MEMORANDUM ORDER AND OPINION
Before the Court is the motion to dismiss of counterclaim defendant James W. Luce (“Luce”), the former Executive Vice President of the defendant / counterclaim plaintiff corporation, ULLICO. Luce moves to dismiss the counterclaims asserted against him by ULLICO (Counts IV, VI, and VII of the Amended Answer and Counterclaim). He moves for dismissal of Count IV on the grounds that he was not properly joined in the claim and the Court lacks subject matter jurisdiction because the claim should have been asserted as a compulsory counterclaim in a related action. . Luce also moves for dismissal of Counts VI and VII of ULLICO’s Amended Answer and Counterclaims for lack of subject matter jurisdiction. For the following reasons, the Court GRANTS Luce’s motion with regard to Count IV, and DENIES the motion with regard, to the remaining counterclaims. Count IV is thus dismissed.
BACKGROUND
The claims in this case relate to retirement benefits offered to ULLICO employees under an “Early Retirement Program.” On July 18, 2003, Joseph A. Carabillo (“Carabillo”), the former Chief Legal Officer of ULLICO and the original plaintiff in this action, filed a complaint asserting that ULLICO had wrongfully withheld his retirement benefits and had terminated him for that precise purpose, in violation of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1132, 1140, and state common law. Among the retirement benefits to which former employees such as Luce and Carabillo are allegedly entitled are those provided under “the Auxiliary Retirement Benefits Plan” (“Auxiliary Plan”),
1
established on Janu
On November 3, 2003, ULLICO filed its Amended Answer and Counterclaims in the current action, asserting thirteen counterclaims against Carabillo and six other counterclaim defendants: Luce, John K. Grelle (“Grelle”) (former Chief Financial Officer of ULLICO), Robert A. Georgine (“Georgine”) (former Chief Executive Officer of ULLICO), Pacific Life Insurance Compаny, the Robert and Mary Rita Geor-gine Trust, and its trustee, Ann O’Brien. Many of these claims relate to a series of stock repurchase programs that were allegedly authorized by ULLICO’s Executive Committee, of which Carabillo and Georgine were members, from 1998 through 2001 (“Stock Repurchase Programs”). 3 Amend. Countercl. ¶¶ 36-49, 50-54. It is ULLICO’s contention, that as a result of corporate misconduct relating to the Stock Repurchase Programs, the Auxiliary Plan, the Deferred Compensation Plan, and other retirement benefit programs, Carabillo, Georgine, Grelle, Luce, and other officers obtained improper profits and other benefits, to the detriment of the corporation.
Among the thirteen counterclaims asserted by ULLICO are three counterclaims that include Luce as a counterclaim defendant. Count IV, a counterclaim only against Luce, seeks disgorgement of profits and benefits as a result of alleged breaches of his fiduciary duties with regard to the Stock Repurchase Programs, and specifically, the 1998 and 1999 Stock Offer Programs, the Actual 2000 Stock Repurchase Program, the 2001 Repurchase Program, and the discretionary rer purchase programs in 2000. Amend. Countercl. ¶ 109. Count IV also alleges that Luce “aided and abetted” breaches of fiduciary duty by others and improperly benefitted from such conduct. Id. at ¶ 110.
Count VI, which asserts claims against Georgine, Carabillo, Grelle, and Luce,
Finally, Count VII, which asserts claims against Georgine and Luce, seeks a declaratory judgment that these former officers are not entitled to compensation under the Deferred Compensation Plan because the plan was enacted without Board approval and allowed these officers to “exploit[ ] the ULLICO share valuation system, adopted in connection with the 1997 Repurchase Program” to generate profits by manipulating their Deferred Compensation accounts “in and out of ‘deemed investments’ in ULLICO stock.” Amend. Countercl. ¶¶ 129,132.
Luce moves for dismissal of all three counterclaims asserted against him by UL-LICO. First, he asserts that Count IV should be dismissed because he was not properly joined under Federal Rules of Civil Procedure 13,19, and 20. Second, he argues that even if ULLICO had properly joined him as a proсedural matter, Count IV was an omitted compulsory counterclaim in the Luce action, which was not asserted in that case and thus cannot be asserted here. Finally, Luce contends that all three of the counterclaims should be dismissed for lack of subject matter jurisdiction. For the following reasons, the Court GRANTS Luce’s motion in part and dismisses Count IV. With regard to the remaining counterclaims, the Court DENIES the motion.
DISCUSSION
I. Standards of Review
The Court will only dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) if “it appears beyond doubt that the plaintiff can prove no sеt of facts in support of his claim which would entitle him to relief.”
Conley v. Gibson,
Upon a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), it is the plaintiffs burden of persuasion to establish the existence of subject matter jurisdiction by a preрonderance of the evidence.
Thompson v. Capitol Police Board,
II. Count IV: Breach of Fiduciary Duty, Aiding and Abetting Breaches of Fiduciary Duty and Unjust Enrichment
As previously noted, Count IV of the Amended Answer and Counterclaim alleges that Luce engaged in breaches of his fiduciary duties, and also aided and abetted others in breaching their fiduciary duties with regard to the Stock Repurchase Plans authorized by the Executive Committee. Luce moves for dismissal of this claim on the grounds that he was never properly joined in the action under Federal Rules of Civil Procedure 13, 19, and 20. Luce Mot. to Dismiss 14-15. The Court agrees, and for the following reasons, dismisses this counterclaim.
Under Rule 13(h) of the Federal Rules of Civil Procedure, “[p]ersons other than those made parties to the original action may be made parties to a counterclaim or cross-claim in accordance with the provisions of Rules 19 and 20.” Fed. R.Civ.P. 13(h). As the Court does not believe that Luce is a “necessary party” under Rule 19, ULLICO would have to join Luce in this action under Rule 20(a) permissive joinder, which provides, relevant part:
All persons.. .may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction or ocсurrence, or series of transactions or occurrences and if any question of law or fact common to all defendants will arise in the action.
Fed.R.Civ.P. 20(a). Whether particular circumstances warrant joinder is left to the sound discretion of the district courts.
American Directory Service Agency, Inc. v. Beam,
As an initial matter, ULLICO failed to seek leave of this Court to assert the counterclaim against Luce.
Kaempfer v. Broum,
ULLICO also asserts that join-der is proper under Federal Rule, of Civil Procedure 18 because “[o]nce Lucе was properly joined as a party in that count under Rule 19 or 20, ULLICO could then properly join any other claims against him (including the improper stock profits claim of Count IV) under Rule 18.” Def. Opp. 4. Rule 18(a) states, in relevant part:
A party asserting a claim to relief as an original claim, counterclaim, cross-claim, or third-party claim, may join, either as independent or alternative claims, as many claims, legal, equitable, or maritime, as the party has against an opposing party.
Fed.R.Civ.P. 18(a). However, Rule 18(a) does not purpоrt to convey subject matter jurisdiction over a joined claim. Fed. R.Civ.P. 82 (“These rules shall not be construed to extend or limit the jurisdiction of the United States district courts... ”). Thus, even though Rule 18(a) does not require any factual relatedness to be demonstrated for claims to be joined, ULLICO would have to demonstrate a basis for the Court’s exercise of subject matter jurisdiction. It has not. ULLICO acknowledges that Count IV is not based on federal law. Def. Opp. 6-7 (“Legally, Count IV involves the common law of fiduciary duty while Luce’s ERISA enforceable claims in his Amended Complaint will be governed by federal law.”). Furthermore, the Court does not believe that supplémental jurisdiction under 28 U.S.C. § 1367(a) is available where Count IV shares no common nucleus of fact with the core claims in the case, ie., claims and counterclaims relating to the retirement benefits of Carabillo and other former ULLICO officers. Accordingly, Count IV cannot be properly joined under Rule 18(a) and will be dismissed. As Count IV will be dismissed for improper joinder, the Court has no need to evaluate whether Count IV should have been asserted as a compulsory сounterclaim in the Luce action.
III. Counts VI and VII: Declaratory Judgments regarding the Auxiliary Plan and Deferred Compensation Plan
Luce next moves for dismissal of the remaining two counterclaims asserted against him for lack of subject matter jurisdiction. As previously noted, Count VI seeks a declaratory judgment regarding the ability of Georgine, Carabillo, Grelle, and Luce to recover benefits under the Auxiliary Plan in light of ULLICO’s allegation that the Qualified Pension Plan and Trust was improperly amended to increase the benefits paid to these former officers. Amend. Counterсl. ¶¶ 124-26. Count VII seeks a declaratory judgment that these four former officers are not entitled to benefits under the Deferred Compensation Plan because the plan, which allowed these officers to make “deemed investments” in ULLICO stock, was “enacted without Board approval and was otherwise administered in violation of the fiduciary duties owed to ULLICO... ”. Amend. Answer and Countercl. ¶ 131.
Luce asserts that these counterclaims must be dismissed for lack of subject matter jurisdiction because there is no independent basis for subject matter jurisdiction to support these claims. In addition, Luce contends that the Court should not exercise supplemental jurisdiction under 28 U.S.C. § 1367(a) because these claims are not part of the same case or controversy as Carabillo’s claims. The Court will address these arguments in turn.
Luce first argues that there is no basis for subject matter jurisdiction under ERISA, 29 U.S.C. § 1132(a)(3), because under this provision only “a participant, beneficiary, or fiduciary” of a qualifying plan can bring suit, and ULLICO has not put forth any facts indicating it is covered by this provision. Luce Mot. to Dismiss 20. Furthermore, Lucе asserts that there is no subject matter jurisdiction conferred by the Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. Id. at 20;
see Skelly Oil Co. v. Phillips Petroleum Co.,
However, ULLICO contends that this Court has federal question jurisdiction under 28 U.S.C. § 1331 over Counts VI and VII because these claims “arise under federal common law.” Def. Opp. 8. The Supreme Court first discussed the “federal common law” of ERISA in
Franchise Tax Board v. Construction Laborers Vacation Trust,
ERISA’s legislative history indicates that, in light of the act’s virtually unique preemption provision, see § 514, 29 U.S.C. § 1144, ‘a body of Federal substantive law will bе developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans.’
Id.
(citing the remarks of Senator Javitz, 120 Cong. Rec. 29,942 (1974)).. Although there is no question that the federal courts have been delegated a broad authority to create a “federal common law” of ERISA, the courts have not agreed on the precise contours of this body of law. Several circuit courts have set forth specific limits in determining whether a particular claim falls within the “federal common law.”
See, e.g., Singer v. Black & Decker Corp.,
The D.C. Circuit, on the other hand, has proceeded on a case-by-case basis in determining whether a particular сlaim falls within its “federal common law” jurisdiction.
See Young v. Washington Gas Light Co.,
ULLICO asserts that Counts VI and VII are “federal common law” claims because it seeks recovery of benefits under two “top hat” retirement plans,
ie.,
pension plans that are unfunded and maintаined to provide deferred compensation to management or trained employees. Def. Opp. 9. Luce responds that to recognize Counts VI and VII by creating implied rights of action not specified by Congress would “fl[y] in the face of ... controlling precedents” from the Supreme Court regarding the scope of the “federal common law,” especially in light of the fact that
ULLICO presents no authority from this Circuit or any other that supports its broad view of this Court’s “federal .common law” jurisdiction. Indeed, there is no indication that the either D.C. Circuit or this Court has ever recognized a claim breach of fiduciary duty against the
participant
or
beneficiary
of a plan as a “federal common law” cause of action. Moreover, where the D.C. Circuit has previously recognized a “federal common law” claim for restitution of benefits by an employer, the claim was based on the mistaken payment of benefits to an individual who was ineligible under the terms of the plan.
Heller,
In contrast to the claims in
Heller
and
Fasco,
Counts VI ■ and VII are not claims for restitution of benefits paid based on the terms of the Auxiliary and Deferred Compensation Plans. Instead, they seek declaratory relief. There is no allegation under these counts that the counterclaim defendants have wrongly received benefits as a result of a mistake of fact or law regarding the terms of the plans.
Fasco,
B. Supplemental Jurisdiction
In the absence of an independent basis for subject matter jurisdiction over Counts VI and VII, ULLICO asserts that this Court should nonetheless exercise its supplemental jurisdiction under 28 U.S.C. § 1367(a). Section 1367(a) provides, in relevant part:
[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all othеr claims that are so related to claims in the action within such original jurisdiction 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. § 1367(a). The Court may, however, decline to exercise its supplemental jurisdiction where claims raise novel or complex issues of state law, or where those state law issues “substantially predominate” over the claims for which the district court has original jurisdiction. 28 U.S.C. §§ 1367(c)(l)-(2). The Court may also decline such jurisdiction where it has dismissed all claims over which it has original jurisdiction, or where “other compelling reasons” exist. 28 U.S.C. §§ 1367(c)(3)-(4).
Luce contends that the Court should decline supplemental jurisdiction over Counts VI and VII because these claims do not arise out of a “common nucleus of operative fact” with the claims of Carabil-lo. Luce Reply 18. Luce further argues that even if the counterclaims were factually related enough to the other claims in this action, the Court should dеcline to exercise its jurisdiction because these state law claims “predominate” over Carabillo’s “simple ERISA claim” and would greatly increase the number of factual issues in the case. Id. at 19. The Court should also decline to exercise its supplemental jurisdiction, Luce asserts, because the counterclaims present novel and complex issues of Maryland state corporate law. Id. at 20.
In contrast to Count TV, which this Court earlier held was not part of the same “case and controversy” as the other claims in this action, Counts VI and VII properly fall within its supplemental jurisdiction. Although the Court does not believe that these counterclaims can be asserted under “federal common law,” the Court does find that there is a factual nexus between Carabillo’s ERISA claim and ULLICO’s counterclaims that benefits cannot be paid under the Auxiliary and Deferred Compensation Plans because such plans were improperly established, amended, or implemented. The misconduct alleged in Counts VI and VII, unlike the conduct alleged in several other of ULLICO’s counterclaims, appears to bear upon whether Carabillo, Luce, and the other counterclaim defendants can properly claim the retirement benefits to which they believe they are entitled. While the Court will not now evaluate whether the misconduct alleged renders Carabillo, Luce, and the other counterclaim defendant officers ineligible to receive retirement benefits, it does find that for the purpose of evaluating jurisdiction, these claims are part of the same “case or controversy” as Carabil-lo’s claims. 7
ORDER
For the reasons set forth above, it is this 30th of September, 2004, hereby
ORDERED that counterclaim defendant Luce’s Motion to Dismiss [# 35, 36] is GRANTED in part and DENIED in part; and it is further
ORDERED that Count IV of the defendant / counterclaim plaintiff ULLICO’s Amended Answer and Counterclaim is dismissed without prejudice.
SO ORDERED.
Notes
. In its Amended Answer and Counterclaim and other pleadings, ULLICO indicates that the Auxiliary Plan is a "top hat” plan established to provide retirement benefits to its
. According to ULLICO, under the Deferred Compensation Plan (also described as a "top hat” plan), the counterclaim defendant officers were allowed to defer up to 25% of their base salary and up to 100% of their bonuses (avoiding current income tax on such amounts). Amend. Countercl. ¶ 63. One of the investment alternatives for plan participants was ULLICO stock, valued each year. Id.
. In its Amended Answer and Counterclaim, ULLICO describes in great detail a battery of stock repurchase programs approved by its Executive Committee during the years 1998-2001. See Amend. Countercl. ¶ 24 (discussing the "the 1998 and 1999 Stock Offer Programs,” "the 1998, 1999, 2000, and 2001 Formal Repurchase Programs,” and the “discretionary” repurchase programs in 2000 and 2001). For the purposes of this memorandum opinion, however, the Court does not believe that a summary of these alleged programs and related facts is necessary and will thus refer to these programs as "the Stock Repurchase Programs.”
. ULLICO alleges that the Benefits Commit- . tee was created on May 5, 1997 by ULLICO's Executive Committee and was authorized and empowered to act as fiduciary to all plans created for the benefit and welfare of the corporation’s employees. Amend. Coun-tercl. ¶ 68. The counterclaim defendant officers served as four of the five members of the Benefits Committee during 1999. Id. at ¶ 69.
. Rule 12(b) of the Federal Rules of Procedure otherwise requires that a motion to dismiss be considered according to summary judgmеnt standard if the movant submit matters outside of the pleadings that are not excluded by the Court. Fed.R.Civ.P. 12(b), 56;
see also IMS v. Alvarez,
.
See, e.g., Singer,
. Although Luce does not raise the issue in his motion to dismiss, the Court notes that, notwithstanding its supplemental jurisdiction over state law claims that form part of the same “case or controversy,” ERISA preempts any state law claims that "relate to any employee benefit plan” covered by the statute. 29 U.S.C. § 1144(a). The Supreme Court has
In this case, although Luce has not raised the issue, the Court clearly may
sua sponte
evaluate whether ULLICO's claims are preempted because they "relate to” ERISA plans. However, based on ULLICO's stated allegations and the record as it currently stands, the Court cannot find that Counts VI and' VII are preempted by ERISA. Even assuming that the Auxiliary and Deferred Compensation Plans are plans covered by ERISA, the Court believes that Counts VI and VII, based on allegations of breaches of fiduciary duty to ULLICO, derive from the counterclaim defendants' obligations and resрonsibilities as officers of the corporation under state ■corporate law, rather than their relationship to the plans as beneficiaries.
See, e.g., Krooth & Altman v. North American Life Assurance Co.,