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Dr. Fadi Chaaban, Dr. Sabino v. Dr. Mario A. Criscito

January 31, 2011


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



This matter comes before the Court upon: (1) the motion for summary judgment filed by Plaintiffs Doctors Fadi Chaaban, Sabino R. Torre, Constantinos A. Costeas, and Anthony J. Casella (collectively, "Plaintiffs"); and (2) the motion for summary judgment filed by Defendant Doctor Mario A. Criscito ("Defendant"). (Docs. No. 57, 58.) The Court has reviewed the parties' submissions and decided these motions without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Plaintiffs' motion will be granted in large part, and Defendant's motion will be denied in all respects.


Plaintiffs are trustees of the Diagnostic & Clinical Cardiology, P.A. ("DCC") Profit Sharing Plan ("Profit Sharing Plan"). (Pls.' R. 56.1 ¶¶ 1-4; Doc. No. 57-2.) (Def.'s Responsive R. 56.1 ¶¶ 1-4; Doc. No. 62-13.) Defendant was the sole trustee of the Profit Sharing Plan and its predecessor, the DCC Money Purchase Plan ("Money Purchase Plan"), from April 1976 until his removal from that position by Plaintiffs in July 2007. (Pls.' R. 56.1 ¶¶ 5, 35; Def.'s Responsive R. 56.1 ¶¶ 5, 35.) (Def.'s R. 56.1 ¶¶ 6, 7, 8; Doc. No. 58-17.) (Pls.' Responsive R. 56.1 ¶¶ 6, 7, 8; Doc. No. 61-1.) After July 2007, Plaintiffs assumed responsibilities as Plan trustees. (Id.) The Money Purchase Plan and Profit Sharing Plan (together, "Plan") are pension plans that include both segregated and commingled accounts. (See Pls.' R. 56.1 ¶ 18; see Def.'s Responsive R. 56.1 ¶ 44.) By December 31, 1997, Defendant had placed the retirement savings of Plan participants in the commingled account in several institutions, including Morgan Stanley Dean Witter ("Morgan Stanley account") and Solomon Smith Barney ("Smith Barney account"). (Pls.' R. 56.1 ¶ 28; Def.'s Responsive R. 56.1 ¶ 28.) The American Pension Corporation ("APC") has been the third party administrator of the Plan since 1981 and prepared annual reports regarding the commingled accounts based on information provided by Defendant. (Pls.' R. 56.1 ¶¶ 16, 20; Def.'s Responsive R. 56.1 ¶¶ 16, 20.*fn1

As of December 31, 1999, seventeen individuals had their retirement funds in commingled accounts. (Flax Decl. Ex. 42 at 11719; Doc. No. 57-10.) As of January 13, 2000, Defendant had expressed an intention to have Plan participants in the commingled accounts transfer their assets into newly created segregated individual accounts. The information contained in the annual report prepared by APC in 1999 was used in the creation of the segregated accounts. (Flax Decl. Ex. 51.) (Pls.' R. 56.1 ¶¶ 48, 49.) (Pls.' R. 56.1 ¶ 44; Def.'s Responsive R. 56.1 ¶ 44.) After most participants transferred their assets into segregated accounts, only Defendant and two other Plan participants knowingly retained an interest in the Morgan Stanley commingled account. (Pls.' R. 56.1 ¶ 55.) (Flax Decl. Ex. 51.) (Flax Decl. Ex. 39, Warnock Dep., 164:20-166:4; Doc. No. 57-8.)

Based generally upon the foregoing basic undisputed facts, Plaintiffs filed the instant complaint in United States District Court for the District of New Jersey on March 28, 2008. (Doc. No. 1.) In their complaint, Plaintiffs allege Defendant's various actions violated his fiduciary duties under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. (Id. at ¶ 1.) Specifically, Plaintiffs allege that "[a]s a direct result of defendant's fraudulent concealment, fraudulent misrepresentations, self-dealing, diversion of Plan assets, and unpaid loan from the Plan, he caused damage to the Plan and its participants and beneficiaries and breached his fiduciary duties under ERISA as the Plan's trustee." (Id. at ¶ 71.) To remedy Defendant's breach of fiduciary duties, Plaintiffs seek:

1. restitution of all losses to the Plan

2. disgorgement of all profits that defendant made using assets of the Plan

3. the imposition of a constructive trust on all real estate or other items in which defendant acquired any right, title or interest through the improper use of Plan assets

4. a full accounting by defendant of the use of Plan assets during his tenure as the sole trustee of the Plan

5. permanent injunctive relief preventing defendant from using or benefiting [sic] in any manner whatsoever from Plan assets to which he is not entitled

6. attorney's fees and costs

7. compensatory damages suffered by the Plan

8. punitive damages by reason of defendant's fraud

9. such other, further, or different relief as the Court deems just or equitable. (Id.)

Defendant filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) in lieu of an answer on May 7, 2008, and therein argued that Plaintiffs' complaint was barred by the statute of limitations. (Doc. No. 5.1.) On June 24, 2008, then-presiding Judge William J. Martini, U.S.D.J. denied Defendant's motion after he concluded that "Plaintiffs adequately allege that Defendant concealed his wrongdoing, preventing Plaintiffs from discovering it until quite recently." (Doc. No. 12.) Thereafter, Plaintiff Dr. Casella filed a motion for sanctions on July 2, 2008 (Doc. No. 14), and a request for default on July 16, 2008 (Doc. No. 15). The Clerk of the Court entered default on the same day. On July 17, 2008, the case was reassigned to Judge Joseph A. Greenaway, Jr., U.S.D.J., and referred to Judge Madeline C. Arleo, U.S.M.J. (Doc. No. 16.) On July 21, 2008, Defendant moved to set aside the default entered against him. (Doc. No. 17) Judge Greenaway granted that motion and also denied Dr. Casella's motion for sanctions on February 5, 2009. (Doc. Nos. 24, 25.)

Following these decisions, Defendant filed an answer and counterclaim to Plaintiffs' complaint on February 17, 2009, and therein provided general denials, admissions, and affirmative defenses. (Doc. No. 26.) Defendant's counterclaim alleged that "plaintiffs have acted to interfere with his access to and control over [his] accounts . . . resulting in the substantial loss of value of the assets held in these accounts . . . as a result of [which Defendant] suffered serious losses to the value of the assets held in these accounts." (Id.) Defendant has since voluntarily abandoned his counterclaim. (Def.'s Opp'n. Br. at 35; Doc. No. 62-12.)

On March 15, 2010, the case was reassigned to the undersigned. (Doc. No. 39.) Subsequently, on April 23, 2010, Defendant moved for leave to file a third-party complaint against APC, Warnock, and Dominique Sandra Eck, a pension consultant employed by APC. (Doc. No. 42.) That motion was denied by Judge Arleo on June 21, 2010. (Doc. No. 52.)

Ultimately, Plaintiffs and Defendant filed their present motions for summary judgment on September 17, 2010. (Doc. Nos. 57, 58.) Both motions are opposed. (Doc. Nos. 61, 62.) Defendant opposes Plaintiffs' motion by arguing that there are issues of material fact, that there was no fraud, and that Plaintiffs are estopped from alleging breaches of fiduciary duty against Defendant based on negligence or strict liability theories. Similarly, Plaintiffs oppose Defendant's claim that he is entitled to summary judgment by arguing that there was indeed fraudulent conduct, and as a result, the "fraud or concealment" exception to the statute of limitations is applicable, ...

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