Matassarin v. Lynch

Decision Date27 April 1999
Docket NumberNo. 97-51081,97-51081
PartiesFed. Sec. L. Rep. P 90,465, Pens. Plan Guide (CCH) P 23954H Patricia J. MATASSARIN, Individually, for and on behalf of The Great Empire Broadcasting Employee Stock Ownership Plan and its Beneficiaries; for and on behalf of that class of persons, participants and/or Beneficiaries of The Great Empire Broadcasting Employee Stock Ownership Plan, Past or Present, Defrauded, Plaintiff-Appellant, v. F.F. Mike LYNCH, Individually and as Trustee for The Great Empire Broadcasting Employee Stock Ownership Plan (ESOP); Michael C. Oatman, Individually and as Trustee for The Great Empire Broadcasting Employee Stock Ownership Plan (ESOP); Danny E. Jenkins, Individually and as former Trustee of the ESOP and Agent of the Trustees and Agent of the Administrator of The Great Empire Broadcasting Employee Stock Ownership Plan; Great Empire Broadcasting, Inc., Individually and as a Plan Administrator for The Great Empire Broadcasting Employee Stock Ownership Plan, and The Great Empire Broadcasting Employee Stock Ownership Plan "Administrative Committee"; Great Empire Broadcasting Inc., Individually and as Plan Administrator for the Great Empire Broadcasting Employee Stock Ownership Plan; Karen K. Warner, CPA, Individually and as a member of the Great Empire Broadcasting Employee Stock Ownership Plan "Administrative Committee"; Unknown Members of the "Board Of Directors", of the Great Empire Broadcasting Employee Stock Ownership Plan; Menke & Associates, Inc.; Don T. Buford; Curtis W. Brown, Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Patricia J. Matassarin, San Antonio, TX, pro se.

W. Wendell Hall, Joseph B. Friedman, Jr., Robert Gilchrist Newman, Lucie Frost Webb, Fulbright & Jaworski, San Antonio, TX, for Lynch, Oatman, Jenkins, Great Empire Broadcasting, Inc., Warner, Buford and Brown.

Michael Lamoine Holland, Cox & Smith Incorporated, San Antonio, TX, for Menke & Associates, Inc.

Appeals from the United States District Court for the Western District of Texas.

Before EMILIO M. GARZA, BENAVIDES and DENNIS, Circuit Judges.

BENAVIDES, Circuit Judge:

Plaintiff Patricia Matassarin appeals the district court's grants of summary judgment dismissing her ERISA and securities claims. We affirm.

I

In this unusual employee benefits matter, Patricia Matassarin, who is the plaintiff/appellant and the current plaintiff's attorney of record, brought suit against the Great Empire Broadcasting, Inc. ("Great Empire") employee stock ownership plan ("ESOP" or "Plan") and its fiduciaries and author. The Great Empire ESOP is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 et seq.

Until 1988, appellees Mike Lynch and Michael Oatman owned 75 and 25 percent of Great Empire, respectively. Great Empire established the ESOP effective January 1, 1988, by document executed on October 21, 1988, in order to distribute Lynch's and Oatman's shares more widely among Great Empire employees. The Plan was restated on November 15, 1994. The restatement, which brought the Plan into compliance with certain tax code provisions, was deemed retroactive to January 1, 1989. Appellee Menke & Associates, Inc. drafted the original documents establishing the ESOP and continues to provide ministerial services to Great Empire but does not serve as the Plan administrator. Every Great Empire employee who satisfies the ESOP's service requirements and who is not subject to a collective bargaining agreement automatically becomes a Plan participant. As Great Empire makes all contributions to the Plan, employee participants do not contribute directly.

Appellant Matassarin was married to appellee Danny Jenkins, Great Empire's chief financial officer and a participant in the Great Empire ESOP, until the couple divorced on October 15, 1991. Upon their divorce, Jenkins and Matassarin entered into a qualified domestic relations order ("QDRO"), which was approved by a Kansas state court. Menke & Associates suggested the terms of the QDRO. Under the QDRO, Jenkins agreed to assign Matassarin one-half of his interest in the Great Empire ESOP. Great Empire would hold Matassarin's interest in a segregated account, where it would accrue interest at the rate of a one-year certificate of deposit. 1 The QDRO did not specify how long Great Empire would retain Matassarin's interest or when it would pay any distribution directly to her. Matassarin was represented by counsel when she agreed to the QDRO.

On the day of Jenkins's divorce from Matassarin, his Great Empire ESOP account held 1040.171 total shares. The Plan administrator segregated 520.086 of those shares into an account for Matassarin. The Plan administrator valued Matassarin's 520.086 shares at $22 per share, their market value at the end of 1990, the Plan's last determination date for value. Matassarin's interest in the Plan, thus calculated, totaled approximately $11,442. The Plan administrator then allowed Matassarin's account to accumulate interest at the rate of a one-year certificate of deposit.

When Great Empire restated its Plan on December 15, 1994, Michael Oatman sent a letter to everyone who had a segregated account under the original Plan. Most of the segregated-account holders, approximately sixty-seven people, were Plan participants who had left Great Empire's employment and had accounts established pursuant to Plan § 14(h). 2 The letter stated that the ESOP administrative committee 3 had authorized lump-sum distributions to segregated-account holders. The letter offered distributions either in cash or in shares of Great Empire stock. Matassarin contends that she never received this letter, and in any event she did not respond to it. Oatman sent follow-up correspondence to Matassarin and other segregated-account holders in May 1995, 4 which reiterated the distribution offer but failed to mention that segregated-account holders could select shares of company stock as their form of distribution. The appellees now contend that Matassarin, unlike other segregated-account holders, was not entitled to any distribution and was sent Oatman's correspondence only in error. According to the appellees, § 18(e)(4) in both the original and the restated Plan provides that the Plan need not offer Matassarin any distribution until Jenkins is eligible for retirement. Section 18(e)(4) states: "In the case of any payment to an Alternate Payee before a Participant has separated from service, the Plan shall not be required to make any payment to an Alternate Payee prior to the date Participant attains (or would have attained) the Earliest Retirement Age." It is not clear from the record how many of the segregated-account holders received payment. For those who did, the Plan administrator converted the "suspended" stock, i.e., that in the segregated accounts, to cash value for distribution, then reallocated the stock among active Plan participants. For distribution purposes, the Plan apparently valued the suspended stock by the fair market value for whichever year-end preceded the relevant employee's termination from Great Empire employment. The Great Empire ESOP defines the "valuation date" as the December 31 "coinciding with or immediately preceding the date of actual distribution of Plan Benefits."

On May 9, 1996, Matassarin brought suit in the United States District Court for the Western District of Texas against Lynch, Oatman, Jenkins, Great Empire, Warner, Menke & Associates, and unknown members of Great Empire's Board of Directors. She alleged that the defendants committed common-law fraud and violated ERISA, federal securities laws, and state securities laws.

Matassarin filed a motion for class certification, with herself as the representative plaintiff, which the district court denied. She then filed a motion to have her suit treated as a shareholder's derivative action, or alternatively for joinder, or alternatively for reconsideration of the district court's decision denying class certification. The district court denied the motion in toto.

The district court then granted partial summary judgment against Matassarin on her federal securities claims against Lynch, Oatman, Jenkins, Warner, Great Empire, and Menke & Associates. Matassarin amended her complaint, adding Burford and Brown, members of the ESOP administrative committee, as defendants. The court granted partial summary judgment on Matassarin's federal securities claims against Burford and Brown, as well.

The court next granted partial summary judgment for all of the defendants on Matassarin's fraud, conversion, and state securities claims.

The defendants filed a motion for partial summary judgment on Matassarin's claim for attorneys' fees. The district court granted summary judgment with regard to any legal work done or supervised by Matassarin but denied the motion as to work done by other attorneys. 5

The district court then ordered Matassarin to file an amended complaint including only claims that still remained after the summary judgment grants. Matassarin did so, alleging only ERISA violations. The court thereafter struck Matassarin's jury demand and, in two separate orders, granted summary judgment for the defendants on Matassarin's ERISA claims, effectively ending her suit.

Matassarin also filed a motion requesting that Judge Prado, the presiding judge, recuse himself from the case on the basis of alleged bias. The judge denied the motion, prompting Matassarin to petition this Court for a writ of mandamus directing Judge Prado to recuse himself. A three-judge panel of this Court denied the petition and Matassarin's subsequent motion for rehearing on the issue.

Both Matassarin and the defendants filed motions seeking to recover attorneys' fees. The district court denied Matassarin's motion but, finding Matassarin's ERISA suit "frivolous," awarded more than $24,000 in attorneys' fees to Menke & Associates and more than $88,000 to...

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