Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Levy v. Young Adult Inst., Inc.

United States District Court, S.D. New York

November 21, 2014

JOEL M. LEVY and JUDITH W. LYNN, Plaintiffs,
v.
YOUNG ADULT INSTITUTE, INC., et al., Defendants

For Joel M. Levy, Judith W. Lynn, Plaintiffs: Melissa Yang, Michael C. Rakower, Rakower Lupkin PLLC, New York, NY.

For Young Adult Institute, Inc., in its Individual capacity and in its capacity as administrator of the Supplemental Pension Plan and Trust for Certain Management Employees of Young Adult Institute and the Life Insruance Plan and Trust for Certain Management Employees of YAI, doing business as Yai National Institute for People with Disabilities, Eliot P. Green, Defendants: Marcus Aaron Asner, Yue-Han Chow, Arnold & Porter, LLP, New York, NY.

For 1 John Doe, as trustees of the Supplemental Pension Plan for Certain Management Employees of Young Adult Institute, 2 John Doe, as trustees of the Supplemental Pension Plan for Certain Management Employees of Young Adult Institute, 3 John Doe, as trustees of the Supplemental Pension Plan for Certain Management Employees of Young Adult Institute, Board of Trustees of Young Adult Institute, Inc., as administrator of the Supplemental Pension Plan and Trust for Certain Management Employees of Young Adult Institute, Pension Retirement Committee of the Board of Trustees of Young Adult Institute, as administrator of the Supplemental Pension Plan and Trust for Certain MAnagement Employees of Young Adult Institute, Supplemental Pension Plan and Trust for Certain Management Employees of Young Adult Institute, Life Insurance Plan and Trust for Certain Management Employees of Yai, Defendants: Yue-Han Chow, Arnold & Porter, LLP, New York, NY.

OPINION AND ORDER

SARAH NETBURN, United States District Judge.

Plaintiffs Joel M. Levy and his spouse Judith W. Lynn (collectively, the " plaintiffs"), bring this action pursuant to: (1) the enforcement provisions of the Employee Retirement Income Security Act of 1974 (" ERISA" or the " Act") to recover and to clarify benefits due to them and to obtain appropriate equitable relief under the terms of a Supplemental Pension Plan and Trust for Certain Management Employees of Young Adult Institute (the " SERP" or the " Plan") and under the terms of a Life Insurance Plan and Trust for Certain Management Employees of Young Adult Institute (the " Life Insurance Plan and Trust"); (2) case law from the Court of Appeals for the Second Circuit applying the principles of promissory estoppel to ERISA claims to enforce promises not to reduce certain benefits under the SERP; and (3) a state law claim for damages for breach of fiduciary duty. The plaintiffs now seek to amend the Third Amended Complaint to add three claims for equitable relief (Proposed Counts VI, VII, and VIII) under § 502(a)(3)(B) of ERISA: (1) an order of restitution, disgorgement of profits, and the imposition of a constructive trust or equitable lien; (2) a derivative claim for restitution, disgorgement of profits, and the imposition of a constructive trust or equitable lien; and (3) specific performance to prevent alleged misuse of trust assets.

For the following reasons, plaintiffs' motion for leave to amend the Third Amended Complaint is DENIED.

BACKGROUND[1]

I. Factual Background

The Young Adult Institute, Inc. (" YAI") is a New York non-profit organization that serves people with developmental disabilities. Levy worked for YAI for over 40 years before his retirement, first as Executive Director and later as Chief Executive Officer. Among the benefits YAI agreed to provide to Levy were: (1) a Supplemental Pension Plan for Certain Management Employees of Young Adult Institute, dated July 1, 1985 (the " Original SERP"); and (2) four life insurance policies purchased from the Northwestern Mutual Life Insurance Company with a collective face value of $3, 172, 762 (the " Northwestern Mutual Policies"), pursuant to the Life Insurance Plan. YAI also created a trust as a funding medium for the SERP Plan and Trust (the " SERP Trust" or the " Trust").

Under the Original SERP, upon his retirement from YAI, Levy was entitled to receive an annual annuity calculated pursuant to a formula (the " Benefit Formula"), which originally afforded him an annual benefit of approximately $900, 000 for the rest of his lifetime, payable in monthly installments of $75, 000. The Original SERP could be amended by resolution of the Board or the Pension Retirement Committee, but prohibited an amendment that would reduce a vested benefit. YAI claims that it later amended the SERP to reduce the plaintiffs' benefits, first in a 2008 employment agreement and amended SERP (the " 2008 Amendment"). In opposition to the motion to amend, YAI contends that it reduced the plaintiffs' benefits a second time in a 2012 amendment to the SERP (the " 2012 Amendment"). The 2012 Amendment had two effects, according to YAI. First, it allowed YAI to distribute Trust assets to satisfy a settlement with state and federal officials in connection with a suit brought under the False Claims Act. Second, it capped the benefits of any one SERP participant to those determined by Mercer LLC, the executive compensation consultant retained by YAI's counsel. YAI also claims to have passed a board resolution in 2011 that, reflecting the SERP as amended, authorized the payment of legal expenses relating to the SERP to be paid from the SERP Trust.

II. Procedural History

The plaintiffs filed the Complaint on April 30, 2013, and the First Amended Complaint on June 26, 2013. On August 6, 2013, the defendants moved to dismiss the First Amended Complaint, and on August 29, 2013, the Honorable J. Paul Oetken referred the case to my docket for general pretrial supervision and dispositive motions. On January 27, 2014, the Court recommended that the motion to dismiss be granted as to all state law claims, the ERISA claim for breach of fiduciary duty, and the claims requesting specific performance with regard to the trustees of the SERP, the Life Insurance Plan and Trust, and the Northwestern Mutual Life Insurance Policies. The Court recommended that the motion be denied as to all other claims. On March 31, 2014, Judge Oetken adopted the Court's recommendation as to all counts, except the state law claim for breach of fiduciary duty by Green, for which Judge Oetken sustained the plaintiffs' objections and denied the motion to dismiss.

On April 14, 2014, the plaintiffs filed the Second Amended Complaint, and the defendants answered on May 19, 2014. On June 9, 2014, the Court signed a stipulation and order directing the plaintiffs to file a Third Amended Complaint within 10 days, which remedied the issues raised in the defendants' previously filed motion to strike. On June 19, 2014, the plaintiffs filed the Third Amended Complaint, and on June 30, 2014, the defendants answered. On July 11, 2014, the plaintiffs filed a motion to amend the Third Amended Complaint. In support of its motion, the plaintiffs submitted: (1) a Memorandum of Law; and (2) the Declaration of Michael Rakower (the " First Rakower Declaration"), attaching Exhibits A through J, which included the proposed Fourth Amended Complaint (Exhibit I).

On August, 13, 2014, in opposition to the plaintiffs' motion, the defendants submitted: (1) a Memorandum of Law in Opposition; and (2) the Declaration of Yue-Han Chow (the " Chow Declaration"), attaching Exhibits A through I.

On August 27, 2014, in their reply, the plaintiffs submitted: (1) a Memorandum of Law in Further Support; and (2) the Declaration of Michael Rakower (the " Second Rakower Declaration"), attaching Exhibits 1 through 3.

III. The Proposed Counts

The plaintiffs' existing Counts I and II of the Third Amended Complaint plead claims for legal relief under ERISA § 502(a)(1)(B), seeking to enforce the terms of the Original SERP; the plaintiffs contest the validity of amendments that purported to alter or divest the plaintiffs of certain benefits. Count I seeks to recover benefits due to Levy under the Original SERP, namely money damages for the difference between payments received and what is owed him under the Original SERP. Count II seeks to clarify and determine what rights to future benefits are due to Lynn under the Original SERP, and requests in the alternative that she be awarded a lump sum of the present value of her vested benefits.

Counts VI, VII and VIII in the proposed Fourth Amended Complaint, meanwhile, are, in essence, claims to enforce certain alleged rights under the terms of the Original SERP and to clarify rights to future benefits under the terms of the SERP. The plaintiffs propose to bring all three new counts under ERISA § 502(a)(3). Count VI is an " equitable claim of restitution and disgorgement of profits and request for imposition of a constructive trust or equitable lien"; Count VII is a " derivative equitable claim of restitution and disgorgement of profits and request for imposition of a constructive trust or equitable lien"; and Count VIII seeks " specific performance to prevent further misuse of SERP Plan and Trust assets." See First Rakower Decl. Ex. I. (the " proposed Fourth Amended Complaint") ¶ ¶ 43, 47, 51. The plaintiffs contend that these new equitable claims are necessary to protect their interests. The claims arise out of recent disclosures that $11.2 million from the SERP Trust has been used in full or in part for purposes other than the exclusive benefit of the participants or beneficiaries.

DISCUSSION

I. Leave to Amend Standard


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.