Caltagirone v. NY Community Bancorp, Inc., 2007 U.S. App. Lexis 29516 (2d Cir. Dec. 20, 2007)

Appellate Court Affirms District Court Finding That Plaintiffs Lacked Standing To Sue summarizes Caltagirone v. NY Community Bancorp, Inc., 2007 U.S. App. Lexis 29516 (2d Cir. Dec. 20, 2007):

"The plaintiffs in this case alleged that they were participants in an ERISA plan that suffered losses due to fiduciary breaches…The district court held that neither plaintiff was a "participant" in the plans with statutory standing to sue and granted the defendants' motion to dismiss. The plaintiffs appealed…In its decision on appeal, the U.S. Court of Appeals for the Second Circuit explained that the rights of action that the plaintiffs sought to assert were available only to "participants, beneficiaries, or fiduciaries of an employee benefit plan." A "participant" is "any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan."

One of the plaintiffs terminated the day prior to the merger and was therefore never an employee of the acquiring company. The Court found that, even though the employee was still a 401(k) participant, they had never been a participant in a plan administered by the defendants and therefore lacked standing to sue.

The other participant received a distribution of their 401(k) balance prior to the acquisition, but rolled the funds into an IRA administered by the bank. Since the employee was no longer a plan participant, she had no claim. This participant was also an ESOP participant, but had no claim because ESOP participants automatically receive allocations of shares and ESOP fiduciaries do not have the authority to choose investments under the plan:

"This plaintiff also participated in an Employee Stock Ownership Plan (ESOP). Unlike with her Savings Plan account, this plaintiff continued to hold her NYCB ESOP account after she left NYCB and through the end of the class period. The Second Circuit pointed out, however, that the plaintiffs' theory of fiduciary breaches had "no application to the actions of the ESOP administrators" because participants in the ESOP, unlike those in the Savings Plan, could not chose among a variety of investment options but were instead granted shares of NYCB by virtue of their employment. Thus, the "failure-to-disclose" and the "imprudent-investment" allegations had no possible application to the ESOP plan, because neither the administrators nor the participants had the power to choose their investments under this plan. Accordingly, the circuit court found that this plaintiff did not have a claim for benefits relating to her ESOP account, and it affirmed the district court's decision."