Winfield et al v. Citibank, N.A.
Filing
54
OPINION AND ORDER: re:#101346 33 MOTION to Dismiss The First, Second And Sixth Claims in the Amended Complaint and Strike Claims For Injunctive Relief filed by Citibank, N.A. For the foregoing reasons, the defendant's motion is granted in part and denied in part. The Clerk is directed to close Docket No. 33. (Signed by Judge John G. Koeltl on 1/27/2012) (cd) Modified on 1/30/2012 (jab).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
────────────────────────────────────
FREDERICK L. WINFIELD, ZULMA G.
MUNIZ, JAMES STEFFENSEN and ADORAM
SHEN, Individually and On Behalf of
All Others Similarly Situated,
10 Civ. 7304 (JGK)
OPINION AND ORDER
Plaintiffs,
- against CITIBANK, N.A.,
Defendant.
────────────────────────────────────
JOHN G. KOELTL, District Judge:
The plaintiffs, Frederick L. Winfield, Zulma G. Muniz,
James Steffensen, and Adoram Shen (“the plaintiffs”), bring this
purported class action on behalf of themselves and all others
similarly situated against the defendant, Citibank, N.A. (“the
defendant”).
The plaintiffs are personal bankers who were
previously employed by the defendant.
They were classified as
“non-exempt” employees and therefore eligible for overtime
payments under federal and state laws but claim that they were
not paid overtime for which they should have been paid.
The
plaintiffs bring claims under the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and various
state laws.
The defendant now moves to dismiss the plaintiffs’
ERISA claims; to dismiss plaintiff Shen’s claim under California
law and to strike the allegations asserted in that claim; and to
strike the plaintiffs’ claims for injunctive relief.
I.
In deciding a motion to dismiss pursuant to Rule 12(b)(6),
the allegations in the complaint are accepted as true, and all
reasonable inferences must be drawn in the plaintiff’s favor.
McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.
2007).
The Court’s function on a motion to dismiss is “not to
weigh the evidence that might be presented at a trial but merely
to determine whether the complaint itself is legally
sufficient.”
1985).
Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.
The Court should not dismiss the complaint if the
plaintiff has stated “enough facts to state a claim to relief
that is plausible on its face.”
U.S. 544, 570 (2007).
Bell Atl. Corp. v. Twombly, 550
“A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.”
(2009).
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
While the Court should construe the factual allegations
in the light most favorable to the plaintiff, “the tenet that a
court must accept as true all of the allegations contained in
the complaint is inapplicable to legal conclusions.”
2
Id.
When presented with a motion to dismiss pursuant to Rule
12(b)(6), the Court may consider documents that are referenced
in the complaint, documents that the plaintiff relied on in
bringing suit and that are either in the plaintiff’s possession
or that the plaintiff knew of when bringing suit, or matters of
which judicial notice may be taken.
See Chambers v. Time
Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002); see also Taylor
v. Vt. Dep’t of Educ., 313 F.3d 768, 776 (2d Cir. 2002); Cortec
Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir.
1991); Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir.
1991).
II.
The following facts alleged in the Amended Complaint are
accepted as true for the purposes of this motion to dismiss,
unless otherwise indicated.
The plaintiffs are personal bankers
who were previously employed by the defendant.
12.)
(Am. Compl. ¶
Their primary job responsibility was to sell the
defendant’s financial products and services to the general
public in Citibank branches throughout the United States.
Compl. ¶ 21.)
(Am.
They bring this purported class action on behalf
of themselves and other future, current and former employees of
Citibank who are similarly situated, asserting claims under
ERISA and the FLSA (“the purported ERISA class” or “the
3
purported FLSA class”).
Plaintiffs Winfield, Muniz and Shen
also bring purported class claims on behalf of District of
Columbia, Illinois, and California subclasses, respectively,
alleging violations of those states’ laws.
(Am. Compl. ¶¶ 14-
16.)
The plaintiffs allege that, during their employment with
the defendant, they and members of the purported FLSA class were
classified as “non-exempt” employees and therefore eligible for
overtime payments under federal and state laws.
22.)
(Am. Compl. ¶
The plaintiffs claim, however, that the defendant has
failed to pay them and the purported FLSA class the overtime
compensation to which they were entitled and has thereby
violated the FLSA and the laws of the District of Columbia,
Illinois, and California.
(Am. Compl. ¶¶ 84-120.)
The plaintiffs also allege that the defendant was a plan
sponsor and fiduciary of the Citigroup 401(K) Plan (“the Plan”),
an employee pension benefit plan within the meaning of § 3(2) of
ERISA and an employee benefit plan within the meaning of § 3(3)
of ERISA.
(Am. Compl. ¶¶ 18, 70, 80.)
The Plan provides
matching funds for contributions made by employees.
These
contributions are calculated as a percentage of employees’
eligible pay, which is defined as compensation paid to
employees, including overtime pay.
(Am. Compl. ¶¶ 72-73;
Citigroup 401(K) Plan, attached as Ex. 1 to Supplemental Decl.
4
of Jean Roma in Supp. of Def.’s Mot. to Dismiss (“Plan”) at 6;
Citigroup 401(K) Plan: Prospectus and summary plan description,
attached as Ex. 1 to Decl. of Jean Roma in Supp. of Def.’s Mot.
to Dismiss (“Summary Plan Description”) at 6.)
The parties
dispute whether contributions under the Plan are linked only to
actual compensation paid to employees or also to the number of
hours worked by employees, for which compensation may have been
earned but not actually paid.
The plaintiffs allege that the
defendant has breached its fiduciary duties under ERISA by
failing to credit overtime work performed by the plaintiffs and
members of the purported ERISA class as eligible compensation
under the Plan.
(Am. Compl. ¶¶ 77-83.)
The plaintiffs seek an
injunction requiring the defendant to credit all members of the
purported ERISA class with eligible compensation under the Plan
for the past and future overtime work those individuals have
performed or will perform.
(Am. Compl. ¶ 82.)
The plaintiffs also allege that the defendant has failed to
maintain records indicating the hours that they and all members
of the purported ERISA class have worked in excess of forty
hours per week.
(Am. Compl. ¶¶ 69, 74.)
The plaintiffs claim
that, by failing to do so, the defendant has violated the
record-keeping requirement set forth in section 209(a)(1) of
ERISA.
(Am. Compl. ¶¶ 68-76.)
The plaintiffs seek injunctive
5
and equitable relief to remedy this alleged violation of ERISA.
(Am. Compl. ¶¶ 75-76.)
The defendant now brings this motion seeking dismissal of
the plaintiffs’ record-keeping and breach of fiduciary duty
claims under ERISA.
The defendant also moves to dismiss
plaintiff Shen’s claim under California state law, which he
seeks to bring on behalf of a California subclass, and to strike
the class allegations asserted in that claim.
Finally, the
defendant moves to strike the plaintiffs’ claims for injunctive
relief.
III.
The defendant first moves to dismiss the plaintiffs’ First
Claim for Relief, namely the claim for failure to maintain
accurate records.
The defendant contends that the plaintiffs
cannot bring this claim under either section 209(a)(1) or
section 502(a)(3) of ERISA.
The defendant also asserts that the
plaintiffs have failed to state a claim for violation of the
ERISA record-keeping requirement.
A.
Section 209(a)(1) of ERISA requires that “every employer
shall . . . maintain records with respect to each of his
employees sufficient to determine the benefits due or which may
6
become due to such employees.”
29 U.S.C. § 1059(a)(1).
Section
209(b) provides that “[i]f any person who is required . . . to
furnish information or maintain records for any plan year fails
to comply with such requirement, he shall pay to the Secretary a
civil penalty of $10 for each employee with respect to whom such
failure occurs . . . .”
29 U.S.C. § 1059(b).
Courts have interpreted this language to mean that section
209 does not create a private right of action but instead
affords the remedy of a civil penalty to be paid to the
Secretary of Labor.
See, e.g., Kifafi v. Hilton Hotels Ret.
Plan, 616 F. Supp. 2d 7, 37-38 (D.D.C. 2009); Premick v. Dick’s
Sporting Goods, Inc., No. 06 Civ. 530, 2007 WL 141913, at *6
(W.D. Pa. Jan. 18, 2007); Colin v. Marconi Commerce Sys. Emps.’
Ret. Plan, 335 F. Supp. 2d 590, 606 (M.D.N.C. 2004); Lowe v.
Telesat Cablevision, Inc., 837 F. Supp. 410, 412 (M.D. Fla.
1993); Cartelli v. Plumbers and Steamfitters Local Union No. 422
Pension Fund, No. 89 Civ. 6783, 1991 WL 150039, at *3 (N.D. Ill.
July 31, 1991).
The plaintiffs do not dispute that a private right of
action is unavailable under section 209(a) of ERISA. 1
Instead,
they contend that they have the right to sue under section
502(a)(3), ERISA’s “catch-all” provision, which provides that:
1
Hr’g Tr., 24-25, Dec. 20, 2011 (“Tr.”).
7
[a] civil action may be brought —
. . .
by a participant, beneficiary, or fiduciary (A) to enjoin
any act or practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such violations
or (ii) to enforce any provisions of this subchapter or the
terms of the plan[.]
29 U.S.C. § 1132(a)(3).
The relief available under this
provision is limited to equitable relief: monetary damages are
generally unavailable.
See Lee v. Burkhart, 991 F.2d 1004, 1011
(2d Cir. 1993); Harrison v. Metro. Life Ins. Co., 417 F. Supp.
2d 424, 433 (S.D.N.Y. 2006).
District courts in this Circuit that have confronted ERISA
record-keeping claims brought under section 502(a)(3) have
deemed such claims to be disguised claims for benefits properly
brought under section 502(a)(1)(B) of ERISA rather than claims
for equitable relief which may permissibly be brought under
section 502(a)(3).
For example, in DeSilva v. North Shore-Long
Island Jewish Health System, Inc., 770 F. Supp. 2d 497, 537
(E.D.N.Y. 2011), the court concluded that the plaintiffs’ ERISA
claim for failure to record hours worked, which purportedly
sought equitable relief under section 502(a)(3), should instead
be construed as a claim for monetary damages.
The court
explained that the
plaintiffs cannot avoid the fact that, ultimately, their
claim is one for monetary relief. . . . [I]f plaintiffs are
8
successful on their claim to be credited for all hours
worked (assuming arguendo that the plan requires such
crediting) this crediting of hours will result in a
recalculation of plaintiffs’ benefits, which, in turn, will
result in a monetary gain to plaintiffs.
Id. at 537.
The court thus found that “[s]uch a claim should be
brought under Section 502(a)(1)(B), not Section 502(a)(3), and
cannot be brought before plaintiffs have exhausted their
administrative remedies.”
Id. at 537-38; see also Barrus v.
Dick’s Sporting Goods, Inc., 732 F. Supp. 2d 243, 258-59
(W.D.N.Y. 2010) (ERISA claim for failure to record hours worked
was actually asserting a claim for benefits rather than a claim
for equitable relief and could not be brought under section
502(a)(3)) (citing Premick, 2007 WL 141913, at *6).
In this case, like in DeSilva and Barrus, the plaintiffs
purportedly seek injunctive relief requiring the defendant to
credit the plaintiffs and members of the purported ERISA class
for hours worked but not recorded.
The logical result of such
crediting of hours would be a recalculation of the plaintiffs’
benefits, which, in turn, would result in monetary relief.
Thus, the “plaintiffs’ claim is inextricably intertwined with
the benefits that they will receive under the plan and, as such,
should be construed as [a] plan-based claim seeking monetary
damages.”
De Silva, 770 F. Supp. 2d at 537.
Such a claim must
be brought under section 502(a)(1)(B) of ERISA and is subject to
ERISA’s exhaustion requirement.
See, e.g., Burke v. Kodak Ret.
9
Income Plan, 336 F.3d 103, 107 (2d Cir. 2003); Chapman v.
ChoiceCare Long Island Term Disability Plan, 288 F.3d 506, 511
(2d Cir. 2002).
The plaintiffs, however, have not pleaded that
they filed any claim under the Plan’s claims and appeals
procedures or otherwise exhausted the administrative remedies
specified in the Plan. 2
The plaintiffs cannot bring their
2
The plaintiffs contend that they should not be required to
exhaust administrative remedies before bringing this action
because doing so would be futile and inadequate. See, e.g.,
Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594
(2d Cir. 1993) (exhaustion requirement may be excused on grounds
of futility). The plaintiffs claim that exhaustion would be
futile here because their claims do not stem from the nonpayment of benefits, which could be remedied under the Plan’s
administrative process, but rather from a failure to properly
record hours worked, which has resulted in inaccurate payroll
records from which benefits under the Plan are derived. They
argue that they have no administrative recourse within the Plan
for proper accounting and crediting of hours because the
defendant has not maintained records sufficient to enable such
an accounting to take place. The plaintiffs, however, cite only
one case that has excused the exhaustion requirement on these
grounds. See Stickle v. SCIWestern Mkt. Support Ctr., L.P., No.
08 Civ. 83, 2008 WL 4446539, at *17 (D. Ariz. Sept. 30, 2008)
(“It would be futile for Plaintiffs to exhaust administrative
remedies with the Plan when, Plaintiffs allege, the Plan has not
been provided a correct record of Plaintiffs[’] hours.”).
However, no district court in this Circuit has accepted this
argument, and courts in this Circuit have not hesitated to
dismiss ERISA record-keeping claims on the ground that such
claims were disguised claims for benefits under section
502(a)(1)(b) for which exhaustion was required but unsatisfied.
De Silva, 770 F. Supp. 2d at 538; Barrus, 732 F. Supp. 2d at
259. In order for the exhaustion requirement to be excused, a
plaintiff must “make a clear and positive showing that pursuing
available administrative remedies would be futile . . . .”
Kennedy, 989 F.2d at 594 (internal quotation marks and citations
omitted). The plaintiffs have not made such a showing here.
10
record-keeping claim under section 502(a)(1)(B) without first
exhausting administrative remedies.
See Leonelli v. Pennwalt
Corp., 887 F.2d 1195, 1199 (2d Cir. 1989) (affirming refusal to
allow plaintiff to amend complaint to add claim for benefits
under section 502(a)(1)(B) where plaintiff “made no attempt, as
required, to exhaust the administrative remedies provided for
under the plan”); De Silva, 770 F. Supp. 2d at 538; Barrus, 732
F. Supp. 2d at 259.
Thus, the plaintiffs’ record-keeping claim cannot be
brought under section 502(a)(3) or section 209(a)(1), and the
First Claim for Relief must be dismissed.
B.
The First Claim for Relief should also be dismissed because
the plaintiffs have failed to state a claim for a violation of
section 209(a)(1) of ERISA.
Under section 209(a)(1), an
employer is only required to maintain those records “sufficient
to determine the benefits due or which may become due to such
employees.”
29 U.S.C. § 1059(a).
In order to assess what
records are “sufficient to determine the benefits due” to
employees, a court must “evaluat[e] how contributions are
allocated under the pension plan.”
Henderson v. UPMC, 640 F.3d
524, 528 (3d Cir. 2011); see also Trs. of Chi. Painters &
Decorators Pension Health & Welfare & Deferred Savings Plan
11
Trust Funds v. Royal Int’l Drywall & Decorating, Inc., 493 F.3d
782, 786 (7th Cir. 2007) (determining the scope of an employer’s
record-keeping duty by assessing which records were necessary
for the calculation of benefits under the plan in question); De
Silva, 770 F. Supp. 2d at 537 (“[T]o know what records are
‘sufficient’ to determine benefits due, one must refer to the
language of the applicable ERISA plan to determine how benefits
are calculated.”); Davis v. Abington Mem’l Hosp., Nos. 09-5520,
09-5533, 09-5548, 09-5549, 09-5590, 09-5551, 2011 WL 4018106, at
*5 (E.D. Pa. Sept. 8, 2011) (“[A]bsent any description of the
terms of the ERISA plans to which Plaintiffs were subject, it is
impossible to determine whether it was the responsibility of the
ERISA plan to keep records, in the first instance, of the number
of hours plaintiffs worked.” (internal quotation marks and
citation omitted)).
Where the records an employer allegedly
failed to maintain are not necessary to determine the benefits
due under a particular plan, an ERISA record-keeping claim will
not lie.
See Henderson, 640 F.3d at 529-30; Kuznyetsov v. W.
Penn Allegheny Health Sys., Inc., No. 09 Civ. 379, 2010 WL
597475, at *7 (W.D. Pa. Feb. 16, 2010).
Here, the only records the plaintiffs claim the defendant
failed to maintain are those indicating the number of hours the
plaintiffs worked.
However, under the Plan at issue in this
case, it is the compensation actually paid to employees, rather
12
than the number of hours worked, which is relevant to allocating
contributions.
See Plan at 6 (stating that eligible pay for the
purposes of Plan contributions includes “the regular base salary
and wages paid in cash, including overtime and shift
differentials, paid by an Employer during such Plan Year”);
Summary Plan Description at 6 (stating that eligible pay for the
purposes of Plan contributions includes “base pay, plus overtime
and shift differential paid to you during the calendar year”). 3
Thus, under the Plan at issue here, records of hours worked are
not records which are necessary “to determine the benefits due”
to employees within the meaning of section 209(a)(1) of ERISA.
See Henderson, 640 F.3d at 529 (collecting cases finding that,
where plan language defined compensation as “amounts paid by an
Employer to an Employee” or in similar terms, employer had no
obligation under ERISA to record amounts earned or hours
worked).
The plaintiffs urge the Court to reach a contrary
conclusion, pointing to the Plan’s definition of “hours of
3
The Court can properly consider the Plan and the Summary Plan
Description on this motion to dismiss because they are essential
to the plaintiffs’ ERISA claims and incorporated by reference
into their complaint. See Chambers, 282 F.3d at 152-53; De
Silva, 770 F. Supp. 2d at 545 n.22 (court could consider plan
document because the plaintiffs’ ERISA record-keeping and breach
of fiduciary duty claims were “based upon the ERISA plans and
the plan documents plainly are integral to plaintiffs’
complaint”).
13
service.”
This definition does account for not only the number
of hours for which an employee is actually paid but also the
number of hours for which the employee is entitled to payment.
(Plan at 11.)
However, the number of “hours of service” an
employee performs is only relevant to determining whether
certain part-time or temporary employees are eligible to
participate in the Plan in the first instance, 4 not to
calculating benefits once an employee is participating.
at 24.)
(Plan
See Mathews v. ALC Partner, Inc., No. 08 Civ. 10636,
2009 WL 3837249, at *6-*7 (E.D. Mich. Nov. 16, 2009) (rejecting
plaintiffs’ reliance on definition of “hours of service” that
included hours for which an employee was entitled to
compensation, reasoning that the number of hours of service
performed did not factor into the calculation of benefits under
the plan).
The plaintiffs also refer to a provision in the Summary
Plan Description which requires that eligible pay be “earned and
paid” while the employee is an eligible employee of the company.
(Summary Plan Description at 6.)
The plaintiffs interpret this
provision to mean that compensation that is earned but not paid
is relevant to calculation of benefits under the Plan.
4
(Tr. at
It is undisputed that the plaintiffs here were full-time
employees who were automatically eligible to participate in the
Plan without any preliminary calculation of the hours of service
they had performed.
14
19-21.)
However, this interpretation is not persuasive.
The
provision makes clear that, to constitute eligible pay under the
Plan, the compensation must be both “earned” and “paid.”
(Summary Plan Description at 6.)
Accordingly, compensation that
is earned but not actually paid does not constitute eligible pay
under the Plan.
Thus, because the Plan at issue here determines benefits
based on the compensation paid to employees rather than the
number of hours worked, any alleged failure by the defendant to
maintain records of hours worked does not constitute an ERISA
record-keeping violation.
See, e.g., Henderson, 640 F.3d at 530
(affirming dismissal of ERISA claim asserting failure to record
hours worked because the plan in question tied contributions and
benefits to compensation paid rather than to uncompensated hours
worked); Kuznyetsov, 2010 WL 597475, at *7 (dismissing ERISA
record-keeping claim on same grounds); Mathews, 2009 WL 3837249,
at *7 (same).
Section 209(a)(1) of ERISA imposes no independent
requirement on an employer to maintain records of the hours its
employees work when such records are not necessary to “determine
the benefits due or which may become due to such employees.”
U.S.C. § 1059(a)(1).
29
Accordingly, the plaintiffs have failed to
state a claim for a violation of ERISA’s record-keeping
requirement.
For this reason, and because the plaintiffs cannot
bring a record-keeping claim under section 209(a)(1) or section
15
502(a)(3) of ERISA, the defendant’s motion to dismiss the
plaintiffs’ ERISA record-keeping claim is granted and this claim
is dismissed with prejudice. 5
IV.
The defendant next moves to dismiss the plaintiffs’ Second
Claim for Relief for breach of fiduciary duty under ERISA.
Section 404(a)(1) of ERISA provides that an employee
benefit plan fiduciary shall, among other obligations,
“discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries . . . .”
U.S.C. § 1104.
29
ERISA defines a plan fiduciary as a person who,
among other functions, “exercises any discretionary authority or
discretionary control respecting management of such plan or
exercises any authority or control respecting management or
disposition of its assets” or “has any discretionary authority
5
The plaintiffs seek leave to amend the complaint in the event
the Court deems the defendant’s motion to have merit. However,
the plaintiffs were already given an opportunity to amend the
complaint in response to a prior motion to dismiss by the
defendant and were put on notice that, if any claims in the
amended complaint were dismissed, such dismissal would be with
prejudice. Memorandum Opinion and Order, Winfield v. Citibank,
N.A., 10 Civ. 7304 (S.D.N.Y. Apr. 13, 2011); see also Abu Dhabi
Commercial Bank v. Morgan Stanley & Co., No. 08 Civ. 7508, 2009
WL 3346674, at *2 (S.D.N.Y. Oct. 15, 2009) (“[A] dismissal with
prejudice is generally appropriate where a court puts a
plaintiff on notice of a complaint’s deficiencies and the
plaintiff fails to correct those deficiencies after
amendment.”).
16
or discretionary responsibility in the administration of such
plan.”
29 U.S.C. § 1002(21)(A).
To qualify as a fiduciary
under this definition, “the threshold question is not whether
the actions of some person employed to provide services under a
plan adversely affected a plan beneficiary’s interest, but
whether that person was acting as a fiduciary (that is, was
performing a fiduciary function) when taking the action subject
to complaint.”
De Silva, 770 F. Supp. 2d at 539 (quoting Pegram
v. Herdrich, 530 U.S. 211, 226 (2000)).
Here, the plaintiffs allege that the defendant breached its
fiduciary duties under ERISA by “failing to credit and/or pay
compensation due for overtime performed by Plaintiffs and the
members of the ERISA Class as Eligible Compensation under the
Citigroup Plan.”
(Am. Compl. ¶ 81.)
However, the crediting of
hours worked is not a fiduciary function where, as here, the
number of hours worked does not factor into the calculation of
benefits under the plan in question.
“[W]here an ERISA plan
defines benefits in terms of compensation, and where
compensation is tied to wages actually paid, employers are not
obligated to credit employees for ‘all hours worked,’ and thus,
the failure to credit those hours does not constitute a breach
of fiduciary duty under ERISA.”
De Silva, 770 F. Supp. 2d at
541; see also Henderson, 640 F.3d at 530 (affirming dismissal of
breach of fiduciary duty claim for failure to credit overtime
17
hours worked where number of hours worked was not relevant to
calculation of benefits under the plan); Kuznyetsov, 2010 WL
597475, at *7 (dismissing breach of fiduciary duty claim on same
grounds); Mathews, 2009 WL 3837249, at *7 (same); Zipp v. World
Mortg. Co., 632 F. Supp. 2d 1117, 1125 (M.D. Fla. 2009) (same);
LePage v. Blue Cross & Blue Shield of Minn., No. 08 Civ. 584,
2008 WL 2570815, at *6 (D. Minn. June 25, 2008) (same).
Because
the Plan in this case calculates benefits based on compensation
actually paid rather than compensation earned through hours
worked, the failure to credit such hours does not constitute a
breach of fiduciary duty. 6
The plaintiffs cite a line of cases holding that claims for
breach of fiduciary duty premised on a failure to credit hours
worked could not be dismissed at the pleading stage.
See
Stickle, 2008 WL 4446539, at *19 (“Under ERISA, crediting hours
is a fiduciary function . . . .”); In re Farmers Ins. Exch.
Claims Representatives’ Overtime Pay Litig., No. MDL 33-1439,
2005 WL 1972565, at *5 (D. Or. Aug. 15, 2005) (concluding that
plaintiffs’ allegations that defendants failed to credit
overtime hours worked stated a claim for breach of fiduciary
6
The defendant also asserts that it cannot be characterized as a
plan fiduciary because it has no discretion or authority over
crediting compensation under the Plan. However, the Court need
not reach this argument because, regardless of whether the
defendant qualifies as a plan fiduciary, the crediting of hours
worked is not a fiduciary function under the Plan at issue in
this case.
18
duty); cf. Rosenburg v. Int’l Bus. Machines Corp., No. 06 Civ.
430, 2006 WL 1627108, at *5 (N.D. Cal. June 12, 2006) (holding
that whether the alleged failure to credit hours worked
constituted a breach of fiduciary duty was a fact-intensive
inquiry inappropriate for resolution on a motion to dismiss).
However, these cases did not analyze the language of the
applicable plans, and their reasoning has been widely rejected,
including by district courts in this Circuit.
See De Silva, 770
F. Supp. 2d at 544-45 (rejecting Stickle, Rosenburg, and Farmers
as “provid[ing] virtually no legal analysis or analysis of the
applicable plan language in support of their conclusion”);
Barrus, 732 F. Supp. 2d at 257 (“The Court is not persuaded by
the reasoning in Stickle.”); LePage, 2008 WL 2570815, at *7
(rejecting these cases as unpersuasive and as not sufficiently
addressing “the policy implications of recognizing such a
sweeping fiduciary duty”); Steavens v. Elec. Data Sys. Corp.,
No. 07 Civ. 14536, 2008 WL 3540070, at *3 (E.D. Mich. Aug. 12,
2008) (finding that Rosenberg and Farmers contained “little or
no analysis” and did not “adequately address[] the specific
language of the benefits plans at issue”); cf. Mathews v. ALC
Partner, Inc., No. 08 Civ. 10636, 2008 WL 5188760, at *6-*7
(E.D. Mich. Dec. 9, 2008) (reading this line of cases as
applicable only where the plan in question measures
19
contributions based on number of hours worked rather than wages
actually paid). 7
Indeed, there are sound policy reasons for rejecting this
line of cases.
If ERISA imposed a fiduciary duty to ensure that
all overtime hours worked were properly recorded and
compensated, irrespective of how benefits are calculated under
the applicable plan, then every violation of the FLSA would give
rise to a violation of ERISA. 8
Congress in enacting ERISA.
This was not the intent of
As the Supreme Court has explained:
In enacting ERISA, Congress’ primary concern was with the
mismanagement of funds accumulated to finance employee
benefits and the failure to pay employees benefits from
accumulated funds. . . . [T]he danger of defeated
7
At oral argument, counsel for the plaintiffs suggested that a
breach of fiduciary duty claim could also arise from the
defendant’s failure to ascertain the accuracy of contributions
under the Plan and failure to ensure that compensation earned
was in fact paid. (Tr. at 21.) However, it is clear that
“[w]here the Plan itself imposes no obligation to credit for
such hours or to base benefits determinations on compensation
that might be owing to employees, plan administrators do not
have an obligation to double-check whether employers are
fulfilling their statutory and contractual payment obligations
to employees.” De Silva, 770 F. Supp. 2d at 543; see also
LePage, 2008 WL 2570815, at *5-*7 (rejecting argument that
defendant had a fiduciary duty to “evaluate whether employees
had some legal claim to additional compensation”).
8
At oral argument, plaintiffs’ counsel agreed that this would be
the logical result of the argument advanced by the plaintiffs.
See Tr. at 21 (“[The Court:] If you say there’s a fiduciary
obligation on the part of the administrator to assure that all
overtime is in fact paid so that ERISA benefits are triggered
then, of necessity, every violation of the Fair Labor Standards
Act is a violation of ERISA, right? [Plaintiffs’ counsel:] Yes,
your Honor.”)
20
expectations of wages for services performed [is] a danger
Congress chose not to regulate in ERISA.
Massachusetts v. Morash, 490 U.S. 107, 115 (1989).
Ensuring
that employees are properly compensated for hours worked is
instead the province of other federal statutes such as the FLSA.
See Perdue Farms, Inc. v. Travelers Cas. & Sur. Co. of Am., 448
F.3d 252, 261 (4th Cir. 2006) (“[ERISA] was not designed to
address every conceivable aspect of an employee’s monetary
rights, and it is not primarily concerned with hourly wages and
overtime pay, the domain of the FLSA and its state
counterparts.”).
Imposing “[s]uch a far-reaching duty would
send the administration of [ERISA pension plans] into gridlock
and dramatically increase the cost of administering [such
plans].”
LePage, 2008 WL 2570815, at *7.
Moreover, treating a failure to credit overtime hours
worked as a fiduciary duty under ERISA would allow future
plaintiffs to circumvent the opt-in requirement for FLSA
collective actions by instead bringing claims for unpaid
overtime as opt-out class actions under ERISA, effectuating an
immense sub rosa expansion of the FLSA.
Accordingly, the sweeping definition of fiduciary duties
under ERISA that the plaintiffs urge the Court to adopt is not
persuasive.
Thus, any alleged failure by the defendant to
credit overtime hours worked or to ascertain the accuracy of
21
contributions under the Plan in question here does not
constitute a breach of fiduciary duty under ERISA.
The
defendant’s motion to dismiss the plaintiffs’ ERISA breach of
fiduciary duty claim is therefore granted and the Second Claim
for Relief is dismissed with prejudice.
V.
The defendant next moves to dismiss the Sixth Claim for
Relief, namely plaintiff Shen’s claim under California law,
which he seeks to bring on behalf of a California sub-class.
The defendant argues that the claim should be dismissed under
the abstention doctrine set forth in Colorado River Conservation
Dist. v. United States, 424 U.S. 800 (1976), and that plaintiff
Shen’s class allegations should be stricken because the adequacy
and superiority requirements set forth in Federal Rule of Civil
Procedure 23 are not satisfied.
A.
Colorado River abstention arises in limited “situations
involving the contemporaneous exercise of concurrent
jurisdictions, either by federal courts or by state and federal
courts.”
Colorado River, 424 U.S. at 817.
The doctrine
presents an “extraordinary and narrow exception” to “the
virtually unflagging obligation of the federal courts to
22
exercise the jurisdiction given them.”
Id. at 813, 817
(internal quotation marks and citation omitted).
The threshold
inquiry for determining whether abstention is appropriate is
“whether the state and federal proceedings are indeed parallel,
i.e. whether substantially the same parties are litigating the
same issues in a state forum.”
Mouchantaf v. Int’l Modeling &
Talent Ass’n, 368 F. Supp. 2d 303, 306 (S.D.N.Y. 2005) (citation
omitted).
If the proceedings are indeed parallel, the Court
must then consider six factors set forth in Supreme Court
precedent to determine whether extraordinary circumstances
warranting abstention are present, “with the balance heavily
weighted in favor of the exercise of jurisdiction.”
Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16
(1983). 9
The defendant argues that Colorado River abstention is
appropriate here because plaintiff Shen’s California class claim
is parallel to an action brought in California state court two
years prior to this case (“the Davis case”).
The Davis case, in
which Citibank is the only defendant, is a purported California
class action that is premised on the same California statutes
9
These six factors are: “(1) assumption of jurisdiction over a
res; (2) inconvenience of the forum; (3) avoidance of piecemeal
litigation; (4) order in which the actions were filed; (5) the
law that provides the rule of decision; and (6) protection of
the federal plaintiff’s rights.” Mouchantaf, 368 F. Supp. 2d at
306 (quoting FDIC v. Four Star Holding Co., 178 F.3d 97, 101 (2d
Cir. 1999)).
23
and similar factual allegations of unpaid overtime.
The
defendant contends that proceeding with plaintiff Shen’s laterfiled, duplicative California state law claims in federal court
would be an inefficient use of limited judicial resources.
The defendant has not established a basis for Colorado
River abstention at this stage of the litigation.
The Court is
not yet being asked to decide whether it is appropriate to
certify the California subclass on whose behalf plaintiff Shen
seeks to bring his claim, such that there would be a class
action in New York which is potentially duplicative of the Davis
case for which a class certification motion is pending in
California.
Instead, at this time, plaintiff Shen has an
individual claim under California law, over which the Court can
properly exercise supplemental jurisdiction because the claim
shares a common nucleus of operative fact with the FLSA claim
that remains to be decided in this action.
1367(a).
See 28 U.S.C. §
It would be premature to dismiss plaintiff Shen’s
individual claim merely because he also seeks to bring his claim
on behalf of a class, given that no class certification motion
is before the Court at this time, and no class has even been
certified in the Davis action.
The defendant argues that plaintiff Shen’s claim should
nonetheless be dismissed at this stage because the class-related
discovery pending a class certification decision would be
24
burdensome and costly.
However, there is nothing in the
defendant’s papers in connection with this motion indicating
that any such discovery would be unduly burdensome.
Moreover,
because discovery will proceed in any event on the plaintiffs’
FLSA claims, which have significant factual overlap with the
California state law claims, the burden associated with
discovery will likely be reduced.
In addition, any arguments
with respect to the burdensome nature of discovery should be
directed at imposing appropriate limits on discovery rather than
dismissing possibly meritorious claims.
See Fed. R. Civ. P.
26(b)(2)(C)(iii) (requirement of proportionality in discovery).
The Colorado River doctrine does not require abstention
merely because parallel federal and state court actions are
proceeding simultaneously.
To the contrary, abstention is only
appropriate where extraordinary circumstances weighing against
the exercise of jurisdiction are present.
The defendant has not
demonstrated that such extraordinary circumstances exist here.
Thus, the defendant’s motion to dismiss plaintiff Shen’s
California law claim is denied.
The denial is without prejudice
to reassertion at a subsequent time, if class-related discovery
with respect to plaintiff Shen’s claim becomes burdensome or
duplicative, or at the class certification stage.
25
B.
The defendant also moves to strike plaintiff Shen’s class
allegations, asserting that the adequacy and superiority
requirements of Rule 23 are not satisfied.
“Motions to strike are generally disfavored, and should be
granted only when there is a strong reason for doing so.”
In re
Tronox Sec. Litig., No. 09 Civ. 6220, 2010 WL 2835545, at *4
(S.D.N.Y. June 28, 2010).
Moreover, “[a] motion to strike class
allegations . . . is even more disfavored because it requires a
reviewing court to preemptively terminate the class aspects of
. . . litigation, solely on the basis of what is alleged in the
complaint, and before plaintiffs are permitted to complete the
discovery to which they would otherwise be entitled on questions
relevant to class certification.”
Chenensky v. N.Y. Life Ins.
Co., No. 07 Civ. 11504, 2011 WL 1795305, at *1 (S.D.N.Y. Apr.
27, 2011) (quoting Ironforge.com v. Paychex, Inc., 747 F. Supp.
2d 384, 404 (W.D.N.Y. 2010)).
Accordingly, district courts in
this Circuit have frequently found that a determination of
whether the Rule 23 requirements are met is more properly
deferred to the class certification stage, where a more complete
factual record can aid the court in making this determination.
See, e.g., Chenensky, 2011 WL 1795305, at *4; Ironforge, 747 F.
Supp. 2d at 404; Cohen v. Gerson Lehrman Grp., Inc., 686 F.
Supp. 2d 317, 324 (S.D.N.Y. 2010); Ruggles v. Wellpoint, Inc.,
26
253 F.R.D. 61, 67 (N.D.N.Y. 2008).
In this case, as well, the
defendant’s motion to strike plaintiff Shen’s class allegations
is premature and should await a decision on class certification
where the Court will have the benefit of a full factual record
and can better assess whether the adequacy and superiority
requirements of Rule 23 are met.
The defendant’s motion to
strike is therefore denied without prejudice to the defendant’s
ability to oppose class certification on these same grounds.
VI.
Finally, the defendant moves to strike the plaintiffs’
claims for injunctive relief.
The defendant, relying on the
Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131
S. Ct. 2541, 2559-60 (2011), argues that, because all of the
named plaintiffs are former employees of the defendant, they
lack standing to bring a claim for injunctive relief against the
defendant.
It is appropriate to defer standing objections until after
class certification where certification issues are “‘logically
antecedent’ to Article III concerns.”
Ortiz v. Fibreboard
Corp., 527 U.S. 815, 831 (1999) (quoting Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 612 (1997)).
While the contours of the
“logically antecedent” rule have not been defined by the Court
of Appeals for the Second Circuit, “there has been a growing
27
consensus among district courts that class certification is
‘logically antecedent,’ where its outcome will affect the
Article III standing determination, and the weight of authority
holds that in general class certification should come first.”
Blessing v. Sirius XM Radio, Inc., 756 F. Supp. 2d 445, 451
(S.D.N.Y. 2010).
While the named plaintiffs in a class action
“must have standing to sue the defendant on ‘at least some
claims,’ whether they may bring each claim asserted on behalf of
the proposed class is properly determined after class
certification is decided.”
Id. at 452 (quoting In re Buspirone
Patent Litig., 185 F. Supp. 2d 363, 377 (S.D.N.Y. 2002)).
In this case, it is undisputed that each of the named
plaintiffs has standing to bring at least some claims.
Moreover, the class certification process is “logically
antecedent” to Article III concerns in this case.
If any
proposed class includes plaintiffs who are current employees of
the defendant and thus have standing to bring claims for
injunctive relief, the only relevant question will be whether
the injuries of the named plaintiffs are “sufficiently similar
to those of the purported Class to justify the prosecution” of
such a class action.
In re Grand Theft Auto Video Game Consumer
Litig. (No. II), No. 06 MD 1739, 2006 WL 3039993, at *3
(S.D.N.Y. Oct. 25, 2006).
This question is, “at least in the
first instance, appropriately answered through the class
28
certification process.”
Id.
Indeed, district courts in this
Circuit have held that it is appropriate to defer standing
questions until after class certification in similar
circumstances.
See In re Digital Music Antitrust Litig., No. 06
MD 1780, 2011 WL 2848195, at *10 (S.D.N.Y. July 18, 2011);
Blessing, 756 F. Supp. 2d at 452; Woodhams v. Allstate Fire &
Cas. Co., 748 F. Supp. 2d 211, 217 n.3 (S.D.N.Y. 2010), aff’d
No. 10-4389, 2012 WL 5834 (2d Cir. Jan. 3, 2012); La Pietra v.
RREEF Am., L.L.C., 738 F. Supp. 2d 432, 439 n.1 (S.D.N.Y. 2010).
Thus, in this case, it is appropriate to decide class
certification before resolving the defendant’s Article III
standing challenge.
The defendant, however, argues that any addition of current
employees into the prospective class would not cure the standing
problems raised here, contending that the Supreme Court in Dukes
held that the proper remedy when faced with a prospective Rule
23(b)(2) class consisting of both current and former employees
is to refuse to certify the class, rather than to cull the class
of former employees.
See Dukes, 131 S. Ct. at 2559-60.
However, the question of whether it is appropriate to certify a
Rule 23(b)(2) class composed of both current and former
employees is not a question pertaining to standing but rather a
question pertaining to class certification that should be
resolved on a motion for class certification.
29
Accordingly, it is appropriate to defer the defendant's
standing objections to the claims for injunctive relief until
after the class certification determination.
The defendant's
motion to strike the plaintiffs' claims for injunctive relief is
therefore denied without prejudice.
CONCLUSION
The Court has considered all of the arguments of the
parties.
To the extent not specifically addressed above, the
remaining arguments are either moot or without merit.
foregoing reasons, the defendant's motion
denied in part.
For the
granted in part and
The Clerk is directed to close Docket No. 33.
SO ORDERED.
Dated:
New York, New York
JanuaryJ7, 2012
Judge
30
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