Kuper v. Quantum Chemical Corp.
| Decision Date | 27 October 1993 |
| Docket Number | No. C-1-91-918.,C-1-91-918. |
| Parties | Glenn KUPER, et al., Plaintiffs, v. QUANTUM CHEMICAL CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
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Russell Kelm, Juan Jose Perez, Marion H. Little, Jr., Schwartz, Kelm, Warren & Rubenstein, Columbus, OH, for plaintiffs.
James Adams, Cincinnati, OH, for defendants.
This matter is before the Court upon Defendants' Motion for Summary Judgment (Doc. no. 43) and Plaintiffs' Supplemental Memorandum in Opposition thereto (Doc. no. 54). For the reasons stated below, defendants' motion is hereby GRANTED in part and DENIED in part.
Plaintiffs bring claims under The Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1101, et seq. Plaintiffs are former employees of the Emery Division (Emery) of Quantum Chemical Corporation (Quantum) who participated in employer-sponsored stock ownership plans prior to Quantum's sale of the Emery Division. Their claims arise out of the "dimunition in value" of plaintiffs' stock over an 18-month period when the stock was held in the employer-sponsored plans. Defendants contend that they are entitled to judgment as a matter of law on plaintiffs' ERISA claims because (1) plaintiffs lack standing to pursue their claims; (2) defendants Quantum and the individual directors are not fiduciaries under ERISA; and (3) the remaining individual defendants are not alleged to have breached any obligations cognizable under ERISA.
On July 21, 1993, the court issued an order in which it found that plaintiffs had standing to pursue their ERISA claims (Doc. no. 52). The court expressly refrained from making any determinations on the merits of plaintiffs' claims and granted plaintiffs an additional 20 days in which to respond to defendants' remaining contentions. Plaintiffs have submitted their response and this matter is now before the court on the remaining issues.
Quantum was the sponsor of the Quantum Savings & Stock Ownership Plan 401(k) and the Employee Stock Option Plan (ESOP). Quantum is neither a Plan administrator nor a named fiduciary. Plaintiffs Kuper and Jones were salaried employees of the former Emery division until April 17, 1989 when Emery's assets were sold to the Henkel Corporation (Henkel). These employees were Plan participants.
The Plan was administered by a Committee of not less than three members appointed by Quantum's Board of Directors. The members of the Committee at all relevant times were Howard Burkhardt, F. Donald Brigham, and W. Westin Clarke, Jr. The Plan expressly provides that the Committee's determination as to any disputed question under the Plan "shall be conclusive".
Employer contributions to the ESOP are held in a separate trust and invested by the ESOP trustees in a fund consisting of shares of Quantum Stock. The trustees acquire company stock as directed by the employer and voting stock as directed by the Plan participants. They also hold the assets of the ESOP. The trustees of the ESOP at all relevant times were Harry B. Anderson, Michael Iovenko, and David T. Schmidt.
Chase Manhattan is the Master Trustee of the non-ESOP portion of the Plan. It holds the 401(k) funds in trust and invests them in one of three investment funds. Chase Manhattan is also the custodian of stock certificates issued in connection with the ESOP. Chase Manhattan has no discretionary authority under the Plan regarding the management or distribution of Plan assets.
Under the terms of the sale of the Emery Division to Henkel, all employees of that division continued their employment with Henkel. The terms and conditions of their employment were comparable to those existing immediately prior to the closing date of the sale. In connection with the sale, a trust-to-trust transfer of all securities held for the benefit of any employee under the Plan as of the closing date of the sale was effected. The employees were offered continuing participation in a plan established by Henkel. The trust-to-trust transfer was completed on November 1, 1990. Between March 31, 1989 and November 1, 1990, the trust assets were frozen. The market price of Quantum stock fell from $49.00 to $10.00 during this interim.
Plaintiffs claim that defendants breached their fiduciary duties under 29 U.S.C. § 1104(a)(1)(A) by failing to act solely in the interests of the class in providing benefits to them, failing to defray reasonable expenses in administering the Plan, and failing to act with the care of a prudent person acting in a like capacity. Specifically, plaintiffs claim that defendants committed the following breaches: (1) they failed to allow a distribution of assets to Plan participants following the sale of the Emery Division; (2) they failed to prevent the trust-to-trust transfer of assets; (3) they failed to fairly present the financial condition of the company to Plan participants; (4) they failed to monitor the financial condition of the company and to protect Plan assets; and (5) they failed to take steps to reduce losses after learning of an alleged scheme by Quantum and its directors to denude Quantum of its assets and to entrench the Directors in their positions by declaring a $50.00 dividend per share of Quantum stock prior to the sale of the Emery Division.
Defendants present the following arguments in support of their contention that they are entitled to summary judgment: (1) Quantum and its Board of Directors are not fiduciaries under ERISA; (2) even if these parties were fiduciaries, the decision to declare a stock dividend was a non-fiduciary business decision completely unrelated to administration of the Plan; (3) the remaining defendants did not breach a fiduciary duty under the Plan; (4) defendants had no duty to monitor the financial condition of Quantum; and (5) plaintiffs were not terminated and therefore were not entitled to receive a lump sum distribution of assets upon the sale of the Emery division.
Plaintiffs concede that while Plan administration was vested solely in the Committee, there is a factual question as to whether the Board of Directors controlled or influenced decisions regarding administration of the Plan and therefore acted as fiduciaries. Plaintiffs allege that there is a "reasonable suspicion" that the Board influenced the Committee's decisions in light of the fact that the Committee took no steps to diversify the ESOP fund when the Emery Division was sold and the company had pursued financing efforts that would negatively impact the value of Quantum stock. Plaintiffs contend that because Quantum and the Board of Directors could be deemed fiduciaries under the appropriate factual scenario, and because there is an issue as to whether the fiduciaries acted with due diligence, summary judgment is not appropriate.
The summary judgment procedure under Fed.R.Civ.P. 56 is designed to secure a just, speedy, and inexpensive determination of any action. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). The function of the court is not to weigh the evidence and determine the truth of the matter but to determine whether there is a "genuine issue as to any material fact and whether the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party has the initial burden of showing the absence of a genuine issue of material fact as to an essential element of the non-movant's case. Celotex, 477 U.S. at 321, 106 S.Ct. at 2552; Guarino v. Brookfield Township Trustees, 980 F.2d 399, 405 (6th Cir.1992); Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir.1989). If the moving party meets this burden, then the non-moving party "must set forth specific facts showing there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Guarino, 980 F.2d at 405. The evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in his favor. Anderson v. Liberty Lobby, 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970)). There is no genuine issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. Conclusory allegations, however, are not sufficient to defeat a motion for summary judgment. McDonald v. Union Camp. Corp., 898 F.2d 1155, 1162 (6th Cir.1990).
OPINIONInitially, the court must address plaintiffs' contention that summary judgment is inappropriate at this juncture because factual questions underlying resolution of their claims against Quantum and the Board remain unanswered. Plaintiffs suggest that they do not know the answers to pertinent factual questions because the parties agreed to stay discovery pending resolution of the standing issue raised in defendants' summary judgment motion. However, the fact that counsel imposed a stay of discovery without any court intervention does not excuse plaintiffs' obligation to present sufficient facts to show the existence of a genuine issue for trial, particularly in view of the procedural history of this case. The complaint was filed nearly two years ago on December 27, 1991, and trial is scheduled for November of this year. The discovery cut-off was originally set for October 1, 1992 and was subsequently extended to May 1, 1993. On March 16, 1993, plaintiffs filed a partial response addressing the standing issue raised in defendants' motion for summary judgment. At that time, plaintiffs requested an extension of two weeks following the May 15 discovery cut-off in which to respond to the remaining issues. On June 10, 1993, the discovery cut-off was extended to October 15, 1993. On July 21, 1993, the court issued an...
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Kuper v. Quantum Chemicals Corp.
...sufficient evidence to suggest that Quantum and its Board of Directors had acted in a fiduciary capacity with respect to the ESOP funds. 838 F.Supp. 342. Accordingly, the Court granted summary judgment in favor of those Defendants. (Doc. The Court nonetheless found that a genuine issue of m......