Connecticut National Bank that only the trustees have standing to sue to recover assets for the trust, that the plan participants can only sue to recover against the plan or against the plan's fiduciaries; therefore, Travelers cannot be subrogated to claims against City National Bank and Connecticut National Bank as the plan's participants have no standing to sue as against those parties.
In analyzing a motion to dismiss, the Court will not dismiss the complaint unless it is clear that no set of facts which plaintiff could prove consistent with the pleadings would entitle plaintiff to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2233, 81 L. Ed. 2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-02, 2 L. Ed. 2d 80 (1957); Murphy v. Lane, 833 F.2d 106, 107 (7th Cir. 1987); Vaden v. Village of Maywood, 809 F.2d 361, 363 (7th Cir.), cert. denied, 482 U.S. 908, 107 S. Ct. 2489, 96 L. Ed. 2d 381 (1987). The Court will accept all well-pleaded factual allegations in the complaint as true. Vaden, 809 F.2d at 363; Doe v. St. Joseph's Hospital of Fort Wayne, 788 F.2d 411, 414 (7th Cir. 1986). In addition, the Court will view the allegations in the complaint in a light most favorable to the non-moving party, in this case the defendant and counter-plaintiff, Travelers Insurance Company. Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1104 (7th Cir. 1984); Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir. 1984).
The central question presented in the instant motion to dismiss the amendment to the amended counterclaim is whether Travelers has standing to sue as subrogee to the rights of the plan participants.
In order for Travelers to have standing to sue as subrogee to the rights of the plan participants, three prerequisites must be satisfied. First, the claim or debt under which the subrogee asserts his rights must have been paid in full, see, e.g., Medigroup, Inc. v. Schildknecht, 463 F.2d 525, 528 (7th Cir. 1972); Village of Crainville v. Argonaut Insurance Co., 81 Ill. 2d 399, 410 N.E.2d 5, 7, 43 Ill. Dec. 5, 7 (1980), and the claim or debt must not have been paid by the subrogee voluntarily. Second, the subrogee must have paid on a claim or debt for which a third party -- not the subrogee is primarily liable either in law or in equity. See City of Hillsboro ex rel. International Insurance Co. v. Springfield Mechanical Co., 75 Ill. App. 3d 154, 394 N.E.2d 30, 32, 31 Ill. Dec. 114, 116 (5th Dist. 1979). And third, the subrogor must possess a right which he could enforce against the third party and the subrogee is attempting to enforce that right of subrogor. American National Bank & Trust Co. v. Weyerhaeuser Co., 692 F.2d 455, 461 (7th Cir. 1982).
In the instant case, the subrogee paid subrogor's debt in full, the payment was not voluntary and the subrogee paid on a debt for which the third party was primarily liable. Thus, the first two prerequisites are satisfied. The final prerequisite, however, poses some difficulty and is worthy of some extended discussion. The final prerequisite mandates that the subrogor must possess a right which is enforceable against the third party and the subrogee must be attempting to enforce that right. In order to determine whether the plan participants or beneficiaries in the instant case had an enforceable right against plaintiff/counter-defendant banks, we must look to the Employee Retirement Income Security Act (ERISA). 29 U.S.C.A. § 1001 et seq. (1985).
It is noteworthy that in this Court's previous order in this case, dated June 6, 1988, the Court stated that "the actual loss fell upon the pension plan." This Court there held that the individual plan participants and beneficiaries sustained no actual loss; rather, the plan itself sustained the loss. For these losses incurred by the plan itself, the plan, through its trustees, have the sole right to sue for recovery. Therefore, the plan participants and beneficiaries derive their causes of action, if any, from the ERISA statute itself.
ERISA explicitly provides five separate subsections outlining civil causes of action which may be brought by a plan participant or beneficiary. 29 U.S.C. § 1132(a)(1) - (a)(4).
This subchapter is very specific about who may sue under ERISA and the particular subject matter amenable to suit for those potential plaintiffs.
Plaintiff/counter-defendants argue that none of the causes of action enumerated in the statute allow the beneficiaries or plan participants to sue third parties on behalf of the plan; therefore, Travelers could not maintain the instant cause of action as they can take or enforce no more rights as subrogee than the plan participants had as subrogors. It is necessary, then, to determine what rights the plan participants had under ERISA and under the plan.
Section 1132(2)(1)(A) provides for a civil cause of action by a plan participant or beneficiary for refusal of an administrator to supply information pursuant to section 1132(c). This subsection is clearly inapplicable to the present factual circumstances and there has been no allegation of failure to comply with section 1132(c).
Section 1132(a)(2) allows civil suit by the Secretary, or by a participant, beneficiary or fiduciary for monetary damages and other equitable and remedial relief for breach of fiduciary responsibility.
In the instant case, neither Couper nor the two banks fit into the definition of a fiduciary provided in the statute as they had no discretionary authority, control or responsibility in the administration of this plan. In fact, Couper merely served as a "pass-through" mechanism -- passing claims forms to Travelers and, in turn, in theory at least, passing checks on to the participants or beneficiaries. As to the two banks, City National Bank and Connecticut National Bank, they merely paid out on the forged instruments. The banks may have had various obligations, responsibilities and duties pursuant to the Uniform Commercial Code, but neither of the banks were invested with any discretionary control or authority with respect to the plan. Therefore, section 1132(a)(2) is inapplicable to the instant case.
Section 1132(a)(3) allows maintenance of a civil cause of action, for injunctive or other equitable relief only, for violations or enforcement of ERISA or the terms of the plan or to redress such violations. The instant action is for money damages only. No injunctive or other equitable relief is sought and, therefore, section 1132(a)(3) does not apply here.
Section 1132(a)(4) grants a cause of action to the Secretary, or to a participant or beneficiary, for appropriate relief for a violation of certain reporting requirements set out in section 1025(c). Again, there is no allegation of reporting requirement violations and the facts would not support any if alleged. Therefore, section 1132(a)(4) has no application to the case at bar.
Section 1132(a)(1)(B) allows civil suit by a participant or beneficiary to recover benefits, enforce rights or clarify future rights under the terms of the plan. In the facts as presented to this Court, there can be no recovery of benefits by the participants or beneficiaries based on Couper's misconduct as Travelers has already obviated that necessity by making the plan whole and covering any and all losses. In addition, there is no need to clarify future rights under the plan, nor has any party alleged such a potential cause of action. In any event, that type of clarification would give rise to declaratory or injunctive relief, a far cry from the money damages sought by Travelers. The last potential cause of action provided for in section 1132(a)(1)(B) allows a participant or beneficiary to enforce rights under the terms of the plan. The express terms of the plan appear to provide a participant or beneficiary with a right to contribution to the plan by the company according to the formula specified in the plan. CNB Exhibit 108 at 3-4 & 7-9. In addition, the participants also appear to have a right to payment of their accumulated share pursuant to the conditions set out in the plan. CNB Exhibit 108 at 4-5 & 13-20. This appears to be the extent of the interest of the participants and beneficiaries in the plan or trust.
Count IV of Traveler's amendment to the amended counterclaim identifies numerous causes of action the participants or beneficiaries have as against the two banks, City National and Connecticut National. However, all of the causes of action alleged by Travelers are actions maintainable under the Illinois Uniform Commercial Code, 26 Ill. Rev. Stat. Ann. § 1-101 et seq. However, these are purely state law claims and there is no independent basis for federal jurisdiction except the jurisdiction which may be specifically provided for in the ERISA statute. ERISA provides no basis for jurisdiction pursuant to the U.C.C. unless enforcement of the provisions of the Illinois U.C.C. is the legal equivalent of the enforcement of rights "under the terms of the plan." Then, and only then, would a plan participant or beneficiary be allowed to bring a Uniform Commercial Code claim against the banks under section 1132(a)(1)(B) of ERISA. Therefore, we hold that section 1132(a)(1)(B) provides no such cause of action based solely on the provisions of the Illinois Uniform Commercial Code; a suit under the U.C.C. is not a suit to "enforce [a participant's] rights under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B) (emphasis added).
Therefore, the right of a particular participant or beneficiary to sue for enforcement of rights under the plan pursuant to section 1132(a)(3) would be limited to suit for contribution by the company or payment to the participant or beneficiary pursuant to the trust agreement. See Village of Brookfield v. Pentis, 101 F.2d 516, 521 (7th Cir. 1939); see also Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324-25 (9th Cir. 1985) ("ERISA permits suits to recover benefits only against the plan as an entity . . . and suits for breach of fiduciary duty only against the fiduciaries . .") Neither of the aforementioned causes of action are proffered by Travelers in the instant case; therefore, section 1132(a)(3) does not provide a cause of action against City National Bank or Connecticut National Bank by the participants or beneficiaries of the plan.
The instant circumstances do not give rise to a cause of action under ERISA or the plan to the participants or beneficiaries as against City National Bank or Connecticut National Bank. Therefore, Travelers must fail in its subrogation action as it fails to meet the third prerequisite for a subrogation action, namely that the subrogor must possess a right which he could enforce against the third party and the subrogee, Travelers, is attempting to enforce that right of the subrogor. In this case, the plan participants and beneficiaries have no right to sue third parties on behalf of the plan except as provided for in the statute.
For the reasons set forth in the opinion above, the Court grants plaintiff/counter-defendant's motion to dismiss defendant/counterplaintiff's amendment to the amended counterclaim as Travelers has no standing to sue.
DATED: May 9, 1989