Opinion ID: 762432
Heading Depth: 1
Heading Rank: 2

Heading: claims brought by stauter

Text: 8 Common law breach of fiduciary duty claims are clearly preempted by ERISA. See Perry v. PIE Nationwide, Inc., 872 F.2d 157, 161 (6th Cir.1989), cert. denied, 493 U.S. 1093, 110 S.Ct. 1166, 107 L.Ed.2d 1068 (1990). Stauter argues that his claim is not preempted because Provident was no longer an ERISA fiduciary when it wrongly removed the shares from his account. This argument fails for two reasons. 9 First, it is the nature of the claim--breach of fiduciary duty--that determines whether ERISA applies, not whether the claim will succeed. See Tolton v. American Biodyne, Inc., 48 F.3d 937, 943 (6th Cir.1995). In enacting ERISA and broadly preempting state law, Congress intended to standardize the administration of employee benefit plans, including the duties and liabilities of fiduciaries. It is not a valid argument against preemption to say that the state seeks to impose greater obligations than Congress did. 10 Second, Provident was an ERISA fiduciary as long as it exercised control over plan assets. Stauter argues that as of May 1, 1991, Provident retained no discretionary authority over the plan and was charged only with the ministerial task of transferring the assets to Society. However, the definition of a fiduciary under ERISA is a functional one, is intended to be broader than the common law definition, and does not turn on formal designations such as who is the trustee. See Brock v. Hendershott, 840 F.2d 339, 342 (6th Cir.1988) (describing breadth of fiduciary status under ERISA); Custer v. Pan American Life Ins. Co., 12 F.3d 410, 418 n. 3 (4th Cir.1993) (stating that ERISA definition of fiduciary is broader than the common law concept of a trustee). It includes anyone who exercises any discretionary authority or discretionary control respecting management of [the] plan or exercises any authority or control respecting management or disposition of its assets. 29 U.S.C. § 1002(21)(A)(i) (emphasis added). Because Provident controlled Plan assets, it is liable under ERISA as a fiduciary. See Blatt v. Marshall & Lassman, 812 F.2d 810, 813 (2d Cir.1987); see also Hendershott, 840 F.2d at 342. 11 The fiduciary duty claims against Cowen--the brokerage company that handled the stock purchase--and Cambron--the Provident employee who managed Stauter's account--are preempted for the same reasons. To the extent that Provident delegated duties and powers to Cowen and Cambron, they personally could become ERISA fiduciaries and be liable under § 1132(a)(2). See Donovan v. Mercer, 747 F.2d 304, 309 (5th Cir.1984). If Cowen and Cambron do not meet ERISA's definition of a fiduciary, neither can be liable for breach of fiduciary duty with respect to management of an ERISA plan. 12 While the fiduciary duty claims asserted in the 1995 complaint are preempted, the mere availability of a federal preemption defense to a state-law claim does not, in general, confer federal subject-matter jurisdiction. The Supreme Court has held that in the special context of claims to recover ERISA benefits under § 1132(a)(1)(B), purported state-law claims are not only preempted by ERISA but entirely displaced, such that federal courts have subject-matter jurisdiction despite the well-pleaded complaint rule. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 67, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Neither the Supreme Court nor this court has expressly extended this complete preemption doctrine to claims for breach of fiduciary duty, which fall under § 1132(a)(2), not § 1132(a)(1)(B). However, we see little reason to distinguish between the two provisions. ERISA is at least as concerned with defining and standardizing the duties of a fiduciary as it is with providing for recovery of benefits. See Mertens v. Hewitt Assocs., 508 U.S. 248, 251-53, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (describing obligations ERISA imposes on fiduciaries). A claim for breach of fiduciary duty against the fiduciary of an ERISA plan necessarily presents a federal question. Thus, Stauter's state-law fiduciary duty claim is not only preempted but also provides federal subject-matter jurisdiction. See Kramer v. Smith Barney, 80 F.3d 1080, 1083-84 (5th Cir.1996) (holding that fiduciary duty claim can be removed on the basis of ERISA preemption). Because the other claims asserted in the 1995 action arise out of the same case or controversy and therefore fall within our supplemental jurisdiction, removal of the entire case was proper. See 28 U.S.C. § 1367(a) ([I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related ... that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.); 28 U.S.C. § 1441(c) (providing for removal of entire case when one claim presents a federal question).
13 Stauter's second claim in the 1995 complaint is for recovery of benefits and damages. This claim is brought under OHIO REV.CODE ANN. § 1308.30 (Banks-Baldwin West 1994 & Supp.1998), which permits a plaintiff to recover wrongfully transferred securities and obtain damages. This claim is essentially identical to Stauter's 1993 claim to recover benefits due under an ERISA plan. The only difference is that the 1995 complaint characterizes the claim as a state-law action. 14 Despite having filed and never having sought to dismiss an ERISA claim to recover benefits, Stauter argues that this claim is not preempted because he seeks to recover certain shares of stock, not benefits. He states, Whether those shares would ever be converted into a 'benefit' is the subject of speculation. Appellants' Br. at 25. This statement seems to refer to whether Stauter actually received the assets in his account, which are now held by Society Bank for his benefit. The assets are, however, indisputably the assets of an ERISA plan. Section 1132(a)(1)(B) allows Stauter to sue to clarify his rights to future benefits under the terms of the plan, which includes clarifying the amount that will be due to him if and when he becomes entitled to withdraw the money. The case before us is clearly such a suit. 15 Stauter also argues that even if § 1308.30 would otherwise be preempted by ERISA, it is saved by 29 U.S.C. § 1144(b)(2)(B), which provides: nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities. He points out that § 1308.30 appears in the chapter of the Ohio code dealing with investment securities. It creates a cause of action available to [a]ny person against whom the transfer of a security is wrongful for any reason and provides for damages as well as for recovery of the securities. OHIO REV.CODE ANN. § 1308.30. 16 Most cases interpreting ERISA's saving clause have arisen in the context of insurance rather than banking or securities. In that context the Supreme Court laid out the criteria for applying the saving clause in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987): 17 First, we [take] what guidance [is] available from a common-sense view of the language of the saving clause itself.... Second, we [make] use of the case law interpreting the phrase business of insurance under the McCarran-Ferguson Act.... [That case law establishes three criteria:] [F]irst whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry. 18 Pilot Life, 481 U.S. at 48-49, 107 S.Ct. 1549 (citing Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), and quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982)). The common-sense view is that, in order to be saved, a law must be specifically directed towards the insurance industry. Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549. While the McCarran-Ferguson criteria are not directly applicable in the securities context, we are guided in our interpretation of the saving clause by the Court's discussion of those criteria and its conclusion that the state's bad-faith doctrine was preempted despite its association with the insurance industry. See id. at 49-50, 107 S.Ct. 1549. The Court described the McFarran-Ferguson factors as helping to identify a law's connection to the insurer-insured relationship and said that preemption was appropriate because the bad-faith doctrine 19 [did not] define the terms of the relationship between the insurer and the insured; it declare[d] only that, whatever terms have been agreed upon in the insurance contract, a breach of that contract may in certain circumstances allow the policyholder to obtain punitive damages. 20 Id. at 50-51, 107 S.Ct. 1549. 21 In essence, the test for application of the saving clause is whether the law substantively regulates a relationship or merely provides alternative remedies for harms for which ERISA already provides redress. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. Id. at 54, 107 S.Ct. 1549. Ohio's § 1308.30 fails this test. It does not regulate or define what constitutes a wrongful transfer of a security but provides remedies for such a transfer. When ERISA benefits are wrongly transferred, the beneficiary's exclusive remedy is through § 1132(a)(1)(B).
22 Stauter has asserted common law claims against Provident for conversion, negligence, trover, replevin, destruction of evidence, misrepresentation, and bad faith. All of these except bad faith are also asserted against Cambron. The claims for negligence, trover, and replevin are also asserted against Cowen, the Rossmans, Star, and the Diocese. 23 These claims merely attach new, state-law labels to the ERISA claims for breach of fiduciary duty and recovery of benefits, for the apparent purpose of obtaining remedies that Congress has chosen not to make available under ERISA. It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan benefit. Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir.1991), cert. dismissed, 505 U.S. 1233, 113 S.Ct. 2, 120 L.Ed.2d 931 (1992). Stauter's remedy against the Plan fiduciaries lies with ERISA, and substitute common law claims are preempted. See Tolton, 48 F.3d at 941-43 (holding that ERISA preempted beneficiary's state-law claims against plan, including wrongful death, malpractice, insurance bad faith, and breach of contract); Kramer, 80 F.3d at 1083 (holding that ERISA preempted beneficiary's state-law claims against ERISA fiduciary for fraud, negligence, securities violations, and breach of contract). 24 ERISA may also provide limited relief against the nonfiduciary defendants who participated in a breach of fiduciary duty or otherwise violated the Act. See Hendershott, 840 F.2d at 342 (holding that a nonfiduciary can be liable under ERISA for aiding and assisting a breach of fiduciary duty); see also Mertens, 508 U.S. at 253-58, 113 S.Ct. 2063 (noting provisions of ERISA that impose obligations on nonfiduciaries and holding that nonfiduciaries are not liable for money damages under ERISA for participating in breach of fiduciary duty); Landwehr v. DuPree, 72 F.3d 726, 734 (9th Cir.1995) (holding that at least some ERISA claims against nonfiduciaries are available after Mertens ). Regardless of the availability of an ERISA action against particular defendants, the relief provided by ERISA is the only relief available for the wrongs Stauter alleges. See Custer, 12 F.3d at 419 (holding that state causes of action asserted [by beneficiaries] against nonfiduciaries are preempted by ERISA) (citing cases in the Eighth, Ninth, and Eleventh Circuits); Gibson v. Prudential Ins. Co. of America, 915 F.2d 414, 418 (9th Cir.1990) (holding that Congress intended ERISA to preempt claims that relate to an employee benefit plan even if the defendant is a nonfiduciary); Howard v. Parisian, Inc., 807 F.2d 1560, 1564-65 (11th Cir.1987) (holding that ERISA preempts a beneficiary's claim against the nonfiduciary administrator of a benefit plan); see also Mertens, 508 U.S. at 261, 113 S.Ct. 2063 (assuming, without deciding, that beneficiary's state-law claims against nonfiduciary were preempted); id. at 267 n. 2, 113 S.Ct. 2063 (White, J., dissenting) (stating that it is difficult to imagine how any common-law remedy for the harm alleged here--participation in a breach of fiduciary duty concerning an ERISA-governed plan--could have survived enactment of ERISA's deliberately expansive pre-emption provision) (internal quotation marks omitted).