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HOLANSKY v. PRUDENTIAL FINANCIAL

June 17, 2004.

YAAKOV B. HOLANSKY, Plaintiff,
v.
PRUDENTIAL FINANCIAL, PRUDENTIAL SECURITIES INCORPORATED MASTERSHARE PLAN, and JUDY VANCE, Defendants.



The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge

MEMORANDUM OPINION

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.

BACKGROUND

  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.

  LEGAL STANDARD

  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 466-67.

  DISCUSSION

  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 ...


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