18

‐ 1558

Sacerdote v. Cammack Larhette Advisors, LLC

1



## In the 2



# United States Court of Appeals

3



## For the Second Circuit 4

________ 5

6

A UGUST T ERM

, 2018 7

8

A RGUED : A PRIL 8, 2019 9

D ECIDED : O CTOBER 1, 2019 10

11

No. 18

‐ 1558 12

13

D R

. A LAN S ACERDOTE

, D R

. H ERBERT S AMUELS

, M ARIE E. M ONACO

, 14

M ARK C RISPIN M ILLER

, D R

. S HULAMITH L ALA S TRAUSSNER

, D R

. J AMES 15

B. B ROWN

, INDIVIDUALLY AND AS REPRESENTATIVES OF A CLASS OF 16

PARTICIPANTS AND BENEFICIARIES ON BEHALF OF THE NYU S CHOOL OF 17

M EDICINE R ETIREMENT P LAN FOR M EMBERS OF THE F ACULTY

, 18

P ROFESSIONAL R ESEARCH S TAFF AND A DMINISTRATION AND THE N EW 19

Y ORK U NIVERSITY R ETIREMENT P LAN FOR M EMBERS OF THE F ACULTY

, 20

P ROFESSIONAL R ESEARCH S TAFF AND A DMINISTRATION

, 21

Plaintiffs

‐ Appellants, 22

23

v. 24

25

C AMMACK L ARHETTE A DVISORS

, LLC, 26

Defendant

‐ Appellee

, 27

28

R ETIREMENT P LAN C OMMITTEE

, R ICHARD B ING

, M ICHAEL B URKE

, 29

C ATHERINE C ASEY

, M ARTIN D ORPH

, S ABRINA E LLIS

, T HOMAS 30

F EUERSTEIN

, A NDREW G ORDON

, P ATRICIA H ALLEY

, T IM H ESLER

, 31

K ATHLEEN J ACOBS

, M ARINA K ARTANOS

, A NN K RAUS

, M ARGARET 32

M EAGHER

, C YNTHIA N ASCIMENTO

, N ANCY S ANCHEZ

, T INA S URH

, 33

L INDA W OODRUFF

, M AURICE M AERTENS

, J OSEPH M ONTELEONE

, R AY 342 No. 18

‐ 1558

O QUENDO

, C HRIS T ANG

, N EW Y ORK U NIVERSITY S CHOOL OF 1

M EDICINE

, NYU L ANGONE H OSPITALS

, NYU L ANGONE H EALTH 2

S YSTEM

, 3

Defendants. * 4

________ 5

6

Appeal from the United States District Court 7

for the Southern District of New York. 8

No. 17 Civ. 8834

– Katherine B. Forrest, Judge

. 9

________ 10

11

Before: W ALKER

, C ALABRESI

, AND L IVINGSTON

, Circuit Judges

. 12

________ 13

Plaintiffs filed an action, which we refer to as Sacerdote I

, against 14

New York University (“NYU”) alleging violations of ERISA in 15

connection with two retirement plans sponsored by NYU. The 16

district court dismissed most, but not all, of the causes of action 17

against NYU. Plaintiffs then filed this action, which we refer to as 18

Sacerdote II

, against a variety of affiliates of NYU and Cammack 19

Larhette Advisors, LLC, alleging substantially the same claims as 20

those in Sacerdote I

, including the dismissed claims. Cammack is an 21

independent investment management company that was hired by 22

NYU to provide investment advice on the retirement plans. The 23

district court dismissed all of the claims against all of the NYU

‐ 24

affiliated defendants, as well as Cammack, on the grounds that a 25

plaintiff has no right to maintain two actions on the same subject, 26

against the same parties, at the same time. The district court 27

concluded that even though Cammack and the other defendants in 28

Sacerdote II were not defendants in Sacerdote I

, all of them were in 29

privity with defendant NYU in Sacerdote I because they had a 30

* The Clerk of Court is respectfully directed to amend the official caption as listed

above.3 No. 18

‐ 1558

sufficiently close relationship with NYU and their interests were 1

aligned with those of NYU. Plaintiffs appealed only the dismissal as 2

to Cammack. We conclude that Cammack and NYU are not in 3

privity, and we now VACATE and REMAND the district court’s 4

order as to Cammack. 5

________ 6

S EAN E. S OYARS (Jerome J. Schlinchter, on the brief ), 7

Schlichter Bogard & Denton LLP, St. Louis, MO, for 8

Plaintiffs

‐ Appellants

. 9

C HARLES M. D YKE

, Nixon Peabody LLP, San 10

Francisco, CA (Kristin Marie Jamberdino, Nixon 11

Peabody LLP, New York, NY, on the brief ), for 12

Defendant

‐ Appellee. 13

________ 14

J OHN M. W ALKER

, J R

., Circuit Judge : 15

Plaintiffs filed an action, which we refer to as Sacerdote I

, against 16

New York University (“NYU”) alleging violations of ERISA in 17

connection with two retirement plans sponsored by NYU. The 18

district court dismissed most, but not all, of the causes of action 19

against NYU. Plaintiffs then filed this action, which we refer to as 20

Sacerdote II

, against a variety of affiliates of NYU and Cammack 21

Larhette Advisors, LLC, alleging substantially the same claims as 22

those in Sacerdote I

, including the dismissed claims. Cammack is an 23

independent investment management company that was hired by 24

NYU to provide investment advice on the retirement plans. The 25

district court dismissed all of the claims against all of the NYU

‐ 26

affiliated defendants, as well as Cammack, on the grounds that a 27

plaintiff has no right to maintain two actions on the same subject, 28

against the same parties, at the same time. The district court 294 No. 18

‐ 1558

concluded that even though Cammack and the other defendants in 1

Sacerdote II were not defendants in Sacerdote I

, all of them were in 2

privity with defendant NYU in Sacerdote I because they had a 3

sufficiently close relationship with NYU and their interests were 4

aligned with those of NYU. Plaintiffs appealed only the dismissal as 5

to Cammack. We conclude that Cammack and NYU are not in 6

privity, and we now VACATE and REMAND the district court’s 7

order as to Cammack. 8

BACKGROUND 9

This appeal concerns two actions that were filed in the 10

Southern District of New York and assigned to Judge Katherine 11

Forrest. 1 We refer to the two actions as Sacerdote I (No. 16

‐ cv

‐ 06284) 12

and Sacerdote II (No. 17

‐ cv

‐ 8834). Plaintiffs in both actions are six 13

professors at New York University (“NYU”) or the New York 14

University School of Medicine who participated in two ERISA

‐ 15

governed retirement plans sponsored by NYU (“the plans”). 16

I. Sacerdote I 17

Plaintiffs commenced the first action on August 9, 2016, against 18

NYU only, and alleged breaches of the duties of loyalty and prudence 19

under ERISA based on unreasonable administrative fees, 20

unreasonable investment management fees and performance losses, 21

and failure to monitor unnamed co

‐ fiduciaries. 2 22

On November 9, 2016, plaintiffs amended their complaint to 23

allege breaches of ERISA’s duties of loyalty and prudence, as well as 24

its prohibited transaction rules, by: locking the plans into an 25

imprudent investment and recordkeeping arrangement with TIAA

‐ 26

1 Judge Forrest resigned from the bench in September 2018. The case has been

reassigned to Judge Analisa Torres.

2 See Complaint, Sacerdote I, 16

‐ cv

‐ 06284 (S.D.N.Y. Aug. 9, 2016), ECF No. 1.5 No. 18

‐ 1558

CREF (Counts I and II); causing the plans’ participants to pay 1

unreasonable administrative fees to TIAA

‐ CREF and Vanguard 2

(Counts III and IV); and causing the plans’ participants to pay 3

unreasonable investment management, marketing, distribution, 4

mortality, and expense risk fees, and incur unreasonable performance 5

losses (Counts V and VI). 3 Plaintiffs also alleged that NYU failed to 6

properly monitor unnamed co

‐ fiduciaries to the plans (Count VII). 4 7

The amended complaint, like its predecessor, named NYU as the only 8

defendant. 9

On August 25, 2017, the district court granted in part and 10

denied in part NYU’s motion to dismiss the amended complaint. The 11

district court dismissed all claims except those alleging certain 12

breaches of ERISA’s duties of loyalty and prudence in Counts III and 13

V. 5 With respect to Count VII, alleging NYU’s failure to properly 14

monitor unnamed co

‐ fiduciaries, the district court found that 15

plaintiffs’ failure to name any co

‐ fiduciary rendered the claim 16

materially deficient. 6 However, the district court invited plaintiffs to 17

file for reconsideration if they possessed additional facts to support 18

their co

‐ fiduciary claim. 7 19

While NYU’s motion to dismiss was pending, plaintiffs learned 20

that NYU had delegated responsibility for administering the plans to 21

a Retirement Plan Committee (the “Committee”), which consisted of 22

nine officers of NYU and NYU Langone Medical Center. Armed with 23

this new information, and in response to the district court’s invitation, 24

plaintiffs moved on September 8, 2017, for reconsideration of the 25

district court’s dismissal. The same day, plaintiffs moved for leave to 26

3 See Amended Complaint, Sacerdote I

, ECF No. 39.

4 See id.

5 See Opinion & Order, Sacerdote I

, ECF No. 79.

6 Id. at 34–35.

7 Id. at 35.6 No. 18

‐ 1558

file a second amended complaint, in which they sought to add the 1

Committee and its nine individual members, as defendants, and to 2

add additional facts to bolster the co

‐ fiduciary claim. 3

On October 17, 2017, the district court denied plaintiffs’ motion 4

for leave to amend. 8 It concluded that plaintiffs failed to demonstrate 5

good cause for why they failed to amend earlier, given that the 6

defendant had disclosed the existence of the Committee and its 7

members in November 2016. Two days later, the district court denied 8

plaintiffs’ motion for reconsideration for substantially the same 9

reason. 9 10

II. Sacerdote II 11

On November 13, 2017, the same plaintiffs filed a new action— 12

Sacerdote II —alleging substantially the same seven claims alleged in 13

Sacerdote I

, including those claims the district court dismissed in its 14

August 25, 2017 decision. 10 The Sacerdote II complaint named as 15

defendants: NYU Langone Hospitals, NYU Langone Health System, 16

the Retirement Plan Committee, and twenty

‐ one past or present 17

members of the Committee. It did not name NYU. The Sacerdote II 18

complaint also added a new claim and specifically identified the 19

Committee and its members as the co

‐ fiduciaries that NYU Langone 20

Hospitals and NYU Langone Health System allegedly failed to 21

monitor. 22

On December 20, 2017, the Sacerdote II defendants moved to 23

dismiss the action as duplicative of Sacerdote I

. Instead of responding 24

to the motion to dismiss, plaintiffs amended the Sacerdote II complaint 25

on January 10, 2018. The amended complaint removed NYU Langone 26

8 See Order, Sacerdote I

, ECF No. 100.

9 See Order, Sacerdote I, ECF No. 101.

10 See Complaint, Sacerdote II

, No. 17

‐ cv

‐ 08834 (S.D.N.Y. Nov. 13, 2017), ECF No. 1.7 No. 18

‐ 1558

Hospitals and NYU Langone Health System as defendants and added 1

the New York University School of Medicine (“NYU School of 2

Medicine”) as a defendant. 11 The amended complaint, for the first 3

time, also named Cammack Larhette Advisors, LLC (“Cammack”), as 4

a defendant, and alleged that Cammack was a co

‐ fiduciary; that 5

Cammack breached its fiduciary duties under ERISA; and that both 6

Cammack and the NYU School of Medicine, as co

‐ fiduciaries, were 7

liable for the other’s breaches. The amended complaint also added 8

new claims. 9

On January 24, 2018, all defendants—except for Cammack— 10

(the “NYU defendants”) responded to the Sacerdote II amended 11

complaint with a new motion to dismiss. The NYU defendants 12

argued that the Sacerdote II action was duplicative of the Sacerdote I 13

action and was an impermissible attempt to circumvent the district 14

court’s rulings in Sacerdote I

, which prohibited plaintiffs from 15

amending the complaint to replead the dismissed claims and add the 16

new defendants. Before Cammack responded to the amended 17

complaint, the district court entered an opinion and order dismissing 18

the entire action against the NYU defendants and Cammack as 19

duplicative of Sacerdote I

. 12 The district court held that the NYU 20

defendants in Sacerdote II were in privity with NYU in Sacerdote I

, and 21

that Sacerdote II

, which alleged substantially the same claims and facts 22

as the prior action, was duplicative of Sacerdote I

. With respect to 23

Cammack, the district court held that the claims against Cammack 24

“should have been brought by joining Cammack earlier in the 25

Sacerdote I litigation.” 13 26

11 See Amended Complaint, Sacerdote II

, ECF No. 105.

12 See Opinion & Order, Sacerdote II

, ECF No. 137; see also No. 17

‐ cv

‐ 8834 (KBF),

2018 WL 1054573 (S.D.N.Y. Feb. 23, 2018).

13 Sacerdote II

, ECF No. 137 at 7.8 No. 18

‐ 1558

On March 7, 2018, plaintiffs moved for reconsideration of the 1

district court’s sua sponte dismissal as to Cammack before Cammack 2

had responded to the amended complaint. Plaintiffs argued they 3

were entitled to assert the same claims against a separate, 4

independent defendant, and that the factors the district court cited to 5

support a finding of privity between the NYU defendants in Sacerdote 6

I and II did not apply to Cammack, an independent entity not related 7

to NYU. In response, the district court ordered Cammack to file a 8

letter motion for dismissal and granted plaintiffs an opportunity to 9

respond, which they did. Cammack argued that like the NYU 10

defendants in Sacerdote II

, it was in privity with NYU, the defendant 11

in Sacerdote I

, because Cammack and NYU were in contractual 12

privity, the parties’ interests were fully aligned, and the defenses of 13

NYU would be fully dispositive of any claims against Cammack, if 14

successful. 15

On March 22, 2018, the district court adhered to its judgment 16

dismissing Cammack from Sacerdote II

. 14 The district court concluded 17

that Cammack was in privity with NYU because Cammack and 18

NYU’s interests were aligned and they had a “sufficiently close 19

relationship

. . . to justify preclusion.” 15 The district court rejected 20

plaintiffs’ argument that “Cammack need not have been added [as a 21

defendant in Sacerdote I ] and that they can maintain a separate suit” 22

against Cammack. 16 23

14 See Mem. Decision & Order, Sacerdote II

, ECF No. 147; see also No. 17

‐ cv

‐ 8834

(KBF), 2018 WL 6253366 (S.D.N.Y. Mar. 22, 2018).

15 2018 WL 6253366, at *2 (internal quotation marks omitted).

16 Id.9 No. 18

‐ 1558

Plaintiffs now appeal the district court’s dismissal of Cammack 1

from Sacerdote II

. 17 2

DISCUSSION 3

We must determine in this case whether the district court 4

correctly applied the privity rule in the context of the rule against 5

duplicative litigation. More precisely, the question is whether the 6

claims against Cammack in Sacerdote II —which are substantially 7

similar to the claims against NYU in Sacerdote I —should have been 8

barred by the rule against duplicative litigation on the basis of 9

Cammack’s alleged privity with NYU. We begin with a discussion of 10

the rule against duplicative litigation and the privity rule, and then 11

assess whether the district court properly applied the two rules to 12

conclude that Cammack was in privity with NYU and that Sacerdote 13

II was therefore barred by the rule against duplicative litigation. 14

I. The Rule Against Duplicative Litigation 15

“As part of its general power to administer its docket, a district 16

court may stay or dismiss a suit that is duplicative of another federal 17

court suit.” 18 This is because a plaintiff has “no right to maintain two 18

actions on the same subject in the same court, against the same 19

defendant at the same time.” 19 In order for the rule to be properly 20

invoked, however, “the case must be the same.” 20 As the Supreme 21

Court recognized over a century ago, “[t]here must be the same 22

17 Plaintiffs initially also appealed the dismissal of the NYU defendants from

Sacerdote II

, but have since dropped that argument following a bench trial on the

surviving claims in Sacerdote I

, in which the district court ruled in favor of NYU on

all claims. That decision in Sacerdote I is also up on appeal, but has not yet been

argued.

18 Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000).

19 Id. at 139.

20 The Haytian Republic, 154 U.S. 118, 124 (1894).10 No. 18

‐ 1558

parties, or, at least, such as represent the same interests; there must be 1

the same rights asserted and the same relief prayed for; the relief must 2

be founded upon the same facts, and the title, or essential basis, of the 3

relief sought must be the same.” 21 4

This rule, known as the rule against duplicative litigation, 5

sometimes termed the rule against claim

‐ splitting, is “distinct from 6

but related to the doctrine of claim preclusion or res judicata .” 22 The 7

rule and the doctrine serve similar goals of “foster[ing] judicial 8

economy,” “protect[ing] the parties from vexatious and expensive 9

litigation,” and ensuring the “comprehensive disposition of 10

litigation.” 23 As the Seventh Circuit put it, “[c]laim splitting is an 11

aspect of the law of preclusion. Lawyers often use the words ‘res 12

judicata’ to summon up all aspects of preclusion.” 24 Because they are 13

animated by similar policy goals and concerns, we frequently apply 14

principles governing the doctrine of claim preclusion to the rule 15

against duplicative litigation. 25 16

The vital difference between the rule against duplicative 17

litigation and the doctrine of claim preclusion, however, is that the 18

former can only be raised to bar one of two suits that are both still 19

21 Id. (internal quotation marks omitted).

22 Curtis, 226 F.3d at 138.

23 Id. (internal quotation marks omitted).

24 Horwitz v. Alloy Auto. Co., 992 F.2d 100, 103 (7th Cir. 1993).

25 See Davis v. Norwalk Econ. Opportunity Now, Inc., 534 F. App’x 47, 48 (2d Cir. 2013)

(summary order) (“While the rule against duplicative litigation is distinct from

claim preclusion, the former analysis borrows from the latter to ‘assess whether

the second suit raises issues that should have been brought in the first.’” (quoting

Curtis, 226 F.3d at 138–40) (internal citations omitted)); see also 18 Charles A.

Wright, Arthur R. Miller, et al., Fed. Prac. & Proc. § 4404 (3d ed.), Westlaw (“One

growing trend is to import the tests of claim preclusion into a ‘claim

‐ splitting’

doctrine that enables a court, as a matter of discretion, to dismiss an action that

presents the same claim, as measured by claim

‐ preclusion tests, as another

pending action.”).11 No. 18

‐ 1558

pending; the latter is generally 26 raised, after a prior suit is resolved 1

on the merits, to preclude a party (or its privy) from relitigating claims 2

in a subsequent suit that were or could have been raised in the prior 3

action. 27 4

II. Privity Rule 5

Just as we typically do not allow the doctrine of claim 6

preclusion to bind nonparties to a judgment because they have “not 7

had a full and fair opportunity to litigate the claims and issues settled 8

in that suit,” 28 we generally do not apply the rule against duplicative 9

litigation when the defendants in two similar actions are different. 29 10

Indeed, a plaintiff has “as many causes of action as there are 11

defendants to pursue.” 30 As the Restatement (Second) of Judgments 12

states: 13

When a person suffers injury as the result of the 14

concurrent or consecutive acts of two or more persons, 15

he has a claim against each of them. If he brings an action 16

against one of them, he is required [by the doctrine of 17

claim preclusion] to present all the evidence and theories 18

26 We say that claim preclusion “generally” is only raised after one suit has been

resolved on the merits because the doctrine can apply while two similar suits are

pending when the district court denies on the merits a motion to amend the

complaint to add new claims while permitting the existing claims to proceed. In

such a case, the denial of leave to amend on the merits, as opposed to a denial on

procedural grounds such as timeliness, operates as a bar. The plaintiff cannot file

a new, second action raising those denied claims. See Curtis, 226 F.3d at 139. That

precise scenario does not apply to this case, however, because plaintiffs never

sought, and were never denied, leave to amend their complaint in Sacerdote I to

add Cammack as a defendant.

27 Curtis, 226 F.3d at 138.

28 Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (internal quotation marks omitted).

29 See The Haytian Republic, 154 U.S. at 124 (the rule against duplicative litigation

may only be invoked when the cases are the same and involve “the same parties,

or, at least, such as represent the same interests”).

30 N. Assur. Co. of Am. v. Square D Co., 201 F.3d 84, 88–89 (2d Cir. 2000).12 No. 18

‐ 1558

of recovery that might be advanced in support of the 1

claim against the obligor

. . . . But the claim against others 2

who are liable for the same harm is regarded as 3

separate. 31 4

In other words, if a plaintiff suffers the same harm at the hands of two 5

defendants, the plaintiff may institute one suit against one defendant 6

and a separate suit against another defendant alleging that each 7

caused his injury. 32 This is known as the rule against nonparty 8

preclusion. 33 9

There are specific exceptions to this rule, however, that 10

recognize narrow circumstances in which applying a preclusion 11

doctrine to a nonparty is appropriate, fair, and does not violate the 12

nonparty’s due process rights. When any of these circumstances is 13

present, the parties are said to be in privity. 34 In the context of claim 14

preclusion, if a party to an action is found to be in privity with a party 15

to a previous action, then the “privy is bound with respect to all the 16

issues that were raised or could have been raised in the previous 17

lawsuit.” 35 18

The circumstances sufficient to invoke the privity rule have 19

evolved over time. In 2008, the Supreme Court distilled the current 20

31 Restatement (Second) of Judgments § 49 (1982).

32 See N. Assurance, 201 F.3d at 88–89. We do not consider here how other doctrines

and rules of civil procedure, such as joinder of parties, might impact a plaintiff’s

ability to bring separate claims against different defendants regarding the same

harm caused by both.

33 See Taylor

, 553 U.S. at 892.

34 See id. at 898 n.8 (“The substantive legal relationships justifying preclusion are

sometimes collectively referred to as ‘privity.’ The term ‘privity,’ however, has

also come to be used more broadly, as a way to express the conclusion that

nonparty preclusion is appropriate on any ground.” (internal citations omitted));

see also Wright & Miller § 4449 (“[T]he privity label simply expresses a conclusion

that preclusion is proper.”).

35 Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 346 (2d Cir. 1995).13 No. 18

‐ 1558

“recognized exceptions” to the rule against nonparty preclusion into 1

six categories: (1) agreements by a nonparty to be bound by the 2

determination of issues in an action between others; (2) certain pre

‐ 3

existing substantive legal relationships based in property law 4

between the nonparty and the party, such as preceding and 5

succeeding owners of property, bailee and bailor, and assignee and 6

assignor; (3) representative suits where the nonparty’s interest was 7

adequately represented 36 by a party with the same interests, such as 8

class actions and suits brought by trustees, guardians, and other 9

fiduciaries; (4) when a nonparty has assumed control over the 10

litigation in which the judgment was rendered; (5) when a nonparty 11

is acting as a proxy, agent, or designated representative of a party 12

bound by a judgment; and (6) when a statutory scheme expressly 13

forecloses successive litigation by nonlitigants, so long as the scheme 14

comports with due process. 37 15

Although most of the treatises and cases—including Taylor

— 16

that discuss the privity rule do so in the context of claim preclusion, 17

the same principles apply in the context of the rule against duplicative 18

litigation. In The Haytian Republic

, the Supreme Court implicitly 19

recognized that the privity rule applies to the rule against duplicative 20

litigation when it stated that the rule may only be invoked when the 21

two pending suits have “the same parties, or, at least, such as represents 22

the same interests .” 38 Since then, courts, including ours, have 23

36 The term “adequate representation” was further defined by the Court as

requiring certain procedural protections. These requirements are discussed in

greater detail below. See infra, notes 64–66 and accompanying text.

37 Taylor, 553 U.S. at 893–95.

38 154 U.S. at 124 (emphasis added). As illustrated by Taylor

, the privity rule has

evolved over time such that a party merely representing the same interest as a

nonparty, without more, is no longer sufficient to justify a finding of privity and

to apply a preclusion doctrine to a nonparty. See infra, notes 64–66 and

accompanying text. At the time of The Haytian Republic

, however, this was a14 No. 18

‐ 1558

frequently applied principles originating in the doctrine of claim 1

preclusion to the similar context of the rule against duplicative 2

litigation. 39 We can think of no reason—and the parties have 3

presented none—why the principles underlying the privity rule in the 4

context of other preclusion doctrines should not apply equally in the 5

context of the rule against duplicative litigation. 6

III. Standard of Review 7

We review de novo both a district court’s dismissal of a 8

complaint 40 and its ruling on preclusion. 41 At the dismissal stage, we 9

must accept as true all factual claims in the complaint and draw all 10

reasonable inferences in the plaintiff’s favor. 42 We review for abuse 11

of discretion a district court’s decision to stay or dismiss a suit as 12

duplicative of another federal court suit. 43 However, when a district 13

court’s determination that parties are in privity rests on a “purely 14

legal proposition,” we review that decision, like all questions of law, 15

de novo

. 44 Moreover, a district court necessarily abuses its discretion 16

when it makes an error of law. 45 17

sufficient condition to invoke the privity rule and bar a nonparty from instituting

a similar suit, and demonstrates that the concepts of privity and nonparty

preclusion apply to the rule against duplicative litigation.

39 See N. Assur., 201 F.3d at 88–89 (declining to apply the rule against duplicative

litigation to bar a suit by a plaintiff against one defendant that was identical to,

and arose out of the same events as, another suit by the same plaintiff against a

different defendant and alleged joint tortfeasor because the parties were not in

privity); see also Davis

, 534 F. App’x at 48; Vancouver v. NCO Fin. Srvs., Inc., 857 F.3d

833, 841–42 (11th Cir. 2017) (asking whether the case “involves the same parties

and their privies” in applying the rule against duplicative litigation); Wright &

Miller § 4404.

40 See Singh v. Cigna Corp., 918 F.3d 57, 62 (2d Cir. 2019).

41 See Hoblock v. Albany Cty Bd. of Elections, 422 F.3d 77, 93 (2d Cir. 2005).

42 See Singh

, 918 F.3d at 62.

43 See Curtis, 226 F.3d at 138.

44 See Hoblock

, 422 F.3d at 93–94.

45 See United States v. Hasan

, 586 F.3d 161, 167–68 (2d Cir. 2009).15 No. 18

‐ 1558

IV. The District Court’s Finding of Privity Between NYU 1

and Cammack 2

There is no dispute that the facts and legal claims asserted in 3

Sacerdote II are substantially similar to those asserted in Sacerdote I

. 4

Nor is there a dispute that NYU and Cammack are different parties. 5

The question, therefore, is whether the district court erred in 6

concluding that NYU and Cammack are in privity, such that the rule 7

against duplicative litigation should apply to bar recovery against 8

Cammack in Sacerdote II

. We conclude that the district court did so 9

err. 10

The district court concluded that NYU and Cammack were in 11

privity based on the following facts taken from the amended 12

complaint: 13

Cammack has provided advisory services to NYU since 14

2009. The Amended Complaint alleges that Cammack is 15

a co

‐ fiduciary to the Plans, and is a party to a contract 16

that requires it to advise NYU on investment options. It 17

also claims that Cammack participated in and enabled 18

the NYU defendants to commit a number of the alleged 19

breaches of fiduciary duty by providing imprudent 20

investment advice, and by failing to make any reasonable 21

effort under the circumstances to remedy the breaches 22

. . . . [However,] NYU and Cammack have different 23

states of incorporation and different principal places of 24

business, and [plaintiffs allege that] they took 25

independent actions with regard to the Plans’ losses. 46 26

The district court found that these facts supported the conclusion that 27

“Cammack has a ‘sufficiently close relationship’ to NYU to justify 28

46 Sacerdote II

, 2018 WL 6253366, at *1–2 (internal citations and quotation marks

omitted).16 No. 18

‐ 1558

preclusion.” 47 It also rejected plaintiffs’ argument that Cammack and 1

NYU’s interests will “sharply diverge” to the extent that Cammack’s 2

advice was imprudent. 48 3

We disagree that Cammack and NYU’s interests are sufficiently 4

identical to support a finding of privity. Under ERISA’s co

‐ fiduciary 5

provision, a co

‐ fiduciary is only liable for another fiduciary’s 6

independent breach if the co

‐ fiduciary (1) knowingly participates in 7

or conceals the breaching act or omission of another fiduciary; (2) 8

enables another fiduciary to breach by failing to comply with ERISA’s 9

“prudent man” standard of care; or (3) knows of another fiduciary’s 10

breach and fails to make reasonable efforts to remedy the breach. 49 11

Unless this is so, the co

‐ fiduciaries’ interests are not aligned. Here, 12

the bases for liability as to NYU and Cammack are not necessarily the 13

same; it is possible that one party could be found liable and the other 14

not. 15

Indeed, as plaintiffs plausibly pleaded, Cammack and NYU 16

had separate and distinct responsibilities as co

‐ fiduciaries to the 17

plans, and could be found liable for plaintiffs’ injuries for separate 18

reasons. “Cammack’s potential liability arises from providing flawed 19

advice to the Committee

. . . .” 50 On the other hand, “NYU’s 20

[potential] liability would arise from failing to independently 21

investigate the merits of the Plans’ investments, or failing to 22

determine whether it was reasonable to rely on Cammack.” 51 23

47 Id. at *2 (quoting Cent. Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A.

, 56

F.3d 359, 368 (2d Cir. 1995).

48 Id.

49 29 U.S.C. § 1105(a); see also 29 U.S.C. § 1104(a)(1) (defining the “prudent man”

standard of care).

50 Appellant’s Br. at 18.

51 Id. at 18–19.17 No. 18

‐ 1558

A reasonable trier of fact could find that Cammack provided 1

flawed advice to NYU and was liable for plaintiffs’ losses, while also 2

finding that NYU reasonably relied on Cammack’s advice, 3

notwithstanding its flawed nature. Conversely, a reasonable trier of 4

fact could find that Cammack provided reasonably prudent advice to 5

NYU, but that NYU imprudently rejected Cammack’s advice or failed 6

to properly implement Cammack’s investment recommendations. In 7

these plausible scenarios, NYU and Cammack’s interests would 8

surely diverge, to the point where it would be in each of their interests 9

to place the blame on the other. Especially at the pleading stage, it 10

was error for the district court to accept Cammack’s argument that its 11

interests were identical to those of NYU over plaintiffs’ plausible 12

assertions to the contrary. 52 13

Even assuming that Cammack and NYU have a sufficiently 14

close relationship and identical interests, the district court further 15

erred because the presence of these two conditions alone is 16

insufficient as a matter of law to support a finding of privity. The 17

district court relied primarily on Central Hudson for the proposition 18

that identical interests and a sufficiently close relationship are all that 19

is required to find parties in privity. That case, however, does not 20

support that proposition. Central Hudson held that to determine 21

whether nonparty preclusion is warranted, a court must also “inquire 22

52 In its brief, Cammack argues that the district court’s determination that NYU

and Cammack had identical interests was proper because plaintiffs “never made

any showing” “that NYU’s interests will sharply diverge from Cammack’s.” See

Appellee’s Br. at 29. But the burden of proving privity and preclusion is on the

party asserting that affirmative defense. See Taylor, 553 U.S. at 907. It was therefore

Cammack’s burden to prove that its interests were aligned with NYU’s. We

conclude it has failed to do so because plaintiffs have plausibly alleged realistic

scenarios in which Cammack and NYU’s interests are not identical, but, in fact,

materially conflict.18 No. 18

‐ 1558

whether a [non]party controlled or substantially participated in the 1

control of the presentation on behalf of a party to the prior action.” 53 2

The Supreme Court’s decision in Taylor is instructive. In 3

recognizing the six circumstances sufficient to establish privity, the 4

Court rejected a proposed seventh category called virtual 5

representation. 54 The contours of a proposed virtual representation 6

category have differed from circuit to circuit. 55 The formulation 7

rejected by the Court in Taylor would have found a nonparty to be in 8

privity with a party if the nonparty (1) had the same interests as the 9

party; (2) was adequately represented by the party; and (3) at least 10

one of the following conditions was present: (a) a close relationship 11

between the nonparty and party; (b) substantial participation by the 12

nonparty in the other action; or (c) tactical maneuvering by the 13

nonparty to avoid preclusion. 56 The Court refused to adopt this 14

virtual representation exception to the rule against nonparty 15

preclusion, stating that it would be “at odds with the constrained 16

approach to nonparty preclusion” adopted by the Court’s prior 17

decisions, and would circumvent the protections guaranteed by the 18

Due Process Clause. 57 In holding that that NYU and Cammack were 19

in privity based solely on their sufficiently close relationship and 20

identical interests, the district court essentially adopted an even 21

broader formulation of virtual representation than that rejected by the 22

Court in Taylor

. This was in error. 23

53 Cent. Hudson, 56 F.3d at 368 (modifications incorporated) (internal quotation

marks omitted).

54 Taylor, 553 U.S. at 895–96.

55 See id. at 889.

56 Id. 889–90.

57 Id. at 898; see also id. at 901.19 No. 18

‐ 1558

Moreover, none of the six circumstances that Taylor recognized 1

as permitting a finding of privity are present here. There is no 2

allegation or evidence that Cammack agreed to be bound by the 3

disposition of Sacerdote I

, 58 nor that Cammack assumed control over 4

NYU’s defense in Sacerdote I

, 59 nor that Cammack is a designated 5

representative or proxy of NYU. 60 And no applicable statutory 6

scheme expressly forecloses successive litigation by or against 7

nonlitigants. 61 8

We also conclude that NYU and Cammack do not have the type 9

of property rights

‐ based “pre

‐ existing substantive legal relationship” 10

that could justify a finding of privity in this case. 62 The contract 11

between NYU and Cammack obliges Cammack only to provide 12

investment advisory services to NYU with respect to the plans. It 13

does not create a property rights

‐ based relationship akin to those 14

recognized in Taylor that could render a nonparty subject to the 15

judgment of a party with which it is in privity. 63 No property rights 16

were transferred, assigned, or delegated to or from NYU or 17

Cammack, and the claims in Sacerdote I and II did not concern NYU 18

and Cammack’s mutual or successive rights in the same property. 19

Thus, the contractual and co

‐ fiduciary relationships between NYU 20

and Cammack are insufficient to find the parties in privity. 21

Finally, we conclude that the representative suit exception to a 22

plaintiff’s right to sue each defendant separately does not apply here. 23

The Supreme Court has described this exception as applying only in 24

58 See id. at 893–94.

59 See id. at 895.

60 See id.

61 See id.

62 See id. at 894 (internal quotation marks omitted).

63 See id.20 No. 18

‐ 1558

“certain limited circumstances” when the nonparty is “adequately 1

represented by someone with the same interests who was a party to 2

the suit,” such as class actions and suits brought by trustees, 3

guardians, and other fiduciaries. 64 A party’s representation of a 4

nonparty is considered ”adequate” for preclusion purposes “only if, 5

at a minimum: (1) [t]he interests of the nonparty and her 6

representative are aligned; and (2) either the party [in the first suit] 7

understood herself to be acting in a representative capacity [of the 8

nonparty] or the original court took care to protect the interests of the 9

nonparty.” 65 Adequate representation often also requires “(3) notice 10

of the original suit to the persons alleged to have been represented.” 66 11

Cammack has made no argument that NYU understood itself 12

to be acting in a representative capacity for Cammack in litigating 13

Sacerdote I

, or that the district court took care to protect the interests 14

of Cammack in Sacerdote I

. 67 Without these procedural protections, 15

privity cannot be said to exist on the basis that NYU adequately 16

represented Cammack’s interests in Sacerdote I

, such that plaintiffs are 17

now precluded by the rule against duplicative litigation from 18

asserting claims against Cammack arising out of the same nucleus of 19

acts at issue in Sacerdote I

. 20

In summary, because the relationship between NYU and 21

Cammack does not fit into any of the privity categories recognized by 22

the Supreme Court in Taylor as sufficient to justify an exception to the 23

rule against nonparty preclusion, the district court erred in 24

concluding that NYU and Cammack were in privity. It is insufficient 25

64 Id. at 894–95 (modifications incorporated) (internal quotation marks omitted).

65 Id. at 900 (internal quotation marks and citations omitted).

66 Id.

67 Because preclusion is an affirmative defense, it was Cammack’s burden to plead

and prove that these procedural protections were in place to justify nonparty

preclusion under the representative suit exception. See id. at 907.21 No. 18

‐ 1558

as a matter of law to find two parties in privity based solely on the 1

fact that they share a sufficiently close relationship and have aligned 2

interests. This is precisely the type of virtual representation theory of 3

privity that the Supreme Court rejected in Taylor

. Because NYU and 4

Cammack are not in privity, the district court’s dismissal of Cammack 5

from Sacerdote II pursuant to the rule against duplicative litigation 6

was legal error, and thus an abuse of discretion, and a violation of the 7

fundamental principle that a plaintiff has “as many causes of action 8

as there are defendants to pursue.” 68 9

CONCLUSION 10

We have considered the parties’ other arguments and find them 11

to be without merit. We therefore VACATE the district court’s order 12

dismissing Cammack from Sacerdote II and REMAND the matter back 13

to the district court. 14

68 N. Assur.

, 201 F.3d at 88–89.