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

Case 1:04-cv-00680-REB-CBS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO ) ) Plaintiff, ) ) - vs) ) ) QWEST COMMUNICATIONS ) INTERNATIONAL INC., QWEST ASSET ) MANAGEMENT COMPANY and ) JOHN DOES 1-15, ) ) Defendants. ) ______________________________________ ) DONALD KELLER, Cause No. 04-RB-680 (CBS) PLAINTIFF'S BRIEF IN SUPPORT OF MOTION TO COMPEL DISCOVERY

FACTUAL BACKGROUND As set forth in Plaintiff's Complaint, Plaintiff asserts an individual allegation of fiduciary breach against Qwest, unique to his own circumstances. Plaintiff has alleged that Defendants breached their fiduciary duty under The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), by failing to conduct any due diligence prior to freezing the Qwest Share Fund, by failing to properly communicate its decision restricting the participants' ability to invest in the QWEST Share Fund, and by failing to follow the terms of the Plan in freezing the Qwest Share Fund. As a result of Defendants' fiduciary breach, Plaintiff was unlawfully denied the opportunity to invest in the QWEST Share Fund, resulting in lost earnings to his retirement account. In re Qwest Savings and Investment Plan ERISA Litigation, Civil Action No. 02-RB-464 (CBS), 2004 U.S. Dist. LEXIS 24647 (D.Colo. 2004). ("QWEST/ERISA") was a class action suit brought on behalf of all participants in the QWEST Savings and Investment Plan (the "Plan") alleging certain statutory breaches by the Plan fiduciaries. This Court recognized the substantial differences in the QWEST/ERISA litigation and Plaintiff's individual action in this
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case when it denied Defendants' motion to consolidate the two cases. See Order Denying Defendants' Motion to Consolidate, attached as Exhibit A. The QWEST/ERISA litigation settled on January 29, 2007. Stipulation of Settlement, April 26, 2006, 04-RB-464 [#383]. Plaintiff objected to the class action settlement in a letter filed with this Court on October 16, 2006, 04-RB-464 [#405]. On January 29, 2007, after hearing numerous objections, this Court approved the settlement. Order and Final Judgment, January 29, 2007, 04-RB-464, [#428]. Following the settlement of the QWEST/ERISA litigation, Plaintiff moved forward with his individual claims against Defendants for fiduciary breaches arising from preventing Plaintiff's allocation of Plan assets to the Qwest Share Fund. On May 1, 2007, Plaintiff made a combined request for discovery, including interrogatories, requests for production and requests for admissions. See Plaintiffs First Combined Discovery Request, attached as Exhibit B. On July 5, 2007, Defendants objected to Plaintiff's first combined discovery request, claiming Plaintiff is barred from pursuing his case because his individual claims were released along with the class action settlement. See Defendants' Response to Plaintiff's First Combined Discovery Request, attached as Exhibit C. Defendants also claim the requests are improper, unduly burdensome, and the information sought is protected by privilege. Following attempts to resolve this matter, it is clear the parties have a different interpretation of the Court's Order. Plaintiff asserts that the two actions are substantially different, as recognized by this Court in its order denying consolidation of Plaintiff's individual action with the Colorado class action, see Order Denying Consolidation, attached as Exhibit A, and, thus, its claims were not released by any settlement resolving that case. To the contrary, Defendants argue that the QWEST/ERISA class action and Plaintiff's individual action are substantially similar, despite the Court's denial of consolidation, and, thus, the settlement of that action also disposed of Plaintiff's individual claims. To resolve this matter, Plaintiff
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respectfully requests that this Court issue an Order compelling Defendants to answer discovery in this matter and to deem all requests for admissions admitted. ARGUMENT This Court held, in its Order denying consolidation, that the distinctive focus of Plaintiff's claims was substantially different from, and, thus, not specifically included in, the QWEST/ERISA claims. See Order Denying Consolidation, attached as Exhibit A. Despite the Court's ruling on the issue, the Defendants argue that Plaintiff's individual claims were dissolved in the QWEST/ERISA settlement. Contrary to Defendants' assertion, Plaintiff's claims were not covered claims under the QWEST/ERISA class-action, nor did Plaintiff release his claims by virtue of his membership in the class. As set forth herein, the facts demonstrate that Plaintiff made no knowing release of his individual claims nor did he receive any consideration for the release of his individual claims. As such, Defendants' objections are improper and they should be compelled to respond to Plaintiff's discovery to afford him a fair opportunity to adjudicate and resolve his claims on the merits. A. PLAINTIFF'S CLAIMS ARE NOT COVERED UNDER THE QWEST/ERISA CLASS ACTION NOR COVERED BY THE SETTLEMENT OF THAT LITIGATION In this regard, the Court is bound by the well-established law of the case doctrine which states that, "when a court decides upon a rule of law, that decision continues to govern the same issue in subsequent stages in the same case." U.S. v. Power Engineering Co., Ltd., 125 F. Supp. 2d 1050, 1068 (2000) (citing U.S. v. Monsisvais, 946 F.2d 114, 115 (10th Cir. 1991). The Court in U.S. v. Power Engineering Co. also stated that the doctrine is based on "sound public policy that litigation should come to an end and is designed to bring about a quick resolution of disputes by preventing continued re-argument of issues already decided." Id. (citing McIlravy v. Kerr-McGee Coal Corp., 204 F.3d 1031, 1035 (10th Cir. 2000) While application of the law of the case doctrine is not "an inexorable command," it
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should be applied with good sense and only disregarded in rare, narrowly construed circumstances when the exception "specifically and unquestionably applies." U.S. v. Monsisvais, 946 F.2d 114, 117 (10th Cir. 1991). Tenth Circuit Chief Judge Orie Phillips has outlined the exceptions as follows: When the evidence on a subsequent trial was substantially different, controlling authority has since made a contrary decision of the law applicable to such issues, or the decision was clearly erroneous and would work a manifest injustice. Id. As applied here, the claims set forth in, and ultimately settled under, the QWEST/ERISA class action, are substantially different from Plaintiff's individual claims as noted in the Court's order denying consolidation of the cases. Policy disfavors reopening the issue because it has already been decided and doing so would waste judicial resources and frustrate the doctrine's purpose to bring about quick resolutions to disputes. Furthermore, none of the exceptions apply. There were no subsequent trials and research has produced no recent decisions altering the applicable law in the case. Unless this Court finds its decision was clearly erroneous or manifestly unjust, the law of the case finding the two causes substantially different should stand. The Court's Order denying consolidation and, in effect, ruling on the substantial differences in the claims, is the law of the case and the Court, as well as the parties in this action, should be bound by the previous decision. B. ANY ALLEGED RELEASE OF PLAINTIFF'S CLAIMS LACKS CONSIDERATION Additionally, the Court must recognize that, pursuant to Colorado law, a release is only valid if supported by adequate consideration. CMCB Enterprises, Inc. v. Ferguson, 114 P.3d 90, 96 (Colo. App. 2005). It is well established in Colorado that grossly inadequate consideration for a release of valuable rights is itself evidence of fraud. Weber v. Camp, 60 Colo. 529, 535, 154 P. 728, 730 (1915). In Weber, there was no consideration for a widow's release of an
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insurance company, rendering the release void. Id. The Court voided the widow's release for lack of consideration because she released an insurance company in exchange for only half of her policy's value, and precedent states that release of a debt for less than the amount due is not consideration. Id. Although Weber was a fraud case, the basic premise that, lack of consideration casts doubt upon, if not completely invalidates, a release should still apply. Releases should be construed to effectuate the manifest intention of the parties, relying on good sense and the plain meaning of the associated words and conduct. CMCB Enterprises, 114 P.3d at 96. In CMCB Enterprises, the court decided there was no release exacted because the plaintiff's words and actions indicated he deleted the defendant because the business closed, not because he was releasing him from liability. Id. In In re Qwest Sav. & Inv. Plan ERISA Litig., this Court has also adopted the following nine factors to help determine if a release was executed knowingly and voluntarily: (1) (2) (3) (4) (5) (6) (7) (8) (9) releasor's education and business experience; releasor's input in negotiating the terms of the settlement; clarity of the release language; amount of time releasor had for deliberation before signing the release; whether the releasor read the release and considered its terms before signing it; whether the releasor knew of his or her rights under the plan and the relevant facts when he signed the release; whether the releasor was given an opportunity to consult with an attorney before signing the release; whether the releasor received adequate consideration for the release; and whether the releasor's release was induced by improper conduct by the defendants.

2004 U.S. Dist. LEXIS 24647 at *10 (D.Colo. 2004). Applying these factors, this Court noted that a plaintiff's lack of input regarding the terms of the release will not, by itself, render a release invalid. Therefore, despite a lack of participation in the creation of the release, the Court found the release valid because a majority of the factors were present. Id. However, there is nothing in the settlement nor this Court's Order approving the settlement that indicates the Plaintiff in this action received any
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consideration to release his separate and distinct cause of action. As a member of the class, Plaintiff was bound to the agreement without any right to negotiate separate consideration to release his independent cause of action. This is demonstrated by the fact that Plaintiff receives the same consideration under the class action settlement agreement regardless of the fact he has a separate cause of action. Moreover, despite Plaintiff's strenuous objections to the stipulation and settlement of the class action, his requests were summarily denied, leaving him no avenue to negotiate and receive consideration to release his independent cause of action. Absent the opportunity to negotiate separate consideration, Plaintiff received no consideration for release of his separate and distinct claims rendering the settlement agreement, with respect to his independent claims, void. Further, equity in this matter dictates that Plaintiff be allowed to fully litigate his independent cause of action and either have his claims resolved on the merits, or receive consideration to release those claims. In addition, equity favors a full and fair adjudication of claims, not an involuntary settlement akin to an exculpatory agreement or contract of adhesion. The law has long disfavored exculpatory agreements. Bauer v. Aspen Highlands Skiing Corp., 788 F. Supp. 472, 474 (D. Colo. 1992). Although exculpatory agreements are strictly construed, they are not necessarily void "as long as one party is not at such obvious disadvantage in bargaining power that the effect of the contract is to put him at the mercy of the other's negligence." Id. Generally, exculpatory agreements are invalid between employer and employee and between common carrier or public utilities and the general public. Id. Colorado courts look at four factors to determine the validity of an exculpatory agreement: (1) the existence of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties is expressed in clear and unambiguous language.
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Id. (Citing Jones v. Dressel, 623 P.2d 370, 376 (Colo. 1981). In Jones, the court defined "a duty to the public" as when the party is "engaged in providing a service of great importance to the public, which is often a matter of practical necessity to some members of the public." 623 P.2d at 376. In other words, the essence of the service gives the party seeking exculpation an unfair bargaining advantage "running contrary to public policy." Bauer, 788 F. Supp. at 474. While in Bauer the Court found that a recreational sport such as skiing does not fall into the category of public necessities, the creation and reasonable maintenance of a retirement fund for employees of a large company like Qwest would likely be viewed differently. The maintenance of a retirement fund is undoubtably a matter of great public importance and practical necessity to those whose life savings and future welfare is invested. Even if the Defendants could demonstrate the forth factor, clear and unambiguous language of the release, the evidence shows the Defendants not only had a duty to the public to service the fund with due diligence, but the Plaintiff did not fairly enter into the release. In fact, he strenuously objected at all stages of the litigation, from being included in the class action to the settlement and release. Thus, arguably the first three, if not all four, of the factors exist proving the exculpatory agreement is invalid. The Plaintiff was at a distinct bargaining disadvantage in the settlement and without signature was bound by the form release. Such a wide gap in the relative bargaining positions indicates the release was also a contract of adhesion. Colorado law defines a contract of adhesion as "generally not bargained for, but imposed on the public for a necessary service on a take it or leave it basis." Bauer, 788 F. Supp. at 474. To demonstrate the presence of a contract of adhesion, the Plaintiff must only show that "the parties were greatly disparate in bargaining power, that there was no opportunity for negotiation, or that [the] services could not be obtained elsewhere." Bauer, 788 F. Supp. at 475.
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The Plaintiff was involuntarily, and over objection, included in the QWEST/ERISA class action, provided no opportunity to negotiate the settlement, and, over strenuous objections, bound by the form release. Furthermore, the litigation has become so convoluted that the litigants, including the Plaintiff, still do not know the final settlement amount they will receive, despite the disposition of the case more than six months ago. The release, as it alleges to release Plaintiff's separate cause of action, is invalid because it was offered by a party providing a necessary service to the public, the Plaintiff was denied the opportunity to negotiate, it was executed by parties in grossly unequal bargaining positions, and implemented without consideration. C. REQUESTED DISCOVERY IS RELEVANT AND NOT COVERED UNDER ANY RECOGNIZED PRIVILEGE The Federal Rules of Civil Procedure provide for discovery regarding any matter not privileged that is relevant to the subject matter of the case. Fed.R.Civ.P. 26(b). Information is also discoverable if it appears "reasonably calculated to lead to the discovery of admissible evidence." Id. The court may compel a party to respond to an opposing party's discovery request if the party fails to respond. Fed. R. Civ. P. 37(a). Additionally, if a party fails to respond to a request for admissions, the Court may deem the requested admissions admitted. Fed.R.Civ.P. 36(a). The Defendant claims that the information sought by the Plaintiff in discovery is protected by attorney-client and work product privilege. See Defendants' Response to Plaintiff's First Combined Discovery Request, attached as Exhibit C. In most circumstances, a document is protected by the attorney client privilege if it reveals communications between client and attorney made in the process of giving legal advice. Aull v. Cavalcade Pension Plan, 185 F.R.D. 618, 624 (D. Colo. 1998). Similarly, a document is protected by the work product privilege if it was prepared in anticipation of litigation and was intended to remain confidential. Id.
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However, there is a fiduciary-beneficiary exception precluding ERISA fiduciaries from "us[ing] the attorney-client privilege to narrow the fiduciary obligation of disclosure owed to the plan beneficiaries." Id. at 625. In Aull, the Court allowed discovery of certain allegedly privileged documents explaining that: An ERISA fiduciary has an obligation to provide full and accurate information to the plan beneficiaries regarding the administration of the plan . . . As part of this obligation, the ERISA fiduciary must make available to the beneficiary, upon request, any communications with an attorney that are intended to assist in the administration of the plan. Id. While the fiduciary-beneficiary exception does not automatically cover documents protected under the work product privilege, discovery is often permitted when the documents at issue are related to alleged improper actions by the ERISA fiduciaries. Id. at 626. In Aull, the Court allowed the plaintiffs to discover documents related to ERISA's alleged fiduciary breach, despite the claim of work product privilege. Id. The discovery requested is clearly within the purview of Rule 26, Fed.R.Civ.P. and relevant to the pending litigation. Plaintiff seeks information regarding persons with knowledge, documents related to the parties' dealings and admissions regarding facts in dispute. Additionally, like the plaintiffs in Aull, Plaintiff, a retirement plan beneficiary, is suing a plan fiduciary concerning an alleged breach of fiduciary duty. Thus, the Defendants can use neither the attorney-client privilege nor the work product privilege to exclude otherwise relevant documents from disclosure. Therefore, Plaintiff respectfully requests that this Court issue an order compelling Defendants to provide appropriate responses to Plaintiffs' discovery requests as required under the Federal Rules of Civil Procedure, to deem Plaintiff's request for admissions admitted and such other relief as this Court deems to be appropriate under the circumstances. //
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CONCLUSION As set forth in Plaintiffs' argument, Defendants have responded to Plaintiffs' discovery request by asserting a blanket objection that the Plaintiff is barred from further litigation against Qwest. However, the law of the case dictates that Plaintiff's individual action is substantially different from, and was not included in, the QWEST/ERISA class action settlement. Even if it was, Plaintiff's release was invalid due to lack of consideration and the fact it fits Colorado's definition of an exculpatory agreement and contract of adhesion. Additionally, the information Plaintiff requested is clearly relevant to the claims alleged by Plaintiff, not subject to privilege and otherwise discoverable under the Federal Rules of Civil Procedure. Therefore, Plaintiff respectfully requests that this Court issue an order compelling Defendants to respond to Plaintiffs' discovery requests as required by the Federal Rules of Civil Procedure. In addition, the facts here clearly demonstrate that Defendants' failure to comply with the Federal Rules of Civil Procedure necessitated this Motion. As such, Plaintiff respectfully requests that this Court issue an order compelling Defendants to respond to Plaintiff's Initial Discovery Request, the requested admissions be deemed admitted, and any such other relief this Court deems to be appropriate under the circumstances. DATED this 10th day of August, 2007. By: /s/Perry J. Schneider Perry J. Schneider MILODRAGOVICH, DALE, STEINBRENNER & NYGREN, P.C. P.O. Box 4947 Missoula, Montana 59806-4947 Telephone: (406) 728-1455 Fax No: (406) 549-7077 E-mail: [email protected] Attorneys for Plaintiff Donald Keller

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CERTIFICATE OF SERVICE The undersigned certifies that the foregoing document was served upon the following individuals by the means designated below this 10th day of August, 2007: [ ] U.S. Mail [ ] Fed Ex [ ] Hand-Delivery [ ] Facsimile [ ] Email [X] ECF Michael B. Carroll, Esq. William T. Hankinson, Esq. William A. Wright, Esq. SHERMAN & HOWARD L.L.C. D.C. Box 12 633 Seventeenth Street, Suite 3000 Denver, Colorado 80202 /s/Perry J. Schneider 10534/2(jkb)(ljs)
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