The Amalgamated National Health Fund v. Hickey Freeman Tailored Clothing, Inc.

Background

The plaintiffs filed the case on February 21, 2023, and filed an amended complaint on April 12, 2023. Defendants then filed a partial motion to dismiss the amended complaint’s claims against Stephen Granovsky. Magistrate Judge Katharine Parker issued a Report and Recommendation on February 28, 2024, recommending that the motion be denied. She concluded that the plaintiffs had adequately pleaded their Employee Retirement Income Security Act of 1974 (ERISA) claims against Granovsky under Federal Rule of Civil Procedure 9(b), which requires fraud-based allegations to be stated with particularity.

Defendants objected to the recommendation. The district court treated the objections as sufficiently specific for a fresh review of the challenged issues and reviewed the relevant arguments anew.

Issues and Analysis

Defendants argued that the plaintiffs’ allegation, made based on information and belief, that Alan Peck was Granovsky’s agent did not satisfy Rule 9(b). The court explained that allegations may be based on information and belief when the relevant facts are especially within the opposing party’s knowledge, as long as the complaint provides specific facts supporting a strong inference of fraud rather than speculation or conclusory assertions.

The court also stated that defendants had cited no authority showing that Rule 9(b)’s heightened standard necessarily applied to pleading the agency relationship itself. Even assuming that the standard applied, the court found the allegations sufficient. The plaintiffs alleged that Granovsky was Hickey Freeman’s chief executive officer and owner, its controlling corporate official, and had full operational control of the company. They also alleged that Peck was the company’s chief financial officer and that both men communicated with the plaintiffs about Hickey Freeman’s delinquent payments and made false statements that the payments would be made soon. The court found these allegations sufficient to support an inference that Peck acted as Granovsky’s agent when making statements about Hickey Freeman’s contributions.

Defendants also argued that the magistrate judge improperly considered statements made during settlement discussions because Federal Rule of Evidence 408 limits the use of compromise evidence. The court explained that Rule 408 bars using settlement negotiations to prove or disprove the validity or amount of a disputed claim, but does not bar using such evidence for another purpose. Here, the plaintiffs alleged that Granovsky made fraudulent statements and other statements showing fraudulent intent during settlement discussions, not that the statements proved the validity, invalidity, or amount of a disputed claim. The court therefore found Rule 408 inapplicable.

Disposition

The court adopted Magistrate Judge Parker’s Report and Recommendation in full and denied defendants’ partial motion to dismiss. The Clerk of Court was directed to terminate the motion at Docket Number 29. Because this was a motion to dismiss, the order addressed whether the claims were adequately pleaded, not whether the plaintiffs ultimately would prevail on the ERISA claims.