Beaston v. Sundt Cos.
| Citation | 804 F.Supp.2d 1011 |
| Decision Date | 15 August 2011 |
| Docket Number | No. CV 09–551–TUC–AWT.,CV 09–551–TUC–AWT. |
| Parties | Peggy J. BEASTON, Plaintiff, v. The SUNDT COMPANIES; Carol W. Peabody; and The Sundt Companies Esop Committee, Defendants. |
| Court | U.S. District Court — District of Arizona |
OPINION TEXT STARTS HERE
Bruce R. Heurlin, Eric James McNeilus, Sr., Kevin Michael Sherlock, Heurlin Sherlock Panahi, Tucson, AZ, for Plaintiff.
David M. Bell, David Bell & Associates PLLC, Phoenix, AZ, Dennis G. Rolstad, Sedgwick Detert Moran & Arnold LLP, San Francisco, CA, for Defendants.
Peggy J. Beaston (“Plaintiff”) brings this action against The Sundt Companies (“Sundt”), Carol W. Peabody, a member of the Sundt ESOP Advisory Committee (“Peabody”), and the Sundt Companies ESOP Committee (the “Committee”). (The defendants, collectively, are hereinafter referred to as “Defendants.”) Plaintiff alleges discrimination, breach of fiduciary and cofiduciary duty, fraud, and misrepresentation by Defendants, giving rise to a cause of action under the Employee Retirement Income Security Act of 1974 (“ERISA”). Pending before the court is Defendants' Motion for Summary Judgment (Doc. 30), which has been fully briefed. On the basis of that briefing and a review of the summary judgment record, the court has determined that oral argument on the motion will not be helpful. The motion, therefore, is now submitted for decision and, for the reasons stated below, the court GRANTS Defendants' Motion.
Plaintiff is a former Sundt employee. (Doc. 32, at 2–4.) During her employment, she participated in an Employee Stock Ownership Plan sponsored by Sundt (the “ESOP”). The ESOP is an employee stock ownership plan as defined by ERISA, § 407(d)(6), 29 U.S.C. § 1107(d)(6). Its plan year (the “Plan Year”) runs from October 1 through September 30. ( Id., at 2.)
In 2006, Plaintiff was considering participating in a reduction-in-force program (the “RIF”) at Sundt. At that time, she anticipated that the value of Sundt stock, in which her ESOP account was invested, would rise. She was concerned about missing out on any such increase in value, and she discussed the matter with Peabody prior to and during the month of September 2006. Plaintiff advised Peabody that she wanted her retirement plan assets to remain invested in Sundt stock after her retirement. Peabody informed Plaintiff that historically it was taking approximately two years for the ESOP to convert former employees' assets out of Sundt stock and into other investments and advised Plaintiff that her assets would remain in Sundt stock for approximately two years after her employment terminated. ( Id., at 2–3.) Plaintiff decided to participate in the RIF, and her employment at Sundt ended on September 23, 2006. ( Id., at 4.)
In 2006, at the time of Plaintiff's conversation with Peabody, the ESOP governing documents provided that the ESOP (Doc. 31–1, at 27–28.) At that time, Sundt's actual practice was to move former employees' assets out of Sundt stock and into other assets as soon as it had enough cash to do so after their employment ended. As of 2006, as Peabody stated, that process historically had taken up to two years. (Doc. 32, at 3.) In 2005, 2006, and January 2007, Sundt sent a notice to ESOP participants informing them that, after they separated from service with Sundt, the value of their account balance would be converted out of Sundt stock and into alternative investments as soon as sufficient cash was available within the ESOP trust. (Doc. 31–2, at 5–6, 7–8, 9.)
However, at a meeting of the Committee on February 5, 2007, the Committee discussed for the first time the possibility of amending the ESOP terms regarding when former employees' ESOP account balances would be moved out of Sundt stock. (Doc. 32, at 4; Doc. 31–2, at 13.) Then, at a Committee meeting held on May 21, 2007, the Committee agreed to change the ESOP terms to provide that all terminated employees' Sundt stock would be converted to cash in the Plan Year following the Plan Year in which an employee terminated his or her employment, and that the conversion would be based on the fair market value of Sundt stock at the end of the Plan Year in which the employee's employment with Sundt ended (in other words, on the September 30th following the employee's termination of employment). (Doc. 32, at 5–6; Doc. 31–2, at 46.) This decision was informed by the Committee's review of certain repurchase liability studies, which are not in the record before the court. (Doc. 32, at 5.) In May 2007, the ESOP documents were amended to reflect this change. The Committee applied this change retroactively, with the result that “all former employees' accounts would be effectively segregated and valued on the first day of the ESOP year following the year in which their employment ended.” (Doc. 32, at 6 (emphasis added).)
In September of 2007, Sundt sent Plaintiff a notice informing her that her ESOP account would “remain invested in Sundt stock [only] through the September 30th (plan year) after [her] termination of employment with Sundt.” (Doc. 31–4, at 2; see Doc. 32, at 6.) In January of 2008, Plaintiff emailed Peabody expressing surprise that her recent ESOP statement reflected that her shares had been converted to cash at the September 30, 2006 share price. Plaintiff's email indicated that she had believed that her account would remain in Sundt stock through September 30, 2007. (Doc. 31–4, at 5.) The value of one share of Sundt stock on September 30, 2006 was $52.96. The value as of September 30, 2007 was $80.33. (Doc. 38, at 2.)
On June 13, 2008, Plaintiff's counsel sent a letter to Sundt contesting the decision to convert her Sundt stock as of September 30, 2006, and demanding payment of $149,064.88 (the additional amount Plaintiff alleged she would have gained had her account remained in Sundt stock until September 30, 2007), plus interest. Plaintiff's counsel sent a second letter, on October 15, 2008, reiterating Plaintiff's position. On October 28, 2008, the Committee sent Plaintiff's counsel a letter asserting that her interest in the ESOP was calculated correctly and denying her claim for an adjustment to her interest. (Doc. 32, at 7.) Plaintiff submitted an appeal of this determination to the Committee on December 24, 2008; this appeal was denied on February 18, 2009. ( Id. at 7–8.)
Plaintiff commenced this action on September 29, 2009, and, on October 26, 2009, filed an Amended Complaint (hereinafter, the “Complaint”). (Docs. 1, 3.) Plaintiff seeks, inter alia, equitable relief pursuant to 29 U.S.C. § 1132(a)(3) and damages under ERISA. (Doc. 3, at 18.) Defendants filed a Motion to Dismiss certain state law claims contained in the Complaint on January 15, 2010, and Plaintiff voluntarily dismissed those claims on February 1, 2010. (Docs. 10, 16.) Defendants filed the present Motion for Summary Judgment on February 24, 2011. (Doc. 30.)
A. Legal Standard for Summary Judgment
The court may grant summary judgment when the pleadings and evidence show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To establish a genuine dispute as to any material fact, the non-moving party “must come forth with evidence from which a jury could reasonably render a verdict in the non-moving party's favor.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir.2010). In determining whether the non-moving party has met this burden, the court must draw “all justifiable inferences” in the non-moving party's favor. Id.
Plaintiff has not challenged Defendants' Separate Statement of Facts in Support of Motion for Summary Judgment (Doc. 32) and has not argued that there is any genuine dispute as to any material fact. (Doc. 37, at 4–5.) Therefore, the only question the court must decide is whether Defendants are entitled to judgment as a matter of law, based on the facts as set forth above.
B. Analysis1. Statutory Basis for Plaintiff's Claim
As an initial matter, the parties dispute the sections of ERISA under which Plaintiff may bring a claim.
Defendants argue that Plaintiff's claim should be brought as a claim for additional benefits under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), but that Plaintiff cannot prevail on a claim under that section. (Doc. 30, at 13–17.) Plaintiff in turn argues that she can prevail on a claim under that section. (Doc. 37, at 6–8.) In their Reply in Support of Their Motion for Summary Judgment, Defendants argue for the first time that Plaintiff waived the right to bring a claim under that section because she did not specifically mention it as a basis for relief in the Complaint. (Doc. 39, at 12–13.)
Section 502(a)(1)(B) provides a cause of action for a participant or beneficiary of an ERISA plan “to recover benefits due to him under the terms of his plan, [or] to enforce his rights under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). While it is true that Plaintiff did not specifically cite this section in the Complaint, the Complaint does state that Plaintiff “seeks all remedies available under ERISA.” (Doc. 3, at 2.) Moreover, Defendants had fair notice of a potential claim under this section, as evidenced by the fact that they specifically argued in their Motion for Summary Judgment that Plaintiff cannot prevail on a claim under § 502(a)(1)(B). See Katie A., ex rel. Ludin v. L.A. Cnty., 481 F.3d 1150, 1162 (9th Cir.2007). It is not necessary for a complaint to identify every particular legal theory under which recovery could be granted. Crull v. GEM Ins. Co., 58 F.3d 1386, 1391 (9th Cir.1995). Therefore, the court will consider Plaintiff's claim under § 502(a)(1)(B) on the merits.
ERISA § 502(a)(2) permits a plan...
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