14‐0676‐cv Diamond v. Local 807 LaborManagement Pension Fund et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 11th day of December, two thousand fourteen.

PRESENT: RALPH K. WINTER, DENNY CHIN, Circuit Judges. J. PAUL OETKEN, District Judge.*

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

LANCE S. DIAMOND, Plaintiff‐Appellant,

v. 14‐0676‐cv

LOCAL 807 LABORMANAGEMENT PENSION FUND, JOHN SULLIVAN, ANTHONY STORZ, LUIS HERRERA, JOHN ZAK, ALFRED FERNANDEZ, Defendants‐Appellees.**

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

* The Honorable J. Paul Oetken, of the United States District Court for the Southern District of New York, sitting by designation. ** The Clerk of the Court is directed to amend the caption to conform to the above. FOR PLAINTIFF‐APPELLANT: BENNET SUSSER, Richard S. Meisner, Jardim, Meisner & Susser, P.C., Florham Park, New Jersey.

FOR DEFENDANTS‐APPELLEES: DAVID W. NEW, Benjamin A. Karfunkel, Herbert New & David W. New, P.C., West Caldwell, New Jersey.

Appeal from the United States District Court for the Eastern District of

New York (Mauskopf, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Plaintiff‐appellant Lance Diamond appeals from the judgment of the

district court entered February 7, 2014 dismissing Diamondʹs complaint against Local

807 LaborManagement Pension Fund (the ʺFundʺ) and the members of its Board of

Trustees, John Sullivan, Anthony Storz, Luis Herrerra, John Zak, and Alfred Fernandez.

By memorandum and order also filed February 7, 2014, the district court held that

Diamondʹs complaint ‐‐ which alleged violations of the Employee Retirement Income

Security Act (ʺERISAʺ),

et seq. ‐‐ did not state a federal cause of action

because he did not exhaust his administrative remedies prior to filing suit. We assume

the partiesʹ familiarity with the underlying facts, the procedural history, and the issues

on appeal.

According to the allegations of the complaint, defendants administer a

pension plan (the ʺPlanʺ) for qualifying employees who work under a collective

bargaining agreement between Truck Drivers Local 807 IBT of Long Island City, New ‐ 2 ‐

York, and their employers. Diamond was employed by defendants as ʺControllerʺ of

the Fund from January 1997 to May 2005 and thus was eligible for benefits under the

Plan. Diamond was dismissed from this position in May 2005.

The Plan sets forth rules and regulations governing eligibility and the

rights of participants to receive benefits. Section 6(b) provides that benefits can be

suspended if participants engage in ʺTotally Disqualifying Employment.ʺ For

employees claiming benefits after 65 years of age, ʺDisqualifying Employmentʺ is

defined as employment of forty or more hours in any month in (A) an industry covered

by the Plan when the participantʹs pension payments began; (B) in the geographic area

covered by the Plan when the participantʹs pension began; and (C) in any occupation in

which the participant worked under the Plan at any time.

On January 9, 2012, Diamond accepted a consulting position with the

Puerto Rican Family Institute, Inc. (ʺPRFIʺ). In February 2012, Diamond turned 65 and

thereafter applied for and began receiving benefits under the Plan. Defendants

suspended Diamondʹs benefits on June 14, 2012 on the basis that his employment with

PRFI constituted Disqualifying Employment under the Plan.

Diamond requested review of his benefit suspension by the Planʹs trustees

but withdrew his request on July 30, 2012. Diamond thus failed to exhaust his

administrative remedies under the Planʹs claims procedure. In October 2012, Diamond

filed the complaint in the district court alleging that defendants (1) breached their

fiduciary duties to Plan participants by failing to comply with their duties under ERISA; ‐ 3 ‐

(2) improperly suspended his benefits; and (3) failed to produce certain documents.1

Defendants moved to dismiss, asserting that Diamond failed to exhaust administrative

remedies prior to filing suit. The district court granted defendantsʹ motion to dismiss,

and Diamond appeals the district courtʹs judgment.

ʺWe review de novo the dismissal of a complaint under [Federal] Rule [of

Civil Procedure] 12(b)(6), accepting all factual allegations as true and drawing all

reasonable inferences in favor of the plaintiff.ʺ N.J. Carpenters Health Fund v. Royal Bank

of Scotland Grp., PLC,

(2d Cir. 2013) (quoting Litwin v. Blackstone Grp.,

L.P.,

(2d Cir. 2011)) (alterations in original) (internal quotation marks

omitted). In assessing a motion to dismiss under 12(b)(6), a court must consider

whether the complaint contains ʺsufficient factual matter, accepted as true, to ʹstate a

claim to relief that is plausible on its face.ʹʺ Ashcroft v. Iqbal,

(2009)

(quoting Bell Atl. Corp. v. Twombly,

(2007)).

Under ERISA, all covered benefit plans must ʺprovide adequate notice in

writing to any participant or beneficiary whose claim for benefits under the plan has

been deniedʺ and ʺafford a reasonable opportunity to any participant . . . for a full and

fair review by the appropriate named fiduciary of the decision denying the claim.ʺ

(1)‐(2). Plan participants denied benefits ʺmust pursue all administrative

remedies provided by their plan pursuant to statute, which includes carrier review in

1 Diamond declined to appeal his claims of ERISA retaliation by Fernandez and failure to produce documents, leaving only the fiduciary duty claims. ‐ 4 ‐

the event benefits are denied.ʺ Chapman v. ChoiceCare Long Island Term Disability Plan,

(2d Cir. 2002). We have consistently recognized ʺthe firmly

established federal policy favoring exhaustion of administrative remedies in ERISA

cases.ʺ Kennedy v. Empire Blue Cross & Blue Shield,

(2d Cir. 1993)

(quoting Alfarone v. Bernie Wolff Constr.,

(2d Cir. 1986)) (internal

quotation marks omitted).

It is undisputed that Diamond failed to exhaust the claims procedure of

the Plan. Diamond initially appealed his benefit suspension to the Planʹs trustees as

required by the Planʹs claims procedure, but he later withdrew the appeal intending, as

he explained, to ʺseek reinstatement of his pension benefit in Federal Court without

exhausting the administrative appeal process.ʺ App. at 200. At issue is whether

Diamondʹs complaint is premised on an interpretation of the terms of the Plan or on an

ERISA statutory violation. District courts in this Circuit ʺhave drawn a distinction

between claims relating to violations of the terms of a benefit plan, and claims relating

to statutory violations of ERISA, finding that the former, but not the latter, claims must

be administratively exhausted.ʺ Role v. Johns Hopkins Bayview Med. Ctr., 06‐Civ.‐2475,

, at *3 (E.D.N.Y. Feb. 15, 2008).

Diamond argues that he is not required to exhaust administrative

remedies because he alleges a statutory violation of ERISA. The Second Circuit ʺhas not

addressed the specific question whether exhaustion is required for statutory [ERISA]

claims.ʺ Nechis v. Oxford Health Plans, Inc.,

(2d Cir. 2005). The Third, ‐ 5 ‐

Fourth, Fifth, Sixth, Ninth, and Tenth Circuits have held that plaintiffs need not exhaust

administrative remedies before bringing a legal action asserting a violation of the

ERISA statute. See Milofsky v. Am. Airlines, Inc.,

(5th Cir. 2006) (per

curiam); Smith v. Snydor,

, 363‐65 (4th Cir. 1999); Richards v. Gen. Motors

Corp.,

(6th Cir. 1993); Held v. Mfrs. Hanover Leasing Corp.,

(10th Cir. 1990); Zipf v. A.T.&T. Co.,

(3d Cir. 1986); Amaro v.

Contʹl Can Co.,

, 749‐50 (9th Cir. 1984). The district court below agreed,

joining the district courts in this Circuit that have dispensed with the exhaustion

requirement where plaintiffs allege statutory ERISA violations. See, e.g., De Pace v.

Matsushita Elec. Corp. of Am.,

, 557‐58 (E.D.N.Y. 2003). Yet, the

district court required exhaustion because it found Diamondʹs claims to allege

violations of the terms of the Plan.

We need not decide the issue of whether exhaustion is required for

statutory ERISA claims because we agree that Diamond is alleging a breach of the terms

of the Plan, not a statutory violation of ERISA. Diamond casts his claim as a statutory

violation, arguing that ʺDefendantsʹ misreading of the Pension Plan Rules was so

improper, so egregious and so unreasonable as to be a breach of Defendantʹs ERISA‐

created fiduciary duties.ʺ Appellantʹs Corrected Reply Brief at 4. Yet Diamondʹs

amended complaint specifically alleges that defendants ʺviolated the express terms and

conditions of the Pension Planʺ and thus breached their ʺfiduciary duties under Section

404 of ERISA because, at this time, they have knowledge that they are not operating the ‐ 6 ‐

Pension Plan ʹin accordance with the documents and instrumentsʹ governing the

Pension Plan.ʺ App. at 25‐26. The "essence of a cause of action,ʺ however, ʺis found in

the facts alleged and proven by the plaintiff, not the particular legal theories

articulated.ʺ Oneida Indian Nation of N.Y. v. Cnty. of Oneida,

(2d Cir.

2010); cf. Hack v. President & Fellows of Yale Coll.,

, 89 (2d Cir. 2000) (Pooler, J.,

concurring), abrogated on other grounds by Swierkiewicz v. Sorema N.A.,

(2002).

Because Diamondʹs allegations explicitly required interpretation of the documents

governing the Plan, we view his claim as involving a breach of fiduciary duties,

notwithstanding his framing of the claim as a statutory violation. Cf. Cent. States, Se. &

Sw. Areas Health & Welfare Fund v. Gerber Life Ins. Co.,

(2d Cir. 2014)

(Litigants cannot ʺplead around ERISAʹs limitationsʺ and bring ʺlegal [claims] for

money damages even though they are covered by an equitable label.ʺ).

Because Diamond was seeking only to receive benefits under the Plan that

he contends were withheld in violation of the terms of the Plan, he was required to

exhaust his administrative remedies. Because he failed to do so, his claim was properly

dismissed. See Chapman,

.

Diamond further contends that it would have been futile to pursue

administrative remedies. Where an ERISA plaintiff makes a ʺclear and positive

showing that pursuing available administrative remedies would be futile,ʺ a failure to

exhaust is excused. Kennedy,

(internal quotation marks omitted). Here,

however, the conclusory allegations of Diamondʹs complaint fail to sufficiently allege ‐ 7 ‐

futility. See Davenport v. Harry N. Abrams, Inc.,

(2d Cir. 2001) (per

curiam) (holding that a ʺputative ʹdenialʹ of benefitsʺ contained in a letter ʺdid not

render futile further pursuit of [plaintiffʹs] claims through the proper channelsʺ); see also

Saladin v. Prudential Ins. Co. of Am., 337 F. Appʹx 78, 80 (2d Cir. 2009) (summary order)

(stating that exhaustion was required where ʺadministrative rejection of [plaintiffʹs]

challenge was not a foregone conclusionʺ).

We have reviewed Diamondʹs remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

‐ 8 ‐