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JORGENSEN v. PRUDENTIAL INS. CO. OF AMERICA

March 16, 1994

MARK JORGENSEN, Plaintiff,
v.
PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendants.



The opinion of the court was delivered by: DICKINSON R. DEBEVOISE

 Debevoise, District Judge

 The case is presently before the court on defendant's motion to strike plaintiff's notice of dismissal filed pursuant to FED. R. CIV. P. 41 (a)(1). I directed that in addition to addressing defendant's motion, the parties address plaintiff's previously filed motion to remand this action to the state court from which defendant removed it.

 PROCEDURAL HISTORY

 Plaintiff Mark Jorgensen filed a complaint in the New Jersey Superior Court on November 4, 1993. Plaintiff asserted two claims: (i) violation of the New Jersey Conscientious Employee Protection Act ("CEPA"), N.J.S.A. 34:19-1 et seq. and (ii) defamation.

 Defendant removed the action from state court, asserting that the action is preempted by the Employee Retirement Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq.

 Defendant also moved to dismiss the complaint pursuant to FED. R. CIV. P. 12(b)(6) on ERISA preemption grounds. Plaintiff moved to remand the case to state court. The parties submitted affidavits in support of and in opposition to the various motions.

 Before the motions were argued, I entered a protective order placing certain documents under seal and imposing requirements upon plaintiff with respect to disclosure of confidential information. Thereupon plaintiff filed a notice of voluntary dismissal pursuant to FED. R. CIV. P. 41 (a)(1). Shortly thereafter, plaintiff refiled a similar or identical complaint in the state court and defendant removed the new state court action to this court. The circle was completed when the new action was assigned to me.

 Defendant moved to strike plaintiff's dismissal of the original action. I directed that on the return date of defendant's motion that parties be prepared to argue plaintiff's remand motion. *fn1"

 For the following reasons, defendant's motion to strike plaintiff's notice of dismissal will be granted, and plaintiff's motion for remand to the state courts will also be granted.

 STATEMENT OF FACTS *fn2"

 In or about May of 1992, defendant reemployed plaintiff in its Prudential Real Estate Investment ("PREI") section as its Managing Director in charge of the real estate portfolios in the PRISA I, PRISA II, and PRISA III accounts ("PRISA"). *fn3" Certification of Mark Jorgensen, § 2 ("Certification"). Plaintiff's duties included overseeing investment portfolios and implementing investment objectives, although he did not have authority to buy or sell properties. Certification § 3.

 When he returned to Prudential, plaintiff visited almost 160 PRISA properties. Complaint, § 5. As a result of these visits, plaintiff became concerned about the valuation of these properties. Certification § 9 & 10; Complaint § 6. Plaintiff expressed these concerns to his supervisors and submitted a report detailing his concerns regarding overvaluation of PRISA holdings. Complaint § 9. On July 27, 1993, plaintiff refused to sign the quarterly report. Complaint at § 12. Consequently, several meetings took place with a law firm and other employees of defendant, culminating in plaintiff being placed on a leave of absence, and being stripped of all his responsibility for management of PRISA portfolios. Complaint at §§ 13-19.

 Plaintiff alleges that these were retaliatory acts for his raising the question of possible overvaluation of PRISA properties. Complaint at § 28. His first count alleges damage to his reputation, severe mental anguish, stress, humiliation, and loss in income and other benefits. His second claim alleges defamation by defendant's accusations that he violated Securities and Exchange Commission ("SEC") regulations. Complaint at § 30-32. *fn4" The complaint asserts only state law causes of action and does not rely in any way upon ERISA.

 Plaintiff in his certification and defendant's Assistant General Counsel, Joseph D. Margolis in his certification have described the general nature of the PRISA accounts and defendant's role with respect to them. The three PRISA accounts were open-ended real estate equity funds. Each was established to offer tax-qualified pension plans the opportunity to invest their funds in a managed portfolio of real property on a commingled basis. According to Margolis, each PRISA account was subject to the provisions of ERISA. PRISA accounts were managed by PREI, which was a unit of defendant. The sole function of PREI was to provide real estate investment advisory and portfolio asset management services to institutional investors.

 Participation in PRISA accounts is limited to pension plans qualified under Section 401 (a) of the Internal Revenue Code, governmental plans qualified to hold separate account contracts and other plans where a unit value account is maintained for each participant and 33% or less of the fund for which such unit value is determined is placed in PRISA. Some of the assets in the commingled funds of PRISA I and II are not pension accounts that are governed by ERISA, such as state or public funds. *fn5" Defendant is currently seeking to expand its PRISA accounts to include foreign investors, endowments, and foundations - entities whose plans would not be subject to ERISA.

 The PRISA accounts are governed by a document entitled "Essentials of Method of Operation" and participants execute a contract, appointing defendant as an investment manager of the participant's investment in PRISA. Neither document refers to ERISA although in the former contract defendant acknowledges that it is a fiduciary with respect to a participant's investment in PRISA. According to Assistant General Counsel Margolis "in its fiduciary role as an investment manager, Prudential is subject to ERISA and at all times attempts to manage PRISA portfolios in accordance with its obligations as an ERISA fiduciary." (Margolis Certification, § 6).

 As Managing Director overseeing the investment of PRISA portfolios, plaintiff was unaware that these portfolios were subject to separate ERISA requirements and none of his criticisms or questions concerning their valuations were based on ERISA requirements or regulations. Rather his evaluations and judgments were based on his understanding of sound investment and accounting practices and the general duties which a fund manager has to its clients. His use of the term "fiduciary" in his discussions and memoranda to his superiors was not in a technical ERISA sense but reflected his understanding of defendant's obligations.

 DISCUSSION

 I. Motion to Strike

 
This rule affixes a bright-line test to limit the right of dismissal to the early stages of litigation, See D.C. Electronics, Inc. v. Nartron Corp., 511 F.2d 294, 296-97 (6th Cir. 1975); Universidad Central Del Caribe, Inc., 760 F.2d [14,] 19 n.5 [1st Cir. 1985]. In the words of the Court of Appeals for the Seventh Circuit,
 
Rule 41 (a)(1) as it was drafted simplifies the court's task by telling it whether a suit has reached the point of no return. If the defendant has served either an answer or a summary judgment motion it has; if the defendant has served neither, it has not.
 
Winterland Concessions Co. v. Smith, 706 F.2d 793, 795 (7th Cir.).

 Id.; see 5 Moore's Federal Practice § 41.02[1].

 In Manze, the Third Circuit criticized the decision in Tele-Views News Co. v. S.R.B. TV Publishing Co. and reversed a lower court decision that relied on its holding. In Tele-Views, the court held that there was "no logical reason for differentiating a motion for summary judgment, a motion to dismiss for failure to state a claim accompanied by extraneous matter, and a motion to dismiss for failure to state a claim not accompanied by extraneous matter-at least for the purposes of Rule 41 (a)." Tele-Views News Co. v. S.R.B. TV Publishing Co., 28 F.R.D. 303, 307-08 (E.D.Pa. 1961) (citations omitted).

 In Manze the Circuit did not allow conversion of a Rule 12 (b)(6) motion into a summary judgment motion because: (i) defendant did not intend a Rule 56 motion, (ii) the district court did not treat it as such, (iii) the district court did not allow the-parties reasonable opportunity to present material pertinent to a Rule 56 motion, *fn6" and (iv) the district court dismissed the action because of a failure to state a claim. Manze, 817 F.2d at 1066.

 By disallowing conversion of a Rule 12 (b)(6) motion into a summary judgment motion in Manze, the Court of Appeals recognized that such a conversion was allowable:

 
Concededly, a Rule 12(b)(6) motion may be treated as one for summary judgment for Rule 41(a)(1)(i) purposes. See, e.g., Exxon Corp. v. Maryland Casualty Co., 599 F.2d 659, 661 (5th Cir. 1979); Bangor Baptist Church v. Maine, Dep't of Educ. and Cultural Services, 92 F.R.D. 123, 124 (D.Me. 1981).

 Manze, 817 F.2d at 1066; see also Wiley v. Hughes Capital Corp., 746 F. Supp. 1264, 1275-76 (D.N.J. 1990); Rose v. Bartle, 871 F.2d 331, 339-40 (3d Cir. 1989). The Court established guidelines for such a conversion: (i) matters outside the pleading must accompany defendant's Rule 12 (b)(6) motion, *fn7" (ii) parties must be beyond the early stages of litigation, (iii) defendant must have intended a motion that would be fatal to plaintiff's cause of action, (iv) the district court must treat the motion as potentially fatal to plaintiff's cause ...


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