Chambers v. Kaleidoscope, Inc. Profit Sharing Plan and Trust
| Decision Date | 26 September 1986 |
| Docket Number | Civ. A. No. C80-609A. |
| Citation | 650 F. Supp. 359 |
| Parties | Susan CHAMBERS, Plaintiff, v. KALEIDOSCOPE, INC. PROFIT SHARING PLAN AND TRUST; Kaleidoscope, Inc. Money Purchase Plan and Trust; ERISA Administrators, Inc. as Professional Plan Administrator of both the above Plans; Susan L. Edmondson, personally and as Trustee and Administrator for both the above Trusts; and Kawyn L. Zilm, personally and as Trustee and Administrator for both the above Trusts, Defendants. |
| Court | U.S. District Court — Northern District of Georgia |
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Robert E. McCormack, Atlanta, Ga., for plaintiff.
Robert A. Bartlett, Fred F. Manget, Samuel Appel, Atlanta, Ga., Frank G. Smith, Austell, Ga., for defendants.
ORDER OF COURT
This is an action to recover pension benefits from employee pension and profit sharing plans and damages for alleged breaches of fiduciary duty by the plan trustees and administrators. This matter is before the court on the motion of plaintiff, Susan Chambers, for summary judgment on counts one through six of her complaint, defendant ERISA Administrators, Inc.'s ("EAI") cross-motion for summary judgment, and plaintiff's motion to reopen discovery. Each motion will be addressed in this order.
Because of the long and tortuous history of this litigation, a brief discussion of the factual and procedural history is necessary. Kaleidoscope, Inc. ("the company"), an Atlanta-based mail order business, hired plaintiff in March 1975. Soon thereafter, the company established pension and profit sharing plans for its qualified employees. The company made contributions to each plan, but then began experiencing financial difficulties. Defendant Susan Edmondson, the company's president, resigned her position in January 1979. An involuntary bankruptcy petition was filed on February 1, and the company followed with a voluntary petition several days later. Plaintiff was terminated in August 1979.
Plaintiff then instigated her efforts to recover her account benefits in the pension and profit sharing plans. She first filed a proof of claim in the bankruptcy proceeding. After defendant Edmondson rejected her request for plan records and benefit distribution, Chambers filed this action against both plans and three alleged trustees and administrators.1 She sought relief under the Employee Retirement Income Security Act ("ERISA") for breach of fiduciary duty, failure to supply certain reports and documents on demand, and failure to distribute benefits. Plaintiff also alleged common law claims for compensatory and punitive damages for conversion and conspiracy, and requested termination of the plans and an accounting.
From the beginning, this litigation was complicated by the bankruptcy trustee's seizure of plan assets and his efforts to void company contributions to the plans as fraudulent transfers under the 1898 Bankruptcy Act. The trustee also sought to have this case resolved in the bankruptcy court and to join all former plan participants. In addition, the parties disagreed on the scope of this court's jurisdiction under ERISA and the Bankruptcy Act. This court concluded it had jurisdiction to hear plaintiff's claims; however, after a conference in chambers with the parties, the court stayed this action until the company's bankruptcy proceeding was completed. Ultimately, the bankruptcy court surrendered jurisdiction over the plan assets and this action was reinstated. The bankruptcy trustee was dismissed after he deposited all plan assets in his possession with the court and returned the plan records to defendant Edmondson.
Plaintiff now seeks summary judgment awarding her the following relief: (1) statutory damages of $100 per day from all defendants for failure to provide documents as requested (Counts 1-3 of the complaint); (2) lump sum distribution of her benefits, which she contends should be the entire assets of both plans (Count 4); (3) compensatory and punitive damages against all defendants for alleged breaches of their fiduciary duties under ERISA (Counts 5-6); and (4) all attorneys fees and costs incurred in this action. Plaintiff expressly states in her motion that she is not seeking resolution of counts 7-10, which include the claims for conversion, conspiracy, plan termination, and an accounting. She also has moved to reopen discovery for four (4) months after entry of the court's order. Defendant EAI has filed a cross-motion for summary judgment against plaintiff on all claims asserted against it.
After a careful review of the record, the court finds the following material facts are not in dispute:
(1) Plaintiff became an employee of Kaleidoscope, Inc. on March 6, 1975. Defendant Edmondson was the company's president at that time.
(2) The company instituted the Kaleidoscope, Inc. Money Purchase Pension Plan and Trust and the Kaleidoscope, Inc. Profit Sharing Plan and Trust (the "plans"), both of which became effective on July 1, 1975 (the "effective date").
(3) The plan agreements provide that the fiscal year ends on June 30 of each year.
(4) The "anniversary date" for each plan is defined as the first day of each plan year following the effective date.
(5) The "entry date" for each plan is defined as either the anniversary date or the first day of the seventh month following the anniversary date.
(6) A "year of service" is defined under each plan as a period of twelve consecutive months during which an employee has at least 1000 hours of service with the company.
(7) An employee becomes a "participant" in each plan on the entry date coincident with or next following the date on which he or she completes one year of service.
(8) Both plans provide that a participant achieves a vested interest of forty percent in his or her employer contribution account after four years of service subsequent to the date on which the company adopted the plan.
(9) Both plans provide for employer contributions based on a percentage of the employee's compensation. Employer contributions to the money purchase pension plan are mandatory, but contributions to the profit sharing plan are to be made at the discretion of the company's board of directors. Contributions under both plans are to be paid on or before the due date for the company's federal tax return for the fiscal year in which the contribution is to be made.
(10) Plaintiff received a summary plan description for the profit sharing plan and an annual report for both plans dated June 30, 1977. The annual reports listed Susan Edmondson and Kawyn Zilm as the trustees and administrators for each plan. The annual reports provided the following financial information:
Company contributions
for fiscal year ended Total assets
6/30/77 as of 6/30/77
Profit sharing
plan $34,451.32 $61,151.67
Money purchase
pension plan 22,967.55 40,767.79
(11) The federal income tax returns filed by the plans for fiscal year 1976-77 listed the employer contributions as the same amounts listed in the annual reports. The returns also stated that each plan had 12 participating employees.
(12) In its financial statements and federal tax return for the fiscal year ending June 30, 1977, Kaleidoscope, Inc. stated that it made contributions to the pension and profit sharing plans totalling $58,800.
(13) Plaintiff was never notified that any portion of these contributions had not been made, or that Edmondson and Zilm were no longer the plan administrators and trustees.
(14) EAI was hired by the company in July 1977 to prepare 1976 and 1977 plan annual reports and calculate the portion of company contributions attributable to each participant's account.
(15) The summary description of the profit sharing plan distributed to plaintiff listed EAI as the "professional plan administrator ... hired to assist with the administration of the Plan." The summary further stated that the plan administrative committee and the professional plan administrator "will decide all questions which come up under the Plan based on their interpretation of the Plan and Trust Agreement."
(16) EAI prepared the 1976 and 1977 annual reports for both plans and delivered them to the company.
(17) On several occasions, EAI made telephone and written contact with company representatives in an attempt to obtain the financial information needed to prepare the 1978 reports, but the company never provided the information. EAI had no further contact with the company or the plans after that time.
(18) Neither plan has received an employer contribution since the fiscal year that ended on June 30, 1977, nor has either plan filed a federal tax return or released an annual report since that time.
(19) Susan Edmondson resigned as president of the company in January 1979.
(20) The company's creditors filed an involuntary bankruptcy petition on February 1, 1979, and the company filed a voluntary Chapter 11 petition on February 5. The case was converted to a Chapter 10 reorganization under the 1898 Bankruptcy Act on September 14, 1979.
(21) Kawyn Zilm was terminated from the company in March 1979.
(22) Plaintiff was terminated on August 31, 1979.
(23) Plaintiff, through counsel, sent a letter dated February 27, 1980 by certified mail, return receipt requested, to Susan Edmondson in her capacity as trustee and plan administrator. In the letter, Chambers demanded certain documents and information as provided in 26 U.S.C. § 6057(a)(2) and 29 U.S.C. §§ 1021(a)(1), 1022(a), 1024(b), 1059(a)(1), and also demanded payment of her nonforfeitable accrued benefits.
(24) Edmondson, through counsel, responded to plaintiff by a letter dated March 25, 1980 in which she denied ever having been the plan administrator and suggested Chambers direct her inquiry to Kaleidoscope, Inc.
(25) Plaintiff...
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