because the uncontroverted evidence shows that ERISA does not govern Norman's plan and, even if it did, that plaintiff's ERISA claims would otherwise be barred by the statute of limitations, the Court grants summary judgment in favor of defendants on plaintiff's ERISA claims. Additionally, because the Internal Revenue Code (" IRC" or the " Code" ) provisions cited by plaintiff do not create a private right of action for her, to the extent plaintiff is seeking relief pursuant to the IRC, the Court grants summary judgment in favor of defendants. Finally, for the reasons discussed in detail below, the Court declines to exercise jurisdiction over Ameriprise's interpleader counterclaim and cross-claims and, as such, does not permit Ameriprise to deposit the IRA proceeds with the Court and declines to discharge Ameriprise from liability pursuant to 28 U.S.C. § 2361.

Also before the Court is a cross-motion for summary judgment made, pursuant to Rule 56, by plaintiff. Plaintiff requests a declaratory judgment (pursuant either to ERISA or, in the alternative, to the Declaratory Judgment Act) and any other " make whole" remedies, including legal fees, which the Court deems appropriate. However, as discussed in detail below, because plaintiff has no federal claim that survives summary judgment, she cannot maintain an action for a declaratory judgment. Accordingly, the Court denies plaintiff's cross-motion for summary judgment in its entirety.

Additionally, the Court declines to exercise supplemental jurisdiction over any remaining state law claims and, in its discretion, declines to award attorney's fees and costs to any party in this litigation.

I. Background

A. Factual Background

The Court has taken the facts set forth below from the parties' depositions, affidavits, exhibits, and respective Rule 56.1 Statements of Facts. Upon consideration of a motion for summary judgment, the Court shall construe the facts in the light most favorable to the non-moving party. See Capobianco v. City of New York, 422 F.3d 47, 50 (2d Cir. 2005). Unless otherwise noted, where a party's 56.1 statement is cited, that fact is undisputed or the opposing party has not pointed to any evidence in the record to contradict it.[2]

Hildegard and Norman were married on June 3, 2011. (Pl.'s Ameriprise 56.1 ¶ 1.) They resided together in Woodmere, New York. (Ameriprise 56.1 ¶ 2.) Defendant Wendy Sue Perlman is Norman's daughter from a previous marriage. ( See Wendy Perlman 56.1 (" Wendy 56.1" ) ¶ 8.) In 2001, before they married, Norman and Hildegard entered into a prenuptial agreement. (Fidelity 56.1 ¶ 6.)[3] Approximately two

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years after they were married (on approximately June 10, 2003), Norman set up a Money Purchase Pension Plan Keogh account and plan (the " Keogh account" and the " Keogh plan" ), which were maintained by Fidelity. (Ameriprise 56.1 ¶ 3; Wendy 56.1 ¶ 3.)

In the Koegh plan documents, Norman listed himself as the sole employer and sole plan administrator. (Ameriprise 56.1 ¶ 4.) Norman also listed himself, and no others, as a participant in the Keogh plan. ( Id. ¶ 5.) According to Brian Hogan, Director of Retirement Product Management for Fidelity, a search was conducted during the pendency of this action to determine whether there were participants in the Keogh plan other than Norman; no evidence of other participants was found. ( Id. ¶ 6.) Discovery in this action has similarly failed to produce any evidence of participants other than Norman ( id. ¶ 7), and Hildegard acknowledged, at her deposition, that she herself was unaware of any additional participants in the Keogh plan ( id. ¶ 8). Additionally, Norman signed his own name in the section titled, " Spousal Consent," above the line labeled, " Signature of Participant's Spouse." (Pl.'s Ameriprise 56.1 ¶ 4; see Decl. of Rachel Nicotra in Opp'n to Defs.' Summ. J. Mots. and in Supp. of Pl.'s Cross Mot. for Summ. J. (" Nicotra Decl." ) Ex. A, at 5.[4])

At all times relevant to this action, Norman was an attorney. (Wendy Perlman 56.1 ¶ 2.) In his Keogh plan documents, as noted above, Norman identified himself as his own employer. ( Id. ¶ 4.) Indeed, in a letter dated September 9, 2000, Norman explicitly references the " solo practitioner practice" of his that he handed over to his son eight years earlier, as well as the fact that, although he worked in the same office as his son following the transfer, he remained " totally independent." (Nicotra Decl. Ex. Y, at 4.) During his legal career, Norman had a professional relationship with Robert D. Rosen (" Rosen" ) -- a relationship that Norman described as " essentially a two man partnership presented to the world as a solo practice in his name with my own inclusion as trial counsel." ( Id.) Norman believed that " upon [his] retirement or disability [his son] and Robert (Rosen) will undoubtedly form a conventional partnership." ( Id.) At his deposition, Rosen testified that his relationship with Norman began in about 1992, and that virtually all of the cases he handled were referred to him by Norman. (Nicotra Decl. Ex. DD, Dep. of Robert D. Rosen (" Rosen Dep." ) at 14-15.) When asked about his fee sharing arrangement with Norman, Rosen testified that it was " 50/50." ( Id. at 15.) This professional relationship between Norman and Rosen continued until approximately 2007, when Norman acted as trial counsel on one of Rosen's cases for the final time. ( Id. at 33-34.)

While they were married, Norman and Hildegard filed joint tax returns, including a Self Employment Tax Schedule S.E. and/or Schedule C reflecting Norman's self employment. (Wendy 56.1 ¶ 5.) Hildegard states, however, that in 2007, one year prior to Norman's death, she began filing individual tax returns. (Pl.'s Decl. in Opp'n to Summ. J. ¶ 12.)

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Fidelity managed Norman's Keogh plan from December 2004 to January 2007. (Fidelity 56.1 ¶ 1.) On or about January 22, 2007, Norman sought to transfer all of the assets from his Keogh plan to an IRA maintained by Ameriprise. (Ameriprise 56.1 ¶ 10.) Whether or not Hildegard knew that the type of plan was changing during this transfer, she knew that Norman's funds were in fact being transferred from Fidelity to Ameriprise before that transfer occurred. (Fidelity 56.1 ¶ 3; see also Wendy 56.1 ¶ 10 (citing Hildegard deposition testimony about an Ameriprise representative coming to her home sometime in January 2007 before the transfer to discuss the transfer).) In fact, at her deposition, Hildegard recalled that Norman had asked for her permission to conduct such a transfer. (Decl. of Virginia T. Shea in Supp. of Ameriprise's Mot. for Summ. J. and to Interplead Funds (" Shea Decl." ) Ex A., Dep. of Hildegard Perlman (" Hildegard Dep." ) at 103 (" Q. Did Norman ever ask for your permission to transfer the assets from the Fidelity account to Ameriprise? A. I remember signing something, a spousal consent. . . . Q. Have you ever seen a copy of that document? A. No. Q. But you believe that you signed it? A. I believe so." ).)[5] Indeed, Hildegard recalled signing " a spousal consent" regarding the transfer ( id.), although she testified that she did not read the form, nor did anyone explain it to her before she signed it ( id. at 105). To date, no written spousal consent to the transfer of funds signed by Hildegard has been produced by any party. (Ameriprise 56.1 ¶ 16.) Fidelity transferred Norman's funds from the Keogh account to Ameriprise on or about January 31, 2007. ( Id. ¶ 11.) When the account was transferred, it was deposited into an IRA. ( See Wendy 56.1 ¶ 12.)

Norman executed his will on February 5, 2007. ( Id. ¶ 13.) He established a living trust that same day, which provides that, upon Norman's death, the income from managing, investing, and reinvesting all trust property shall be paid one-third to Hildegard and two-thirds to Wendy for as long as Hildegard is living. ( Id.) Similarly, according to the IRA Designation of Beneficiary for the IRA held by Ameriprise, Norman named " the trust under my last will and testament for Hildegard Perlman (wife)" as the beneficiary of 33.3% of the IRA. and " the trust under my last will and testament for Wendy Perlman (daughter)" as the beneficiary of 66.6% of the IRA. (Ameriprise 56.1 ¶ 17.)

Norman passed away in August of 2010. (Fidelity 56.1 ¶ 8.) Following his death, Wendy filed a petition in the Surrogate's Court, Nassau County, regarding Norman's account. ( Id.; see also Shea Decl. Ex. I, Order to Show Cause.) On November

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10, 2010, Hildegard filed a motion to dismiss that petition for lack of subject matter jurisdiction, alleging that " federal courts have exclusive jurisdiction over the matter because she asserts an ERISA claim based on her alleged right to those benefits under ERISA as Norman's surviving spouse." (Fidelity 56.1 ¶ 9.) Upon application, on March 9, 2011, Blass was appointed trustee of the trust created by Norman's will. ( See Decl. of Elizaveta S. Korotkova in Supp. of Wendy Perlman's Mot. for Summ. J. (" ESK Decl." ) Ex 16, Mar. 9, 2011 Surrogate Court, Nassau County, Order for Appointment of Trustee.) On December 13, 2011, the Surrogate's Court, Nassau County, denied Hildegard's motion to dismiss. It also deferred Wendy's petition (for limited letters of administration, so that she can represent the interests of the estate in the federal action, and for denial of letters of trusteeship to Blass, because he allegedly has a conflict of interest, has demonstrated hostility to petitioner, and has failed to vigorously defend the estate's position in the federal action) pending this Court's determination of whether Blass will properly represent the interests of Norman's estate and trust in the federal action. ( See ESK Decl. Ex. 17, Dec. 13, 2011 Surrogate Court, Nassau County, Order.)

In bringing this lawsuit, Hildegard seeks all assets in the account held by Ameriprise, attorney's fees, and " such other legal or equitable relief as this Court deems appropriate." (Pl.'s Fidelity 56.1 ¶ 10.) Wendy seeks what she contends is her two-thirds interest in the income from the proceeds. (Ameriprise 56.1 ¶ 21.) She also seeks a determination, by this Court, that Blass is not fit to serve as trustee over the trust created under the last will and testament of Norman. ( See Wendy's Answer to Second Am. Compl. ¶ ¶ 16-18 (cross-claim against Blass for declaratory judgment that Blass lacks standing to defend the testamentary trust).) The value of the proceeds in the IRA account has at all times exceeded $500.00. ( Id. ¶ 22.)

B. Procedural History

Plaintiff filed the complaint in this action on January 21, 2011. Plaintiff then filed an amended complaint on February 23, 2011. Blass filed an answer to the amended complaint on March 10, 2011, as did Fidelity Brokerage on March 21, 2011. On April 8, 2011, Ameriprise filed an answer to plaintiff's amended complaint and asserted a cross-claim against Blass, as well as a counterclaim against plaintiff, for interpleader. Blass filed an answer to Ameriprise's cross-claim on April 26, 2011.

On May 9, 2011, Wendy filed a motion to intervene in the action. Blass filed an opposition to this motion on June 30, 2011, and Wendy filed a reply in further support of her motion to intervene on July 14, 2011. On October 21, 2011, a stipulation was filed wherein the parties agreed to the filing of plaintiff's proposed second amended complaint (to add Wendy as a defendant and to add certain provisions of the IRC to the provisions of ERISA already cited in the first amended complaint).

On October 21, 2011, plaintiff filed her second amended complaint. On December 2, 2011, Fidelity and Blass filed separate answers to plaintiff's second amended complaint, and Ameriprise filed an answer and cross-claim against Blass and Wendy, as well as a counterclaim against plaintiff, for interpleader. On December 7, 2011, Wendy filed an answer to the second amended complaint. She also filed cross-claims against Blass for breach of fiduciary duty and a declaratory judgment that Blass lacks standing to defend the testamentary trust created under the ...

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