Crowley ex rel. Corning, Inc. v. Corning, Inc.

• Decision Date: 09 December 2002
• Docket Number: No. 02-CV-6172.,02-CV-6172.
• Parties: Joseph J. CROWLEY, on Behalf of the CORNING, INC. INVESTMENT PLAN, and on Behalf of a Class of All Other Persons Similarly Situated, Plaintiff, v. CORNING, INCORPORATED, et al., Defendants.
• Court: U.S. District Court — Western District of New York

234 F.Supp.2d 222

Joseph J. CROWLEY, on Behalf of the CORNING, INC. INVESTMENT PLAN, and on Behalf of a Class of All Other Persons Similarly Situated, Plaintiff, v. CORNING, INCORPORATED, et al., Defendants.

No. 02-CV-6172.

United States District Court, W.D. New York.

December 9, 2002.

Patrick A. Klingman, Esq., Robert A. Izard, Esq., Wayne T. Boulton, Esq., Schatz & Nobel, P.C., Hartford, CT, Eugene Welch, Esq., Harris, Chesworth & O'Brien, Rochester, NY, for Plaintiff.

Eugene D. Ulterino, Esq., Ryan T. Jenny, Esq., Carolyn G. Nussbaum, Esq., Nixon Peabody LLP, Rochester, NY, for Defendants.

DECISION AND ORDER

SIRAGUSA, District Judge.

INTRODUCTION

This Employee Retirement Income Security Case ("ERISA") case is before the Court on defendants' motion to dismiss plaintiff's amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).¹ After considering the papers filed in support of, and in opposition to, the motion, and oral argument having been heard on December 4, 2002, the Court grants defendants' motion and dismisses the case.

LEGAL STANDARD FOR A MOTION TO DISMISS

In considering a motion for dismissal under Rule 12, a defendant must show that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. See H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 249, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989); see also 2 MOORE'S FEDERAL PRACTICE, § 12.34[1][a] (Matthew Bender 3d ed.). The Court must view the complaint, and draw all reasonable inferences, in the light most favorable to the non-moving party. Id.; see also 2 MOORE'S FEDERAL PRACTICE, § 12.34[1][b] (Matthew Bender 3d ed.) (court must accept plaintiff's factual allegations as true).

Both parties have relied upon documents outside the complaint in support of their positions. As the Court of Appeals stated, "[f]or purposes of a motion to dismiss, we have deemed a complaint to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference ... as well as public disclosure documents require by law to be, and that have been, filed with the SEC ... and documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the" Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir.2000) (citation omitted). Thus, the Court will employ the same rule in examining the papers outside the complaint relied upon by the parties here. However, "it is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss. Jacobson v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 518, 526 (S.D.N.Y.1977); Sansom Comm. v. Lynn, 366 F.Supp. 1271, 1278 (E.D.Pa.1973); Chambliss v. Coca-Cola Bottling Corp., 274 F.Supp. 401, 409 (E.D.Tenn.1967), aff'd on other grounds, 414 F.2d 256 (6th Cir. 1969), cert. denied, 397 U.S. 916, 90 S.Ct. 921, 25 L.Ed.2d 97 (1970)." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984).

FACTUAL BACKGROUND

Plaintiff, a resident of Georgia, and over the age of 55, is a retiree of Corning, Incorporated ("Corning"), who was and is a participant in the Corning Investment Plan ("Plan"). 29 U.S.C. § 1002(7) (1999). Corning is the sponsor of the Plan. The Plan, by its own terms, is governed by New York law and by the Employee Retirement Income Security Act of 1974 ("ERISA"), Pub.L. 93-406, Title I, § 2, Sept. 2, 1974, 88 Stat. 832, codified at 29 U.S.C. § 1001 (1999), et seq. Jurisdiction in this court arises under ERISA § 502(e)(1), 29 U.S.C. § 1132(e)(1), and venue is proper here in this District, since the Plan is administered here and plaintiff alleges that the breaches of fiduciary duties occurred here. Plaintiff is bringing this action as a class action under Federal Rule of Civil Procedure 23. The issue of whether this action should be certified as a class action is not at present before the Court.

1. Defendants Named in the Amended Complaint

Plaintiff is suing Corning and a number of individuals. John Does 1-30 are the individual members of the Plan's Investment Committee ("Committee"). John S. Brown, James B. Flaws, John H. Foster, Gordon Gund, John M. Hennessy, James R. Houghton, James J. O'Connor, Catherine A. Rein, Deborah D. Rieman, H. Onno Ruding, William D. Smithburg, Hansel E. Tookes, II, Peter F. Volanakis, and Wendell P. Weeks, are or were individual members of Corning's Board of Directors ("Board" or "Board of Directors"), as are Richard Roes 1-30, whose identities are unknown to plaintiff.

2. The Plan

The Plan is a "defined contribution" or "individual account" plan under ERISA § 3(34), 29 U.S.C. § 1002(34) (1999). Each participant has an individual account under the Plan. Benefits are based on the amount contributed by a participant to his or her account, along with any income, expenses, gains, losses, and forfeitures, which may be allocated to such participant's account. The Plan gives participants different options for investment of their contributions, including a money market fund, a bond fund, a variety of equity funds, and Corning stock. The Plan also provides that Corning would make matching contributions in cash² out of its profits, and that all such matching contributions were required to be invested in the Corning stock fund, an Employee Stock Ownership Plan ("ESOP"). Thus, a participant in the Plan can direct his own contributions to any of the offered investment funds, but the matching contributions were to be used to purchase Corning stock. The Committee, under Plan § 6.5, has the discretion to determine what funds would be offered to plan participants for their investments. Further, under the Plan, fund participants over age 55 are allowed to move not only their own voluntary contributions, but also the Corning matching contributions, to one of the twelve available investment funds. Additionally, the Plan requires that the Board of Directors appoint the members of the Committee, who are designated by the Plan as the fiduciaries³ and plan administrators as those terms are defined by ERISA. Plan Article VII. ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A) (1999).

3. Plaintiff's Allegations

Plaintiff, in his amended complaint, alleges that defendants, as fiduciaries of the Plan, were required under ERISA to furnish certain information to the participants, including the Summary Plan Description ("SPD"). According to plaintiff, the SPD apprised participants of their rights under the Plan, and incorporated by reference all of the documents filed by Corning with the Securities and Exchange Commission ("SEC"). See ERISA § 102, 29 U.S.C. § 1022 (1999). Further, plaintiff alleges that defendants had the discretion to establish and change the investment alternatives offered to Plan participants as well as direct investment of the Plan's assets allocated to their accounts. He also alleges that defendants had a "duty to obtain from [Corning] information necessary for the proper administration of the Plan." Am. Compl. ¶ 31.⁴

According to plaintiff's amended complaint, on September 27, 2000, Corning announced that it had agreed to acquire Pirelli S.p.A.'s ("Pirelli") interest in Pirelli's optical components and devices business, Optical Technologies USA, for approximately $3.6 billion in cash. Plaintiff alleges that Corning disseminated to the market, through a press conference and national media networks, that this acquisition was necessary to keep up with demand for its products resulting from companies upgrading telephone networks. According to plaintiff, on October 23, 2000, Corning filed with the SEC a Form 8-K which plaintiff contends contains the following statements which he alleges are false or misleading:

"As the quarter's performance clearly shows, we continue to benefit from delivering powerful optical technologies that provide capacity to double Internet traffic every six months," said Roger G. Ackerman, Corning's Chairman and Chief Executive Officer. "We met exceptionally robust demand for our optical-networking technologies by sourcing products from our expanded network of five optical fiber plants and nine photonic technology plans on four continents...."

"Looking forward to 2001," Ackerman said, "we believe our key growth businesses will lead the way for strong revenue and earnings growth throughout 2001. Consistent with our long-term growth objectives, we expect earnings to grow next year at a rate of about 25%."

Am. Compl. ¶ 34 (quoting SEC Form 8-K (Oct. 23, 2000) at 3) (emphasis added by plaintiff). Plaintiff also maintains that on November 3, 2000, Corning filed with the SEC the following false or misleading statements:

We expect full year 2000 pro forma diluted earnings per share in the range of $1.15 to $1.17, an increase of approximately 78% compared to 1999. We expect earnings to grow at a rate of approximately 25% in 2001. The Corel the acquisition, as described below, is expected to be less than 5% diluted to our 2001 pro forma earnings per share and accretive thereafter, resulting in 2001 pro forma diluted earnings per share in the range of $1.40 to $1.43.

Am. Compl. ¶ 35 (quoting SEC Form 424B5 (Nov. 3, 2000)) (emphasis added by plaintiff). Plaintiff alleges that these statements were false and misleading when issued because they misrepresented, or omitted the following adverse facts:

(1) that demand for Corning's optical network technologies was not "exceptionally robust," but was, instead, weakening as Corning's primary customers were experiencing severe and persistent business slowdowns;

(2) That the purportedly "exceptionally robust demand" Corning had experienced was the result of a massive inventory buildup at Corning's customers and was therefore not truly reflective of the mark demand for Corning's products;

(3) that Corning was amassing hundreds of millions of dollars of obsolete inventory which would have to be written-off;

(4) that the Pirelli acquisition was fraught with extreme risk as the...