Kennedy et al v. ABB Inc. et al

Filing 814

ORDER entered by Judge Nanette Laughrey. No later than January 12, 2018, the parties shall file proposed findings of fact and conclusions of law on the issue of damages for Tussey's mapping claim, consistent with the methodology adopted by the Court in this Order. (Barragan-Scott, Alana) Modified on 12/12/2017 (Barragan-Scott, Alana).

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF MISSOURI
SOUTHWESTERN DIVISION
RONALD TUSSEY, et al.,
Plaintiffs,
v.
ABB INC., et al.,
Defendants.

)
)
)
)
)
)
)
)
)

No. 2:06-cv-04305-NKL

ORDER
After remand from the Eighth Circuit, this Court ordered each party to propose the proper
method for calculating damages on Tussey’s mapping claim for the breach of the duty of loyalty.
They were also instructed to identify additional evidence needed to supplement the trial record, if
any. Having considered the parties’ proposals, the Court concludes that that the record will not
be reopened for additional evidence and the proper method of calculating damages is to compare
the performance of the Wellington Fund with the relevant Freedom Funds between 2001 and
2007.
The Court rejects Tussey’s argument that there is one calculation of damages for ABB’s
decision to remove the Wellington Fund from the plan platform, and a different and additional
calculation of damages for mapping the assets into the Fidelity Freedom Funds. ABB’s breach
of the duty of loyalty was for removing the Wellington Funds and mapping them into the
Freedom funds. While they are separate acts, the breach of the duty of loyalty would not have
been found as a matter of fact if only one event had occurred.
The Court rejects ABB’s argument that the proper measure of damages is a comparison
of the rate of return that Plan beneficiaries actually received from the Freedom Funds, with the

returns they would have received in a comparable target-fund family in the marketplace. The
losses for breaching the duty of loyalty in mapping the Wellington assets into the Freedom Funds
cannot be measured by asking what the losses would have been had a loyal fiduciary mapped the
assets into a different fund. Such measure does not restore the Plan to the position that it would
have occupied but for ABB’s breach of the duty of loyalty. ABB did not make an imprudent
investment; it made a disloyal investment decision. This case has never been about whether
ABB made a poor or even negligent choice when it selected the Freedom Funds. If that had been
the claim, then the reasons for choosing the Freedom Funds might have been relevant to the
damage calculation and a comparison between the Freedom Funds and other similar target funds
might have been relevant. But such considerations are not relevant to a damage calculation
based on a breach of the duty of loyalty.
The Court also rejects ABB’s argument that a comparison of the performance of the
Wellington Fund and the Freedom Funds is prohibited by earlier Eighth Circuit opinions. When
the Eighth Circuit first reversed and remanded this case for application of the Firestone abuse of
discretion standard, it said:
On remand, the district court should reevaluate its method of
calculating the damage award, if any, for the participants'
investment selection and mapping claims. … First, the district
court awarded the amount that participants who had invested in the
Wellington Fund presumably would have had if (1) ABB had not
replaced the Wellington Fund with the Freedom Funds, and (2) the
participants remained invested in the Wellington Fund for the
entire period at issue. In light of the [policy statement's]
requirement to add a managed allocation fund, it seems the
participants' mapping damages, if any, would be more accurately
measured by comparing the difference between the performance of
the Freedom Funds and the minimum return of the subset of
managed allocation funds the ABB fiduciaries could have chosen
without breaching their fiduciary obligations.
Second, the district court determined “it [was] a reasonable
2

inference that participants who invested in the Freedom Funds
would have invested in the Wellington Fund had it not been
removed from the Plan's investment platform.” Such an inference
appears to ignore the investment provisions of the IPS, participant
choice under the Plan, and the popularity of managed allocation
funds. And the participants fail to cite any evidentiary support for
inferring the participants' voluntary, post-mapping investments in
the Freedom Funds would have instead been made in the
Wellington Fund, even if that fund remained as a Plan option for
all of the years at issue. “A reasonable inference is one which may
be drawn from the evidence without resort to speculation.” As
calculated, the $21.8 million damage award for the participants’
mapping claim is speculative and exceeds the “losses to the plan”
resulting from any fiduciary breach.
Tussey v ABB, 746 F.3d 327, 338-339 (8th Cir. 2014) (Tussey I) (case citations omitted). The
Eighth Circuit’s direction was further clarified in Tussey v. ABB, 850 F. 3d 951 (8th Cir. 2017)
(Tussey II), where it said:
To be sure, we did clearly rule that the original award was wrong
“[a]s calculated.” … At the same time, we left open exactly how it
should be fixed. We suggested two points in the district court’s
explanation that “seem[ed] or “appear[ed]” to be mistaken, but we
did so in tentative, qualifying terms, rather than the firm, definite
language used for our holdings (the award “is speculative and
exceeds” the plan’s losses, and the district court “should
reevaluate” its methodology). Properly read, the passage at issue
proposed an alternative we thought warranted consideration (if
measuring the plans’ losses became necessary again on remand), it
did not require that the district court adopt our proffered approach.
That is why our overarching instruction to the district court was to
“reevaluate its method of calculating the damage award.”… With
that phrasing, we meant to make clear both that there was work—
“reevaluation”—to do and the work involved resolving the
“method of calculating losses, not just there ultimate amount. Such
a directive would have made little sense if, as the ABB fiduciaries
assert, all we meant for the district court to do was carry out the
calculations under an approach we had dictated on appeal.
Id. at 959 (italics in original). The Eighth Circuit continued:
[I]t is a mistake to argue, as the ABB fiduciaries and SIFMA do,
that measuring any portion of the losses by comparing the returns
from the Freedom Funds with what the plans would have earned
3

from the Wellington Fund is necessarily inappropriate because it
involves “an apples-to-oranges comparison.” True, the funds are
designed for different purposes and thus choose their investments
differently, so there is no reason to expect them to make similar
returns over any given span of time. But the point of the
comparison here would just be to determine, as a factual matter,
the effect of owning one fund rather than the other. The reason for
any difference in returns would be immaterial.
This is not to say we are sure a comparison with the returns on the
Wellington Fund must be part of measuring what the ABB
fiduciaries' breach cost the plans, just that we are unpersuaded by
[this] arguments against it and do not want [it] to unduly occupy
the parties and the district court on remand. The measure and
amount of the plans’ losses remain for the district court to resolve.
See generally Martin v. Feilen, 965 F.2d 660, 671–72 (8th Cir.
1992) (insisting the district court perform its “function ‘to fashion
the remedy best suited to the harm’” even though the plaintiff had
“presented only an unsound ... damage theory,” and explaining
“the measure of such damages need not be exact—‘it will be
enough if the evidence show [sic] the extent of the damages as a
matter of just and reasonable inference, although the result be only
approximate’”….).
Id. at 960–61 (italics in original).
Therefore, using Wellington as a comparator is not foreclosed by the law of the case.
To the contrary, as the Eighth Circuit expressly held in Tussey II, using Wellington as a
comparator is well within the range of this Court’s authority on remand to resolve the measure of
the plan’s losses and fashion the remedy best suited to the harm.
There remains the question of how to bring any damages up to date, given the time that
has elapsed since the original calculation of damages and the date of any final award of damages
for the mapping claim. Tussey proposes comparing the rate of return between the Wellington
Fund and the Freedom Funds between 2007 and the present to bring the damage award up to
date. Alternatively, they propose using the S & P 500 rate of return as the comparator. The
Court rejects both these approaches because Tussey never asked for future damages when the

4

Complaint was filed. Nor did Tussey do so during the pendency of the trial. In other words,
Tussey never claimed damages beyond 2007, nor is the Court aware of any basis for claiming
future damages in an ERISA case such as this. While the Court recognizes the burden of the
delay in this matter, it cannot award damages after 2007 because of the delay in the post-trial
proceedings. Because no one has proposed a specific method of bringing the measure of
damages forward using prejudgment interest, the Court will not address that issue in this order.
As for ABB’s arguments concerning the lack of evidence to support a damage award
using the methodology adopted by the Court, it is premature.

When submitting proposed

findings of fact and conclusions of law, the parties can make their respective arguments
concerning the evidence, its sufficiency, and the respective burdens of proof under ERISA, as
informed by trust law. The Court in this Order only selects the method of calculating damages; it
does not resolve any of these other issues.
Finally, both parties have requested to supplement the record. The Court will not permit
the record to be reopened. The methodology adopted by the Court was before the Court at the
time of trial. Neither party can say they did not have the opportunity to present all their evidence
at the time of trial to support or oppose Tussey’s damage calculation.
The parties shall file proposed findings of fact and conclusions of law on the issue of
damages for Tussey’s mapping claim, by January 12, 2018, consistent with the methodology
adopted by the Court in this Order.
s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: December 12, 2017
Jefferson City, Missouri

5