     18‐1558
     Sacerdote v. Cammack Larhette Advisors, LLC

 1


 2                                 In the
 3            United States Court of Appeals
 4                      For the Second Circuit
 5                                ________
 6
 7                           AUGUST TERM, 2018
 8
 9                         ARGUED: APRIL 8, 2019
10                        DECIDED: OCTOBER 1, 2019
11
12                               No. 18‐1558
13
14    DR. ALAN SACERDOTE, DR. HERBERT SAMUELS, MARIE E. MONACO,
15   MARK CRISPIN MILLER, DR. SHULAMITH LALA STRAUSSNER, DR. JAMES
16     B. BROWN, INDIVIDUALLY AND AS REPRESENTATIVES OF A CLASS OF
17   PARTICIPANTS AND BENEFICIARIES ON BEHALF OF THE NYU SCHOOL OF
18       MEDICINE RETIREMENT PLAN FOR MEMBERS OF THE FACULTY,
19   PROFESSIONAL RESEARCH STAFF AND ADMINISTRATION AND THE NEW
20   YORK UNIVERSITY RETIREMENT PLAN FOR MEMBERS OF THE FACULTY,
21          PROFESSIONAL RESEARCH STAFF AND ADMINISTRATION,
22                         Plaintiffs‐Appellants,
23
24                                    v.
25
26                  CAMMACK LARHETTE ADVISORS, LLC,
27                        Defendant‐Appellee,
28
29     RETIREMENT PLAN COMMITTEE, RICHARD BING, MICHAEL BURKE,
30       CATHERINE CASEY, MARTIN DORPH, SABRINA ELLIS, THOMAS
31      FEUERSTEIN, ANDREW GORDON, PATRICIA HALLEY, TIM HESLER,
32     KATHLEEN JACOBS, MARINA KARTANOS, ANN KRAUS, MARGARET
33     MEAGHER, CYNTHIA NASCIMENTO, NANCY SANCHEZ, TINA SURH,
34    LINDA WOODRUFF, MAURICE MAERTENS, JOSEPH MONTELEONE, RAY
     2                                                                    No. 18‐1558

 1        OQUENDO, CHRIS TANG, NEW YORK UNIVERSITY SCHOOL OF
 2       MEDICINE, NYU LANGONE HOSPITALS, NYU LANGONE HEALTH
 3                              SYSTEM,
 4                           Defendants.*
 5                             ________
 6
 7                 Appeal from the United States District Court
 8                    for the Southern District of New York.
 9                 No. 17 Civ. 8834 – Katherine B. Forrest, Judge.
10                                   ________
11
12   Before: WALKER, CALABRESI, AND LIVINGSTON, Circuit Judges.
13                                       ________
14          Plaintiffs filed an action, which we refer to as Sacerdote I, against
15   New York University (“NYU”) alleging violations of ERISA in
16   connection with two retirement plans sponsored by NYU.                         The
17   district court dismissed most, but not all, of the causes of action
18   against NYU. Plaintiffs then filed this action, which we refer to as
19   Sacerdote II, against a variety of affiliates of NYU and Cammack
20   Larhette Advisors, LLC, alleging substantially the same claims as
21   those in Sacerdote I, including the dismissed claims. Cammack is an
22   independent investment management company that was hired by
23   NYU to provide investment advice on the retirement plans. The
24   district court dismissed all of the claims against all of the NYU‐
25   affiliated defendants, as well as Cammack, on the grounds that a
26   plaintiff has no right to maintain two actions on the same subject,
27   against the same parties, at the same time.                  The district court
28   concluded that even though Cammack and the other defendants in
29   Sacerdote II were not defendants in Sacerdote I, all of them were in
30   privity with defendant NYU in Sacerdote I because they had a


     *The Clerk of Court is respectfully directed to amend the official caption as listed
     above.
     3                                                             No. 18‐1558

 1   sufficiently close relationship with NYU and their interests were
 2   aligned with those of NYU. Plaintiffs appealed only the dismissal as
 3   to Cammack. We conclude that Cammack and NYU are not in
 4   privity, and we now VACATE and REMAND the district court’s
 5   order as to Cammack.

 6                                   ________

 7                      SEAN E. SOYARS (Jerome J. Schlinchter, on the brief),
 8                      Schlichter Bogard & Denton LLP, St. Louis, MO, for
 9                      Plaintiffs‐Appellants.

10                      CHARLES M. DYKE, Nixon Peabody LLP, San
11                      Francisco, CA (Kristin Marie Jamberdino, Nixon
12                      Peabody LLP, New York, NY, on the brief), for
13                      Defendant‐Appellee.

14                                   ________

15         JOHN M. WALKER, JR., Circuit Judge:

16         Plaintiffs filed an action, which we refer to as Sacerdote I, against
17   New York University (“NYU”) alleging violations of ERISA in
18   connection with two retirement plans sponsored by NYU.                The
19   district court dismissed most, but not all, of the causes of action
20   against NYU. Plaintiffs then filed this action, which we refer to as
21   Sacerdote II, against a variety of affiliates of NYU and Cammack
22   Larhette Advisors, LLC, alleging substantially the same claims as
23   those in Sacerdote I, including the dismissed claims. Cammack is an
24   independent investment management company that was hired by
25   NYU to provide investment advice on the retirement plans. The
26   district court dismissed all of the claims against all of the NYU‐
27   affiliated defendants, as well as Cammack, on the grounds that a
28   plaintiff has no right to maintain two actions on the same subject,
29   against the same parties, at the same time.           The district court
     4                                                              No. 18‐1558

 1   concluded that even though Cammack and the other defendants in
 2   Sacerdote II were not defendants in Sacerdote I, all of them were in
 3   privity with defendant NYU in Sacerdote I because they had a
 4   sufficiently close relationship with NYU and their interests were
 5   aligned with those of NYU. Plaintiffs appealed only the dismissal as
 6   to Cammack. We conclude that Cammack and NYU are not in
 7   privity, and we now VACATE and REMAND the district court’s
 8   order as to Cammack.

 9                                BACKGROUND

10           This appeal concerns two actions that were filed in the
11   Southern District of New York and assigned to Judge Katherine
12   Forrest.1 We refer to the two actions as Sacerdote I (No. 16‐cv‐06284)
13   and Sacerdote II (No. 17‐cv‐8834). Plaintiffs in both actions are six
14   professors at New York University (“NYU”) or the New York
15   University School of Medicine who participated in two ERISA‐
16   governed retirement plans sponsored by NYU (“the plans”).

17           I.     Sacerdote I

18           Plaintiffs commenced the first action on August 9, 2016, against
19   NYU only, and alleged breaches of the duties of loyalty and prudence
20   under        ERISA   based   on   unreasonable      administrative      fees,
21   unreasonable investment management fees and performance losses,
22   and failure to monitor unnamed co‐fiduciaries.2

23           On November 9, 2016, plaintiffs amended their complaint to
24   allege breaches of ERISA’s duties of loyalty and prudence, as well as
25   its prohibited transaction rules, by: locking the plans into an
26   imprudent investment and recordkeeping arrangement with TIAA‐


     1 Judge Forrest resigned from the bench in September 2018. The case has been
     reassigned to Judge Analisa Torres.
     2 See Complaint, Sacerdote I, 16‐cv‐06284 (S.D.N.Y. Aug. 9, 2016), ECF No. 1.
     5                                                           No. 18‐1558

 1   CREF (Counts I and II); causing the plans’ participants to pay
 2   unreasonable administrative fees to TIAA‐CREF and Vanguard
 3   (Counts III and IV); and causing the plans’ participants to pay
 4   unreasonable investment management, marketing, distribution,
 5   mortality, and expense risk fees, and incur unreasonable performance
 6   losses (Counts V and VI).3 Plaintiffs also alleged that NYU failed to
 7   properly monitor unnamed co‐fiduciaries to the plans (Count VII).4
 8   The amended complaint, like its predecessor, named NYU as the only
 9   defendant.

10          On August 25, 2017, the district court granted in part and
11   denied in part NYU’s motion to dismiss the amended complaint. The
12   district court dismissed all claims except those alleging certain
13   breaches of ERISA’s duties of loyalty and prudence in Counts III and
14   V.5 With respect to Count VII, alleging NYU’s failure to properly
15   monitor unnamed co‐fiduciaries, the district court found that
16   plaintiffs’ failure to name any co‐fiduciary rendered the claim
17   materially deficient.6 However, the district court invited plaintiffs to
18   file for reconsideration if they possessed additional facts to support
19   their co‐fiduciary claim.7

20          While NYU’s motion to dismiss was pending, plaintiffs learned
21   that NYU had delegated responsibility for administering the plans to
22   a Retirement Plan Committee (the “Committee”), which consisted of
23   nine officers of NYU and NYU Langone Medical Center. Armed with
24   this new information, and in response to the district court’s invitation,
25   plaintiffs moved on September 8, 2017, for reconsideration of the
26   district court’s dismissal. The same day, plaintiffs moved for leave to

     3 See Amended Complaint, Sacerdote I, ECF No. 39.
     4 See id.
     5 See Opinion & Order, Sacerdote I, ECF No. 79.

     6 Id. at 34–35.

     7 Id. at 35.
     6                                                                    No. 18‐1558

 1   file a second amended complaint, in which they sought to add the
 2   Committee and its nine individual members, as defendants, and to
 3   add additional facts to bolster the co‐fiduciary claim.

 4          On October 17, 2017, the district court denied plaintiffs’ motion
 5   for leave to amend.8 It concluded that plaintiffs failed to demonstrate
 6   good cause for why they failed to amend earlier, given that the
 7   defendant had disclosed the existence of the Committee and its
 8   members in November 2016. Two days later, the district court denied
 9   plaintiffs’ motion for reconsideration for substantially the same
10   reason.9

11          II.     Sacerdote II

12          On November 13, 2017, the same plaintiffs filed a new action—
13   Sacerdote II—alleging substantially the same seven claims alleged in
14   Sacerdote I, including those claims the district court dismissed in its
15   August 25, 2017 decision.10 The Sacerdote II complaint named as
16   defendants: NYU Langone Hospitals, NYU Langone Health System,
17   the Retirement Plan Committee, and twenty‐one past or present
18   members of the Committee. It did not name NYU. The Sacerdote II
19   complaint also added a new claim and specifically identified the
20   Committee and its members as the co‐fiduciaries that NYU Langone
21   Hospitals and NYU Langone Health System allegedly failed to
22   monitor.

23          On December 20, 2017, the Sacerdote II defendants moved to
24   dismiss the action as duplicative of Sacerdote I. Instead of responding
25   to the motion to dismiss, plaintiffs amended the Sacerdote II complaint
26   on January 10, 2018. The amended complaint removed NYU Langone

     8 See Order, Sacerdote I, ECF No. 100.
     9 See Order, Sacerdote I, ECF No. 101.
     10 See Complaint, Sacerdote II, No. 17‐cv‐08834 (S.D.N.Y. Nov. 13, 2017), ECF No. 1.
     7                                                                  No. 18‐1558

 1   Hospitals and NYU Langone Health System as defendants and added
 2   the New York University School of Medicine (“NYU School of
 3   Medicine”) as a defendant.11 The amended complaint, for the first
 4   time, also named Cammack Larhette Advisors, LLC (“Cammack”), as
 5   a defendant, and alleged that Cammack was a co‐fiduciary; that
 6   Cammack breached its fiduciary duties under ERISA; and that both
 7   Cammack and the NYU School of Medicine, as co‐fiduciaries, were
 8   liable for the other’s breaches. The amended complaint also added
 9   new claims.

10          On January 24, 2018, all defendants—except for Cammack—
11   (the “NYU defendants”) responded to the Sacerdote II amended
12   complaint with a new motion to dismiss.               The NYU defendants
13   argued that the Sacerdote II action was duplicative of the Sacerdote I
14   action and was an impermissible attempt to circumvent the district
15   court’s rulings in Sacerdote I, which prohibited plaintiffs from
16   amending the complaint to replead the dismissed claims and add the
17   new defendants.        Before Cammack responded to the amended
18   complaint, the district court entered an opinion and order dismissing
19   the entire action against the NYU defendants and Cammack as
20   duplicative of Sacerdote I.12 The district court held that the NYU
21   defendants in Sacerdote II were in privity with NYU in Sacerdote I, and
22   that Sacerdote II, which alleged substantially the same claims and facts
23   as the prior action, was duplicative of Sacerdote I. With respect to
24   Cammack, the district court held that the claims against Cammack
25   “should have been brought by joining Cammack earlier in the
26   Sacerdote I litigation.”13


     11 See Amended Complaint, Sacerdote II, ECF No. 105.
     12 See Opinion & Order, Sacerdote II, ECF No. 137; see also No. 17‐cv‐8834 (KBF),
     2018 WL 1054573 (S.D.N.Y. Feb. 23, 2018).
     13 Sacerdote II, ECF No. 137 at 7.
     8                                                                 No. 18‐1558

 1          On March 7, 2018, plaintiffs moved for reconsideration of the
 2   district court’s sua sponte dismissal as to Cammack before Cammack
 3   had responded to the amended complaint. Plaintiffs argued they
 4   were entitled to assert the same claims against a separate,
 5   independent defendant, and that the factors the district court cited to
 6   support a finding of privity between the NYU defendants in Sacerdote
 7   I and II did not apply to Cammack, an independent entity not related
 8   to NYU. In response, the district court ordered Cammack to file a
 9   letter motion for dismissal and granted plaintiffs an opportunity to
10   respond, which they did.          Cammack argued that like the NYU
11   defendants in Sacerdote II, it was in privity with NYU, the defendant
12   in Sacerdote I, because Cammack and NYU were in contractual
13   privity, the parties’ interests were fully aligned, and the defenses of
14   NYU would be fully dispositive of any claims against Cammack, if
15   successful.

16          On March 22, 2018, the district court adhered to its judgment
17   dismissing Cammack from Sacerdote II.14 The district court concluded
18   that Cammack was in privity with NYU because Cammack and
19   NYU’s interests were aligned and they had a “sufficiently close
20   relationship . . . to justify preclusion.”15 The district court rejected
21   plaintiffs’ argument that “Cammack need not have been added [as a
22   defendant in Sacerdote I] and that they can maintain a separate suit”
23   against Cammack.16




     14 See Mem. Decision & Order, Sacerdote II, ECF No. 147; see also No. 17‐cv‐8834
     (KBF), 2018 WL 6253366 (S.D.N.Y. Mar. 22, 2018).
     15 2018 WL 6253366, at *2 (internal quotation marks omitted).

     16 Id.
     9                                                                     No. 18‐1558

 1          Plaintiffs now appeal the district court’s dismissal of Cammack
 2   from Sacerdote II.17

 3                                    DISCUSSION

 4          We must determine in this case whether the district court
 5   correctly applied the privity rule in the context of the rule against
 6   duplicative litigation. More precisely, the question is whether the
 7   claims against Cammack in Sacerdote II—which are substantially
 8   similar to the claims against NYU in Sacerdote I—should have been
 9   barred by the rule against duplicative litigation on the basis of
10   Cammack’s alleged privity with NYU. We begin with a discussion of
11   the rule against duplicative litigation and the privity rule, and then
12   assess whether the district court properly applied the two rules to
13   conclude that Cammack was in privity with NYU and that Sacerdote
14   II was therefore barred by the rule against duplicative litigation.

15          I.      The Rule Against Duplicative Litigation

16          “As part of its general power to administer its docket, a district
17   court may stay or dismiss a suit that is duplicative of another federal
18   court suit.”18 This is because a plaintiff has “no right to maintain two
19   actions on the same subject in the same court, against the same
20   defendant at the same time.”19 In order for the rule to be properly
21   invoked, however, “the case must be the same.”20 As the Supreme
22   Court recognized over a century ago, “[t]here must be the same


     17  Plaintiffs initially also appealed the dismissal of the NYU defendants from
     Sacerdote II, but have since dropped that argument following a bench trial on the
     surviving claims in Sacerdote I, in which the district court ruled in favor of NYU on
     all claims. That decision in Sacerdote I is also up on appeal, but has not yet been
     argued.
     18 Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000).

     19 Id. at 139.

     20 The Haytian Republic, 154 U.S. 118, 124 (1894).
     10                                                                      No. 18‐1558

 1   parties, or, at least, such as represent the same interests; there must be
 2   the same rights asserted and the same relief prayed for; the relief must
 3   be founded upon the same facts, and the title, or essential basis, of the
 4   relief sought must be the same.”21

 5          This rule, known as the rule against duplicative litigation,
 6   sometimes termed the rule against claim‐splitting, is “distinct from
 7   but related to the doctrine of claim preclusion or res judicata.”22 The
 8   rule and the doctrine serve similar goals of “foster[ing] judicial
 9   economy,” “protect[ing] the parties from vexatious and expensive
10   litigation,” and ensuring the “comprehensive disposition of
11   litigation.”23 As the Seventh Circuit put it, “[c]laim splitting is an
12   aspect of the law of preclusion. Lawyers often use the words ‘res
13   judicata’ to summon up all aspects of preclusion.”24 Because they are
14   animated by similar policy goals and concerns, we frequently apply
15   principles governing the doctrine of claim preclusion to the rule
16   against duplicative litigation.25

17          The vital difference between the rule against duplicative
18   litigation and the doctrine of claim preclusion, however, is that the
19   former can only be raised to bar one of two suits that are both still

     21 Id. (internal quotation marks omitted).
     22 Curtis, 226 F.3d at 138.
     23 Id. (internal quotation marks omitted).

     24 Horwitz v. Alloy Auto. Co., 992 F.2d 100, 103 (7th Cir. 1993).

     25 See Davis v. Norwalk Econ. Opportunity Now, Inc., 534 F. App’x 47, 48 (2d Cir. 2013)

     (summary order) (“While the rule against duplicative litigation is distinct from
     claim preclusion, the former analysis borrows from the latter to ‘assess whether
     the second suit raises issues that should have been brought in the first.’” (quoting
     Curtis, 226 F.3d at 138–40) (internal citations omitted)); see also 18 Charles A.
     Wright, Arthur R. Miller, et al., Fed. Prac. & Proc. § 4404 (3d ed.), Westlaw (“One
     growing trend is to import the tests of claim preclusion into a ‘claim‐splitting’
     doctrine that enables a court, as a matter of discretion, to dismiss an action that
     presents the same claim, as measured by claim‐preclusion tests, as another
     pending action.”).
     11                                                                    No. 18‐1558

 1   pending; the latter is generally26 raised, after a prior suit is resolved
 2   on the merits, to preclude a party (or its privy) from relitigating claims
 3   in a subsequent suit that were or could have been raised in the prior
 4   action.27

 5             II.   Privity Rule

 6             Just as we typically do not allow the doctrine of claim
 7   preclusion to bind nonparties to a judgment because they have “not
 8   had a full and fair opportunity to litigate the claims and issues settled
 9   in that suit,”28 we generally do not apply the rule against duplicative
10   litigation when the defendants in two similar actions are different.29
11   Indeed, a plaintiff has “as many causes of action as there are
12   defendants to pursue.”30 As the Restatement (Second) of Judgments
13   states:

14             When a person suffers injury as the result of the
15             concurrent or consecutive acts of two or more persons,
16             he has a claim against each of them. If he brings an action
17             against one of them, he is required [by the doctrine of
18             claim preclusion] to present all the evidence and theories

     26 We say that claim preclusion “generally” is only raised after one suit has been
     resolved on the merits because the doctrine can apply while two similar suits are
     pending when the district court denies on the merits a motion to amend the
     complaint to add new claims while permitting the existing claims to proceed. In
     such a case, the denial of leave to amend on the merits, as opposed to a denial on
     procedural grounds such as timeliness, operates as a bar. The plaintiff cannot file
     a new, second action raising those denied claims. See Curtis, 226 F.3d at 139. That
     precise scenario does not apply to this case, however, because plaintiffs never
     sought, and were never denied, leave to amend their complaint in Sacerdote I to
     add Cammack as a defendant.
     27 Curtis, 226 F.3d at 138.

     28 Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (internal quotation marks omitted).

     29 See The Haytian Republic, 154 U.S. at 124 (the rule against duplicative litigation

     may only be invoked when the cases are the same and involve “the same parties,
     or, at least, such as represent the same interests”).
     30 N. Assur. Co. of Am. v. Square D Co., 201 F.3d 84, 88–89 (2d Cir. 2000).
     12                                                                    No. 18‐1558

 1          of recovery that might be advanced in support of the
 2          claim against the obligor . . . . But the claim against others
 3          who are liable for the same harm is regarded as
 4          separate.31
 5   In other words, if a plaintiff suffers the same harm at the hands of two
 6   defendants, the plaintiff may institute one suit against one defendant
 7   and a separate suit against another defendant alleging that each
 8   caused his injury.32 This is known as the rule against nonparty
 9   preclusion.33

10          There are specific exceptions to this rule, however, that
11   recognize narrow circumstances in which applying a preclusion
12   doctrine to a nonparty is appropriate, fair, and does not violate the
13   nonparty’s due process rights. When any of these circumstances is
14   present, the parties are said to be in privity.34 In the context of claim
15   preclusion, if a party to an action is found to be in privity with a party
16   to a previous action, then the “privy is bound with respect to all the
17   issues that were raised or could have been raised in the previous
18   lawsuit.”35

19          The circumstances sufficient to invoke the privity rule have
20   evolved over time. In 2008, the Supreme Court distilled the current

     31 Restatement (Second) of Judgments § 49 (1982).
     32 See N. Assurance, 201 F.3d at 88–89. We do not consider here how other doctrines
     and rules of civil procedure, such as joinder of parties, might impact a plaintiff’s
     ability to bring separate claims against different defendants regarding the same
     harm caused by both.
     33 See Taylor, 553 U.S. at 892.

     34 See id. at 898 n.8 (“The substantive legal relationships justifying preclusion are

     sometimes collectively referred to as ‘privity.’ The term ‘privity,’ however, has
     also come to be used more broadly, as a way to express the conclusion that
     nonparty preclusion is appropriate on any ground.” (internal citations omitted));
     see also Wright & Miller § 4449 (“[T]he privity label simply expresses a conclusion
     that preclusion is proper.”).
     35 Chase Manhattan Bank, N.A. v. Celotex Corp., 56 F.3d 343, 346 (2d Cir. 1995).
     13                                                                  No. 18‐1558

 1   “recognized exceptions” to the rule against nonparty preclusion into
 2   six categories: (1) agreements by a nonparty to be bound by the
 3   determination of issues in an action between others; (2) certain pre‐
 4   existing substantive legal relationships based in property law
 5   between the nonparty and the party, such as preceding and
 6   succeeding owners of property, bailee and bailor, and assignee and
 7   assignor; (3) representative suits where the nonparty’s interest was
 8   adequately represented36 by a party with the same interests, such as
 9   class actions and suits brought by trustees, guardians, and other
10   fiduciaries; (4) when a nonparty has assumed control over the
11   litigation in which the judgment was rendered; (5) when a nonparty
12   is acting as a proxy, agent, or designated representative of a party
13   bound by a judgment; and (6) when a statutory scheme expressly
14   forecloses successive litigation by nonlitigants, so long as the scheme
15   comports with due process.37

16          Although most of the treatises and cases—including Taylor—
17   that discuss the privity rule do so in the context of claim preclusion,
18   the same principles apply in the context of the rule against duplicative
19   litigation. In The Haytian Republic, the Supreme Court implicitly
20   recognized that the privity rule applies to the rule against duplicative
21   litigation when it stated that the rule may only be invoked when the
22   two pending suits have “the same parties, or, at least, such as represents
23   the same interests.”38       Since then, courts, including ours, have

     36 The term “adequate representation” was further defined by the Court as
     requiring certain procedural protections. These requirements are discussed in
     greater detail below. See infra, notes 64–66 and accompanying text.
     37 Taylor, 553 U.S. at 893–95.

     38 154 U.S. at 124 (emphasis added). As illustrated by Taylor, the privity rule has

     evolved over time such that a party merely representing the same interest as a
     nonparty, without more, is no longer sufficient to justify a finding of privity and
     to apply a preclusion doctrine to a nonparty. See infra, notes 64–66 and
     accompanying text. At the time of The Haytian Republic, however, this was a
     14                                                                       No. 18‐1558

 1   frequently applied principles originating in the doctrine of claim
 2   preclusion to the similar context of the rule against duplicative
 3   litigation.39    We can think of no reason—and the parties have
 4   presented none—why the principles underlying the privity rule in the
 5   context of other preclusion doctrines should not apply equally in the
 6   context of the rule against duplicative litigation.

 7           III.    Standard of Review

 8           We review de novo both a district court’s dismissal of a
 9   complaint40 and its ruling on preclusion.41 At the dismissal stage, we
10   must accept as true all factual claims in the complaint and draw all
11   reasonable inferences in the plaintiff’s favor.42 We review for abuse
12   of discretion a district court’s decision to stay or dismiss a suit as
13   duplicative of another federal court suit.43 However, when a district
14   court’s determination that parties are in privity rests on a “purely
15   legal proposition,” we review that decision, like all questions of law,
16   de novo.44 Moreover, a district court necessarily abuses its discretion
17   when it makes an error of law.45


     sufficient condition to invoke the privity rule and bar a nonparty from instituting
     a similar suit, and demonstrates that the concepts of privity and nonparty
     preclusion apply to the rule against duplicative litigation.
     39 See N. Assur., 201 F.3d at 88–89 (declining to apply the rule against duplicative

     litigation to bar a suit by a plaintiff against one defendant that was identical to,
     and arose out of the same events as, another suit by the same plaintiff against a
     different defendant and alleged joint tortfeasor because the parties were not in
     privity); see also Davis, 534 F. App’x at 48; Vancouver v. NCO Fin. Srvs., Inc., 857 F.3d
     833, 841–42 (11th Cir. 2017) (asking whether the case “involves the same parties
     and their privies” in applying the rule against duplicative litigation); Wright &
     Miller § 4404.
     40 See Singh v. Cigna Corp., 918 F.3d 57, 62 (2d Cir. 2019).

     41 See Hoblock v. Albany Cty Bd. of Elections, 422 F.3d 77, 93 (2d Cir. 2005).

     42 See Singh, 918 F.3d at 62.

     43 See Curtis, 226 F.3d at 138.

     44 See Hoblock, 422 F.3d at 93–94.

     45 See United States v. Hasan, 586 F.3d 161, 167–68 (2d Cir. 2009).
     15                                                               No. 18‐1558

 1          IV.    The District Court’s Finding of Privity Between NYU
 2                 and Cammack

 3          There is no dispute that the facts and legal claims asserted in
 4   Sacerdote II are substantially similar to those asserted in Sacerdote I.
 5   Nor is there a dispute that NYU and Cammack are different parties.
 6   The question, therefore, is whether the district court erred in
 7   concluding that NYU and Cammack are in privity, such that the rule
 8   against duplicative litigation should apply to bar recovery against
 9   Cammack in Sacerdote II. We conclude that the district court did so
10   err.

11          The district court concluded that NYU and Cammack were in
12   privity based on the following facts taken from the amended
13   complaint:

14          Cammack has provided advisory services to NYU since
15          2009. The Amended Complaint alleges that Cammack is
16          a co‐fiduciary to the Plans, and is a party to a contract
17          that requires it to advise NYU on investment options. It
18          also claims that Cammack participated in and enabled
19          the NYU defendants to commit a number of the alleged
20          breaches of fiduciary duty by providing imprudent
21          investment advice, and by failing to make any reasonable
22          effort under the circumstances to remedy the breaches
23          . . . . [However,] NYU and Cammack have different
24          states of incorporation and different principal places of
25          business, and [plaintiffs allege that] they took
26          independent actions with regard to the Plans’ losses.46
27   The district court found that these facts supported the conclusion that
28   “Cammack has a ‘sufficiently close relationship’ to NYU to justify



      Sacerdote II, 2018 WL 6253366, at *1–2 (internal citations and quotation marks
     46

     omitted).
     16                                                                     No. 18‐1558

 1   preclusion.”47 It also rejected plaintiffs’ argument that Cammack and
 2   NYU’s interests will “sharply diverge” to the extent that Cammack’s
 3   advice was imprudent.48

 4          We disagree that Cammack and NYU’s interests are sufficiently
 5   identical to support a finding of privity. Under ERISA’s co‐fiduciary
 6   provision, a co‐fiduciary is only liable for another fiduciary’s
 7   independent breach if the co‐fiduciary (1) knowingly participates in
 8   or conceals the breaching act or omission of another fiduciary; (2)
 9   enables another fiduciary to breach by failing to comply with ERISA’s
10   “prudent man” standard of care; or (3) knows of another fiduciary’s
11   breach and fails to make reasonable efforts to remedy the breach.49
12   Unless this is so, the co‐fiduciaries’ interests are not aligned. Here,
13   the bases for liability as to NYU and Cammack are not necessarily the
14   same; it is possible that one party could be found liable and the other
15   not.

16          Indeed, as plaintiffs plausibly pleaded, Cammack and NYU
17   had separate and distinct responsibilities as co‐fiduciaries to the
18   plans, and could be found liable for plaintiffs’ injuries for separate
19   reasons. “Cammack’s potential liability arises from providing flawed
20   advice to the Committee . . . .”50              On the other hand, “NYU’s
21   [potential] liability would arise from failing to independently
22   investigate the merits of the Plans’ investments, or failing to
23   determine whether it was reasonable to rely on Cammack.”51



     47 Id. at *2 (quoting Cent. Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A., 56
     F.3d 359, 368 (2d Cir. 1995).
     48 Id.

     49 29 U.S.C. § 1105(a); see also 29 U.S.C. § 1104(a)(1) (defining the “prudent man”

     standard of care).
     50 Appellant’s Br. at 18.

     51 Id. at 18–19.
     17                                                                      No. 18‐1558

 1          A reasonable trier of fact could find that Cammack provided
 2   flawed advice to NYU and was liable for plaintiffs’ losses, while also
 3   finding that NYU reasonably relied on Cammack’s advice,
 4   notwithstanding its flawed nature. Conversely, a reasonable trier of
 5   fact could find that Cammack provided reasonably prudent advice to
 6   NYU, but that NYU imprudently rejected Cammack’s advice or failed
 7   to properly implement Cammack’s investment recommendations. In
 8   these plausible scenarios, NYU and Cammack’s interests would
 9   surely diverge, to the point where it would be in each of their interests
10   to place the blame on the other. Especially at the pleading stage, it
11   was error for the district court to accept Cammack’s argument that its
12   interests were identical to those of NYU over plaintiffs’ plausible
13   assertions to the contrary.52

14          Even assuming that Cammack and NYU have a sufficiently
15   close relationship and identical interests, the district court further
16   erred because the presence of these two conditions alone is
17   insufficient as a matter of law to support a finding of privity. The
18   district court relied primarily on Central Hudson for the proposition
19   that identical interests and a sufficiently close relationship are all that
20   is required to find parties in privity. That case, however, does not
21   support that proposition. Central Hudson held that to determine
22   whether nonparty preclusion is warranted, a court must also “inquire


     52In its brief, Cammack argues that the district court’s determination that NYU
     and Cammack had identical interests was proper because plaintiffs “never made
     any showing” “that NYU’s interests will sharply diverge from Cammack’s.” See
     Appellee’s Br. at 29. But the burden of proving privity and preclusion is on the
     party asserting that affirmative defense. See Taylor, 553 U.S. at 907. It was therefore
     Cammack’s burden to prove that its interests were aligned with NYU’s. We
     conclude it has failed to do so because plaintiffs have plausibly alleged realistic
     scenarios in which Cammack and NYU’s interests are not identical, but, in fact,
     materially conflict.
     18                                                                No. 18‐1558

 1   whether a [non]party controlled or substantially participated in the
 2   control of the presentation on behalf of a party to the prior action.”53

 3          The Supreme Court’s decision in Taylor is instructive.                In
 4   recognizing the six circumstances sufficient to establish privity, the
 5   Court rejected a proposed seventh category called virtual
 6   representation.54 The contours of a proposed virtual representation
 7   category have differed from circuit to circuit.55           The formulation
 8   rejected by the Court in Taylor would have found a nonparty to be in
 9   privity with a party if the nonparty (1) had the same interests as the
10   party; (2) was adequately represented by the party; and (3) at least
11   one of the following conditions was present: (a) a close relationship
12   between the nonparty and party; (b) substantial participation by the
13   nonparty in the other action; or (c) tactical maneuvering by the
14   nonparty to avoid preclusion.56 The Court refused to adopt this
15   virtual representation exception to the rule against nonparty
16   preclusion, stating that it would be “at odds with the constrained
17   approach to nonparty preclusion” adopted by the Court’s prior
18   decisions, and would circumvent the protections guaranteed by the
19   Due Process Clause.57 In holding that that NYU and Cammack were
20   in privity based solely on their sufficiently close relationship and
21   identical interests, the district court essentially adopted an even
22   broader formulation of virtual representation than that rejected by the
23   Court in Taylor. This was in error.




     53 Cent. Hudson, 56 F.3d at 368 (modifications incorporated) (internal quotation
     marks omitted).
     54 Taylor, 553 U.S. at 895–96.

     55 See id. at 889.

     56 Id. 889–90.

     57 Id. at 898; see also id. at 901.
     19                                                              No. 18‐1558

 1          Moreover, none of the six circumstances that Taylor recognized
 2   as permitting a finding of privity are present here. There is no
 3   allegation or evidence that Cammack agreed to be bound by the
 4   disposition of Sacerdote I,58 nor that Cammack assumed control over
 5   NYU’s defense in Sacerdote I,59 nor that Cammack is a designated
 6   representative or proxy of NYU.60               And no applicable statutory
 7   scheme expressly forecloses successive litigation by or against
 8   nonlitigants.61

 9          We also conclude that NYU and Cammack do not have the type
10   of property rights‐based “pre‐existing substantive legal relationship”
11   that could justify a finding of privity in this case.62 The contract
12   between NYU and Cammack obliges Cammack only to provide
13   investment advisory services to NYU with respect to the plans. It
14   does not create a property rights‐based relationship akin to those
15   recognized in Taylor that could render a nonparty subject to the
16   judgment of a party with which it is in privity.63 No property rights
17   were transferred, assigned, or delegated to or from NYU or
18   Cammack, and the claims in Sacerdote I and II did not concern NYU
19   and Cammack’s mutual or successive rights in the same property.
20   Thus, the contractual and co‐fiduciary relationships between NYU
21   and Cammack are insufficient to find the parties in privity.

22          Finally, we conclude that the representative suit exception to a
23   plaintiff’s right to sue each defendant separately does not apply here.
24   The Supreme Court has described this exception as applying only in


     58 See id. at 893–94.
     59 See id. at 895.
     60 See id.

     61 See id.

     62 See id. at 894 (internal quotation marks omitted).

     63 See id.
     20                                                                 No. 18‐1558

 1   “certain limited circumstances” when the nonparty is “adequately
 2   represented by someone with the same interests who was a party to
 3   the suit,” such as class actions and suits brought by trustees,
 4   guardians, and other fiduciaries.64         A party’s representation of a
 5   nonparty is considered ”adequate” for preclusion purposes “only if,
 6   at a minimum: (1)           [t]he interests of the nonparty and her
 7   representative are aligned; and (2) either the party [in the first suit]
 8   understood herself to be acting in a representative capacity [of the
 9   nonparty] or the original court took care to protect the interests of the
10   nonparty.”65 Adequate representation often also requires “(3) notice
11   of the original suit to the persons alleged to have been represented.”66

12          Cammack has made no argument that NYU understood itself
13   to be acting in a representative capacity for Cammack in litigating
14   Sacerdote I, or that the district court took care to protect the interests
15   of Cammack in Sacerdote I.67 Without these procedural protections,
16   privity cannot be said to exist on the basis that NYU adequately
17   represented Cammack’s interests in Sacerdote I, such that plaintiffs are
18   now precluded by the rule against duplicative litigation from
19   asserting claims against Cammack arising out of the same nucleus of
20   acts at issue in Sacerdote I.

21          In summary, because the relationship between NYU and
22   Cammack does not fit into any of the privity categories recognized by
23   the Supreme Court in Taylor as sufficient to justify an exception to the
24   rule against nonparty preclusion, the district court erred in
25   concluding that NYU and Cammack were in privity. It is insufficient

     64 Id. at 894–95 (modifications incorporated) (internal quotation marks omitted).
     65 Id. at 900 (internal quotation marks and citations omitted).
     66 Id.

     67 Because preclusion is an affirmative defense, it was Cammack’s burden to plead

     and prove that these procedural protections were in place to justify nonparty
     preclusion under the representative suit exception. See id. at 907.
     21                                                          No. 18‐1558

 1   as a matter of law to find two parties in privity based solely on the
 2   fact that they share a sufficiently close relationship and have aligned
 3   interests. This is precisely the type of virtual representation theory of
 4   privity that the Supreme Court rejected in Taylor. Because NYU and
 5   Cammack are not in privity, the district court’s dismissal of Cammack
 6   from Sacerdote II pursuant to the rule against duplicative litigation
 7   was legal error, and thus an abuse of discretion, and a violation of the
 8   fundamental principle that a plaintiff has “as many causes of action
 9   as there are defendants to pursue.”68

10                                        CONCLUSION

11             We have considered the parties’ other arguments and find them
12   to be without merit. We therefore VACATE the district court’s order
13   dismissing Cammack from Sacerdote II and REMAND the matter back
14   to the district court.




     68   N. Assur., 201 F.3d at 88–89.
