O SBORN MALEDON
A P ROF E SS IO NA L A S S OC IA T I O N A T T OR NEY S A T LA W
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______________________ The Phoenix Plaza 21st Floor 2929 North Central Avenue Phoenix, Arizona 85012-2794
P.O. Box 36379 Phoenix, Arizona 85067-6379 Telephone Facsimile
602.640.9000 602.640.9050
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David B. Rosenbaum, Atty. No. 009819 Dawn L. Dauphine, Atty. No. 010833 Osborn Maledon P.A. 2929 North Central Avenue Suite 2100 Phoenix, AZ 85012-2794 Telephone: (602) 640-9000 Michael L. Banks, Pro Hac Vice William J. Delany, Pro Hac Vice Azeez Hayne, Pro Hac Vice MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Telephone: (215) 963-5000 Howard Shapiro, Pro Hac Vice PROSKAUER ROSE LLP 909 Poydras Street, Suite 1100 New Orleans, LA 70112-4017 Telephone: (504) 310-4088 Amy Covert, Pro Hac Vice PROSKAUER ROSE LLP One Newark Center 1085 Raymond Blvd. Newark, NJ 07102 Telephone: (973) 274-3258 Attorneys for Defendants 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 DEFENDANTS' OPPOSITION TO PLAINTIFFS' MOTION FOR APPROVAL OF FORM AND MAILING OF NOTICE TO CLASS MEMBERS OF PENDENCY OF CLASS ACTION AND CROSSMOTION TO APPROVE DEFENDANTS' PROPOSED FORM OF NOTICE AND MAILING OF QUESTIONNAIRE TO CLASS MEMBERS
Case 2:04-cv-00424-ROS
Document 265
Filed 01/05/2007
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In response to Plaintiffs' Motion for Approval of Form and Mailing of Notice to Class Members of Pendency of Class Action ("Plaintiffs' Motion", dkt. # 259), and without waiving any objections to the certification of a class and the designation of existing subclasses, Defendants file this Opposition to Plaintiffs' Motion, and cross-move for an Order approving the alternative form of Proposed Notice attached hereto as Defendants' Attachment 1.1 Defendants move further for an order permitting Defendants to enclose a questionnaire with the Class Notice. RELEVANT FACTS AND PROCEDURAL HISTORY This action arises from the merger of the Retirement Plan for Employees of the Garrett Corporation and Its Participating Subsidiaries ("Garrett Retirement Plan") into the Signal Companies Inc. Retirement Plan ("Signal Retirement Plan"). The Court granted (at dkt. # 73) Plaintiffs' motion for partial summary judgment with respect to Plaintiffs' claim that this merger, effectuated by Amendment IX to the Garrett Retirement Plan and the accompanying restatement of the Signal Retirement Plan, effective January 1, 1984, resulted in an illegal cutback, in violation of Section 204(g) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (incorporated in Count II of the Amended Complaint, dkt. # 47); Plaintiffs' claim that the Signal Retirement Plan's application of an offset to the Plan's minimum benefit formula, based on participant accounts in the Garrett Secured Benefit Account, violated the terms of the Signal Retirement Plan (incorporated in Count I of the Amended Complaint); and Plaintiffs' claim that the 1993 amendment to the Signal Retirement Plan violates ERISA Sections 204(g) and (h) (incorporated in Count II of the Amended Complaint). The Court recognized, however, that Defendants may oppose these claims based on their affirmative defenses, including statute of limitations and laches. See Class Cert. Order at 9-14, dkt. # 226; see also Reconsid. Order, Nov. 18, 2005, at 3, dkt. # 138 (confirming that the Court's July 19, 2005, ruling "did not intend to foreclose Defendants from . . . asserting affirmative defenses For the Court's convenience, submitted as Attachment 2 is a redline version comparing Plaintiffs' proposed Notice (Ex. A. to Plaintiffs' Motion) with Defendants' Proposed Notice (Attachment 1 hereto).
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related to individual putative class members' claims"). On September 6, 2006, this Court granted the Named Plaintiffs' motion for certification of a class. (Dkt. # 226.) To date, however, the Court has not yet issued an Order defining the class or any exclusions, nor has it foreclosed Defendants from challenging the definitions of the class or any sub-classes. ARGUMENT On December 7, 2006, Plaintiffs filed their Plaintiffs' Motion along with a proposed Notice. Plaintiffs' proposed Notice, however, is biased and inadequate. The scope of the class and subclasses to which Plaintiffs seek to distribute notice is overly broad and does not represent accurately the class and subclasses certified by the Court. Further, the descriptions of Plaintiffs' claims and Defendants' defenses are vague and incomplete. To ensure that potential class members have the opportunity to make fully informed decisions respecting their participation in this class action, Defendants ask the Court to approve a Notice in the form submitted herewith as Defendants' Attachment 1. Fed.R.Civ.P. 23(c)(2)(B) requires, inter alia, that the notice to class members: ... concisely and clearly state in plain, easily understood language: · the nature of the action, · the definition of the class certified, [and] · the class claims, issues, or defenses,... Courts should monitor the preparation of a class action notice to ensure it is accurate and informative. Hoffmann-LaRoche, Inc. v. Sperling, 493 U.S. 165, 172 (1989); see also Williams v. Trendwest Resorts, Inc., No. CVS05-0605-RCJ-LRL, 2006 WL 3690686 (D. Nev. Dec. 7, 2006) (citing Hoffmann-LaRoche, court considers versions of notice offered by plaintiffs and defendant before drafting its own form of notice). As explained below, to achieve the requisite neutrality and fairness, the Court should revise Plaintiffs' descriptions of the certified class, the claims, and the defenses to portray more accurately the Court's decisions on the merits of Plaintiffs' claims and on class certification.
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A. 1.
The Scope Of The Class Described In Plaintiffs' Proposed Notice Is Overbroad And Inaccurate Plaintiffs' inaccurate description of the Court's ruling results in an over-inclusive description of the class
In its July 19, 2005, decision, the Court ruled that a plan amendment constituted an unlawful cutback because it changed the interest rate utilized to calculate the projected value of the Secured Benefit Account at normal retirement age for individuals who terminated employment prior to normal retirement age. The Court's decision makes clear that the offset calculation at issue used the participants' Secured Benefit Account balance at the date of termination as the starting value on which the projection forward was calculated. The Court reasoned that the increase in the interest rate from 3.5% to 7.5% that was used to project a portion of the Secured Benefit Account to normal retirement age for individuals who terminated employment earlier than at normal retirement age decreased accrued benefits of certain participants because it resulted in a larger projected value, and, thus, a larger offset to the participants' normal retirement benefits. See Allen v. Honeywell Ret. Earnings Plan, 382 F. Supp. 2d 1139, 1145, 1149, 1179 (D. Ariz. 2005) (order setting forth violation as "retroactively increasing the interest rate used to project a portion of the participant's Secured Benefit Account forward to age 65 for the purpose of calculating the Secured Benefit Account offset") (emphasis added). This Court reaffirmed its ruling in its November 18, 2005, Reconsideration Order,
stating that the Court granted summary judgment on "(1) Plaintiffs' claim that Defendants violated 29 U.S.C. § 1054(g) by amending the Garrett Retirement Plan to retroactively increase the interest rate used to project a portion of participant's Secured Benefit Account forward to age 65 for the purpose of calculating the Secured benefit Account offset; . . ." (Dkt. # 138) (emphasis added). This portion of the Court's decision thus relates only to the change in the interest rate used for this particular calculation, i.e., the projection to normal retirement age, and affects only those class members for whom the calculation was required, i.e., only those participants who chose not to transfer their Secured Benefit Account balance to the retirement plan, and who
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terminated employment earlier than the normal retirement age.2 Plaintiffs' description of the certified class in the proposed Notice is problematic because it describes the Court's decision on this issue too broadly and inaccurately. Plaintiffs' proposed Notice states that the Court found Defendants violated ERISA's anti-cutback rule "by amending the Garrett Retirement Plan to retroactively increase the interest rate used for the purpose of calculating the Secured Benefit account offset;..." (Pls.' Notice, at 5:11-14, Ex. A to Pls.' Motion.) To determine all participants' retirement benefits, several discrete mathematical operations are required, including calculations relating to the Secured Benefit Account balance at termination or retirement, and the annuitized value of the actual or projected account balance. Plaintiffs' description of this aspect of the Court's decision could be misconstrued to inaccurately suggest that any interest rate used in any portion of the offset calculation, performed for any participant, constitutes an illegal cutback. This reading would be incorrect. A more accurate description is provided in Defendants' proposed Notice, which tracks While Defendants respectfully disagree with the conclusion that there was any prohibited cutback, they agree with this Court's conclusion that the offset calculation must start with the account balance at date of termination. As this Court already concluded, the plans at issue constitute a floor-offset arrangement in which, not surprisingly, the defined benefit plan provides that the offset shall be calculated based on the participant's account balance in the defined contribution plan at date of termination. Id. at 1144-45. This conclusion is also correct because there could be no cutback when this is precisely what the predecessor Garrett Retirement Plan terms provided. The Garrett Retirement Plan § 4.1(c) provided that the amount used to calculate the offset shall be based on "the sum which could have been transferred to the Plan, pursuant to Article 3.2, from the Severance Plan at the Participant's retirement date or earlier date of termination of service, whichever is earlier, increased by Credited Interest for the period from the date when the transfer could have been made to the Participant's Normal Retirement Date." (Declaration of Amy Promislo in Supp. of Defs.' Mot. to Dismiss Pls.' Complt., May 4, 2004, Ex. A at HW 0000039 [emphasis added], dkt # 16.) Article 3.2 provides in pertinent part that "Any Participant, upon his termination of service with the Company for any reason other than death, may elect to have all or a part of the benefit to which he is entitled upon termination of service under the Severance Plan transferred to the Plan." (Id. at HW 0000031-32 (emphasis added).) "The benefit to which a participant is entitled" under a defined contribution plan is his or her account balance. E.g., ERISA § 3(23)(B) & (34), 29 U.S.C. § 1002(23)(B) & (34); Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439, 119 S. Ct. 755, 761 (1999). As the Garrett Retirement Plan terms provide, projections are needed not to calculate the actual account balance, but to convert that account balance into an annuity commencing at age 65 for participants that terminate prior to age 65. It is this actual account balance at termination, projected forward to age 65, that serves as the basis of the Retirement Plan offset.
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this Court's July 19, 2005, Order by stating that the Court found that Defendants violated the anti-cutback rule "by increasing the interest rate used to project a portion of participants' Secured Benefit Account ("SBA") balances to age 65 for purposes of calculating the SBA offset for participants who retired or terminated their employment with the Company before age 65." (Attachment 1 at 2-3; Attachment 2 at 3. See also 382 F. Supp. 2d at 1173.) 2. Plaintiffs' failure to carve out an exclusion from the class for individuals who never held vested benefits, or who took distribution of SBA accounts before 1993, results in an over-inclusive description of the class
This action relates only to claims of individuals who were participants in the Garrett Plans and who became vested participants in the Signal Retirement Plan and the Secured Benefit Plan. (See Class Cert. Order at 2 n.2, dkt. # 226.) One of the asserted claims still unresolved is Plaintiffs' claim that Defendants violated ERISA by charging administrative fees to their Secured Benefit Accounts beginning in 1993. Individuals who took a complete distribution of their Secured Benefit Accounts prior to 1993, and who had no vested retirement benefits in the Signal Retirement Plan, however, have no viable claims. Plaintiffs' proposed Notice fails to address these exclusions. Defendants cure this error in their proposed Notice by explaining to Notice recipients that even if they meet the general class definition, they cannot be class members if they never held a vested benefit in the Signal Retirement Plan and took a complete distribution of their Secured Benefit Account balance before 1993. (See Attachment 1 at 2; Attachment 2 at 2.) In their proposed Notice, Defendants explain further that they have requested exclusion from the class of those individuals who never held a vested benefit in the Signal Retirement Plan and did not have administrative expenses charged to their Secured Benefit Accounts. (See Attachment 1 at 5; Attachment 2 at 6.) This exclusion is entirely consistent with this Court's Order certifying a class, which confirms that "Plaintiffs are former salaried employees of the Garrett Corporation and/or its participating subsidiary companies who were participants in the Garrett Retirement Plan and Severance Plan ("Garrett Plans") as of December 31, 1983 and who became vested participants in the Signal Retirement Plan and Secured Benefit Plan." (Class
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Cert. Order at 2, n.2, citing Pls.' Am. Compl. ¶ 3.) 3. Defendants' proposed addition of Subclass E
To enable Defendants to prepare a defense and respond to discovery requests, defense counsel must communicate with certain current and former directors, officers and employees who may be class members. Plaintiffs' counsel has refused to permit defense counsel to engage in ex parte, privileged communications with these individuals.3 Plaintiffs' counsel has also refused to agree to Defendants' suggested modification of the Court's prior certification order, to define an additional subclass consisting of these current and former directors, officers and employees with whom defense counsel needs to communicate. The parties are currently attempting to resolve this matter through meet and confer negotiations. If the parties are unable to resolve this issue, Defendants will file a separate Motion, asking the Court to modify its prior certification order to add Subclass E, as described in Defendants' proposed Notice. (See Attachment 1 at 5; Attachment 2 at 8.) B. The Descriptions Of The Class Claims, Issues, And Defenses In Plaintiffs' Proposed Notice Are Incomplete And Inaccurate
Plaintiffs' Motion seeks approval of a Notice that describes the Court's ruling as finding in Plaintiffs' favor on the "main claims," and in Defendants' favor on "certain other claims." A neutral notice should list the Court's determinations without superfluous characterization. Plaintiffs must give clear notice of claims decided in their favor; claims decided in Defendants' favor; remaining issues with respect to claims decided in Plaintiffs' favor; and other claims not yet resolved by the Court. As written, Plaintiffs' Notice is not sufficiently clear with respect to these distinct categories.
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On January 3, 2006, Plaintiffs' counsel proposed a limited approach that would enable counsel for Defendants to engage in ex parte communications with a limited number of individuals who were involved in plan administration and benefits planning functions. Counsel for Defendants expects to engage in a continuing dialogue to resolve this issue. Meanwhile, Defendants have been unable to communicate with critical witnesses and decision-makers, including corporate officers and Board members. This has unduly hampered the ability of Defendants to develop and present their case, and to identify witnesses to testify as designated representatives on issues listed by Plaintiffs.
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1.
Plaintiffs' proposed description of the claims decided in Plaintiffs' favor is confusing and misleading
The Court granted partial summary judgment to Plaintiffs, finding in Plaintiffs' favor with respect to the following claims: (1) The merger of the Garrett Retirement Plan into the Signal Retirement Plan violated ERISA Section 204(g), 29 U.S.C. § 1054(g), by (a) retroactively increasing the interest rate used to project a portion of the participant's Secured Benefit Account forward to age 65 when calculating the Secured Benefit Account offset; (b) adding a Social Security offset attributable to years of service worked prior to the amendment; and (c) eliminating the fractional reduction to the Secured Benefit Account offset for participants with more than 35 years of service. (2) The 1993 amendment to the Signal Retirement Plan violated ERISA Sections 204(g) and (h), 29 U.S.C. §§1054(g) and (h), by providing for a Secured Benefit Account offset to the Plan's minimum benefit formula, and by failing to give notice of this amendment; and (3) Defendants violated the terms of the Signal Retirement Plan by applying a Secured Benefit Account offset to the Plan's minimum benefit formula. Plaintiffs' proposed Notice describes the claims decided in their favor at page 2, lines 16 to 23, and then at page 5 purports to describe the claims for which the Court certified the class and subclasses. (Ex. A to Pls.' Motion). Defendants submit that describing the existing claims in this manner, in two separate locations, is potentially confusing to notice recipients. Defendants' proposed Notice more accurately describes the claims decided in Plaintiffs' favor as follows: On July 19, 2005, the Court ruled in favor of Plaintiffs on certain legal issues related to Plaintiffs' claims that: 1. Defendants' merger of the Garrett Retirement Plan into the Signal Retirement Plan violated ERISA's "anti-cutback" rule by (i) increasing the interest rate used to project a portion of participants' Secured Benefit Account ("SBA") balances to age 65 for purposes of calculating the SBA offset for participants who terminated their employment or retired before age 65; (ii) applying a Social Security offset to benefits attributable to years of service worked prior to the adoption of the offset; and (iii)
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eliminating the fractional reduction to the SBA offset for participants with more than 35 years of service. 2. Defendants violated the terms of the Signal Retirement Plan by applying an SBA offset to benefits calculated under one of the Signal Retirement Plan's Normal Retirement formulas (the so called "minimum" benefit formula). 3. Defendants violated ERISA's anti-cutback rule by amending the Signal Retirement Plan to apply an SBA offset to benefits calculated under one of the Signal Retirement Plan's Normal Retirement formulas (the "minimum" benefit formula), and that Defendants violated ERISA's notice requirements by failing to provide proper notice of this amendment. (Attachment 1 at 2-3; Attachment 2 at 3.) Plaintiffs' description of the remaining issues to be decided with respect to claims decided in Plaintiffs' favor does not fairly inform class members of Defendants' affirmative defenses
With respect to the claims on which the Court ruled in their favor, Plaintiffs' proposed Notice notes in general terms that "certain affirmative defenses" asserted by Defendants have yet to be considered by the Court, and that the only remaining issues are "the amount of damages and other remedies." (Pls.' Notice, 3:22-26, Ex. A to Pls.' Motion.) This short paragraph appears in a puzzling and potentially confusing location, immediately following the Plaintiffs' listing of the claims on which the Court ruled in Defendants' favor. To inform the class members fairly and adequately, the Notice must be more forthcoming and specific about the nature of the affirmative defenses. Defendants' proposed Notice describes in greater detail their affirmative defenses immediately after the listing of the claims to which these defenses apply, as follows: There are issues remaining to be decided with respect to these claims, including whether a remedy is available and what the remedy may be, if any, and whether certain defenses, if accepted by the Court, could bar some or all of the recovery for some or all Class members. These defenses include the statute of limitations, which addresses the timeliness of the filing of the lawsuit and the assertion of claims that are based on plan amendments and events that occurred mostly between 1984 and 1993. (Attachment 1 at 3; Attachment 2 at 3.)
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3.
Plaintiffs' description of the additional claims to be determined by the Court is vague and imprecise
In their proposed Notice, Plaintiffs' description of their additional claims is vague and imprecise and is unlikely to fairly apprise potential class members fairly of the nature and complexity of the remaining claims. (See Ex. A to Pls.' Motion, at 4.) Defendants' proposed Notice describes the additional claims more specifically and precisely, to provide fair notice to potential class members of the complex nature of the claims still to be litigated in this action, as follows: In addition to the matters already resolved by the Court's July 19, 2005 opinion, the following additional claims must still be determined: 1. Plaintiffs' claims that Defendants violated the terms of the Plan and ERISA's claims procedure and disclosure requirements and applicable regulations by failing to provide Plaintiffs with certain requested documents within the statutorily proscribed time period. 2. Plaintiffs' claims that Defendants violated ERISA's anti-cutback and notice provisions and breached their contractual promises to Plaintiffs by charging administrative fees to their Secured Benefit Accounts beginning in 1993. 3. Plaintiffs' claims that Defendants violated the terms of the Plan and ERISA by failing to adjust Plaintiffs' benefits and pay them retroactive benefits plus interest for the claim granted in the administrative process. 4. Plaintiffs' claims that Defendants violated the terms of the Plan and ERISA by reducing accrued benefits by amendments made in 2000 which allowed participants to choose to receive the greater of (1) benefits calculated under the terms of the AlliedSignal Retirement Program, or (2) benefits calculated under the terms of the AlliedSignal Retirement Program based only on service credited after January 1, 1984 but without being subject to any SBA offset. 5. Plaintiffs' claims that Defendants violated ERISA's written plan requirements. (Attachment 1 at 5; Attachment 2 at 4-5.) 4. Plaintiffs' proposed Notice fails to accurately describe the eight claims asserted in the Amended Complaint that the District Court dismissed with prejudice
Plaintiffs' description of the dismissed claims, at pages 2-3 of their proposed Notice, is vague and, thus, misleading. Defendants suggest a revision to this description as follows: The Court dismissed some of Plaintiffs' claims at the outset, including the following:
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1. Plaintiffs' claim that the amendments to the Plans violated ERISA's vesting rules; 2. Plaintiffs' claim that the amendments to the Plans violated ERISA's rules governing the rates and formulas under which benefits are required to accrue; 3. Plaintiffs' claim that Defendants violated the terms of the Signal Retirement Plan by calculating certain participants' benefits under a 1% rather than a 1.25% "minimum" benefit formula; 4. Plaintiffs' claim that Defendants violated the terms of the Signal Retirement Plan by failing to use a 3.5% projection rate in calculating the SBA offset for Garrett participants eligible to commence benefits as of December 31, 1983; 5. Plaintiffs' claim that Defendants violated an ERISA notice requirement by failing to provide notice of the amendment of the Signal Retirement Plan to refer to the "Garrett Division" rather than the "Garrett Corporation"; 6. Plaintiffs' claim that Defendants violated ERISA's anti-cutback rule by amending the Signal Retirement Plan to refer to the "Garrett Division" rather than the "Garrett Corporation"; 7. Plaintiffs' claim that Defendants violated certain ERISA disclosure requirements by failing to timely provide them with copies of benefit calculation worksheets, and 8. Plaintiffs' claim that Defendants violated certain of ERISA's disclosure requirements by failing to adequately disclose certain information in their summary plan descriptions. (Attachment 1 at 3-4; Attachment 2 at 3-4.) C. Plaintiffs Must Bear The Cost Of Notice To The Class Because Plaintiffs Have Failed To Identify Any Special Circumstances That Justify Shifting This Cost To Defendants
Plaintiffs have requested that the Court shift the cost of providing notice to the class to Defendants. This Court should reject Plaintiffs' request because it is well established that plaintiffs must bear the cost of providing notice to class members. See, e.g., Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974) (holding that in class actions maintained under Fed.R.Civ.P. 23(b)(3), the party seeking class certification must bear the cost of providing notice to the class members). See also Manual for Complex Litigation at § 21.311 (4th ed. 2004) (same). Courts routinely order plaintiffs to bear the cost of notice, unless exceptional circumstances exist that
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justify departure from the usual rule. Eisen, 417 U.S. at 178; Gacy v. Gammage & Burnham, 2005 U.S. Dist. LEXIS 38081, *5 (D. Ariz. Dec. 15, 2005) (holding that plaintiffs are required to bear the cost of notice); Powers v. Stuart-James Co., 707 F. Supp. 499, 503 (M.D. Fla. 1989) (same). Because Plaintiffs have not established the existence of any special circumstances that would warrant shifting the cost of notice to Defendants, Plaintiffs must bear the cost of notice to the class. The case of Six (6) Mexican Workers v. Arizona Citrus Growers, 641 F. Supp. 259, 262 (D. Ariz. 1986), exemplifies the special circumstances, which are lacking here, that would justify shifting the cost of notice to the defendant. In Six (6) Mexican Workers, this Court shifted the cost of notice to the defendants, because the plaintiffs demonstrated that the defendants intentionally kept inadequate records in violation of statutory requirements and failed to maintain the addresses of potential class members. Id. In holding that the usual rule that the plaintiff should bear the cost of notice did not apply, the Court stated, "since it is the Defendants who have failed in their duty to keep accurate home addresses ... it seems only fitting that they should be the ones to bear the cost rather than this burden being placed upon the Plaintiffs." Id. at 264. Applying these principles here, Plaintiffs have failed to identify any special circumstances, such as the failure to maintain accurate records, that would justify shifting the cost of notice to Defendants. Indeed, contrary to Plaintiffs' assertion, granting partial summary judgment does not per se shift the cost of notice to Defendants. See e.g., H.W. Urban GmbH v. Republic of Arg., 2006 U.S. Dist. LEXIS 9668, *7-9 (S.D.N.Y. Mar. 9, 2006) (denying plaintiff's motion to shift the cost of class notice to defendant, notwithstanding order granting plaintiff's motion for partial summary judgment). In H.W. Urban, the Court noted that although the plaintiff had obtained partial summary judgment as to liability, the plaintiff "has not shown any special duty owed by [the defendant] or any exceptional hardship it will suffer by initially bearing the (currently modest) costs of class notice, which are typically borne by plaintiffs at this stage in a class action." Id. at *8 (emphasis added).
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Moreover, here the Court has already acknowledged that Defendants' arguments opposing Plaintiffs' anti-cutback claims "is a position the Court would like to follow because it is correct, but cannot because the law in this Circuit as it now exists will not allow it." 382 F. Supp. 2d at 1153. The Court further explained that it "would overrule Shaw and Michael if it had the power, and urges the Ninth Circuit to do so...." Id. at 1158. Indeed, the Court granted Defendants' motion to certify its ruling on the anti-cutback claim for interlocutory appeal to the Ninth Circuit.4 "The Court identified at least five reasons why Michael should not govern this case and why its interpretation is simply incorrect." (Reconsid. Order at 13, Dkt. No. 138.) Moreover, the Court noted that, "[s]hould the Ninth Circuit find in favor of Defendants, most of Plaintiffs' significant claims will be eliminated." (Id. at 13.) Given the Court's recognition of the significance of the arguments to be made on appeal and its repeated acknowledgement of the unresolved affirmative defenses that apply to all of Plaintiffs' claims, the entry of partial summary judgment on certain legal issues should not shift the burden and cost of notice to Defendants. If Plaintiffs' attorneys wish to represent a broad class of present and former plan participants and to seek attorneys' fees for their efforts, they should be responsible for communicating with their own clients. Accordingly, it is respectfully submitted that this Court should adhere to Supreme Court precedent and require Plaintiffs' counsel to bear the cost and burden of notice to class members. D. The Court Should Grant Defendants' Request To Enclose The Proposed Questionnaire With The Class Notice Mailing
As noted above, the Court has already ruled that Defendants may present "affirmative defenses related to individual putative class members' claims." Those defenses, which include the statute of limitations and laches, turn specifically on the extent to which individual class members knew or should have known of the plan amendments that they now challenge. As Plaintiffs' counsel must concede, at least some of the participants certainly knew of the
4
Dkt. #124. The Ninth Circuit declined to accept Defendants' Petition for Interlocutory Appeal. See Allen v. Honeywell Ret. Earnings Plan, No. 05-80130 (9th Cir. Feb. 24, 2006) (order denying petition for permission to appeal pursuant to 28 U.S.C. § 1292(b)).
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amendments and many complained bitterly, to the point where focus and discussion groups were convened to address the issues. (Defs.' Supp. Br. in Opp'n to Pls.' Mot. for Class Cert., at 14-23, dkt. # 185, and Declarations referenced therein, dkt. ## 187-193; Defs.' Opp. to Pls.' Mot. for Class Cert. at 9-13, dkt. # 146, and Declarations referenced therein, dkt. ## 85-87, 147.) It is impossible, however, for Defendants to know which of the more than 10,000 class members received summary plan descriptions and benefits communications, and the extent of the information and knowledge that was available to individual employees and plan participants.5 Obviously, the only way for Defendants to satisfy their burden on the defenses permitted by this Court is to obtain information from the class members on behalf of whom substantial monetary relief is sought.6 During discussions among counsel, Defendants requested that the Notice include a questionnaire seeking information material to Defendants' defenses. Plaintiffs objected outright and refused to incorporate any questionnaire in the proposed Class Notice for the Court's review. Thus, Defendants now move this Court for an order permitting Defendants to enclose a questionnaire with the Class Notice. In its prior rulings, the Court recognized that there are outstanding issues requiring resolution, including, the fact-laden statute of limitations and laches defenses. Discovery with respect to these issues necessarily requires discovery from class members. The proposed questionnaire, which is attached hereto as Attachment 3, will permit Defendants to obtain necessary information without protracted and burdensome discovery.7 The class action device cannot be permitted to infringe on the substantive rights of
5
Plaintiffs' counsel, moreover, has refused to stipulate that class members received the summary plan descriptions and other benefits communications that were sent periodically by the Plan Administrator. 6 While Defendants are mindful of this Court's initial view as to class discovery, see Class Cert. Order at 11 n.7, dkt. # 226, that discussion was preliminary in nature and did not resolve this issue. Defendants now present this issue directly for the Court's resolution. In light of this authority, Defendants should be permitted to distribute this questionnaire. 7 Defendants reserve the right to seek additional discovery from absent class members in the future, as needed, based on the class member responses to the questionnaires and other information obtained through Defendants' ongoing investigation.
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defendants, including the right to investigate properly and assert defenses. Where those rights are at risk of being infringed, the Court has both the authority and responsibility to impose rules that do not infringe upon those rights. The Rules Enabling Act of 1934, which "conferred upon the Judiciary the power to promulgate federal rules of civil procedure," Mistretta v. United States, 488 U.S. 361, 387 (1989), explicitly cautions that "[s]uch rules shall not abridge, enlarge or modify any substantive right." 28 U.S.C. § 2072(b). In fact, the Rules Enabling Act goes so far as to say that "[a]ll laws in conflict with such rules shall be of no further force or effect after such rules have taken effect." 28 U.S.C. § 2072(b). These principles apply equally to the certification of class actions under Fed.R.Civ.P. 23. See Ortiz v. Fibreboard Corp., 527 U.S. 815, 845 (1999) ("no reading [of Rule 23] can ignore the [Rules Enabling] Act's mandate that `rules of procedure shall not abridge, enlarge or modify any substantive right.'") (quoting Amchem Prods. v. Windsor, 521 U.S. 591, 613 (1997) (quoting 28 U.S.C. § 2072(b)). Thus, district courts must ensure that class certification decisions not come at the expense of the substantive rights of defendants. Among the rights protected by the Rules Enabling Act are the due process rights of defendants to present their defenses. See, e.g., American Surety Co. v. Baldwin, 287 U.S. 156, 168 (1932) (stating that due process requires that there be an opportunity to present every available defense). 8 For this reason, and where appropriate based on the nature of the claims or defenses at issue, courts have permitted defendants in class actions to take discovery of absent class members. See, e.g., Brennan v. Midwestern United Life Ins. Co., 450 F.2d 999 (7th Cir. 1971) ("If discovery from the absent member is necessary or helpful to the proper presentation and correct adjudication of the principal suit, we see no reason why it should not be allowed so long as adequate precautionary measures are taken to insure that the absent member is not misled or confused"); Redmond v. Moody's Investor Servs., No. 92 Civ. 9161, 1995 WL 276150
8
See also Goldberg v. Kelly, 397 U.S. 254, 269 (1970) ("in almost every setting where important decisions turn on questions of fact, due process requires an opportunity to confront and cross-examine adverse witnesses"); People ex rel. Hartigan v. Peters, 871 F.2d 1336 (7th Cir. 1989) (citing Baldwin); Jimenez v. Domino's Pizza, Inc., 238 F.R.D. 241 (C.D. Cal. 2006) (stating that defendant has a right to cross-examine each individual to determine whether there is liability as to that specific person).
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(S.D.N.Y. May 10, 1995) (same) (collecting cases). Although the Court of Appeals for the Ninth Circuit has not addressed this issue, other courts have allowed discovery of absent class members by interrogatory when: (i) the discovery is not designed to take undue advantage of class members or to reduce the class size; (ii) the discovery is necessary; (iii) responding to the discovery requests would not require the assistance of counsel or other technical advice; and (iv) the discovery seeks information not already known by the proponent. See, e.g., Manual for Complex Litigation at § 21.41 (4th ed. 2004).9 Here, the Court should permit the inclusion of the proposed questionnaire with the Class Notice because the factors identified above have been met. The proposed questionnaire contains twenty threshold questions narrowly tailored to determine the scope of each class member's knowledge of the facts and events giving rise to this lawsuit. In light of the significant dollars at stake in this litigation as to each class member, it can hardly be said that requiring class members
9
See Brennan, 450 F.2d at 1006 (affirming order allowing discovery of absent class members); Marcera v. Chinlund, 595 F.2d 1231, 1240 (2d Cir.) (stating that the district court should have permitted discovery of absent class members), vacated on other grounds, 442 U.S. 915 (1979); Dellums v. Powell, 566 F.2d 167, 187 (D.C. Cir. 1977) (noting that while "it is true that discovery against absentee class members under Rules 33 and 34 cannot be had as a matter of course, the overwhelming majority of courts which have considered the scope of discovery against absentees have concluded that such discovery is available, at least when the information requested is relevant to the decision of common questions, when the interrogatories or document requests are tendered in good faith and are not unduly burdensome, and when the information is not available from the representative parties"); Schwartz v. Celestial Seasonings, 185 F.R.D. 313 (D. Colo. 1999) (permitting questionnaire with class notice where questions relate to issues that must be proved by plaintiffs and addressed by defendants to formulate defenses; there is no evidence of bad faith or improper motive; questionnaire is succinct, clear, and not burdensome; and only class members have access to requested information). See also Redmond, 1995 WL 276150 (permitting discovery requests to absent class members); Easton & Co. v. Mutual Benefit Life Ins. Co., 1994 U.S. Dist. LEXIS 12308 (D.N.J. May 18, 1994) (same); Transamerican Refining Corp. v. Dravo Corp., 139 F.R.D. 619, 621 (S.D. Tex. 1991) (allowing interrogatories on absentee class members because relevant information "may not be known to the representative class members and only to each absent class member"); Doe v. Meachum, 126 F.R.D. 444 (D. Conn. 1989) (observing that the "overwhelming majority of courts" have held that defendants may serve discovery on absentee class members when relevant, when tendered in good faith and not unduly burdensome, and when information is not available from representative parties); M. Berenson Co. v. Faneuil Hall Marketplace, Inc., 103 F.R.D. 635, 637 (D. Mass. 1984) (holding that "the broad mandates of Fed.R.Civ.P. 26 demand that the scope of discovery be liberally construed so as to provide both parties with information essential to proper litigation on all the facts" and permitting discovery); United States v. Trucking Employers, Inc., 72 F.R.D. 101, 104-05 (D.D.C. 1976) (permitting interrogatories on class members and observing that the evolving view is that such discovery is permissible when justified) (citations omitted).
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to respond to twenty questions (addressing such issues as when and how the class member learned of certain events that would trigger the statute of limitations and other related matters) would be unduly burdensome. Specifically, the questionnaire seeks the following information of class members: · When and how they learned of the merger of the Garrett Retirement Plan into the Signal Retirement Plan. · When and how they learned that as of January 1, 1984, the Secured Benefit Account would be earning interest at the rate of 12.3% per year for 25 years. · Whether they ever believed, had discussions about, and/or heard others complain that the value of their Secured Benefit Account should not be offset against their Retirement Plan benefit or that the Secured Benefit Account offset was not being properly calculated; and any actions they took as a result of such beliefs or discussions. · When and how they learned that any Social Security benefits they received would be offset against the pension benefits they would receive under the Retirement Plan, and whether they had discussions with anyone regarding the Social Security offset and/or were concerned that such an offset was improper. · Whether they ever requested copies of plan documents. · Whether they ever discussed the plans or their retirement benefits with any employees or representatives of the Company. · Whether they attended any meetings, exit interviews, seminars, presentations, focus groups, workshops or other meetings during which benefits under the Retirement Plan or Severance Plan, or offsets for the Secured Benefit Account or Social Security, were discussed. · Whether they took any actions to investigate or obtain information concerning their retirement benefits prior to initiating this lawsuit. · Whether they are associated with any retirement groups, associations or committees of other Company Retirees. (See Attachment 3.)10 The questionnaire is simply worded, not complex, and responding to the questionnaire should not require the assistance of counsel or technical advice. Additionally, the information sought by the questionnaire is essential to prove that class members knew or should have known of the injury that is the basis for this lawsuit, which directly supports Defendants' statute of limitations and laches defenses. See Pisciotta v. Teledyne Industries, Inc., 91 F.3d
10
The questionnaire also seeks information about the loss or destruction of documents and other evidence.
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1326, 1331 (9th Cir. 1996) (holding that in ERISA actions, the statute of limitations accrues "when the plaintiff knows or has reason to know of the injury that is the basis of the action"). Moreover, because the questionnaire is designed to elicit information regarding each class member's actual knowledge, the information is not now known, nor can it otherwise be learned, by Defendants or the Named Plaintiffs.11 In short, Defendants have a due process right to requested discovery. The questionnaire proposed is a reasonable means to conduct such discovery that will neither confuse nor unduly burden Named Plaintiffs or the class members. Defendants recognize that written discovery from class members will impose some burden on the individuals and class counsel, but this burden results primarily from delay in asserting the class claims. The plan amendments at issue here were adopted 23 years ago. Plaintiffs reaped the benefits of those amendments in many respects, and their unexcused delays in asserting their claims have created timeliness questions as to which individualized evidence is essential. If Plaintiffs and the class are to be permitted to proceed, expedience should not preempt Defendants' Due Process rights to develop and present the factual elements of their defenses. Any other conclusion would be egregiously unfair, not only to Honeywell and the plans, but to the tens of thousands of other participants in the Honeywell Retirement Plan whose pensions will be paid from the trust fund that Plaintiffs now look to for additional benefits. CONCLUSION For the foregoing reasons, Defendants request that the Court issue an Order (1) approving the form of Proposed Notice attached hereto as Defendants' Attachment 1, submitted as a suggested substitute for the Proposed Notice of Pendency of Class Action (Ex. A to Pls.' Motion); and (2) granting leave to Defendants to enclose a questionnaire with the Class Notice.
11
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For example, in discovery, Named Plaintiff Barbara Allen produced a 500+ page complaint submitted to the United States Department of Labor by Paul E. Bierlert and Jack R. Gilmore. (Dkt. # 172, Attachments #1 through #7, at BA 16772187.) The complaint notes that it is submitted on behalf of "over 100 people who have wrote letters, agreeing with [Messrs. Bierlert and Gilmore], seeking [their] help to pursue this in everyone's behalf for our lost benefits." (Id. at BA1969.) Before obtaining a copy of the submission through the discovery process in this case, Defendants had never received a copy of, nor did they have knowledge of this complaint submitted to the Department of Labor.
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Respectfully submitted this 5th day of January, 2007. OSBORN MALEDON P.A. By:s/Dawn L. Dauphine David B. Rosenbaum Dawn L. Dauphine Osborn Maledon, P.A. 2929 North Central Avenue, Suite 2100 Phoenix, AZ 85012-2794 Michael L. Banks (Pro Hac Vice) William J. Delany (Pro Hac Vice) Azeez Hayne (Pro Hac Vice) MORGAN, LEWIS & BOCKIUS LLP 1701 Market Street Philadelphia, PA 19103 Howard Shapiro (Pro Hac Vice) PROSKAUER ROSE LLP 909 Poydras Street, Suite 1100 New Orleans, LA 70112-4017 Amy Covert, Pro Hac Vice PROSKAUER ROSE LLP One Newark Center 1085 Raymond Blvd. Newark, NJ 07102 Attorneys for Defendants
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14791551
CERTIFICATE OF SERVICE I hereby certify that on January 5, 2006, 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: Susan Martin Martin & Bonnett P.L.L.C. 3300 N. Central Ave., Suite 1720 Phoenix, Arizona 85012-2517 Attorneys for Plaintiff Upon receipt of the Notice of Electronic Filing, a copy of the attached document and Notice of Electronic Filing will be hand delivered to the Honorable Roslyn O. Silver. s/Susanne Wedemeyer
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