Free Lodged Proposed Document - 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

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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 PLAINTIFFS SURREPLY IN OPPOSITION TO DEFENDANTS MOTION TO AMEND ANSWER

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Plaintiffs submit this surreply and respond seriatim to the following misstatements and arguments raised for the first time in Defendants Reply in Support of Defendants Motion for Leave to File Amended Answer ( Defs. Br. ). (Doc. 263.) 1. Defendants Erroneous Claims That They Moved to Amend Before Plaintiffs Served Notices of Depositions At several points in their brief Defendants endeavor to show lack of prejudice through the erroneous claim that their motion to amend the answer was filed on November 11, 2006, before Plaintiffs served deposition notices. (Defs. Br. p. 1 ll.5-9, 19-20, p. 7 ll. 21-23, p. 8 ll.

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8-9.) In fact, Defendants did not move to amend until November 21, 2006, (Doc. 255), after Plaintiffs served deposition notices, (Doc. 254), not before. While Plaintiffs assert that prejudice lies in Defendants attempt to relitigate the summary judgment motion and dispute that the prejudice caused by Defendants delay could have been ameliorated if they had moved to amend their answer before Plaintiffs noticed depositions, the argument is irrelevant because the asserted timing is incorrect. 2. The Court s November 18, 2005 Order Did Not Give Defendants Free Reign to Assert New Class-wide Defenses Defendants take liberties in their reference to the Court s Order dated November 18, 2005, (Doc. 138), for the proposition that this Court has clarified that its partial summary judgment rulings did not preclude Defendants from presenting affirmative defenses. (Defs. Br. p. 1 ll.8-9.) Defendants motion for clarification asked the Court to clarify that its Order entering partial summary judgment in Plaintiffs favor on certain legal claims does not

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preclude Defendants from developing a record and challenging such claims on an individual
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basis and that it did not purport to address ...applicable individual defenses, such as the application of the statute of limitations or the effect of releases signed by some plan participants. (Doc. 79 p.1, emphasis supplied.) The November 18, 2005 Order held that

Defendants were not foreclosed from taking discovery on and asserting affirmative defenses related to individual putative class members claims. (Doc. 138 p.15.) The limited

clarification of the Court s July 25, 2005 summary judgment ruling did not give Defendants
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license to raise new defenses of class-wide applicability in disregard of Kontrick v. Ryan, 540 U.S. 443 (2004) and Rules 56, 59 and 60. Not surprisingly, none of the cases cited by Defendants, (Defs. Br. pp. 6-7), support the proposition that new defenses raised after a ruling on the merits are permitted or would not be prejudicial. Prejudice is inherent in requiring a party to relitigate an issue they have won after a ruling on the merits. Rules 59 and 60 provide the narrow circumstances where forcing a party to do so is permitted. Defendants also made no showing that the newly proposed affirmative defenses are

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related to individual putative class members claims. They are not. Nor, contrary to Defendants assertion, was prejudice an element of Plaintiffs § 204(h) claims. There is no colorable argument (and not a single § 204(h) case is cited by Defendants), that the issue of prejudice could have been relevant, even if Defendants had timely raised it in opposition to summary judgment. Under the clear language of the statute as in effect in 1993 when the challenged Plan amendments were adopted, ERISA § 204 (h) (which is included as part of § 204, ERISA s Benefit Accrual Requirements ), imposes a statutory condition precedent to

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the right to reduce future benefit accruals by amendment. No plan amendments adopted in
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violation of ERISA § 204(h) ever become effective.1 Defendants proposed amendments are foreclosed by the summary judgment ruling. They are not related to individual class members claims and are not permitted by the Court s November 18, 2005 Order. 3. Plaintiffs Oppose Defendants Motion to Amend in its Entirety Defendants misstate Plaintiffs position by asserting that Plaintiffs oppose only Defendants proposed Eighth, Ninth and Tenth Affirmative Defenses. (Defs. Br. p. 2 n.1.)

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Plaintiffs opposed Defendants motion to amend in its entirety, (Doc. 262 p. 1, 4 n.4), and also stated that the proposed changes to the Third Affirmative Defense and the language adding the words all putative class members should be denied as unnecessary and moot. See McGrath v. Scott, 250 F.Supp.2d 1218, 1235-36 (D.Ariz. 2003) (denying motion to amend as unnecessary and moot where allegations were already sufficiently alleged ).

See 29 U.S.C. § 1054(h) ( an applicable pension plan may not be amended so as to provide for a significant reduction in the rate of future benefit accrual unless the plan administrator provides the notice described in paragraph 2 to each applicable individual. ). See cases cited by Plaintiffs on pp. 16-17 of Plaintiffs Opposition Br. (Doc. 262.) See also Howard Shapiro & Robert Rachal, Litigation Issues in Cash Balance Plans (1999) available at http://benefitslink.com/articles/cashbalance.html. ( ...the remedy for failure to comply with this notice requirement is draconian: The amendment is not effective.... ). The imperative of § 204(h) is a far cry from the two inapposite Ninth Circuit cases cited by Defendants for the proposition that procedural violations might not warrant substantive relief. (Defs. Br. pp.1011.) McKenzie v. Gen. Tel. Co. of Cal., 41 F.3d 1310, 1314-15 (9th Cir. 2004), addresses the inadvertent failure to provide a summary plan description where the participant agreed that he knew about the terms of the governing Plan document and there was no claim that the Plan was administered in violation of the terms of the governing Plan document. Siles v. ILGWU Nat l Ret. Fund, 783 F.2d 923, 930 (9th Cir. 1986), involves Plan amendments adopted in the mid-1970's, a decade before ERISA § 204(h) was enacted in 1986.
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4.

Defendants Claimed Investigation In 2006 Provides No Excuse For Their Delay Defendants made no effort to justify their delay in their moving papers. On reply,

ignoring Kontrick v. Ryan, 540 U.S. 443 (2004), and other cases cited by Plaintiffs that hold that assertion of new defenses after entry of summary judgment is too late, (see Doc. 262 pp. 7-8), Defendants argue, without any supporting documentation or detail, that they failed to raise their affirmative defenses sooner because of difficulties in investigation. This argument

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does not excuse their delay. Defendants were put on notice of Plaintiffs minimum benefits claims four and a half years ago, beginning when Plaintiffs filed their July 2002 Plan claims and their July 2003 administrative appeal. Defendants had ample time to investigate Plaintiffs claims that imposition of an offset to the minimum benefits formula violates the terms of the Plan and ERISA and they had no excuse for waiting until 2006 to investigate.2 Defendants were on explicit notice that Plaintiffs did not believe that a scriveners error argument could apply, and Defendants chose not to assert that argument. On July 1,

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2003 in the administrative appeal, citing Cinelli v. Security Pacific Corp., 61 F.3d 1437, 1445 (9th Cir. 1995), Plaintiffs stated:

Aside from the lack of impediment to conducting an investigation before the case was brought and the motion for class certification was filed, the very first time Defendants requested permission from Plaintiffs counsel to interview absent class members was not until June 2006. After advising Defendants that Plaintiffs believed that interviews with absent class members should be conducted in the presence of Plaintiffs counsel, Plaintiffs offered to discuss the issue. Defendants did not pursue the matter. It was not until November 2006 and only after Plaintiffs served Rule 30(b)(6) deposition notices and Defendants demurred, claiming a need to interview class member witnesses in order to testify, that Defendants raised this issue again. (The parties are continuing in good faith efforts to resolve their differences with respect to this issue.)
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You do not argue that the Plan drafters made a mistake, nor could you. Given the written plan requirements of ERISA, the courts have held that documents upon which a plan claimed to have made a mistake cannot be modified so as to deny benefits... (See Declaration of Amy Promislo, Doc. 16, Exh.L, at HW 0000501 n.8.) In apparent recognition that a mistake argument would have no merit, neither in response to Plaintiffs appeal nor at any time until now did Defendants contend that the Plan language was the result of scriveners error. Defendants clearly made a tactical decision. They do not get to replay their defense strategy 15 months after entry of summary judgment.

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It is fundamental that the party opposing summary judgment has the burden to establish the existence of a triable issue of fact. Defendants never asserted the need to conduct a purported investigation into intent nor did they ever request additional time or the right to conduct discovery while the motions for summary judgment were pending. They do not get a do over under the convoluted argument that these afterthought defenses are not about the merits but rather about remedies. The Court found in favor of Plaintiffs on their claims that the Defendants violated the terms of the Plans by imposing an SBA offset on the minimum benefits formula. If Defendants had some basis to argue that they should not be held liable for the offsets they imposed on the minimum benefits formula, they had an obligation to raise those arguments in response to Plaintiffs motion. To permit Defendants to relitigate issues of what the plan sponsor might have intended the plan to say or what the plan drafters might

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or might not have been authorized to write is a direct attack on the court s ruling that the Plan does not permit an SBA offset to the minimum benefits formula. The proposed defenses

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would undermine the Rules of Civil Procedure and the comprehensive ruling entered in Plaintiffs favor. If that is not prejudicial to Plaintiffs and the judicial process, Plaintiffs cannot fathom what is.3 5. Defendants Representations Regarding the Petition For An Interlocutory Appeal and Stay Are Misleading Defendants other attempts to justify their delay are equally unavailing. Defendants sought reconsideration and/or an interlocutory appeal only on the ERISA § 204(g) anticutback rulings and Defendants expressly disavowed seeking reconsideration with regard to

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the minimum benefits rulings that are the subject of the proposed amended defenses. (Doc. 79, p. 1 n.1.) Nevertheless, in discussing the minimum benefits formula ruling, Defendants broadly claim the Court certified the legal issues it decided for interlocutory review. (Defs Br. p. 2 ll. 11-25, p. 4 ll. 17-19.) Given that the minimum benefits issues were never the subject of a request for reconsideration or a petition for an interlocutory appeal, those motions provide no excuse for Defendants failure to timely raise the defenses to the minimum benefits issues. Defendants attempt to justify their delay by the slightly more than three month stay

Defendants arguments that these defenses deal not with merits but with so-called remedies, (Defs. Br. p. 2), are also contradicted by the cases cited by Defendants to show their defenses would not be futile. In both Int'l Union of Elec., Elec., Salaried, Mach. & Furniture Workers v. Murata Erie N. Am., 980 F.2d 889, 907 (3d Cir. 1992) and Air Line Pilots Ass'n v. Shuttle, Inc., 55 F. Supp. 2d 47, 48-49 (D.D.C. 1999),(cited by Defs. at p. 3), the arguments about the scrivener s errors were raised in response to the summary judgment motions, not afterwards. In contrast, the Court found here that Defendants' unsupported assertions regarding the intent of the Plan cannot overcome the clear language of the plan, and that [t]he text of the Plan controls here, not the unexpressed intent of the drafters. Allen v. Honeywell Retirement Earnings Plan, 382 F.Supp.2d 1139, 1163 (D.Ariz. 2005) (citations omitted) (emphasis added).
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of this lawsuit and their claim that [s]ince the Court lifted the stay in 2006, Defendants have been vigorously investigating the factual underpinning of the proposed defenses as required by Fed. R. Civ. P. 11(b), (Defs Br. p. 4), likewise do not excuse the failure to raise or

investigate these defenses at the appropriate time or their failure to make an appropriate Rule 56(f), 59 or 60 motion. Defendants have failed to show that any new facts or theories have come to light based

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on their alleged 2006 investigation and why, with due diligence, those facts could not have been discovered earlier. Indeed Defendants cite as support for their argument regarding intent, a document that Defendants offered in support of their May 2004 motion to dismiss as Exhibit C. (Defs. Br. pp. 9-10, citing Doc. 16.) To now claim that they should not be charged with knowledge of the contents of their own exhibits belies reason. The Ninth Circuit has held that: in evaluating undue delay, we also inquire whether the moving party knew or should have known the facts and theories raised by the amendment in the original

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pleading. We have held that an eight month delay between the time of obtaining a relevant fact and seeking a leave to amend is unreasonable. AmerisourceBergen Corp. v. Dialysist West, Inc., 465 F.3d 946, 953 (9th Cir. 2006) (citations omitted). There is no excuse for Defendants delay. 6. Plaintiffs Never Moved to Strike Defendants Affirmative Defenses and The Court Never Rejected This Fictional Motion Defendants fictionalize the record by stating the Court has already rejected Plaintiffs previous attempt to strike the affirmative defenses Defendants raised in their Answer. (Defs.

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Br. p. 2 ll. 23-35.)

Defendants citation is to Doc 138, at p. 15, the Court s ruling on

Defendants motion for clarification. Plaintiffs never made a motion to strike affirmative defenses. Needless to say, no such motion was denied. CONCLUSION For the foregoing reasons and the reasons set forth in Plaintiffs opposition to Defendants motion to amend the answer, Plaintiffs respectfully request that Defendants

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motion to amend the answer be denied in its entirety. Plaintiffs request such further relief as is equitable and just. Respectfully submitted this 16th day of January, 2007. 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

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CERTIFICATE OF SERVICE I hereby certify that on January 16, 2007, 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 William Delaney John G. Ferreira Azeez Hayne Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Amy Covert Proskauer Rose LLP th One Newark Center, 18 Floor Newark , NJ 07102-5211 Howard Shapiro Proskauer Rose, LLP 909 Poydras St., Suite 1100 New Orleans, LA 70112 Attorneys for Defendants

s/Susan Martin

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