Brown v. American Life Holdings, Inc.

• Citation: 64 F.Supp.2d 882
• Decision Date: 18 November 1998
• Docket Number: No. 4-96-CV-9087 1.,4-96-CV-9087 1.
• Parties: C. Richard BROWN, Plaintiff, v. AMERICAN LIFE HOLDINGS, INC., C. Harold Brown, Robert Clark, Jerome Crowley, Donald F. Gongaware, and Rollin M. Dick, and Bank One, Indianapolis, N.A., Defendants.
• Court: U.S. District Court — Southern District of Iowa

64 F.Supp.2d 882

C. Richard BROWN, Plaintiff, v. AMERICAN LIFE HOLDINGS, INC., C. Harold Brown, Robert Clark, Jerome Crowley, Donald F. Gongaware, and Rollin M. Dick, and Bank One, Indianapolis, N.A., Defendants.

No. 4-96-CV-9087 1.

United States District Court, S.D. Iowa, Central Division.

November 18, 1998.

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Nicholas v. Critelli, Jr., Critelli & Associates, Des Moines, Iowa, for plaintiff.

Mark A. Casciari, Robert P. Flanagan, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, Thomas N. Kamp, Lane & Waterman, Davenport, IA, for defendants.

MEMORANDUM OPINION AND ORDER

PRATT, District Judge.

This matter comes before the Court on Defendants' Motion for Summary Judgment filed on August 17, 1998. After receiving Plaintiffs Response and Defendants' Reply, hearing oral argument, and reviewing the applicable law, this Court grants partial summary judgment for Defendants and grants partial summary judgment for Plaintiff, although no cross-motion has been filed with the court.

This action arises under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). Plaintiff filed his original Complaint on December 12, 1996, alleging failure to furnish information as required under 29 U.S.C. § 1024(b)(4) (enforceable under 29 U.S.C. § 1132(c)(1)(B)). Plaintiff tiled his [First] Amended Complaint on February 18, 1998, adding "Count II" alleging two additional claims: (1) breach of fiduciary duty under 29 U.S.C. §§ 1104(a)(1)(A) & (B) by "taking an unreasonably long time" to either terminate an Employee Stock Ownership Plan ("ESOP") and distribute the funds or to roll the funds into the existing Statesman 401(k) Plan; and (2) breach of fiduciary duty under 29 U.S.C. §§ 1104(a)(1)(A) & (B) by failing to diversify the investments into higher yielding investments. Plaintiff filed his [Second] Amended Complaint on July 14, 1998, in which he joined additional Defendants. The Court exercises federal question jurisdiction over these claims under 29 U.S.C. § 133 1 and venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b)(3). Defendants request summary judgment on Plaintiffs three claims.¹

I. Facts

The following facts, taken from the record as a whole, are either undisputed or viewed in the light most favorable to the nonmoving party. See Ledergerber v. Stangler, 122 F.3d 1142, 1144 (8th Cir. 1997). Defendant American Life Holdings, Inc. ("American Life") was formerly known as The Statesman Croup, Inc. ("Statesman"). Statesman operated an ESOP, an employee benefit plan under ERISA.² Plaintiff C. Richard Brown ("Plaintiff") was a participant in the ESOP, and Statesman was the ESOP sponsor. Defendants C. Harold Brown ("Brown"), Robert Clark ("Clark"), Jerome Crowley ("Crowley"), Donald Gongaware ("Gongaware"), and Roland Dick ("Dick") were members, at various times, of the Administrative Committee, which was the ESOP administrator. Defendant Bank One, Indianapolis, N.A. ("Bank One") was the ESOP trustee.

The Statesman ESOP was established on January 1, 1970, and was maintained continuously until January 2, 1996, when it was merged into the Statesman Savings Plan 401(k) ("401(k) plan"). On September 29, 1994, Conseco Capital Partners II, L.P. ("Conseco") acquired a controlling interest in Statesman, tendering cash for all Statesman stock, and on that date, or shortly after, the ESOP received cash for its stock holdings. Sometime between September 29, 1994 and October 20, 1994, John Matovina ("Matovina")³ advised Bank One representatives that the continuing existence of the ESOP was uncertain and that it might be terminated or merged into another tax-qualified plan, such as the 401(k) plan. On or about October 13, 1994, Plaintiff attended a meeting at which he was told that the ESOP assets were being invested in U.S. Treasury bills. At about that time, in mid-October 1994, Bank One did invest approximately 90 percent of the ESOP cash in U.S. Treasury bills to mature on April 20, 1995. The remaining cash was invested in a Bank One money market savings fund. On or about December 15, 1994, no further employer contributions were made to the ESOP.

On April 20, 1995, Bank One re-invested approximately 90 percent of the ESOP cash in U.S. Treasury bills to mature on August 17, 1995. The remaining cash was again invested in a Bank One money market savings fund. From August 17, 1995 until January 2, 1996, when the ESOP was merged into the 401(k) plan, all of the ESOP assets were invested in a Bank One money market savings fund.

The Administrative Committee met formally at least once a year, usually in December. The members of the Administrative Committee were appointed annually by the Board of Directors of the plan sponsor and were removable at will, as set forth in § 4.1 of the ESOP. The Administrative Committee, composed of Brown, Clark, and Crowley, ceased to function after the merger on September 29, 1994. The new Board of Directors of Statesman did not appoint Gongaware and Dick as new replacement members of the Administrative Committee until January 1, 1995. Gongaware and Dick were part of the senior management of Conseco and were also on the new Board of Directors for Statesman.

On February 2, 1996, Plaintiff sent a letter to Matovina requesting certain ESOP-related documents. Plaintiff specifically requested copies of "all documents pertaining to The Statesman Group, Inc. ESOP plan" including "the latest [presumably 1995] annual report, the Trust contract, minutes of administrative meetings ... resolutions ... written communications between the company, the administrative committee and the trustee ... and any other documents under which the plan was established or is operated." Plaintiff received a copy of the ESOP sometime within two weeks of sending his letter. The Assistant General Counsel for Conseco responded in writing to Plaintiffs letter on February 14, 1996, stating, "[w]e have requested that John Matovina provide us with a copy of the latest annual report for the ESOP" (emphasis added), adding that he did not think any documentation outside of the plan itself need be provided to Plaintiff under ERISA. Nothing further was provided to Plaintiff at this time.

Plaintiff, with assistance of counsel, submitted a second written request for information on September 13, 1996, and asked Matovina, Crowley, Clark, and Brown to provide him with: minutes of the meetings of the Plan's Administrative Committee, the latest annual report of the plan, the trust contract, all resolutions pertaining to the plan, copies of the plan's 5500 tax forms, a detailed explanation concerning the Committee's decisions to maintain the plan and retain plan funds in low-yielding investments, and all filing and correspondence to and from the Internal Revenue Service and the Department of Labor. In his October 17, 1996 response, Matovina provided summary annual reports for 1994 and 1995, an annual report on Form 5500 for the prior five years, audited financial statements for the prior five years, and a copy of the amended and restated plan and trust document.

II. Legal Standard

The precise standard for granting summary judgment is well-established and oft-repeated: summary judgment is properly granted when the record, viewed in the light most favorable to the nonmoving party and giving that party the benefit of all reasonable inferences, shows that there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Harlston v. McDonnell Douglas Corp., 37 F.3d 379, 382 (8th Cir.1994). The Court does not weigh the evidence nor make credibility determinations, rather the court only determines whether there are any disputed issues and, if so, whether those issues are both genuine and material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact based on the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any. See Celotex v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Once the moving party has carried its burden, the nonmoving party must go beyond the pleadings and, by affidavits or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is genuine issue for trial. See Fed. R.Civ.P. 56(c), (e); Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. 2548; Anderson, 477 U.S. at 257, 106 S.Ct. 2505. "[T]he mere existence of some alleged factual dispute between the parties will not defeat a motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505 (emphasis added). An issue is "genuine" if the evidence is sufficient to persuade a reasonable jury to return a verdict for the nonmoving party. See id at 248, 106 S.Ct. 2505. "As to materiality, the substantive law will identify which facts are material.... Factual disputes that are irrelevant or unnecessary will not be counted." Id.

III. Discussion

A. Failure to Furnish Information Claim

Plaintiff argues that Defendants violated 29 U.S.C. §§ 1024(b)(4) and 1132(c)(1) by failing to provide him with all of the documents he sought within thirty days of his written requests. Defendants respond that they provided Plaintiff with all documents as required and are entitled to summary judgment as a matter of law because Plaintiff cannot show harm or prejudice.

In order to decide whether Defendants are entitled to summary judgment, the Court must decide whether the failure of Defendants to provide all of the documents requested by Plaintiff is a violation of § 1024(b)(4). The plain language of the text is the starting point in every case involving statutory...