Retail Shoe Health Comm. v. Reminick, Aarons & Co., 62 N.Y.2d 173 (1984)
ERISA preempts state law claims for contribution or indemnity against employee benefit plan fiduciaries based on breaches of their fiduciary duties, vesting exclusive jurisdiction in federal courts.
Summary
This case addresses whether ERISA preempts state law claims against trustees of an employee welfare benefit plan. The Retail Shoe Health Commission sued its accountants for failing to detect misappropriations by the fund’s administrator. The accountants then filed a third-party complaint against the trustees for contribution or indemnity, alleging the trustees’ breach of fiduciary duties contributed to the losses. The New York Court of Appeals held that ERISA’s preemption provisions govern such claims, precluding state court actions. The court reasoned that ERISA vests exclusive jurisdiction over these matters in federal courts, superseding state laws regarding fiduciary duties related to ERISA plans.
Facts
The Retail Shoe Health Commission (Fund), a multiemployer welfare fund, sued its accountants, Reminick, Aarons & Company, for failing to detect the administrator’s misappropriation of $675,000. Reminick filed a third-party complaint against the Fund’s individual trustees and Tolley International Corporation (the Fund’s actuarial and consulting service), seeking contribution or indemnity. Reminick alleged that the trustees’ negligence in supervising the administrator contributed to the loss. Tolley filed counterclaims and crossclaims against Reminick, the Fund, and the trustees, also seeking contribution or indemnity.
Procedural History
The individual trustees moved to dismiss Reminick’s third-party complaint and Tolley’s claims, arguing that the court lacked subject matter jurisdiction under ERISA. The Supreme Court denied the motion, finding ERISA did not preempt state law in this instance. The Appellate Division affirmed without opinion, granting the trustees leave to appeal to the New York Court of Appeals. The Court of Appeals then reversed the lower courts’ decisions.
Issue(s)
Whether ERISA preempts state law claims for contribution or indemnity against the individual trustees of an employee welfare benefit plan, when those claims are based on alleged breaches of the trustees’ fiduciary duties.
Holding
Yes, because ERISA’s provisions supersede all state laws relating to employee benefit plans, and ERISA vests exclusive jurisdiction in federal courts for civil actions arising under the Act involving breaches of fiduciary duty by plan trustees.
Court’s Reasoning
The court emphasized ERISA’s broad preemption clause, which supersedes state laws relating to employee benefit plans. The court stated that “the Federal law pre-empts State regulation of ERISA employee benefit plans. The Act provides expressly that its provisions shall supersede all State laws insofar as they may relate to any employee benefit plan within its embrace.” The trustees are fiduciaries under ERISA, and Reminick’s and Tolley’s claims allege breaches of those fiduciary duties. ERISA §§ 404, 405, and 409 govern the duties and liabilities of these trustees. The court noted that ERISA § 502(e) vests exclusive jurisdiction in federal district courts over civil actions arising under ERISA. The court rejected the argument that because Reminick and Tolley are not among those listed in ERISA § 502(a) as parties who can bring a civil action, ERISA should not preclude their claims. The court stated, “Inasmuch as ERISA preempts all claims based on alleged breach of fiduciary duty on the part of ERISA trustees and vests jurisdiction for their enforcement exclusively in the Federal courts, the circumstance that persons in the outboard position of Re-minick and Tolley may have no statutory standing to bring such an action under the Federal regulatory scheme is merely an aspect of that scheme.” The court also held that claims for contribution and indemnity under state law (e.g., CPLR art 14; Dole v Dow Chem. Co.) are superseded by ERISA. Finally, the court addressed Tolley’s argument regarding pre-ERISA transactions, stating that while ERISA preemption does not apply to acts or omissions before January 1, 1975, Tolley had not pleaded such claims separately. However, the dismissal was without prejudice, allowing Tolley to seek leave to replead claims based on pre-1975 transactions.