Crane v. Sartain et al
Filing
99
MEMORANDUM Opinion and Order signed by the Honorable Ronald A. Guzman on 9/27/2012. Mailed notice(cjg, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAUL CRANE,
Plaintiff,
v.
CHARLOTTE SARTAIN, THE
PACKER GROUP, INC., anf THE
PACKER GROUP, INC. EMPLOYEE
OWNERSHIP PLAN AND TRUST,
Defendants.
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11 C 1743
Judge Ronald A. Guzmán
MEMORANDUM OPINION AND ORDER
When Paul Crane was terminated from The Packer Group, Inc., he was told that although
he had approximately $78,000.00 in vested shares in the company’s employee stock ownership
plan (“ESOP”), he would not be paid due to the company’s unstable financial condition. Crane
filed suit under various provisions of the Employee Retirement Income Security Act (“ERISA”),
alleging that the plan administrator failed to provide him with required documents, and that the
defendants failed to pay him the benefits due him and breached their fiduciary duties to Crane.
Currently pending before the Court are the following motions:
(1) Plaintiff’s Motion for Summary Judgment [Dkt. # 25];
(2) Defendants’ Motion to Strike Plaintiff’s Motion for Summary Judgment
Relating to New Breach of Fiduciary Duty Claims [Dkt. # 37], which, in addition
to the normal response and reply, includes a sur-reply and response to the surreply;
(3) Defendants’ Cross-motion for Summary Judgment [Dkt. # 40];
(4) Plaintiff’s Motion to Strike Defendant’s Motion to Strike Plaintiff’s Motion
for Summary Judgment Relating to New Breach of Fiduciary Duty Claims or, in
the alternative, to Amend Complaint to Conform to Evidence [Dkt. # 44]; and
(5) Plaintiff’s Motion to Strike Scurrilous Statements [Dkt. # 88].
For the reasons stated below, the defendants’ motion for summary judgment as to Counts
I and II is denied and as to Count III is granted. Crane’s motion for summary judgment as to all
claims is denied. The defendants’ motion to strike Crane’s motion for summary judgment
relating to the new breach of fiduciary duty claims, Crane’s motion to strike the defendant’s
motion to strike Crane’s summary judgment motion relating to the breach of fiduciary duty
claims, and Crane’s motion to strike scurrilous statements are denied as moot.
I.
Analysis
A.
Crane’s Motion for Summary Judgment and Defendants’ Cross-Motion for
Summary Judgment
Crane filed suit alleging that: (1) Charlotte Sartain, as the plan administrator, failed to
provide him with documents required under the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. §§ 1024(b)(2)-(4) (Count I); (2) the defendants failed to pay Crane the
benefits due him under the company’s employee stock option plan in violation of ERISA, 29
U.S.C. §1132(a)(1)(B) (Count II); and (3) the defendants breached their fiduciary duties to Crane
in violation of ERISA, 29 U.S.C. § 1104 (Count III). Crane and the defendants have crossmoved for summary judgment as to each claim.
1.
Facts
The court notes at the outset that contrary to the requirements of Local Rule 5.2(f), Crane
has submitted as courtesy copies to the Court three oversized binders of untabbed exhibits with
no indexes. Crane’s failure to abide by basic filing requirements has significantly increased the
time this Court has spent addressing the merits of the pending motions.
The parties agree on certain facts as stated here. Other undisputed facts are discussed as
necessary in the analysis section of the order. The Court has jurisdiction pursuant to 28 U.S.C. §
1331 because the action involves application of ERISA and venue is proper in this district under
2
28 U.S.C. § 1391 because a substantial portion of the events giving rise to the complaint
occurred in this district.
Paul Crane was an employee of The Packer Group, Inc. (“TPG”) until 2009 when his
employment was terminated. (Defs.’ Resp. Pl’s. Local Rule 56.1 Statement of Facts, Dkt. # 42 ¶
1.) TPG sponsors The Packer Group, Inc. ESOP, which is a tax qualified retirement plan under
Title I of ERISA. (Id. ¶¶ 3-4.) While employed by TPG, Crane became a participant in the
ESOP and has vested benefits in the ESOP in the form of TPG company shares. (Id. ¶¶ 5-6.)
Defendant Charlotte Sartain is the named administrator of the ESOP and signed the 2002 ESOP
Plan Document as the ESOP Trustee. (Id. ¶ 8.) She is a member of TPG’s Board of Directors
and is TPG’s Executive Vice President of Finance. (Id. ¶ 10.)
Following Crane’s termination, Sartain sent him a letter dated June 10, 2010 describing
how many vested shares he held in the ESOP, the cash value and his holding’s aggregate value.
(Id. ¶ 17.) Crane has not yet been paid the benefits outlined in the June 10, 2010 letter. (Id.)
Crane has served on Sartain multiple written requests for the production of documents related to
the ESOP. (Id. ¶ 66.)
2.
Analysis
A.
Count I–Failure to Provide Documents
ERISA requires a plan administrator to provide certain documents to a participant or
beneficiary upon request. 29 U.S.C § 1024(b)(4) (“The administrator shall, upon written request
of any participant or beneficiary, furnish a copy of the latest updated summary [ ] plan
description, and the latest annual report, any terminal report, the bargaining agreement, trust
agreement, contract, or other instruments under which the plan is established or operated.”).
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However, “[t]he universe of documents that qualify as ones under which the plan is established
or operated . . . is small and is limited to those documents that formally, i.e., legally, govern the
establishment or operation of the plan.” Mondry v. Am. Family Mut. Ins. Co., 557 F.3d 781, 801
(7th Cir. 2009) (internal quotation marks omitted).
With respect to Crane’s claim that Sartain failed to provide ESOP Plan documents,
genuine issues of material fact preclude summary judgment. Crane contends that from August
2010 until March 2011, when this case was filed, Crane sent many requests for the documents
both to Sartain and her counsel, but received nothing until just before the second status hearing
in this case. (Pl.’s Ex. S, 5/12/2011 Hr’g Tr., Dkt. #27-23, at 4, PageID # 653.) The defendants,
on the other hand, contend that on two different occasions in May 2010, Sartain tendered all of
the relevant plan documents to Crane in person but he refused to accept them saying that he
wanted the ESOP money and not the documents. (Defs.’ Statement Add’l. Facts, Dkt. #42, ¶¶
17-18, PageID ##931-32.)1 The Court cannot grant summary judgment on this claim given these
competing facts.
B.
Count II–Failure to Pay ESOP Benefits2
Pursuant to ERISA § 1132(a)(1)(B), “[a] civil action may be brought [by a participant or
beneficiary] ... to recover benefits due to him under the terms of his plan, to enforce his rights
under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.”
1
Crane’s motion to strike Sartain’s affidavit in support of this statement of fact because
it does not comply with 28 U.S.C. § 1746 is denied on the ground that Sartain has submitted a
revised affidavit that is in compliance. (Corrected Sartain Aff., Dkt # 81, PageID # 3423-28.)
2
Neither party details the legal framework for analyzing this claim. The Court has set
forth what is believes is the proper analytical framework. However, in light of the complete lack
of guidance by the parties on the issue, any motion to reconsider on the ground that the Court did
not accurately analyze the claim will not be well-taken.
4
29 U.S.C. § 1132(a)(1)(B). Crane contends that, while the defendants acknowledge that he is
owed certain benefits under the ESOP, he has not been paid and therefore is entitled to judgment
on this claim. The defendants assert that it has not been “administratively feasible” to pay Crane
due to TPG’s precarious financial condition, and that the decision to withhold payment is not
arbitrary and capricious.3 First, though, the defendants contend that Crane failed to exhaust his
administrative remedies because he did not file a written claim as required by the Plan.
i.
Exhaustion
“[W]e have interpreted ERISA as requiring exhaustion of administrative remedies as a
prerequisite to bringing suit under the statute.” Edwards v. Briggs & Stratton Retirement Plan,
639 F.3d 355, 360 (7th Cir. 2011). The parties, however, do not agree on which version of the
Plan applies. Crane contends that although it was never produced to him by the defendants, a
version of the Plan effective January 1, 2009 (“2009 Plan”) applies. While admitting in response
to Crane’s statement of additional facts that the Plan was completely restated effective January 1,
2009 and that the 2009 Restated Plan was substituted for the earlier version of the Plan, see
Defs’ Resp. Pl.’s Add’l Facts, Dkt. #77 ¶ 4, the defendants assert without explanation that
Crane’s reference to the 2009 Plan is a “red herring” as there is “no material difference between
3
The defendants assert that the plan is the only proper defendant in a suit for benefits.
While it is true that “[t]he proper defendant in a suit for benefits under an ERISA plan is ...
normally the plan itself,” Feinberg v. RM Acquisition, LLC, 629 F.3d 671, 673 (7th Cir. 2011),
“when the lines between the plan, the plan administrator, and the plan sponsor are indistinct or
contested, the plaintiff's designation of the ‘wrong’ defendant can be forgiven provided the
‘right’ defendant is not misled.” Id. (citations omitted). While Crane’s complaint alleges the
claim for a denial of benefits against the plan administrator, Sartain, the plan and the employer,
absent evidence establishing that the three defendants are indistinct, the Court concludes that the
plan is the only defendant as to this claim. Sartain and TPG are dismissed as defendants with
respect to this claim.
5
the 2009 document and the prior plan documents relating to this issue.” (Defs.’ Corrected Reply,
Dkt. #82, at 5 n.2, PageID # 3619.)4
The 2002 Plan states that “[a]ny person entitled to benefits must file a written claim with
the Administrator on forms provided by the Administrator,” (Pl.’s Ex. A-2, Dkt #27-3, ¶ 10.1,
Page ID # 254), while the 2009 Plan simply states that “[a] Claimant must submit any necessary
forms and needed information when making a claim under the Plan.” (Pl.’s Reply Ex. E, Dkt.
#55-5, § 9.05, PageID # 1716.) The Court assumes for purposes of this motion that the two
plans require the same written submission in order to make a claim.
Crane contends that the November 2009 distribution request form, in which he asked that
his payments for the ESOP shares be rolled over to his qualified retirement plan, constituted his
written claim. The defendants do not address this argument. He also contends that Sartain did
not follow Plan procedures because she did not send him a written denial which explained the
basis for the denial and informed him of his appeal rights. Finally, he asserts that Sartain denied
him access to administrative procedures by failing to provide the relevant Plan documents
despite his requests.
The Court finds that, even if Crane was required to but did not exhaust his administrative
remedies, exhaustion would have been futile. Exhaustion “encourages informal, non-judicial
resolution of disputes about employee benefits” and “helps to prepare the ground for litigation in
case administrative dispute resolution proves unavailing.” Edwards, 639 F.3d at 360-61.
However, the decision to require exhaustion is within the discretion of the trial court and may
4
Despite the defendants’ contention that a summary plan description for the 2009 Plan
does not exist, (Defs.’ Resp. Pl.’s Statement Fact, ¶ 70, PageID # 928), Crane asserts that he
obtained the 2009 Plan and the summary plan description for the 2009 Plan through a third-party
subpoena. (Pl.’s Reply Supp. Summ. J., Dkt. #54, at 5, PageID # 1544.)
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not be necessary “where pursuing internal plan remedies would be futile.” Id. at 361. Here,
exhaustion would be futile as both parties’ positions are clear and there is no question as to the
basis for Sartain’s decision. Accordingly, the Court concludes that, even assuming that Crane
did not exhaust, exhaustion is not required as it would have been futile in this case.
2.
Administrator’s Decision
As already noted, Sartain declined to pay Crane his ESOP benefits because TPG was not
financially able to do so and, therefore, payment was not administratively feasible. Sartain relies
upon Article 7 of the 2002 Plan, which states in part that “[t]he ESOP Contribution Account
invested in Qualifying Employer Securities shall be payable as soon as administratively feasible
following the end of the Plan Year in which the Participant terminates employment . . . .” (Pl.’s
Ex. A-2, 2002 Plan, Dkt. # 27-3, Art. 7.1(b)(1)(B).) (emphasis added). Crane challenges on
several grounds Sartain’s decision not to pay him.
Before addressing the substance of Crane’s argument, the Court first must ascertain the
standard of review to apply to Sartain’s decision, which the parties do not address other than for
the defendants’ passing reference to Sartain’s decision not being arbitrary and capricious. “‘[A]
denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard
unless the benefit plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan,’ in which case a deferential standard
of review is appropriate.” Schultz v. Aviall, Inc. Long Term Disability Plan, 670 F.3d 834, 83637 (7th Cir. 2012) (citation omitted). Specifically, where “the plan grants the administrator the
discretion to determine eligibility and construe the plan terms, [the court] review[s] the
administrator's decision under an arbitrary and capricious standard.” Weitzenkamp v. Unum Life
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Ins. Co. of Am., 661 F.3d 323, 329 (7th Cir. 2011). This standard requires a court to “ensure
only that a plan administrator's decision has rational support in the record,” and is not
“downright unreasonable.” Edwards, 639 F.3d at 360 (internal quotation marks and citation
omitted).
To determine whether a plan administrator has discretionary authority, the Court looks to
the plain language of the plan. Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 538 (7th Cir.
2000). Again, the parties’ failure to discuss or in any way attempt to resolve whether the 2002 or
2009 Plan applies to Crane’s claims is problematic. The 2009 Plan expressly states that:
The Employer, Plan Administrator and any other person or entity who has
authority with respect to the management, administration, of the Plan may
exercise that authority in its/his full discretion, subject only to the duties imposed
under ERISA. This discretionary authority includes, but is not limited to, the
authority to make any and all factual determinations and interpret all terms and
provisions of the Plan documents relevant to the issue under consideration. The
exercise of authority will be binding upon all persons; will be given deference in
all courts of law to the greatest extent allowed under law; and will not be
overturned or set aside by any court of law unless found to be arbitrary and
capricious or made in bad faith.
(Pl.’s Reply Ex. E, Dkt. #55-5, at § 9.07, PageID # 1720.) Based on this language, the Court
finds that the deferential arbitrary and capricious standard of review would apply.
However, the 2002 Plan states as follows:
The Administrator shall administer the Plan in accordance with its terms and shall
discharge its duties 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 with like
character and with like aims. The Administrator shall have full and complete
authority and control with respect to Plan operations and administration unless the
Administrator allocates and delegates such authority or control pursuant to the
procedures stated in subsection (b) or (c) below. Any decisions of the
Administrator or its delegate shall be final and binding upon all persons dealing
with the Plan or claiming any benefit under the Plan. The Administrator shall
have all powers that are necessary to manage and control Plan operations and
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administration . . . .
(Pl.’s Ex. A-2, Dkt. #27-3, at § 8.2, PageID # 249.)
While a plan document need not use particular words to convey discretionary authority,
“[i]f a plan ‘is going to reserve a broad, unchanneled discretion to deny claims, [plan
participants] should be told this, and told clearly.’” Diaz v. Prudential Ins. Co. of Am., 424 F.3d
635, 637 (7th Cir. 2005) (quoting Herzberger v. Standard Ins. Co., 205 F.3d 327, 333 (7th Cir.
2000) (brackets added in Diaz). While the 2002 Plan grants the administrator “full and complete
authority and control with respect to Plan operations and administration,” this language falls
short of the clear grant of discretion to interpret all plan terms and provisions as was conferred in
the 2009 Plan. Given the failure of the 2002 Plan to clearly provide for deferential review of the
administrator’s decisions, the Court concludes that the de novo standard of review would apply if
the 2002 Plan controls.
Because of the different standards of review in the two plans, the parties’ failure to
address which plan controls generally would prevent the Court from properly addressing this
claim.5 Nevertheless, the Court has reviewed the summary judgment filings and it is clear that,
regardless of the standard of review, numerous genuine disputes of material fact exist that
preclude summary judgment as to this claim.6 For example, while Sartain asserts that TPG’s
5
Moreover, the defendants’ assertion that Crane is not entitled to be paid retirement
benefits because under the 2009 Plan he has not reached retirement age fails in light of the
parties’ failure to address which Plan applies.
6
Indeed, the second section of the defendants’ (corrected) reply in support of their
motion for summary judgment is entitled “Plaintiff’s Claims are Based on Erroneous Facts” and
sets forth, with citations to the record, nine instances in which Crane is purportedly mistaken as
to various propositions of fact several of which are material to Crane’s claims. (Defs.’
(Corrected) Reply, Dkt. #82, at 2-3, PageID ## 3616-17.).
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poor financial condition prevented it from making retirement payouts, Crane argues that the
defendants had $575,000.00 available on their credit line as of May 16, 2011 and $731,000.00 as
of December 31, 2009. (Pl.’s Stmt. Add’l. Facts, Dkt. #57, ¶ 11, PageID # 2139) The
defendants counter that although they had not exhausted their line of credit, TPG was not
allowed to draw additional funds on it. (Defs.’ Stmt. Add’l. Fact, Dkt. #42, ¶ 23, PageID # 933)
Crane also asserts that around the time that Sartain declined to pay his ESOP benefits, Sartain
redeemed over $575,000.00 in company shares for Ken Packer, the chairman of TPG’s board.
(Pl.’s Stmt. Add’l. Facts, Dkt. #57, ¶ 12, PageID # 2140) The defendants respond that in April
2010, Packer contributed 20,633 shares of TPG stock with a value of over $590,000.00 to TPG
but that the transaction did not involve the payment of cash. (Defs.’ Stmt. Add'l. Fact, Dkt. #42,
¶ 24, PageID # 933) TPG’s true financial condition and resources go directly to whether
Sartain’s decision to withhold payment was proper. Given the factual disputes regarding TPG’s
financial condition at the time of Crane’s termination, summary judgment cannot be granted on
this claim.
C.
Breach of Fiduciary Duty (Count III)
In his third count, Crane contends that the defendants breached their fiduciary duties by
failing to pay Crane his ESOP benefits and by failing to produce documents as required by
ERISA. In addition, Crane points to the following facts in support of his claim that the
defendants breached their fiduciary duties of failing to pay him: (1) they selectively redeemed
$575,000.00 in shares of the Chairman of the Board of Directors, but did not redeem Crane’s
$77,000.00 in ESOP shares; (2) they spent nearly $900,000.00 in company assets to make
payments for a separate company in violation of the Board of Directors’ wishes; (3) they
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removed the plan trustee in 2002 and failed to have outside § 103 ERISA audits conducted; and
(4) they dispossessed Crane of his ESOP shares when he was terminated and placed the shares in
the general treasury.
Crane states in his motion for summary judgment that he is proceeding under §
1132(a)(2), ERISA § 502(a)(2) with respect to his breach of fiduciary duty claim. (Pl.’s Br.
Supp. Mot. Summ. J., Dkt. #31, at 11, Page ID # 842.)7 Section 1132(a)(2) states that “[a] civil
action may be brought ... by the Secretary, or by a participant, beneficiary or fiduciary for
appropriate relief under section 1109 of this title[.]” Section 1109(a), ERISA § 409(a), in turn
provides in pertinent part that
[a]ny person who is a fiduciary with respect to a plan who breaches any of the
responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter
shall be personally liable to make good to such plan any losses to the plan
resulting from each such breach, and to restore to such plan any profits of such
fiduciary which have been made through use of assets of the plan by the fiduciary,
and shall be subject to such other equitable or remedial relief as the court may
deem appropriate, including removal of such fiduciary.
“As its language suggests, [this section of] the statute only provides for a fiduciary’s liability to
the plan, not to a plan participant. . . .” Krukowski v. Omicron Tech. Inc., No. 10 C 5282, 2011
WL 1303416, at *4 (N.D. Ill. Mar. 31, 2011). Because Crane seeks relief only as to himself and
not the plan, he cannot proceed under § 1109, and thus § 1132(a)(2).
Alternatively, in his complaint, Crane cites to § 1104, ERISA § 404, as the statutory basis
for his breach of fiduciary duty claim. “Section 404 actions are brought under ERISA § 409,
codified at 29 U.S.C. § 1109, or ERISA § 502(a)(3), codified at 29 U.S.C. § 1132(a)(3).” Lewis
v. Aetna Ins. Agency, Inc., 749 F. Supp. 2d 852, 858 (S.D. Ill. 2010). The Court has already
7
Reference to the defendant’s response is unhelpful as they do not cite to any authority
that governs the breach of fiduciary duty claim.
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indicated why Crane cannot proceed under § 1109. As to § 1132(a)(3), “binding precedent
dictates that [Crane] cannot seek relief under ERISA § 502(a)(3) because [he] can seek and [is]
seeking relief under ERISA § 502(a)(1)(B).” Id. Because Count II of Crane’s complaint seeks
relief for the denial of benefits under ERISA § 502(a)(1)(B), he cannot proceed under §
1132(a)(3).
Finally, the Court notes that since Crane seeks relief only as to himself, he is limited to
equitable relief. Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 464 (7th Cir. 2010) (“ERISA
authorizes an award of equitable relief alone to a plan participant suing on her own behalf for
breach of fiduciary duty.”). Because Crane does not seek equitable relief, the claim must fail.
For all of these reasons, the defendants’ motion for summary judgment as to Count III,
the breach of fiduciary duty claim, is granted.
B.
Defendants’ Motion to Strike Plaintiff’s Motion for Summary Judgment Relating
to the New Breach of Fiduciary Duty Claims and Plaintiff’s Motion to Strike
Defendants’ Motion to Strike or, in the Alternative, to Amend Complaint
In their motion to strike, the defendants contend that Crane’s breach of fiduciary duty
claim as plead alleged only that the defendants purportedly breached their duty by (1) not paying
Crane his benefits in the ESOP and (2) failing to provide Crane with plan documents. The
defendants contend that Crane raises new allegations in his motion for summary judgment and
ask that the new allegations be stricken. Because the Court has granted the defendants’ motion
for summary judgment with respect to the breach of fiduciary duty claims, the Court need not
address this motion and it is stricken as moot.
II.
Conclusion
For the reasons stated above, the defendants’ motion for summary judgment [40-1] as to
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Counts I and II is denied and as to Count III is granted. Crane’s motion for summary judgment
[25-1] as to all claims is denied. The defendants’ motion to strike Crane’s motion for summary
judgment relating to the new breach of fiduciary duty claims [37-1], Crane’s motion to strike the
defendant’s motion to strike Crane’s summary judgment motion relating to the breach of
fiduciary duty claims [44-1] and Crane’s motion to strike scurrilous statements [88-1] are denied
as moot.
The parties shall appear for a status on October 4, 2012 at 9:30 a.m. prepared to set a trial
date.
ENTER:
Date: September 27, 2012
______________________________________
Ronald A. Guzman
United States District Judge
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