Corbin v. Blankenburg

39 F.3d 650, 1994 WL 601455

• Court: Court of Appeals for the Sixth Circuit
• Decided: November 4, 1994
• Docket: No. 92-1540
• Status: Published

Opinions

NELSON, J., delivered the opinion of the court, in which MERRITT, C.J., and KENNEDY, JONES, MILBURN, GUY, RYAN, BOGGS, NORRIS, SUHRHEINRICH, SILER, BATCHELDER and DAUGHTREY, JJ., joined. CELEBREZZE, J. (pp. 656-58), delivered a separate dissenting opinion, in which KEITH and MARTIN, JJ., joined, with BOYCE F. MARTIN, Jr., J. (p. 658), also delivering a separate dissenting opinion.

DAVID A. NELSON, Circuit Judge.

Where a trustee commences a lawsuit in his fiduciary capacity and later resigns from office, a successor trustee will normally be allowed to step into the plaintiffs shoes and take over the prosecution of the action; the resignation of the original trustee is not deemed to abate the lawsuit without possibility of revival. The question presented in the case at bar is whether the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq., requires a different result with respect to trustees of employee benefit plans governed by that statute.

The district court answered the question in the affirmative. The present action, commenced in federal court by an ERISA trustee who was authorized by statute to bring the suit, was dismissed for want of jurisdiction following the trustee’s resignation from office. Dismissal was ordered notwithstanding the pendency of a motion to substitute as plaintiff a successor trustee who was prepared to go forward with the litigation.

We think that the dismissal was unwarranted. ERISA, as we read it, does not mandate abatement of the action under the circumstances presented here. We shall therefore reverse the order of dismissal and direct that the successor trustee be substituted as plaintiff.

I

Alleging that he was a trustee of a defined benefit pension plan established in accordance with the requirements of §§ 402 and 403 of ERISA, 29 U.S.C. §§ 1102 and 1103, plaintiff Gary Corbin brought suit against a group of defendants that included, among others, nine former trustees and two current trustees. Mr. Corbin’s complaint, which asserted claims for breaches of fiduciary duty that were said to have caused substantial losses to the pension plan, was filed in the United States District Court for the Eastern District of Michigan. Federal question jurisdiction was asserted on the basis of § 502 of ERISA, 29 U.S.C. § 1132, which authorizes ERISA fiduciaries to bring civil actions in federal court. After an amended complaint was filed, the defendants filed an answer in which they admitted plaintiff Corbin’s status as a fiduciary and admitted that the district court had subject matter jurisdiction by virtue of ERISA.

The action was commenced in May of 1991. Extensive discovery proceedings ensued, and the defendants eventually filed a voluminous motion for summary judgment.

Effective December 20, 1991 — a date prior to the filing of the defendants’ summary judgment motion — Mr. Corbin resigned his trusteeship. He was replaced in February of 1992 by a man named Paul Gard.

On March 19, 1992, the defendants moved to dismiss the complaint pursuant to Rules 12(b)(1) and 12(h)(3), Fed.R.Civ.P. The theory of the defendants’ motion was that Mr. Corbin had lost standing to continue the lawsuit when he resigned as trustee and that the district court irretrievably lost subject matter jurisdiction once Mr. Corbin ceased to qualify, under 29 U.S.C. § 1132, as a person entitled to bring this type of action.

On March 24, 1992 — three working days after the filing of the defendants’ motion to dismiss — Mr. Corbin moved to substitute Paul Gard as plaintiff. The motion was accompanied by an affidavit in which Mr. Gard swore that he had succeeded Mr. Corbin as trustee on February 25,1992; that he (Gard) desired to pursue the allegations of the amended complaint on behalf of and for the benefit of the pension plan; and that he was prepared to act as party plaintiff. The defendants immediately objected to the substitution on the ground that there had been no “transfer of interest” from Corbin to Gard within the meaning of Rule 25(c), Fed.R.Civ. P., a rule that allows the court, upon motion, to direct substitution of the person to whom an interest has been transferred.

Two days after the fifing of the motion to substitute Mr. Gard as plaintiff, the district court heard oral argument on the defendants’ motion to dismiss. At the conclusion of the argument the court announced its decision from the bench. The gist of the court’s oral ruling was that although Plaintiff Corbin had possessed standing to bring the suit in May of 1991, when he was still a plan fiduciary, he lost his standing as a fiduciary when he resigned his trusteeship the following December; that with the plaintiffs loss of standing, the district court immediately lost subject matter jurisdiction over the case; that the subsequent motion to substitute Mr. Gard as plaintiff should be “ignore[d]” by the court, notwithstanding that “Mr. Gard has standing under ERISA to bring a claim,” because jurisdiction had been lost before Mr. Gard even became a trustee; that Rule 25(c) “cannot be used to restore jurisdiction once it is lost,” cf. Rule 82, Fed.R.Civ.P., and the lawsuit was abated by Corbin’s resignation unless the action was one that survived as a matter of substantive law, cf. Hilbmnds v. Far East Trading Co., 509 F.2d 1321, 1323 (9th Cir.1975); and that while the court had “no quarrel” with Blackmar v. Lichtenstein, 468 F.Supp. 370 (E.D.Mo.1979), aff'd, 603 F.2d 1306 (8th Cir.1979), where successor trustees were substituted as plaintiffs in a lawsuit that had been brought by a profit-sharing plan trustee prior to his removal as trustee, Blackmar was not dispositive because jurisdiction had not been predicated on ERISA there.¹ A written order of dismissal was entered on April 1, 1992, and the plaintiff perfected a timely appeal.

A divided panel of this court affirmed the dismissal. A petition for rehearing en banc was subsequently granted, the panel’s judgment thereupon being vacated. The matter has been briefed and argued before the full court, and it is now ripe for decision.

II

If Gary Corbin had not been a plan fiduciary when this lawsuit was originally filed, he would have had no authority to bring the action under ERISA in the first place. See Pressroom Unions-Printers League Income Security Fund v. Continental Assurance Co., 700 F.2d 889, 891-92 (2d Cir.), cert. denied, 464 U.S. 845, 104 S.Ct. 148, 78 L.Ed.2d 138 (1983), holding that an ERISA action may be brought only by a member of one of the categories of people (the Secretary of Labor, a plan participant, a plan beneficiary, a plan fiduciary, or (for suits against the Secretary) a plan administrator) specifically named in 29 U.S.C. § 1132. And if the action had been brought by a person not statutorily authorized to bring it, the absence of subject matter jurisdiction could not have been cured by substituting an authorized plaintiff for the unauthorized plaintiff. “The longstanding and clear rule is that ‘if jurisdiction is lacking at the commencement of [a] suit, it cannot be aided by the intervention of a [plaintiff] with a sufficient claim.’” Pressroom Unions, 700 F.2d at 893 (quoting Pianta v. H.M. Reich Co., 77 F.2d 888, 890 (2d Cir.1935)).

In the case at bar, however, jurisdiction was not lacking at the commencement of the suit. As a plan fiduciary, Gary Corbin was unquestionably authorized by 29 U.S.C. § 1132(a) to bring the action. The district court unquestionably had subject matter jurisdiction ab initio, and the issue presented here was thus similar to that presented in Blackmar v. Lichtenstein, 603 F.2d 1306 (8th Cir.1979): whether abatement of an action properly commenced by an employee benefit plan trustee is required when the trustee leaves office.

As far as what the Supreme Court has referred to as “the common law of trusts” is concerned, see Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 2840, 86 L.Ed.2d 447 (1985), it is hornbook law that an action brought by a trustee “is not ordinarily abated by his failure to continue in his office.” 1 C.J.S., Abatement and Revival § 111(a). When a trustee party leaves office, “an action is ordinarily revived in the name of the successor representative.” 1 Am.Jur.2d, Abatement, Survival, and Revival, § 121. Congress could have prescribed a different rule for ERISA trustees, of course, but it did not do so. Nothing in 29 U.S.C. § 1132 or any other section of ERISA suggests that a civil action brought by an ERISA trustee is personal to the particular individual who held the office when the suit was filed and must therefore be abated, without possibility of revival in the name of another representative, when the original trustee leaves office.

The declaration of policy adopted by Congress in enacting ERISA indicates, on the contrary, that Congress would have looked askance at any abatement rule calculated to leave plan participants and beneficiaries high and dry if a plan trustee who has brought an action on their behalf against other fiduciaries subsequently leaves office for one reason or another. “It is hereby declared to be the policy of this chapter,” Congress said in 29 U.S.C. § 1001(b), “to protect ... the interests of participants in employee benefit plans and their beneficiaries ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.” An abatement rule of the sort adopted by the district court in the instant case seems particularly difficult to square with the legislative policy where, as here, a new lawsuit commenced either by the successor trustee or by individual participants or beneficiaries suing in their own right would undoubtedly be met with a statute of limitations defense.²

As emphasized by Justice Marshall, who wrote for the Supreme Court in Central States, Congress found that “the continued well-being and security of millions of employees and their dependents are directly affected by these [employee benefit] plans.” 472 U.S. at 569, 105 S.Ct. at 2839 (quoting 29 U.S.C. § 1001(a)). Congress was concerned to see that workers who had obtained vested pension rights actually received what they had been promised, and to this end “Congress invoked the common law of trusts to define the general scope of [plan fiduciaries’] authority and responsibility.” 472 U.S. at 570, 105 S.Ct. at 2840. And just as the common law of trusts is relevant in assuring that the responsibilities of plan fiduciaries are not given too narrow a compass, we take it that the common law of trusts is relevant in assuring “ready access to the Federal courts” on behalf of those whose well-being and security Congress wished to protect. Under the common law of trusts, to repeat, abatement of an action commenced by a trustee in his fiduciary capacity is not favored when the trustee leaves office and a successor trustee is available to be substituted as plaintiff.

If abatement of the action commenced by Gary Corbin as a fiduciary is difficult to square with the policies of the common law and the policies adopted by Congress in ERISA, it is equally difficult to square with the policies embodied in the Federal Rules of Civil Procedure.

Although the plaintiff in this case ceased to be a real party in interest as of December 20, 1991, and thus had no standing to prosecute the action after that date, Rule 17(a) provides that “[n]o action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ... joinder or substitution of, the real party in interest; and such ... joinder, or substitution shall have the same effect as if the action had been commenced in the name of the.real party in interest." (Emphasis supplied.) Here the motion to substitute the successor trustee as plaintiff was filed only three working days (five calendar days) after the defendants’ objection to the predecessor trustee’s standing — and three or five days, in this context, was hardly unreasonable.

It is true, as the district court said in its oral decision, that a procedural rule cannot be used to restore jurisdiction once it is lost. But subject matter jurisdiction was not irretrievably lost the moment Gary Cor-bin resigned his trusteeship, and “[s]ubject matter jurisdiction, once it validly exists among the original parties, remains intact after substitution.” Ransom v. Brennan, 437 F.2d 513, 516 (5th Cir.), cert. denied, 403 U.S. 904, 91 S.Ct. 2205, 29 L.Ed.2d 680 (1971). As the Fifth Circuit said in Ransom, citing Chief Justice Marshall’s opinion in M’Knight v. Craig’s, Adm’r, 10 U.S. (6 Cranch) 183, 187, 3 L.Ed. 193 (1810), “[a] substituted party steps into the same position of the original party.” Id.

When a successor fiduciary steps into the shoes of a predecessor who, acting in a fiduciary capacity, has brought a lawsuit in a court vested with jurisdiction over the subject matter of the suit, the “stepping in” relates back to the time when the original party had standing to sue. No other conclusion is possible, given the statement in Rule 17(a) that “substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.”³

The relation back doctrine has likewise been adopted in Rule 15(c): “An Amendment of a pleading relates back to the date of the original pleading when ... (2) the claim ... asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth ... in the original pleading_” If in the case at bar the district court had granted the motion to substitute the successor trustee as plaintiff vice the original trustee, therefore, the amendment naming the new plaintiff would necessarily have related back to the date of the original complaint. Relation back would have occurred, under Rule 15(c)(2), because the claim being asserted would not have been changed.

Rule 15(a) provides that leave to amend “shall be freely given when justice so requires.” Justice does so require in this case — at least it does if Congress meant what it said in the findings and declaration of policy enacted into law with the adoption of ERISA.

The order of dismissal is REVERSED, and the case is REMANDED to the district court with instructions to grant the motion for substitution.

1 . The original complaint in Blackmar asserted four causes of action, two of which were based on federal securities law and the others of which were pendent claims for relief under state law. See Blackmar v. Lichtenstein, 578 F.2d 1273, 1275 (8th Cir.1978). In granting the successor trustees’ motion for substitution, the district court rejected an argument that the question of who the real parties in interest were was controlled by ERISA. See 468 F.Supp. at 374. The district court went on to say, however, that "[e]ven assuming ... that ERISA did apply to the determination of the real party in interest, the Court concludes that ERISA would not preclude substitution of movants herein." Id. (emphasis supplied).

In affirming the order that substituted the successor trustees for Mr. Blackmar, the Court of Appeals for the Eighth Circuit noted that § 502 of ERISA authorizes a fiduciary to sue for ERISA violations. 603 F.2d at 1310. The court of appeals went on to observe that "[o]nce Blackmar's successor trustees ... were appointed, [Black-mar] ceased to be a fiduciary and no longer had the capacity to sue for violations which may have occurred under this title." Id. It was the loss of the original trustee’s standing to sue that was held to justify substitution of the successor trustees as parties plaintiff.

2 . The supplemental brief filed by the plaintiff after the granting of his petition for rehearing en banc states that “[b]y the time the district judge dismissed this action, the statute had run as to the bulk of the issues raised in the litigation.” The defendants have never taken issue with this statement.

The defendants do, however, vigorously assert that the interests of the plan participants and beneficiaries are not being prejudiced here because the plaintiffs’ claims have never had any merit. But the district court did not have occasion to rule on the defendants' motion for summary judgment, and, given the present posture of the case, this court is obviously in no position to address the merits. The only question before us now is whether the district court erred in granting the defendants’ motion to dismiss for lack of jurisdiction over the subject matter. We intimate no opinion, of course, as to how the merits of the case should ultimately be decided.

3 . Although Rule 17(a) requires that every action be prosecuted in the name of the real party in interest, the rule also provides that a trustee, or a party authorized by statute, may sue in that person’s own name without joining the party for whose benefit the action is brought.