Free Reply in Support of Motion - District Court of Arizona - Arizona

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SUSAN MARTIN (AZ#014226) DANIEL L. BONNETT (AZ#014127) JENNIFER KROLL (AZ#019859) MARTIN & BONNETT, P.L.L.C. 3300 N. Central Avenue, Suite 1720 Phoenix, Arizona 85012-2517 Telephone: (602) 240-6900 [email protected] [email protected] [email protected] Attorneys for Plaintiffs IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Barbara Allen; Richard Dippold; Melvin Jones; ) Donald McCarty; Richard Scates and Walter G. ) West, individually and on behalf of all others ) similarly situated, ) ) Plaintiffs, ) ) vs. ) ) Honeywell Retirement Earnings Plan; Honeywell ) Secured Benefit Plan; Plan Administrator of ) Honeywell Retirement Earnings Plan; and Plan ) Administrator of Honeywell Secured Benefit ) Plan, ) ) Defendants. ) ) No. CV04-0424 PHX ROS

REPLY IN FURTHER SUPPORT OF PLAINTIFFS MOTION FOR PARTIAL SUMMARY JUDGMENT DISMISSING DEFENDANTS STATUTE OF LIMITATIONS DEFENSE

While attempting to defeat Plaintiffs rights to relief on the basis of the statute of limitations, Defendants are simultaneously arguing in their motion for reconsideration, (Doc. 368), that benefits were not decreased based on comparisons of the gross aggregate value of Plan-wide benefits on January 1, 2007 with that value on December 31, 1983. Defendants endeavor to justify that comparison by asserting that [u]nder the Signal Plan (as under the Garrett Plan), a participant s accrued benefits cannot even be calculated before termination of the participant s active employment. (Doc. 368, p. 11 (emphasis in original).) This latest assertion by Defendants defeats the polar-opposite contention made on this motion that every participant should have known in 1984 that their accrued benefits were reduced by Plan

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amendments. According to Defendants brief on their reconsideration motion, the effect of the challenged plan amendments on Plaintiffs accrued benefits cannot be known until, at the very earliest, the time Plaintiffs retired.1 In other words, even though Defendants actuary claims that accrued benefits cannot be calculated until termination of employment, Defendants are contending that all participants somehow should have known in 1984 of the effect of the amendments on their accrued benefits. Defendants latest assertion defeats the statute of limitations defense. Defendants brief in opposition to Plaintiffs Motion for Summary Judgment on Statute of Limitations Defense ( Defs. Br. ), (Doc. 369), sets up a straw man only to knock it down by claiming that Plaintiffs insist that a claim does not accrue until a formal denial of benefits. (Defs. Br. p. 2.) Defendants misrepresent Plaintiffs position. Plaintiffs have shown that under the facts present here, the statute of limitations began to run, at the earliest, in October 2003, when the claims asserted on behalf of the class were denied.2 Beyond Defendants straw man arguments, Defendants brief in opposition adds nothing to satisfy Defendants burden that they put Plaintiffs on actual or constructive notice of injury so as to trigger the running of the statute of limitations. It is not Plaintiffs responsibility to pinpoint when the statute of limitations accrued, although Plaintiffs have pointed to the only

Defendants abandoned any claim that communications at the time of retirement triggered the statute. Plaintiffs claims were asserted on behalf of the class. (Doc. 16, Exh. L, at HW0000480.) The fact that Plaintiffs agreed to toll the statute of limitations in order to permit exploration of an amicable resolution of Plaintiffs claims, is not an indication that the statute of limitations began to run before final denial of those claims, particularly since the tolling agreement specifically provides that nothing in this agreement shall be construed as an admission by Former Garrett Employees that any actions or claims are barred by the statute of limitations or would be barred by the statute of limitations in the absence of this agreement. (Decl. of Susan Martin, Doc. 167, Exh. A, pp. 1-2.) The tolling agreement, which was entered into out of an abundance of caution by Class Counsel, is irrelevant to the question of whether there was an unmistakable repudiation such that a class member could not have reasonably believed but that his claim had been finally denied. Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1038 (9th Cir. 2006).
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time it could be deemed to have been triggered, the final denial of Plaintiffs claims in October 2003 and the subsequent expiration of the tolling agreement on March 1, 2004. Defendants bear the burden on the statute of limitations defense and they have pointed to no other communications that triggered the running of the statute.3 The cases relied on by Defendants are inapposite because they turn on the fact that specific information putting the plaintiffs on constructive notice that they had been injured was conveyed. For example, in Miller v. Fortis Benefits Ins. Co. 475 F.3d 516, 522 (3d Cir. 2007), the court made clear that a simple calculation of sixty percent of his salary should have alerted him that he was being underpaid and that [s]ignificantly, at oral argument, Miller's attorney could point to no facts that he would pursue in discovery upon remand to help establish that Miller had reason to be unaware in 1987 that there was an error. In

contrast, Defendants have abandoned any contention that the calculations provided to retirees were sufficient to put anyone on notice of the claims in this case and Plaintiffs have demonstrated in detail why the three documents upon which Defendants rely did not trigger the statute. In Pincay v. Andrews, 238 F.3d 1106 (9th Cir. 2001), (Defs. Br. pp.6-7), a civil RICO

It is Defendants burden to establish that they put class members on notice of the running of the statute of limitations in order to defeat Plaintiffs motion. See Fed. R. Civ. Pro. 56(e). A party cannot in defending against a motion for summary judgment, rest on mere allegations or denials of his pleadings[] as Defendants have done here. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 259 (1986). A party must show "specific facts showing that there is a genuine issue for trial." Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324-25 (1986)). Defendants cannot meet their burden to show genuine issues of fact precluding summary judgment in favor of Plaintiffs because Defendants have pinned their statute of limitations defense on three documents, the contents of which speak for themselves, and fail to support Defendants affirmative defense. Continental Airlines, Inc. v. Intra Brokers, Inc., 24 F.3d 1099, 1103 (9th Cir. 1994); Childress v. Darby Lumber, Inc., 357 F.3d 1000, 1007 (9th Cir. 2004); Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001). See also Local Rule 56.1(b)(1) (requiring party opposing summary judgment to set[] forth...any additional facts that establish a genuine issue of material fact or otherwise preclude judgment in favor of the moving party. ).
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case, the plaintiffs sued investment managers who had paid themselves more than the 5 % commissions they had contracted for. The court held the plaintiffs had constructive knowledge because the plaintiffs were given and had signed documents that expressly disclosed the fact that payments exceeding the bargained for amounts would be made to the defendants including a document that stated that the defendants would receive 10 % of the capital distribution and other similarly explicit disclosures. 238 F.3d at 1110. So direct and explicit was the constructive notice in Pincay, that one could argue that in Pincay, the plaintiffs had actual knowledge of the injury. Likewise, in Davel Commc ns, Inc. v. Qwest Corp., 460 F.3d 1075 (9th Cir. 2005), the court held that Qwest s affirmative act of failing to complete an FCC filing and the plaintiff s actual knowledge of that fact put the plaintiff on notice of the injury: As soon as Qwest failed to file fraud protection rates with the FCC, ...Davel was on inquiry notice that it might be paying excessive rates for fraud protection. Id. at 1092. The court found that the statute of limitations had accrued based on the plaintiff s knowledge of the failure to file with the FCC and because Davel had a cause of action against Qwest as soon as Qwest missed the federal filing deadline and Davel paid for fraud protection services based on the non-compliant rates on file with the state utility commissions. Id. Defendants only argument that the statute of limitations on the Social Security offset claim was triggered is based on the assertion that the definition of credited service under the Plan utilizes Signal and Garrett service and therefore that if Plaintiffs had purportedly read the plan carefully, including its separate but interrelated definitional section, together with the section describing the benefit formulas, then the plaintiffs should have been astute enough to grasp that the benefits formula that takes Social Security into account would utilize their prior service under the Garrett Plan for purposes of calculating the Social Security offset. Defendants make this assertion notwithstanding the fact that the Garrett Plan promised no Social Security offset. The conclusion that, in violation of the Garrett Plan promises, the Signal Plan would apply a Social Security offset retroactively to benefits attributable to service earned prior to the introduction of that offset, is nowhere stated in the
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three documents upon which Defendants rely. Further, the claim that the three documents should have put Plaintiffs on inquiry notice is negated by several additional factors. First, the fact that several formulas are used to determine benefits prevented any participant from determining that they would be injured when they retired. It would have been purely speculative on a participant s part to investigate the description of a benefits formula that might never apply.4 Second, the 1984 brochure specifically promises the absence of any

injury flowing from the Signal Retirement Plan changes: At the time of your retirement two formulas will be used to calculate your retirement benefit under the Signal Plan. The dual calculation will ensure that you will not receive a lesser pension benefit under the new Signal Plan than you would have received from the Garrett Retirement Plan. (Doc.340, Exhibit A, at HW0008543.) Likewise, the 1984 brochure also advised that [f]or virtually all employees, the benefits and overall features of the new plan will be better than their old plans. (Id. at HW0008547.) Given the assurance of lack of harm, it is impossible for Defendants to make the case that Plaintiffs were on inquiry notice of an injury. See cases cited in Plaintiffs Opposition to Defendants Motion for Summary Judgment, (Doc. 375), at pp. 3-5, 10-12. It is not clear on what basis Defendants claim they gave notice that would trigger the running of the claim that Defendants violated ERISA by changing the interest rate used to calculate the SBA Offset from termination of employment to age 65. Defendants attempt to bootstrap a statute of limitations defense onto the Court s dismissal of Count V of the Amended Complaint (Plaintiffs claim that Defendants violated ERISA s summary plan description disclosure requirements), is without merit. It is one thing for the Court to find that Defendants minimally described benefits and quite another to argue that such ruling Each of the references in the SPDs explain that a participant s benefits are calculated using the larger of one of two formulas only one of which took into account Social Security benefits. (Doc 16, Exh. H, at HW000434, Question 10.) The 1996 SPD states: Two formulas are used to determine your accrued retirement benefits under the plan the retirement benefits under each are compared and you receive the greater amount. (Doc. 340, Exh. E, at BA0397.)
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also constitutes a finding that the minimal description of the SBA offset somehow put participants on inquiry notice of a plan amendment changing interest rates sufficient to trigger the statute of limitations. Similarly, Defendants argument on Plaintiffs Minimum Benefits claim defies logic. Telling someone that minimum benefits will be offset in the SPD does not put anyone on notice that the Plan document forbids it.5 The fact that Plaintiffs could have asked for more specific information about their pension benefits is not a substitute for notice or constructive notice of an injury. As this Court stated: A plaintiff cannot be charged with knowledge, actual or constructive, until the defendant shows that it clearly repudiated the plaintiff s claims. (Doc.226, p. 11.)

ERISA provisions allowing employees to request plan documents do not impose on employees the obligation to verify all of the plan provisions described in the summary plan description. The mere fact that a summary plan description states that an employee may receive benefits under one of several formulas at the time of retirement does not impose on employees the obligation to ask for detailed explanations of the components of each potential benefit formula and how they would hypothetically be applied. Under Defendants formulation, employees would have to be ERISA police and verify every statement in a plan brochure or SPD and confirm the absence of potential ERISA violations or have their

Defendants miss the point regarding the failure to produce Exhibit B. Defendants failure to produce Exhibit B is relevant under the standards set forth in Chuck and most recently reiterated in Johnson v. Georgia-Pacific Corp., 2007 WL 4533476 (9th Cir. 2007). Until receipt of Exhibit B, it would not have been unreasonable to believe that the claim regarding the change in the interest rate had not been completely repudiated. Absent knowledge of the content of Exhibit B, which was not furnished by Defendants until 2003, it was not clear how benefits under the Garrett Retirement Plan were required to be calculated, given that the Plan expressly directed that calculations be performed pursuant to the tables set forth in Exhibit B (and any necessary interpolations or extrapolations from these tables)... (SOF ¶ 6, 9.) The fact that Plaintiffs asserted their administrative claims before receipt of Exhibit B is not evidence that claims were finally repudiated before that document was received. The clear repudiation standard would make no sense if the mere filing of an administrative claim is somehow evidence of a clear repudiation, yet that is precisely what Defendants appear to be arguing. (Defs. Br. pp. 9-10.)
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claims forever barred. Given that the plan summaries here provide no reason to believe that participants have been injured, Defendants argument is particularly offensive. Similar arguments have been rejected by the Ninth Circuit. In Price v. Provident Life and Acc. Ins. Co., 2 F.3d 986, 988 (9th Cir. 1993), for example, the defendant argued that because the benefit plan required proof of loss within 90 days, the statute of limitations began to run on the 91st day and expired three years and 90 days later even though the defendant had never denied the claim and, as a result, the plaintiff did not know of the denial of benefits. The Ninth Circuit stated: We find this argument remarkable. If accepted, Provident's argument would allow the insurer to simply bury a denial of coverage and wait for the statute of limitations to run. ERISA does not permit such a result. Id. at 989. See Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1501 (9th Cir.1984) ( We accept the proposition that an ERISA cause of action based on a denial of benefits accrues at the time the benefits are denied. This rule reflects a concern that it would be burdensome and unfair to require lay participants and beneficiaries to be constantly alert for possible errors or abuses that might give rise to a claim and start the statute of limitations running. It also seeks to avoid the burden on the judicial system of multiple actions, some of which might be premature. ) (citing Morgan v. Laborers Pension Trust Fund For Northern California, 433 F.Supp. 518, 522 n.5 (N.D. Cal. 1977)); Chappel v. Laboratory Corp. of America, 232 F.3d 719 (9th Cir. 2000) (finding a breach of fiduciary duty by failing to disclose a mandatory arbitration provision at the time benefits were denied even though there was no dispute that the provision was disclosed in the summary plan description). See also Romero v. Allstate Corp., 404 F.3d 212, 224 (3d Cir. 2005) ( A rule that unwaveringly ties the date of accrual to the date of amendment would have the undesirable effect of requiring plan participants and beneficiaries likely unfamiliar with the intricacies of pension plan formulas and the technical requirements of ERISA, to become watchdogs over potential [p]lan errors and abuses. ) (quoting DeVito v. Pension Plan of Local 819 I.B.T. Pension Fund, 975 F.Supp. 258, 265 (S.D.N.Y. 1997)). The point of these cases is clear. The nature of the communication has to put plaintiffs on notice that they have been injured such that a
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participant could not have reasonably believed but that his claim had been finally denied. Chuck, 455 F.3d at 1038. ARIZONA S SIX YEAR CONTRACT STATUTE OF LIMITATIONS APPLIES The 1984 Plan like the later versions of the Plan specifically disavows that it is an employment contract: The Plan...shall not constitute a contract between any Company and any Participant, or consideration for, or an inducement or condition of, the employment of a Participant. Nothing contained in the Plan shall give any Participant the right to be retained in the service of a Company or to interfere with or restrict the right of the Companies which is hereby expressly reserved, to discharge or retire any Participant except as provided by law, at any time with or without cause. (Doc. 16, Exh. E, at HW0000372-73. See also Exh. Q, at HW000732; Exhibit P, at HW0000610 Section 16.06 (nothing contained in the plan shall give any participant right to employment or any legal or equitable right against the Employer ).) Given this language, Ariz. Rev. Stat. § 12-541(3) (adopted in the Arizona Employment Protection Act, EPA ), simply does not apply. Taylor v. Graham County Chamber of Commerce, 33 P.3d 518, 521 (Ariz. App. 2001) ( [T]he EPA applies to all employers...and addresses claims for

termination of employment but not other wrongful employment acts or omissions. ) See generally, Thomas M. Rogers & David Gomez, All Employment Contracts Are Not Created Equal: Arizona s One-Year Statute of Limitations, Ariz. Att y 34 (March 2007) ( The AEPA by necessary implication of its language and context applies only to those contracts related to a term of employment or to limitation of the employer s right to terminate atwill ). Defendants allege, without citation of authority, that the statute of limitations was not contested in McElwaine v. U.S. West, Inc., 176 F.3d 1167, 1170 (9th Cir. 1999), but the Arizona one year statute of limitations existed in 1999 and there is no reason to suggest that the Ninth Circuit was not aware of it. In addition to the Ninth Circuit authorities making clear that the forum state s statute for a claim based on written contracts governs, this Court

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has expressly determined that Arizona s six year contract statute of limitations applies to claims for benefits brought for violations of the plan and ERISA See Loewy v. Retirement Committee, No. 03-CV-2284-PHX-FJM, Order entered March 30, 2005, at pp. 17-20 (Exhibit A hereto). See also Johns v. AutoNation USA Corp., No. CV 04-1476-PHX-ROS, Order entered June 2, 2005, at p. 9 (Exhibit B hereto) ( In addition to bringing a claim under Section 1132(c) [ERISA provision for $100 per day penalty for failure to provide plan documents], Johns also claims that Defendants alleged failure to notify constitutes a breach of contract under the Defendant AutoNation Group Health and Welfare Benefit Plan. Assuming this claim survives any further dispositive motions, a six-year statute of limitations will apply pursuant to Ariz. Rev. Stat. § 12-548. ) (footnote omitted); Borota v. Arizona Pipe Trades Pension Trust Fund, No. CV-02-669-PHX-FJM, at p. 2, Order entered Jan. 28, 2003 (Exhibit C, hereto) (holding that for ERISA cause of action in Arizona, Plaintiff had six years from the date on which his ERISA cause of action accrued to bring suit. ) (citing Ariz. Rev. Stat. § 12-548), affirmed in unpublished opinion, see 72 Fed.Appx. 723 (9th Cir. 2003).6 The Delaware law provision cited by Defendants did not even exist in the Plan document until the year 2000 and Defendants made no showing that the law of Delaware has anything to do with any of the participants or claims in this case. For that reason, the law of the forum state should apply. As Plaintiffs set forth in opposition to Defendants motion for summary judgment, this Court has already determined that the claims addressed in this case arose under the 1984 Signal Retirement Plan and the 1993 Signal Retirement Plan and that later provisions purporting to expand Defendants rights and limit Plaintiffs rights

A review of the types of cases under state law, which apply the six year contract statute of limitations reveals that the statute has been applied to a wide variety of claims including, for example, uninsured or underinsured motorist claims, Blutreich v. Liberty Mut. Ins. Co., 826 P.2d 1167, 1169 (Ariz. App. 1991), claims based on implied warranty of workmanlike performance and habitability, Woodward v. Chirco Const. Co., Inc., 687 P.2d 1269, 1271 (1984), and insurance actions, Insurance Co. of North America v. Superior Court In and For County of Santa Cruz, 800 P.2d 585, 589 (Ariz. 1990).
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would not apply. Allen v. Honeywell Ret. Earnings Plan, 382 F.Supp.2d 1139, 1161 (D. Ariz. 2005) (noting that Defendants do not contest that Plaintiffs' benefits vested under prior iterations of the Plan.... ). See Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001). Fenberg v. Cowden Automotive Long Term Disability Plan, 2007 WL 4386126 (9th Cir. 2007), while ruling that Rhode Island law applied, would not change the outcome here. The Fenberg court was careful to note that the choice of law provision was contained in a master insurance policy issued and delivered in Rhode Island to a Rhode Island trust ten years before Cowden Automotive became a participating unit in the trust. That situation does not even remotely resemble the case here.7 CONCLUSION For the foregoing reasons, Plaintiffs respectfully request that Plaintiffs motion for summary judgment dismissing Defendants statute of limitations defense be granted and that Defendants motion for summary judgment on the statute of limitations defense be denied. Plaintiffs request such further relief as is equitable and just.

Respectfully submitted this 25th day of January, 2008. MARTIN & BONNETT, P.L.L.C. By: s/Susan Martin Susan Martin Daniel L. Bonnett Jennifer L. Kroll 3300 North Central Avenue Suite 1720 Phoenix, AZ 85012-2517 Attorneys for Plaintiffs

Defendants argue that not all of the plan participants worked in Arizona but they made no showing that any of them worked in Delaware and obviously in a class action, there will be some variance, which is why applying the law of the forum state makes sense and is good law.
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CERTIFICATE OF SERVICE I hereby certify that on January 25, 2008, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Ave., Suite 2100 Phoenix, AZ 85012-2794 Michael Banks Azeez Hayne Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Howard Shapiro Proskauer Rose LLP 909 Poydras Street, Suite 1100 New Orleans, LA 70112 Amy Covert Proskauer Rose LLP One Newark Center, 18th Floor Newark , NJ 07102-5211 Christopher Landau Eleanor R. Barrett Craig Primis Kirkland & Ellis LLP 655 Fifteenth Street, N.W. Washington, D.C. 20005 Attorneys for the Defendants

s/ S. Martin

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