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DAILEY v. NATIONAL HOCKEY LEAGUE

December 30, 1991

ROBERT DAILEY AND REGGIE LEACH, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
THE NATIONAL HOCKEY LEAGUE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gerry, Chief Judge.

  OPINION

Plaintiffs, two former professional hockey players, filed this class action lawsuit on June 6, 1991, alleging violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., in connection with the funding, administration, and management of the National Hockey League Pension Plan and Trust. Defendants are the National Hockey League (NHL), the National Hockey League Pension Society, the Manufacturer's Life Insurance Company ("Manulife"), and numerous member clubs of the NHL.

All defendants have moved to dismiss on the grounds that another previously filed lawsuit addressing the same issues is now pending in Canada. Defendants cite three legal doctrines which they argue compel this court to relinquish jurisdiction over this action and leave the matter to be resolved by the Canadian court: 1) the Princess Lida of Thurn and Taxis v. Thompson, 305 U.S. 456, 59 S.Ct. 275, 83 L.Ed. 285 (1939) doctrine, 2) the forum non conveniens doctrine, and 3) the Colorado River Water Conservation District v. U.S., 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) abstention doctrine. Plaintiffs argue that dismissal is inappropriate under all three doctrines, primarily because ERISA is subject to the exclusive jurisdiction of the United States District Courts.*fn1 For the reasons set forth below, defendants motions to dismiss are denied.

I.  PLAINTIFFS' CLAIMS

The NHL pension plan has been in existence since 1947, but in 1967 its terms and conditions were set down in a document called the National Hockey League Club Pension Plan and Trust Agreement (the "1967 Agreement") which designated the NHL Pension Society as trustee of the Pension Plan and Trust. Until 1986, the Pension Society invested substantially all of the funds under the plan in a group annuity contract with defendant Manulife. Under this contract, to the extent that Manulife was able to earn a rate of return on the funds deposited in excess of the internal rate of return on which the contract was based, "surplus funds" would be generated.

The 1967 agreement contained a provision directing that surplus funds generated by the plan were to be used solely for the benefit of participating players and were to be allocated to their accounts on a regular basis at five year intervals. It also contained several clauses stating that all funds and assets of the Pension Plan and Trust were to be used for the exclusive benefit of plan participants and their beneficiaries, as well as a clause prohibiting amendment of the agreement in any way that would vitiate or contradict the exclusive benefit provision. In accordance with this agreement, surplus funds existing as of April 30, 1967 were allocated to participating players.

In 1972 the agreement was amended and restated in the "First Restated Agreement," purporting to be effective retroactively to May 1, 1969. The exclusive benefit provisions and the prohibition on amendments remained unchanged from the 1967 Agreement. The only relevant changes made were the provision of two additional allocations of surplus funds from the Pension Plan and Trust to participants as of April 30, 1968 and April 30, 1969. These allocations were subsequently made in accordance with the amended agreement. In 1977 the agreement was amended again, but no relevant changes were made.

Although under the then existing Agreement as amended, additional allocations of surplus should have been made as of 1972 and 1977, no such allocations were made, despite the fact that substantial surplus funds were accruing in the fund at that time. In 1982 an agreement was reached between Manulife and the NHL Pension Society, whereby Manulife agreed to disgorge approximately $2,993,000.00 of surplus funds from the Pension Plan and Trust to the Pension Society. The Pension Society allocated approximately one million dollars of this surplus to the accounts of retired participants in the pension plan; but the remaining approximately $1,993,000.00 was refunded to member clubs and the NHL and was removed altogether from the Pension Plan and Trust. No notice was given to participants of this diversion of plan assets to the benefit of the NHL and member clubs.

In 1983 yet another amendment was made, the "First Amendment to the Second Restated Agreement," which purported to be effective retroactively to January 1, 1982. Although this amendment did not alter the provisions of the agreement providing that all funds be used solely and exclusively for the benefit of plan participants and beneficiaries, it did provide that present and future surplus funds were to be allocated to the NHL and the member clubs as well as plan participants, each allocation to be made in proportion to the contributions made to the plan by that recipient. Plaintiffs contend that this provision and the 1982 diversion of funds violated the 1967 agreement and subsequent amendments in that it provided for the use of funds under the plan other than for the benefit of participants and their beneficiaries.

The next significant amendment was executed in 1987, the "Fourth Restated Agreement," purporting to be effective retroactively to July 1, 1986. This amendment effectively converted the Pension Plan and Trust from a defined benefit pension plan into a defined contribution pension plan. Thus, all benefits accruing to participants under the plan as of the effective date were to be in the form of defined contributions allocated specifically to individual accounts.

Around the same time, the Pension Society, the NHL, and the member clubs made an agreement with Manulife, whereby Manulife agreed to refund an additional twenty-four million dollars in surplus funds that had previously accrued in the Pension Plan and Trust, in exchange for the Pension Society's agreement to allow Manulife to convert the pension fund from a participating to a non-participating group contract such that surplus funds would no longer be generated under the plan. No notice of this agreement was given to plan participants, and of the twenty-four million dollars refunded to the Pension Society, less than four and a half million dollars were allocated to the accounts of retired participants of the plan. Approximately sixteen and a half million dollars were allocated to the accounts of member clubs. Plaintiffs claim that these actions violated various provisions of ERISA, specifically: §§ 404, 409, 29 U.S.C. § 1104, 1109, imposing fiduciary duties with respect to the management of pension funds; and § 403(c)(1), 29 U.S.C. § 1103(c)(1), prohibiting inurement of the assets of a plan to the benefit of an employer. Plaintiffs' complaint also includes state law breach of contract and breach of fiduciary duty claims.

II. THE CANADIAN LAWSUIT

On April 26, 1991, before the filing of this suit, seven retired hockey players (not including the plaintiffs in this suit) filed a similar suit in the Ontario Court of Justice. The defendants in that suit are the same as in this suit except that the NHL is not named. That suit has been made, by stipulated order of the Ontario court, a "representative action" — analogous to our class action — with the plaintiff class consisting of all player participants with service under the pension plan on or before June 30, 1982 and their beneficiaries.*fn2 The plaintiffs' claims allege breach of contract and breach of fiduciary duty under Canadian common law.

Plaintiffs seek relief substantially similar to what is requested in the case before us, including: 1) an order directing that all surplus funds generated by the pension fund and withdrawn by defendants be returned to the fund and allocated among the participating players and beneficiaries; 2) a declaration that the Pension Society and the NHL are in breach of their legal and fiduciary duties to the plan participants and beneficiaries; 3) a declaration that all amendments to the 1967 Agreement are null and void to the extent that they purport to allocate surplus funds to persons other than participating players and their beneficiaries; 4) an accounting of monies allocated or to be allocated among plan participants and beneficiaries; and 5) an order removing the NHL Pension Society as trustee and appointing a new trustee.

III.  THE PRINCESS LIDA DOCTRINE

The Princess Lida doctrine holds that where two suits filed in separate courts are "in rem or quasi in rem, so that the court . . . has possession or must have control of the property which is the subject of the litigation in order to proceed with the cause and grant the relief sought," the court in which the suit was filed later must relinquish its jurisdiction and allow the case to proceed solely in the first court. Princess Lida of Thurn and Taxis v. Thompson, 305 U.S. 456, 466, 59 S.Ct. 275, 280, 83 L.Ed. 285 (1939). On the other hand, "where the judgment sought [in one court] is strictly in personam, both [courts], having concurrent jurisdiction, may proceed ...


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