11-5369-cv(L)
     Janese v. Fay

                                 UNITED STATES COURT OF APPEALS

                                     FOR THE SECOND CIRCUIT

                                        August Term 2011

                     Heard: June 26, 2012        Decided: August 27, 2012

                           Docket Nos. 11-5369-cv(L), 12-80-cv(XAP)

     - - - - - - - - - - - - - - - - - - - - - -
 1   Douglas A. Janese, Christopher V. Shakarjian,
 2   Louis D’Aurizio, as representatives of the
 3   participants and beneficiaries of the
 4   former Niagara Genesee & Vicinity Carpenters
 5   Local 280 Pension and Welfare Funds,
 6
 7           Plaintiffs-Appellants-Cross-Appellees,
 8
 9                          v.
10
11   David A. Fay, Angelo Massaro, Dominic P. Massaro,
12   George R. Weidert, Christopher M Scrufari,
13   David J. Knapp, Trustees of the Niagara-Genesee
14   & Vicinity Carpenters Local 280 Pension and
15   Welfare Funds from 1994 through 1998, and John
16   J. Fuchs, Patrick Morin, John J. Simmons, Trustees
17   of the Niagara-Genesee & Vicinity Carpenters
18   Local 280 Pension and Welfare Funds from 2006
19   through 2008, and Gordon J. Knapp, Robert P.
20   Williams, Thomas P. Hartz, Trustees of the Niagara-
21   Genesee & Vicinity Carpenters Local 280 Pension
22   and Welfare Funds in 2000, and Santo S. Scrufari,
23   Russell P. Scrufari, Plan Managers of the Niagara-
24   Genesee & Vicinity Carpenters Local 280 Pension
25   and Welfare Funds, and Empire State Carpenters
26   Welfare Fund, Empire State Carpenters Pension Fund,
27
28        Defendants-Appellees-Cross-Appellants.
29   - - - - - - - - - - - - - - - - - - - - - -
30
31   Before: NEWMAN, WINTER, and POOLER, Circuit Judges.
32
33           Appeal from the May 2, 2011, judgment of the United States

34   District Court for the Western District of New York (John T. Curtin,

35   District Judge), dismissing as time-barred a complaint brought under

36   the Employee Retirement Income Security Act of 1974 (“ERISA”), 29
 1   U.S.C. § 1001 et seq.   The Appellants challenge the time-bar rulings;

 2   the   Appellees   challenge,    in   light   of   subsequent   Supreme   Court
 3   decisions, the continuing validity of our opinions in           Chambless v.

4    Masters, Mates & Pilots Pension Plan , 

(2d Cir. 1985),

 5   and Siskind v. Sperry Retirement Program, Unisys, 

(2d Cir.

 6   1995), which stated that trustees of a pension plan act as fiduciaries

 7   when they amend the plan.

 8         Affirmed in part, vacated in part, and remanded; cross-appeal

 9   dismissed as unnecessary.

10                                    Timothy Alan McCarthy, Buffalo, N.Y.
11                                      (Burd & McCarthy, Buffalo, N.Y., on the
12                                      brief), for Appellants-Cross-Appellees.
13
14                                    Jeffrey S. Swyers, Washington, D.C.
15                                      (Allison A. Madan, Slevin & Hart, P.C.,
16                                      Washington, D.C.; Robert L. Boreanaz,
17                                      Lipsitz   Green Scime Cambria LLP,
18                                      Buffalo, N.Y., on the brief), for
19                                      Appellees-Cross-Appellants.
20
21
22   JON O. NEWMAN, Circuit Judge:
23         This appeal and a purported cross-appeal primarily concern two

24   issues arising under the Employee Retirement Income Security Act of
25   1974 (“ERISA”), 29 U.S.C. § 1001 et seq.          The first issue is whether

26   trustees of a multi-employer pension fund act as fiduciaries when they

27   amend the pension plan.        The second issue is whether the claims

28   asserted in this case are time-barred.            These issues arise on an

29   appeal by present and former beneficiaries of the former Niagara-




                                           -2-
1    Genesee & Vicinity Carpenters Local 280 Pension and Welfare Funds1 from

2    the May 2, 2011, judgment of the District Court for the Western

3    District of New York (John T. Curtin, District Judge) dismissing their

4    complaint against present and former trustees and plan managers of the

5    Funds.   The Plaintiffs-Appellants also appeal from the December 1,

6    2011, order denying their motion for reconsideration and for leave to

7    amend.   By a purported cross-appeal, the Defendants-Appellees seek to

8    appeal that part of the District Court’s October 22, 2010, order that

9    had denied dismissal of Counts I-V of the Complaint for failure to

10   state a claim on which relief could be granted; these counts were

11   subsequently dismissed as time-barred.

12        We conclude that dismissal of Counts I-V was proper because the

13   trustees were not acting as fiduciaries in amending the Plan, and in

14   reaching that conclusion, we deem the contrary rulings of our Court in
15   Chambless v. Masters, Mates & Pilots Pension Plan, 

(2d
16   Cir. 1985), and Siskind v. Sperry Retirement Program, Unisys, 

  498 (2d Cir. 1995), to have been abrogated by subsequent decisions of
18   the Supreme Court.2   We also conclude that fact issues remain as to
19   whether Counts VII-IX were properly dismissed as time-barred.     The

20   dismissal of Count VI is not challenged on appeal.   On the appeal, we


          1
           The Funds merged into the Empire State Carpenters Pension and
     Welfare Funds, effective January 1, 2008.
          2
           This opinion has been circulated to the active judges of the
     Court prior to filing.




                                       -3-
 1   therefore affirm in part, vacate in part, and remand.     We dismiss the

 2   cross-appeal as unnecessary.

 3                                  Background

 4        The parties. This is a derivative action brought on behalf of the

 5   participants and beneficiaries of the Funds seeking to recover assets

 6   that the Plaintiffs-Appellants assert were wrongfully depleted by the

 7   Defendants-Appellees in violation of their fiduciary duties.        The

 8   Defendants-Appellees are present and former trustees or plan managers

 9   of the Funds.   The Complaint divides the trustees into four separate

10   groups, based on whether they served as trustees during the following

11   periods:   (1) July 13, 2000 to December 31, 2007; (2) January 26, 1999

12   to July 12, 2000 (the “2000 trustees”); (3) January 20, 1994 to

13   January 25, 1999 (the “1994-98 trustees”); and (4) November 1993 to
14   January 19, 1994.3   The two plan managers are Santo Scrufari, who

15   served from 1985 to July 14, 1996, and his son Russell, who succeeded

16   his father and served until December 31, 2008.

17        The allegations in the Complaint.      The Complaint asserted nine

18   counts of breach of fiduciary duty, eight of which are at issue in
19   this appeal.    Counts I-V alleged various plan amendments that are

20   claimed to have breached the trustees’ fiduciary duties. Count VI

21   alleged an increase in the monthly retirement benefit for a retired

22   trustee, accomplished with a plan amendment.      The dismissal of this

23   count is not challenged on appeal.


          3
           Some defendants are members of multiple groups.




                                        -4-
 1         Count VII alleged that, from 1993 to July 14, 1996, Santo

 2   Scrufari manipulated Pension Fund calculations in order to grant

 3   himself and one trustee higher pay-outs than they were owed under the

 4   Fund Plan. He concealed this from the other trustees by altering the

 5   relevant pension credit records.               Count VII further asserted that the

 6   1994-98   trustees       breached      their       fiduciary   duties     by    failing   to

 7   adequately     monitor      Scrufari.     Counts VIII-IX alleged that the

 8   Scrufaris and their associates stole money from the Welfare Fund over

 9   a   number    of   years,    fraudulently          concealed    these     withdrawals     by

10   labeling them “Scholarship” or “Health Care” benefits, and failed to

11   pay taxes on these withdrawals. Like Count VII, Counts VIII and IX

12   further asserted that the 1994-98 trustees and the 2000 trustees

13   failed to adequately monitor the Scrufaris.

14         Prior    litigation        involving     Santo Scrufari.          In     2006,   Santo

15   Scrufari was found liable for a number of breaches of fiduciary duty,

16   including improper weighting of his fringe benefits, during the period

17   between March 1989 and October 1992. See LaScala v. Scrufari, No. 93-
18   CV-982C(F), 

, at *1 (W.D.N.Y. Feb. 27, 2006), rev’d, 479

(2d Cir. 2007), on remand, 

, at *1 (W.D.N.Y.

20   Feb. 5, 2010).      That suit did not consider Scrufari’s activities after

21   October 1992.      See LaScala, 

at *1.

22         Procedural history of the pending suit.                  The Plaintiffs filed the

23   present action on June 26, 2009.               They assert that they became aware

24   of the Defendants’ illegal activities after September 20, 2007, when

25   damages      discovery      in   the    LaScala       case     revealed      incriminating



                                                  -5-
 1   documents. The Defendants moved to dismiss pursuant to Fed. R. Civ. P.

 2   12(b)(6), principally asserting that the Plaintiffs’ claims were time-

 3   barred under section 413 of ERISA, 29 U.S.C. § 1113 (as amended).    The

 4   District Court granted the motion as to all pertinent claims on that

 5   basis but rejected the Defendants’ alternative claim that Counts I-V

 6   did not allege actions that fell within the scope of ERISA’s fiduciary

 7   duty statute.

 8        Following   entry of judgment, the Plaintiffs moved for

 9   reconsideration of the District Court’s order and for leave to amend

10   the complaint to allege fraud with greater particularity.           The

11   District Court denied the motion for reconsideration, rendering the

12   motion to amend moot.    See National Petrochemical Co. of Iran v. M/T

13   Stolt Sheaf, 

, 244 (2d Cir. 1991) (“[O]nce judgment is

14   entered the filing of an amended complaint is not permissible until

15   judgment is set aside or vacated pursuant to Fed. R. Civ. P. 59(e) or

16   60(b).”) (internal quotation marks and citation omitted).

17                                  Discussion

18   I. Whether Trustees Act as Fiduciaries in Amending a Plan
19        We consider first the contention of the Appellees that the

20   dismissal of Counts I-V should be affirmed on the ground that the

21   actions challenged in those counts were pension plan amendments, which

22   are not fiduciary actions and therefore do not violate section

23   404(a)(1) of ERISA.     Initially, we note that the Appellees took the

24   unnecessary step of filing a cross-appeal to assert this contention.

25   An appellee needs to file a cross-appeal only to request an appellate

26   court to grant some additional relief beyond the judgment entered by

                                        -6-
1    a district court. See Carlson v. Principal Financial Group, 

   301, 309 (2d Cir. 2003).     In the absence of a cross-appeal, an

3    appellee is entitled to seek affirmance on any ground supportable by

4    the record.   See Bruh v. Bessemer Venture Partners III L.P., 

  202, 205 (2d Cir. 2006) (“[W]e may affirm on any basis for which there

 6   is sufficient support in the record, including grounds not relied on

 7   by the district court.”).   For this reason, we will dismiss the cross-

 8   appeal as unnecessary, but nonetheless consider the contention that

 9   the Appellees have advanced in support of the District Court’s

10   judgment.

11        In 1985, this Court ruled that, with respect to multi-employer

12   pension plans, the act of amending a plan should be treated as a
13   fiduciary function, see 

, thereby invoking
14   section 404(a)(1) of ERISA, 29 U.S.C. § 1104(a)(1), which obliges a

15   fiduciary to “discharge his duties with respect to a plan solely in

16   the interest of the participants and beneficiaries.”   Ten years later

17   we ruled that amending a single employer pension plan was not a
18   fiduciary function, pointedly distinguishing Chambless on the ground
19   that “[i]n the multi-employer setting, trustees amending a pension

20   plan ‘affect the allocation of a finite plan asset pool’ to which each

21   participating employer has contributed.” See 

22   (quoting Musto v. American General Corp., 

, 912 (6th Cir.

23   1988)).   The Appellees contend that the ruling in   Chambless and the

24   language in Siskind distinguishing multi-employer plans has been

25   abrogated by the combined effect of three decisions of the Supreme

26   Court: Curtiss-Wright Corp. v. Schoonejongen, 

(1995);

                                       -7-
 1   Lockheed Corp. v. Spink, 

(1996), and Hughes Aircraft Co.

 2   v. Jacobson, 

(1999).    The Appellants respond that the
 3   Chambless/Siskind view of multi-employer plans has survived the later
 4   Supreme Court decisions.

 5        Resolving this dispute involves consideration of the deference a

 6   court of appeals owes to language in Supreme Court opinions that

 7   contributes to the Court’s reasoning, even if it does not incorporate

 8   a precise holding. See generally Pierre N. Leval, Judging Under the

 9   Constitution: Dicta about Dicta, 81 N.Y.U. L. Rev. 1249 (2006)

10   Initially, we note that Curtiss-Wright, Lockheed Corp., and Hughes

11   Aircraft all involved single employer plans.     Thus, the Supreme Court

12   had no occasion to rule definitively on whether amending a multi-

13   employer plan was a fiduciary function.      Nevertheless, we need to

14   consider carefully what the Supreme Court said in deciding those

15   cases.

16        In Curtiss-Wright, which involved a welfare plan, the Court said,

17   “Employers or other plan sponsors are generally free under ERISA, for
18   any reason at any time, to adopt, modify, or terminate welfare plans.”

(emphasis added).     Lockheed Corp. involved a pension

20   benefit plan.    The Court said, “We see no reason why the rule of

21   Curtiss-Wright should not be extended to pension benefit plans.” 

.    The Court also declared, “Plan sponsors who alter the

23   terms of a plan do not fall into the category of fiduciaries.” 

concerned a pension plan to which employees were

25   required to contribute.    The Ninth Circuit had thought that this

26   circumstance distinguished    Lockheed   Corp.   and   concluded   that   an

                                        -8-
 1   amendment to such a plan was subject to ERISA’s fiduciary standards.

 2   See Jacobson v. Hughes Aircraft Co. , 

, 1293 (9th Cir.

 3   1997) (“[T]the asset surplus that was used in         Lockheed to fund the

 4   early    retirement program was attributable            only     to   employer

 5   contributions.   Here, plaintiffs allege that the asset surplus Hughes

 6   used to fund the early retirement program and the new Non-Contributory

 7   Plan was attributable to both employer and employee contributions”).
8    The Supreme Court disagreed.      “Our conclusion [in      Lockheed Corp.]
9    applies with equal force to persons exercising authority over a

10   contributory plan, a noncontributory plan, or any other type of plan.”

11   Hughes   

.   And, the Court added

12   emphatically, the fiduciary duty claims “are directly foreclosed by

13   [Lockheed’s] holding [sic] that, without exception, ‘[p]lan sponsors

14   who alter the terms of a plan do not fall into the category of

15   fiduciaries.’” 

).

16        Shortly after Lockheed was decided, the Third Circuit relied on

17   the Supreme Court’s reference to “plan sponsors” to rule that the
18   Court’s decision applies to multi-employer plans.              See Walling v.
19   Brady, 

(3d Cir. 1997).          “    Lockheed speaks of ‘plan

20   sponsors,’ a term that applies to both single-employer sponsors and

21   multi-employer sponsors under ERISA, and the opinion lacks any hint

22   that single- and multi-employer plans should be analyzed differently.”

23   

Third Circuit also quoted ERISA’s definition of “plan

24   sponsor”:




                                            -9-
 1           The term “plan sponsor” means (i) the employer in the case
 2           of an employee benefit plan established or maintained by a
 3           single employer . . . or (iii) in the case of a plan
 4           established or maintained by two or more employers or
 5           jointly by one or more employers and one or more employee
 6           organizations, the association, committee, joint board of
 7           trustees, or other similar group of representatives of the
 8           parties who establish or maintain the plan.
 9
10   

29 U.S.C.A. § 1002(16)(B)).

11        Thereafter,     with   the   benefit     of   Lockheed   Corp.     and    Hughes
12   Aircraft,     the   District   of    Columbia      Circuit    reached    the    same

13   conclusion. See Hartline v. Sheet Metal Workers’ National Pension

14   Fund, 

, 599 (D.C. Cir. 2002).            “The Supreme Court made it

15   clear    in   [Curtiss-Wright,      Lockheed,      and   Hughes   Aircraft]     that

16   employers and plan sponsors do not act in a fiduciary capacity when

17   they modify, adopt or amend plans.            Nothing in the Supreme Court’s

18   decisions or ERISA itself creates an exemption for multiemployer

19   pension plans.” 

the three Supreme Court decisions, the Sixth Circuit

21   had abandoned dictum in 

, indicating that

22   trustees amending a multi-employer plan act as fiduciaries, and ruled
23   that “amendment of multi-employer plans does not differ from amendment

24   of single-employer plans.” Pope v. Central States Southeast and

25   Southwest Areas Health and Welfare Fund, 

, 213 (6th Cir.

26   1994).

27        Closer to home, three district courts within the Second Circuit

28   have either questioned or disregarded the continuing validity of our




                                            -10-
 1   opinions in Chambless and Siskind in light of the Supreme Court’s

 2   decisions.     In 2005, Judge Hurd, in the Northern District of New York,

 3   stated that “the invalidation of . . . Musto . . . leaves the view in

 4   Siskind and Chambless without any support in the post-Hughes Aircraft

 5   era.” Fuchs v. Allen, 

, 416 (N.D.N.Y. 2005). 4              In

 6   that same year, Judge Garaufis, in the Eastern District of New York,

 7   ruled that the holdings in           Chambless and Siskind cannot survive

 8   Lockheed and Hughes Aircraft. See Cement and Concrete Workers District

 9   Council Pension Fund v. Ulico Casualty Co., 

, 186
10   (E.D.N.Y. 2005), aff’d on other grounds , 199 F. App’x 29 (2d Cir.
11   2006).     Last year, Judge Gardephe, in the Southern District of New

12   York, stated flatly that Chambless and Siskind “have been overruled.”

13   Gannon v. NYSA-ILA Pension Trust Fund and Plan, No. 09-CV-10368, 2011

, at *8 (S.D.N.Y. Mar. 11, 2011).

15        Although     the    Supreme    Court’s     opinions   in   Curtiss-Wright,

16   Lockheed, and Hughes Aircraft all involved single-employer plans, we

17   agree with the Third, Sixth, and District of Columbia Circuits that

18   the Court’s language analyzing fiduciary duties under ERISA is equally

19   applicable to multi-employer plans.            Although it is a somewhat close

20   question whether that language was sufficiently related to the Court’s

21   ultimate    rulings     to   be   considered    as   holdings or only highly

22   persuasive dicta, we now regard it as ample justification to deem it
23   to have abrogated Chambless and Siskind with respect to multi-employer



          4
           Judge Hurd noted, but disagreed with, the opinion of Judge
     Curtin, in the Western District of New York, Burke v. Bodewes, 250 F.
     Supp. 2d 262, 270 (W.D.N.Y. 2003), adhering to Chambless and Siskind
     after the Supreme Court decisions. See 

.

                                            -11-
 1   plans.   Moreover, in the absence of compelling reasons to the

 2   contrary,    maintaining a circuit split on the issue of trustee

 3   liability    as     fiduciaries   for    amending   multi-employer    plans    is

 4   inadvisable.      We therefore conclude that Counts I through V were

 5   subject to dismissal because the Defendants were not acting as

 6   fiduciaries when they amended the plans.

 7   II. Whether Counts VII-IX Are Time-Barred

8         ERISA’s statute of limitations, set out in the margin,5 provides

9    three alternative limitations periods, depending on the underlying

10   factual circumstances.      The first period, applicable in the absence of

11   any special circumstances, is six years from the date of the last

12   action that was part of the breach.          The second period is three years,

13   applicable    and    beginning    when   a   putative   plaintiff   has   “actual

14   knowledge” of the violation, defined as “knowledge of all material

15   facts necessary to understand that an ERISA fiduciary has breached his
16   or her duty or otherwise violated the Act.” Caputo v. Pfizer, Inc.,



          5
           Section 1113 provides:

          No action may be commenced under this subchapter with
          respect to a fiduciary's breach of any responsibility, duty,
          or obligation under this part, or with respect to a
          violation of this part, after the earlier of –

                  (1) six years after (A) the date of the last
                  action which constituted a part of the breach or
                  violation, or (B) in the case of an omission the
                  latest date on which the fiduciary could have
                  cured the breach or violation, or

                  (2) three years after the earliest date on which
                  the plaintiff had actual knowledge of the breach
                  or violation;

          except that in the case of fraud or concealment, such action
          may be commenced not later than six years after the date of
          discovery of such breach or violation.
                                      -12-
 1   

, 193 (2d Cir. 2001).6      However, “constructive knowledge”

 2   of the breach does not trigger the three-year period. See 

  The third period is six years, applicable where a complaint alleges

 4   fraud or concealment with the requisite particularity.         Relevant to

 5   the pending appeal, this six year period is tolled until the plaintiff

 6   discovers, or should with reasonable diligence have discovered, the

 7   breach. See 

successfully plead this “fraud or

 8   concealment exception,” a complaint must allege that a fiduciary

 9   either “(1) breached its duty by making a knowing misrepresentation or

10   omission of a material fact to induce an employee/beneficiary to act

11   to his detriment; or (2) engaged in acts to hinder the discovery of a
12   breach of fiduciary duty.”   

must be

13   stated “with particularity,” Fed. R. Civ. P. 9(b), requiring a

14   plaintiff to “specify the time, place, speaker, and content of the

15   alleged misrepresentations,” as well as “how the misrepresentations

16   were fraudulent” and “those events which give rise to a strong

17   inference that the defendant had an intent to defraud, knowledge of

18   the falsity, or a reckless disregard for the truth.”               

  (internal   textual   alterations,     quotation    marks,   and    citations

20   omitted).

21        The issue as to whether Counts VII-IX could be dismissed on

22   motion under Rule 12(b)(6) concerns application of the “fraud or

23   concealment” exception of Section 1113(2).         Count VII alleged Santo

24   Scrufari’s improper “weighting” of benefits between late 1992-1993 and


          6
           Of course, the three-year limitations period may not extend the
     viability of claims beyond the outer limit of six years specified in
     section 1113(1).

                                          -13-
 1   1996.       Counts VIII and IX alleged that Scrufari and his son stole

 2   money       from   the    Welfare   Fund   and   concealed   their   actions by

 3   fraudulently labeling withdrawals “Scholarship” or “Health Care”

 4   benefits.      Although Judge Curtin was satisfied that the Plaintiffs had

 5   adequately pleaded fraud or concealment, at least with respect to

 6   Counts VII and VIII,7 he concluded, taking judicial notice of the

 7   LaScala case, that they knew or should have known of Santo Scrufari’s

 8   activities well in advance of June 26, 2003, six years prior to the

 9   commencement of this suit.

10           We think that conclusion could not properly be reached at the
11   pleading stage.          It is true that theLaScala case concerned misconduct
12   similar to what Scrufari is alleged to have done in this case.

13   However, the prior litigation concerned misconduct occurring no later

14   than October 1992, a period prior to the time during which the

15   misconduct at issue in this case is alleged to have occurred.                At

16   most, LaScala creates an issue of fact as to whether the Plaintiffs

17   knew or should have known of Scrufari’s activities between 1993 and

18   1996 based on his activities prior to that time.             The resolution of

19   that issue was not proper at the pleading stage.             Whether the issue

20   might be resolved on motion for summary judgment after discovery

21   remains to be determined on remand.
22   III. Whether the District Court Properly Denied the Motion to Amend

23           The Plaintiffs-Appellants assert that the District Court erred in

24   denying leave to amend the Complaint.            Normally, leave to amend should


             7
           Count IX asserted substantially the same activity as Count VIII,
     which the District Court found adequately alleged fraud or
     concealment. Fairly read, the allegations of fraud or concealment in
     Count VIII apply to Count IX as well.
                                       -14-
 1   be “freely give[n] . . . when justice so requires.”           Fed. R. Civ. P.

 2   15(a)(2).    However, amendment of a complaint becomes significantly

 3   more difficult when a plaintiff waits, as the Plaintiffs in this case

 4   did, until after judgment has been entered.              “[O]nce judgment is

 5   entered the filing of an amended complaint is not permissible until

 6   judgment is set aside or vacated pursuant to Fed. R. Civ. P. 59(e) or

 7   60(b).”     National Petrochemical Co. of 

.         “The

 8   merit of this approach is that ‘[t]o hold otherwise would enable the

 9   liberal amendment policy of Rule 15(a) to be employed in a way that is

10   contrary to the philosophy favoring finality of judgments and the
11   expeditious termination of litigation.’”           

  Wright & A. Miller, FEDERAL PRACTICE   AND   PROCEDURE § 1489, at 694 (1990)).

13   Here, the District Court properly denied the motion to amend following

14   its denial of the motion for reconsideration.

15        Because we vacate the District Court’s dismissal of several

16   counts, however, we note that the prior judgment will no longer bar

17   future motions for leave to amend with respect to the surviving

18   claims.

19                                  Conclusion

20        For the foregoing reasons, the District Court’s dismissal of

21   Counts I-V is affirmed, its dismissal of Counts VII-IX is vacated, and

22   the case is remanded for further proceedings.            The cross-appeal is

23   dismissed as unnecessary.




                                        -15-