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PATRICK TOOL v. NATIONAL EMPLE. BEN. SERVS.

November 18, 1996

PATRICK TOOL, STEPHEN T. TOOL, JR., STEPHEN T. TOOL, SR., CATHERINE TOOL, on behalf of themselves and of all other participants and beneficiaries of the Polymeric Technology Profit Sharing Plan and the Cal-Neva Supply Profit Sharing Plan; POLYMERIC TECHNOLOGY PROFIT SHARING PLAN; TECHNOLOGY PROFIT SHARING PLAN; POLYMERIC TECHNOLOGY, INC., a California Corporation; CAL-NEVA SUPPLY CO, INC., a California Corporation, Plaintiffs,
v.
NATIONAL EMPLOYEE BENEFIT SERVICES, INC., a Corporation; NATIONAL EMPLOYEE BENEFIT SERVICES LIMITED PARTNERSHIP, a limited partnership; NATIONAL RETIREE HEALTH GROUP, a business entity; THOMAS W. CORDRY, JR.; THOMAS W. CORDRY III; HELEN CORDRY; MASSACHUSETTS MUTUAL LIFE INSURANCE CO., a corporation; Defendants.



The opinion of the court was delivered by: PATEL

 Plaintiffs are two profit sharing plans, four participants in those plans and two employers who have made contributions to the plans. They bring this action against defendants Massachusetts Mutual Life Insurance Company ("MassMutual") and others alleging that the defendants violated sections 409 and 502 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1109 and 1132. However, MassMutual has filed a motion to dismiss for failure to state a claim.

 In opposition to the motion to dismiss, plaintiffs craft their allegations as: (1) MassMutual breached its fiduciary duty of loyalty under the doctrine of respondeat superior because its agents, National Employee Benefit Services ("NEBS") and the Cordrys, breached their fiduciary duties in converting funds; (2) MassMutual breached its fiduciary duty of loyalty when it failed to disclose that NEBS and Cordrys had converted funds from other plans; and (3) MassMutual breached its duty of care in failing to advise the employer and plans about the restrictions on NEBS' and Cordrys' authority which allowed them to convert the funds and in its failure to properly supervise NEBS and Cordrys.

 MassMutual's motion to dismiss contends that: (1) plaintiff employers lack standing; (2) MassMutual is not liable as a fiduciary under ERISA; and (3) MassMutual is not liable as a fiduciary under common law agency doctrines because ERISA does not adopt such doctrines. Defendants also seek to dismiss the prayer for punitive damages, claiming that such damages are unavailable under ERISA. Finally, defendants move to strike plaintiffs' request for a jury trial.

 Having considered the parties' arguments and submissions, the court now enters the following order.

 BACKGROUND

 This is an action that involves the alleged theft of pension plan contributions. The pension plans are prototype plans written, created and marketed by MassMutual. The plans were set up by NEBS, Thomas W. Cordry, Jr., Helen Cordry, and Thomas W. Cordry III (the "Cordrys"). The contributions to the plans were delivered to NEBS and the Cordrys, who were supposed to deliver them to MassMutual. MassMutual managed the funds and determined the rate of return that would be paid on them. Plaintiffs allege that NEBS and the Cordrys converted sums that were intended as contributions to either of two pension plans.

 Plaintiffs filed this action on January 19, 1996. On June 7, 1996, plaintiffs filed an amended complaint. On June 27, 1996, Judge Legge recused himself from this case, and the case was reassigned to this court July 1, 1996. On July 17, 1996, this court granted defendant MassMutual leave to file a motion to dismiss, which was subsequently filed on July 23, 1996. This court heard argument from the parties on September 13, 1996, during which defendant informed the court of a recent amendment to ERISA. As such, this court ordered the parties to file briefs discussing the effect of the amendment on the motion before the court. *fn1"

 LEGAL STANDARD

 A motion to dismiss will be denied unless it appears that the plaintiff can prove no set of facts which would entitle him or her to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Fidelity Financial Corp. v. Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986), cert. denied, 479 U.S. 1064, 93 L. Ed. 2d 998, 107 S. Ct. 949 (1987). All material allegations in the complaint will be taken as true and construed in the light most favorable to the plaintiff. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). Although the court is generally confined to consideration of the allegations in the pleadings, when the complaint is accompanied by attached documents, such documents are deemed part of the complaint and may be considered in evaluating the merits of a Rule 12(b)(6) motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.), cert. denied sub. nom. Wyoming Community Dev. Auth. v. Durning, 484 U.S. 944, 98 L. Ed. 2d 358, 108 S. Ct. 330 (1987).

 DISCUSSION

 Some preliminary observations about the complaint in this action may be helpful in understanding the motion before this court. It is undisputed by the parties that the plans which are the subject of this action are ERISA plans. Plaintiffs' first amended complaint states that their claims are brought under sections 1104, 1105, 1109 and 1132(a)(2) of ERISA. No claims are asserted under state law. Section 1104 sets forth the duties of and the standard of care owed by a fiduciary; section 1105 deals with co-fiduciary liability; and section 1109 provides for the liability that may be imposed upon a breaching fiduciary. Subparagraph (a)(2) of section 1132, the enforcement section of ERISA, implements section 1109 and authorizes a civil action for breach of fiduciary duty.

 Without designating under which of these sections each claim is asserted, plaintiffs allege three separate claims or counts, two entitled "breach of fiduciary duty of loyalty" and one entitled "breach of fiduciary duty of care". It is not completely clear from the pleadings whether all three claims are asserted against all defendants. The thrust of the claims is predominately against MassMutual. The manner in which the claims are alleged makes them sound more like common law claims than ERISA claims.

 I. ERISA Claims

 A. Standing

 MassMutual seeks to dismiss the employers, Polymeric Technology, Inc. and Cal-Neva Supply Co., as plaintiffs on the grounds that they have no standing.

 Section 1132(a)(2) provides that the persons who can bring a civil action for breach of fiduciary duty are the Secretary of Labor, a participant, beneficiary or fiduciary . . . ." 29 U.S.C. § 1132(a)(2). Since employers are not included, Polymeric Technology and Cal-Neva do not fall within one of these categories.

 In defense of the employers' standing, plaintiffs rely solely on Fentron Indus. v. Nat'l Shopmen Pension Fund, 674 F.2d 1300 (9th Cir. 1982), which held that an employer had standing under ERISA because its injury was "specific and personal". The theory in that case was that the failure of an ERISA plan/fund to ...


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