The Trundle & Co Pension Plan v. Emanuel

Background

The Trundle & Co. Pension Plan and Carin Trundle, who sued both as trustee and individually, brought claims against Barry Emanuel concerning a 2003 transaction. According to the opinion, Emanuel transferred $150,000 to a lawyer’s trust account, and the law firm later transferred that money to East Hampton Indoor Tennis Club, LLC, in which Emanuel and his family had an ownership interest. Trundle learned of the transaction while trying to close the Plan in 2016.

The Plaintiffs asserted claims including declaratory judgment, breach of fiduciary duty, conversion, an accounting, breach of the covenant of good faith and fair dealing, breach of contract, and unjust enrichment. Emanuel removed the case from state court and moved to dismiss, arguing that the claims were preempted by the Employee Retirement Income Security Act of 1974, a federal law governing employee benefit plans.

The court dismissed the claims in an earlier order but allowed the Plaintiffs an opportunity to seek amendment. The Plaintiffs later proposed adding claims for economic duress and fraud. In the July 23, 2020 order, the court denied leave to amend and dismissed the case with prejudice, finding that the proposed fraud claim was preempted by ERISA and, separately, did not state a claim.

Motions and standards

The Plaintiffs sought reconsideration of the July 23 order and, alternatively, leave to amend for a third time. The court explained that reconsideration is an extraordinary remedy generally available only when the court overlooked controlling law or facts, made a qualifying mistake, or when exceptional circumstances or undue hardship justified relief. The court also explained that leave to amend may be denied when amendment would be futile, meaning the proposed claim could not survive a motion to dismiss.

The court held that the Plaintiffs’ reconsideration request was untimely under the local rule and Federal Rule of Civil Procedure 59(e). It nevertheless considered the request under Federal Rule of Civil Procedure 60(b), which permits relief from a final judgment in specified circumstances, and concluded that the Plaintiffs had not met that rule’s standard.

Fraud allegations

The court held that the proposed fraud claim did not satisfy Rule 9(b), which requires fraud to be pleaded with particularity. The Plaintiffs alleged that Emanuel concealed the transaction, made false representations, and failed to keep records, but the court found that they did not provide sufficient details about the alleged representations, the concealment steps, or when and where the statements were made.

The court also rejected the Plaintiffs’ attempt to characterize the claim as based on material omissions. It found that this was a new argument raised for the first time in the reconsideration motion and that the Plaintiffs had not adequately alleged either the details of the omission or a duty requiring Emanuel to disclose the information.

In addition, the court stated that the fraud claim would remain preempted by ERISA even if the Plaintiffs had adequately pleaded the alleged omission and a disclosure duty. The opinion states that the Plaintiffs did not dispute that preemption conclusion.

Disposition

The court denied the motion for reconsideration. Because reconsideration was denied, the court also denied leave to amend. The court noted that the Plaintiffs had not attached a proposed pleading to their motion and that this was their third attempt to amend their claims in federal court. The court’s final order states that the Plaintiffs’ motions for reconsideration and leave to amend are DENIED.