641 F.3d 786 (7th Cir. 2011), 10-1469, George v. Kraft Foods Global, Inc.
|Citation:||641 F.3d 786|
|Opinion Judge:||ADELMAN, District Judge.|
|Party Name:||Gerald GEORGE, et al., Plaintiffs-Appellants, v. KRAFT FOODS GLOBAL, INCORPORATED, et al., Defendants-Appellees.|
|Attorney:||Jerome J. Schlichter, Attorney, Michael A. Wolff (argued), Attorney, Schlichter, Bogard & Denton, St. Louis, MO, for Plaintiffs-Appellants. Ian Hugh Morrison (argued), Attorney, Seyfarth Shaw LLP, Chicago, IL, for Defendants-Appellees.|
|Judge Panel:||Before CUDAHY and ROVNER, Circuit Judges, and ADELMAN, District Judge.[*] CUDAHY, Circuit Judge, concurring in part and dissenting in part.|
|Case Date:||April 11, 2011|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Oct. 19, 2010.
Plaintiffs, current and former employee-participants in the Section 401(k) plan (the " Plan" ) of Kraft Foods Global, Inc. (" Kraft" ) brought this class action against various individuals and entities associated with the Plan, alleging that they breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (" ERISA" ) by imprudently allowing the Plan to incur excessive expenses and generate insufficient returns.1 The district court certified a plaintiff class composed of Plan participants but ultimately granted summary judgment to defendants.2 Plaintiffs appeal this grant of summary judgment along with two of the district court's procedural rulings— its order denying plaintiffs' motion for leave to file an amended complaint and its order excluding the testimony of one of plaintiffs' expert witnesses, Dr. Edward O'Neal. We affirm the procedural rulings and affirm in part and reverse in part the grant of summary judgment.
The Kraft Plan was a defined contribution plan within the meaning of ERISA, see 29 U.S.C. § 1002(34), and was structured as a typical Section 401(k) plan. The Plan established an account for each participant, and participants were allowed to contribute up to a specified amount of their wages to that account. To an extent, Kraft made matching contributions on behalf of its employees. Upon retirement, a participant had whatever the account had accumulated through contributions and investment earnings.
Between 2000 and 2006, the Plan had between 37,000 and 55,000 participants and between $2.7 billion and $5.4 billion in assets. Participants were able to direct their contributions into one or more mutual funds, and during the relevant time the Plan allowed participants to choose from a menu of seven to nine different funds. Two of these funds were company stock funds (" CSFs" ), which invested almost exclusively in the common stock of Kraft and Kraft's then-parent company, Altria Group, Inc. (formerly Philip Morris).3 The Plan also offered various multi-stock funds, two of which are relevant to this case, the Growth Equity Fund and the Balanced Fund.
In connection with their administration of the Plan, the Plan fiduciaries hired various service providers, including a recordkeeper, Hewitt Associates (" Hewitt" ), and a trustee, State Street Bank & Trust Company (" State Street" ). Hewitt's job was to keep track of the various accounts and transactions associated with the Plan and to assist Plan participants in managing their accounts. State Street's job was to hold and manage the Plan's assets. The fees of both Hewitt and State Street were paid out of Plan assets.
Plaintiffs filed the present action in 2006, alleging that Plan fiduciaries mismanaged the CSFs and paid excessive fees
to Hewitt and State Street. Plaintiffs' claims arise under 29 U.S.C. § 1104(a)(1), which provides that plan fiduciaries must act prudently— i.e., " with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." This section also states that plan administrative costs must be " reasonable." We explain the details of plaintiffs' claims in the course of our analysis of each claim, below.
II. Motion to Amend Complaint
We start by examining whether the district court abused its discretion in denying plaintiffs' motion for leave to file an amended complaint under Federal Rule of Civil Procedure 15(a). See Soltys v. Costello, 520 F.3d 737, 743 (7th Cir.2008). Plaintiffs' original complaint, which named seven different defendants, focused on the alleged mismanagement of the CSFs and the alleged payment of excessive fees to Plan service providers. The proposed amended complaint sought to add an additional twenty-one defendants and to add claims regarding various investment decisions made by Plan fiduciaries. As the district court characterized the proposed new claims, they involved attacks " on the substantive investment choices made with the assets of the Plan. Questions of whether there were appropriate investment vehicles used, whether there should have been holdings in investment X versus investment Y. Whether there should have been cash position A or cash position B." (App.17.) The district court contrasted these claims with the claims in the original complaint, which focused largely on " the issue of fees and expenses paid to service providers." (App.16.)
Ultimately, the district court denied plaintiffs' motion on the ground of undue delay. See, e.g., Arreola v. Godinez, 546 F.3d 788, 796 (7th Cir.2008) (recognizing that district courts have broad discretion to deny leave to amend where there has been undue delay). We therefore take some time to explain the procedural history of the case up to the time of the district court's ruling.
Plaintiffs filed this lawsuit on October 16, 2006, in the Southern District of Illinois. Defendants then moved to transfer venue to the Northern District of Illinois, and the Southern District allowed plaintiffs to conduct discovery in connection with the venue motion. Through this initial discovery, plaintiffs obtained much of the evidence underlying the allegations they sought to add to the case by way of their unsuccessful motion to amend.
The Southern District of Illinois granted defendants' motion to transfer venue, and the case was transferred to the Northern District of Illinois on March 26, 2007. Shortly thereafter, the district court ordered the parties to meet and confer pursuant to Federal Rule of Civil Procedure 26(f) and arrive at a proposed discovery schedule. In their proposal, the parties did not request a deadline for joining parties or amending pleadings. After receiving the parties' proposal, the court entered a scheduling order and, pursuant to the parties' request, bifurcated fact discovery from discovery relating to class certification. The scheduling order set August 6, 2007, as the deadline for completing class-certification discovery. The district also set a deadline for plaintiffs to file their class-certification motion; briefing on this motion was to be completed by January 25, 2008. After entering this schedule, the court ordered the parties to conduct a second Rule 26(f) discovery conference regarding fact (i.e., non-class certification)
discovery. The parties did so, and once again they failed to request a deadline for adding parties or amending pleadings without leave of court. Upon receipt of the parties' new proposed discovery plan, the district court set a deadline of March 21, 2008 for non-expert discovery and a deadline of June 16, 2008 for expert discovery.
On November 12, 2007, plaintiffs filed their class-certification motion, and briefing on this motion was complete by January 25, 2008. On January 31, 2008, plaintiffs moved for an extension of time to complete discovery on the basis of the overwhelming number of documents produced by defendants in response to plaintiffs' requests for production. The district court granted this request and set deadlines for non-expert and expert discovery of May 20, 2008 and August 15, 2008, respectively. On March 21, 2008, plaintiffs moved to compel discovery from defendants. Plaintiffs wanted to obtain unredacted copies of certain documents, but defendants refused to remove their redactions. The district court granted this motion and ordered defendants to produce the unredacted documents by April 4, 2008. On April 17, 2008, at plaintiffs' request, the district court extended the deadlines for non-expert and expert discovery until July 21, 2008 and October 17, 2008, respectively. On May 7, 2008, plaintiffs filed their motion for leave to file an amended complaint.
In denying plaintiffs' motion, the district court found that plaintiffs knew about the facts that gave rise to their proposed amendments " at the outset of the case, either before the original complaint was filed in October of 2006, or shortly thereafter." (App.6.) Plaintiffs did not include any argument in their opening brief on appeal indicating that they dispute this finding. In their reply brief, plaintiffs suggest that they were unable to " clearly ascertain all of the fiduciaries and elements of their breaches" until the district court granted plaintiffs' motion to compel production of the unredacted documents. (Reply Br. at 5.) However, arguments raised for the first time in a reply brief are forfeited. See, e.g., United States v. Lupton, 620 F.3d 790, 807 (7th Cir.2010). In any event, plaintiffs do not identify any specific claims or allegations that they could not have asserted prior to the time they received defendants' unredacted documents, and so we are in no position to disturb the district court's finding regarding what plaintiffs knew and when.
Plaintiffs also indicate that they decided to wait until after defendants finished their document production to seek leave to amend in order to avoid having to seek leave to amend more than once. That is, plaintiffs tell us that they...
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