Brieger v. Tellabs, Inc.
| Decision Date | 26 June 2009 |
| Docket Number | Case No. 06 C 1882. |
| Citation | 629 F.Supp.2d 848 |
| Parties | Don BRIEGER, Harry Schultz, Robert Becker, and Alan Burstin, individually and on behalf of all others similarly situated, Plaintiffs, v. TELLABS, INC., Tellabs Operations, Inc., Richard C. Notebaert, Michael J. Birck, Brian J. Jackman, Debra Ragusa, Michael C. Smiley, and Joan E. Ryan, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Donna Siegel Moffa, James A. Maro, Peter A. Muhic, Katherine B. Bornstein, Barroway Topaz Kessler Meltzer & Check, LLP, Radnor, PA, Norman Rifkind, Lasky & Rifkind, Ltd., Chicago, IL, Matthew M. Houston, Harwood Fefferllp, New York, NY, for Plaintiffs.
Charles Clark Jackson, Amy Marie Foran, Deborah S. Davidson, Julia Y. Trankiem, Kirsten Milton Evans, Sari M. Alamuddin, Morgan, Lewis & Bockius LLP, Chicago, IL, for Defendants.
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiffs Don Brieger, Harry Schultz, Robert Becker, and Alan Burstin, on behalf of themselves and a certified class, have sued defendants Tellabs, Inc. (Tellabs or the company), Tellabs Operations, Inc., Richard C. Notebaert, Michael J. Birck, Brian J. Jackman, Debra Ragusa, Michael C. Smiley, and Joan E. Ryan for alleged breaches of fiduciary duties under the Employee Retirement Income Security Act, 29 U.S.C. §§ 1109 & 1132. The Court certified a class of plaintiffs on September 19, 2007. See Brieger v. Tellabs, Inc., 245 F.R.D. 345 (N.D.Ill.2007). The class was defined as "[a]ll persons who were participants or beneficiaries of the Tellabs, Inc. Profit Sharing and Savings Plan at any time between December 11, 2000 and July 1, 2003 and whose accounts included investments in Tellabs stock." Id. at 357.
The case was tried in a bench trial over eight days from April 13 to May 7, 2009. Following the close of evidence, the parties submitted proposed findings of fact and conclusions of law, collectively totaling over 330 pages. The Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52. To the extent any findings of fact are deemed conclusions of law, they shall be considered conclusions of law and vice versa.
Tellabs was founded in the 1970s by Birck and several others. It designs and manufactures equipment used in the telecommunications industry. Tellabs also sells installation, engineering, and maintenance services to purchasers of its products. Birck was the CEO of Tellabs from its inception until mid-2000. After he resigned as CEO, Birck remained on Tellabs' board of directors, serving as chairman. Notebaert replaced Birck as CEO. He remained in that position until June 2002, when he left Tellabs to become the CEO of Qwest. After Notebaert's departure, Birck resumed his former role as CEO of Tellabs for the remainder of the relevant period. Ryan was Tellabs' CFO throughout most of the relevant period. Jackman was a Tellabs executive vice president until August 2001 and a member of the board of directors until April 2002. At various times, Birck, Notebaert, Ryan, and Jackman would speak to Tellabs employees, market analysts, and the general public on a wide array of issues concerning the company.
Tellabs established a retirement and savings plan known as the Tellabs Advantage Program (the Plan). Two components of the Plan were the Tellabs Savings and Profit Sharing Plan and the Tellabs Retirement Program. The Plan was an employee pension benefit plan as defined by ERISA. See 29 U.S.C. § 1002(2)(A). Employees had individual accounts within the Plan. The Plan stated that it was designed to help Tellabs employees prepare for retirement.
Tellabs utilized two committees to oversee the Plan. One was known as the investment committee. The investment committee met annually and had ultimate authority for selecting investment options for the Plan. At various times relevant to this case, defendants Birck, Notebaert, Jackman, and Ryan were members of the investment committee. The administrative committee oversaw the day-to-day operations of the Plan and made recommendations to the investment committee. The administrative committee formally met at least quarterly, and sometimes more frequently. Members of the administrative committee regularly attended investment committee meetings, though the reverse did not occur. Defendants Ragusa and Smiley were members of the administrative committee. Tellabs' board of directors appointed the members of both committees.
Tellabs hired Hewitt Financial Services to administer the Plan on a day-to-day basis in conjunction with the administrative committee. The members of the administrative committee were Hewitt's primary contacts at Tellabs. Hewitt kept the Plan's records, processed participant transactions, maintained online services for the participants, and sent out account statements. Hewitt also played a limited role in evaluating mutual funds that were included as investment options for the Plan. Hewitt never evaluated, however, whether Tellabs stock should be included or remain as an investment option.
An employee could elect to make contributions to the "savings" portion of the Plan, which Tellabs matched in an amount up to three percent of the employee's income in 2000 and 2001, and subsequently four percent. The matching contribution made by Tellabs was allocated in the same manner as the employee's contribution. An employee could direct his contributions to the savings component of the Plan into any of the investment choices offered by the Plan. Each individual employee determined how to allocate his or her investments among those choices. The Plan offered eleven or twelve different investment choices at any given time. Those spanned an array of investments, from different types of growth and value stock and bond funds to more conservative money market investments. One fund consisted solely of Tellabs stock. The Tellabs stock fund was the only single-security investment offered to the Plan participants.
Under the "retirement" portion of the Plan, Tellabs contributed five percent of each employee's salary to his or her Plan account. Of that contribution, one-half of one percent was automatically invested in the Tellabs stock fund. Each employee selected how the rest of the contribution would be allocated, except that it could not be invested in the Tellabs stock fund. Tellabs also contributed to the retirement portion of the Plan up to one week of an employee's unused, otherwise forfeited vacation time. The contribution for the rollover of vacation time was made to the Tellabs stock fund. Employees could not transfer the vacation rollover or the company contributions to the Tellabs stock fund until they reached the age fifty-five.
Tellabs provided its employees with information regarding their participation in the Plan and the various available investment options. Employees received information regarding how to select the investments according to their goals and circumstances. They were also informed of the general risk levels associated with each investment. The Tellabs stock fund was clearly denoted as the riskiest investment option, due to the fact it was the only single-security fund available. Information regarding the investments and the Plan was provided both in written materials distributed to employees and in presentations conducted by members of Tellabs' human resources department, including Ragusa. Quarterly statements were mailed to each of the Plan participants containing information on the performance of all of their investments. Those statements were also available online.
Tellabs also provided its employees with extensive information regarding the company itself, how it was performing, and how senior management expected it would perform in the future. Employees had access to a Tellabs intranet website that contained numerous news articles about the company, a daily update of its stock price, and links to websites where participants could review and alter their investment choices in the Plan. Tellabs also emailed employees a weekly newsletter containing much of the same information, called "This Week at Tellabs." Hard copies of the newsletter were made available for employees who did not work at computers. Executives, including Birck, Notebaert, Ryan, and Jackman regularly conducted "town hall" meetings, at which employees were able to ask questions. Transcripts or recordings of those meetings were made available to employees unable to attend. Employees also had access to transcripts of telephone conferences between senior executives and outside analysts.
The Plan's investment committee was responsible for selecting the investment options available to Tellabs employees. The Plan provided that the investment committee had the power and duty:
(I) to establish investment guidelines and objectives for the investment of the Trust Fund and each investment Fund as a part thereof, including, but not by way of limitation, the establishment of additional investment funds or the consolidation of one ore more of the existing funds. . . .
JX 8 at TL-ERISA 6857. The Plan defined "Funds" as "the separate investment funds as described in Section 5.2." Id. at TL-ERISA 6802. Section 5.2(a) of the Plan provided that the Plan's assets would be held in a common trust fund that in turn was divided into the separate funds for each investment. The Plan specified that one of its "Funds," the "Tellabs Stock Fund," was "the Fund described in Section 5.2 (Common Fund)." Id. at TL-ERISA 6810.
The Plan required that
[e]ach Fund shall be established and invested ... in accordance with investment policies determined . . . by the Investment Committee.... The Investment Committee may from time to time also direct that Funds be terminated or that Funds with similar investment objectives be...
To continue reading
Request your trial
-
Gray v. Citigroup Inc. (In re Citigroup Erisa Litig.)
...when, as Plaintiffs allege, Defendants were aware of the deteriorating nature of the Company and its Stock”); Brieger v. Tellabs, Inc., 629 F.Supp.2d 848, 865 (N.D.Ill.2009) (explaining that fiduciaries do not discharge their duty by merely warning that a particular investment was the “risk......
-
Rights v. Tellabs Inc.
...and reactions to affirmation of the 2001 forecast. Id. at ¶ 55. VIII. Facts Relating to the Brieger Case In Brieger v. Tellabs, Inc., 629 F.Supp.2d 848 (N.D.Ill.2009) (Kennelly, J.), plaintiffs Don Brieger, Harry Schultz, Robert Becker, and Alan Burstin, on behalf of themselves and a certif......
-
Bartnett v. Abbott Labs.
...fiduciaries’ actions and to provide them with the information necessary to carry out their responsibilities." Brieger v. Tellabs, Inc. , 629 F. Supp. 2d 848, 867 (N.D. Ill. 2009) ; see also Howell , 633 F.3d at 573 ("There is no doubt that those who appoint plan administrations have an ongo......
-
Killian v. Concert Health Plan
...1104(a)(1), 1105(a); see also Jenkins, 444 F.3d at 924-25; Leigh v. Engle, 727 F.2d 113, 135-36 (7th Cir.1984); Brieger v. Tellabs, Inc., 629 F.Supp.2d 848, 866-68 (N.D.Ill.2009); Smith v. Aon Corp., No. 04 C 6875, 2006 WL 1006052, at *7 (N.D.Ill. Apr. 12, 2006); Howell v. Motorola, Inc., 3......