In re Delphi Corporation Securities
| Decision Date | 18 March 2009 |
| Docket Number | This Document Relates to: 05-71339.,This Document Relates to: 05-71508.,This Document Relates to: 05-71200.,This Document Relates to: 05-71437.,This Document Relates to: No. 05-70882.,MDL No. 1725.,This Document Relates to: 05-71397.,This Document Relates to: 05-71249.,This Document Relates to: 05-72198.,This Document Relates to: 05-71396.,This Document Relates to: 05-71030.,This Document Relates to: 05-71897.,This Document Relates to: 05-70940.,This Document Relates to: 05-71291.,This Document Relates to: 05-71620.,Master Case No. 05-md-1725.,This Document Relates to: 05-71398. |
| Citation | 602 F.Supp.2d 810 |
| Parties | In Re: DELPHI CORPORATION SECURITIES, DERIVATIVE & "ERISA" LITIGATION. |
| Court | U.S. District Court — Eastern District of Michigan |
This multi-district litigation action is one of a number of securities-related actions occasioned by the decline and ultimate bankruptcy of Delphi Corporation, the world's largest supplier of automobile parts. All of the cases in this multi-district action except this one have been resolved by settlement, and this action is now before the Court on the cross-motions filed by Defendant State Street Bank and Trust Company and the ERISA Plaintiffs seeking, respectively, summary and partial summary judgment on all claims asserted against State Street in the Plaintiffs' Consolidated Class Action Complaint.
State Street had previously moved for dismissal of Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(6), but after meeting with counsel for the parties, the Court determined that discovery was warranted. The Court, therefore, entered an order directing the parties to proceed with discovery, and dismissed State Street's original Motion to Dismiss, without prejudice to its right to file a dispositive motion after the close of discovery. See 10/26/07 Scheduling Order II [Dkt. # 240].
Discovery has now closed, and the parties have filed dispositive motions, largely based upon Stipulated Facts and Exhibits. Having reviewed and considered the parties' briefs and supporting evidence, the Court has determined that oral argument is not necessary. Therefore, pursuant to Eastern District of Michigan Local Rule 7.1(e)(2), this matter will be decided on the briefs. This Opinion and Order sets forth the Court's ruling.
Delphi Corporation, once an integrated division of General Motors Corporation, was established as an independent company in 1999. In connection with its spin-off from GM, on May 28, 1999, Delphi established 401(k) plans for its salaried and hourly employees that essentially matched the hourly and salaried plans offered by GM.1 Each of the Plans provided eligible employees the opportunity to make and receive contributions, and invest those contributions among various investment funds offered by the Plans.
One stated purpose of the Plans was "to provide employees an opportunity to acquire a stock interest in [Delphi]." [See e.g., Delphi Savings-Stock Purchase Program for Salaried Employees in the United States, Ex. 1 to Stipulated Statement of Facts, p. 1.] Among the funds offered was a Delphi Common Stock Fund (the "Delphi Fund"). Id., p. 3. Plan Participants were informed in the Summary Plan Descriptions ("SPDs") that the Delphi Fund "is not diversified" and that
[t]he Fund invests solely in the shares of Delphi common stock, except for a small portion, ordinarily targeted at 1%, dedicated to short-term, fixed-income investments and money market instruments. These latter groups of securities provide liquidity for loans, withdrawals, and exchanges by participants in this Fund.
See Stip. Ex. 5, p. 25.
The SPDs also informed participants that the Delphi Fund, like all of the other company stock funds "is a commingled fund managed by State Street Bank and Trust Company," id., and that as to each company stock fund, including the Delphi Fund, "State Street Bank and Trust Company is responsible for (1) anticipating liquidity needs and maintaining sufficient cash levels to process participant transactions, (2) determining the daily number of shares of each common stock to be purchased or sold, and (3) obtaining the best prices for any purchases or sales." Id. at 28.
Participants were free to transfer funds to and from the investment offerings in their Plans on a daily basis. See Stip. Ex. 1 at 19-20. The SPDs for each Plan made clear, in bold face print, that participants were "solely responsible" for their investment selections, and warned participants, "There is no assurance that you will realize gains from investing in these funds and indeed you may suffer losses due to various factors such as market volatility." See Stip. Ex. 5, pp. 8-9. The SPDs further stated that "it is intended that the [Stock Purchase] Program constitute a plan described in Section 404(c) of ERISA, and pursuant to such Section 404(c), the fiduciaries of the Program may be relieved of liability for losses resulting from investment instructions given by participants." Id. at 50.
General Motors Investment Management Company ("GMIMCo") (a settling defendant in this litigation) became the overall Investment Manager and the named fiduciary for investments of the Delphi Plans, as it was for the GM Plans. GMIMCo entered into a written trust agreement, the Delphi Automotive Systems Savings Trust (referred to herein as the "Master Trust"), with State Street Bank and Trust Company ("State Street"), appointing State Street to serve as the Trustee to hold the Delphi Plans' assets. See Stip. Ex. 10. State Street's duties with respect to Delphi Plan assets were limited. As set forth in Article II of the Master Trust:
GMIMCo and the Trustee [State Street] hereby establish a trust to hold in the Trust Fund created thereunder assets for the benefit of Delphi Savings Plans as may be designated in writing from time to time by GMIMCo, and the rights powers, authorities, duties and responsibilities of the Trustee shall be solely as provided in this Agreement or applicable law.
Pursuant to the Master Trust, State Street was made expressly subject to the direction of GMIMCo, any investment manager, plan participants and other named fiduciaries, and State Street had no duty to inquire as to the correctness of the direction, and was to be fully protected and indemnified for actions taken according to such directions. Id. §§ 13.1; 14.3.2
The Master Trust also required State Street to maintain a separate investment account for each class of common stock of Delphi (a "Company Common Stock Fund"). Id. § 4.1. It further provided that "[e]ach such Fund shall consist of the applicable class of common stock of the Company and cash or short term United States Treasury securities or investments in a short-term investment fund" and that an "Investment Manager designated by GMIMCo . . . shall determine the applicable amount of Company common stock and cash or short term fixed income securities for a Company Common Stock Fund . . . based on its estimates of the cash flow requirements of such Company Common Stock Fund and the investment guidelines of the Company Common Stock Fund." Id.
As provided in the Master Trust, GMIMCo and State Street entered into a separate Investment Manager Agreement ("IMA") pursuant to which State Street served as investment manager for specified company stock funds that were to be a part of the Delphi Plans.3 The IMA gave State Street responsibility for the management and investment of the Company Stock Funds, but did so subject to the Master Trust and to the written fund policy for each Fund (the "Fund Policy"). See Stip. Ex. 11, §§ 3-4.4
As indicated above, the Master Trust stated that the job of an investment manager appointed by GMIMCo for a company stock fund was to determine the mix of company stock and short-term instruments in the fund based only on its estimates of the cash flow requirements of the fund, and in accordance with investment guidelines supplied by GMIMCo. Stip. Ex. 10 § 4.1. The Fund Policy for the Delphi Fund provided that the objectives of the Delphi Common Stock Fund were (1) to maximize investment in company stock so that the fund performance closely tracked the Delphi stock performance; (2) to maintain an appropriate level of liquidity to meet ongoing daily cash flow needs; and (3) to manage that liquidity and necessary trading in company stock to minimize transaction costs. See Stip. Ex. 12. The Fund Policy established a liquidity cushion of 1% of net asset value ("NAV") of the stock fund as the appropriate target for managing the fund consistent with those objectives. Id. The Fund Policy also required that liquidity levels be monitored and adjusted based on experience and other information that becomes available, such as plan or demographic changes affecting anticipated transfers into and out of the fund. Id.
At the time of the Delphi spin-off, GMIMCo also requested that State Street collectively manage several single stocks being held in the identical company stock funds in the GM and Delphi Plans. State Street, accordingly, established a separate trust vehicle—the State Street Bank and Trust Company Stock Funds for Employee Benefit Trusts (the "Collective Trust")—to accommodate this request. Pursuant to the Declaration of Trust for the Collective Trust, State Street established separate company stock fund trusts by executing a Fund Declaration for each such fund. See Stip. Ex. 13, § 3.1. Under the Declaration of Trust for the Collective Trust, State Street was directed to invest the assets of each fund in accordance with the Fund Declarations, and was prohibited from placing any assets in a fund until the Fund Declaration was provided to the fiduciary of each participating Plan...
To continue reading
Request your trial
-
Chesemore v. Alliance Holdings Inc.
...1037–40 (S.D.Ohio 2006); Herman v. NationsBank Trust Co., 126 F.3d 1354, 1361 (11th Cir.1997); In re Delphi Corp. Sec., Derivative & Erisa Litig., 602 F.Supp.2d 810, 821 (E.D.Mich.2009). In DiFelice, the court reasons that directed trustees should not be held to any duty of “prudence” becau......
-
In re Co.
...1101, 1105 (6th Cir.1983) (employer can occupy two roles—an employer and an ERISA fiduciary); In re Delphi Corp. Securities, Derivative & “Erisa” Litigation, 602 F.Supp.2d 810, 821 (E.D.Mich.2009) (an ERISA trustee can wear different hats). Couturier, being a decision in favor of ERISA plai......
-
In re the Antioch Company, Case No. 08-35741 through 08-35747
...1105 (6th Cir. 1983) (employer can occupy two roles-an employer and an ERISA fiduciary); In re Delphi Corp. Securities, Derivative & "ERISA" Litigation, 602 F. Supp. 2d 810, 821 (E.D. Mich. 2009) (an ERISA trustee can wear different hats). Couturier, being a decision in favor of ERISA plain......
-
Pfeil v. State St. Bank & Trust Co.
...conclusion is not allowed. Berry v. City of Detroit, 25 F.3d 1342, 1354 (6th Cir. 1994); In re Delphi Corp. Securities, Derivative & ERISA Litigation, 602 F.Supp. 2d 810, 829 n. 10 (E.D. Mich. 2009). The Court finds that the experts designated by the parties appear to have the requisite edu......