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Prudential Investment Management Services LLC v. Forde

United States District Court, Second Circuit

June 24, 2013

MICHAEL FORDE, et al., Defendants.


LORETTA A. PRESKA, Chief District Judge.

Plaintiffs Prudential Investment Management Services LLC and Prudential Bank & Trust, FSB (collectively, "Plaintiffs" or "Prudential") filed this interpleader action for the purpose of obtaining adjudication of the rights of certain claimants with respect to their claims of entitlement to certain assets held in an IRA ("Disputed Assets") in the custody or possession of Prudential. The Disputed Assets are held in the name of interpleader defendant Michael J. Forde. Mr. Forde and his wife Mary Jane Forde (collectively, the "Fordes" or "Defendants") seek release of the Disputed Assets. The Fordes have asserted four counterclaims against Prudential in their Answer to Prudential's Interpleader Complaint, [dkt. no. 26], which Prudential has moved to dismiss pursuant to Rule 12(b)(6). For the reasons set forth herein, Prudential's motion [dkt. no. 30] is GRANTED, and the Defendants' counterclaims are DISMISSED.


1. The Disputed Assets and Current Litigation

This is an interpleader action brought for the purpose of determining the rights of certain claimants with respect to their claims of entitlement to the Disputed Assets in the custody or possession of Prudential. In 2010, Mr. Forde opened an Individual Retirement Account ("IRA") with Prudential Investment Management Services LLC, which is in the custody of Prudential Bank & Trust, FSB. (See Memorandum of Law in Support of Plaintiffs' Motion to Dismiss, Sept. 14, 2012 [dkt. no. 31] ("Pl. Memo"), at 2.) Interpleader defendant New York City District Council of Carpenters Annuity Fund (the "Fund") is a jointly-administered employee benefit plan in which Mr. Forde was a participant in and with which he held a retirement account. (Id.) The Disputed Assets are those that were purchased by "rolling over" the assets that had been held in Mr. Forde's retirement account in the Fund into the IRA. (Id.)

Mr. Forde pled guilty to charges of criminal racketeering and racketeering conspiracy that involved the misuse of funds administered by the Fund. (Pl. Memo at 1.) The Fund is seeking restitution and claiming that Mr. Forde's IRA is reachable. In addition to seeking restitution, the Fund has also filed an amended complaint against Mr. Forde in a related action in this Court seeking monetary damages for injuries caused to the Fund. (N.Y. Dist. Council of Carpenters Pension Fund, et al. v. Forde, et al., 11-cv-5474 (LAP).)

The Fund asked Prudential to place a freeze on Mr. Forde's account until it can obtain a court order for restitution of the Disputed Assets. (Pl. Memo at 1.) Prudential complied with the request on March 24, 2010, and although Mr. Forde is currently permitted to inquire about his account and make investment and beneficiary changes, he is not able to withdraw any amounts from the IRA. (Id. at 3.) In May 2012, the Fordes executed a designation of power of attorney for Mary Jane Forde on behalf of Michael Forde. (Id.) In June 2012, Ms. Forde sought to withdraw the Disputed Assets, and the request was refused. (Id. at 3-4.) After several communications between Prudential, the Fordes, and the Fund, Prudential filed this interpleader action on July 2, 2012. (Id. at 3-5; see Interpleader Complaint [dkt. no. 1] ("Compl.").) Including the Fordes, the interpleader complaint names as defendants the Fund and several Trustees of the Funds ("Fund Trustee Defendants" or, collectively, "Fund Defendants"), as parties asserting claims to the Disputed Assets.

On August 13, 2012, the Fordes answered the complaint and asserted counterclaims against Prudential of breach of fiduciary duty, breach of contract, negligence, and conversion. ("Ans.") [Dkt. No. 26.] On the same day, the Fund answered on behalf of the Fund Defendants. [Dkt. No. 24.] On September 14, 2012, Prudential filed the instant motion to dismiss the Forde's counterclaims. [Dkt. No. 30.] The Fordes did not file an opposition to the motion to dismiss. Prudential filed a brief reply on October 5, 2012. [Dkt. No. 41.]

2. Conference and Subsequent Letter Motions

On April 29, 2013, a conference was held in this action and the related civil action. (See Transcript of Conference, Apr. 29, 2013 [11-cv-5474, dkt. no. 141] ("Trans.").) At that conference, this Court questioned Defendants as to their Rule 11 basis for opposing Prudential's motion to dismiss. (Trans. at 6.) The Court asked Defendants' counsel if there is a dispute over the funds held by Prudential, which counsel acknowledged there is. (Id. at 7.) The Court reminded Defendants' counsel that an interpleader action is a legal basis for not releasing the funds and urged counsel to confer and notify the Court whether they planned on filing a substantive opposition to the motion. (Id. at 9, 11-12.) Defendants were given two weeks to notify the Court by letter of their intentions. (Id. at 13.)

On May 13, the Fordes' counsel wrote to this Court requesting to file an amended answer so that they could re-plead their counterclaims.[1] ("Fordes May 13 Letter") (attached). The Fordes did not indicate that they would be filing a substantive opposition to Prudential's motion to dismiss. Besides a lengthy fact-based argument as to why the Disputed Assets are not available to creditors, the Fordes conceded that Prudential is not a fiduciary, (id. at 5 & n.9), and also asserted a new claim that minimal diversity has not been plead (id. at 6-7). Prudential responded via letter on May 16, 2013. ("Prudential May 16 Letter") (attached). Prudential argued that the Fordes failed to present any legal arguments that would support a good faith basis to oppose the motion. (Id. at 2.) Prudential pointed out that although the Fordes' letter describes in detail why the Disputed Assets are protected, the issue underlying the interpleader action is whether or not there are competing claims to the Disputed Assets and not whether the Fund will ultimately be able to recover those assets. (Id.) Prudential also argued that the Fordes' request for leave to amend their counterclaims should be denied as futile. (Id. at 3.)

As to the Fordes' claim that the Court lacks subject matter jurisdiction, Prudential asserted in their letter that minimal diversity exists because Mr. Forde is a citizen of New York, and the Fund has admitted that Fund Trustee Defendant Paul O'Brien is a citizen of New Jersey. (Id.) The Fordes noted that certain of the Fund's Trustees had been replaced by the time the interpleader was filed. (Fordes May 13 Letter at 6.) Prudential argued that the changes did not impact diversity and request leave to file an amended complaint to correct the caption and substitute the new Trustees as defendants. (Prudential May 16 Letter at 4.)

The Fordes responded on May 17, 2013 via letter. ("Fordes May 17 Letter") (attached). In this letter, the Fordes withdraw their contract claims. (Id. at 2.) The Fordes now appear to be asserting solely tort-based claims, based on the duty imposed by the alleged "custodial relationship and the agency/principal relationship" between the Fordes and Prudential. (Id.) In support of this principle, the Fordes cite to a completely inapposite case regarding joint liability. (Id. (citing Rastelli v. Goodyear Tire & Rubber Co. , 79 N.Y.2d 289, 295 (1992).)

Prudential replied on May 22, 2013 via letter. ("Prudential May 22 Letter") (attached). Prudential reasserted that minimal diversity exists and that the Fordes have not, and cannot, dispute that there are competing claims to the Disputed Assets. (Id. at 1.) Prudential argues that the Fordes' additional legal claims are meritless ...

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