Free Brief in Support of Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. No. 04-RB-0680 (CBS) DONALD KELLER, Plaintiff, v. QWEST COMMUNICATIONS INTERNATIONAL INC., QWEST ASSET MANAGEMENT COMPANY AND JOHN DOES 1-15, Defendants.

DEFENDANTS' OPENING BRIEF IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF'S CLAIMS The facts of this motion are simple. As part of the class of plaintiffs in the related ERISA class action litigation, plaintiff Donald Keller ("Mr. Keller") released his claims. This Court approved the settlement terms, including this release of claims. Defendants paid significant consideration in exchange for this release. This Court barred and enjoined Mr. Keller from further pursuing these claims. Flaunting the Court's order, Mr. Keller knowingly continues to litigate the released claims. Accordingly, pursuant to Federal Rule of Civil Procedure ("Rule") 56, defendants Qwest Communications International Inc. ("QCII") and Qwest Asset Management ("QAM") submit this opening brief in support of their motion (the "Motion") for summary judgment on the claims asserted by Mr. Keller in his Complaint. Pursuant to this Court's Practice Standards for Civil

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Actions (the "Practice Standards"), QCII and QAM (collectively "Qwest") hereby certify that their undersigned counsel has read and complied with the Practice Standards in filing this Motion. I. SUMMARY

On January 29, 2007, this Court approved a Stipulation of Settlement ("Stipulation") in the ERISA class action litigation. As part of this settlement, Qwest paid $33 million. The Stipulation provides in relevant part that all "Settlement Class Members" -- which undeniably includes Mr. Keller -- released all "Released Claims" against all "Released Persons," including QCII and QAM. Mr. Keller's own Complaint establishes beyond any doubt that, by continuing to maintain this action, Mr. Keller seeks improperly to pursue "Released Claims" against QCII and QAM. Mr. Keller continues to litigate this case despite the fact that this Court entered an order in the class action that expressly "bar[s] and enjoin[s]" Mr. Keller from doing so. Mr. Keller and his counsel are aware that the class settlement bars his claims in this action. Mr. Keller filed two objections to the proposed settlement. He appeared at the hearing conducted by the Court to consider approval of the class settlement (the "Settlement Hearing") through counsel. At the Settlement Hearing, Mr. Keller's counsel expressly admitted that Mr. Keller would be "stuck with" the terms of the settlement if this Court approved the class settlement (as it ultimately did).1 Just over a month ago, Qwest wrote to Mr. Keller's counsel,
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For settlement purposes in the ERISA class action litigation, this Court approved a "non-opt out" class under Rule 23(b)(1).

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explaining in detail how this Court's orders in the class action "forever barred and enjoined" Mr. Keller from further pursuing this case. Mr. Keller apparently does not care. Accordingly, Qwest has been forced to file this Motion to enforce the terms of the Court's order. Qwest respectfully requests that this Court grant this Motion, enter judgment against Mr. Keller, and thereby require Mr. Keller to comply with this Court's prior order.2 II. A. FACTS

The Settlement In The ERISA Class Action Provides That All "Settlement Class Members" Have Released All "Released Claims" Against All "Released Persons." Pursuant to Practice Standard V.I.4(b), Qwest seeks summary judgment on Mr. Keller's

sole cause of action, and states that the following are the undisputed material facts:3 On January 29, 2007, this Court entered its Order and Final Judgment (the "Final Order") in the class action captioned In Re Qwest Savings and Investment Plan ERISA Litigation, Civil Action No. 02-cv-00464-REB (the "ERISA Class Action"). See Final Order, Ex. A-1.4 Both Mr. Keller in this action, and the class of plaintiffs in the ERISA Class Action (of which Mr.

Although Qwest has not yet filed a motion for sanctions under Rule 11, the continued litigation of this action is clearly a violation of Rule 11. Qwest reserves its right to file a motion seeking Rule 11 sanctions. As discussed in this brief, Qwest currently seeks judgment based upon the preclusive effect of the Order issued by this Court in the ERISA class action litigation. Qwest is not currently seeking judgment based upon Mr. Keller's inability to prove material facts upon which Mr. Keller has the burden of proof, and therefore Qwest cannot currently identify any such materials facts under Practice Standard V.I.4(b). Qwest has submitted the exhibits referred to in this brief as exhibits to the Declaration of Michael B. Carroll that is filed concurrently with this brief. Pursuant to D.C.COLO.LCivR 56.1, Qwest: (a) refers to those exhibits as "Ex.A-1, Ex.A-2, Ex.A-3, etc. . .," and (b) has only submitted the "essential portions" of those exhibits. Qwest will submit the entirety of any such document upon request. Complete copies of those documents are also found in this Court's files in the ERISA Class Action.
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Keller was one), asserted claims for breach of fiduciary duty by alleged fiduciaries of the Qwest Savings and Investment Plan (the "Plan") regarding the purchase, retention and sale of employer securities by the Plan. The Final Order expressly approves the Stipulation of Settlement dated April 26, 2006. See Stipulation, Ex. A-2. The Final Order provides, inter alia, that the Stipulation: (1) is a fair, reasonable and adequate settlement, (2) forms a part of, and is incorporated into, the Final Order, and (3) is binding and enforceable. See Final Order, Ex. A-1 at ¶¶ 1 and 3. The Stipulation requires Qwest to pay $33 million to the Plan for distribution into the Plan accounts of Settlement Class Members. See Stipulation, Ex. A-2 at ¶ 2.1. Qwest also guarantees that, subject to certain conditions, the Plan's total settlement recovery will be at least $57.5 million. Id. at ¶ 2.4. In exchange for tens of millions of dollars in settlement

consideration, the Stipulation provides, in relevant part, that both the Plan and all "Settlement Class Members" release all "Released Claims" as to all "Released Persons." See Stipulation, Ex. A-2 at ¶ 5.1. The Final Order expressly provides for this same scope of release. See Final Order, Ex. A-1 at ¶ 9(a). The Stipulation also provides that Settlement Class Members are "forever barred and enjoined" from asserting Released Claims against Released Persons "in any court of law or equity, or in any other forum." See Stipulation, Ex. A-2 at ¶ 5.1(iii). B. Mr. Keller Is A "Settlement Class Member" Who Improperly Seeks To Pursue "Released Claims" Against "Released Persons." As discussed below, Mr. Keller is a Settlement Class Member who improperly seeks to pursue Released Claims against Released Persons in this action.

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The definition of Settlement Class Member includes all individuals who owned, bought or sold units of the Qwest Shares Fund between March 7, 1999 and January 12, 2004. See Stipulation, Ex. A-2 at ¶¶ 1.4, 1.42 and 1.43. Mr. Keller is a Settlement Class Member because (as he alleges in this action) he owned units of the Qwest Shares Fund between March 7, 1999 and January 12, 2004. See Complaint in this action ("Keller Complaint"), Ex. A-3 at ¶¶ 5 & 23. See also Declaration of Holly Morgan filed with this brief. The Defendants in this action (i.e. QCII and QAM) are expressly named as Released Persons in the Stipulation. See Stipulation, Ex. A-2 at ¶¶ 1.5 and 1.41 (stating that Released Persons includes all Defendants, and that Defendants "means QCII, QAM" and others). Mr. Keller's claims in this action are Released Claims because they fall within at least the following portions of the definition of Released Claims contained in paragraph 1.40 of the Stipulation: [A]ll claims, demands, rights, liabilities, and causes of action . . . that were asserted or that could have been asserted. . . at any time, in any forum . . . by . . . Settlement Class Members, or any of them, against the Released Persons, arising out of, based upon, or related to any such claim, demand, right, liability, or cause of action if it is described in any one of the following subparagraphs (or if it is described in more than one of the following subparagraphs): (a) allegations that have been or could have been asserted in the Litigation5 and that arise from or related to any act, omission, fact, or event alleged in the Litigation; allegations relating to any alleged fiduciary's breach of duty with respect to the Qwest Shares Fund, the U S West Shares Fund, or QCII securities, including but not limited to. . . the administration of Plan investment options enabling participants to invest in. . . shares or units of the Qwest

(b)

The Stipulation defines the "Litigation" to be the ERISA Class Action. See Stipulation, Ex. A-2 at ¶ 1.21.

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Shares Fund, the U S West Shares Fund, or QCII securities during the Class Period. Id. at ¶ 1.40(a & b) (Emphases added). Mr. Keller's claims in this action fall squarely within the above definition of Released Claims. First, the allegations that are the basis of Mr. Keller's claims are among the same allegations made by plaintiffs in the ERISA Class Action, and, therefore fall within the definition of Released Claims under subparagraph 1.40(a) of the Stipulation. In this action, Mr. Keller alleges a single cause of action titled "Breaches of Fiduciary Duty" and bases this cause of action on alleged breaches of ERISA fiduciary duty by Defendants in implementing an August 2002 restriction on the ability of Plan participants to purchase units of the Qwest Shares Fund for their Plan accounts. See Keller Complaint, Ex. A-3 at ¶¶ 28-33. The following comparison of allegations from the ERISA Class Action and this action illustrates the overlap: ERISA CLASS ACTION "Qwest's imposition of inappropriate restrictions on Qwest Share Fund Stock relative to the 401(k) Plans included not only the delayed lifting of sale restrictions but also the imposition of purchase restrictions in August, 2002 and continuing through the date of this Second Amended Complaint. [This prevented] purchasing of shares at a depressed stock price." KELLER'S ACTION "[T]he Company and the Plan's Fiduciaries elected to implement restrictions on Plan participants' and beneficiaries' ability to direct investment of their account into the Qwest Shares Fund, with such restrictions becoming effective August 7, 2002. . . . The Defendants' actions denied Plaintiff his right to exercise investment discretion over his account balance to purchase Company stock at the decreased value and benefit from the subsequent increase in share value." See Keller Complaint, Ex. A-3 at ¶¶ 22 & 33

See Second Amended and Consolidated Complaint in the ERISA Class Action, Ex. A-4 at ¶ 15(d) (brackets added)

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Thus, not only could Keller's allegations have been asserted in the ERISA Class Action, but the very same claims were asserted in the ERISA Class Action, resulting in a release of Keller's claims under paragraph 1.40(a) of the Stipulation. Second, subparagraph 1.40(b) of the Stipulation provides that Released Claims include a Settlement Class Member's allegations relating to any alleged breach of duty with respect to the Qwest Shares Fund, including any such breach related to a participant's ability "to invest in" the Qwest Shares Fund. The Keller Complaint's allegations fall within the scope of subparagraph 1.40(b). Indeed, Mr. Keller alleges that QCII and QAM breached a fiduciary duty by placing a restriction on Mr. Keller's ability to invest in the Qwest Shares Fund. See Keller Complaint, Ex. A-3 at ¶ 22. Mr. Keller further alleges that this breach of fiduciary duty denied him the opportunity "to invest a portion" of his Plan account balance in the Qwest Shares Fund when he attempted to do so on August 15, 2002. Id. at ¶ 23. Mr. Keller asserts that the Defendants' actions constituted a breach of fiduciary duty because Defendants failed to provide him with sufficient notice of this restriction on Qwest Shares Fund purchases prior to their implementation of that restriction on August 7, 2002. Id. at ¶¶ 30­32. Mr. Keller's allegations clearly and indisputably fall within the scope of subparagraph 1.40(b) of the Stipulation. C. Mr. Keller Is Aware That He Is Bound By the Settlement. Mr. Keller had full and adequate notice of the Stipulation before it was approved and acknowledged that, as a "non-opt-out" class member, he was bound by the release. Mr. Keller filed two objections to the Stipulation before it was approved. On October 16, 2006, Mr. Keller filed his own objection without counsel. See Objection, Ex. A-5. On

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November 3, 2006, Mr. Keller filed his second objection, through counsel. See Notice of Objections and Intent to Appear at Settlement Hearing, Ex. A-6. Mr. Keller then appeared through counsel at the November 16, 2006 Settlement Hearing. See Transcript of the Settlement Hearing, Ex. A-7 at p. 29. Mr. Keller's attorney at the Settlement Hearing expressly admitted that if this Court approved the Stipulation (as it later did) Mr. Keller's claims in any other action would be barred. Id. at 35 (objectors' counsel states that his clients "can't go file another lawsuit" and are "stuck with the results in this case."). As Mr. Keller's counsel was aware at the Settlement Hearing, Mr. Keller's claims would be barred by an approved settlement because Mr. Keller would be bound by a release and Court order. In fact, as a Settlement Class Member in the ERISA Class Action, Mr. Keller will receive a payment into his Plan account as a result, inter alia, of the $57.5 million that Qwest will either pay or guaranty is paid into the settlement fund under the terms of the Stipulation. Stipulation, Ex. A-2 at ¶¶ 2.1-2.4. Finally, Qwest recently reminded Mr. Keller that his claims here are barred. On May 1, 2007, Mr. Keller served written discovery on Qwest in this action. Qwest responded not only by objecting to that discovery, but also by explaining in a letter to Mr. Keller that the Stipulation and the Final Order "forever barred and enjoined" Mr. Keller from further litigating this case. See July 5, 2007 Letter, Ex. A-8. Qwest explained why Mr. Keller was required to dismiss this action. Id. In response, Mr. Keller provided Qwest with no explanation or rationale for his refusal to dismiss this action. Instead, on August 10, 2007, Mr. Keller simply filed a motion to compel responses to his written discovery. See

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III. ARGUMENT A. Summary Judgment Is Appropriate Because Mr. Keller's Claims Are Barred By The Stipulation And The Final Order. An essential characteristic of class actions is that the members of a certified class are bound by the results of the action. See e.g. 1 Newberg on Class Actions (4th ed.) §1:7 at p. 28 ("When adequate representation is present, then the essential adjudicatory characteristic of representative litigation can be realized, to wit, the adjudication of common questions, whether favorably or not, will be binding on class members."); Restatement of the Law (Second) Judgments (1980) § 41, comment e (when a class action is approved under Rule 23 "persons within the class are bound by a judgment for or against the representative"). Rule 23 expressly creates procedures (e.g. prior notice, settlement approval hearing) that allow for court-approved class action settlements that are final and binding on all class members. See e.g. Rule 23(e)(1)(C) (court may approve a settlement that will "bind class members"). Rule 23 promotes the important policy of facilitating resolution of multiple claims in a single lawsuit. In cases like the ERISA Class Action, where the recovery inures to the benefit of the Plan and then all Plan members, a final settlement is made possible because all plan participants, including Mr. Keller and those who are members of the Court-approved class, are bound by the Stipulation and the release. Mr. Keller's pursuit of this action after the settlement, release and Final Order is an improper collateral attack on the settlement in the ERISA Class Action, which directly contravenes the policy behind Rule 23. See e.g. Garcia v. Board of Ed. School District No. 1,

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573 F.2d 676, 679 (10th Cir. 1978) ("The policy behind the class action device is, of course, to facilitate the final determination of numerous claims in one suit. This policy is not furthered by allowing subsequent collateral attacks by class members."). Perhaps most importantly, Mr. Keller's further pursuit of this action is expressly prohibited by the plain, clear and mandatory language of Rule 23, the Stipulation, and the Final Order. The members of a certified class may be bound by the result of the class action "even though they may not be actually aware of the proceedings." Albertson's Inc. v. Amalgamated Sugar, 503 F.2d 459, 464-464 (10th Cir. 1974). In this action, however, Mr. Keller actually had notice and an opportunity (which he took) to object to the Stipulation. Mr. Keller objected. His lawyer objected. His lawyer argued at the Settlement Hearing. After hearing and considering all of the evidence, this Court ruled that the Stipulation was fair, reasonable and appropriate for approval. Significantly, in its Final Order, the Court held: "[T]he Settlement removes the risks, delay, and costs to the Plan and the Settlement Class associated with continued litigation and the difficult matter of calculating damages by delivering assured benefits and significant economic benefit to the Settlement Class as set forth in the Stipulation." See Final Order, Ex. A-1, at ¶ 3. (Emphasis added.) In other words, this Court ruled on the proposed settlement in a manner inconsistent with Mr. Keller's position, but consistent with the position of: (a) all plaintiffs and all plaintiffs' counsel in the ERISA Class Action, (b) all defendants and all defendants' counsel in the ERISA Class Action, (c) the Honorable Layn Phillips (the retired federal judge who mediated the ERISA Class Action and filed an affidavit with this Court in support of the fairness of the settlement), (d) the independent fiduciary

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retained by the Plan to assess the reasonableness of the settlement, in accordance with Department of Labor rules, as discussed on page 13 below, and (e) the more than 81,000 potential class members who were sent notice of the proposed settlement but did not object. This Court's order approving the settlement was indisputably reasonable, correct and, most importantly, in the present context, binding.6 Mr. Keller cannot simply ignore that ruling. As the Tenth Circuit has stated in a related context, "a litigant given one good bite at the apple should not have a second." United States v. Alvarez, 142 F.3d 1243, 1247 (10th Cir. 1998) (discussing the law of the case doctrine) (quoting Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 900 (Fed. Cir. 1984)). It is axiomatic that one of the basic policy considerations underlying class action litigation is that the resolution of such lawsuits provides defendants closure with respect to the claims asserted therein and released by the settlement without having to relitigate the matters at issue with individual class members. It is this closure that provides the incentive for Qwest and other defendants to enter into class action settlements. This Court should not allow Mr. Keller to circumvent this important policy of finality, and it is unfortunate that Qwest has to expend the resources to file this Motion in a case that is clearly barred by the Court's Final Order approving the Stipulation. If Mr. Keller is permitted to pursue this action despite the clear bar in the Stipulation and Final Order, this would negate the very consideration for which Qwest paid a "significant" sum.
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It is also noteworthy that no party to the litigation or member of the class, including Mr. Keller, either sought reconsideration of this Court's approval of the settlement or filed a notice of appeal. The Stipulation is now final and fully enforceable.

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Accordingly, the Court should grant the requested relief and bar Mr. Keller's claims under the doctrines of both release and res judicata. See, e.g., Reppert v. Marvin Lumber and Cedar Co., 359 F.3d 53, 56-59 (1st Cir. 2004) (settlement and judgment in state court class action barred subsequent claims under doctrines of both release and res judicata); Nottingham Partners v. Trans-Lux Corporation, 925 F.2d 29, 32 (1st Cir. 1991) (claims barred by release language because the "release contained in the [class action] settlement, by its terms, met all the criteria necessary to engage the gears of the release defense for purposes of this suit: it (1) applied to appellants, (2) encompassed the claims asserted below, and (3) was legally enforceable."). B. Because The Plan's Claims Were Also Released In The Settlement Of The ERISA Class Action, Mr. Keller Cannot Pursue Claims In This Action That the Plan Has Released. Under ERISA, Mr. Keller may only seek monetary damages to be paid to the Plan itself. Plan participants such as Mr. Keller are not entitled to direct monetary damages for alleged breaches of fiduciary duty. ERISA provides no remedy through which Mr. Keller can recover for himself individually. Section 409(a) of ERISA provides that a person who breaches an ERISA fiduciary duty is liable only "to make good to such plan any losses to the plan resulting from each such breach. . . ." 29 U.S.C. § 1109(a). (Emphasis added.) See e.g. Smith v. Snydor, 184 F.3d 356, 363 (4th Cir. 1999) (plaintiffs' fiduciary breach claim under § 409 not precluded when recovery would be paid directly to the plan and not to individual participants). In an apparent attempt to comply with this statutory requirement, Mr. Keller's Complaint seeks the following relief: "As required by ERISA § 409(a)(29 U.S.C. § 1109(a)) [Mr. Keller seeks] a monetary payment from the Defendants to the Plan to make good to the Plan the losses

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to the Plan resulting from the breaches of fiduciary duty alleged above. . . ." See Keller Complaint, Ex. A-3 at pp. 6-7. Mr. Keller cannot obtain such relief because the Plan has itself released all of the Released Claims against all Released Persons, including Qwest. See Stipulation, Ex. A-2 at ¶ 5.1. After careful consideration of the benefits it would receive in exchange for doing so, the independent fiduciary retained on behalf of the Plan submitted a written statement to this Court stating, inter alia, that the proposed settlement was reasonable to the Plan.7 See Statement of Independent Fiduciary submitted in the ERISA Class Action, Ex. A-9. The Honorable Layn Phillips, who mediated this case, also filed a statement with this Court concluding the settlement was fair and reasonable to the Plan and its participants. See Declaration of Layn R. Phillips in Support of Motion for Final Approval of Class Action Settlement, Ex. A-10. Mr. Keller's continued pursuit of this action would render meaningless the Plan's release of its claims, and hence he should not be permitted to do so.

In accordance with the Department of Labor Class Exemption for the Release of Claims and Extensions of Credit in Connection with Litigation PTE 2003-39, an independent fiduciary was retained on behalf of the Plan to consider the amount paid in settlement, the scope of the release, and other factors in order to determine, inter alia, whether the proposed settlement was reasonable and should bind the Plan.

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IV.

CONCLUSION

For all of the reasons stated above, Qwest respectfully requests that this Court grant this Motion and enter judgment for defendants. Dated this 22nd day of August, 2007.

_s/ Michael B. Carroll___________________ Michael B. Carroll William A. Wright SHERMAN & HOWARD L.L.C. 633 Seventeenth Street, Suite 3000 Denver, Colorado 80202 Telephone: (303) 297-2900 Facsimile: (303) 298-0940 Attorneys for Defendants Qwest Communications International Inc. and Qwest Asset Management Company

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CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2007, I electronically filed the foregoing DEFENDANTS' OPENING BRIEF IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT ON PLAINTIFF'S CLAIMS with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following counsel at the following email address:: Perry J. Schneider, Esq. Milodragovich, Dale, Steinbrenner & Binney, P.C. P.O. Box 4947 Missoula, MT 59806-4947 E-Mail: [email protected] Attorney for Plaintiff Donald Keller __s/Kathleen J. Norris________________

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