Brown v. Owens Corning Inv. Review Committee, Case No. 3:06 CV 2125.

• Decision Date: 31 March 2008
• Docket Number: Case No. 3:06 CV 2125.
• Parties: Britton C. BROWN, et al., Plaintiffs, v. OWENS CORNING INVESTMENT REVIEW COMMITTEE, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

541 F.Supp.2d 958

Britton C. BROWN, et al., Plaintiffs, v. OWENS CORNING INVESTMENT REVIEW COMMITTEE, et al., Defendants.

Case No. 3:06 CV 2125.

United States District Court, N.D. Ohio, Western Division.

March 31, 2008.

COPYRIGHT MATERIAL OMITTED

Cornish F. Hitchcock, Gregory Y. Porter, J. Brian McTigue, Jennifer H. Strouf, Patrick P. De Gravelles, McTigue & Porter, Washington, DC, for Plaintiffs.

Janine T. Avila, Steven R. Smith, William M. Connelly, Connelly, Jackson & Collier, Jennifer J. Dawson, Marshall & Melhorn, Toledo, OH, John M. George, Jr., Alison V. Potter, Erin E. Kelly, Walter C. Carlson, Sidley Austin, Chicago, IL, Charles F. Seemann, III, Howard Shapiro, Proskauer Rose, New Orleans, LA, for Defendants.

MEMORANDUM OPINION AND ORDER

JACK ZOUHARY, District Judge.

PROCEDURAL BACKGROUND

Plaintiffs bring this putative class action under the federal Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1104(a)(1)(A) & (B).¹ The Amended Complaint alleges three counts arising from Defendants' alleged breaches of fiduciary duties in the management of Plaintiffs' retirement accounts. Defendants are the Owens Corning Savings Plan and Owens Corning Saving and Security Plan (collectively, "the Plans"); Fidelity Management Trust Company ("Fidelity"); five named individuals who served on the Investment Review Committee ("IRC"), which was the Named Fiduciary for the Plans; a named Plan Administrator at Owens Corning ("OC"); and John Does Nos. 1 through 25, individuals or entities who served on the IRC or otherwise performed discretionary administrative functions with respect to the Plans during the relevant time period.

The named Plaintiffs, Britton Brown, Sandra Brown and Carol Lindhuber, are former employees of OC and participated in the Plans. The Plans offered participants various investment options, one of which included investing in an OC Company Stock Fund consisting primarily of OC common stock (Am. Complaint ¶ 24). OC also contributed matching funds to employee Plans calculated as a percentage of salary and made additional discretionary profit sharing contributions of OC stock at various times. Plaintiffs allege Defendants breached their fiduciary duty by allowing new or continuing investment in OC stock in the Plans after these investments became imprudent.

This matter is before the Court on Defendants' Motions to Dismiss. The OC Defendants filed a Motion to Dismiss (Doc. No. 32), which Plaintiffs opposed (Doc. No. 37). Fidelity also filed a Motion to Dismiss (Doc. No. 34), which was opposed (Doc. No. 36). The Court converted the OC Defendants' motion to a Summary Judgment motion on the limited issue of the statute of limitations under ERISA and permitted discovery on this issue (Doc. No. 41). The parties filed supplemental briefs and responses (Doc. Nos. 55-56, 66-67), and the Court conducted oral argument on the issue (Doc. No. 73). Defendant Fidelity submitted supplemental authority after oral argument (Doc. No. 74) and Plaintiffs responded (Doc. No. 75).

FACTUAL BACKGROUND

From 1996-2000, OC paid over $2.4 billion in resolving asbestos claims. Plaintiffs allege OC intended to manage its potential asbestos liability through class action lawsuits. In 1999, the U.S. Supreme Court held that asbestos defendants could not cap their liability by forcing claimants to seek compensation from a limited fund. See Ortiz v. Fibreboard Corp., 527 U.S. 815, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999). Plaintiffs note many asbestos defendants filed for Chapter 11 under the Bankruptcy Code to establish trusts that would channel future asbestos liability. OC, however, continued to attempt to manage its liability through a National Settlement Program that sought to coordinate claims resolution with the various law firms representing claimants. Despite this effort, OC filed for bankruptcy on October 5, 2000.

During this time, the IRC served as a fiduciary for these Plans and was responsible for prudent management of the investments in the Plans. Defendant Fidelity administered the Plans under a Master Trust Agreement (Doc. 34-15) that granted Fidelity limited powers. In 1999, 100 percent of the OC stock, in the form of matching contributions, and 50 percent of profit sharing contributions were "locked up" and could not be redistributed to individual participants until the participant was terminated or reached age 65, whichever came earlier. Although a policy relaxing these restrictions was set to be implemented beginning January 1, 2000, and expected to be completed by January 1, 2002, this policy was delayed because, by 1999, Owens Coming's asbestos liability problems threatened the company's finances. As a result, Employee Contributions in the form of company stock remained "locked up" until September 29, 2000, a few days before bankruptcy filing.

Plaintiffs allege the Plans, the IRC and the Plan Administrator (OC Defendants) breached their fiduciary duties of prudence and loyalty to participants in the Owens Corning Savings Plan and the Owens Corning Savings and Security Plan by "causing or allowing the Plans to invest tens of millions of dollars in Owens Corning stock ... when they knew or should have known that OC Stock was an imprudent investment for retirement plan savings" (Opp. to MSJ, Doc. No. 37 at p. 1). Plaintiffs set forth this claim in Count One of the Amended Complaint. In Count Two, Plaintiffs also claim the OC Defendants enabled their co-fiduciaries to breach their duties to Plaintiffs and are therefore liable under ERISA § 405(a)(2).² In Count Three, Plaintiffs allege Defendant Fidelity breached its fiduciary duties under ERISA by failing to timely pursue claims on behalf of the Plans against OC in its bankruptcy.

1. OC Defendants' Motion for Summary Judgment Summary Judgment Standard of Review

Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Federal Civil Rule 56(c). The moving party bears the initial responsibility of "informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The movant may meet this burden by demonstrating the absence of evidence supporting one or more essential elements of the non-movant's claim. Id. at 323-25, 106 S.Ct. 2548. Once the movant meets this burden, the opposing party "must. set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Federal Civil Rule 56(e)).

Once the burden of production has so shifted, the party opposing summary judgment cannot rest on its pleadings or merely reassert its previous allegations. It is not sufficient "simply [to] show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Rather, Rule 56(e) "requires the nonmoving party to go beyond the pleadings" and present some type of evidentiary material in support of its position. Celotex, 477 U.S. at 324, 106 S.Ct. 2548; see also Harris v. Gen. Motors Corp., 201 F.3d 800, 802 (6th Cir.2000). Summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Ultimately, this Court must determine "whether [the evidence] is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505; see also Atchley v. RK Co., 224 F.3d 537, 539 (6th Cir.2000).

Statute of Limitations Defense

The OC Defendants argue Plaintiffs have not timely filed their Complaint. ERISA provides a six-year statute of limitations for breach of fiduciary duty, with the caveat that actions must be commenced "three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation." 29 U.S.C. § 1113.³ This section establishes six years as the default, but it is shortened to three years when the plaintiff gains sufficient knowledge. Defendants argue Plaintiffs had actual knowledge of the facts constituting the breach more than three years prior to the commencement of this lawsuit.

The Court undertakes a two-part inquiry: (1) when did the breach occur; and (2) when did the plaintiff have actual knowledge of the breach. See Midgley v. Rayrock Mines, 374 F.Supp.2d 1039, 1043 (D.N.M.2005). A plaintiff has "actual knowledge of the breach or violation" when he or she has "knowledge of the facts or transactions that constitute the alleged violation." Wright v. Heyne, 349 F.3d 321, 330 (6th Cir.2003). The defendant does not need to prove that the plaintiff had "actual knowledge that the facts establish a cognizable legal claim under ERISA in order to trigger the running of the statute." Id. The inquiry, rather, is whether the plaintiff knew of the facts that constitute the claim, not whether he or she knew of a legal claim. The relevant facts may include "experts of opinions, knowledge of the transaction's harmful consequences, or even actual harm." Id. at 328 (quoting Gluck v. Unisys Corp., 960 F.2d 1168, 1177 (3d Cir.1992)). Although "[t]he line between actual and constructive knowledge is not a bright and readily distinguishable one ... somewhere between `every last detail' and `something was awry' lies the requisite knowledge." Id. at 329 (quoting Martin v....