Cunningham v. Wawa, Inc.

• Decision Date: 02 July 2019
• Docket Number: Civ. No. 18-3355
• Citation: 387 F.Supp.3d 529
• Parties: John J. CUNNINGHAM, et al., Plaintiffs, v. WAWA, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

387 F.Supp.3d 529

John J. CUNNINGHAM, et al., Plaintiffs,

v.WAWA, INC., et al., Defendants.

Civ. No. 18-3355

United States District Court, E.D. Pennsylvania.

Signed July 2, 2019

Colin M. Downes, R. Joseph Barton, Block & Leviton LLP, Washington, DC, Daniel Feinberg, Nina Wasow, Feinberg Jackson Worthman & Wasow LLP, Berkeley, CA, Gary L. Azorsky, Raymond M. Sarola, Cohen Milstein Sellers & Toll PLLC, Philadelphia, PA, Richard E. Donahoo, Donahoo & Associates PC, Tustin, CA, for Plaintiffs.

David I. Monteiro, Joseph J. Mammone, Jr., Morgan Lewis & Bockius LLP, Dallas, TX, Brian T. Ortelere, Christopher Varano, Morgan, Lewis & Bockius LLP, Philadelphia, PA, for Defendants.

ORDER

Paul S. Diamond, J.

Plaintiffs John Cunningham, David Ciuffetelli, Benjamin DiDonato, and John Rucki, Jr. challenge two amendments to Defendant Wawa, Inc.'s Employee Stock Ownership Plan that eliminated their right to hold Wawa stock through age 68 and forced them to sell their shares at a purportedly unfair price. (Compl., Doc. No. 1.) Plaintiffs seek to certify a Class of all terminated employee participants in the ESOP whose accounts were liquidated after September 12, 2015 for Counts I–IV, IX, and X in their Complaint. (Doc. No. 56.) They also seek to certify a Subclass of: (1) all Class members who participated in the ESOP before January 1, 2014 and were terminated on or after January 1, 2015 for Counts VI and VIII in their Complaint; and (2) all Class members who retired between January 1, 2011 and December 31, 2014 for Counts V–VIII in their Complaint. (Id. ) Defendants challenge class certification as to only three claims. (Doc. No. 57.) I will grant Plaintiffs' Motion to Certify.

I. FACTUAL BACKGROUND

Established in 1992, the Wawa Employee Stock Ownership Plan is an ERISA-qualified employee benefit plan sponsored by Defendant Wawa; its primary asset is Wawa equity. (Compl. ¶¶ 3, 16, 29; Answer ¶¶ 3, 16, 29, Doc. No. 49.) The Retirement Plans Committee is the ESOP administrator. (Compl. ¶ 17; Answer ¶ 17.) Individual Defendants Culotta, Eckhardt, Morey, Pulos, Swartz, and Wiggins are Committee members and Wawa officers. (Compl. ¶¶ 18–24; Answer ¶¶ 18–24.) Individual Defendants Wood, Wright, and Stoeckel are the Trustees of the ESOP. (Compl. ¶¶ 25–27; Answer ¶¶ 25–27.)

The Wawa ESOP initially permitted all retired and terminated employees—including those terminated for cause—to continue to hold Wawa stock through the ESOP after their Wawa employment ended. (See ESOP (eff. Jan. 1, 2004), Doc. No. 56-3; see also Peterson Dep. 120:21–121:8, Doc. No. 77-3, Civ. No. 16-497; accord. Stipulation ¶ 2, Doc. No. 54.) As required by ERISA, Wawa periodically provided Summary Plan Descriptions of the Plan terms. (Compl. ¶¶ 37, 43, 46; Answer ¶¶ 37, 43, 46; Peterson Dep. 70:18–25); see also 29 U.S.C. § 1022(a). Each SPD stated that terminated employee participants would be "paid in the same form and manner as retirement benefits," and that "no amendment to the Plan will reduce the benefit you have already earned or divest you of any entitlement to a benefit." (See 2004 SPD 8–9, Doc. No. 77-4, Civ. No. 16-497; 2006 SPD 9, Doc. No. 77-5, Civ. No. 16-497; 2011 SPD 9, Doc. No. 77-6, Civ. No. 16-497; 2014 SPD 12, Doc. No. 77-7, Civ. No. 16-497; accord. Joint Stipulation ¶ 1, Doc. No. 46.) The SPDs also provided that "if the total value of your benefit is more than $5,000, you may elect to delay payment until the April 1 of the year following the year you reach age 68." (See 2011 SPD 9; 2014 SPD 12; see also 2004 SPD 8–9; 2006 SPD 9 (until 2011, former employees could hold Wawa stock until age 70½).)

Beginning in 2014, Wawa amended the ESOP to remove former employees from the Plan. (ESOP (eff. Jan. 1, 2014) Art. V § 5.2(d), Doc. No. 77-9, Civ. No. 16-497.) The 2014 Amendment required the Trustee to liquidate the ESOP stock of any Participant who terminated employment after January 1, 2015. (Id. ) The 2014 Amendment stated that all liquidated proceeds would be transferred to Participants' 401(k) accounts. (Id. ) The Parties dispute when Defendants informed Participants about this Amendment. Plaintiffs allege that they did not learn about the 2014 Amendment until "at least mid-August 2014 and possibly as late as sometime in 2015." (Compl. ¶ 62.)

On August 7, 2015, Wawa amended the ESOP again—this time requiring the Trustee to liquidate the ESOP stock of any Participant who terminated employment before January 1, 2015. (ESOP Amendments, Doc. No. 77-12, Civ. No. 16-497.) On August 10, 2015, Wood and Stoeckel (the ESOP Trustees) sent a letter to all terminated employees informing them that Wawa had adopted the 2015 Amendment. (See Doc. No. 77-21, Civ. No. 16-497.) On September 11, 2015, Defendants began effectuating that Amendment: terminated participants received $6,940 per share of Wawa stock and were required to pay a $50.00 distribution fee. (Compl. ¶¶ 77, 80, 86, 103; Answer ¶¶ 77, 80, 103.)

Plaintiffs Cunningham, Ciuffetelli, Rucki, and DiDonato are terminated employee ESOP participants who were divested of their Wawa stock because of the Plan Amendments. Wawa terminated: (1) Cunningham in September 2011; (2) DiDonato in September 2013; (3) Rucki in January 2015; and (4) Ciuffetelli in August 2015. (Compl. ¶¶ 12–15; Answer ¶¶ 12–15.) Wawa liquidated shares in Cunningham, Ciuffetelli, and Rucki's ESOP accounts in March 2016, and DiDonato's in March 2018. (Id. )

II. PROCEDURAL HISTORY

On February 1, 2016, two terminated Wawa employees, acting on behalf of a proposed Class of terminated Wawa employees, challenged the 2015 Amendment. (Compl., Doc. No. 1, Civ. No. 16-497.) The case, Pfeifer v. Wawa , settled on August 31, 2018. The Pfeifer settlement Class included: (1) ESOP participants who ended employment with Wawa before January 1, 2015; and (2) ESOP participants who retired before January 1, 2011. (Doc. Nos. 133, 134, Civ. No. 16-497; see also Compl. ¶ 5.) These Class participants had their ESOP accounts liquidated on September 11, 2015. (Id. )

On August 8, 2018, while the Pfeifer settlement was pending, Plaintiffs Cunningham, Ciuffetelli, Rucki, and DiDonato filed the instant Complaint against Wawa and its fiduciaries, on behalf of another group of terminated Wawa employees. (Doc. No. 1.) These Plaintiffs similarly allege that:

• Count I: The Trustee and Committee Defendants breached their fiduciary duties by authorizing the ESOP's sale of Wawa stock in the ESOP accounts of Plaintiffs and the Class at a price below fair market value. ERISA §§ 404(a)(1)(A), (B), (D), 29 U.S.C. § 1104(a)(1)(A), (B), (D) ;

• Count II: The Trustee Defendants and Wawa unlawfully caused the Plan to engage in a related party transaction (the forced sale) at a price below fair market value. ERISA § 406(a)(1)(A), (D), 29 U.S.C. § 1106(a)(1)(A), (D) ;

• Count III: The Trustee Defendants unlawfully caused the Plan to engage in a related party transaction (the forced sale) for inadequate consideration. ERISA § 406(b), 29 U.S.C. § 1106(b) ;

• Count IV: The Trustee and Committee Defendants breached their fiduciary duties by authorizing the forced sale because the sale failed to follow Plan § 11.2, which prohibits any Plan transfers that decrease the value of the Plan. ERISA § 404(a)(1)(D), 29 U.S.C. §§ 1104(a)(1)(D) ;

• Count V: The Trustee and Committee Defendants breached their fiduciary duties by misrepresenting that terminated employee participants could hold Wawa stock in their ESOP accounts until age 68. ERISA § 404(a)(1)(A), (B), 29 U.S.C. § 1104(a)(1)(A), (B) ;

• Count VI: Wawa breached ERISA's anti-cutback provision by eliminating terminated employees' rights to hold Wawa stock in the ESOP through age 68. ERISA § 204(g), 29 U.S.C. § 1054(g). I dismissed this claim in part. (Doc. No. 45);

• Count VII: The 2015 Amendment should be invalidated under unilateral contract principles because it violated the terms of the Plan then in effect. ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3) ; • Count VIII: The Committee Defendants violated ERISA by furnishing SPDs that were materially misleading. ERISA § 102, 29 U.S.C. § 1022 ;

• Count IX: Wawa breached its fiduciary duties by failing to monitor the Trustee and Committee Defendants' activities. ERISA § 404, 29 U.S.C. § 1104 ; and

• Count X: Defendants' attempt, through the Plan, to relieve its fiduciaries of liability for fiduciary breaches is void. ERISA §§ 410, 404, 29 U.S.C. §§ 1110, 1104.

Plaintiffs contend that they are "entitled to sue the fiduciaries pursuant to ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2) for relief on behalf of the Plan as provided in ERISA § 409, 29 U.S.C. § 1109." (Compl. ¶ 216.) They further contend that they are entitled to relief pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). (Id. at ¶ 217.)

On January 10, 2019, I largely denied Defendants' Motion to Dismiss, in which they raised the same arguments I rejected in Pfeifer. (Doc. No. 45.)

III. THE INSTANT MOTION

On March 18, 2019, Plaintiffs moved for class certification. (Doc. No. 56); Fed. R. Civ. P. 23. Plaintiffs seek to certify a Class respecting Counts I–IV, IX, and X:

All Participants in the Wawa, Inc. Employee Stock Ownership Plan ("Wawa ESOP") with account balances greater than $5,000.00 as of the date that they terminated employment whose accounts were liquidated on or after September 12, 2015 and the beneficiaries of such participants.

(Pl.'s Mot. Class Cert. ¶ 2, Doc. No. 56.)

Plaintiffs also seek to certify two Subclasses. As to Counts VI and VIII, Plaintiffs seek to certify the "Terminated Pre-2014 Employee Subclass," comprising:

All Participant members of the Class who were employed by Wawa and participated in the ESOP before January 1, 2014 and who terminated employment on or after January 1, 2015 except for Participants whose accounts were liquidated due to death, disability or a voluntary request for distribution, and the beneficiaries of such participants.

(Id. at ¶ 3.) On Counts V–VIII, Plaintiffs seek to certify the "Retired Employee Subclass," comprising:

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