Clark v. Feder Semo & Bard, P.C.

Decision Date15 August 2012
Docket NumberCivil Action No. 07–470(JDB).
Citation895 F.Supp.2d 7
PartiesDenise M. CLARK, Plaintiff, v. FEDER SEMO & BARD, P.C., et al., Defendants.
CourtU.S. District Court — District of Columbia

OPINION TEXT STARTS HERE

Allison C. Pienta, Stephen Robert Bruce, Stephen R. Bruce Law Offices, Washington, DC, John R. Ates, Ates Law Firm, P.C., Alexandria, VA, for Plaintiff.

James Charles Bailey, Jason H. Ehrenberg, Michael A. Tilghman, Bailey & Ehrenberg PLLC, Washington, DC, for Defendants.

MEMORANDUM OPINION

JOHN D. BATES, District Judge.

Plaintiff Denise Clark brings this action pursuant to the Employee Retirement Income Security Act of 1974 (ERISA), alleging that defendants improperly denied her a significant portion of her retirement benefits. Defendants are the law firm Feder, Semo & Bard (Feder Semo or “the firm”) (Clark's former employer), the Feder Semo Retirement Plan and Trust (“Plan”), and two former trustees of the Plan, Joseph Semo and Howard Bard. The Court conducted a six-day bench trial beginning on April 23, 2012, on plaintiff's three remaining claims in the case.

Clark worked at Feder Semo for almost ten years before moving on to other employment in 2002. She was distributed retirement benefits after the firm unexpectedly went out of business toward the end of 2005. However, when Feder Semo went out of business, it had insufficient funds to pay out all benefits due under calculations dictated by the terms of the Plan. Lump sum distributions under the Plan's terms could be determined in two ways, and Plan participants were entitled to receive benefits in the amount of whichever determination was larger. One of the two amounts was a definite amount of money that grew as Plan participants accrued a percentage of their annual compensation in benefits and earned interest on the account balance; Plan recipients, including Clark, were regularly notified of this amount. The other was based on a calculation involving a floating interest rate, which was tied to the return on 30–year Treasuries. When the Plan went out of business, this rate was especially low, resulting in benefit distributions—and Plan liabilities—that were especially high. But the Plan had insufficient funds to pay these benefits, so each Plan recipient received a pro rata share of the amount due. Hence, although Clark ultimately received more money than the fixed amount that had been quoted to her, she received only about 53% of the full amount due under the second calculation. She claims both that the Plan's actuarial assumptions were unreasonable given the terms of the Plan and that she was inadequately informed of the risk of loss of her benefits. Furthermore, Clark contends that under either calculation her account balance was credited with a smaller percentage of her annual compensation than she was entitled to receive.

Clark's three claims accordingly involve the administration of the Plan. First, she contends that she was improperly grouped for the purpose of determining her account balance and that Semo and Bard violated their fiduciary duties in failing to correct this error when Clark made a formal appeal. Second, she contends that the firm violated ERISA's disclosure requirements by failing to disclose the risk of loss if the Plan terminated with insufficient funds and the Plan's lack of insurance to protect participants in that contingency. Third, she contends that Feder Semo and Semo and Bard, as Plan fiduciaries, failed to use a reasonable actuarial assumption for intereston the Plan's assets, causing the Plan to be underfunded.

After careful consideration of the evidence at trial, the parties' memoranda, the applicable law, and the entire record herein, and for the reasons set forth in more detail in the findings of fact and conclusions of law that follow, the Court will enter judgment for the defendants on each of Clark's remaining three claims. With respect to the improper grouping claim, the Court concludes that the decision Semo and Bard made on Clark's appeal was reasonable. With respect to ERISA's disclosure requirements, the Court finds that Clark was not harmed by any failure to disclose the risk of loss at Plan termination and the Plan's lack of insurance. And with respect to the interest rate assumption, the Court finds that the defendants did not breach their fiduciary duties to maintain the Plan on a sound actuarial basis.

I. Case History

This case has already gone through several iterations in this Court. Clark's amended complaint was filed on May 28, 2008 [Docket Entry 28]. On December 17, 2007, the Court dismissed some of Clark's claims but denied defendants' motion to dismiss on the remaining claims. Clark v. Feder Semo & Bard, P.C., 527 F.Supp.2d 112, 118–19 (D.D.C.2007) (“Clark I ”). On March 22, 2012, the Court granted summary judgment for defendants on all but plaintiff's improper grouping claim. Clark v. Feder Semo & Bard, P.C., 697 F.Supp.2d 24 (D.D.C.2010) (“Clark II ”). However, on September 13, 2010, the Court issued its decision on reconsideration, which vacated the partial grant of summary judgment. Clark v. Feder Semo & Bard, P.C., 736 F.Supp.2d 222, 225 (D.D.C.2010) (“Clark III ”). After this decision, the Court ordered Clark to file a statement precisely detailing the nature of her remaining claims so that both the Court and the parties would have a concrete grasp of her at-times evolving allegations. See Order of Sept. 30, 2010 [Docket Entry 85]. In Clark's Statement Detailing Nature of Claims [Docket Entry # 87] (“Pl.'s Statement”), she asserted five theories of recovery. On September 7, 2011, the Court granted summary judgment for defendants on two of these claims. Clark v. Feder Semo & Bard, P.C., 808 F.Supp.2d 219 (D.D.C.2011) (“Clark IV ”). Specifically, the Court concluded that Clark could not bring an “anti-cutback” claim because Clarks' benefits were not reduced by an amendment to the Plan. Id. at 226–29. The Court also concluded that Clark could not bring a claim against Semo and Bard for permitting distributions to the firm's founder and his wife in 2002 and 2005. See id. at 232–34. The case then proceeded to trial on the three remaining claims.

II. Findings of Fact

The Court conducted a bench trial over a six-day period beginning on April 23, 2012. Based on the record established at trial, the Court makes the following findings of fact. The Court will first introduce the individuals involved in this case and then explain the evolution of the firm and the Plan. Next, the Court will describe Clark's treatment under the Plan, including the decision made by the firm upon her appeal of the amount of her distribution. The Court will then explain how, in relevant part, the Plan was funded, including the actuarial assumption of interest that is the basis of one of Clark's claims. The Court will then describe the expert testimony heard at trial about the interest rate assumption. Finally, the Court will review the evidence heard about the Plan's summary plan description.

a. Individuals Involved with the Firm and the Plan

Gerald Feder founded the Feder Semo law firm, then known as “Feder & Associates,”1 in the mid–1970s. Feder Tr. 8:2–9.2 The Plan was founded in the mid–1980s. Feder Tr. 9:14–16, 29:11–16. Feder was the original sponsor and fiduciary of the Plan. Feder Tr. 11:11–12:7. The Plan was initially drafted to be primarily to the benefit of Feder and his wife, Loretta, who was also employed by the firm. Tr. 839:12–21 (Anspach). The Feders retired from the firm on December 31, 2001, but continued to receive a percentage of the firm's revenue for some time thereafter. Feder Tr. 13:6–9, 15:12–19.

Denise Clark is an attorney with an L.L.M. degree and employee benefits certification from Georgetown University Law Center. Tr. 29:10–17 (Clark). She practices in the “employee benefits” area of law, among other related areas. See Tr. 29:20–30:3, 39:18–40:1 (Clark). Clark was hired in 1993 to work at the Feder Semo law firm, then known as “Feder & Associates, P.C.,” by Gerald Feder. Tr. 30:6–15 (Clark). After becoming a non-equity partner in 1997, Clark became an equity partner in the firm as a Class A Shareholder in 2000. See Tr. 31:5–35:9 (Clark); Pl.'s Ex. 7. In 2001, she became managing partner of the firm. Tr. 36:25–37:8 (Clark). Clark resigned from the firm in mid–2002 to become the general counsel of the Hotel Employees and Restaurant Employees International Union Welfare and Pension Fund. Tr. 37:20–38:11, 117:21–118:11 (Clark).

Howard Bard is an attorney who began working for the firm roughly contemporaneously with Clark in 1993. Tr. 30:18–20 (Clark). Bard practices in the employee benefits area of the law. Tr. 313:1–14 (Bard). He became a non-equity partner in the firm in 1997 and a Class A Shareholder in 2000 when Clark did. Tr. 31:5–31:7 (Clark); Tr. 319:6–10 (Bard); Pl.'s Ex. 7. He became the managing partner when Clark left the firm in 2002 and remained in that position until the firm terminated in 20052006. Tr. 313:17–24 (Bard). It is fair to say that, with one notable exception described below, Bard and Clark were treated equivalently in relevant respects during their time together at Feder Semo.

Joseph Semo is an attorney with substantial experience in the employee benefits field dating to the mid–1970s. Tr. 472:25–475:15 (Semo). His own firm merged with Feder & Associates in July 1998. Pl.'s Ex. 6; Tr. 31:19–32:14 (Clark); Tr. 478:15–17 (Semo). According to the terms of the merger, memorialized in a “Business Combination Agreement” (“BCA”), Semo became a Class A Shareholder in Feder Semo at that time. See Pl.'s Ex. 6.

Robert Landau is an attorney who was an employee of Feder Semo until approximately January 2000. Tr. 428:1–21 (Landau). Landau appears to have been treated roughly equivalently with Bard and Clark while at the firm, but left the firm before becoming an equity partner.

Mark Nielsen is an attorney who was also an employee of Feder Semo until the firm's dissolution in 2005....

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