Bialy v Honeywell Intl. Inc.

[*1] Bialy v Honeywell Intl. Inc. 2006 NY Slip Op 51497(U) [12 Misc 3d 1189(A)] Decided on July 13, 2006 Supreme Court, Erie County Fahey, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 13, 2006
Supreme Court, Erie County

Frank Bialy, HENRY BORKOWSKI, GRACE CAMPANELLA, ANDREW CZARNECKI, RAYMOND DUGGAN, JOHN FIJOL, ROGER GOETZ, ELROY GRAF, NANCY GRIFFIN, ROBERT HERDLE, ROBERT LADOWSKI, JOHN LEGLER, JOHN LEITTEN, VINCENT MAHONEY, DOROTHY MORAN, WILLIAM ORLUK, JOHN O'SULLIVAN, MARIE PAA, FREDERICK PARKER, MARY PIEBER, MORTON SENSENEY, JOSEPH SIMPSON, LUCY SLIWINSKI, ELMER SMITH, JOHN DOES 1-20, AND JANE DOES 1-20, Plaintiffs,

against

Honeywell International Inc., Defendant.



2004-8890



COHEN & LOMBARDO, P.C.

Christopher M. Duggan, Esq.

343 Elmwood Avenue

Buffalo, New York 14213-5204

Attorneys for Plaintiffs

MORGAN, LEWIS & BOCKIUS LLP

Brian Ortelere, Esq.

William J. Delany, Esq.

Michael J. Puma, Esq.

1701 Market Street

Philadelphia, Pennsylvania 19103

Attorneys for Defendant Honeywell International Inc.

BUCHANAN INGERSOLL PC.

Patrick J. Maxwell, Esq.

Scott M. Philbin, Esq.

268 Main Street, Suite 201

Buffalo, New York 14202

Attorneys for Defendant Honeywell International Inc.

Eugene M. Fahey, J.

This matter came before the Court on a motion by Defendant Honeywell International Inc. to dismiss the Amended Complaint. In the Amended Complaint, which alleges six State law causes of action, Plaintiffs contend that Honeywell provided them with a written guarantee in 1977 that, if they agreed to work for the purchaser of Honeywell's Dye Plant, Buffalo Color Corporation (a corporation now in bankruptcy), they would receive the same employee pension and other benefits that they would have received had they remained employed by Honeywell. Oral argument on the motion took place on May 9, 2006. Upon due consideration, the Court grants the motion to dismiss the Amended Complaint, but with leave to re-plead any causes of action under the Employee Retirement Income Security Act (ERISA), 29 USC § 1001 et seq.

I.BACKGROUND

According to the Amended Complaint filed in this matter, Plaintiffs were employees of Allied Chemical Corporation (Allied Chemical) at a Dye Plant in the City of Buffalo (see Philbin Affirm., Exhibit E [hereinafter Amended Complaint] ¶¶35, 37).[FN1] Allied Chemical was the predecessor of Defendant Honeywell International Inc. (Honeywell) (see Amended Complaint ¶ 34; Defendant's Memo of Law at 1). Plaintiffs allege that they all were participants in the Allied Chemical Salaried Employees' Pension Plan and other Allied Chemical benefit plans (see Amended Complaint ¶ 37).

In 1977, Allied Chemical was negotiating with the Buffalo Color Corporation (hereinafter Buffalo Color) to sell the Dye Plant, and Buffalo Color wished to retain certain employees of the Dye Plant (see Amended Complaint ¶ 36). According to Plaintiffs, Allied Chemical, Buffalo Color and Plaintiffs entered into a contract, which provided for the protection of certain employee benefits if Plaintiffs agreed to work for Buffalo Color. That Contract appears as Exhibit A to Plaintiffs' affidavit of Christopher Duggan, Esq., and provides in pertinent part as follows [FN2]: Buffalo Color will establish a pension plan for salaried employees which is substantially equivalent to the present Allied Chemical Salaried Employees' Pension Plan. Active employees, as of the date of the closing who accept continued employment with Buffalo Color, will be given full credit for past service with Allied Chemical for all pension purposes. Thus the total pension benefits to which you can look forward on retirement from Buffalo Color Corporation will be the same as they would have been if the sale had not been effected and you had continued your employment with Allied. Of course, you can elect, if eligible, to take your pension with Allied Chemical Corporation. If you do, then you will not be given credit for prior service with Allied Chemical Corporation for purposes of Buffalo Color's pension plan benefits. * * *[*2] * * *If you accept this opportunity, Buffalo Color will continue your employment with an equivalent program of employee benefits, including future severance rights. Therefore, you will not be entitled to any termination or severance benefits as a result of the sale of the Buffalo Color business. Except for the pension benefits described above and your entitlements under the Allied Chemical Stock Purchase and Savings Plan, Allied Chemical will be released from any continuing obligations to you including severance pay, unvested pensions or accrued vacations.

(Duggan Affid., sworn to on April 18, 2006, Exhibit A [hereinafter the Contract], at 1-2). The Contract is signed by Thomas F. Huntington, President, Buffalo Color Corporation; by a representative of Allied Chemical and (in the case of Exhibit A to the Duggan Affidavit) by one of the Plaintiffs, Mr. Duggan. The signatures appear thus: BUFFALO COLOR CORPORATION

/s/Thomas F. Huntington

Thomas F. Huntington

President

CONCUR:

ALLIED CHEMICAL CORPORATION

By_(illegible signature)_ Accepted with Respect to BuffaloColor Corporation and AlliedChemical Corporation

/s/ Raymond J. Duggan

Dated: 6/7/77

(id.).[FN3]

In reliance on the "assurances and * * * guarantees" in the Contract, Plaintiffs assert, they waived their entitlement to severance and other benefits from Allied, due at the time of the sale (Amended Complaint ¶ 61).

Thus, Plaintiffs' interpretation of the Contract is that, pursuant to its terms, they were guaranteed pension and employee benefits and severance payments on the same level as the pension and benefits that they would have received had the sale of the plant not taken place and the Plaintiffs instead had continued employment with Allied (see Amended Complaint ¶62). Plaintiffs admit, however, that, even if they had not accepted employment with Buffalo Color and accepted the terms of the contract, they would no longer be employed with Allied Chemical or Honeywell (see id. ¶ 44). [*3]

Over twenty years after execution of the Contract, in May 1999, Buffalo Color began reducing its contributions to Plaintiffs' medical benefits and, by March 2002, ceased contributing at all (see id. ¶ 49). At the same time, Buffalo Color began to skip required pension fund allocations (see id. ¶ 50) and, in May 2003, Plaintiffs received notice that their pension benefits were being cancelled (see id. ¶ 53). In December 2003, Plaintiffs were notified that the Pension Benefit Guarantee Corporation (PBGC) would be taking over their pension plans, and that some benefits would be reduced (id. ¶¶54-55).

In 2002 and/or 2003, Plaintiffs allege, a number of them demanded that Honeywell comply with the terms of the Contract and include them in its employee benefit plans; Honeywell refused to do so (see id. ¶¶51-52).

Buffalo Color is presently in bankruptcy (Philbin Affid. ¶ 7).

II. PROCEDURAL HISTORY

The initial Complaint was filed in Supreme Court in September 2004 (Philbin Affid. ¶ 3 & Exhibit A).[FN4] On December 8, 2004, Honeywell removed the action to the United States District Court for the Western District of New York, claiming that the District Court had original jurisdiction because the action was governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC § 1001 et seq. (see Duggan Affid. Exhibit B [Bialy et al v Honeywell International, Inc., Memorandum and Order [No. 04-CV-0980E (Sc), dated Jan. 17, 2006] [Elfvin, J.] [hereinafter Bialy I], at 1). Defendant Honeywell then immediately moved to dismiss the action, alleging pre-emption of all of Plaintiffs' State law causes of action under ERISA, and Plaintiffs cross moved to remand (Bialy I, at 2). Judge Elfvin denied Honeywell's motion and granted Plaintiffs' motion in part (denying costs and sanctions), remanding the case to this Court.

Because Plaintiffs stated only State law causes of action, Judge Elfvin reasoned, the Court could find removal jurisdiction only if "complete pre-emption" applied here (Bialy I, at 4). The Court stated: ERISA preemption provides a valid basis for removal jurisdiction only if the state law causes of action are (1) preempted by ERISA and are (2) "within the scope" of the civil enforcement provision of ERISA Section 502 (a), 29 USC § 1132 (a). * * * Assuming arguendo that plaintiffs' claims are preempted by ERISA, they are not within the scope of ERISA's civil enforcement provisions and thus removal jurisdiction is not valid

(Bialy I, at 4). Section 502 (a) provides in pertinent part: a) Persons empowered to bring a civil actionA civil action may be brought (1) by a participant or beneficiary

(A) for the relief provided for in subsection (c) of this section [for information on benefits], or [*4] (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title [for breach of fiduciary duty];(3) 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;(4) by the Secretary, or by a participant, or beneficiary for appropriate relief in the case of a violation of 1025(c) of this title [for reports of benefit rights] * * *

(29 USC § 1132 [a] [1] - [4] [emphasis supplied]). Noting that the United States Supreme Court has construed section 502 narrowly to allow only the stated categories of private parties e.g., participants or beneficiaries to sue directly for relief under ERISA, Judge Elfvin determined that Plaintiffs did not qualify as "participants" (Bialy I, Slip Op at 5).

Section 1002 of the Code defines a "participant"as follows: (7) The term "participant" means any employee or former employee of an employer, * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer * * *, or whose beneficiaries may be eligible to receive any such benefit

(29 USC § 1002 [7]).

In making the determination that Plaintiffs were no longer "participants", Judge Elfvin relied upon an admission by Honeywell in its brief that Plaintiffs were " not entitled to benefits "under the terms of" any of Honeywell's benefit plans'" (Bialy I, Slip Op at 5, quoting Defendant's Mem. Opp'n P[laintiffs'] Cross-Mot. at 18). Judge Elfvin determined that, "[b]y definition, therefore, plaintiffs are not participants in Honeywell's plans and thus their claims do not fit within the scope of ERISA's civil enforcement provisions" (Bialy I, Slip Op at 5 [footnote omitted]). Further, Judge Elfvin relied upon the Second Circuit decision in Nechis v Oxford Health Plans, Inc. (421 F3d 96 [2d Cir 2005]), which held that a plaintiff's status as a participant was terminated when her coverage under a plan was terminated (see id. at 101). Here, the Judge stated, Plaintiffs were no longer participants in any pension plan because their pension benefits were cancelled by Buffalo Color (see Bialy I, Slip Op at 6).

Therefore, Judge Elfvin remanded the case to this Court "for adjudication of plaintiffs' claims and any relevant defenses that Honeywell may raise", on the basis that the Federal Court lacked jurisdiction; the Court declined to decide the motion to dismiss (see id. at 3, 7). Thus, Judge Elfvin did not reach the issue of whether Plaintiffs' causes of action were pre-empted by ERISA and therefore subject to dismissal on that basis.

[*5]III. DISCUSSION

Defendant Honeywell contends that the Amended Complaint should be dismissed because all of Plaintiffs' State law causes of action are pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC § 1001 et seq., on the basis that the causes of action "relate to" employee benefit plans (see Defendant's Memo of Law at 1, 5, citing 29 USC § 1144 [a]). Nor, contends Honeywell, should the Court permit Plaintiffs to re-plead their Amended Complaint and attempt to allege causes of action under ERISA, because that would be futile. According to Honeywell, the only possible causes of action Plaintiff could assert for benefits under 29 USC § 1132 (a) (1) (B) or for damages or equitable relief due to a breach of fiduciary duty under 29 USC § 1132 (a) (3) are invalid: first, because Judge Elfvin held that Plaintiffs are not "participants" in any employee benefit plan and, second, because they are not entitled to benefits "under the terms of" any of Honeywell's plans (see Defendants' Memo of Law at 14-15). Thus, according to Defendants, ERISA both pre-empts Plaintiffs' causes of action and leaves them without a remedy. Defendant Honeywell insists that it is "universally recognized that the absence of a remedy has no bearing on the ERISA pre-emption inquiry" (Defendant's Reply Memo at 8; see id. at 8-9 nn. 11-12, citing cases).

Plaintiffs counter that their State law causes of action are not pre-empted because the causes of action have only a "tenuous, remote and peripheral connection to an ERISA plan" (Plaintiffs Memo of Law at 7, 12-17). Further, they contend that, because they lack standing to bring a claim under ERISA, ERISA cannot not pre-empt the field; even if Defendant now claimed that they were potential "participants", pre-emption would still not apply because they would be without a remedy (see Plaintiffs Memo of Law at 7-12, citing Greenblatt v Budd Company, 666 FSupp 735, 742 [ED PA 1987] [where plaintiff would otherwise be without a remedy, "it would defy logic to presume that Congress intended to pre-empt the common law action of fraud"]). In addition, Plaintiffs assert that a fiduciary relationship under an ERISA plan does not exist toward mere potential participants, and therefore Plaintiffs cannot sue for misrepresentation and breach of fiduciary duty under ERISA (see Plaintiffs' Memo of Law at 8-9, citing Coleman v General Elec. Co., 643 FSupp 1229, 1229 [ED Tenn 1986], aff'd 722 F2d 59 [6th Cir 1987]; Saladino v International Ladies Garment Workers Union National Ret. Fund, 754 F2d 473, 476 [2d Cir 1985]).

A.PRE-EMPTION

The Second Circuit noted in the past that "ERISA is a veritable Sargasso Sea of obfuscation'" (Travelers Ins. Co. v Cuomo, 14 F3d 708, 717 [2d Cir 1993], rev'd on other grounds sub nom. Blue Cross & Blue Shield Plans v Travelers Ins. Co, 514 US 645 [1995]).[FN5] For State courts not often presented with ERISA claims, the way seems particularly dark. However, as the Fourth Department recently reminded us, this Court has concurrent jurisdiction over some ERISA claims

(see 29 USC § 1132 [e][1]; Holbrook v National Fuel Gas Distrib. Corp., 11 AD3d 1040, 1041 [4th Dept 2004], rearg denied 13 AD3d 1235 [4th Dept 2004]),[FN6] and, furthermore, pre-emption doctrines also apply in State courts (see e.g. Greco v International Hodcarriers, Building and Common Laborers' Union Local 17 Pension Fund, 201 AD2d 65, 69-70 [3rd Dept 1994]).

Although ERISA pre-emption is broadly applied, nonetheless, the United States Supreme Court has stated: Our past cases have recognized that the Supremacy Clause, U.S. Const., Art. VI, may entail pre-emption of state law either by express provision, by implication, or by a conflict between federal and state law. * * * And yet, despite the variety of these opportunities for federal preeminence, we have never assumed lightly that Congress has derogated state regulation, but instead have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law

(Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654-655 [1995] [internal citations omitted] [emphasis supplied]).

That said, there are two types of pre-emption at issue in this case. So-called "complete pre-emption" occurs when a claim which could be characterized as an ERISA claim under section 514 (a) (29 USC § 1144 [a]), because it "relate[s] to" an employee benefit plan, also "falls within the scope of the statute's civil enforcement provisions, found in section 502 (a) [29 USC § 1132 (a)]" (Smith v Dunham-Bush, Inc., 959 F2d 6, 8 [2d Cir 1992]).

Here, although Judge Elfvin determined that Plaintiffs were not entitled to any remedy under section 502 (a), because they allegedly are no longer "participant[s]" (see 29 USC § 1132 [a] [1]), he did not have to nor did he decide whether Plaintiffs' claims "relate[d] to" employee benefit plans, because a determination that the claim "relate[d] to" such a plan, but that Plaintiffs were not participants, would not confer jurisdiction on the federal court under the well-pleaded complaint rule (see Bialy I, Slip Op at 6). Again, because Judge Elfvin held that Plaintiffs were not entitled to seek a remedy under the ERISA civil enforcement scheme, the federal District Court had no jurisdiction over the causes of action and, therefore, complete pre-emption did not apply. Conflict pre-emption under ERISA, on the other hand, arises where the State law, statute or cause of action falls within section 514 (a) of ERISA, which provides in pertinent part with exceptions not here relevant: Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as [*6]they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title

(29 USC § 1144 [a] [emphasis supplied]). That section was effective in 1975. Concerning it, the United States Supreme Court stated: * * * [section] 514 (a) indicates Congress's intent to establish the regulation of employee welfare benefit plans "as exclusively a federal concern." [internal citation omitted]. We have found that in passing section 514 (a), Congress intended " to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the federal Government ..., [and to prevent] the potential for conflict in substantive law ... requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction" [citation omitted]. *** *** The basic thrust of the pre-emption clause, then, was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans

(New York State Conference of Blue Cross & Blue Shield Plans, 514 US 645, 656-657 [1995] [emphasis supplied, other citations omitted]).

Under ERISA, therefore, a State law cause of action is pre-empted if it "relate[s] to" an employee benefits plan (see 29 USC § 1144 [a]). Case law has somewhat clarified the "relate[d] to" language, defining it to mean that a State law cause of action is pre-empted if it "has a connection with or reference to [an employee benefits] plan, whatever the state law's underlying intent" (Ingersoll-Rand Co. v McClendon, 498 US 133, 140 [1990] [internal citation omitted]; cf. California Div. of Labor Stds. v Howe, 519 US 316, 335-336 [1997] [Scalia, J. concurring] [seeking to clarify "relates to" test]). In the State court, the Second Department has baldly stated that, "ERISA preempts all State common-law claims based on denial of pension benefits, except those claims which accrue, or are based on acts or omissions that occurred, prior to January 1, 1975" (Greco v International Hodcarriers, Bldg. and Common Laborers' Union Local 17 Pension Fund, 201 AD2d 65, 68 [3rd Dept 1994]).

In Ingersoll, Justice O'Connor relied in part upon Mackey v Lanier Collection Agency & Service Inc., 486 US 825 [1988]) for her reasoning in finding pre-emption of that plaintiff's cause of action for wrongful discharge, where the plaintiff alleged that his employer fired him to avoid paying him pension benefits. In Mackey, the statute expressly referred to an ERISA plan, and thus it was pre-empted. In Ingersoll, the Court stated: The facts here are slightly different but the principle is the same: The Texas cause of action makes specific reference to, and indeed is premised on, the existence of a pension plan. In the words of the Texas court, "the cause of action allows recovery when the plaintiff proves that the principal reason for his termination was the employer's desire to avoid contribution to or paying benefits under the employee's pension fund" [citation omitted]. Thus, in order to prevail a plaintiff must plead, and the Court must find, that an ERISA plan exists and the employer had a [*7]pension-defeating motive in terminating the employment. Because the court'sinquiry must be directed to the plan, this judicially created cause of action "relate[s] to" an ERISA plan

(Ingersoll, 498 US at 140 [emphasis supplied]).

Here, Plaintiffs assert four causes of action (counts one through four) alleging a breach of the Contract; a cause of action for fraudulent misrepresentation; and, one for negligence. Simply following the letter and intent of the Supreme Court's language in Ingersoll and later cases, the Court is constrained to determine that Plaintiffs' State law causes of action one through four, based upon breach of contract, "relate to" an ERISA plan. Plaintiffs' contentions to the contrary are similar to those rejected in other cases by other courts.

Plaintiffs contend here, and contended in the federal court, that they do not seek "benefits" from the plan administrator under Honeywell's pension plan, rather they seek damages for breach of a contract made by Honeywell the employer (see Philbin Affid. Exhibit C [Plaintiff's memo in federal court] at 8 ["Plaintiffs' claims are enforceable independently of any additional legal rights, which they may have under ERISA"]).

In Sandler v New York News Inc., (721 F Supp 506 [SDNY 1989]), the plaintiff sued his former employer after he had agreed to early retirement, based in part upon his employer's estimate of the pension benefits he would receive when he left. The District Court found that Plaintiff's contract causes of action were pre-empted, because "[t]he * * * theory relied upon by the plaintiff * ** provide[s] an alternative cause of action * * * to collect benefits protected by ERISA, * * * and so f[ell] rather squarely into one of the classes of state * * * actions that * * * [are] pre-empted by ERISA's section [1144 (a)]" (Sandler v New York News, Inc., 721 F Supp at 512 [internal citations omitted, emphasis omitted]); see Cerasoli v Xomed, Inc., 952 FSupp 152, 158 [WDNY 1997] [where terms of ERISA plan necessary to calculate damages under State law claim, claim is pre-empted]).

The Court also determines that the claim for fraudulent misrepresentation is pre-empted based upon established Second Circuit precedent. In Smith v Dunham-Bush, Inc. (959 F2d 6 [2d Cir 1992]), the plaintiff agreed to relocate from England to Connecticut for his employer, after an alleged oral promise that he would be provided "with a benefits package comparable to what he would have received upon his retirement in the United Kingdom" (id. at 7). The Second Circuit held that, where the plaintiff made direct reference to an employee benefits plan in his complaint and the alleged misrepresentation dealt exclusively with the alleged supplemental pension benefits, the calculation of which "would * * * implicate [the employer's] ERISA plan, requiring ongoing financial coordination and control", the claim was pre-empted (959 F2d at 10).

Finally, with respect to the negligence cause of action, the Court agrees with Honeywell that ERISA pre-empts a State law cause of action for negligence based upon an alleged failure to ensure that Plaintiffs received adequate benefits under either Allied Chemical/Honeywell's or Buffalo Color's employee benefits plans (see McCauley v First Unum Life Ins. Co, 1998 WL 846121, at 5 [SDNY 1998]). [*8]

Thus, Defendant Honeywell's motion to dismiss the Amended Complaint as pre-empted under the federal Supremacy Clause must be granted.

B.PLAINTIFFS MAY HAVE LEAVE TO SERVE SECOND AMENDED COMPLAINT

Judge Elfvin's determination that Plaintiffs were not "participants" has placed them in a catch-22.[FN7] Because they are not "participants" (29 USC § 1132 [a][1]), they cannot bring an ERISA claim. However, because their State law causes of action "relate to" an employee benefits plan (29 USC §1144 [a]), the causes of action are pre-empted by federal law.

Other courts have acknowledged an absence of or dearth of remedies in the area of ERISA pre-emption and left it for Congress to rectify (see e.g. Smith v Dunham-Bush Inc., 959 F2d 6, 11 [2d Cir 1992]). "The question of preemption is a matter of congressional intent; it is not a question of which body of lawstate or federaloffers more protection to an aggrieved party" (First Nat. Life Ins. Co. v Sunshine-Jr. Food Stores, Inc., 960 F2d 1546, 1550 [11th 1992], cert denied 506 US 1079 [1993], citing Phillips v Amoco Oil Co., 799 F2d 1464, 1470 [11th Cir 1986], cert denied 481 US 1016 [1987] ["To argue that Congress created a gap' in the law does not undermine the reasoning on which a finding of pre-emption is based."]). That said, the purpose of ERISA was not just to honor the fiduciary rights of plan administrators to do as they see fit or to ensure orderly administration, but to protect employees from unjustified losses of promised benefits (see 29 USC § 1001 [a]).

Defendant Honeywell contends that the District Court's finding that Plaintiffs were not "participants" under 29 USC § 1002 is entitled to law of the case treatment (see Defendant's Memo of Law at 14-15). Plaintiffs do not argue otherwise, but go further, denying that they are "potential" participants under ERISA: Even if the defendant now attempts to claim that these plaintiffs are potential participants, preemption would still not apply. The reason for the lack of preemption is that "[a] fiduciary relationship does not exist toward potential participants and such potential participants have no standing to sue for misrepresentations and breach of fiduciary duty under ERISA" (Coleman [v General Elec. Co., 643 FSupp 1229, 1235 (ED Tenn 1986), aff'd 722 F2d 59 (6th Cir 1987)]); Saladino v International Ladies Garment Workers Union National Ret. Fund, 754 F2d 473, 476 [2d Cir 1985]). Thus, as the plaintiffs are not participants for the purposes of ERISA, if the plaintiffs' claims are preempted, the plaintiffs would be left with no remedy under ERISA

(Plaintiffs Memo of Law at 9). [*9]

In this case, the catch-22 within which Plaintiffs find themselves results from the parties' agreement in their papers before the District Court that Plaintiffs were not "participants" under ERISA.[FN8]

"The doctrine of law of the case' relates to the practice of courts generally to refuse to reopen what has been decided'" (Riley v MEBA Pension Trust, 586 F2d 968, 970 [2d Cir 1978] [abrogated on other grounds by Local 144 Nursing Home Pension Fund v Demisay, 508 US 581 (1993)], quoting Messenger v Anderson, 225 US 436, 444 [1912]). "[A] court should not ordinarily reconsider, disturb or overrule an order in the same action of another court of co-ordinate jurisdiction" (Matter of Dondi v Jones, 40 NY2d 8, 15 [1976]).

Nonetheless, the law of the case "doctrine is discretionary, and does not constitute a limitation on the court's power'" (Doe v Cigna Life Ins. Co. of New York, 304 FSupp 2d 477, 503 [WDNY 2004], quoting United States v Birney, 686 F2d 102, 107 [2d Cir1982]). The doctrine of law of the case is not an absolute mandate on the court,' since it may be ignored' in extraordinary circumstances' vitiating its effectiveness as a rule fostering orderly convenience * * *. The error sought to be corrected must, however, be so plain * * * [that it] would require [the] court to grant a reargument of a cause"

(Foley v Roche, 86 AD2d 887, lv denied 56 NY2d 507 [1982], quoted in Welch Foods, Inc. v Wilson, 262 AD2d 949, 950 [4th Dept 1999]; cf. Riley v MEBA Pension Trust, 586 F2d at 970 [rulings merely reflecting the agreement of the parties were not "law of the case" because not determinations of law by the court]).

The Court notes, initially, that in papers before the District Court, Plaintiffs stated that they did "not contend that they should be considered participants at this time". However, should this Court determine that the Plaintiffs are participants, Plaintiffs will seek leave of the Court to assert their claims under ERISA" (Philbin Affid. Exhibit C [Plaintiffs Mem. of Law in Oppos. to Defendant's Motion to Dismiss Plaintiffs' Complaint etc. at 13]).

Neither party raised the issue before the District Court whether Plaintiffs could be potential participants under section 1002(a) ("former employee of an employer, * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan" [emphasis supplied]). Again, in this Court neither party contests the Federal Court's determination based at least in part upon agreement of the parties that Plaintiffs were not participants under ERISA.

Nonetheless, under the doctrine established by Firestone Tire & Rubber Co. v Bruch (489 US 101 [1989]), the Court determines that Plaintiffs are "participants" because they are "former employees" who "may become eligible" for benefits, sufficient for the purposes of their eligibility [*10]to sue under 29 USC § 1132 (a) (1) (B) (see Waters Corp. v Millipore Corp., 140 F3d 324, 326-327 [1st Cir 1998] [even if transfer of subsidiary of one corporation had been fully consummated, leaving transferred employees as participants only in the successor plan, their claim to standing against the first corporation "would be substantial"]; cf. 29 USC § 1058).

In Firestone Tire & Rubber Co. v Bruch (489 US 101 [1989]), the United States Supreme Court considered the question whether a former employee of Firestone Tire & Rubber Co. qualified as a "participant" for the purpose of being entitled to obtain information about benefit plans under 29 USC § 1024 (b) (4) (id. at 115-116). As noted, ERISA defines "participant" in section 1002 (7) as "any employee or former employee of an employer, * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer * * *, or whose beneficiaries may be eligible to receive any such benefit" (id.). Firestone stated that: In order to establish that he or she "may become eligible" for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future

(Firestone, 489 US at 117-118 [emphasis supplied], citing Saladino v International Ladies Garment Workers' Union, 754 F2d at 476 [former employee who has neither a reasonable expectation of going back to covered employment nor "a colorable claim to vested benefits * * simply does not fit within the [phrase] may become eligible'"]). Apparently because the parties failed to raise the issue, the Federal Court did not consider whether Plaintiffs, as former employees of Allied/Honeywell, had a colorable claim to vested benefits (see Saladino, 754 F2d at 476 & n. 5).[FN9]

The Court further disagrees with Honeywell that permitting Plaintiffs to replead their causes of action as claims under ERISA would be "futile" (see Defendants' Memo of Law at 13-14). Plaintiffs' claims to benefits are based on the Contract, and upon alleged misrepresentations by Honeywell employees that Plaintiffs were essentially guaranteed the same level of pension benefits with Buffalo Color as they would have had with Allied/Honeywell. The validity of those causes of action cannot be determined on this record.

For example, Defendant contends that enforcement of the Contract is barred by the statute of limitations. However, Plaintiffs make the plausible argument that the statue of limitations did not begin to run until the time of the breach (see Kassner & Co. Inc. v City of New York, 46 NY2d 544, 550 [1979]), or in this case, when Honeywell refused Plaintiffs' demands to comply with the alleged terms of the Contract. Plaintiffs also allege that the Contract is ambiguous, that it must be construed against the drafter as a contract of adhesion, and that they must be allowed to obtain and submit extrinsic evidence on its meaning (see Plaintiffs' Memo of Law at 17-20). Further, the Second Circuit has recognized that claims of equitable estoppel may be permitted in ERISA cases under [*11]"extraordinary circumstances" (Lee v Burkhart, 991 F2d 1004, 1009 [2d Cir 1999]; see Ludwig v NYNEX Service Co., 838 FSupp 769, 794 [SDNY1993]). For all of those reasons, Plaintiffs should be permitted the chance to re-plead their cause(s) of action under ERISA (see Lee v Burkhart, 991 F2d at 1009; Cerasoli v Xomed, Inc., 952 FSupp at 161).

Because the Court determines that Plaintiffs' State law causes of action are pre-empted, it grants Defendant Honeywell's motion to dismiss on that basis alone, but with leave to Plaintiffs to re-plead any causes of action that they may have under ERISA that are cognizable in State court (see, e.g. 29 USC § 1132 [a] [1] [B], [e]).

Plaintiffs' counsel to submit order upon notice to Defendant's counsel.

EUGENE M. FAHEY, J.S.C.

Dated: July 13, 2006 Footnotes

Footnote 1:Some of the Plaintiffs are beneficiaries or successor beneficiaries of former employees (see Amended Complaint ¶¶25-28), but that difference is not germane for present purposes and, for simplification, Plaintiffs will hereinafter be referred to as employees.

Footnote 2:Defendant Honeywell claims that the Contract was never executed by a Honeywell representative (see Defendant's Memo of Law at 3), but Plaintiffs in their opposition papers submit a copy of the Contract that was so executed.

Footnote 3:Plaintiffs further allege "on information and belief", that Allied guaranteed through a so-called "Salary Continuation Plan" all other employee benefits including severance and medical benefits (Amended Complaint ¶ 45).

Footnote 4:Buffalo Color was originally a defendant in the action, although it had filed for protection under Chapter 11 of the Bankruptcy Code; the case was dismissed as against it in January 2005 (see Duggan Affid. Exhibit B, at 1 n.2).

Footnote 5:In a later decision, Judge Marrero of United States District Court of the Southern District of New York quoted the abovementioned language of the Second Circuit, thereafter striding forward to "offer[] a contribution to th[e] debate, even if its flicker may be likened to striking yet another match in a black hole, if nothing else, for the value that the instant its time and spark exist may serve in guiding the next bearer of the torch" (Atlantis Health Plan, Inc. v Local 713, OBOTU, 258 FSupp 2d 284, 288 [SDNY 2003]).

Footnote 6:State courts have concurrent jurisdiction over "some civil actions commenced by plan participants for relief pursuant to ERISA, particularly those actions alleging the improper denial of benefits under ERISA plans" (Holbrook v National Fuel Gas Distrib. Corp., 11 AD3d at 1041; see generally 29 USC § 1132 [a] [1] [B]). Pursuant to section 1132 (e) (1), "State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this section".

Footnote 7:Merriam-Webster's Collegiate Dictionary (10th ed.) defines a catch-22 to be "a problematic situation for which the only solution is denied by a circumstance inherent in the problem or by a rule".

Footnote 8:To the extent that Judge Elfvin also relied upon Nechis v Oxford Health Plans Inc. 421 F3d 96, 101 [2d Cir 2005], the Court notes that the plaintiff in that case was denied standing to sue for breach of fiduciary duty under 29 USC § 1132 (a) (3) because she was no longer employed ("a participant") and therefore not entitled to seek equitable relief. Plaintiffs here are unable to bring a claim under 29 USC § 1132 (a) (3) because jurisdiction over such causes of action lie exclusively in the federal courts (see 29 USC § 1132 [e]). The case is thus inapplicable here.

Footnote 9:This issue has been characterized as one of standing to bring an ERISA claim (see e.g. Caltagirone v United States Community Bancorp., 414 FSupp2d 188, 191 [EDNY 2006]; see generally RIA Pension Analysis P 76, 613 [Westlaw]).