Reed v. Queens Vill. Comm. for Mental Health for J-CAP

REED, et al., Plaintiffs, v. QUEENS VILLAGE COMMITTEE FOR MENTAL HEALTH FOR J-CAP, INC., et al., Defendants.

18-CV-3114 (AMD) (JO)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

FILED: September 17, 2019

September 16, 2019

MEMORANDUM & ORDER

ANN M. DONNELLY, U.S. District Judge:

On May 25, 2018, the plaintiffs commenced this civil action against Queens Village Committee for Mental Health for Jamaica Community Adolescent Program, Inc. ("Queens Village"), Diane Gonzalez, Nilda Ruiz, and Nancy Brinn (collectively, the "Queens Village defendants"), alleging violations of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq. (ECF No. 1.) The plaintiffs filed an amended complaint on September 24, 2018, which added a co-fiduciary liability claim against Delaware Charter Guaranty and Trust Company, d/b/a Principal Trust Company. (ECF No. 21.) On November 1, 2018, the Queens Village defendants and Principal moved separately to dismiss the claims against them. (ECF Nos. 33, 34.) For the reasons explained below, the Queens Village defendants' motion is granted in part and denied in part, and Principal's motion is denied.

BACKGROUND¹

The plaintiffs are former employees of Queens Village who participated in the J-Cap Pension Plan and did not receive some or all the contributions to which they were entitled from Queens Village within the 2008 to 2016 timeframe.² (ECF No. 21 ("Compl.") ¶¶ 1, 17-20.)

Queens Village is a non-profit 501(c)(3) corporation that runs a residential drug and alcohol abuse treatment program in Jamaica, New York. (Compl. ¶ 2.) Queens Village sponsors the Pension Plan for its employees and "is responsible for the day-to-day administration and management of the plan." (Compl. ¶ 23.) It is also the named fiduciary of the Pension Plan. (Compl. ¶ 23.)

The plaintiffs allege that the three individual defendants - Diane Gonzalez, Nancy Brinn, and Nilda Ruiz - are fiduciaries for the Pension Plan. (Compl. ¶¶ 13.) Ms. Gonzalez is the Chief Executive Officer of Queens Village. (Compl. ¶ 24.) The plaintiffs assert that Ms. Gonzalez "exercises authority and control over the pension plan asset" — "its right to payment of the debt that Queens Village owed the pension plan" — and "has the authority to determine and control... whether and under what circumstances Queens Village... would manage or dispel of the plan asset." (Compl. ¶¶ 25-26.) They also say that Ms. Gonzalez exercises control over whether to seek federal court guidance on how Queens Village should exercise its fiduciary duty to the Pension Plan, that she controls which of Queens Village's creditors get paid and in whatorder, and that she "exercises discretionary authority or discretionary control" over what information is provided to Principal. (Compl. ¶¶ 27-29.)

Ms. Brinn is the Chief Operating Officer of Queens Village and is listed as a Pension Plan trustee. (Compl. ¶ 31.) Ms. Brinn signed the Pension Plan's annual U.S. Department of Labor Form 5500 SF ("Form 5500 SF") for the 2009 and 2010 plan years. (Compl. ¶ 32.) According to the plaintiffs, Ms. Brinn had "discretionary authority or discretionary control respecting management" of the Pension Plan because she "conceal[ed] the failure of Queens Village to make its mandatory contributions... for the 2008-2010 plan years." (Compl. ¶ 35.)

Ms. Ruiz is the Chief Financial Officer of Queens Village. (Compl. ¶ 36.) Ms. Ruiz signed the Pension Plan's annual Form 5500 SFs for the 2012 to 2016 plan years. (Compl. ¶ 36.) As with Ms. Brinn, the plaintiffs allege that Ms. Ruiz had "discretionary authority or discretionary control respecting management" of the Pension Plan because she "conceal[ed] the failure of Queens Village to make its mandatory contributions... for the 2008-2010 plan years." (Compl. ¶ 39.)

Principal Trust Company is a trustee of the Pension Plan. (Compl. ¶¶ 13.) The plaintiffs allege that Principal is also a co-fiduciary of the Pension Plan pursuant to ERISA § 405(a), 29 U.S.C. § 1105(a). (Compl. ¶¶ 41.) Principal holds Queens Village's contributions to the Pension Plan in a trust fund. (Compl. ¶ 41.)

The Pension Plan

Queens Village created the Pension Plan in 1980 for employees who complete at least one year of service to Queens Village. (Compl. ¶¶ 42-43.) Pursuant to the Pension Plan, Queens Village was supposed to "match" employees' contributions by contributing funds into the plan on the employees' behalf. (Compl. ¶ 4.) According to the plaintiffs, the 2002 Pension Plandescription says that Queens Village "will contribute an amount equal to 7% of [the participant's] compensation up to the Taxable Wage Base, plus an amount equal to 5.7% of [the participant's] compensation above the Taxable Wage Base." (Compl. ¶ 44.) A grant from the New York State Office of Alcohol and Substance Abuse Services (OASAS) provides some or all of the funding for Queens Village's contributions to the plan. (Compl. ¶¶ 3, 4.)

For the plan years 2007 through 2010,³ Queens Village did not pay its required contributions, which were $202,851 for 2007, $216,057 for 2008, $212,193 for 2009, and $187,000 for 2010. (Compl. ¶¶ 46, 48-49.)

As of July 1, 2011, the Pension Plan was amended so that Queens Village was required to contribute only 1% of the participant's compensation. (Compl. ¶ 50.) Queens Village's contribution for the 2011 plan year was $32,063.⁴ (Compl. ¶ 51.)

"At some point after contributions were due for the 2010 plan year" in 2012, Principal met with Queens Village and the three individual defendants. (Compl. ¶ 10.) The individual defendants announced that Queens Village would not be enforcing the Pension Plan's right to payment for the unpaid 2008 to 2010 contributions. (Compl. ¶ 10.) After that meeting, Principal did not alert the plan participants that Queens Village did not intend to enforce the plan's right to payment of the unpaid contributions. (Compl. ¶ 10.)

The plaintiffs allege that "[b]y early 2016, at the latest," Queens Village had funds available to pay the contributions it owed the Pension Plan; they point out that Queens Villagesatisfied the mortgage for its residential treatment facility prior to February 29, 2016. (Compl. ¶¶ 11, 12, 80-83.) The plaintiffs reason that the mortgage was "worth millions of dollars," and that therefore Queens Village "had and has assets from which the plan's loss could be recovered." (Compl. ¶ 12.) They also allege that Verizon paid Queens Village "a large amount of money in 2016," which Queens Village used to create a television show "instead of putting the money into the pension plan to fund the unpaid contributions." (Compl. ¶ 84.)

The Form 5500 SFs

According to the plaintiffs, Queens Village concealed its failure to make the required contributions to the Pension Plan on the annual Form 5500 SF for the 2008-2010 plan years. (See, e.g., Compl. ¶¶ 6-8, 47-28, 51-52.)

Under ERISA, the Pension Plan is required annually to file a Form 5500, also known as an "annual report;" on which the Pension Plan must include financial information such as assets, liabilities, income and expenses, including the amount of any employer contributions. (See 29 U.S.C. § 1023; Annual Reporting and Disclosure, 72 FR 64710-01 (November 16, 2007).⁵) The contents of all annual reports must be maintained publicly. 29 U.S.C. § 1026.

Queens Village, as sponsor for the Pension Plan, must "[e]nter the minimum required contribution for [each] plan year" in Form 5500 SF Part VI ("Pension Funding Compliance"), Line 12(b). (See Compl. ¶¶ 47-48, 51-52; see also ECF No. 34-2 at 5, 7, 9, 11, 14.) Theinstructions for Line 12(b) provide as follows: "If there is an accumulated funding deficiency for a prior year that has not been waived, that amount should also be included as part of the contribution required for the current year." (Compl. ¶ 33; see also Instructions for Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan at 18.⁶)

The plaintiffs allege that for each plan year beginning in 2008, Queens Village included the required contribution amount only for the particular plan year, and did not include the deficiency for the prior year. (Compl. ¶¶ 47-48, 51-52.) They say that Ms. Brinn "signed and submitted" the annual Form 5500 SFs for the 2010 and 2011 plan years, and that Ms. Ruiz "signed and submitted" the Form 5500 SFs for the 2012 through 2016 plan years. (Compl. ¶¶ 32, 36.) According to the plaintiffs, Ms. Brinn and Ms. Ruiz "failed to follow the directions" and "concealed" the fact that Queens Village did not make mandatory contributions to the Pension Plan by not including the accumulated funding deficiency from the prior year in Line 12(b). (Compl. ¶¶ 33, 37-38.) The plaintiffs say that Ms. Gonzalez "had the authority to direct Ruiz to include the cumulative funding deficiency on Line 12(b)... but did not do so." (Compl. ¶ 40.)

Line 12(e) of Form 5500 SF asks whether "the minimum funding amount...[will] be met by the funding deadline." (See, e.g., ECF No. 34-2 at 5, 7, 9, 12, 15.) The funding deadline is "8 ½ months after the end of the plan year." (See Instructions for Form 5500-SF at 19.) For the 2009, 2011, 2012 and 2013 plan years Queens Village checked "Yes," indicating it would meet the minimum funding amount by the deadline. (See ECF No. 34-2 at 5, 9, 12, 15.) Queens Village checked "No" for the 2010 plan year and "N/A" for the 2014 to 2016 plan years. (ECF No. 34-2 at 7, 18, 21, 24.)

Principal

Pension Plan contributions are held by Principal in a trust fund, for which Principal is the trustee. (Compl. ¶ 85.) Principal is "responsible for allocating the employer contribution into the individual accounts of the participants and the investment vehicles chosen by the participants." (Compl. ¶ 86.) According to the plaintiffs, Queens Village did not provide Principal with information that it needed to make a proper allocation of money into individual accounts within the plan, "causing participants to lose contributions and...