The Trundle & Co Pension Plan v. Emanuel

Background

Carin Trundle sued Barry Emanuel individually and on behalf of the Trundle & Co Pension Plan. The original complaint asserted claims including declaratory judgment, breach of fiduciary duty, breach of contract, conversion, accounting, breach of the covenant of good faith and fair dealing, and unjust enrichment. The court had previously dismissed those claims as expressly preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and denied an earlier request to amend without prejudice.

Trundle then sought permission under Federal Rule of Civil Procedure 15(a)(2) to file a proposed First Verified Amended Complaint adding claims for economic duress and fraud. The economic-duress claim concerned her allegation that Emanuel refused to sign documents needed to close the Plan unless he received an additional $100,000. She alleged that, without his signature, the Plan could not distribute its assets and she faced financial penalties exceeding $1,000,000. The fraud claim concerned an alleged 2003 transfer of $150,000 from the Plan to a law firm account and the law firm’s later transfer of the same amount to the East Hampton Indoor Tennis Club, LLC. Trundle alleged that Emanuel took unspecified steps to conceal the transaction.

Legal standard

A party generally needs the opposing party’s consent or the court’s permission to amend a pleading after the period for amendment as of right has passed. Courts ordinarily allow amendment when justice requires, but may deny permission when the proposed amendment would be futile. An amendment is futile if the proposed claims could not survive a motion to dismiss for failure to state a claim under Rule 12(b)(6).

For purposes of that analysis, the court accepted the proposed complaint’s factual allegations as true and drew reasonable inferences in Trundle’s favor. It did not have to accept legal conclusions, bare assertions, or conclusory allegations.

ERISA preemption

The court explained that ERISA expressly preempts state-law claims that relate to an employee-benefit plan. For state common-law claims, the court applied the two-part test from Aetna Health Inc. v. Davila. The test asks whether the plaintiff could have brought the claim under ERISA’s civil-enforcement provisions and whether the defendant’s conduct implicated an independent legal duty outside the plan.

The court concluded that Trundle could bring an ERISA enforcement claim because the proposed complaint described her as a Plan administrator and trustee, and she was also a beneficiary or potential beneficiary. It further concluded that both proposed claims could be understood as ERISA claims involving benefits or fiduciary duties.

For the economic-duress claim, the court reasoned that the allegations concerned Emanuel’s conduct as a Plan trustee, his control over the Plan’s assets, and alleged self-dealing. The court said the allegations could support an ERISA claim for breach of fiduciary duty or a claim to recover or clarify benefits under the Plan.

For the fraud claim, the court reasoned that the alleged transfer involved possible self-dealing, fiduciary duties, management of Plan assets, recordkeeping, or disclosure obligations. The court therefore found that this claim also satisfied the first part of the Davila test. The court found no independent legal duty alleged for either proposed claim, satisfying the second part of the test. It held that both claims were expressly preempted by ERISA and that amendment would therefore be futile.

Fraud pleading

The court also held that the proposed fraud claim independently failed the heightened pleading requirement in Federal Rule of Civil Procedure 9(b). That rule requires a fraud claim to identify the allegedly fraudulent statements, the speaker, where and when the statements were made, and why they were fraudulent.

The proposed complaint referred generally to false representations by Emanuel about the use of Plan funds, but did not identify any specific statements, explain why they were fraudulent, or state where and when they were made. The court therefore concluded that the fraud claim would be dismissed even if ERISA did not preempt it.

Disposition

The court noted that this was Trundle’s second attempt to assert claims that it found preempted and that Trundle had previously been made aware of the Rule 9(b) pleading requirements. The court DENIED Trundle’s motion for leave to amend the complaint with prejudice and requested that the Clerk terminate the motion and close the case.