595 F. App'x 22
2d Cir.2014Background
- Diamond was Fund Controller (1997–May 2005) and eligible for pension benefits under a collective-bargaining Plan administered by Local 807 Pension Fund and its trustees.
- After turning 65 in February 2012, Diamond began receiving benefits; in June 2012 the Fund suspended his benefits, concluding his new consulting job with PRFI constituted "Disqualifying Employment."
- Diamond appealed the suspension to the Plan trustees but withdrew the appeal on July 30, 2012 and then filed suit in federal court in October 2012 under ERISA alleging fiduciary breach, improper benefit suspension, and failure to produce documents.
- The district court dismissed the complaint for failure to exhaust the Plan’s administrative remedies; Diamond appealed, arguing his claims alleged statutory ERISA violations and thus exhaustion was not required.
- The Second Circuit analyzed whether Diamond’s claims sought enforcement of the Plan terms (requiring exhaustion) or alleged independent statutory ERISA violations (possibly excusing exhaustion), and whether the futility exception applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exhaustion of Plan remedies is required before suing | Diamond argued his suit alleges statutory ERISA fiduciary breaches, so exhaustion is not required | Fund argued Diamond failed to exhaust the Plan’s claims procedure and must do so for Plan-benefit disputes | Held: Exhaustion is required because the complaint challenges interpretation/application of Plan terms rather than an independent statutory violation |
| Whether the complaint actually pleads a statutory ERISA violation vs. a Plan-terms claim | Diamond framed claim as ERISA fiduciary breach arising from misreading of Plan rules | Fund pointed to Diamond’s allegations that defendants violated "express terms and conditions of the Pension Plan" | Held: Court found the factual essence requires interpreting Plan documents; claim is a Plan-terms breach despite statutory label |
| Whether the futility exception excuses failure to exhaust | Diamond contended administrative appeal would have been futile | Fund argued no showing of futility; administrative review was available | Held: Futility not sufficiently pleaded; conclusory allegations fail to excuse exhaustion |
| Whether dismissal was proper | Diamond sought reinstatement of withheld benefits in court without completing Plan process | Fund sought dismissal for non-exhaustion | Held: Dismissal affirmed because exhaustion was required and not shown to be futile |
Key Cases Cited
- N.J. Carpenters Health Fund v. Royal Bank of Scotland Grp., 709 F.3d 109 (2d Cir. 2013) (standard of review for Rule 12(b)(6))
- Litwin v. Blackstone Grp., L.P., 634 F.3d 706 (2d Cir. 2011) (pleading and inference principles on dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for plausibility)
- Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F.3d 506 (2d Cir. 2002) (ERISA plaintiffs must pursue plan administrative remedies)
- Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588 (2d Cir. 1993) (federal policy favors ERISA exhaustion)
- Nechis v. Oxford Health Plans, Inc., 421 F.3d 96 (2d Cir. 2005) (noting Second Circuit had not decided whether exhaustion required for statutory ERISA claims)
- Oneida Indian Nation of N.Y. v. County of Oneida, 617 F.3d 114 (2d Cir. 2010) (substance of allegations controls claim’s essence)
- Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Gerber Life Ins. Co., 771 F.3d 150 (2d Cir. 2014) (litigants cannot plead around ERISA’s limits)
- Davenport v. Harry N. Abrams, Inc., 249 F.3d 130 (2d Cir. 2001) (conclusory allegations insufficient to establish futility)