Womack v. Orchids Paper Products Co. 401(k) Sav. Plan

• Decision Date: 15 February 2011
• Docket Number: Case No. 09–CV–748–TCK–FHM.
• Citation: 769 F.Supp.2d 1322,50 Employee Benefits Cas. 1993
• Parties: Carolyn L. WOMACK, Plaintiff,v.ORCHIDS PAPER PRODUCTS COMPANY 401(K) SAVINGS PLAN, Orchids Paper Products Company, Keith R. Schroeder, and Robert R. Snyder, Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

769 F.Supp.2d 1322

50 Employee Benefits Cas. 1993

Carolyn L. WOMACK, Plaintiff,

v.ORCHIDS PAPER PRODUCTS COMPANY 401(K) SAVINGS PLAN, Orchids Paper Products Company, Keith R. Schroeder, and Robert R. Snyder, Defendants.

Case No. 09–CV–748–TCK–FHM.

United States District Court, N.D. Oklahoma.

Feb. 15, 2011.

Jess Vince Hightower, Broken Arrow, OK, for Plaintiff.Marshall James Wells, Johnathan Louis Rogers, Hall Estill Hardwick Gable Golden & Nelson, Tulsa, OK, for Defendants.

OPINION AND ORDER

TERENCE C. KERN, District Judge.

Before the Court is Plaintiff's Motion for Partial Summary Judgment (Doc. 34) and Defendants' Motion for Summary Judgment (Doc. 38).

I. Factual Background

Defendant Orchids Paper Products Company (“Orchids”) is a Delaware corporation with a facility in Pryor, Oklahoma, that manufacturers consumer paper products. Defendant Robert Snyder (“Snyder”) is the president and chief executive officer of Orchids. Defendant Keith Schroeder (“Schroeder”) is the chief financial officer of Orchids. For approximately twenty-two years, Orchids has maintained a defined contribution retirement plan known as Orchids Paper Products Company 401(k) Savings Plan (the “Plan”). The Plan is a named Defendant. Under the terms of the Plan, Orchids is designated as the Plan's administrator and named fiduciary. Also under the terms of the Plan, Snyder and Schroeder are authorized to carry out fiduciary functions on behalf of Orchids. Neither Snyder nor Schroeder are designated as named fiduciaries or trustees under the Plan.

Plaintiff Carolyn Womack (“Plaintiff”) began employment with Orchids in 1978 and was terminated in April 2008. During her employment with Orchids, Plaintiff participated in the Plan and contributed twenty-five percent of her pre-tax compensation to her individual 401(k) account. Plaintiff was seventy years old at the time of her termination. At Orchids' request, Plaintiff served as a contract consultant after her termination and trained her replacement for four months, until approximately August 2008. Plaintiff could not contribute compensation to her account while she was employed as a contract consultant.

In April 2008, following Plaintiff's termination but during her employment as a consultant, Orchids transferred management of the Plan's investments from Principal Financial Group (“Principal”) to Fidelity Management Trust Company (“Fidelity”). Fidelity is designated as the Plan's trustee in the Plan instrument. As part of the transfer from Principal to Fidelity, a series of informational meetings was held for Orchids' employees. During these meetings, representatives of Fidelity and Morgan Stanley Smith Barney (“Smith Barney”), Orchids' third-party defined contributions 401(k) consultant, gave presentations about the Plan's new investment options under Fidelity's management. Plaintiff attended one of these informational meetings on April 24, 2008. During the meeting attended by Plaintiff, a Fidelity representative explained the investment options available under the Plan. Participants could direct Fidelity to invest the funds in their personal accounts into one of several available investment funds, including the Fidelity Advisor Stable Value Portfolio II (“Stable Fund”). Participants who did not select a specific investment fund would have their existing funds rolled into a Fidelity Advisor Freedom Fund (“Default Fund”). Plaintiff met individually with Fidelity and/or Smith Barney representatives following the informational meeting she attended.

Sometime following the informational meeting, Plaintiff completed Fidelity's Designation of Beneficiary Form (“DOB Form”), identifying her beneficiaries and providing instructions regarding the proper distribution of her retirement funds. Under the primary and contingent beneficiary sections of her DOB Form, Plaintiff twice wrote “see attached,” referring to an attached one-page spreadsheet that Plaintiff had created to further explain her beneficiary distribution instructions. In addition, Plaintiff completed a Fidelity Enrollment Form (“Enrollment Form”), in which she indicated her election to invest one-hundred percent of the funds in her individual plan account in the Stable Fund. Plaintiff and other Plan participants were instructed that they could submit their enrollment forms either to Orchids or Fidelity.

Sometime on or after April 28, 2008, Plaintiff delivered a five-page set of documents, which included her DOB Form and Enrollment Form, to Margie King (“King”), Orchids' Accounts Receivable and Credit Manager. King was the individual selected by Orchids' management to collect DOB and enrollment forms from Plan participants. Plaintiffs' documents were paper-clipped together, with Plaintiff's DOB Form on top, followed by Plaintiff's one-page beneficiary spreadsheet, and then Plaintiff's Enrollment Form. Upon receipt of Plaintiff's documents, King reviewed Plaintiff's DOB Form and saw the note stating “see attached.” King flipped the first page over and saw the second page, which was Plaintiff's self-made beneficiary spreadsheet. King assumed that all of the attached pages related to Plaintiff's beneficiary designation instructions. In accordance with the usual procedure for handling DOB Forms, King placed Plaintiff's DOB Form and attached documents in a stack to be filed. A file clerk then filed Plaintiff's DOB Form and Enrollment Form in Plaintiff's individual participant file, which was located at the Orchids facility. Had King seen Plaintiff's Enrollment Form, she would have transmitted it to Fidelity, as she did other enrollment forms.

Having never received Plaintiff's Enrollment Form, in which Plaintiff directed funds in her individual Plan account to be invested in the Stable Fund, Fidelity invested such funds in the Default Fund. Plaintiff first accessed her retirement account via website in late November 2008. At this time, she discovered that her funds had been invested in the Default Fund rather than the Stable Fund and that her retirement savings had decreased by approximately $100,000. In December 2008, Plaintiff directed Fidelity to reinvest the funds in her personal account into the Stable Fund. Plaintiff hired counsel and sent letters to Orchids requesting that it refund certain amounts to her individual Plan account. Orchids denied all such requests.

For purposes of transferring investment management from Principal to Fidelity, Schroeder and/or Snyder assigned King the following duties: scheduling and organizing the informational meetings for employee Plan participants; tracking/confirming attendance at the informational meetings; collecting DOB Forms from all Plan participants; and confirming that such forms were properly completed. King assigned a subordinate employee to file the completed DOB Forms. Additionally, for those Plan participants who gave her their completed enrollment forms, King was assigned the duty of transmitting such forms to Fidelity for processing. DOB Forms were not submitted to Fidelity; instead, these forms were maintained in individual Plan participants' files by Orchids. King ensured that she had received DOB Forms from each Plan participant by maintaining a checklist and then assigning clerks to file the forms in individual participant files. King was not specifically “trained” in any of these duties, and the only oversight she received was an informal inquiry from Schroeder regarding how the conversion process was going.

Most Plan participants completed the enrollment process online or via the toll-free number identified in the Fidelity informational brochure, submitted their completed enrollment forms directly to Fidelity, or did nothing and allowed their funds to roll into the Default Fund. Of approximately one-hundred fifty participants in the Plan, only twenty submitted their enrollment forms directly to Orchids. Plaintiff was the only Plan participant to attach her Enrollment Form to the back of other documents when she submitted it to Orchids.

In her only cause of action, Plaintiff alleges that the Plan, Orchids, Schroeder, and Snyder all breached fiduciary obligations arising under the Employee Retirement Income Security Act (“ERISA”). The Court denied Defendants' motions to dismiss. ( See Docs. 21, 22, 33.) Following discovery, all Defendants moved for summary judgment, and Plaintiff moved for summary adjudication on the issue of liability. The matter is set for a non-jury trial.

II. Summary Judgment Standard

Summary judgment is proper only if “there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The moving party bears the burden of showing that no genuine issue of material fact exists. See Zamora v. Elite Logistics, Inc., 449 F.3d 1106, 1112 (10th Cir.2006). The Court resolves all factual disputes and draws all reasonable inferences in favor of the non-moving party. Id. However, the party seeking to overcome a motion for summary judgment may not “rest on mere allegations” in its complaint but must “set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e). The party seeking to overcome a motion for summary judgment must also make a showing sufficient to establish the existence of those elements essential to that party's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 323–33, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The relevant legal standard does not change where the parties file cross motions for summary judgment, and each party has the burden of establishing the lack of a genuine issue of material fact and entitlement to judgment as a matter of law. See Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir.2000).

III. ERISA Breach of Fiduciary Duty

In relevant part, ERISA provides:

Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries...