United States District Court, N.D. Illinois, Eastern Division
June 17, 2004.
YAAKOV B. HOLANSKY, Plaintiff,
PRUDENTIAL FINANCIAL, PRUDENTIAL SECURITIES INCORPORATED MASTERSHARE PLAN, and JUDY VANCE, Defendants.
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendant's motion to
dismiss. For the reasons stated below we deny the motion in part
and grant the motion in part.
In 1999, Plaintiff Yaskov B. Holansky ("Holansky") worked for
Defendant Prudential Securities Incorporated ("PSI"). During his
employment Holansky elected to participate in a compensation plan
referred to as the MasterShare Plan ("Plan"). The Plan is a
compensation plan offered to employees called Financial Advisors at PSI. Holansky quit his employment with PSI and PSI
told him that his contributions to the Plan were forfeited under
the terms of the Plan. PSI claims that before signing onto the
Plan, Holansky received an informational booklet and signed an
election form that specifically disclosed the forfeiture
provision in the plan.
PSI argues that the individuals that participated in the Plan
were Financial Advisors and thus, were sophisticated individuals
that were knowledgeable in financial matters. Holansky contends
that he was merely a Financial Advisor trainee and that he and
others were not trained in matters that would have enabled him to
understand the forfeiture provision.
Holansky also contends that PSI promoted the Plan as a pension
plan and claims that employees were pressured to join the Plan.
According to Holansky, all trainees were "strongly encouraged" to
join the Plan and that non-participation in the plan was
considered an indication that the trainee did not plan to stay
with PSI. According to Holanksy, a substantial portion of a
trainee's salary was deducted as contributions for the Plan.
Holansky brought the instant action against Defendant PSI and
Defendant Judy Vance (hereafter included in references to "PSI")
who was PSI's Director of Human Resources. Holansky seeks to
recover his contributions and attorneys' fees under § 502 of the
Employee Retirement Income Security Act ("ERISA"). Holansky also brings a breach of fiduciary duty claim under ERISA, an
equitable claim for recovery of contributions, a New York labor
law claim, and an estoppel claim. Defendants have moved to
dismiss the amended complaint in its entirety.
In ruling on a motion to dismiss, the court must draw all
reasonable inferences that favor the plaintiff, construe the
allegations of the complaint in the light most favorable to the
plaintiff, and accept as true all well-pleaded facts and
allegations in the complaint. Thompson v. Illinois Dep't of
Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002); Perkins
v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). The
allegations of a complaint should not be dismissed for a failure
to state a claim "unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which
would entitle him to relief." Conley v. Gibson, 355 U.S. 41,
45-46 (1957). Nonetheless, in order to withstand a motion to
dismiss, a complaint must allege the "operative facts" upon which
each claim is based. Kyle v. Morton High School, 144 F.3d 448,
454-55 (7th Cir. 1998); Lucien v. Preiner, 967 F.2d 1166, 1168
(7th Cir. 1992). The plaintiff need not allege all of the facts
involved in the claim and can plead conclusions. Higgs v.
Carter, 286 F.3d 437, 439 (7th Cir. 2002); Kyle, 144 F.3d at
455. However, any conclusions pled must "provide the defendant with at least minimal notice of the claim," Id., and
the plaintiff cannot satisfy federal pleading requirements merely
"by attaching bare legal conclusions to narrated facts which fail
to outline the bases of [his] claim." Perkins, 939 F.2d at
I. Whether the Plan is Governed by ERISA
Holansky's ERISA claims are based upon the provisions of ERISA
that prohibit the forfeiture of employee contributions.
Defendants seek to dismiss the suit on the basis that the Plan is
not governed by ERISA. ERISA governs plans that fall within the
definition of an "employee welfare benefit plan" or an "employee
pension benefit plan." 29 U.S.C. § 1002(3). Holansky claims that
the Plan constitutes an employee pension benefit plan. An
employee pension benefit plan is defined as "any plan, fund, or
program . . . to the extent that by its express terms or as a
result of surrounding circumstances such plan, fund, or program
(i) provides retirement income to employees, or (ii) results in a
deferral of income by employees for periods extending to the
termination of covered employment or beyond. . . ."
29 U.S.C. § 1002(2)(A). Holansky argues that the surrounding circumstances in
this case indicate that the Plan was an employee pension benefit plan
and that it was thus governed by ERISA.
Holansky argues that the Plan is an employee benefit pension
plan because the Plan defers taxation. PSI argues that the Plan
defers taxation only for a discrete period of time and does not
systematically defer taxation until retirement. According to PSI,
the Plan provides for distribution during a participant's
employment and that at the end of the three year period Plan
participants have the unrestricted right to the full value of
their shares. However, the Plan allows participants to request
successive one year extensions after the three year period.
Holansky alleges that Plan participants routincly seek successive
one year extensions under the terms of the plan to continue
deferment until retirement. PSI argues that simply because
employees may theoretically use a Plan to defer income until
retirement does not mean that the Plan is an employee benefit
pension plan. However, such matters although not conclusive, are
relevant for the surrounding circumstances inquiry.
Holansky also alleges that PSI promoted the Plan as an employee
benefit pension plan. He claims that PSI told new trainees that
the Plan was to serve as a pension plan and was a "great way to
save for retirement." (Ans 2). PSI points out that when Holanksy
joined the Plan he signed a form indicating that his understanding of the Plan was based on the information contained
in the booklet and was not based on oral statements made by
others at PSI.
We find that it is premature to dismiss the ERISA claims at
this juncture. It is possible, based upon the allegations before
us, that the Plan is governed by ERISA. We cannot grant a motion
to dismiss "unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his claim which would entitle
him to relief." Conley, 355 U.S. at 45-46. Based upon the
allegations before us, it is possible that the surrounding
circumstances at PSI were such that the Plan was governed by
ERISA. PSI's arguments are also overreaching at times because
they seek to question the veracity of Holansky's allegations and
implore the court to accept PSI's version of the facts which is
improper at this stage of the proceedings. It is possible that
the Plan is governed by ERISA, if, for example, PSI promoted the
Plan as a retirement plan, its employees regularly utilized it as
a retirement plan, and the three year period was meaningless
because it was routine to simply grant one year extensions until
retirement. Holansky is entitled to proceed on to discovery to
see if he can collect evidence that would show these facts or
other facts that would indicate that ERISA governed the Plan. In
discussing our ruling as to the motion to dismiss, we make no
findings as to what facts may or may not meet Holansky's burden
of proof. Therefore, we deny the motion to dismiss the ERISA
claims. We note that we are informed by PSI that we should not find
that the Plan is "draconian" and apparently should not find that
it is governed by ERISA because "the existence of the identical
forfeiture provision did not stop six judges on the New York
Court of Appeals from unanimously holding" that the plan is valid
under New York Labor Law. (Reply 5). While this fact may have
relevance on the New York Labor Law claim, it has little
relevance for our other determinations in this case. PSI has also
provided the court with a recitation of their previous successes
across the country in litigation. They warn us that "[n]o
tribunal has ruled against PSI on its motion for summary
judgment." (Mot. 5). However, none of PSI's cited case law is
controlling precedent. We address each case before us on an
individual basis and decide according to the facts and law before
us. PSI's string of citations to other cases, in which rulings
were made in its favor, is not dispositive in this case. In fact,
other than statutory citations in its briefs, PSI relies
exclusively on caselaw outside of this district. Such law is
technically persuasive authority, but is not controlling
II. New York Labor Law Claim
Holansky alleges in his amended complaint that the Plan's
payroll deductions violated New York Labor Law § 193.1. Holansky
alleges that the law permits voluntary deductions only for "payments for insurance premiums,
pension or health and welfare benefits, contributions to
charitable organizations, payments for United States bonds,
payments for dues or assessments to a labor organization, and
similar payments for the benefit of the employee." (A Compl. 24).
PSI argues in its memorandum in support of its motion that the
New York Court of Appeals has already considered the Plan in
Marsh v. Prudential Securities Inc., 802 N.E.2d 610 (N.Y. 2003)
and addressed this same issue and found that the Plan does not
violate New York Labor Law § 193.1. Holansky does not respond to
this argument at all in his answer brief. PSI argues expressly
that Holansky, by his silence, concedes that his claim is without
merit and that "[a]ll parties thus agree that the claim fails."
(Reply 14). Holansky has not sought leave to file a sur-reply to
challenge this statement and his continued silence is an
acquiescence that his claim is baseless. A review of the case
also reveals that PSI's position is correct. Therefore, we grant
PSI's motion to dismiss the New York Labor Law claim.
III. Estoppel Claim
PSI moves to dismiss the estoppel claim. Holansky contends that
PSI should be estopped from enforcing the forfeiture provision
because of the manner in which PSI handled FICA taxes on monies
that were invested in the Plan. According to Holansky, since the Internal Revenue Code provides that FICA
taxes should be withheld when there is a risk of forfeiture, PSI
cannot enforce the forfeiture provision. Holansky also makes much
of the fact that PSI changed the tax treatment of the Plan.
Holansky's arguments on this issue are completely without merit.
The the tax treatment of the Plan is not a basis for a valid
claim. Holansky even concedes that he received the benefit of the
Plan's revised tax treatment in the form of a revised W-2.
Holansky also fails to show how his claim is an estoppel claim
and has not provided any law in support of his estoppel claim.
While a plaintiff is not required to specifically plead a cause
of action and is not required to plead each element of a cause of
action, a plaintiff must provide at least the operative facts.
Kyle, 144 F.3d at 454-55. The doctrine of estoppel is based
upon a reasonable reliance by a party to its detriment. See e.g.
Kennedy v. U.S., 965 F.2d 413, 417 (7th Cir. 1992); Estate
of Burne Hogarth v. Edgar Rice Burroughs, Inc., 342 F.3d 149,
165 (2nd Cir. 2003). Holansky fails to allege facts that
would fit into that definition. There is no indication that the
Plan was operated in a manner other than Holanksy should have
expected. Estoppel is not simply a catchall cause of action which
any plaintiff can bring to estop a defendant from doing
something. Therefore, for this reason and the reasons stated
above, we grant the motion to dismiss the estoppel claim. CONCLUSION
Based on the foregoing analysis, we deny the motion to dismiss
the ERISA claims and grant the motion to dismiss the New York
labor law claim and the estoppel claim.
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