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Lentino v. Fringe Employee Plans Inc.

decided: December 18, 1979.

FRANK LENTINO AND PERRY FLAME, TRUSTEES OF THE TEAMSTERS LOCAL 158 -- SEVERANCE PAY PLAN, APPELLANTS
v.
FRINGE EMPLOYEE PLANS, INC., FRINGE PROGRAMS, INC., 377 FIFTH AVENUE, NEW YORK, NEW YORK 10016 AND HOWARD CASPER AND MARK MULLER, INDIVIDUALLY AND TRADING AS CASPER & MULLER A PARTNERSHIP AND JACK MILLER, RAY A. OATES, MAX COHEN, HAROLD KAPP AND ROBERT G. SLOANE, INDIVIDUALLY AND AS FORMER TRUSTEES OF THE TEAMSTERS UNION 158 SEVERANCE PAY PLAN, APPELLEES V . J. B. JACKSON, ET AL., (THIRD-PARTY DEFENDANTS)



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 76-3296)

Before Adams, Hunter, and Higginbotham, Circuit Judges.

Author: Hunter

Opinion OF THE COURT

This is an appeal from the grant of a Rule 50(a) motion for a directed verdict.*fn1 Appellants, plaintiffs below, contend that the directed verdict was improper because it was granted prior to the close of plaintiffs' evidence. We conclude that appellants were not prejudiced by the exclusion of the final item in their case and affirm the order of the district court.

Plaintiffs are the current trustees of the Employee Severance Pay Plan of Teamsters Local 158 (the Plan), a plan designed to provide benefits to employees upon the termination of their employment. The defendants are Fringe Employee Plans, Inc. (Fringe), the drafters and administrators of the Plan, Mark Muller, legal counsel to the Plan, and his law partner, Howard Casper.*fn2

The Plan, as set forth in a collective bargaining agreement between employers and Teamsters Local 158, was to provide that an inception employee, one employed at the time an employer entered the Plan, would receive, at the time of his severance, 100% Of all employer contributions made on his behalf. A non-inception employee would receive, at the time of his severance, a smaller percentage of employer contributions made on his behalf; the difference would be used to pay for costs of the Plan. The Plan actually drafted by Fringe, however, required all employees, including inception employees, to bear the cost of administering the Plan through pro-rata deductions from their benefits.

Muller's first task as counsel for the Plan was to submit the drafted plan to the IRS for approval. IRS approval would insure that the employers could deduct contributions to the plan as business expenses. In December, 1971, the IRS approved the plan as drafted.

The trustees of the plan, relying on the initial collective bargaining agreement and on materials from Fringe, in its capacity as plan administrator, proceeded to pay out 100% Of employer contributions to severed inception employees, contrary to the provisions of the actual plan. The error was finally discovered in mid-1973, during an audit of the Plan. As a result of the discovery, all payments were suspended until August 8 of that year when the trustees met and, on the recommendation of Fringe and Muller, voted to resume 100% payouts and to seek to have an amended plan approved by the IRS. Muller was to submit this amended plan, which included a 100% Payout provision. Although 100% payouts continued, the amended Plan was never submitted for IRS approval. In 1975, Muller suggested delaying submission of the amended Plan until the IRS ruled on a similar plan, that of Local 463, then under consideration by the Service. Eventually, the IRS disapproved Local 463's plan. Prior to that time, Muller resigned as Plan Counsel. Subsequently, the Plan was terminated.

Plaintiffs sued, alleging that all defendants had breached fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. ยงยง 1001-1381, 1109 (1976). Plaintiffs also alleged legal malpractice against attorneys Muller and Casper.

On the morning of trial, Fringe failed to appear and a default judgment was entered. At this time, plaintiffs, recognizing their inability to prove the existence of a fiduciary relationship, dropped their ERISA allegations against the lawyers and proceeded on the malpractice claim alone. Defendants Casper and Muller promptly moved for dismissal for want of subject matter jurisdiction. The motion was denied.

The plaintiffs advance two theories of malpractice. First, that Muller's advice to continue 100% Payout was negligent. Second, that the subsequent failure to submit the amended plan to the IRS constituted malpractice. At the end of its case, plaintiffs, over objection, sought to introduce the Local 463 plan into evidence, purportedly to show how the Local 158 plan would have fared had it been submitted to the IRS for consideration. The district court inquired whether plaintiffs intended to introduce expert testimony to establish the appropriate standard of care and to explain the relationship between the two plans. Plaintiffs answered in the negative, indicating that following the admission of the Local 463 plan their malpractice case would be closed. The district court granted defendants' motion for directed verdict. Plaintiffs appeal only the dismissal of the malpractice claim against Muller.

JURISDICTION

Before examining the merits of plaintiffs' appeal, we must address the threshold question of whether the district court properly exercised federal subject matter jurisdiction over the malpractice claim against Muller. Appellant asserts two grounds for jurisdiction: diversity and pendent jurisdiction.

The assertion of diversity is frivolous and may be summarily dismissed. Allegations of the citizenship of all parties to the lawsuit must appear in the complaint. See, e. g., Guerrino v. Ohio Casualty Ins. Co., 423 F.2d 419, 421 (3d Cir. 1970). In this case, the complaint contains no such allegations. Nor does the trial ...


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