Owen v. Soundview Financial Group, Inc., 96 Civ. 7003(MP).

• Decision Date: 22 June 1999
• Docket Number: No. 96 Civ. 7003(MP).,96 Civ. 7003(MP).
• Citation: 54 F.Supp.2d 305
• Parties: Arnold OWEN, Plaintiffs, v. SOUNDVIEW FINANCIAL GROUP, INC., SoundView 401(k) and Profit-Sharing Plan, Defendants.
• Court: U.S. District Court — Southern District of New York

54 F.Supp.2d 305

Arnold OWEN, Plaintiffs, v. SOUNDVIEW FINANCIAL GROUP, INC., SoundView 401(k) and Profit-Sharing Plan, Defendants.

No. 96 Civ. 7003(MP).

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

June 22, 1999.

Order Supplementing Opinion, July 28, 1999.

Wachtel & Masyr, LLP, William B. Wachtel and John H. Reichman, of counsel, New York City, for plaintiff, Arnold Owen.

Loeb & Loeb LLP, Michael P. Zweig and Helen Gavaris, of counsel, New York City, for defendants, SoundView Financial Group, Inc., and SoundView 401(k) and Profit-Sharing Plan.

OPINION and DECISION

MILTON POLLACK, Senior District Judge.

This action having been tried before the Honorable Milton Pollack, United States Senior District Judge, without a jury on March 24, 29, and 30, 1999; and this Court having received and evaluated the testimony of the witnesses at trial, the deposition testimony¹ and the documents received in evidence, and due deliberation having been had, reports the same as is required by Fed.R.Civ.P. 52(a), in its Opinion and Findings, and expresses its Conclusions as follows.

The plaintiff, Arnold Owen ("Owen"), an employee and Director of the defendant SoundView Financial Group, Inc. ("SoundView") and a participant and trustee of the SoundView 401(k) and Profit-Sharing Plan (the "Plan") elected to cause the Plan to purchase 120,000 shares of restricted SoundView common stock for the benefit of his profit-sharing account. The shares had been placed in a "Pooled Investment Fund" along with the SoundView common stock held for the benefit of other SoundView employee Plan participants. Owen withdrew from his employment with SoundView and from participation in the Plan on March 14, 1996.

The Plan provides that distributions of accounts from a Pooled Investment Fund invested in company stock shall be based on the fair market value of the participant's account on the valuation date that immediately precedes the participant's date of termination of employment. Under that formulation the relevant date for determining the value payable to plaintiff was February 29, 1996. Plaintiff demanded to be paid out at $50 per share (a wholly fictional amount). The Company countered with $5.80 per share as the fair market value, which the trustees determined was the equivalent of the discounted book value of the shares at that time. The trustees of the Plan, including the plaintiff herein, had a longstanding policy of using the book value of the common stock as the agreed fair market value of the stock and so reported quarterly and annually to the plaintiff as a Plan participant.

The plaintiff rejected the trustees determination of the fair market value of the company stock held in a Pooled Investment Fund for his benefit. Thereafter, plaintiff elevated his demand to an unspecified dollar amount described by him as the "current" fair market value of the stock and this suit followed.

The Complaint

In or about September 1996, plaintiff Arnold Owen commenced this action against defendants SoundView Financial Group, Inc., now known as SoundView Technology Group, Inc. ("SoundView"), and the SoundView 401(k) and Profit-Sharing Plan, alleging four causes of action in his Amended Complaint.

The first cause of action seeks a declaratory judgment pursuant to 29 U.S.C. § 1132(a) declaring that Owen is entitled to be paid the current fair market value of the shares of SoundView stock he purchased through the SoundView 401(k) Plan, and seeks the current fair market value of said shares to be established through appraisal procedures set forth in Section 7 of SoundView's Stock Purchase and Transfer Restriction Agreements (the "Stock Purchase Agreements"). The second cause of action seeks injunctive relief pursuant to 29 U.S.C. § 1132(a) in the form of an order directing defendants to pay Owen the current fair market value of his shares held by the Plan and to comply with the appraisal procedures set forth in the Stock Purchase Agreement.

Alternatively, in the third cause of action, Owen asserts that the Plan trustees breached their fiduciary duties under ERISA by acting arbitrarily and capriciously in calculating the fair market value of the highly restricted SoundView common stock held by the plan trustees in a Pooled Investment Fund for the benefit of Owen and seeks an order requiring the defendants to calculate the current fair market value of the stock in a "fair and reasonable manner." Owen's fourth cause of action asserts a claim for unjust enrichment.

ERISA

Generally, the requirements of ERISA apply to any "plan, fund, or program" established by a non-governmental employer for the purpose of providing retirement benefits to its employees. 29 U.S.C. §§ 1002(2), 1003(2). With certain limited exceptions, ERISA preempts all state and local laws that "relate" to an employee benefit plan. See 29 U.S.C. § 1144(a). Under this broad preemptive language, any state law that relates to an ERISA-covered plan is preempted, not just those laws that conflict with ERISA. See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (employee's claim was expressly preempted by ERISA § 514(a), 29 U.S.C. § 1144(a), which provides for preemption of all state laws which "relate to" an employee benefit plan covered by ERISA).

The SoundView 401(k) and Profit-Sharing Plan involved herein is an "employee pension benefit plan" that is intended to be a "qualified" "profit-sharing plan" with a "cash or deferred" feature. Owen's claims for benefits under this Plan are governed by ERISA and the Plan documents.

The Plan

The Plan provides the Administrative Committee, which consists of the trustees, with "the power, to be exercised in its complete discretion, ... [t]o construe all terms, provisions, conditions and limitations of the Plan." The Plan also vests in the trustees exclusive authority to determine the fair market value of the assets held by the Plan's Profit-Sharing Trust.

Consistent with the terms of the Plan Document, following Owen's departure from SoundView in March 1996, the SoundView stock held by the Plan on Owen's behalf was valued as of February 29, 1996, the month-end prior to his departure, and Owen was notified by the Plan that he would receive his vested interest in the stock, the amount of $5.80 per share, or $696,000 in total. Owen argues that this figure does not represent the fair market value of SoundView stock and alleges that the trustees breached their fiduciary duties by calculating the value of the stock based on its discounted book value.

Plan Trustees' Fiduciary Duties

ERISA sets forth the general fiduciary duties of Plan trustees, in 29 U.S.C. § 1104(a)(1), which provides in relevant part,

a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and —

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administering the plan;

(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims ...

(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter....

The Plan trustees' determination of the value of the SoundView stock held in a Pooled Investment Fund for the benefit of Owen's Plan account was reasonable and is entitled to the deference of this court. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) ("Trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers"). The trustees have consistently determined that the book value of SoundView from time to time is the most appropriate measure of the value of SoundView stock for the purpose of determining benefit distributions. In making this determination, the trustees took into account, among other things, the available market for the stock, general industry practices, as well as market conditions. In addition, however, the trustees have compared independent valuations of the SoundView stock prepared by Valuemetrics, an independent valuation firm hired by the plaintiff during his tenure as a Plan trustee, in making benefit determinations. Although those valuations did not rely on the book value of SoundView, they did conform closely to the book value of SoundView as determined by trustees and thereby supported the Plan trustees' valuation method in this circumstance.²

The evidence adduced at trial does not reveal a breach of the aforementioned fiduciary duties on the part of any of the Plan trustees, with the notable exception of Owen, who took great pains to prove that he was a faithless fiduciary of the Plan and SoundView. His testimony, if it is to be credited at all, revealed a consistent and brazen abdication of the fiduciary duties owed an ERISA plan by a trustee: according to Owen, he never attended a meeting of the trustees, never discussed his duties as a trustee with anyone, signed documents without reading them and took no responsibility whatsoever to change a policy which he enforced as a Plan trustee, and now claims, in his own self-interest, is violative of ERISA. His self-interested assertion that he was somehow "excluded" by the other trustees from the administration of the Plan merely impressed the Court that he was not worthy of belief. For Mr. Owen to seek equity from this Court is not only improper, but astonishing. See, e.g., Anweiler v. American Elec. Power Service Corp., 3 F.3d 986, 993 (7th Cir.1993); Schaefer v. Arkansas Med. Soc'y, 853 F.2d 1487, 1493 (8th Cir.1988); Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1097 (9th Cir.1985).

The Court holds that the plaintiff has...