18‐1558 Sacerdote v. Cammack Larhette Advisors, LLC
2 In the 3 United States Court of Appeals 4 For the Second Circuit 5 ________ 6 7 AUGUST TERM, 2018 8 9 ARGUED: APRIL 8, 2019 10 DECIDED: OCTOBER 1, 2019 11 12 No. 18‐1558 13 14 DR. ALAN SACERDOTE, DR. HERBERT SAMUELS, MARIE E. MONACO, 15 MARK CRISPIN MILLER, DR. SHULAMITH LALA STRAUSSNER, DR. JAMES 16 B. BROWN, INDIVIDUALLY AND AS REPRESENTATIVES OF A CLASS OF 17 PARTICIPANTS AND BENEFICIARIES ON BEHALF OF THE NYU SCHOOL OF 18 MEDICINE RETIREMENT PLAN FOR MEMBERS OF THE FACULTY, 19 PROFESSIONAL RESEARCH STAFF AND ADMINISTRATION AND THE NEW 20 YORK UNIVERSITY RETIREMENT PLAN FOR MEMBERS OF THE FACULTY, 21 PROFESSIONAL RESEARCH STAFF AND ADMINISTRATION, 22 Plaintiffs‐Appellants, 23 24 v. 25 26 CAMMACK LARHETTE ADVISORS, LLC, 27 Defendant‐Appellee, 28 29 RETIREMENT PLAN COMMITTEE, RICHARD BING, MICHAEL BURKE, 30 CATHERINE CASEY, MARTIN DORPH, SABRINA ELLIS, THOMAS 31 FEUERSTEIN, ANDREW GORDON, PATRICIA HALLEY, TIM HESLER, 32 KATHLEEN JACOBS, MARINA KARTANOS, ANN KRAUS, MARGARET 33 MEAGHER, CYNTHIA NASCIMENTO, NANCY SANCHEZ, TINA SURH, 34 LINDA WOODRUFF, MAURICE MAERTENS, JOSEPH MONTELEONE, RAY 2 No. 18‐1558
1 OQUENDO, CHRIS TANG, NEW YORK UNIVERSITY SCHOOL OF 2 MEDICINE, NYU LANGONE HOSPITALS, NYU LANGONE HEALTH 3 SYSTEM, 4 Defendants.* 5 ________ 6 7 Appeal from the United States District Court 8 for the Southern District of New York. 9 No. 17 Civ. 8834 – Katherine B. Forrest, Judge. 10 ________ 11 12 Before: WALKER, CALABRESI, AND LIVINGSTON, Circuit Judges. 13 ________ 14 Plaintiffs filed an action, which we refer to as Sacerdote I, against 15 New York University (“NYU”) alleging violations of ERISA in 16 connection with two retirement plans sponsored by NYU. The 17 district court dismissed most, but not all, of the causes of action 18 against NYU. Plaintiffs then filed this action, which we refer to as 19 Sacerdote II, against a variety of affiliates of NYU and Cammack 20 Larhette Advisors, LLC, alleging substantially the same claims as 21 those in Sacerdote I, including the dismissed claims. Cammack is an 22 independent investment management company that was hired by 23 NYU to provide investment advice on the retirement plans. The 24 district court dismissed all of the claims against all of the NYU‐ 25 affiliated defendants, as well as Cammack, on the grounds that a 26 plaintiff has no right to maintain two actions on the same subject, 27 against the same parties, at the same time. The district court 28 concluded that even though Cammack and the other defendants in 29 Sacerdote II were not defendants in Sacerdote I, all of them were in 30 privity with defendant NYU in Sacerdote I because they had a
*The Clerk of Court is respectfully directed to amend the official caption as listed above. 3 No. 18‐1558
1 sufficiently close relationship with NYU and their interests were 2 aligned with those of NYU. Plaintiffs appealed only the dismissal as 3 to Cammack. We conclude that Cammack and NYU are not in 4 privity, and we now VACATE and REMAND the district court’s 5 order as to Cammack.
6 ________
7 SEAN E. SOYARS (Jerome J. Schlinchter, on the brief), 8 Schlichter Bogard & Denton LLP, St. Louis, MO, for 9 Plaintiffs‐Appellants.
10 CHARLES M. DYKE, Nixon Peabody LLP, San 11 Francisco, CA (Kristin Marie Jamberdino, Nixon 12 Peabody LLP, New York, NY, on the brief), for 13 Defendant‐Appellee.
14 ________
15 JOHN M. WALKER, JR., Circuit Judge:
16 Plaintiffs filed an action, which we refer to as Sacerdote I, against 17 New York University (“NYU”) alleging violations of ERISA in 18 connection with two retirement plans sponsored by NYU. The 19 district court dismissed most, but not all, of the causes of action 20 against NYU. Plaintiffs then filed this action, which we refer to as 21 Sacerdote II, against a variety of affiliates of NYU and Cammack 22 Larhette Advisors, LLC, alleging substantially the same claims as 23 those in Sacerdote I, including the dismissed claims. Cammack is an 24 independent investment management company that was hired by 25 NYU to provide investment advice on the retirement plans. The 26 district court dismissed all of the claims against all of the NYU‐ 27 affiliated defendants, as well as Cammack, on the grounds that a 28 plaintiff has no right to maintain two actions on the same subject, 29 against the same parties, at the same time. The district court 4 No. 18‐1558
1 concluded that even though Cammack and the other defendants in 2 Sacerdote II were not defendants in Sacerdote I, all of them were in 3 privity with defendant NYU in Sacerdote I because they had a 4 sufficiently close relationship with NYU and their interests were 5 aligned with those of NYU. Plaintiffs appealed only the dismissal as 6 to Cammack. We conclude that Cammack and NYU are not in 7 privity, and we now VACATE and REMAND the district court’s 8 order as to Cammack.
9 BACKGROUND
10 This appeal concerns two actions that were filed in the 11 Southern District of New York and assigned to Judge Katherine 12 Forrest.1 We refer to the two actions as Sacerdote I (No. 16‐cv‐06284) 13 and Sacerdote II (No. 17‐cv‐8834). Plaintiffs in both actions are six 14 professors at New York University (“NYU”) or the New York 15 University School of Medicine who participated in two ERISA‐ 16 governed retirement plans sponsored by NYU (“the plans”).
17 I. Sacerdote I
18 Plaintiffs commenced the first action on August 9, 2016, against 19 NYU only, and alleged breaches of the duties of loyalty and prudence 20 under ERISA based on unreasonable administrative fees, 21 unreasonable investment management fees and performance losses, 22 and failure to monitor unnamed co‐fiduciaries.2
23 On November 9, 2016, plaintiffs amended their complaint to 24 allege breaches of ERISA’s duties of loyalty and prudence, as well as 25 its prohibited transaction rules, by: locking the plans into an 26 imprudent investment and recordkeeping arrangement with TIAA‐
1 Judge Forrest resigned from the bench in September 2018. The case has been reassigned to Judge Analisa Torres. 2 See Complaint, Sacerdote I, 16‐cv‐06284 (S.D.N.Y. Aug. 9, 2016), ECF No. 1. 5 No. 18‐1558
1 CREF (Counts I and II); causing the plans’ participants to pay 2 unreasonable administrative fees to TIAA‐CREF and Vanguard 3 (Counts III and IV); and causing the plans’ participants to pay 4 unreasonable investment management, marketing, distribution, 5 mortality, and expense risk fees, and incur unreasonable performance 6 losses (Counts V and VI).3 Plaintiffs also alleged that NYU failed to 7 properly monitor unnamed co‐fiduciaries to the plans (Count VII).4 8 The amended complaint, like its predecessor, named NYU as the only 9 defendant.
10 On August 25, 2017, the district court granted in part and 11 denied in part NYU’s motion to dismiss the amended complaint. The 12 district court dismissed all claims except those alleging certain 13 breaches of ERISA’s duties of loyalty and prudence in Counts III and 14 V.5 With respect to Count VII, alleging NYU’s failure to properly 15 monitor unnamed co‐fiduciaries, the district court found that 16 plaintiffs’ failure to name any co‐fiduciary rendered the claim 17 materially deficient.6 However, the district court invited plaintiffs to 18 file for reconsideration if they possessed additional facts to support 19 their co‐fiduciary claim.7
20 While NYU’s motion to dismiss was pending, plaintiffs learned 21 that NYU had delegated responsibility for administering the plans to 22 a Retirement Plan Committee (the “Committee”), which consisted of 23 nine officers of NYU and NYU Langone Medical Center. Armed with 24 this new information, and in response to the district court’s invitation, 25 plaintiffs moved on September 8, 2017, for reconsideration of the 26 district court’s dismissal. The same day, plaintiffs moved for leave to
3 See Amended Complaint, Sacerdote I, ECF No. 39. 4 See id. 5 See Opinion & Order, Sacerdote I, ECF No. 79.
6 Id. at 34–35.
7 Id. at 35. 6 No. 18‐1558
1 file a second amended complaint, in which they sought to add the 2 Committee and its nine individual members, as defendants, and to 3 add additional facts to bolster the co‐fiduciary claim.
4 On October 17, 2017, the district court denied plaintiffs’ motion 5 for leave to amend.8 It concluded that plaintiffs failed to demonstrate 6 good cause for why they failed to amend earlier, given that the 7 defendant had disclosed the existence of the Committee and its 8 members in November 2016. Two days later, the district court denied 9 plaintiffs’ motion for reconsideration for substantially the same 10 reason.9
11 II. Sacerdote II
12 On November 13, 2017, the same plaintiffs filed a new action— 13 Sacerdote II—alleging substantially the same seven claims alleged in 14 Sacerdote I, including those claims the district court dismissed in its 15 August 25, 2017 decision.10 The Sacerdote II complaint named as 16 defendants: NYU Langone Hospitals, NYU Langone Health System, 17 the Retirement Plan Committee, and twenty‐one past or present 18 members of the Committee. It did not name NYU. The Sacerdote II 19 complaint also added a new claim and specifically identified the 20 Committee and its members as the co‐fiduciaries that NYU Langone 21 Hospitals and NYU Langone Health System allegedly failed to 22 monitor.
23 On December 20, 2017, the Sacerdote II defendants moved to 24 dismiss the action as duplicative of Sacerdote I. Instead of responding 25 to the motion to dismiss, plaintiffs amended the Sacerdote II complaint 26 on January 10, 2018. The amended complaint removed NYU Langone
8 See Order, Sacerdote I, ECF No. 100. 9 See Order, Sacerdote I, ECF No. 101. 10 See Complaint, Sacerdote II, No. 17‐cv‐08834 (S.D.N.Y. Nov. 13, 2017), ECF No. 1. 7 No. 18‐1558
1 Hospitals and NYU Langone Health System as defendants and added 2 the New York University School of Medicine (“NYU School of 3 Medicine”) as a defendant.11 The amended complaint, for the first 4 time, also named Cammack Larhette Advisors, LLC (“Cammack”), as 5 a defendant, and alleged that Cammack was a co‐fiduciary; that 6 Cammack breached its fiduciary duties under ERISA; and that both 7 Cammack and the NYU School of Medicine, as co‐fiduciaries, were 8 liable for the other’s breaches. The amended complaint also added 9 new claims.
10 On January 24, 2018, all defendants—except for Cammack— 11 (the “NYU defendants”) responded to the Sacerdote II amended 12 complaint with a new motion to dismiss. The NYU defendants 13 argued that the Sacerdote II action was duplicative of the Sacerdote I 14 action and was an impermissible attempt to circumvent the district 15 court’s rulings in Sacerdote I, which prohibited plaintiffs from 16 amending the complaint to replead the dismissed claims and add the 17 new defendants. Before Cammack responded to the amended 18 complaint, the district court entered an opinion and order dismissing 19 the entire action against the NYU defendants and Cammack as 20 duplicative of Sacerdote I.12 The district court held that the NYU 21 defendants in Sacerdote II were in privity with NYU in Sacerdote I, and 22 that Sacerdote II, which alleged substantially the same claims and facts 23 as the prior action, was duplicative of Sacerdote I. With respect to 24 Cammack, the district court held that the claims against Cammack 25 “should have been brought by joining Cammack earlier in the 26 Sacerdote I litigation.”13
11 See Amended Complaint, Sacerdote II, ECF No. 105. 12 See Opinion & Order, Sacerdote II, ECF No. 137; see also No. 17‐cv‐8834 (KBF), 2018 WL 1054573 (S.D.N.Y. Feb. 23, 2018). 13 Sacerdote II, ECF No. 137 at 7. 8 No. 18‐1558
1 On March 7, 2018, plaintiffs moved for reconsideration of the 2 district court’s sua sponte dismissal as to Cammack before Cammack 3 had responded to the amended complaint. Plaintiffs argued they 4 were entitled to assert the same claims against a separate, 5 independent defendant, and that the factors the district court cited to 6 support a finding of privity between the NYU defendants in Sacerdote 7 I and II did not apply to Cammack, an independent entity not related 8 to NYU. In response, the district court ordered Cammack to file a 9 letter motion for dismissal and granted plaintiffs an opportunity to 10 respond, which they did. Cammack argued that like the NYU 11 defendants in Sacerdote II, it was in privity with NYU, the defendant 12 in Sacerdote I, because Cammack and NYU were in contractual 13 privity, the parties’ interests were fully aligned, and the defenses of 14 NYU would be fully dispositive of any claims against Cammack, if 15 successful.
16 On March 22, 2018, the district court adhered to its judgment 17 dismissing Cammack from Sacerdote II.14 The district court concluded 18 that Cammack was in privity with NYU because Cammack and 19 NYU’s interests were aligned and they had a “sufficiently close 20 relationship . . . to justify preclusion.”15 The district court rejected 21 plaintiffs’ argument that “Cammack need not have been added [as a 22 defendant in Sacerdote I] and that they can maintain a separate suit” 23 against Cammack.16
14 See Mem. Decision & Order, Sacerdote II, ECF No. 147; see also No. 17‐cv‐8834 (KBF), 2018 WL 6253366 (S.D.N.Y. Mar. 22, 2018). 15 2018 WL 6253366, at *2 (internal quotation marks omitted).
16 Id. 9 No. 18‐1558
1 Plaintiffs now appeal the district court’s dismissal of Cammack 2 from Sacerdote II.17
3 DISCUSSION
4 We must determine in this case whether the district court 5 correctly applied the privity rule in the context of the rule against 6 duplicative litigation. More precisely, the question is whether the 7 claims against Cammack in Sacerdote II—which are substantially 8 similar to the claims against NYU in Sacerdote I—should have been 9 barred by the rule against duplicative litigation on the basis of 10 Cammack’s alleged privity with NYU. We begin with a discussion of 11 the rule against duplicative litigation and the privity rule, and then 12 assess whether the district court properly applied the two rules to 13 conclude that Cammack was in privity with NYU and that Sacerdote 14 II was therefore barred by the rule against duplicative litigation.
15 I. The Rule Against Duplicative Litigation
16 “As part of its general power to administer its docket, a district 17 court may stay or dismiss a suit that is duplicative of another federal 18 court suit.”18 This is because a plaintiff has “no right to maintain two 19 actions on the same subject in the same court, against the same 20 defendant at the same time.”19 In order for the rule to be properly 21 invoked, however, “the case must be the same.”20 As the Supreme 22 Court recognized over a century ago, “[t]here must be the same
17 Plaintiffs initially also appealed the dismissal of the NYU defendants from Sacerdote II, but have since dropped that argument following a bench trial on the surviving claims in Sacerdote I, in which the district court ruled in favor of NYU on all claims. That decision in Sacerdote I is also up on appeal, but has not yet been argued. 18 Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000).
19 Id. at 139.
20 The Haytian Republic, 154 U.S. 118, 124 (1894). 10 No. 18‐1558
1 parties, or, at least, such as represent the same interests; there must be 2 the same rights asserted and the same relief prayed for; the relief must 3 be founded upon the same facts, and the title, or essential basis, of the 4 relief sought must be the same.”21
5 This rule, known as the rule against duplicative litigation, 6 sometimes termed the rule against claim‐splitting, is “distinct from 7 but related to the doctrine of claim preclusion or res judicata.”22 The 8 rule and the doctrine serve similar goals of “foster[ing] judicial 9 economy,” “protect[ing] the parties from vexatious and expensive 10 litigation,” and ensuring the “comprehensive disposition of 11 litigation.”23 As the Seventh Circuit put it, “[c]laim splitting is an 12 aspect of the law of preclusion. Lawyers often use the words ‘res 13 judicata’ to summon up all aspects of preclusion.”24 Because they are 14 animated by similar policy goals and concerns, we frequently apply 15 principles governing the doctrine of claim preclusion to the rule 16 against duplicative litigation.25
17 The vital difference between the rule against duplicative 18 litigation and the doctrine of claim preclusion, however, is that the 19 former can only be raised to bar one of two suits that are both still
21 Id. (internal quotation marks omitted). 22 Curtis, 226 F.3d at 138. 23 Id. (internal quotation marks omitted).
24 Horwitz v. Alloy Auto. Co., 992 F.2d 100, 103 (7th Cir. 1993).
25 See Davis v. Norwalk Econ. Opportunity Now, Inc., 534 F. App’x 47, 48 (2d Cir. 2013)
(summary order) (“While the rule against duplicative litigation is distinct from claim preclusion, the former analysis borrows from the latter to ‘assess whether the second suit raises issues that should have been brought in the first.’” (quoting Curtis, 226 F.3d at 138–40) (internal citations omitted)); see also 18 Charles A. Wright, Arthur R. Miller, et al., Fed. Prac. & Proc. § 4404 (3d ed.), Westlaw (“One growing trend is to import the tests of claim preclusion into a ‘claim‐splitting’ doctrine that enables a court, as a matter of discretion, to dismiss an action that presents the same claim, as measured by claim‐preclusion tests, as another pending action.”). 11 No. 18‐1558
1 pending; the latter is generally26 raised, after a prior suit is resolved 2 on the merits, to preclude a party (or its privy) from relitigating claims 3 in a subsequent suit that were or could have been raised in the prior 4 action.27
5 II. Privity Rule
6 Just as we typically do not allow the doctrine of claim 7 preclusion to bind nonparties to a judgment because they have “not 8 had a full and fair opportunity to litigate the claims and issues settled 9 in that suit,”28 we generally do not apply the rule against duplicative 10 litigation when the defendants in two similar actions are different.29 11 Indeed, a plaintiff has “as many causes of action as there are 12 defendants to pursue.”30 As the Restatement (Second) of Judgments 13 states:
14 When a person suffers injury as the result of the 15 concurrent or consecutive acts of two or more persons, 16 he has a claim against each of them. If he brings an action 17 against one of them, he is required [by the doctrine of 18 claim preclusion] to present all the evidence and theories
26 We say that claim preclusion “generally” is only raised after one suit has been resolved on the merits because the doctrine can apply while two similar suits are pending when the district court denies on the merits a motion to amend the complaint to add new claims while permitting the existing claims to proceed. In such a case, the denial of leave to amend on the merits, as opposed to a denial on procedural grounds such as timeliness, operates as a bar. The plaintiff cannot file a new, second action raising those denied claims. See Curtis, 226 F.3d at 139. That precise scenario does not apply to this case, however, because plaintiffs never sought, and were never denied, leave to amend their complaint in Sacerdote I to add Cammack as a defendant. 27 Curtis, 226 F.3d at 138.
28 Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (internal quotation marks omitted).
29 See The Haytian Republic, 154 U.S. at 124 (the rule against duplicative litigation
may only be invoked when the cases are the same and involve “the same parties, or, at least, such as represent the same interests”). 30 N. Assur. Co. of Am. v. Square D Co., 201 F.3d 84, 88–89 (2d Cir. 2000). 12 No. 18‐1558
1 of recovery that might be advanced in support of the 2 claim against the obligor . . . . But the claim against others 3 who are liable for the same harm is regarded as 4 separate.31 5 In other words, if a plaintiff suffers the same harm at the hands of two 6 defendants, the plaintiff may institute one suit against one defendant 7 and a separate suit against another defendant alleging that each 8 caused his injury.32 This is known as the rule against nonparty 9 preclusion.33
10 There are specific exceptions to this rule, however, that 11 recognize narrow circumstances in which applying a preclusion 12 doctrine to a nonparty is appropriate, fair, and does not violate the 13 nonparty’s due process rights. When any of these circumstances is 14 present, the parties are said to be in privity.34 In the context of claim 15 preclusion, if a party to an action is found to be in privity with a party 16 to a previous action, then the “privy is bound with respect to all the 17 issues that were raised or could have been raised in the previous 18 lawsuit.”35
19 The circumstances sufficient to invoke the privity rule have 20 evolved over time. In 2008, the Supreme Court distilled the current
31 Restatement (Second) of Judgments § 49 (1982). 32 See N. Assurance, 201 F.3d at 88–89. We do not consider here how other doctrines and rules of civil procedure, such as joinder of parties, might impact a plaintiff’s ability to bring separate claims against different defendants regarding the same harm caused by both. 33 See Taylor, 553 U.S. at 892.
34 See id. at 898 n.8 (“The substantive legal relationships justifying preclusion are
sometimes collectively referred to as ‘privity.’ The term ‘privity,’ however, has also come to be used more broadly, as a way to express the conclusion that nonparty preclusion is appropriate on any ground.” (internal citations omitted)); see also Wright & Miller § 4449 (“[T]he privity label simply expresses a conclusion that preclusion is proper.”). 35 Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 346 (2d Cir. 1995). 13 No. 18‐1558
1 “recognized exceptions” to the rule against nonparty preclusion into 2 six categories: (1) agreements by a nonparty to be bound by the 3 determination of issues in an action between others; (2) certain pre‐ 4 existing substantive legal relationships based in property law 5 between the nonparty and the party, such as preceding and 6 succeeding owners of property, bailee and bailor, and assignee and 7 assignor; (3) representative suits where the nonparty’s interest was 8 adequately represented36 by a party with the same interests, such as 9 class actions and suits brought by trustees, guardians, and other 10 fiduciaries; (4) when a nonparty has assumed control over the 11 litigation in which the judgment was rendered; (5) when a nonparty 12 is acting as a proxy, agent, or designated representative of a party 13 bound by a judgment; and (6) when a statutory scheme expressly 14 forecloses successive litigation by nonlitigants, so long as the scheme 15 comports with due process.37
16 Although most of the treatises and cases—including Taylor— 17 that discuss the privity rule do so in the context of claim preclusion, 18 the same principles apply in the context of the rule against duplicative 19 litigation. In The Haytian Republic, the Supreme Court implicitly 20 recognized that the privity rule applies to the rule against duplicative 21 litigation when it stated that the rule may only be invoked when the 22 two pending suits have “the same parties, or, at least, such as represents 23 the same interests.”38 Since then, courts, including ours, have
36 The term “adequate representation” was further defined by the Court as requiring certain procedural protections. These requirements are discussed in greater detail below. See infra, notes 64–66 and accompanying text. 37 Taylor, 553 U.S. at 893–95.
38 154 U.S. at 124 (emphasis added). As illustrated by Taylor, the privity rule has
evolved over time such that a party merely representing the same interest as a nonparty, without more, is no longer sufficient to justify a finding of privity and to apply a preclusion doctrine to a nonparty. See infra, notes 64–66 and accompanying text. At the time of The Haytian Republic, however, this was a 14 No. 18‐1558
1 frequently applied principles originating in the doctrine of claim 2 preclusion to the similar context of the rule against duplicative 3 litigation.39 We can think of no reason—and the parties have 4 presented none—why the principles underlying the privity rule in the 5 context of other preclusion doctrines should not apply equally in the 6 context of the rule against duplicative litigation.
7 III. Standard of Review
8 We review de novo both a district court’s dismissal of a 9 complaint40 and its ruling on preclusion.41 At the dismissal stage, we 10 must accept as true all factual claims in the complaint and draw all 11 reasonable inferences in the plaintiff’s favor.42 We review for abuse 12 of discretion a district court’s decision to stay or dismiss a suit as 13 duplicative of another federal court suit.43 However, when a district 14 court’s determination that parties are in privity rests on a “purely 15 legal proposition,” we review that decision, like all questions of law, 16 de novo.44 Moreover, a district court necessarily abuses its discretion 17 when it makes an error of law.45
sufficient condition to invoke the privity rule and bar a nonparty from instituting a similar suit, and demonstrates that the concepts of privity and nonparty preclusion apply to the rule against duplicative litigation. 39 See N. Assur., 201 F.3d at 88–89 (declining to apply the rule against duplicative
litigation to bar a suit by a plaintiff against one defendant that was identical to, and arose out of the same events as, another suit by the same plaintiff against a different defendant and alleged joint tortfeasor because the parties were not in privity); see also Davis, 534 F. App’x at 48; Vancouver v. NCO Fin. Srvs., Inc., 857 F.3d 833, 841–42 (11th Cir. 2017) (asking whether the case “involves the same parties and their privies” in applying the rule against duplicative litigation); Wright & Miller § 4404. 40 See Singh v. Cigna Corp., 918 F.3d 57, 62 (2d Cir. 2019).
41 See Hoblock v. Albany Cty Bd. of Elections, 422 F.3d 77, 93 (2d Cir. 2005).
42 See Singh, 918 F.3d at 62.
43 See Curtis, 226 F.3d at 138.
44 See Hoblock, 422 F.3d at 93–94.
45 See United States v. Hasan, 586 F.3d 161, 167–68 (2d Cir. 2009). 15 No. 18‐1558
1 IV. The District Court’s Finding of Privity Between NYU 2 and Cammack
3 There is no dispute that the facts and legal claims asserted in 4 Sacerdote II are substantially similar to those asserted in Sacerdote I. 5 Nor is there a dispute that NYU and Cammack are different parties. 6 The question, therefore, is whether the district court erred in 7 concluding that NYU and Cammack are in privity, such that the rule 8 against duplicative litigation should apply to bar recovery against 9 Cammack in Sacerdote II. We conclude that the district court did so 10 err.
11 The district court concluded that NYU and Cammack were in 12 privity based on the following facts taken from the amended 13 complaint:
14 Cammack has provided advisory services to NYU since 15 2009. The Amended Complaint alleges that Cammack is 16 a co‐fiduciary to the Plans, and is a party to a contract 17 that requires it to advise NYU on investment options. It 18 also claims that Cammack participated in and enabled 19 the NYU defendants to commit a number of the alleged 20 breaches of fiduciary duty by providing imprudent 21 investment advice, and by failing to make any reasonable 22 effort under the circumstances to remedy the breaches 23 . . . . [However,] NYU and Cammack have different 24 states of incorporation and different principal places of 25 business, and [plaintiffs allege that] they took 26 independent actions with regard to the Plans’ losses.46 27 The district court found that these facts supported the conclusion that 28 “Cammack has a ‘sufficiently close relationship’ to NYU to justify
Sacerdote II, 2018 WL 6253366, at *1–2 (internal citations and quotation marks 46
omitted). 16 No. 18‐1558
1 preclusion.”47 It also rejected plaintiffs’ argument that Cammack and 2 NYU’s interests will “sharply diverge” to the extent that Cammack’s 3 advice was imprudent.48
4 We disagree that Cammack and NYU’s interests are sufficiently 5 identical to support a finding of privity. Under ERISA’s co‐fiduciary 6 provision, a co‐fiduciary is only liable for another fiduciary’s 7 independent breach if the co‐fiduciary (1) knowingly participates in 8 or conceals the breaching act or omission of another fiduciary; (2) 9 enables another fiduciary to breach by failing to comply with ERISA’s 10 “prudent man” standard of care; or (3) knows of another fiduciary’s 11 breach and fails to make reasonable efforts to remedy the breach.49 12 Unless this is so, the co‐fiduciaries’ interests are not aligned. Here, 13 the bases for liability as to NYU and Cammack are not necessarily the 14 same; it is possible that one party could be found liable and the other 15 not.
16 Indeed, as plaintiffs plausibly pleaded, Cammack and NYU 17 had separate and distinct responsibilities as co‐fiduciaries to the 18 plans, and could be found liable for plaintiffs’ injuries for separate 19 reasons. “Cammack’s potential liability arises from providing flawed 20 advice to the Committee . . . .”50 On the other hand, “NYU’s 21 [potential] liability would arise from failing to independently 22 investigate the merits of the Plans’ investments, or failing to 23 determine whether it was reasonable to rely on Cammack.”51
47 Id. at *2 (quoting Cent. Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A., 56 F.3d 359, 368 (2d Cir. 1995). 48 Id.
49 29 U.S.C. § 1105(a); see also 29 U.S.C. § 1104(a)(1) (defining the “prudent man”
standard of care). 50 Appellant’s Br. at 18.
51 Id. at 18–19. 17 No. 18‐1558
1 A reasonable trier of fact could find that Cammack provided 2 flawed advice to NYU and was liable for plaintiffs’ losses, while also 3 finding that NYU reasonably relied on Cammack’s advice, 4 notwithstanding its flawed nature. Conversely, a reasonable trier of 5 fact could find that Cammack provided reasonably prudent advice to 6 NYU, but that NYU imprudently rejected Cammack’s advice or failed 7 to properly implement Cammack’s investment recommendations. In 8 these plausible scenarios, NYU and Cammack’s interests would 9 surely diverge, to the point where it would be in each of their interests 10 to place the blame on the other. Especially at the pleading stage, it 11 was error for the district court to accept Cammack’s argument that its 12 interests were identical to those of NYU over plaintiffs’ plausible 13 assertions to the contrary.52
14 Even assuming that Cammack and NYU have a sufficiently 15 close relationship and identical interests, the district court further 16 erred because the presence of these two conditions alone is 17 insufficient as a matter of law to support a finding of privity. The 18 district court relied primarily on Central Hudson for the proposition 19 that identical interests and a sufficiently close relationship are all that 20 is required to find parties in privity. That case, however, does not 21 support that proposition. Central Hudson held that to determine 22 whether nonparty preclusion is warranted, a court must also “inquire
52In its brief, Cammack argues that the district court’s determination that NYU and Cammack had identical interests was proper because plaintiffs “never made any showing” “that NYU’s interests will sharply diverge from Cammack’s.” See Appellee’s Br. at 29. But the burden of proving privity and preclusion is on the party asserting that affirmative defense. See Taylor, 553 U.S. at 907. It was therefore Cammack’s burden to prove that its interests were aligned with NYU’s. We conclude it has failed to do so because plaintiffs have plausibly alleged realistic scenarios in which Cammack and NYU’s interests are not identical, but, in fact, materially conflict. 18 No. 18‐1558
1 whether a [non]party controlled or substantially participated in the 2 control of the presentation on behalf of a party to the prior action.”53
3 The Supreme Court’s decision in Taylor is instructive. In 4 recognizing the six circumstances sufficient to establish privity, the 5 Court rejected a proposed seventh category called virtual 6 representation.54 The contours of a proposed virtual representation 7 category have differed from circuit to circuit.55 The formulation 8 rejected by the Court in Taylor would have found a nonparty to be in 9 privity with a party if the nonparty (1) had the same interests as the 10 party; (2) was adequately represented by the party; and (3) at least 11 one of the following conditions was present: (a) a close relationship 12 between the nonparty and party; (b) substantial participation by the 13 nonparty in the other action; or (c) tactical maneuvering by the 14 nonparty to avoid preclusion.56 The Court refused to adopt this 15 virtual representation exception to the rule against nonparty 16 preclusion, stating that it would be “at odds with the constrained 17 approach to nonparty preclusion” adopted by the Court’s prior 18 decisions, and would circumvent the protections guaranteed by the 19 Due Process Clause.57 In holding that that NYU and Cammack were 20 in privity based solely on their sufficiently close relationship and 21 identical interests, the district court essentially adopted an even 22 broader formulation of virtual representation than that rejected by the 23 Court in Taylor. This was in error.
53 Cent. Hudson, 56 F.3d at 368 (modifications incorporated) (internal quotation marks omitted). 54 Taylor, 553 U.S. at 895–96.
55 See id. at 889.
56 Id. 889–90.
57 Id. at 898; see also id. at 901. 19 No. 18‐1558
1 Moreover, none of the six circumstances that Taylor recognized 2 as permitting a finding of privity are present here. There is no 3 allegation or evidence that Cammack agreed to be bound by the 4 disposition of Sacerdote I,58 nor that Cammack assumed control over 5 NYU’s defense in Sacerdote I,59 nor that Cammack is a designated 6 representative or proxy of NYU.60 And no applicable statutory 7 scheme expressly forecloses successive litigation by or against 8 nonlitigants.61
9 We also conclude that NYU and Cammack do not have the type 10 of property rights‐based “pre‐existing substantive legal relationship” 11 that could justify a finding of privity in this case.62 The contract 12 between NYU and Cammack obliges Cammack only to provide 13 investment advisory services to NYU with respect to the plans. It 14 does not create a property rights‐based relationship akin to those 15 recognized in Taylor that could render a nonparty subject to the 16 judgment of a party with which it is in privity.63 No property rights 17 were transferred, assigned, or delegated to or from NYU or 18 Cammack, and the claims in Sacerdote I and II did not concern NYU 19 and Cammack’s mutual or successive rights in the same property. 20 Thus, the contractual and co‐fiduciary relationships between NYU 21 and Cammack are insufficient to find the parties in privity.
22 Finally, we conclude that the representative suit exception to a 23 plaintiff’s right to sue each defendant separately does not apply here. 24 The Supreme Court has described this exception as applying only in
58 See id. at 893–94. 59 See id. at 895. 60 See id.
61 See id.
62 See id. at 894 (internal quotation marks omitted).
63 See id. 20 No. 18‐1558
1 “certain limited circumstances” when the nonparty is “adequately 2 represented by someone with the same interests who was a party to 3 the suit,” such as class actions and suits brought by trustees, 4 guardians, and other fiduciaries.64 A party’s representation of a 5 nonparty is considered ”adequate” for preclusion purposes “only if, 6 at a minimum: (1) [t]he interests of the nonparty and her 7 representative are aligned; and (2) either the party [in the first suit] 8 understood herself to be acting in a representative capacity [of the 9 nonparty] or the original court took care to protect the interests of the 10 nonparty.”65 Adequate representation often also requires “(3) notice 11 of the original suit to the persons alleged to have been represented.”66
12 Cammack has made no argument that NYU understood itself 13 to be acting in a representative capacity for Cammack in litigating 14 Sacerdote I, or that the district court took care to protect the interests 15 of Cammack in Sacerdote I.67 Without these procedural protections, 16 privity cannot be said to exist on the basis that NYU adequately 17 represented Cammack’s interests in Sacerdote I, such that plaintiffs are 18 now precluded by the rule against duplicative litigation from 19 asserting claims against Cammack arising out of the same nucleus of 20 acts at issue in Sacerdote I.
21 In summary, because the relationship between NYU and 22 Cammack does not fit into any of the privity categories recognized by 23 the Supreme Court in Taylor as sufficient to justify an exception to the 24 rule against nonparty preclusion, the district court erred in 25 concluding that NYU and Cammack were in privity. It is insufficient
64 Id. at 894–95 (modifications incorporated) (internal quotation marks omitted). 65 Id. at 900 (internal quotation marks and citations omitted). 66 Id.
67 Because preclusion is an affirmative defense, it was Cammack’s burden to plead
and prove that these procedural protections were in place to justify nonparty preclusion under the representative suit exception. See id. at 907. 21 No. 18‐1558
1 as a matter of law to find two parties in privity based solely on the 2 fact that they share a sufficiently close relationship and have aligned 3 interests. This is precisely the type of virtual representation theory of 4 privity that the Supreme Court rejected in Taylor. Because NYU and 5 Cammack are not in privity, the district court’s dismissal of Cammack 6 from Sacerdote II pursuant to the rule against duplicative litigation 7 was legal error, and thus an abuse of discretion, and a violation of the 8 fundamental principle that a plaintiff has “as many causes of action 9 as there are defendants to pursue.”68
10 CONCLUSION
11 We have considered the parties’ other arguments and find them 12 to be without merit. We therefore VACATE the district court’s order 13 dismissing Cammack from Sacerdote II and REMAND the matter back 14 to the district court.
68 N. Assur., 201 F.3d at 88–89.