Harley et al v. The Bank of New York Mellon

Filing 23

MEMORANDUM re MOTION to Transfer Case 5 (Order to follow as separate docket entry)Signed by Honorable Sylvia H. Rambo on 11/10/15. (ma) [Transferred from Pennsylvania Middle on 11/12/2015.]

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
RICHARD A. HARLEY, MICHAEL F.
O’CONNOR, ROBERT J. BATORY,
SHIRLEY A. DWYER and JOHN
HOLMES, in their capacity as members of
THE RETIREMENT PLANS
COMMITTEE, as Plan Administrator for
the WELLSPAN HEALTH SYSTEM
PENSION PLAN,
Plaintiffs
v.
THE BANK OF NEW YORK MELLON,
Defendant

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Civ. No. 1:15-CV-1384

Judge Sylvia H. Rambo

MEMORANDUM
In this ERISA breach of fiduciary duty action, Defendant has moved to transfer
venue to the District Court for the Southern District of New York pursuant to a forum
selection clause contained in a master trust agreement governing Defendant‘s direction of
assets in a pension plan. Because the court finds that the forum selection clause is valid and
applies to the current dispute, Defendant‘s motion to transfer venue will be granted.

I.

Background
A.

Facts

The WellSpan Health System Pension Plan (the ―
Plan‖) is an ―
employee pension
benefit plan‖ governed by the Employee Retirement Income Security Act of 1974
(―
ERISA‖), 29 U.S.C. § 1002(2)(A), that provides pension benefits to employees of

WellSpan Health (―
WellSpan‖) and its various subsidiaries. (Doc. 1, ¶ 1.) The Bank of
New York Mellon (―
Defendant‖) is an investment company acting as a trust and custody
services provider for the Plan through a Master Trust Agreement (the ―
Agreement‖) (Doc. 51) between itself WellSpan, and is responsible for processing investment allocation and
reallocation directions regarding the Plan‘s assets. (Id. at ¶¶ 2, 6, 8, 10.)
Pursuant to the terms of the Agreement and the regular practices of the parties,
WellSpan would provide wire instructions to Defendant for allocation or reallocation of
funds with various investment managers. (Id. at ¶ 11.) In instances where WellSpan did not
provide specific wire instructions, Defendant would either process the wire transfer based on
prior transactions with that particular investment manager, or request specific instructions
from WellSpan. (Id. at ¶¶ 11-13.)
On July 15, 2013, WellSpan made a $29 million contribution to the Plan. (Id. at
¶ 14.) On July 24, 2013, WellSpan sent two letters via facsimile to Defendant to request two
investment allocations: a $14 million transfer from the ―
Cashflow‖ account to an investment
manager called Artisan Partners to invest, and a $15 million transfer from the ―
Cashflow‖
account to an investment manager called LSV Asset Management to invest in the LSV
International Fund. (Id. at ¶ 15.) Both letters invited Defendant to call WellSpan with any
questions regarding specific wiring instructions for the two transfers. (Id. at ¶¶ 16-17.)
Defendant did not follow up with any questions regarding the transfer to the LSV
International Fund, instead confirming in a ―
call-back‖ with WellSpan that the funds would
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be transferred as requested. (Id. at ¶¶ 18, 20.) Despite this confirmation, Defendant
transferred the $15 million not to the LSV International Fund as discussed, but to another
cash account, without providing notice to WellSpan of the change. (Id. at ¶ 21-22.)
WellSpan did not discover that the $15 million had not been transferred to the
LSV International Fund until October 21, 2013. (Id. at ¶ 22.) Plaintiffs allege that, had the
transfer been made as requested on July 24, 2013, the investment would have provided
significant returns. (Id. at ¶ 23.) Plaintiffs claim that Defendant‘s failure to promptly
transfer the funds to the appropriate account and the resulting financial loss constituted a
breach of the fiduciary duties Defendant owed to the Plan. (Id. at ¶¶ 26-29.)
B.

Procedural History

Plaintiffs, in their individual capacities as members of the Retirement Plans
Committee (the ―
Committee‖), which acts as the plan administrator, instituted this action by
filing a complaint on July 15, 2015. (Doc. 1.) On September 15, 2015, Defendant filed a
motion to transfer venue to the Southern District of New York pursuant to a forum selection
clause in the Agreement. (See Doc. 5.) Defendant also filed its brief in support of the
motion to transfer that same day. (Doc. 6.)
Plaintiffs filed their opposition on October 2, 2015, arguing that while the forum
selection clause was valid, it did not apply to the instant dispute because the forum selection
clause is narrowly tailored and only applicable to disputes that ―
arise under‖ the Agreement,
and Plaintiffs‘ claims arise under ERISA. (See Doc. 17.) Defendant filed its reply on
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October 19, 2015. (Doc. 19.) Thus, the motion has been fully briefed and is ripe for
disposition.

II.

Legal Standard
Defendant has moved for a transfer of venue from the Middle District of

Pennsylvania to the Southern District of New York pursuant to 28 U.S.C. § 1404(a), relying
on a forum selection clause in the Agreement with WellSpan as the basis for the transfer.
Oridinarily, in response to a § 1404(a) motion, a district court must ―
weigh the relevant
private and public-interest factors and determine whether a transfer would serve ‗the
convenience of parties and witnesses‘ and otherwise promote ‗the interest of justice.‘‖ Spy
Phone Labs LLC v. Google, Inc., Civ. No. 14-cv-6565, 2015 WL 4773159, *2 (D.N.J. Aug.
13, 2015) (quoting 28 U.S.C. § 1404(a)); see also Jumara v. State Farm Ins. Co., 55 F.3d
873, 879 (3d Cir. 1995). When, however, the parties have agreed to a valid forum selection
clause, the court must change its ―
usual § 1404(a) analysis in three ways.‖ Atl. Marine
Constr. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tex., ___U.S. ___, 134 S. Ct. 568, 581
(2013). ―
First, the weight ordinarily given to the Plaintiffs choice of venue—that is, the
forum in which it filed the civil action—disappears and ‗the plaintiff bears the burden of
establishing that transfer to the forum for which the parties bargained is unwarranted.‘‖ ARK
Builders Corp. v. Minersville Area Sch. Dist., Civ. No. 14-cv-1551, 2015 WL 6121758, *1
(M.D. Pa. Oct. 15, 2015) (quoting Atl. Marine, 134 S. Ct. at 581). Second, the court must
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―
deem the private-interest factors to weigh entirely in favor of the preselected forum.‖ Atl.
Marine, 134 S. Ct. at 582. Third, when a party ―
flouts‖ its contractual obligation under a
forum selection clause, ― § 1404(a) transfer of venue will not carry with it the original
a
venue's choice-of-law rules – a factor that in some circumstances may affect public-interest
considerations .‖ Id. (citation omitted). However, because public-interest factors alone ―
will
rarely defeat a transfer motion, the practical result is that forum-selection clauses should
control except in unusual cases.‖ Id.; see also Untitled 3, LLC v. Apex Energy Group, LLC,
Civ. No. 15-cv-0164, 2015 WL 2169770, *3 (W.D. Pa. May 8, 2015) (stating that a motion
to transfer pursuant to a valid forum selection clause should be granted ― all but the most
in
exceptional cases.‖).

III.

Discussion
A.

Applicability of the Forum Selection Clause to Plaintiffs’ Breach of
Fiduciary Duty Claim

Here, Plaintiffs do not challenge the forum selection clause's validity, but instead
argue that their breach of fiduciary duty claim does not fall within the clause's scope. ―
The
question of the scope of a forum selection clause is one of contract interpretation.‖ John
Wyeth & Bro. Ltd. v. CIGNA Int'l Corp., 119 F.3d 1070, 1073 (3d Cir. 1997). Thus,
―
whether or not a forum selection clause applies depends on what the specific clause at issue
says.‖ Id. at 1075. Here, the forum selection clause found in the Agreement states:

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Except as otherwise required by [ERISA], all proceedings under this
Agreement shall be brought in courts located in the City of New York
and [WellSpan] hereby submits to the jurisdiction of such courts for
such purposes and hereby waives the right to a trial by jury in any
action or proceeding related to this Agreement.
(Doc. 5-1, § 16.) In determining the scope of this forum selection clause, comparing it to
forum selection clauses from ―
other cases is useful only to the extent those other cases
address contract language that is the same or substantially similar to that at issue.‖ John
Wyeth & Bro., 119 F.3d at 1075. Plaintiffs argue that the language ―
proceedings under this
Agreement‖ is a narrow forum selection clause – unlike broad clauses that include phrases
such as ―
relate to‖ or ― connection with‖ – and that it only applies to the two types of
in
proceedings specifically mentioned in the Agreement, namely, ―
proceeding[s] for [a] judicial
settlement‖ of accounts and proceedings to appoint a successor trustee. (Doc. 17, pp. 18-19
of 22.) In so arguing, Plaintiffs contend that the provision at issue here is narrower than
similar clauses that include proceedings or disputes that ―
arise under‖ an agreement. (Id.)
The court disagrees.
The pertinent language in the forum selection clause is ― proceedings under
all
this Agreement,‖ as it goes without saying that a proceeding will need a verb to come into
being. Therefore, whether the proceeding arises, originates, or is created or formed, the
relevant inquiry is whether it has done so ―
under the agreement.‖ Accordingly, the court
finds that the instant forum selection clause is equivalent to forum selection clauses
containing the language ―
arising under‖ or ―
arising from,‖ and will look to how courts have
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interpreted the scope of those clauses in order to determine whether Plaintiffs‘ breach of
fiduciary duty claim is within the scope of the forum selection clause here.
Courts addressing this contractual language have found that ― claim ‗arises
[a]
from‘ a contract where it can be said ‗to originate from‘ the contract.‖ Spy Phone Labs,
2015 WL 4773159 at *3 (quoting Phillips v. Audio Active, Ltd., 494 F.3d 378, 390 (2d Cir.
2007)). This meaning is typically ―
interpreted as indicating a causal connection.‖ Health
Robotics, LLC v. Bennett, Civ. No. 09-cv-0627, 2009 WL 1708067, *3 (E.D. Pa. June 16,
2009) (quoting Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123, 128 (2d Cir.
2001)). As such, the use of language such as ―
‗arising hereunder,‘ ‗arising under,‘ and
‗arising out of‘‖ is intended only to cover disputes ―
relating to the interpretation and
performance of the contract itself.‖ Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914,
922 (9th Cir. 2011) (citations omitted). However, a plaintiff cannot circumvent a valid
forum selection clause by pleading a non-contractual theory of relief if its claim ―
arise[s] out
of the contractual relation and implicate[s] the contract‘s terms.‖ Crescent Int’l, Inc. v.
Avatar Cmtys., Inc., 857 F.2d 943, 944 (3d Cir. 1988) (citing Coastal Steel Corp. v.
Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983)).
Here, Plaintiffs argue that their breach of fiduciary duty claim arises under
ERISA, rather than the Agreement, because it is ERISA that defines the fiduciary duty owed
by Defendant, and the Agreement merely ―
provide[s] background about the parties‘
relationship.‖ (Doc. 17, pp. 20-21 of 22.) The court disagrees. As a threshold matter, the
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scope of the fiduciary duty articulated in ERISA is based on the common law of trusts.
Bixler v. Cent. Pa. Teamsters Health & Welfare Fund, 12 F.3d 1292, 1299 (3d Cir. 1993).
In applying the common law of trusts, several courts in other circuits have construed the
terms of the underlying trust agreement and other related documents to determine the scope
of any fiduciary duty owed by a trustee. See, e.g., Beddall v. State Street Bank & Trust Co.,
137 F.3d 12, 18 (1st Cir. 1998) (finding that, under the relevant agreements, trustee did not
have discretion over the actions that formed the basis of the breach of fiduciary duty claim));
Maniace v. Commerce Bank of Kansas City, N.A., 40 F.3d 264, 267 (8th Cir. 1994) (relying
on trust document to determine the scope of fiduciary duty owed); Kling v. Fid. Mgmt. Trust
Co., 270 F. Supp. 2d 121, 128 (D. Mass. 2003) (finding that trust agreement was ―
central to
[plaintiff‘s] claim because . . . ERISA‘s provisions relating to fiduciary duty make explicit
and repeated reference to plan documents.‖) (citing ERISA §§ 402, 403, 29 U.S.C. §§ 1102,
1103); Justice v. Bankers Trust Co., Inc., 607 F. Supp. 527, 533 (N.D. Ala. 1985) (― a
As
general matter, the duties imposed on a fiduciary by ERISA are limited to those related to
the particular functions which that fiduciary is authorized to perform under the plan and
applicable trust agreements or other controlling documents.‖) (citing Brandt v. Grounds, 687
F.2d 895 (7th Cir. 1982)).
Where the terms of an agreement governing the relationship between the parties
are relevant in determining the scope of the fiduciary duty owed, several courts have found
that a breach of fiduciary duty claim arises under or from the agreement. See Abbey v.
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Skokos, 303 F. App‘x 911, 913 (2d Cir. 2008) (finding that because the conduct at issue
― accomplished through the [relevant] agreement, [plaintiff‘s] allegations of securities
was
fraud in connection with that transaction ‗arise[]‘ from the agreement and therefore the
forum selection clause applies.‖) (citing Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1361 (2d
Cir. 1993)); Presbyterian Healthcare Servs. v. Goldman, Sachs & Co., Civ. No. 14-cv-0181,
2015 WL 4993571, *40 (D.N.M. Aug. 14, 2015) (finding that ―
non-contract claims like
breach of fiduciary duty . . . fall within the forum-selection clause‘s reach‖ where the forum
selection clause covered ― actions and proceedings arising under‖ the agreement) (citing
all
Abbott Labs. v. Takeda Pharm. Co. Ltd., 476 F.3d 421, 424 (7th Cir. 2007)); Absolute
Activist Master Value Fund, Ltd. v. Ficeto, Civ. No. 09-cv-8862, 2013 WL 1286170, *18
(S.D.N.Y. Mar. 28, 2013) (―
When forum selection clauses contain ‗relating to‘ or ‗arising
under‘ language, courts are inclined to interpret those clauses broadly to cover disputes
beyond those for breach of contract,‖ including claims for breach of fiduciary duty) (citing
Coregis Ins., 241 F.3d at 128); Advent Elecs., Inc. v. Samsung Semiconductor, Inc., 709 F.
Supp. 843, 846 (N.D. Ill., E. Div. 1989) (finding forum selection clause governing all
litigation under the agreement applicable to breach of fiduciary duty claim where ―
[t]he
fiduciary duty which [plaintiff] seeks to enforce . . . arises from its relationship with
[defendant]. The [relevant agreement] defines the nature of that relationship and
[defendant]‘s attendant responsibilities, and resolution of the claim hinges on an

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interpretation of the Agreement‖ and ― assessment of [defendant‘s] rights and duties under
an
the Agreement.‖).
Here, as in the cases cited above, the court finds that the fiduciary duties owed to
Plaintiffs by Defendant arise under the Agreement. The Agreement forms the basis of the
relationship between Plaintiffs and Defendant, and provides the scope of Defendant‘s
powers in relation to Plan assets, instructions for Defendant when receiving requests for
allocation or reallocation of Plan assets, and limitations to Defendant‘s liability for certain
conduct. (See Doc. 5-1, §§ 2.2(b), 3, and 8.) Because Plaintiffs‘ claim for breach of
fiduciary duty revolves around whether Defendant properly followed instructions related to
two requests for reallocation of Plan assets, the resolution of Plaintiffs‘ claim will
undoubtedly include an interpretation of the sections of the Agreement related to the powers,
instructions on performance, and limitations of liability conferred upon Defendant by the
Agreement to determine if Defendant breached its fiduciary duties to Plaintiffs. See Cape
Flattery, 647 F.3d at 922. Accordingly, the court finds that Plaintiffs‘ claim arises out of the
contractual relationship between the parties, and a causal connection exists between the
Agreement and Plaintiffs‘ claim. See Kling, 270 F. Supp. at 128; see also Crescent Int’l, 857
F.2d at 944 (citing Coastal Steel, 709 F.2d at 203); Health Robotics, 2009 WL 1708067, *3
(citing Coregis Ins., 241 F.3d at 128). Therefore, Plaintiffs‘ claim for breach of fiduciary
duty falls within the scope of the forum selection clause contained in the Agreement.

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B.

Enforceability of the Forum Selection Clause

The parties do not dispute the validity of the forum selection clause in the
Agreement, and as stated above, the court finds that the clause applies to Plaintiffs‘ claim for
breach of fiduciary duty. Where a valid forum selection clause applies, the court ―
may
consider arguments about public-interest factors only‖ in determining whether to enforce the
clause and transfer venue under 28 U.S.C. § 1404(a). Atl. Marine, 134 S. Ct. at 582 (internal
citation omitted). ―
Because those factors will rarely defeat a transfer motion, the practical
result is that forum-selection clauses should control except in unusual cases.‖ Id. The Third
Circuit has articulated the public-interest factors for the court‘s consideration, which include:
the enforceability of the judgment; practical considerations that could
make the trial easy, expeditious, or inexpensive; the relative
administrative difficulty in the two fora resulting from court
congestion; the local interest in deciding local controversies at home;
the public policies of the fora; and the familiarity of the trial judge
with the applicable state law in diversity cases.
Jumara, 55 F.3d at 879-80 (internal citations omitted). Here, as the party attempting to
defeat a valid forum selection clause, Plaintiffs ― the burden of showing that publicbear
interest factors overwhelmingly disfavor a transfer.‖ Atl. Marine, 134 S. Ct. at 583.
Therefore, the court will examine each of the public-interest factors in turn to determine if
Plaintiffs have met their heavy burden.
1.

Enforceability of the Judgment

Plaintiffs concede in their brief in opposition to Defendant‘s motion to transfer
that judgment enforceability is not an issue in the instant matter, and make no argument that
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a judgment entered by the District Court for the Southern District of New York would be
unenforceable. (Doc. 17, p. 12 of 22.) Therefore, the court finds that this factor does not
weigh against transfer.
2.

Practical Considerations that Could Make the Trial Easy,
Expeditious, or Inexpensive

Plaintiffs argue that the second factor weighs against transfer because the
location of witnesses and relevant evidence makes Harrisburg, Pennsylvania ― far less
a
difficult, far more expeditious, and far less expensive venue than New York City.‖ (Id.)
Defendant counters that this factor does not weigh against transfer because the witnesses and
relevant evidence have yet to be identified, and Plaintiffs have been represented by their
current counsel in several recent actions in the Southern District of New York. (Doc. 19, p.
10 of 12.) Plaintiffs‘ rote recitation of the factor itself with no explanation of the witnesses
or evidence expected to be relied upon to support their argument does little to persuade the
court, and, accordingly, the court finds that this factor does not disfavor transfer.
3.

Court Congestion

Plaintiffs next argue that congestion in the Southern District of New York weighs
against transfer, because as of March 2013, that court had nearly six times the number of
civil cases as this court. (Doc. 17, p. 13 of 22.) While the Southern District of New York
undoubtedly has more civil cases than this court, Plaintiffs fail to mention that the Southern
District of New York also has nearly five times the number of judges and three times the
number of magistrate judges as this court. (Doc. 19, p. 10 of 12.) In fact, Plaintiffs
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themselves point out that the average amount of time to dispose of cases in the Southern
District of New York is 8.3 months, and here in the Middle District the average is 7.7
months. (Doc. 17, p. 13 of 22.) The fact that the average length of a civil case in the two
courts only differs by approximately two weeks belies Plaintiffs‘ argument that court
congestion would disfavor transfer.
4.

Local Interest

Next, Plaintiffs argue that local interests ―
weigh heavily against a transfer‖
because the ERISA claim seeks relief for a Pennsylvania health system‘s pension plan that is
administered within the Middle District for the benefit of employees who work and reside
within the Middle District, and because Defendant‘s conduct that gave rise to Plaintiffs‘
claim occurred exclusively in Pennsylvania. (Id.) Defendant‘s only argument as to New
York‘s interest is that Defendant‘s primary place of business is in New York. (Doc. 6, p. 9
of 10.) Accordingly, the court finds that the local interests weigh against transfer.
5.

Public Policy of the Forum

The parties agree that this factor is neutral. Indeed, because employee benefits
are matters of federal concern, ERISA preempts state law. Therefore, no public policies of
either New York or Pennsylvania are implicated. See 29 U.S.C. § 1144; Aetna Health, Inc.
v. Davila, 542 U.S. 200, 200 (2004).

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6.

Familiarity with Applicable State Law

Finally, Plaintiffs argue that this factor is irrelevant because ERISA preempts
state law and this court would be just as capable of applying federal law as the Southern
District of New York. (Doc. 17, p. 14 of 22.) Defendants counter that the Agreement
contains a choice-of-law provision selecting New York law, which will become relevant to
the extent a court needs to interpret the terms of the Agreement to determine whether
Defendant breached its fiduciary duties to Plaintiffs. (Doc. 19, p. 12 of 12.) The court
agrees with Defendant. As stated supra, section III.A, several portions of the Agreement
bear on Plaintiffs‘ breach of fiduciary duty claim. Accordingly, the court finds that this
factor weighs in favor of transfer.
Based on the consideration of the above factors, the court finds that public
interest does not overwhelmingly weigh against transfer. Only one of the factors – local
interest – disfavors transfer, and the remaining factors are either neutral or favor transfer.
Accordingly, Plaintiffs have not met their burden of showing that the instant case is one of
the unusual or exceptional cases where the public-interest factors would defeat a valid and
applicable forum selection clause. See MoneyGram Payment Sys., Inc. v. Consorcio
Oriental, S.A., 65. F. App‘x 844, 847-48 (3d Cir. 2003) (stating that valid forum selection
clauses are entitled to ―
controlling weight in all but the most exceptional case[s].‖).

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IV.

Conclusion
For the reasons stated herein, the court finds that Plaintiffs‘ breach of fiduciary

duty claim under ERISA constitutes a ―
proceeding under this Agreement‖ pursuant to the
Agreement‘s indisputably valid forum selection clause, and Plaintiffs did not establish that
the public-interest factors so overwhelmingly disfavor transfer to the Southern District of
New York as to overcome the parties‘ binding agreement as to the proper forum for disputes
arising under the Agreement. Accordingly, the court will grant Defendant‘s motion to
transfer.
An appropriate order will issue.
s/Sylvia H. Rambo
United States District Judge
Dated: November 10, 2015

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